2025-06271: Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2026 Rates; Requirements for Quality Programs; and Other Policy Changes

1. Electronically. You may (and we encourage you to) submit

electronic comments on this regulation to https://www.regulations.gov. Follow the instructions under the ``submit a comment'' tab.

2. By regular mail. You may mail written comments to the following

address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1833-P, P.O. Box 8013, Baltimore, MD 21244-8013. Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments via

express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1833-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. For information on viewing public comments, we refer readers to the beginning of the SUPPLEMENTARY INFORMATION section.

1. Purpose and Legal Authority

This FY 2026 IPPS/LTCH PPS proposed rule would make payment and policy changes under the Medicare inpatient prospective payment system (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 would make 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 proposed rule also would make policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs. We are also proposing changes relating to Medicare graduate medical education (GME) for teaching hospitals. We are proposing several changes across pay for performance programs. In the Hospital Value-Based Purchasing (VBP) Program, we are proposing modifications to the Hospital-Level Total Hip Arthroplasty/ Total Knee Arthroplasty (THA/TKA) Complications measure beginning with the FY 2033 program year. We are also providing notice of the technical update to the five National Healthcare Safety Network (NHSN) Healthcare Associated Infection (HAI) measures beginning with the FY 2028 program year, and the technical update to remove the COVID-19 exclusion from the six measures in the Clinical Outcomes domain beginning with the FY 2027 program year. Lastly, we provide previously and newly established performance standards for the FY 2028 through FY 2031 program years for the Hospital VBP Program. In the Hospital Acquired-Conditions (HAC) Reduction Program, we are also providing notice of the technical update to the five Centers for Disease Control National Control (CDC) NHSN healthcare-associated infection (HAI) measures. In the Hospital Readmissions Reduction Program, we are proposing to add Medicare Advantage (MA) beneficiaries to the six Hospital Readmissions Reduction Program (HRRP) measures and make corresponding administrative updates. In the PPS-Exempt Cancer Hospital Quality Reporting Program (PCHQR), we are proposing to modify the public reporting requirements and remove three existing measures. In the Hospital Inpatient Quality Reporting (IQR) Program, we are proposing to modify four existing quality measures and remove four existing measures. We also are proposing to update and codify the Extraordinary Circumstances Exception (ECE) policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital in the Hospital IQR, Hospital Readmissions Reduction, PCHQR, HAC Reduction, and Hospital VBP Programs. In the Medicare Promoting Interoperability Program, we are proposing to define the electronic health record (EHR) reporting period in CY 2026 and subsequent years as a minimum of any continuous 180-day period within that calendar year for eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program and to make corresponding revisions at 42 CFR 495.4. We are proposing to modify the Security Risk Analysis measure beginning with the EHR reporting period in CY 2026. We are proposing to modify the Safety Assurance Factors for EHR Resilience (SAFER) Guides measure beginning with the EHR reporting period in CY 2026. We are proposing to add an optional bonus measure under the Public Health and Clinical Data Exchange objective for reporting data to a public health agency (PHA) using the Trusted Exchange Framework and Common Agreement (TEFCA) beginning with the EHR reporting period in CY 2026. In the LTCH Quality Reporting Program (QRP), we are proposing to remove one item from the LTCH Continuity Assessment Record and Evaluation (CARE) Data Set (LCDS) with respect to patients who have expired in the LTCH. We are also proposing to remove four Social Determinant of Health (SDOH) standardized patient assessment data elements from the LCDS. Next, we are proposing to amend the reconsideration request process in the LTCH QRP. Finally, we include Requests for Information (RFIs) on: (1) future measure concepts for the LTCH QRP; (2) revisions to the data submission deadlines for assessment data collected for the LTCH QRP; and (3) advancing digital quality measurement (dQM) in the LTCH QRP. The Transforming Episode Accountability Model (TEAM), a mandatory alternative payment model that was finalized in the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986), aims to improve beneficiary care through financial accountability for episodes categories that begin with one of the following procedures: coronary artery bypass graft (CABG), lower extremity joint replacement (LEJR), major bowel procedure, surgical hip/femur fracture treatment (SHFFT), and spinal fusion. TEAM will test whether financial accountability for these episode categories reduces Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries. In this proposed rule, we are proposing updates to TEAM that would modify policies affecting participation of new hospitals, quality measure and assessment, the construction of target prices, the removal of certain health reporting elements, the expansion of the Skilled [[Page 18004]] Nursing Facility (SNF) 3-Day Rule, and the removal of the Decarbonization and Resilience Initiative (DRI). Additionally, the policies in this proposed rule reflect our commitment to ensuring TEAM's incentives help to drive beneficiary quality of care improvements and reductions in Medicare spending. Under various statutory authorities, we either discuss continued program implementation or propose to make changes to the Medicare IPPS, the LTCH PPS, other related payment methodologies and programs for FY 2026 and subsequent fiscal years, and other policies and provisions included in this proposed rule. 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 Balanced Budget Refinement Act of 1999 (BBRA) (Public Law (Pub. L.) 106-113) and section 307(b)(1) of the Benefits Improvement and Protection Act of 2000 (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. Section 1814(l)(4) of the Act requires, beginning with FY 2015, that CAHs that do not successfully demonstrate meaningful use of certified electronic health record technology (CEHRT) for an EHR reporting period for a cost reporting period shall be paid 100 percent of reasonable costs rather than 101 percent of reasonable costs. 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. Hospitals paid under the IPPS with approved GME programs are paid for the indirect costs of training residents in accordance with section 1886(d)(5)(B) of the Act. Section 1886(d)(5)(F) of the Act provides for additional Medicare IPPS payments to subsection (d) hospitals that serve a significantly disproportionate number of low-income patients. These payments are known as the Medicare disproportionate share hospital (DSH) adjustment. Section 1886(d)(5)(F) of the Act specifies the methods under which a hospital may qualify for the DSH payment adjustment. 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(b)(3)(B)(ix) of the Act, which requires downward adjustments to the applicable percentage increase, beginning with FY 2015 (and beginning with FY 2022 for subsection (d) Puerto Rico hospitals), for eligible hospitals that do not successfully demonstrate meaningful use of CEHRT for an EHR reporting period for a payment adjustment year. 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(n) of the Act, which establishes the requirements for an eligible hospital to be treated as a meaningful EHR user for an EHR reporting period for a payment year or, for purposes of subsection (b)(3)(B)(ix) of the Act, for a fiscal year. 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 based on their performance on measures 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 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 an additional 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 the statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act if subsection (r) did not apply (``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, in the absence of section 1886(r) of the Act; (2) 1 minus the percent change in the percent of individuals who are uninsured; and (3) the hospital's uncompensated care amount relative to the uncompensated care amount of all DSH hospitals expressed as a percentage. Section 1886(m)(5) of the Act, which requires the Secretary to reduce by 2 percentage points the annual update to the standard Federal rate for discharges for a long-term care hospital (LTCH) during the rate year for LTCHs that do not submit data on quality measures in the form, manner, and at a time, specified by the Secretary. 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. [[Page 18005]]

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, which provides for the establishment of standardized data reporting for certain post-acute care providers, including LTCHs. Section 1115A of the Act authorizes the testing of innovative payment and service delivery models that preserve or enhance the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program (CHIP) beneficiaries while reducing program expenditures. 2. Summary of the Major Provisions The following is a summary of the major provisions in this proposed rule. In general, these major provisions are being proposed as part of the annual update to the payment policies and payment rates, consistent with the applicable statutory provisions. A general summary of the changes in this proposed rule is presented in section I.D. of the preamble of this proposed rule. a. Proposed Transition for the Discontinuation of the Low Wage Index Hospital Policy To help mitigate growing wage index disparities between high wage and low wage hospitals, in the FY 2020 IPPS/LTCH PPS rule (84 FR 42326 through 42332), we adopted a policy to increase 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 indicated our intention 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. We also stated we intended to revisit the issue of the duration of this policy in future rulemaking as we gained experience under the policy. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69301 through 69308), we adopted an extension of the low wage index hospital policy and the related budget neutrality adjustment effective for at least three more years, beginning in FY 2025, in order for sufficient wage data from after the end of the COVID-19 Public Health Emergency to become available. As discussed in section III.F.5. of the preamble of this proposed rule, on July 23, 2024, the Court of Appeals for the D.C. Circuit held that the Secretary lacked authority under section 1886(d)(3)(E) of the Act or under the ``adjustments'' language of section 1886(d)(5)(I)(i) of the Act to adopt the low wage index hospital policy for FY 2020, and that the policy and related budget neutrality adjustment must be vacated. Bridgeport Hosp. v. Becerra, 108 F.4th 882, 887-91 & n.6 (D.C. Cir. 2024). After considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, in the FY 2025 IFC (89 FR 80405 through 80421), we recalculated the FY 2025 IPPS hospital wage index to remove the low wage index hospital policy for FY 2025. We also removed the low wage index budget neutrality factor from the FY 2025 standardized amounts. In addition, we established an interim transition policy for hospitals significantly impacted by the removal of the FY 2025 low wage index hospital policy using our authority under section 1886(d)(5)(I) of the Act. For FY 2026 and subsequent fiscal years, after considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, we are proposing to discontinue the low wage index hospital policy and would no longer apply a low wage index budget neutrality factor to the standardized amounts. As discussed in section III.F.7. of the preamble of this proposed rule, we are proposing to use our authority under section 1886(d)(5)(I)(i) of the Act to adopt a narrow transitional exception to the calculation of FY 2026 IPPS payments for low wage index hospitals significantly impacted by the discontinuation of the low wage index hospital policy, that would be implemented in a budget neutral manner. This proposed transitional exception policy would apply to hospitals that benefitted from the FY 2024 low wage index hospital policy and would compare the hospital's proposed FY 2026 wage index to the hospital's FY 2024 wage index. If the hospital's proposed FY 2026 wage index is decreasing by more than 9.75 percent from the hospital's FY 2024 wage index, then the proposed transitional payment exception for FY 2026 for that hospital would be equal to the additional FY 2026 amount the hospital would be paid under the IPPS if its FY 2026 wage index were equal to 90.25 percent of its FY 2024 wage index. We proposed to make this policy budget neutral through an adjustment applied to the standardized amounts for all hospitals. b. Proposed Update to the IPPS Labor-Related Share As discussed in section IV. of the preamble of this proposed rule, we are proposing to rebase and revise the 2018-based IPPS market basket to reflect a 2023 base year. In addition, using the cost category weights from the proposed 2023-based IPPS market basket, we calculated a labor-related share of 66.0 percent, which we are proposing to use for discharges occurring on or after October 1, 2025. The proposed labor-related share of 66.0 percent is 1.6 percentage points lower than the current labor-related share of 67.6 percent. As discussed in section IVB.3. of the preamble of this proposed rule, this downward revision to the labor-related share is primarily the result of incorporating the more recent 2023 Medicare cost report data for Wages and Salaries, Employee Benefits, and Contract Labor costs. This is partially offset by an increase in the Professional Fees: Labor-Related cost weight. c. Hospital Readmission Reduction Program We are proposing 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. In this FY 2026 IPPS/LTCH PPS proposed rule, we are proposing the following policies: (1) Refine all six readmission measures to add Medicare Advantage patient cohort data; (2) remove the COVID-19 diagnosed patients measure denominator exclusion from the all six readmission measures, beginning with the FY 2026 program year; (3) reduce the applicable period from 3- years to 2-years and update codified regulation language; (4) modify the diagnosis-related group (DRG) payment ratios in the payment adjustment formula to include MA beneficiaries; and (5) update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital. d. Hospital Acquired Condition (HAC) Reduction Program Section 1886(p) of the Act establishes the HAC Reduction Program under which payments to applicable hospitals are adjusted to provide an incentive to [[Page 18006]] reduce hospital-acquired conditions. In this FY 2026 IPPS/LTCH PPS proposed rule, we are making a technical update to the NHSN Healthcare Associated Infection (HAI) measures baseline. We are also proposing to update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital. e. 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 2026 IPPS/LTCH PPS proposed rule, we are proposing modifications to the THA/TKA Complications measure beginning with the FY 2033 program year. We are also providing notice of the technical update to remove the COVID-19 exclusion from the six measures in the Clinical Outcomes domain beginning with the FY 2027 program year and the technical update to the five NHSN Healthcare Associated Infection (HAI) measures beginning with the FY 2028 program year. We also are proposing to update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital. We are also proposing to remove the Program's Health Equity Adjustment. Lastly, we provide previously and newly established performance standards for the FY 2028 through FY 2031 program years for the Hospital VBP Program. e. 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. In this FY 2026 IPPS/LTCH PPS proposed rule, we are proposing several changes to the Hospital IQR Program. We are proposing refinements to four measures currently in the Hospital IQR Program measure set: (1) Hospital-Level, Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) beginning with the April 1, 2023- March 30, 2025 Reporting Period/2027 Payment Determination; (2) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Acute Ischemic Stroke Hospitalization with Claims-Based Risk Adjustment for Stroke Severity beginning with the July 1, 2023-June 30, 2025 Reporting Period/2027 Payment Determination; (3) the Hybrid Hospital-Wide Readmission (HWR) measure beginning with the July 1, 2025, through June 30, 2026 Reporting Period/FY 2028 Payment Determination; and (4) the Hybrid Hospital-Wide All-Cause Risk Standardized Mortality (HWM) measure beginning with the July 1, 2025, through June 30, 2026 Reporting Period/FY 2028 Payment Determination. We are also proposing to remove four measures: (1) the Hospital Commitment to Health Equity measure beginning with the CY 2024 reporting period/FY 2026 payment determination; (2) the COVID-19 Vaccination Coverage among HCP measure beginning with the CY 2024 reporting period/FY 2026 payment determination; (3) the Screening for Social Drivers of Health measure beginning with the CY 2024 reporting period/FY 2026 payment determination; and (4) the Screen Positive Rate for Social Drivers of Health measure beginning with the CY 2024 reporting period/FY 2026 payment determination. We are proposing to update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital. Additionally, we seek comments regarding measure concepts related to well-being and nutrition for future consideration. We also seek comments on the path forward for digital quality measurement and use of Fast Healthcare Interoperability Resources (FHIR). f. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 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. In the FY 2026 IPPS/LTCH PPS proposed rule, we are proposing to publicly report PCH data on both the Provider Data Catalog and on Care Compare and to make corresponding changes to regulatory text to replace references to ``Provider Data Catalog'' with ``CMS website''. We are also proposing to remove the (1) Hospital Commitment to Health Equity, (2) the Screening for Social Drivers of Health measure; and (3) the Screen Positive Rate for Social Drivers of Health measure beginning with the CY 2024 reporting period/FY 2026 payment determination. Lastly, we are proposing to update and codify the ECE policy to clarify that CMS has the discretion to grant an extension in response to an ECE request from a hospital. g. Long-Term Care Hospital Quality Reporting Program (LTCH QRP) In the LTCH QRP, we are proposing to remove five items from the LCDS. We are also proposing to amend the reconsideration request process in the LTCH QRP. Finally, we include Requests for Information (RFIs) on: (1) future measure concepts for the LTCH QRP; (2) revisions to the data submission deadlines for assessment data collected for the LTCH QRP; and (3) advancing digital quality measurement (dQM) in the LTCH QRP. h. Medicare Promoting Interoperability Program Under sections 1886(b)(3)(B)(ix) and 1814(l)(4) of the Act, respectively, eligible hospitals and CAHs are required to submit data in accordance with section 1886(n) to successfully demonstrate meaningful use of CEHRT for an EHR reporting period to avoid a downward payment adjustment under Medicare for the associated fiscal year. We are proposing several changes to the Medicare Promoting Interoperability Program. Specifically, we are proposing: (1) to amend the definition of ``EHR reporting period for a payment adjustment year'' at 42 CFR 495.4 for eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program to define the EHR reporting period in CY 2026 and subsequent years as a minimum of any continuous 180-day period within that calendar year; (2) to modify the Security Risk Analysis measure to require eligible hospitals and CAHs to attest ``yes'' to having conducted security risk management in addition to the existing measure requirement to attest ``yes'' to having conducted security risk analysis, beginning with the EHR reporting period in CY 2026; (3) to modify the SAFER Guides measure by requiring eligible hospitals and CAHs to attest ``yes'' to completing an annual self-assessment using the eight SAFER Guides published in January 2025, beginning with the EHR reporting period in CY 2026; and (4) to add an optional bonus measure to the Public Health and Clinical Data Exchange objective for eligible hospitals and CAHs that submit health information to a public health agency (PHA) using the Trusted Exchange Framework and Common Agreement\TM\ (TEFCA), and consistent with other measure requirements, beginning with the EHR reporting period in CY 2026. [[Page 18007]] i. Transforming Episode Accountability Model (TEAM) In section XI.A. of the preamble of this proposed rule, we propose changes to the Transforming Episode Accountability Model (TEAM). TEAM is a 5-year mandatory model that will be tested under the authority of section 1115A of the Act, beginning on January 1, 2026, and ending on December 31, 2030. We are proposing changes to multiple areas of the model, including: (1) a limited deferment period for certain hospitals; (2) addressing the expiration of the Medicare Dependent Hospital program; (3) adding the Information Transfer Patient Reported Outcome- based Performance Measure (Information Transfer PRO-PM); (4) applying a neutral quality measure score for TEAM participants with insufficient quality data; (5) a methodology to construct target prices when there are coding changes; (6) reconstructing the normalization factor and prospective trend factor; (7) replacing the Area Deprivation Index (ADI) with the Community Deprivation Index (CDI); (8) using a 180-day lookback period and Hierarchical Condition Categories (HCC) version 28 for beneficiary risk adjustment; (9) aligning the date range used for episode attribution; (10) removing health equity plans and health related social needs data reporting; (11) expanding the Skilled Nursing Facility (SNF) 3-day rule waiver; and (12) removing the Decarbonization and Resilience Initiative (DRI). 3. Summary of Costs and Benefits The following table provides a summary of the costs, savings, and benefits associated with the major provisions described in section I.A.2. of the preamble of this proposed rule. ------------------------------------------------------------------------ Description of costs, transfers, savings, Provision description and benefits ------------------------------------------------------------------------ Proposed Transition for the As discussed in section III.F.7. of the Discontinuation of the Low preamble of this proposed rule, we are Wage Index Hospital Policy. proposing to use our authority under section 1886(d)(5)(I)(i) of the Act to adopt a narrow transitional exception to the calculation of FY 2026 IPPS payments for low wage index hospitals significantly impacted by the discontinuation of the low wage index hospital policy, that would be implemented in a budget neutral manner. We proposed to make this policy budget neutral through an adjustment applied to the standardized amounts for all hospitals. Proposed Update to the IPPS As discussed in section IV. of the Labor-Related Share. preamble of this proposed rule, we are proposing to rebase and revise the 2018- based IPPS market basket to reflect a 2023 base year. In addition, using the cost category weights from the proposed 2023-based IPPS market basket, we calculated a labor-related share of 66.0 percent, which we are proposing to use for discharges occurring on or after October 1, 2025. The proposed labor- related share of 66.0 percent is 1.6 percentage points lower than the current labor-related share of 67.6 percent. This proposed change is budget neutral. Proposed Update to the IPPS As discussed in Appendix A of this Payment Rates and Other proposed rule, acute care hospitals are Payment Policies. estimated to experience an increase of approximately $4.0 billion in FY 2026, primarily driven by the changes in FY 2026 operating payments, uncompensated care payments, and capital payments and the expiration of the temporary changes in the low-volume hospital program and the expiration of the MDH program on October 1, 2025. Proposed Update to the LTCH As discussed in Appendix A of this PPS Payment Rates and Other proposed rule, based on the best Payment Policies. available data for the 328 LTCHs in our database, we estimate that the proposed changes to the payment rates and factors that we present in the preamble of and Addendum of this proposed rule, which reflect the proposed update to the LTCH PPS standard Federal payment rate for FY 2026, would result in an estimated increase in payments in FY 2026 of approximately $61 million. Changes to the Hospital We estimated that our changes for the Readmission Reduction Hospital Readmissions Reduction Program Program. will result in no financial impact for the FY 2027 payment determination or subsequent years. Changes to the Value-Based We estimated that there will be no net Incentive Payments under the financial impact to the Hospital VBP Hospital VBP Program. Program for the FY 2026 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 2026 program year and, therefore, the estimated amount available for value- based incentive payments for FY 2026 discharges is approximately $1.7 billion. Proposed Changes to the HAC We estimated that our changes for the HAC Reduction Program. Reduction Program will result in no financial impact for the FY 2027 payment determination or subsequent years. Changes to the Hospital IQR Across 3,050 IPPS hospitals, we estimated Program. that our changes for the Hospital IQR Program will result in a maximum decrease of 660,577 hours and $18,008,959 to the information collection burden for the FY 2026 payment determination or subsequent years. Proposed Changes to the PCHQR Across 11 PCHs, we estimated that our Program. changes for the PCHQR Program will result in a maximum decrease of 153 hours and $7,765 to the information collection burden for the FY 2026 program year or subsequent years. Changes to the LTCH QRP...... Across 330 LTCHs, we estimated that our proposed changes for the FY 2026 LTCH QRP would result in a total information collection burden increase of 4 hours and $187.60 associated with updates to our reconsideration policy. We estimated that our proposed changes for the FY 2028 LTCH QRP would result in a decrease of 2,633.51 hours associated with our policies and updated burden estimates and a total cost decrease of approximately $180,016.80. Changes to the Medicare Across 4,550 eligible hospitals and CAHs, Promoting Interoperability we estimated that our changes for the Program. Medicare Promoting Interoperability Program will not result in a change to the information collection burden for the EHR reporting period in CY 2026 and subsequent years. Transforming Episode We estimate for the TEAM proposals Accountability Model (TEAM). included in this proposed rule that there would be no significant change from the savings estimate in the FY 2025 IPPS/LTCH PPS final rule. Therefore, we estimate testing TEAM would result in saving the Medicare program $481 million across the 5 performance years. ------------------------------------------------------------------------

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 (COLA) 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 [[Page 18008]] 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 an additional Medicare payment beginning on 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 and, beginning in FY 2023 for IHS and Tribal hospitals and hospitals located in Puerto Rico, the new supplemental payment. 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. With the recent enactment of section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025, under current law, the Medicare-dependent, small rural hospital (MDH) program is effective through September 30, 2025. For discharges occurring on or after October 1, 2007, but before October 1, 2025, 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). As section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025 extended the MDH program through FY 2025 only, beginning on October 1, 2025, the MDH program will no longer be in effect absent a change in law. Because the MDH program is not authorized by statute beyond September 30, 2025, beginning October 1, 2025, all hospitals that previously qualified for MDH status under section 1886(d)(5)(G) of the Act will no longer have MDH status and will be paid based on the IPPS Federal rate. 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); Inpatient psychiatric hospitals (IPF) 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. [[Page 18009]] 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. Section 1886(d)(5)(B) of the Act provides that prospective payment hospitals that have residents in an approved GME program receive an additional payment for each Medicare discharge to reflect the higher patient care costs of teaching hospitals relative to non-teaching hospitals. The additional payment is based on the indirect medical education (IME) adjustment factor, which is calculated using a hospital's ratio of residents to beds and a multiplier, which is set by Congress. 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. The regulations regarding the indirect medical education (IME) adjustment are located at 42 CFR 412.105.

1. The Full-Year Continuing Appropriations and Extensions Act, 2025

(Pub. L. 119-4) Section 2201 of the Full-Year Continuing Appropriations and Extensions Act, 2025 extended through FY 2025 the modified definition of a low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals that had been in effect for FYs 2019 through 2024. Specifically, under section 1886(d)(12)(C)(i) of the Act, as amended, for FYs 2019 through 2025, 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. Under section 1886(d)(12)(D) of the Act, as amended, for discharges occurring in FYs 2019 through September 30, 2025, the Secretary determines 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. Section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025 amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to provide for an extension of the MDH program through FY 2025 (that is, through September 30, 2025).

D. Summary of the Proposed Provisions

In this proposed rule, we set forth proposed payment and policy changes to the Medicare IPPS for FY 2026 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 2026. The following is a general summary of the changes that we are proposing to make in this proposed rule.

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

Relative Weights In section II. of the preamble of this proposed rule, we include the following: Proposed changes to MS-DRG classifications based on our yearly review for FY 2026. Proposed recalibration of the MS-DRG relative weights. A discussion of the proposed FY 2026 status of new technologies approved for add-on payments for FY 2025, a presentation of our evaluation and analysis of the FY 2026 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) Public Law 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 2026 new technology applicants under the alternative pathways for certain medical devices and certain antimicrobial products.

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

In section III. of the preamble of this proposed rule, we propose revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include, but are not limited to, the following: The proposed FY 2026 wage index update using wage data from cost reporting periods beginning in FY 2022. Calculation, analysis, and implementation of the proposed occupational mix adjustment to the wage index for acute care hospitals for FY 2026 based on the 2022 Occupational Mix Survey. Proposed application of the rural, imputed and frontier State floors, and proposed transition for the discontinuation 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 adjustment to the wage index for acute care hospitals for FY 2026 based on commuting patterns of [[Page 18010]] hospital employees who reside in a county and work in a different area with a higher wage index. Proposed labor-related share for applying the FY 2026 wage index.

3. Proposed Rebasing and Revising of the IPPS Market Baskets

In section IV. of the preamble of this proposed rule, we propose to rebase and revise the IPPS market baskets to reflect a 2023 base year. In section IV.B.3. of the preamble of this proposed rule, using the cost category weights from the proposed 2023-based IPPS market basket, we propose to use a labor-related share of 66.0 percent for the national standardized amounts for all IPPS hospitals (including hospitals in Puerto Rico) that have a wage index value that is greater than 1.0000.

4. Payment Adjustment for Medicare Disproportionate Share Hospitals

(DSHs) for FY 2026 In section V. of the preamble of this proposed rule, we discuss the following: Proposed calculation of Factor 1 and Factor 2 of the uncompensated care payment methodology. Proposed methodological approach for determining Factor 3 of the uncompensated care payment for FY 2026, which is the same methodology that was used for FY 2025. Proposed methodological approach for determining the amount of interim uncompensated care payments using the average of the most recent 3 years of discharge data.

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

In section VI. of the preamble of this 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 inpatient hospital market basket update for FY 2026. Proposed updated national and regional case-mix values and discharges for purposes of determining RRC status. Proposed conforming amendments to reflect the statutory extension of the temporary changes to the low-volume hospital payment adjustment through September 30, 2025. Proposed conforming amendments to reflect the statutory extension of the MDH program through September 30, 2025. A direct graduate medical education (GME) and indirect medical education (IME) policy proposal for calculating full-time equivalent counts and caps for cost reporting periods other than 12 months; and a notice of closure of two teaching hospitals and opportunities to apply for available slots. Proposed nursing and allied health education (NAHE) program Medicare Advantage (MA) add-on rates and direct GME MA percent reductions for CY 2024; and proposed regulatory changes regarding the calculation of net cost of NAHE. Proposed update to and revision to the payment adjustment for certain immunotherapy cases. Proposed changes to the requirements of the Hospital Readmissions Reduction Program--Updating the proposed estimate of the financial impacts for the FY 2026 Hospital Readmissions Reduction Program. Proposed changes to the requirements of the Hospital Value-Based Purchasing Program--Updating the proposed estimate of the financial impacts for the FY 2026 Hospital Value-Based Purchasing Program. Proposed changes to the requirements of the Hospital- Acquired Conditions Reduction Program--Updating the proposed estimate of the financial impacts for the FY 2026 Hospital-Acquired Conditions Reduction Program. Discussion of and proposed changes relating to the implementation of the Rural Community Hospital Demonstration Program in FY 2025.

6. Proposed FY 2026 Policy Governing the IPPS for Capital-Related Costs

In section VII. of the preamble of the proposed rule, we discuss the proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2025.

7. Proposed Changes to the Payment Rates for Certain Excluded

Hospitals: Rate-of-Increase Percentages In section VIII. of the preamble of the proposed rule, we discuss the following: Proposed changes to payments to certain excluded hospitals for FY 2026. Proposed continued implementation of the Frontier Community Health Integration Project (FCHIP) Demonstration.

8. Proposed Changes to the LTCH PPS

In section IX. 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 2026.

9. Proposed Changes Relating to Quality Data Reporting for Specific

Providers and Suppliers In section X. of the preamble of the proposed rule, we addressed the following: Solicitation of comment on adopting measures across the hospital quality reporting and value-based purchasing programs which capture more forms of unplanned post-acute care and encourage hospitals to improve discharge processes. Proposed changes to the requirements for the Hospital IQR Program. Proposed changes to the requirements for the PCHQR Program. Proposed changes to the requirements for the LTCH QRP, and requests for information on future measure concepts, revisions to the data submission deadlines for assessment data collection, and advancing digital quality measurement (dQM) in the LTCH QRP. Proposed changes to requirements pertaining to eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program.

10. Other Proposals and Comment Solicitations Included in the Proposed

Rule Section XI. of the preamble of the proposed rule includes proposed changes to TEAM that would affect participation, quality measure and assessment, pricing methodology, health data reporting, waivers of Medicare Program requirements, and the Decarbonization and Resilience Initiative.

11. Other Provisions of the Proposed Rule

Section XII.A. of the preamble of the proposed rule includes our discussion of the MedPAC Recommendations. Section XII.B. of the preamble of the proposed rule includes a descriptive listing of the public use files associated with this proposed rule. Section XIII. of the preamble of the proposed rule includes the collection of information requirements for entities based on our proposals. Section XIV. of the preamble of the proposed rule includes information regarding our responses to public comments.

12. Determining Prospective Payment Operating and Capital Rates and

Rate-of-Increase Limits for Acute Care Hospitals In sections II. and III. of the Addendum of the proposed rule, we set forth proposed changes to the amounts and factors for determining the [[Page 18011]] proposed FY 2026 prospective payment rates for operating costs and capital-related costs for acute care hospitals, including cost-of- living adjustment (COLA) factors for IPPS hospitals located in Alaska and Hawaii. We are proposing to establish the threshold amounts for outlier cases. In addition, in section IV. of the Addendum of the proposed rule, we address the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2026 for certain hospitals excluded from the IPPS.

13. Determining Prospective Payment Rates for LTCHs

In section V. of the Addendum of the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2026 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 2026. We are proposing to establish the adjustments for the wage index, 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.

14. Impact Analysis

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

15. Recommendation of Update Factors for Operating Cost Rates of

Payment for Hospital Inpatient Services In Appendix B of this proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the appropriate percentage changes for FY 2026 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.

16. 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 2025 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 address these recommendations in Appendix B of this proposed rule. For further information relating specifically to the MedPAC March 2024 report or to obtain a copy of the report, contact MedPAC at (202) 220- 3700 or visit MedPAC's website at https://www.medpac.gov.

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. 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 2025 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; 84 FR 42058 through 42165; 85 FR 58445 through 58596; 86 FR 44795 through 44961; 87 FR 48800 through 48891; 88 FR 58654 through 58787; and 89 FR 69000 through 69109, respectively). For discussion regarding our previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in case mix, we refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 48799 through 48800).

1. Discussion of Changes to Coding System and Basis for Proposed FY

2026 MS-DRG Updates a. International Classification of Diseases, 10th Revision (ICD-10) 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. 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. b. Basis for Proposed FY 2026 MS-DRG Updates The deadline for interested parties to submit MS-DRG classification change requests for FY 2026 was October 20, 2024. All requests are submitted to CMS via Medicare Electronic Application Request Information SystemTM (MEARISTM), accessed at https://mearis.cms.gov. Specifically, as indicated on the MEARISTM site, the MS-DRG classification change request process may be used for requests to create, modify, or delete MS-DRGs, [[Page 18012]] change ICD-10-CM diagnosis code(s) severity level designations, change ICD-10-PCS procedure code(s) Operating Room (O.R.) designations, or to review the CC Exclusions List or the surgical hierarchy. Within MEARISTM, we have built in several resources to support users, including a ``Resources'' section available at https://mearis.cms.gov/public/resources with technical support available under ``Useful Links'' at the bottom of the MEARISTM site. Questions regarding the MEARISTM system can be submitted to CMS using the form available under ``Contact'', also at the bottom of the MEARISTM site. 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 request for MS-DRG classification changes to CMS. The aforementioned burden is subject to the Paperwork Reduction Act (PRA) of 1995 and approved under OMB control number 0938-1431 and has an expiration date of 09/30/2025. Interested parties should submit any MS-DRG classification change requests, including any comments and suggestions for FY 2027 consideration by October 20, 2025 via MEARISTM at: https://mearis.cms.gov/public/home. As we have discussed in prior rulemaking, 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 further note that we also received recommendations and feedback that did not involve requests to create, modify, or delete MS-DRGs, change code designations, or to review the CC Exclusions List or the surgical hierarchy, which therefore are not summarized or addressed in this discussion of the MS- DRG classification change requests received for FY 2026. We received requests to modify the GROUPER logic in several MS-DRGs under MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) and a request to modify the GROUPER logic for MS-DRG 794 (Neonate with Other Significant Problems) under MDC 15 (Newborns and Other Neonates with Conditions Originating in Perinatal Period). Specifically, we received requests to-- Modify the GROUPER logic of new MS-DRG 426 (Multiple Level Combined Anterior and Posterior Spinal Fusion Except Cervical with MCC or Custom-Made Anatomically Designed Interbody Fusion Device), new MS- DRG 427 (Multiple Level Combined Anterior and Posterior Spinal Fusion Except Cervical with CC), and new MS-DRG 428 (Multiple Level Combined Anterior and Posterior Spinal Fusion Except Cervical without CC/MCC); new MS-DRG 447 (Multiple Level Spinal Fusion Except Cervical with MCC or Custom-Made Anatomically Designed Interbody Fusion Device) and new MS-DRG 448 (Multiple Level Spinal Fusion Except Cervical without MCC); and MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with Spinal Curvature, Malignancy, Infection or Extensive Fusions with MCC, with CC, and without CC/MCC, respectively) by reassigning cases with an ICD-10-PCS code that describes fusion of a sacroiliac joint using an internal fixation device with tulip connector or insertion of an internal fixation device with tulip connector into a pelvic bone with another spinal fusion procedure code that currently map to the lower severity level MS-DRG to the highest severity level (with MCC) MS-DRG. Modify the GROUPER logic of MS-DRGs 463, 464, and 465 (Wound Debridement and Skin Graft Except Hand for Musculoskeletal and Connective Tissue Disorders with MCC, with CC, and without CC/MCC, respectively); MS-DRGs 466, 467, and 468 (Revision of Hip or Knee Replacement with MCC, with CC, and without CC/MCC, respectively); and MS-DRGs 492, 493, and 494 (Lower Extremity and Humerus Procedures Except Hip, Foot and Femur with MCC, with CC, and without CC/MCC, respectively) by reassigning cases with ICD-10-PCS code XW0V0P7 (Introduction of antibiotic-eluting bone void filler into bones, open approach, new technology group 7) that currently map to the lower severity level MS-DRG to the highest severity level (with MCC) MS-DRG. Modify the GROUPER logic of MS-DRG 794. The requestor recommended that ICD-10-CM diagnosis codes P09.6 (Abnormal findings on neonatal screening for neonatal hearing loss), Z13.0 (Encounter for screening for diseases of the blood and blood-forming organs and certain disorders involving the immune mechanism), Z82.5 (Family history of asthma and other chronic lower respiratory diseases) and Z82.79 (Family history of other congenital malformations, deformations and chromosomal abnormalities), be added to the MS-DRG 795 (Normal Newborn) ``only secondary diagnosis'' list so that they would result in assignment to MS-DRG 795 when coded with a principal diagnosis code from ICD-10-CM category Z38 (Liveborn infants according to place of birth and type of delivery) instead of MS-DRG 794. We appreciate the submissions and related analyses provided by the requestors for our consideration as we review MS-DRG classification change requests for FY 2026; however, we note the complexity of the GROUPER logic for these MS-DRGs in connection with these requests requires more extensive analyses to identify and evaluate all the data relevant to assessing these potential modifications. Specifically, we note that MS-DRGs 426, 427, 428, 447, and 448 recently became effective October 1, 2024 (FY 2025) and as discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35982 through 35983) and final rule (89 FR 69049 through 69053) in consideration of any future modifications to the current structure of the logic for case assignment to MS-DRGs 456, 457, and 458 we noted that additional analysis would be needed because the logic is also defined by diagnosis code logic as well as extensive fusions. We also note that, as discussed further in section II.C.5.c. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we identified additional inconsistencies related to the diagnosis code logic for MS-DRGs 456, 457, and 458 for which we are proposing modifications. In addition, analyzing the impact of restructuring the logic in these MS-DRGs with respect to procedure codes describing fusion of a sacroiliac joint using an internal fixation device with tulip connector necessitates evaluating the impact across numerous other MS-DRGs in MDC 08, as well as 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) under MDC 01 (Diseases and Disorders of the Nervous System) since the procedure codes describing fusion of a sacroiliac joint using an internal fixation device with tulip connector also map to these MS- DRGs. With respect to the request to reassign cases reporting procedure code XW0V0P7 from the lower severity level to the highest (with MCC) severity level in the previously listed MS-DRGs, we note that the procedure to insert a bone void filler is designated as a non-operating room (Non-O.R.) procedure and believe that the key factor that [[Page 18013]] would contribute to resource utilization in these cases is the fact that the patients have an infection(s) which require additional resources. As discussed in section II.C.5.a. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we also received an MS-DRG request related to cases reporting a hip or knee procedure with a diagnosis of periprosthetic joint infection (PJI) in MS-DRGs 463, 464, and 465. In our review of the claims data to address that request we noted that a subset of the cases also reported procedure code XW0V0P7. Consistent with our established process, we must also consider if there are additional factors, such as the severity of illness with other secondary CC/MCC conditions reported and any other O.R. procedures or services provided, such as mechanical ventilation, that may be contributing to the consumption of resources for these cases. For these reasons and those previously described, we believe additional time is needed to review and evaluate potential extensive modifications to the structure of these MS-DRGs. With respect to the request to modify the GROUPER logic of MS-DRG 794, as discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69061 through 69065), we acknowledged that MS-DRG 794 utilizes ``fall- through'' logic, meaning if a diagnosis code is not assigned to any of the other MS-DRGs, then assignment ``falls-through'' to MS-DRG 794. As discussed in the FY 2025 IPPS/LTCH PPS rule, we stated we have started to examine the GROUPER logic that would determine the assignment of cases to the MS-DRGs in MDC 15, including MS-DRGs 794 and 795, to determine where further refinements could potentially be made to better account for differences in clinical complexity and resource utilization. However, as we have noted in prior rulemaking (72 FR 47152), we stated we cannot adopt the same approach to refine the newborn MS-DRGs because of the extremely low volume of Medicare patients there are in these MS-DRGs. We believe it is appropriate to consider the request to add ICD-10-CM diagnosis codes P09.6 (Abnormal findings on neonatal screening for neonatal hearing loss), Z13.0 (Encounter for screening for diseases of the blood and blood-forming organs and certain disorders involving the immune mechanism), Z82.5 (Family history of asthma and other chronic lower respiratory diseases) and Z82.79 (Family history of other congenital malformations, deformations and chromosomal abnormalities) to the MS-DRG 795 (Normal Newborn) ``only secondary diagnosis'' list in connection with our continued examination of the GROUPER logic that would determine the assignment of cases to the MS-DRGs in MDC 15 in future rulemaking, rather than proposing to change the MS-DRG assignment of individual ICD-10-CM diagnosis codes at this time. Additional time is needed to fully and accurately evaluate cases currently grouping to the MS-DRGs in MDC 15 to consider if restructuring the current MS-DRGs would better recognize the clinical distinctions of these patient populations. We will continue to monitor the data as we consider these issues in connection with future rulemaking. As we continue the analysis of the claims data with respect to MS-DRGs in MDC 08, MDC 01, and MDC 15, we welcome public comments and feedback on other factors that should be considered in the potential restructuring of these MS-DRGs. Feedback and other suggestions may be directed to MEARISTM at: https://mearis.cms.gov/public/home. As noted, interested parties should submit any MS-DRG classification change requests, including any comments and suggestions for FY 2027 consideration by October 20, 2025 via MEARISTM at: https://mearis.cms.gov/public/home. As we did for the FY 2025 IPPS/LTCH PPS proposed rule, for this FY 2026 IPPS/LTCH PPS proposed rule we are providing a test version of the ICD-10 MS-DRG GROUPER Software, Version 43, so that the public can better analyze and understand the impact of the proposals included in this FY 2026 IPPS/LTCH PPS proposed rule. We note that this test software reflects the proposed GROUPER logic for FY 2026. Therefore, it includes the new diagnosis and procedure codes that are effective for FY 2026 as reflected in Table 6A.--New Diagnosis Codes--FY 2026 and Table 6B.--New Procedure Codes--FY 2026 associated with this FY 2026 IPPS/LTCH PPS proposed rule and does not include the diagnosis codes that are invalid beginning in FY 2026 as reflected in Table 6C.-- Invalid Diagnosis Codes--FY 2026 and Table 6D.--Invalid Procedure Codes--FY 2026 associated with this FY 2026 IPPS/LTCH PPS proposed rule. These tables are not published in the Addendum to this FY 2026 IPPS/LTCH PPS proposed rule, but are available 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 FY 2026 IPPS/LTCH PPS proposed rule. Because the diagnosis and procedure codes no longer valid for FY 2026 are not reflected in the test software, we are making available a supplemental file in Table 6P.1a that includes the mapped Version 43 FY 2026 ICD-10- CM codes and the deleted Version 42 FY 2025 ICD-10-CM codes and Table 6P.1b that includes the mapped Version 43 FY 2026 ICD-10-PCS codes and the deleted Version 42.1 FY 2025 ICD-10-PCS codes that should be used for testing purposes with users' available claims data. Therefore, users will have access to the test software allowing them to build case examples that reflect the proposals included in this FY 2026 IPPS/LTCH PPS proposed rule. In addition, users will be able to view the draft version of the ICD-10 MS-DRG Definitions Manual, Version 43 that contains the documentation for proposed FY 2026 ICD-10 MS-DRG GROUPER Version 43 logic changes and will also be able to view a draft version of the Definitions of Medicare Code Edits (MCE) Manual to review any changes that will become effective October 1 for FY 2026. As a result of new and modified code updates approved after the annual spring ICD- 10 Coordination and Maintenance Committee meeting, any further changes to the MCE will be reflected in the finalized Definitions of Medicare Code Edits (MCE) Manual, made available in association with the annual IPPS/LTCH PPS final rule. We are making available the draft FY 2026 ICD-10 MCE Version 43 Manual file on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software. The MCE manual is comprised of two chapters: Chapter 1: Edit code lists provides a listing of each edit, an explanation of each edit, and as applicable, the diagnosis and/or procedure codes for each edit, and Chapter 2: Code list changes summarizes the changes in the edit code lists (for example, additions and deletions) from the prior release of the MCE software. The public may submit any questions, comments, concerns, or recommendations regarding the MCE to the CMS mailbox at [email protected] for our review and consideration. The test version of the ICD-10 MS-DRG GROUPER Software, Version 43, the draft version of the ICD-10 MS-DRG Definitions Manual, Version 43, the draft version of the Definitions of Medicare Code Edits Manual, Version 43, and the supplemental mapping files in Tables 6P.1a and 6P.1b of the FY 2025 and FY 2026 ICD-10-CM [[Page 18014]] diagnosis codes and ICD-10-PCS procedure codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software. The following are the changes that we are proposing to the MS-DRGs for FY 2026. We are inviting 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 this FY 2026 IPPS/ LTCH PPS proposed rule. In some cases, we are proposing changes to the MS-DRG classifications based on our analysis of claims data and clinical appropriateness. In other cases, we are proposing to maintain the existing MS-DRG classifications based on our analysis of claims data and clinical appropriateness. For this FY 2026 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2024 update of the FY 2024 MedPAR file, which contains hospital bills received from October 1, 2023 through September 30, 2024. In our discussion of the proposed MS-DRG reclassification changes, we refer to these claims data as the ``September 2024 update of the FY 2024 MedPAR file.'' 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 clinical factors 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 the FY 2021 IPPS/LTCH PPS final rule (85 FR 58448), we finalized our proposal to expand our existing criteria to create a new complication or comorbidity (CC) or major complication or comorbidity (MCC) subgroup within a base MS-DRG. Specifically, we finalized the expansion of the criteria to include the NonCC subgroup for a three-way severity level split. We stated we believed that applying these criteria to the NonCC subgroup would better reflect resource stratification as well as promote stability in the relative weights by avoiding low volume counts for the NonCC level MS-DRGs. We noted that in our analysis of MS-DRG classification requests for FY 2021 that were 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 discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661), we continue to apply the criteria to create subgroups, including application of the NonCC subgroup criteria, in our annual analysis of MS-DRG classification requests, consistent with our approach since FY 2021 when we finalized the expansion of the criteria to include the NonCC subgroup for a three-way severity level split. Accordingly, in our analysis of the MS-DRG classification requests for FY 2026 that we received by October 20, 2024, 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. ---------------------------------------------------------------------------------------------------------------- Three-way split 123 (MCC vs Two-way split 1_23 MCC Two-way split 12_3 Criteria No. CC vs NonCC) vs (CC+NonCC) (MCC+CC) vs NonCC ----------------------------------------------------------------------------------------------------------------

1. At least 500 cases in the MCC/CC/ 500+ cases for MCC group; 500+ cases for MCC 500+ cases for

NonCC group. and 500+ cases for CC group; and 500+ cases (MCC+CC) group; and group; and 500+ cases for for (CC+NonCC) group. 500+ cases for NonCC NonCC group. group.

2. At least 5% of the patients are 5%+ cases for MCC group; 5%+ cases for MCC 5%+ cases for (MCC+CC)

in the MCC/CC/NonCC group. and 5%+ cases for CC group; and 5%+ cases group; and 5%+ cases group; and 5%+ cases for for (CC+NonCC) group. for NonCC group. NonCC group.

3. There is at least a 20% 20%+ difference in average 20%+ difference in 20%+ difference in

difference in average cost between cost between MCC group and average cost between average cost between subgroups. CC group; and 20%+ MCC group and (MCC+CC) group and difference in average cost (CC+NonCC) group. NonCC group. between CC group and NonCC group.

4. There is at least a $2,000 $2,000+ difference in $2,000+ difference in $2,000+ difference in

difference in average cost between average cost between MCC average cost between average cost between subgroups. group and CC group; and MCC group and (MCC+CC) group and $2,000+ difference in (CC+NonCC) group. NonCC group. average cost between CC group and NonCC group.

5. The R2 of the split groups is R2 >3.0 for the three-way R2 >3.0 for the two- R2 >3.0 for the two-

greater than or equal to 3. split within the base MS- way 1_23 split within way 12_3 split within DRG. the base MS-DRG. the base MS-DRG. ---------------------------------------------------------------------------------------------------------------- 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 typically evaluate the most recent year of MedPAR claims data available. For example, we stated earlier that for this FY 2026 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2024 update of the FY 2024 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 typically analyze the most recent two years of data. This analysis includes two years of MedPAR claims data to compare the data results from one 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 is satisfied for a three-way split. In applying the criteria for a three-way split, a base MS-DRG is initially subdivided into the three subgroups: MCC, CC, and NonCC. Each [[Page 18015]] subgroup is then analyzed in relation to the other two subgroups using the volume (Criteria 1 and 2), average cost (Criteria 3 and 4), and reduction in variance (Criteria 5). If the criteria fail, the next step is to determine if the criteria are satisfied for a two-way split. In applying the criteria for a two-way split, a base MS-DRG is initially subdivided into two subgroups: ``with MCC'' and ``without MCC'' (1_23) or ``with CC/MCC'' and ``without CC/MCC'' (12_3). Each subgroup is then analyzed in relation to the other using the volume (Criteria 1 and 2), average cost (Criteria 3 and 4), and reduction in variance (Criteria 5). 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. 2. Pre-MDC MS-DRG 018 Chimeric Antigen Receptor (CAR) T-Cell and Other Immunotherapies We received a request to review the recent MS-DRG assignments to Pre-MDC MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies) and to clarify how decisions for the assignment of cell and gene therapies will be made moving forward. According to the requestor, for FY 2025, CMS did not assign prademagene zamikeracel (PZ), an autologous genetically engineered cell-based gene therapy, to MS-DRGs that would create clinical homogeneity and therefore, the mapping of these cases to MS-DRG 018 instead implied that estimated post-approval product pricing takes precedent for cell and gene therapies over clinical homogeneity principles. The requestor acknowledged that CMS has previously clarified that therapies mapped to Pre-MDC MS-DRG 018 do not need to be CAR T-cell products or utilized in the treatment of cancer and stated it concurs with that approach. However, the requestor indicated that the mapping of PZ to Pre-MDC MS- DRG 018 for FY 2025 also raised the following questions: Why was PZ mapped to Pre-MDC MS-DRG 018 when a different product (eladocagene exuparvovec) that is also delivered via operating room administration methods was mapped to other non-pre-MDC MS-DRGs? Why did CMS indicate that Lantidra, a recently approved cellular therapy, would map to the same MS-DRGs as existing insulin delivery therapies and technologies used to treat the subset of patients with hard-to-control Type 1 diabetes complicated by severe hypoglycemia who cannot receive a whole pancreas transplant instead of to Pre-MDC MS-DRG 018? Does CMS intend a future split of Pre-MDC MS-DRG 018 between medical and surgical cell and gene therapies to recognize the clinical resource differential between the two modalities, even if the 500 case volume threshold is not reached? Why was a product delivered via allogeneic stem cell transplant procedure (Orca-T) mapped to Pre-MDC MS-DRG 018 instead of Pre-MDC MS-DRG 014 (Allogeneic Bone Marrow Transplant)? If products delivered via stem cell transplant should be mapped to Pre-MDC MS-DRG 018 based on resource use, per the Orca-T example, why are multiple gene therapy products delivered via stem cell transplant instead mapped to Pre-MDC MS-DRGs 016 and 017 (Autologous Bone Marrow Transplant with CC/MCC and without CC/MCC, respectively)? The requestor stated the previously listed questions illustrate examples of inconsistencies with the MS-DRG mappings of cell and gene therapy products in recent years. The requestor recommended that CMS review recent MS-DRG assignments for these products and consider refinements to the approach. The requestor also urged CMS to clarify how decisions for cell and gene therapies will be made in the future. The requestor stated that if the intent of CMS is for Pre-MDC MS-DRG 018 to be a broad cell and gene therapy MS-DRG then a modification to the title of Pre-MDC MS-DRG 018 should be proposed and therapies currently assigned to other MS-DRGs should be re-mapped. The requestor also suggested that CMS clarify the process by which interested parties can submit comments on potential or proposed procedure code mappings to the MS-DRGs for code proposals discussed at the Spring ICD-10 Coordination and Maintenance (C&M) Committee meeting since, given the timing, proposed code assignments are not published in association with the annual IPPS/LTCH PPS proposed rule. Specifically, the requestor stated there is no opportunity for interested parties to provide feedback to CMS about the assignment of new codes to Pre-MDC MS-DRG 018. The requestor stated that because MS-DRG 018 is a Pre-MDC MS-DRG with a limited number of procedure codes mapping to it, it is important for interested parties to have the ability to preview potential assignments to this MS-DRG and provide feedback to CMS prior to any final mapping decisions being made. The requestor acknowledged that CMS previously responded to prior comments regarding the process of commenting on the assignment of newly created codes; however, the requestor suggested that CMS provide additional clarification. Specifically, the requestor stated that the primary comment period with respect to the Spring procedure code requests is the timeframe following the ICD-10 C&M Committee meeting and that the materials provided in association with the meeting do not contain mapping requests submitted by the code requestor. The requestor indicated that if it is to assume any new procedure code request could potentially be mapped to Pre-MDC MS-DRG 018 and submits comments accordingly, that would create an undue burden. The requestor submitted the following questions regarding the process by which interested parties may submit comments on potential procedure code mappings to MS-DRGs: Can mapping requests be submitted as part of the request for a new ICD-10-PCS procedure code or do mapping requests need to go through the MS-DRG modification process with an annual October deadline? Can CMS provide information on mapping requests as part of the ICD-10 C&M Committee meeting materials? Will comments submitted to the ICD-10 C&M Committee about potential mappings be shared with the CMS teams associated with MS-DRG mapping decisions? Should interested parties include the same comments that are submitted to the ICD-10 C&M Committee in their proposed rule comments? Will comments submitted as part of the proposed rule be considered within scope for proposed codes presented during the spring meeting that are subsequently finalized but not listed in Table 6A.-- New Diagnosis codes and Table 6B.--New Procedure Codes with proposed mappings? Do CMS' prior responses indicate that interested parties who submit comments on procedure code mappings should request code proposals presented at the spring meeting be delayed until the fall meeting? The requestor recommended that CMS address the previously listed [[Page 18016]] questions and seek input on the process by which interested parties may submit comments on potential procedure code mappings. We appreciate the requestor's feedback and suggestions regarding the classification of therapies to Pre-MDC MS-DRG 018 and the broader topic of MS-DRG mappings of cell and gene therapy products for the future. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69008 through 69010), we summarized and responded to comments regarding the mapping of procedure codes describing the application of PZ and other newly established procedure codes to Pre-MDC MS-DRG 018. We note that we previously addressed similar comments in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48806 through 48807), and we also noted that we provided detailed summaries and responses to these same or similar comments in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798 through 44806). We also refer the reader to the discussion in section II.D. of this FY 2026 IPPS/LTCH PPS proposed rule, regarding the proposed relative weight methodology for cases mapping to Pre- MDC MS-DRG 018 effective October 1, 2025, for FY 2026. With respect to the requestor's suggestion that a modification to the title of Pre-MDC MS-DRG 018 be proposed, we note that the requestor did not provide a specific recommendation for FY 2026 consideration; however, we acknowledge that there has been discussion related to requests to revise the title to Pre-MDC MS-DRG 018 in prior rulemaking, most recently in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69008 through 69010), and we continue to be interested in obtaining input from members of the public on options to consider, recognizing there are additional types of cell and gene therapies now mapping to Pre-MDC MS-DRG 018. We will continue to review additional feedback and suggestions in connection with future rulemaking. In response to the requestor's assertion that there is no opportunity for interested parties to submit feedback about MS-DRG assignments, as we have discussed in prior rulemaking (87 FR 48807 through 48808) and as noted in the request, interested parties may use current coding information as shown in the ICD-10 C&M Committee meeting materials to consider the potential MS-DRG assignments for any procedure codes that may be finalized after the Spring meeting and submit public comments for consideration. As we have noted in prior rulemaking, because the diagnosis and procedure code proposals that are presented at the Spring ICD-10-CM C&M Committee meeting for an October 1 implementation (upcoming FY) are not finalized in time to include in Table 6A.--New Diagnosis Codes and Table 6B.--New Procedure Codes in association with the proposed rule, we use our established process to examine the MS-DRG assignment for the predecessor codes to determine the most appropriate MS-DRG assignment. Specifically, we review the predecessor code and MS-DRG assignment most closely associated with the new procedure code, and in the absence of claims data, we consider other factors that may be relevant to the MS-DRG assignment, including the severity of illness, treatment difficulty, complexity of service and the resources utilized in the diagnosis and/or treatment of the condition. We have noted in prior rulemaking that this process does not automatically result in the new procedure code being assigned to the same MS-DRG or to have the same designation (O.R. versus Non-O.R.) as the predecessor code. In response to the question regarding the inclusion of information on mapping requests as part of the ICD-10 C&M Committee meeting materials, we note that, as announced at each ICD-10 C&M Committee meeting, there is no discussion of MS-DRGs, payment, coverage, or billing at the ICD-10 C&M Committee meetings; therefore, we do not include such information in the meeting materials made publicly available in association with the meeting. Rather, we state that any issues related to MS-DRGs or payment are addressed through IPPS rulemaking. The purpose of the ICD-10 C&M Committee meeting is to present code proposals based on requests received regarding coding updates (that is, additions, deletions, or revisions). Therefore, while mapping requests may be included in the submission of an ICD-10-PCS procedure code request, that information is not included in the meeting materials, nor is there any discussion about any mapping request(s) during the meeting. In response to the requestor's question regarding whether comments submitted to the ICD-10 C&M Committee about potential mappings are shared with the CMS staff associated with MS-DRG mapping decisions, we note that the comments are shared. With respect to whether interested parties should include the same comments submitted to the ICD-10 C&M Committee in the comments submitted in response to the proposed rule, we note that what comments to include and submit for each process is up to the commenter. In response to the question of whether comments submitted in response to the proposed rule would be considered within scope for proposed codes presented during the Spring meeting that are subsequently finalized but not listed in Table 6A.--New Diagnosis codes and Table 6B.--New Procedure Codes with proposed mappings, we note that the procedure code update files reflecting the newly finalized codes are made publicly available following the receipt and review of public comments received by the established deadline for the Spring coding topics, and that interested parties may choose to submit public comments on MS-DRG assignment for the agency's consideration. Lastly, in response to the question of whether interested parties considering submitting comments on procedure code mappings should request code proposals associated with the Spring meeting be delayed until the Fall meeting, we similarly note that the decision on what comments a commenter decides to include and submit in response to a code proposal is up to the commenter. We refer the reader to section II.C.11. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule for additional information regarding the ICD-10 C&M Committee meeting process. In connection with the comments and questions about how products are grouped under the IPPS MS-DRGs, specifically with respect to cell and gene therapies under Pre-MDC MS-DRG 018, for FY 2026, we also received a request to create a new neurosurgical gene therapy MS-DRG to more accurately reflect the clinical characteristics and resource intensity required for the administration of neurosurgical gene therapies, including eladocagene exuparvovec, for patients diagnosed with Aromatic L-amino acid decarboxylase (AADC) deficiency. We refer the reader to the FY 2022 IPPS/LTCH PPS final rule (86 FR 44895) and the FY 2023 IPPS/LTCH PPS final rule (87 FR 48853 through 48854) for discussion regarding eladocagene exuparvovec. The requestor (the manufacturer), expressed its appreciation for CMS' efforts to reassign cases reporting procedure code XW0Q316 (Introduction of eladocagene exuparvovec into cranial cavity and brain, percutaneous approach, new technology group 6) to a surgical MS-DRG as discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44895). According to the requestor, the decision appropriately reclassified cases involving eladocagene exuparvovec from a Non-O.R. procedure to an operating room (O.R.) procedure due to [[Page 18017]] the requirement for intraputaminal administration via a burr hole in the skull. However, the requestor did not agree with the current assignment to 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, or MS-DRGs 987, 988, and 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without MCC/CC, respectively). According to the requestor, the clinical characteristics and average costs of the cases currently assigned to MS-DRGs 628, 629, and 630 are significantly different from those associated with eladocagene exuparvovec neurosurgical gene therapy for rare disease. The requestor stated that CMS denied the request to create a new MS-DRG for FY 2023, stating that it would continue to explore appropriate mechanisms to address low volume MS-DRGs indicated for rare diseases; however, after receiving responses to the Request for Information (RFI), the requestor stated that there have not been any changes proposed to the IPPS. The requestor stated its belief that assigning cases for this gene therapy and the rare disease indicated to a new MS-DRG is both appropriate and warranted. According to the requestor, the current MS-DRGs that eladocagene exuparvovec cases group to do not adequately reflect the clinical characteristics or resource needs associated with treatment which may deter hospitals from providing this therapy. The requestor also stated there are approximately 68 gene therapy trials in the U.S. for central nervous system disorders for which over 30 of the 68 trials involve the gene therapy being administered directly into the brain parenchyma. According to the requestor, gene therapies administered surgically, including with neurosurgery, are extremely complicated, resource-intensive procedures for hospitals to undertake. These procedures require highly specialized surgeons, surgical equipment, and staff. Patients undergoing these procedures may also require continuous monitoring and longer hospital stays. The requestor stated the more intensive needs of these patients are not adequately captured in existing MS-DRGs and the creation of a new MS- DRG for neurosurgical gene therapy would help CMS proactively shape payment policy for this evolving class of therapies, thus allowing appropriate payment to support patient access to these treatments. Our analysis of the September 2024 update of the FY 2024 MedPAR file yielded zero cases reporting the administration of eladocagene exuparvovec, therefore, we believe it would be premature to consider the creation of a new neurosurgical gene therapy MS-DRG at this time. We appreciate the detailed clinical information that the requestor provided and acknowledge that cases involving neurosurgery are technically complex and that patients undergoing these procedures tend to be critically ill, many with rare diseases. We note that we did receive a new procedure code request to identify and describe the Smartflow[supreg] Neuro Cannula as the delivery mechanism to administer eladocagene exuparvovec that was included as a topic in the Spring 2025 ICD-10 Coordination and Maintenance Committee Update materials. We refer the reader to the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials for additional detailed information regarding the request, and the related materials. We continue to welcome additional feedback and comments on other options to consider on how to appropriately address low volume, high- cost treatments for rare diseases. We also note, as discussed in prior rulemaking, that this category of therapies continues to evolve, and we are in the process of carefully considering the feedback we have previously received about ways in which we can continue to appropriately reflect resource utilization while maintaining clinical coherence and stability in the relative weights under the IPPS MS-DRGs. We appreciate the recommendations and suggestions for consideration we have received and will continue to examine these complex issues in connection with future rulemaking. We acknowledge that there may be distinctions to account for as we continue to gain more experience in the use of these therapies and have additional claims data to analyze. 3. MDC 01 (Diseases and Disorders of the Nervous System) a. Logic for MS-DRGs 023 Through 027 For this FY 2026 IPPS/LTCH PPS proposed rule, we received three separate but related requests to review the MS-DRG assignments for a subset of procedures assigned to MS-DRGs 023 through 027. In this section of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we discuss each of these separate, but related requests. The first request was to create a new MS-DRG for cases involving ``chemotherapy implants'' and cases involving ``epilepsy with neurostimulator.'' The requestor noted chemotherapy implants are used to treat patients with brain tumors. They are implanted into the brain during the craniotomy procedure at the time of tumor resection. Upon implantation, these devices immediately release radiation or chemotherapeutic agents. This approach enables treatment to be initiated at the time of tumor resection without undue delay. ``Epilepsy with neurostimulator'' cases involve devices used in the treatment of medically intractable epilepsy. The neurostimulator is implanted in the skull via a craniotomy and is connected to electrodes that are implanted on the surface of the brain or in the brain through either a craniotomy or a burr hole(s). According to the requestor, like the procedure to insert a chemotherapy implant, the craniotomy procedure to insert the neurostimulator lead is performed under general anesthesia and the procedure typically takes four hours. The requestor performed their own analysis of Medicare claims data and stated they found that the average costs of cases involving chemotherapy implants and cases involving epilepsy with neurostimulators are significantly higher than the average costs of other procedures currently grouped within MS-DRG 023. The requestor asserted that as a result, these cases are not being adequately paid under the current MS-DRG. Therefore, given the limited options within the existing MS-DRG structure, the requestor recommended that CMS extract cases reporting the insertion of a chemotherapy implant and cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain, and a principal diagnosis of epilepsy from MS-DRG 023 and create a new MS-DRG for these cases with a payment rate that better aligns with the resource utilization associated with these procedures. The requestor stated that this recommendation appeared to be reasonable, given that CMS has already determined that these two subsets of cases are clinically coherent by virtue of them being currently assigned to the same MS-DRG. To begin our analysis, we reviewed the GROUPER logic for MS-DRGs 023 and 024. The requestor is correct that currently, cases involving ``chemotherapy implants'' and cases involving ``epilepsy with neurostimulator'' are assigned to the higher severity level MS-DRG 023. MS- [[Page 18018]] DRGs 023 and 024 contain a logic list referred to as ``Chemotherapy Implant.'' This logic list includes the following four ICD-10-PCS codes: ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 00H004Z................ Insertion of radioactive element, cesium-131 collagen implant into brain, open approach. 3E0Q005................ Introduction of other antineoplastic into cranial cavity and brain, open approach. 3E0Q305................ Introduction of other antineoplastic into cranial cavity and brain, percutaneous approach. 3E0Q705................ Introduction of other antineoplastic into cranial cavity and brain, via natural or artificial opening. ------------------------------------------------------------------------ The ``Chemotherapy Implant'' logic list was created for cases reporting the implantation of a chemotherapeutic agent and devices implanted in the brain, such as implantable chemotherapeutic wafers. Additionally, MS-DRGs 023 and 024 contain a logic list referred to as ``Epilepsy Principal Diagnosis'' that includes 58 ICD-10-CM diagnosis codes that describe epilepsy, and a logic list referred to as ``Neurostimulator'' that includes the following three ICD-10-PCS procedure code combinations: 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); and 0NH00NZ (Insertion of neurostimulator generator into skull, open approach), in combination with 00H04MZ (Insertion of neurostimulator lead into brain, percutaneous endoscopic approach). These two logic lists were created to capture cases involving the use of the RNS[supreg] neurostimulator, a treatment option for persons diagnosed with medically intractable epilepsy. The RNS[supreg] neurostimulator includes a cranially implanted programmable neurostimulator connected to one or two depth and/or subdural cortical strip leads that are surgically placed in or on the brain at the seizure focus. The implanted neurostimulator continuously monitors brain electrical activity and is programmed by a physician to detect abnormal patterns of electrical activity that the physician believes may lead to seizures (epileptiform activity). We refer the reader to the ICD-10 MS-DRG Definitions Manual, Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER logic for MS-DRGs 023 and 024. We then examined claims data from the September 2024 update of the FY 2024 MedPAR file for all cases in MS-DRG 023 and compared the results to cases reporting one of the four procedure codes that appear under the logic list referred to as ``Chemotherapy Implant'' in MS-DRG 023 and for all 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[supreg] neurostimulator), and a principal diagnosis of epilepsy. The following table shows our findings: MS-DRG 023--All Cases Compared to Cases Reporting the Insertion of a Chemotherapy Implant and Cases Reporting a Neurostimulator Generator Inserted Into the Skull With the Insertion of a Neurostimulator Lead Into the Brain and a Principal Diagnosis of Epilepsy ------------------------------------------------------------------------ Average MS-DRG Number of length of Average cases stay costs ------------------------------------------------------------------------ MS-DRG 023--All cases................. 12,136 10 $51,132 Cases reporting the insertion of a 176 6.4 49,743 chemotherapy implant................. Cases with principal diagnosis of 68 2.4 66,303 epilepsy with neurostimulator generator inserted into the skull and insertion of a neurostimulator lead into brain........................... ------------------------------------------------------------------------ As shown in the table, for MS-DRG 023, we identified a total of 12,136 cases, with an average length of stay of 10 days and average costs of $51,132. Of the 12,136 cases in MS-DRG 023, there were 176 cases reporting the insertion of a chemotherapy implant with an average length of stay of 6.4 days and average costs of $49,743. Additionally, there were 68 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[supreg] neurostimulator) that had a principal diagnosis of epilepsy with an average length of stay of 2.4 days and average costs of $66,303. As the data show, the 68 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[supreg] neurostimulator) and a principal diagnosis of epilepsy have average costs that are higher than the average costs of all cases in MS-DRG 023 ($66,303 compared to $51,132), and they have an average length of stay that is shorter (2.4 days compared to 10 days). The 176 cases in MS-DRG 023 reporting the insertion of a chemotherapy implant have average costs that are lower than the average costs of all cases in MS-DRG 023 ($49,743 compared to $51,132), and they have an average length of stay that is shorter (6.4 days compared to 10 days). We reviewed the claims data, and do not believe the data support creating a new MS-DRG for cases reporting the insertion of a chemotherapy implant and 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[supreg] neurostimulator) and a principal diagnosis of epilepsy. The results of the claims analysis as [[Page 18019]] previously summarized indicate the cases reporting the insertion of a chemotherapy implant demonstrate comparable resource utilization with other cases in their currently assigned MS-DRG. Further, the claims data analysis indicates that these two subsets of cases, that is cases reporting the insertion of a chemotherapy implant and 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[supreg] neurostimulator) and a principal diagnosis of epilepsy and cases reporting the insertion of a chemotherapy implant, do not demonstrate comparable resource utilization. The cases in MS-DRG 023 reporting the insertion of a chemotherapy implant have average costs that are lower than the average costs of cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain and a principal diagnosis of epilepsy ($49,743 compared to $66,303), and they have an average length of stay that is longer (6.4 days compared to 2.4 days). Therefore, based on review of the claims data, we are not proposing to create a new-MS-DRG for cases reporting the insertion of a chemotherapy implant and 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[supreg] neurostimulator) and a principal diagnosis of epilepsy for FY 2026. However, while our analysis of the claims data does not support creating a new MS-DRG for cases reporting the insertion of a chemotherapy implant and 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[supreg] neurostimulator) and a principal diagnosis of epilepsy, as discussed, 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[supreg] neurostimulator) and a principal diagnosis of epilepsy have average costs that are higher than the average costs of all cases in MS-DRG 023, with a shorter average length of stay. Accordingly, we determined 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[supreg] neurostimulator), and a principal diagnosis of epilepsy is needed in conjunction with the separate but related requests we received to review the MS-DRG assignments for a subset of procedures also assigned to MS-DRGs 023 through 027 for this FY 2026 IPPS/LTCH PPS proposed rule to ensure clinical coherence between these cases and the other cases with which they may potentially be grouped, as discussed later in this section. As noted previously, MS-DRGs 023 and 024 contain a logic list referred to as ``Chemotherapy Implant'' that includes the following four ICD-10-PCS codes: ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 00H004Z................ Insertion of radioactive element, cesium-131 collagen implant into brain, open approach. 3E0Q005................ Introduction of other antineoplastic into cranial cavity and brain, open approach. 3E0Q305................ Introduction of other antineoplastic into cranial cavity and brain, percutaneous approach. 3E0Q705................ Introduction of other antineoplastic into cranial cavity and brain, via natural or artificial opening. ------------------------------------------------------------------------ During our review of the GROUPER logic for MS-DRGs 023 and 024, we identified that the following four ICD-10-PCS procedure codes describing the insertion of a radioactive element were inadvertently excluded from the ``Chemotherapy Implant'' logic list: ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 00H001Z................ Insertion of radioactive element into brain, open approach. 00H005Z................ Insertion of radioactive element, palladium-103 collagen implant into brain, open approach. 00H031Z................ Insertion of radioactive element into brain, percutaneous approach. 00H041Z................ Insertion of radioactive element into brain, percutaneous endoscopic approach. ------------------------------------------------------------------------ In review of this finding, we analyzed claims data from the September 2024 update of the FY 2024 MedPAR file for MS-DRGs 023, 024, 025, 026, and 027 for all cases and for cases reporting procedure codes 00H001Z, 00H005Z, 00H031Z, or 00H041Z. The findings from our analysis are shown in the following table. ---------------------------------------------------------------------------------------------------------------- Average MS-DRG Number of length of Average cases stay costs ---------------------------------------------------------------------------------------------------------------- 023............................... All cases............................ 12,136 10 $51,132 Cases reporting 00H001Z, 00H005Z, 0 0 0 00H031Z, or 00H041Z. 024............................... All cases............................ 4,624 5 35,516 Cases reporting 00H001Z, 00H005Z, 0 ........... 0 00H031Z, or 00H041Z. 025............................... All cases............................ 21,059 8.6 40,215 Cases reporting 00H001Z, 00H005Z, 4 3.8 40,199 00H031Z, or 00H041Z. 026............................... All cases............................ 5,833 4.1 28,404 Cases reporting 00H001Z, 00H005Z, 0 0 0 00H031Z, or 00H041Z. 027............................... All cases............................ 7,049 1.9 23,059 Cases reporting 00H001Z, 00H005Z, 0 0 0 00H031Z, or 00H041Z. ---------------------------------------------------------------------------------------------------------------- [[Page 18020]] As the data show, we found four cases reporting procedure code 00H001Z, 00H005Z, 00H031Z, or 00H041Z in MS-DRG 025, with average costs of $40,199 and an average length of stay of 3.8 days. We reviewed this issue and note radioactive elements are inserted into the brain to deliver a targeted concentrated dose of radiation directly to a brain tumor or tumor bed. They are primarily used to treat recurrent brain metastases or other aggressive brain cancers, as it allows for high- dose radiation delivery specifically to the tumor site while minimizing damage to surrounding healthy brain tissue. Although we did not identify many cases, we believe the four procedure codes describing the insertion of a radioactive element into the brain are clinically aligned with the procedure codes currently included in the ``Chemotherapy Implant'' logic list in MS-DRGs 023 and 024. Therefore, for clinical consistency we are proposing to add procedure codes 00H001Z, 00H005Z, 00H031Z, and 00H041Z to the ``Chemotherapy Implant'' logic list in MS-DRGs 023 and 024, effective October 1, 2025, for FY 2026. We are also proposing to change the description of the logic list in MS-DRGs 023 and 024 from ``Chemotherapy Implant'' to ``Antineoplastic Implant'' to better reflect the GROUPER logic that includes ICD-10-PCS procedure codes describing antineoplastic agents implanted in the brain. As mentioned previously, for this FY 2026 IPPS/LTCH PPS proposed rule, we received three separate but related requests to review and reconsider the MS-DRG assignments for a subset of procedures assigned to MS-DRGs 023 through 027. The second and third request involve the MS-DRG assignment of cases reporting procedure codes describing the insertion of deep brain stimulators (DBS). Deep brain stimulation is a surgical treatment that involves the implantation of a neurostimulator, used in the treatment of essential tremor, Parkinson's disease, dystonia, epilepsy, obsessive-compulsive disorder and chronic pain. A DBS system consists of one or two leads that are placed stereotactically at defined targets deep within the brain via one or two burr holes created in the skull. The lead is then connected to an extension that is tunneled under the skin, down the neck, and connected to a programmable neurostimulator generator that is placed under the skin. The second request we received was to reassign cases reporting the implantation of a DBS system from the lower (without MCC) severity level MS-DRG 024 to the higher (MCC) severity level MS-DRG 023, even if there is no MCC reported. The requestor suggested that if finalized, the title for MS-DRG 023 should be revised to reflect ``Craniotomy with Acute Complex Central Nervous System Principal Diagnosis with MCC or Chemotherapy Implant or Major Device Implant or Epilepsy with Neurostimulator.'' The requestor performed their own analysis and stated they found that the majority of cases reporting the implantation of a DBS system are assigned to the lower severity level MS-DRG 024. The requestor also stated that in their analysis, the cases reporting the implantation of a DBS system assigned to MS-DRG 024 have average costs that are 20% greater than all cases in MS-DRG 024. The requestor asserted that reassigning cases reporting the implantation of a DBS system from the lower (without MCC) severity level MS-DRG 024 to the higher (with MCC) severity level MS-DRG 023, even if there is no MCC reported, would better recognize hospital resource utilization when the DBS systems are inserted. The requestor identified cases reporting the implantation of a DBS system by the presence of the following procedure code combinations: 0JH60DZ (Insertion of multiple array stimulator generator into chest subcutaneous tissue and fascia, open approach), in combination with 00H00MZ (Insertion of neurostimulator lead into brain, open approach); 0JH60DZ (Insertion of multiple array stimulator generator into chest subcutaneous tissue and fascia, open approach), in combination with 00H03MZ (Insertion of neurostimulator lead into brain, percutaneous approach); 0JH60EZ (Insertion of multiple array rechargeable stimulator generator into chest subcutaneous tissue and fascia, open approach), in combination with 00H00MZ (Insertion of neurostimulator lead into brain, open approach); and 0JH60EZ (Insertion of multiple array rechargeable stimulator generator into chest subcutaneous tissue and fascia, open approach), in combination with 00H03MZ (Insertion of neurostimulator lead into brain, percutaneous approach). To begin our analysis, we again reviewed the GROUPER logic for MS- DRGs 023 and 024. The GROUPER logic for MS-DRGs 023 and 024 also contains 78 procedure code combinations representing the insertion of neurostimulator generator and a neurostimulator lead that are captured under a list referred to as ``Major Device Implant.'' The procedure codes describing the insertion of a neurostimulator generator on this list describe insertion of the neurostimulator generator into the subcutaneous areas of the chest, back, or abdomen, as well as into the skull. The procedure codes describing the insertion of a neurostimulator lead describe the insertion of the lead into the brain or the cerebral ventricle. We refer the reader to the ICD-10 MS-DRG Definitions Manual, Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER logic for MS-DRGs 023 and 024. In our analysis of this issue, we agree that the four procedure code combinations discussed previously that were identified by this requestor are included in the ``Major Device Implant'' logic list of MS-DRGs 023 and 024, but we note that 32 additional procedure code combinations exist on the ``Major Device Implant'' logic list that also describe the implantation of a DBS system by describing the insertion of a neurostimulator generator into the subcutaneous areas of the chest, back, or abdomen in combination with a code describing the insertion of a neurostimulator lead into the brain. We refer the reader to Table 6P.2a associated with this FY 2026 IPPS/LTCH PPS proposed rule (and available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for the list of the 36 ICD-10-PCS procedure code combinations in the logic of MS-DRGs 023 and 024 in the ``Major Device Implant'' logic list that we identified that describe the implantation of a DBS system and therefore were included in our analysis. We then examined claims data from the September 2024 update of the FY 2024 MedPAR file for all cases in MS-DRGs 023 and 024 and compared the results to cases reporting the implantation of a DBS system by reporting a procedure code combination that describes the insertion of a neurostimulator generator into the subcutaneous areas of the chest, back, or abdomen in combination with a code describing the insertion of a neurostimulator lead into the brain. The following table shows our findings: [[Page 18021]] MS-DRGs 023 and 024--All Cases Compared to Cases Reporting the Insertion of a Deep Brain Stimulation System ---------------------------------------------------------------------------------------------------------------- Average MS-DRG Number of length of Average costs cases stay ---------------------------------------------------------------------------------------------------------------- MS-DRG 023--All cases........................................... 12,136 10 $51,132 Cases reporting the implantation of a DBS system................ 26 8.3 81,947 MS-DRG 024--All cases........................................... 4,624 5 35,516 Cases reporting the implantation of a DBS system................ 432 1.7 43,032 ---------------------------------------------------------------------------------------------------------------- As shown in the table, for MS-DRG 023, we identified a total of 12,136 cases, with an average length of stay of 10 days and average costs of $51,132. Of the 12,136 cases in MS-DRG 023, there were 26 cases reporting the implantation of a DBS system with an average length of stay of 8.3 days and average costs of $81,947. For MS-DRG 024, we identified a total of 4,624 cases, with an average length of stay of 5 days and average costs of $35,516. Of the 4,624 cases in MS-DRG 024, there were 432 cases reporting the implantation of a DBS system with an average length of stay of 1.7 days and average costs of $43,032. We reviewed the claims data, and the data do not support reassignment of the cases reporting the implantation of a DBS system from MS-DRG 024 to MS-DRG 023 even if there is no MCC reported. The results of the claims analysis as previously summarized indicate the cases reporting the implantation of a DBS system, without reporting a secondary diagnosis designated as an MCC, that are currently assigned to MS-DRG 024, have average costs that are lower than the average costs of all cases in MS-DRG 023 ($43,032 compared to $51,132), and they have an average length of stay that is shorter (1.7 days compared to 10 days). While the average costs of these cases are higher than the average costs of all cases in MS-DRG 024 ($43,032 compared to $35,516), we believe it would not be appropriate to reassign these cases into the higher severity level MS-DRG 023, even if there is no MCC reported, because the cases would not be coherent with regard to resource utilization. The cases reporting the implantation of a DBS system, without reporting a secondary diagnosis designated as an MCC, that are currently assigned to MS-DRG 024 have average costs that are $8,100 lower than the average costs of all cases in MS-DRG 023. Therefore, we are not proposing to reassign cases reporting the implantation of a DBS system from the lower (without MCC) severity level MS-DRG 024 to the higher (with MCC) severity level MS-DRG 023, even if there is no MCC reported. However, while the analysis of the claims data does not support reassigning the cases reporting the implantation of a DBS system from the lower (without MCC) severity level MS-DRG 024 to the higher (MCC) severity level MS-DRG 023 even if there is no MCC reported, as discussed, our analysis of the claims data found the average costs of the cases reporting the implantation of a DBS system are higher than all cases in their respective MS-DRGs, while the average lengths of stay are shorter. Accordingly, and as discussed later in this section, we determined that further analysis of cases reporting the implantation of a DBS system is needed in conjunction with the separate but related requests we received to review the MS-DRG assignments for a subset of procedures also assigned to MS-DRGs 023 through 027 for this FY 2026 IPPS/LTCH PPS proposed rule to ensure clinical coherence between these cases and the other cases with which they may potentially be grouped. The third request we received was to have all cases reporting the concomitant insertion of a DBS generator and lead assigned to MS-DRGs 023 and 024. This requestor performed their own analysis and stated they found 76 claims reporting procedure codes describing the insertion of a DBS generator and a lead assigned to MS-DRGs 026 and 027 (Craniotomy and Endovascular Intracranial Procedures with CC, and without CC/MCC, respectively) and found that the average costs of these cases were 54% and 63% higher than the average of all cases in MS-DRGs 026 and 027, respectively. The requestor stated that placement of a complete DBS system, which requires placement of both the generator and the lead, during a single procedure, appears to be an efficacious and well-tolerated procedure. The requestor asserted that the relatively low reimbursement in MS-DRGs 026 and 027 can limit patient access to a single stage procedure. This requestor identified cases reporting the implantation of a DBS system by the presence of the following procedure code combinations: 0JH60DZ (Insertion of multiple array stimulator generator into chest subcutaneous tissue and fascia, open approach), in combination with 00H00MZ (Insertion of neurostimulator lead into brain, open approach); 0JH60DZ (Insertion of multiple array stimulator generator into chest subcutaneous tissue and fascia, open approach), in combination with 00H03MZ (Insertion of neurostimulator lead into brain, percutaneous approach); 0JH60EZ (Insertion of multiple array rechargeable stimulator generator into chest subcutaneous tissue and fascia, open approach), in combination with 00H00MZ (Insertion of neurostimulator lead into brain, open approach); and 0JH60EZ (Insertion of multiple array rechargeable stimulator generator into chest subcutaneous tissue and fascia, open approach), in combination with 00H03MZ (Insertion of neurostimulator lead into brain, percutaneous approach); 0JH60BZ (Insertion of single array stimulator generator into chest subcutaneous tissue and fascia, open approach), in combination with 00H00MZ (Insertion of neurostimulator lead into brain, open approach); and 0JH60BZ (Insertion of single array stimulator generator into chest subcutaneous tissue and fascia, open approach), in combination with 00H03MZ (Insertion of neurostimulator lead into brain, percutaneous approach). To begin our analysis, we again reviewed the GROUPER logic for MS- DRG 023 and 024. As mentioned previously, the GROUPER logic for MS-DRGs 023 and 024 contains 78 procedure code combinations representing the insertion of neurostimulator generator and a neurostimulator lead that are captured under a list referred to as ``Major Device Implant.'' The procedure codes describing the insertion of a neurostimulator generator on this list describe insertion of the neurostimulator generator into the subcutaneous areas of the chest, back, or abdomen, as well as into the skull. [[Page 18022]] In reviewing this request, we noted that the procedure code combinations in MS-DRG 023 and 024 captured under the ``Major Device Implant'' logic list that describe the insertion of a neurostimulator generator into the subcutaneous areas of the chest, back, or abdomen, all describe the insertion of a multiple array stimulator generator or a rechargeable multiple array stimulator generator. Procedure code combinations describing the insertion of a single array stimulator generator or a rechargeable single array stimulator generator into the subcutaneous areas of the chest, back, or abdomen and a neurostimulator lead are not captured under the ``Major Device Implant'' logic list, therefore MS-DRGs 025, 026, and 027 (Craniotomy and Endovascular Intracranial Procedures with MCC, with CC, and without CC/MCC, respectively) are assigned based on the reporting of the ICD-10-PCS procedure code describing the insertion of the neurostimulator into the brain. We refer the reader to the ICD-10 MS-DRG Definitions Manual, Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER logic for MS-DRGs 023, 024, 025, 026, and 027. We identified 36 ICD-10-PCS procedure code combinations that would describe the implantation of a DBS system with a single array stimulator generator or a rechargeable single array stimulator generator and the insertion of a neurostimulator lead into the brain. We refer the reader to Table 6P.2b associated with this FY 2026 IPPS/ LTCH PPS proposed rule (and available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for the list of the 36 ICD-10-PCS procedure code combinations we identified that describe the implantation of a DBS system with a single array stimulator generator or a rechargeable single array stimulator generator and the insertion of a neurostimulator lead into the brain. We then examined claims data from the September 2024 update of the FY 2024 MedPAR file for all cases in MS-DRGs 025, 026, and 027 and compared the results to cases reporting a procedure code combination that describes the insertion of a single array stimulator generator or a rechargeable single array stimulator generator into the subcutaneous areas of the chest, back, or abdomen in combination with a code describing the insertion of a neurostimulator lead into the brain. The following table shows our findings: MS-DRGs 025, 026, and 027--All Cases Compared to Cases Reporting the Insertion of a Single Array Generator and Insertion of Neurostimulator Lead Into Brain ---------------------------------------------------------------------------------------------------------------- Average MS-DRG Number of length of Average costs cases stay ---------------------------------------------------------------------------------------------------------------- MS-DRG 025--All cases........................................... 21,059 8.6 $40,215 Cases reporting the insertion of a single array generator and 5 5 73,168 insertion of neurostimulator lead into brain................... MS-DRG 026--All cases........................................... 5,833 4.1 28,404 Cases reporting the insertion of a single array generator and 25 2.3 42,002 insertion of neurostimulator lead into brain................... MS-DRG 027--All cases........................................... 7,049 1.9 23,059 Cases reporting the insertion of a single array generator and 78 1.4 39,381 insertion of neurostimulator lead into brain................... ---------------------------------------------------------------------------------------------------------------- As shown in the table, for MS-DRG 025, we identified a total of 21,059 cases, with an average length of stay of 8.6 days and average costs of $40,215. Of those 21,059 cases, there were 5 cases reporting the insertion of a single array generator and insertion of neurostimulator lead into brain with average costs higher than the average costs in the FY 2024 MedPAR file for MS-DRG 025 ($73,168 compared to $40,215) and a shorter average length of stay (5 days compared to 8.6 days). In MS-DRG 026, we identified a total of 5,833 cases, with an average length of stay of 4.1 days and average costs of $28,404. Of the 5,833 cases in MS-DRG 026, there were 25 cases reporting the insertion of a single array generator and insertion of neurostimulator lead into brain with average costs higher than the average costs in the FY 2024 MedPAR file for MS-DRG 026 ($42,002 compared to $28,404) and a shorter average length of stay (2.3 days compared to 4.1 days). In MS-DRG 027, we identified a total of 7,049 cases, with an average length of stay of 1.9 days and average costs of $23,059. Of the 7,049 cases in MS-DRG 027, there were 78 cases reporting the insertion of a single array generator and insertion of neurostimulator lead into brain with average costs higher than the average costs in the FY 2024 MedPAR file for MS-DRG 027 ($39,381 compared to $23,059) and a shorter average length of stay (1.4 days compared to 1.9 days). As the data show, the cases in MS-DRGs 025, 026, and 027 reporting the insertion of a single array generator and insertion of neurostimulator lead into brain have average costs that are higher than the average costs of all cases in their respective MS- DRGs. We reviewed the clinical issues and note a deep brain stimulator typically has one or two leads implanted in the brain, depending on whether one or both sides of the brain need treatment. A single array stimulator generator has one port where one lead can be connected. A multiple array stimulator generator has two or more ports where two or more leads can be connected. We believe the procedure code combinations that describe the insertion of a single array stimulator generator or a rechargeable single array stimulator generator into the subcutaneous areas of the chest, back, or abdomen in combination with a code describing the insertion of a neurostimulator lead into the brain are clinically coherent with the procedure code combinations in MS-DRG 023 and 024 captured under the ``Major Device Implant'' logic list that describe the insertion of a multiple array stimulator generator or a rechargeable multiple array stimulator generator into the subcutaneous areas of the chest, back, or abdomen in combination with a code describing the insertion of a neurostimulator lead into the brain. To determine how the resources for this subset of cases compared to cases in MS-DRGs 023 and 024 as a whole, we examined the average costs and length of stay for cases in MS-DRGs 023 and 024. Our findings are shown in this table. [[Page 18023]] ---------------------------------------------------------------------------------------------------------------- Average MS-DRG Number of length of Average costs cases stay ---------------------------------------------------------------------------------------------------------------- MS-DRG 023--All cases........................................... 12,136 10 $51,132 MS-DRG 024--All cases........................................... 4,624 5 35,516 ---------------------------------------------------------------------------------------------------------------- We reviewed the data and note the cases in MS-DRGs 025, 026, and 027 reporting the insertion of a single array generator and insertion of neurostimulator lead into brain have average costs that are higher and the average length of stay is shorter than all cases in MS-DRGs 023 and 024. We agree with the requestor that cases reporting the insertion of a single array generator and insertion of neurostimulator lead into brain are more resource intensive and are clinically distinct from other cases currently assigned to MS-DRGs 025, 026, and 027. However, we do not believe proposing to reassign all cases reporting the procedure code combination describing a single array generator and insertion of neurostimulator lead into brain to MS-DRGs 023 and 024, would fully address the difference in resource utilization in these cases. To explore other mechanisms to address this request, we then reexamined the separate but related requests discussed previously to review the MS-DRG assignments for a subset of procedures assigned to MS-DRGs 023 through 027. In examining these requests, we note that the first request was to reassign cases involving ``chemotherapy implants'' and cases involving ``epilepsy with neurostimulator'' from MS-DRG 023 and to create a new MS-DRG for these cases. While analysis of the claims data do not support creating a new MS-DRG for cases reporting the insertion of a chemotherapy implant and 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[supreg] neurostimulator) and a principal diagnosis of epilepsy, our analysis of that request found 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[supreg] neurostimulator) and a principal diagnosis of epilepsy have average costs that are higher than the average costs of all cases in MS-DRG 023, with a shorter average length of stay. The second request we received was to reassign cases reporting the implantation of a DBS system from the lower (without MCC) severity level MS-DRG 024 to the higher (MCC) severity level MS-DRG 023 even if there is no MCC reported. While analysis of the claims data does not support reassigning the cases reporting the implantation of a DBS system from the lower (without MCC) severity level MS-DRG 024 to the higher (MCC) severity level MS-DRG 023 even if there is no MCC reported, our analysis of that request found the average costs of the cases reporting the implantation of a DBS system are higher than all cases in their respective MS-DRGs, while the average lengths of stay are shorter. Lastly, our analysis of the third request demonstrates the cases reporting the insertion of a single array generator and insertion of neurostimulator lead into brain have average costs that are higher than the average costs of all cases in their respective MS-DRGs, while the average lengths of stay are shorter. We reviewed these issues and note intracranial neurostimulator implants, such as deep brain stimulators and RNS[supreg] neurostimulators, are similar in that these intracranial neurostimulators are implanted surgically and include placement of a neurostimulator generator and insertion of leads into specific brain regions to deliver electrical stimulation. Additionally, based on our data analysis, cases reporting the insertion of intracranial neurostimulator implants are clinically coherent in that they are similar in terms of technical complexity and hospital resource use as reflected by the similarity in average costs and average lengths of stay. We explored creating a new base MS-DRG for cases reporting the insertion of an intracranial neurostimulator implant and compared the analysis discussed previously using the claims data from the September 2024 update of the FY 2024 MedPAR file. The following table illustrates our findings for all 654 cases reporting procedure codes describing the insertion of an intracranial neurostimulator implant. Cases Reporting the Insertion of an Intracranial Neurostimulator Implant ---------------------------------------------------------------------------------------------------------------- Average Number of length of Average costs cases stay ---------------------------------------------------------------------------------------------------------------- Cases with principal diagnosis of epilepsy with neurostimulator 68 2.4 $66,303 generator inserted into the skull and insertion of a neurostimulator lead into brain................................ Cases reporting the implantation of a DBS system (insertion of a 26 8.3 81,947 multiple array generator and insertion of neurostimulator lead into brain)--with MCC.......................................... Cases reporting the insertion of a multiple array generator and 1 9 44,475 insertion of neurostimulator lead into cerebral ventricle--with MCC............................................................ Cases reporting the insertion of a single array generator and 5 5 73,168 insertion of neurostimulator lead into brain--with MCC......... Cases reporting the insertion of a multiple array generator and 5 2.2 81,517 insertion of neurostimulator lead into cerebral ventricle--with CC............................................................. Cases reporting the insertion of a single array generator and 25 2.3 42,002 insertion of neurostimulator lead into brain--with CC.......... Cases reporting the implantation of a DBS system (insertion of a 432 1.7 43,032 multiple array generator and insertion of neurostimulator lead into brain)--without MCC....................................... Cases reporting the insertion of a multiple array generator and 14 1.7 48,258 insertion of neurostimulator lead into cerebral ventricle-- without CC/MCC................................................. [[Page 18024]] Cases reporting the insertion of a single array generator and 78 1.4 39,381 insertion of neurostimulator lead into brain--without CC/MCC... ----------------------------------------------- Total....................................................... 654 2.1 47,163 ---------------------------------------------------------------------------------------------------------------- We reviewed these data and do not believe proposing a new base MS- DRG for these cases would better reflect hospital resource use. Because there were only 654 cases identified, the analysis demonstrates both a three-way and a two-way split of a new base MS-DRG would fail the criterion that there be at least 500 cases for each subgroup. The analysis also demonstrates the cases reporting a principal diagnosis of epilepsy with neurostimulator generator inserted into the skull and insertion of a neurostimulator lead into brain, and cases reporting the insertion of a single or multiple array generator with a secondary diagnosis designated as an MCC, would continue to have average costs that are higher when compared to all other cases reporting the insertion of an intracranial neurostimulator implant in a new MS-DRG. We therefore explored an alternative mechanism to address these requests. We note that in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58459 through 58462) and the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661 through 58667), we discussed requests we received 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 to MS-DRG 021 (Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage with CC). While acknowledging 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[supreg] neurostimulators) and a principal diagnosis of epilepsy have average costs that are similar to the average costs of cases in MS-DRG 021, we have stated we 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[supreg] neurostimulators) and a principal diagnosis of epilepsy from MS-DRG 023 to MS-DRGs 020, 021, and 022 (Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage, with MCC, with CC, without CC/MCC, respectively), as the cases in MS-DRGs 020, 021, and 022 are defined by a principal diagnosis of a hemorrhage. We stated that RNS[supreg] neurostimulators are not used to treat patients with diagnosis of a hemorrhage and that we 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. However, after further consideration, to explore other mechanisms to address this request, we examined MS-DRGs 020, 021, and 022 to reconsider the possibility of reassigning the cases reporting the insertion of an intracranial neurostimulator implant as we have been unable to identify another MS-DRG in MDC 01 that would be a more appropriate MS-DRG assignment for these cases based on the indication for and complexity of the procedures. The GROUPER logic for MS-DRGs 020, 021, and 022 contains a list of procedure codes describing intracranial vascular procedures that are captured under a logic list referred to as ``Intracranial Vascular Procedures'' and a list of diagnosis codes describing a diagnosis of a hemorrhage that are captured under a logic list referred to as ``Hemorrhage Principal Diagnosis.'' During our review of MS-DRGs 020, 021, and 022, we identified 57 ICD-10-PCS procedure codes describing the intracranial vascular procedures and 66 diagnosis codes describing a diagnosis of intracranial hemorrhage that were inadvertently excluded from these logic lists. We refer the reader to Table 6P.2c and Table 6P.2d associated with this FY 2026 IPPS/LTCH PPS proposed rule (and available at: https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps) for the lists of the 57 ICD-10-PCS procedure codes and 66 ICD-10-CM diagnosis codes that we identified. As these 57 procedure codes describe the intracranial vascular procedures and the 66 diagnosis codes describe a diagnosis of intracranial hemorrhage, we believe these codes are clinically aligned with the codes currently included in the ``Intracranial Vascular Procedures'' and the ``Hemorrhage Principal Diagnosis'' logic lists, respectively in MS-DRGs 020, 021, and 022. Therefore, for clinical consistency we are proposing to add the 57 procedure codes ``Intracranial Vascular Procedures'' logic list, and the 66 diagnosis codes to the ``Hemorrhage Principal Diagnosis'' logic list of MS-DRGs 020, 021, and 022, effective October 1, 2025, for FY 2026. In reviewing the claims data from the September 2024 update of the FY 2024 MedPAR file and examining the clinical considerations, we believe that the cases reporting the insertion of an intracranial neurostimulator implant could more suitably group to MS-DRGs 020, 021, and 022 and would lead to a grouping that is more coherent and better reflects the clinical severity and resource use involved in these cases. While we previously have stated that we believe it would be inappropriate to reassign cases representing a principal diagnosis of epilepsy to a MS-DRG that contains cases that represent the treatment of intracranial hemorrhage, after further consideration, we no longer believe maintaining a difference in assignment based on the indication is warranted in this subset of cases based on the fact that both treatments involve intracranial procedures and demonstrate comparable resource utilization. We also believe that cases reporting the insertion of an intracranial neurostimulator implant, regardless of principal diagnosis, share similar resource utilization such that it is no longer necessary to subdivide these cases based on the diagnosis codes reported. Accordingly, we believe it is appropriate to remove the special logic defined as ``Epilepsy Principal Diagnosis'' from the definition for assignment to the proposed modified MS-DRGs, as the cases can be appropriately grouped along with cases reporting any MDC 01 diagnosis when reported with qualifying procedures, as part of the proposed restructured MS-DRGs. Therefore, we are proposing to add 114 procedure code combinations to a new ``Intracranial Neurostimulator [[Page 18025]] Implant'' logic list in MS-DRGs 020, 021, and 022 that describe (1) the insertion of multiple or single array neurostimulator generators with the insertion of a neurostimulator lead into the brain or the cerebral ventricle and (2) the insertion of neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain. We are also proposing to delete the ``Major Device Implant,'' ``Epilepsy Principal Diagnosis,'' ``Neurostimulator'' logic lists from MS-DRGs 023 and 024. We refer the reader to Table 6P.2e associated with this FY 2026 IPPS/LTCH PPS proposed rule (and available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for the list of the 114 ICD-10-PCS procedure code combinations we propose to add to a new ``Intracranial Neurostimulator Implant'' logic list in MS-DRGs 020, 021, and 022. To compare and analyze the impact of these potential modifications, we ran a simulation using the claims data from the September 2024 update of the FY 2024 MedPAR file. The following table reflects the simulation of our proposed changes in MS-DRGs 020, 021, and 022. ---------------------------------------------------------------------------------------------------------------- Average MS-DRG Number of length of Average costs cases stay ---------------------------------------------------------------------------------------------------------------- 020............................. All Cases..................... 2,322 12.5 $71,9167 --add cases reporting 100 4.1 70,495 procedure codes describing the insertion of an intracranial neurostimulator implant. --add cases reporting one of 140 13.6 73,810 the 57 procedure codes describing an intracranial vascular procedure with one of the 66 diagnosis codes describing hemorrhage as principal diagnosis. Intracranial Vascular 2,562 12.2 71,964 Procedures with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator Implant with MCC. 021............................. All Cases..................... 642 7.8 48,421 --add cases reporting 134 2.2 47,421 procedure codes describing the insertion of an intracranial neurostimulator implant. --add cases reporting one of 45 9.3 54,617 the 57 procedure codes describing an intracranial vascular procedure with one of the 66 diagnosis codes describing hemorrhage as principal diagnosis. Intracranial Vascular 821 7 48,597 Procedures with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator Implant with CC. 022............................. All Cases..................... 385 2.4 28,243 --add cases reporting 420 1.5 41,525 procedure codes describing the insertion of an intracranial neurostimulator implant. --add cases reporting one of 1 1 24,744 the 57 procedure codes describing an intracranial vascular procedure with one of the 66 diagnosis codes describing hemorrhage as principal diagnosis. Intracranial Vascular 806 1.9 35,160 Procedures with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator Implant without CC/MCC. ---------------------------------------------------------------------------------------------------------------- We believe that this simulation supports that the resulting MS-DRG assignments would be more clinically homogeneous, coherent and better reflect hospital resource use. As the table shows, for MS-DRG 020, there were a total of 2,322 cases with an average length of stay of 12.5 days and average costs of $71,916. For MS-DRG 021, there were a total of 642 cases with an average length of stay of 7.8 days and average costs of $48,421. For MS-DRG 022, there were a total of 385 cases with an average length of stay of 2.4 days and average costs of $28,243. A review of this simulation shows that adding a new ``Intracranial Neurostimulator Implant'' logic list, while also adding 57 procedure codes to the ``Intracranial Vascular Procedures'' logic list, and 66 diagnosis codes to the ``Hemorrhage Principal Diagnosis'' logic list in MS-DRGs 020, 021 and 022 has a limited effect on the average costs of these MS-DRGs, while leading to a grouping that is more coherent and better reflects the clinical severity and resource use involved in these cases. In summary, for FY 2026, to more appropriately reflect utilization of resources for these procedures, we are proposing to add 114 procedure code combinations to a new ``Intracranial Neurostimulator Implant'' logic list in MS-DRGs 020, 021, and 022 that describe (1) the insertion of multiple or single array neurostimulator generators with the insertion of a neurostimulator lead into the brain or the cerebral ventricle and (2) the insertion of neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain. We are also proposing to add 57 procedure codes to the ``Intracranial Vascular Procedures'' logic list, and 66 diagnosis codes to the ``Hemorrhage Principal Diagnosis'' logic list of MS-DRGs 020, 021, and 022. Additionally, we are also proposing to delete the ``Major Device Implant,'' ``Epilepsy Principal Diagnosis,'' ``Neurostimulator'' logic lists from MS-DRGs 023 and 024. Lastly, for consistency, we are proposing to change the titles of MS-DRGs 020, 021, and 022 from ``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage with MCC, with CC, and without CC/MCC, respectively'' to ``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator Implant with MCC, with CC, and without CC/MCC, respectively,'' proposing to change the title of MS-DRG 023 from ``Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator'' to ``Craniotomy with Acute Complex Central Nervous System Principal Diagnosis with MCC or Antineoplastic Implant,'' and proposing to change the title of MS-DRG 024 from ``Craniotomy with Major Device Implant or Acute Complex Central Nervous System Principal Diagnosis without MCC'' to ``Craniotomy with Acute Complex Central Nervous System Principal Diagnosis without MCC'' to better reflect the assigned procedures effective October 1, 2025, for FY 2026. [[Page 18026]] b. Hypertensive Encephalopathy For this FY 2026 IPPS/LTCH PPS proposed rule, we received a request to delete MS-DRGs 077, 078, and 079 (Hypertensive Encephalopathy with MCC, with CC, and without CC/MCC, respectively). Hypertensive encephalopathy refers to brain dysfunction that occurs when the brain's blood vessels can no longer regulate blood flow due to severe or sudden rises in blood pressure, causing brain swelling and damage. It is characterized by the insidious onset of headache, nausea, and vomiting, followed by non-localizing neurologic symptoms such as restlessness, confusion, and, if the hypertension is not treated, seizures and coma. The diagnosis is based on clinical presentation, elevated blood pressure, and neurological examination, often supported by brain imaging like CT or MRI. The treatment involves immediate and rapid lowering of blood pressure with appropriate medications administered in a controlled setting. ICD-10-CM diagnosis code I67.4 (Hypertensive encephalopathy) is used to report this diagnosis. The requestor noted that effective FY 2025, a ``use additional code'' instructional note was added under diagnosis code I16.1 (Hypertensive emergency) in the ICD-10-CM Tabular List of Diseases and Injuries. Specifically, the instructional note states, ``use additional code, if applicable, to identify specific organ dysfunction, such as:'' and lists I67.4 as well as eight other ICD-10-CM diagnosis codes. The requestor stated that the addition of this ``use additional code'' instructional note has sequencing implications and requires I67.4 to be sequenced as a secondary diagnosis when hypertensive emergency and hypertensive encephalopathy are documented. As the GROUPER logic for MS-DRGs 077, 078, and 079 is defined by only diagnosis code I67.4, the requestor stated there will no longer be cases grouping to medical MS- DRGs 077, 078, and 079 because I67.4 will only be sequenced as a secondary diagnosis and I16.1 will have to be sequenced as the principal diagnosis. Instead, these cases will group to MDC 05 (Diseases and Disorders of the Circulatory System) medical MS-DRGs 304 and 305 (Hypertension with MCC and without MCC, respectively) since I16.1 is assigned to those MS-DRGs. To begin our analysis, we reviewed the ICD-10-CM Tabular List of Diseases and Injuries. The requestor is correct a ``use additional code'' instructional note was added under diagnosis code I16.1 (Hypertensive emergency) in the ICD-10-CM Tabular List of Diseases and Injuries, effective FY 2025. According to the ICD-10-CM Official Guidelines for Coding and Reporting, ``certain conditions have both an underlying etiology and multiple body system manifestations due to the underlying etiology. For such conditions the ICD-10-CM has a coding convention that requires the underlying condition be sequenced first followed by the manifestation. Wherever such a combination exists there is a `use additional code' note at the etiology code, and a `code first' note at the manifestation code. These instructional notes indicate the proper sequencing order of the codes, etiology followed by manifestation.'' We note that no such ``code first'' note appears at ICD-10-CM diagnosis code I67.4 (Hypertensive encephalopathy) in the ICD-10-CM Tabular List of Diseases and Injuries meaning the sequencing depends on the circumstances of the encounter when hypertensive emergency and hypertensive encephalopathy are documented. If providers have cases involving hypertensive emergency and hypertensive encephalopathy for which they need ICD-10 coding assistance, we encourage them to submit their questions to the American Hospital Association's Central Office on ICD-10 at https://www.codingclinicadvisor.com/. We then reviewed the GROUPER logic. The requestor is correct that diagnosis code I67.4 is the only diagnosis code listed under the heading of ``Principal Diagnosis'' in the ICD-10 MS-DRG Definitions Manual for MS-DRGs 077, 078, and 079. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 42.1, which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software, for complete documentation of the GROUPER logic for MS-DRGs 077, 078, and 079. We note that a DRG for a principal diagnosis of hypertensive encephalopathy (48 FR 39876) has existed since 1983 when Congress amended the Social Security Act to include a national DRG-based hospital prospective payment system for all Medicare patients. We then examined claims data from the September 2024 update of the FY 2024 MedPAR file for all cases in MS-DRGs 077, 078, and 079 to consider the resources involved in the cases reporting a principal diagnosis of hypertensive encephalopathy. Our findings are shown in this table. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- MS-DRG 077--All cases........................................... 1,488 5.0 $13,176 MS-DRG 078--All cases........................................... 1,846 3.3 8,591 MS-DRG 079--All cases........................................... 243 2.4 6,729 ---------------------------------------------------------------------------------------------------------------- The data reflect a moderately low volume of cases in MS-DRGs 077, 078, and 079, relatively. We then evaluated the reporting of hypertensive encephalopathy in the inpatient setting over the past few years in medical MS-DRGs 077, 078, and 079. We analyzed claims data for MS-DRGs 077, 078, and 079 from the FY 2020 through the FY 2024 MedPAR files, which were used in our analysis of claims data for MS-DRG reclassification requests effective for FY 2022 through FY 2026 to trend the number of cases assigned to these MS-DRGs over time. Our findings are shown in the following graph: [[Page 18027]] [GRAPHIC] [TIFF OMITTED] TP30AP25.000 The data show a general decline in the number of cases reporting hypertensive encephalopathy as a principal diagnosis in medical MS-DRGs 077, 078, and 079 for the past 5 years. We note that as discussed in prior rulemaking, the MS-DRGs are a classification system intended to group together diagnoses and procedures with similar clinical characteristics and utilization of resources. We generally seek to identify sufficient sets of claims data with demonstrated clinical similarity in developing diagnosis related groups rather than subsets based on single diagnoses. After review of the findings indicating a general decline in the number of cases reporting hypertensive encephalopathy as a principal diagnosis, and consideration of the intent of the MS-DRGs, we believe that there is no longer a clinical reason to maintain the MS-DRGs for hypertensive encephalopathy (MS-DRGs 077, 078, and 079) as they are defined by the reporting of one principal diagnosis code. To explore mechanisms to ensure clinical coherence between cases reporting hypertensive encephalopathy as a principal diagnosis and the other cases with which they may potentially be grouped, we then conducted an examination of all the MS-DRGs where I67.4 was also reported as principal diagnosis to determine if the diagnosis was included in any other MS-DRGs outside of MDC 01, to assess the current MS-DRG assignment of this diagnosis code. Our findings are shown in the following table. Other MS-DRGs Reporting Hypertensive Encephalopathy as Principal Diagnosis ------------------------------------------------------------------------ Average MDC MS-DRG Description Number of length of Average cases stay costs ------------------------------------------------------------------------ PRE.. 004 Tracheostomy with MV 1 52 $128,406 >96 Hours or Principal Diagnosis Except Face, Mouth and Neck without Major O.R. Procedures. 01... 025 Craniotomy and 1 16 114,582 Endovascular Intracranial Procedures with MCC. 01... 026 Craniotomy and 1 6 79,934 Endovascular Intracranial Procedures with CC. 01... 028 Spinal Procedures 1 26 58,049 with MCC. 01... 037 Extracranial 4 5.5 27,923 Procedures with MCC. 01... 038 Extracranial 1 4 12,509 Procedures with CC. 01... 040 Peripheral, Cranial 5 8.2 29,325 Nerve and Other Nervous System Procedures with MCC. 01... 041 Peripheral, Cranial 8 4.9 14,909 Nerve and Other Nervous System Procedures with CC or Peripheral Neurostimulator. 981 Extensive O.R. 10 10.3 31,543 Procedures Unrelated to Principal Diagnosis with MCC. 982 Extensive O.R. 1 1 10,926 Procedures Unrelated to Principal Diagnosis with CC. 987 Non-Extensive O.R. 2 8.5 28,020 Procedures Unrelated to Principal Diagnosis with MCC. --------------------------------- Total.............. 35 9.3 32,956 ------------------------------------------------------------------------ As shown in the table, we found 35 cases reporting hypertensive encephalopathy as the principal diagnosis in MS-DRGs other than MS-DRGs 077, 078, and 079. We note that the majority of the listed MS-DRGs are assigned to MDC 01 with one exception: PreMDC MS-DRG 004 (Tracheostomy with MV >96 Hours or Principal Diagnosis Except Face, Mouth and Neck without Major O.R. Procedures). Additionally, there were 11 cases that grouped to MS-DRGs 981, and 982 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, and with CC, respectively) and two cases that grouped to MS-DRG 987 (Non-Extensive O.R. Procedures Unrelated to Principal Diagnosis with MCC). After review of these data, we believe it would not be appropriate to reassign diagnosis code I67.4 to another MDC because it could inadvertently cause cases reporting a principal diagnosis of hypertensive encephalopathy with a nervous system procedure to be assigned to an unrelated MS-DRG. Further, we believe it is clinically appropriate to maintain the assignment of I67.4 in MDC 01 as the condition is consistent with other conditions reported by diagnosis codes assigned to MDC 01. [[Page 18028]] We then examined the MS-DRGs within MDC 01 to consider the possibility of reassigning the cases with a principal diagnosis of hypertensive encephalopathy to other MS-DRGs within MDC 01. In reviewing the claims data from the September 2024 update of the FY 2024 MedPAR file, and examining the clinical considerations, we believe that the cases reporting a principal diagnosis of hypertensive encephalopathy could suitably group to MS-DRGs 070, 071, and 072 (Nonspecific Cerebrovascular Disorders with MCC, with CC and, without CC/MCC, respectively), which contain other cerebrovascular diagnoses under the heading of ``Principal Diagnosis'' in the GROUPER logic list, noting that hypertensive encephalopathy is considered a cerebrovascular disorder, as it is a neurological condition directly caused by a sudden, severe elevation in blood pressure. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 42.1, which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software, for complete documentation of the GROUPER logic for MS-DRGs 070, 071, and 072. To determine how the resources for the cases in MS-DRGs 077, 078, and 079 compared to cases in MS-DRGs 070, 071, and 072, we examined the average costs and length of stay for cases in MS-DRGs 070, 071, and 072. Our findings are shown in the following table. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- MS-DRG 070--All cases........................................... 16,979 6.4 $14,771 MS-DRG 071--All cases........................................... 16,596 4.5 9,381 MS-DRG 072--All cases........................................... 2,687 2.9 7,047 ---------------------------------------------------------------------------------------------------------------- As reflected, the average costs of the 1,488 cases reporting a principal diagnosis of I67.4 with a secondary diagnosis designated as a MCC in MS-DRG 077 are slightly lower ($13,176 compared to $14,771) and the average length of stay is shorter (5 days compared to 6.4 days) than for all cases in MS-DRGs 070. The average costs of the 1,846 cases reporting a principal diagnosis of I67.4 with a secondary diagnosis designated as a CC in MS-DRG 078 are slightly lower ($8,591 compared to $9,381) and the average length of stay is shorter (3.3 days compared to 4.5 days) than for all cases in MS-DRGs 071. The average costs of the 243 cases reporting a principal diagnosis of I67.4 without reporting a secondary diagnosis designated as a CC or a MCC in MS-DRG 079 are slightly lower ($6,729 compared to $7,047) and the average length of stay is shorter (2.4 days compared to 2.9 days) than for all cases in MS-DRGs 072. Our analysis demonstrates that the cases reporting a principal diagnosis of I67.4 currently grouping to medical MS-DRGs 077, 078, and 079 are generally aligned with the average costs for the cases currently grouping to MS-DRGs 070, 071, and 072. While the cases reporting a principal diagnosis code describing hypertensive encephalopathy have slightly lower costs and a shorter average length of stay than for cases in MS-DRGs 070, 071, and 072, we believe reassigning diagnosis code I67.4 to MS-DRGs 070, 071, and 072 will account for the subset of patients reporting this principal diagnosis, and will appropriately reflect the resources involved in evaluating and treating these patients. During our review of this issue and the examination of the MS-DRGs within MDC 01, we noted that the title of MS-DRGs 067, 068, and 069 is ``Nonspecific CVA and Precerebral Occlusion without Infarction with MCC, with CC, and without CC/MCC, respectively'' and the title of MS- DRGs 070, 071, and 072 is ``Nonspecific Cerebrovascular Disorders, with MCC, with CC, and without CC/MCC, respectively.'' In examining the GROUPER logic for these MS-DRGs and reviewing the diagnoses listed under the heading of ``Principal Diagnosis'' in the ICD-10 MS-DRG Definitions Manual, we believe the titles for these MS-DRGs no longer accurately reflects the assigned diagnoses. Like MS-DRGs 077, 078, and 079, the titles of MS-DRGs 067, 068, 069, 070, 071, and 072 were established prior to the transition to ICD-10-CM. The terminology ``nonspecific'' in the titles for these MS-DRGs was appropriate to describe the ICD-9-CM diagnosis codes that were previously assigned to these DRGs, but as discussed in the HIPAA Administrative Simplification: Modification to Medical Data Code Set Standards To Adopt ICD-10-CM and ICD-10-PCS proposed rule (73 FR 49796 through 49803), in comparison to ICD-9-CM, ICD-10-CM diagnosis codes are very specific and that this specificity improves the richness of data for analysis and improves the accuracy of data used for medical research. Therefore, we believe it is appropriate to propose to revise the titles of these MS-DRGs for consistency. In summary, for FY 2026, we are proposing to delete MS-DRGs 077, 078, and 079. Additionally, we are proposing to reassign ICD-10-CM diagnosis code I67.4 (Hypertensive encephalopathy) from MDC 01 MS-DRGs 077, 078, and 079 to MS-DRGs 070, 071, and 072. Lastly, for consistency, we are also proposing to change the titles of MS-DRGs 067, 068, and 069 from ``Nonspecific CVA and Precerebral Occlusion without Infarction with MCC, with CC, and without CC/MCC, respectively'' to ``Precerebral Occlusion without Infarction with MCC, with CC, and without CC/MCC, respectively'' and to change the titles of MS-DRGs 070, 071, and 072 from ``Nonspecific Cerebrovascular Disorders, with MCC, with CC, and without CC/MCC, respectively'' to ``Other Cerebrovascular Disorders with MCC, with CC, and without CC/MCC, respectively'' to better reflect the assigned diagnoses. c. Encounter for Adjustment and Management of Implanted Devices of the Special Senses We identified a replication issue from the ICD-9 based MS-DRGs to the ICD-10 based MS-DRGs regarding the assignment of four ICD-10-CM diagnosis codes that describe encounters for adjustment and management of implanted devices of the special senses. Under the Version 32 ICD-9- CM based MS-DRGs, ICD-9-CM diagnosis code V53.09 (Fitting and adjustment of other devices related to nervous system and special senses), as shown in the following table, was assigned medical MS-DRGs 091, 092, and 093 (Other Disorders of Nervous System with MCC, with CC, and without CC/MCC, respectively) in MDC 01 (Diseases and Disorders of the Nervous System). The four ICD-10-CM code translations also shown in the following table, that provide more detailed and specific information, also [[Page 18029]] currently group to MS-DRGs 091, 092, and 093 in the ICD-10 MS-DRGs Version 42.1. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER logic for MS-DRGs 091, 092, and 093. ---------------------------------------------------------------------------------------------------------------- ICD-10-CM ICD-9-CM diagnosis code Description diagnosis code Description ---------------------------------------------------------------------------------------------------------------- V53.09........................ Fitting and adjustment of other Z45.31 Encounter for adjustment and devices related to nervous management of implanted visual system and special senses. substitution device. Z45.320 Encounter for adjustment and management of bone conduction device. Z45.321 Encounter for adjustment and management of cochlear device. Z45.328 Encounter for adjustment and management of other implanted hearing device. ---------------------------------------------------------------------------------------------------------------- During our review of this issue, we noted that under ICD-9-CM, diagnosis code V53.09 (Fitting and adjustment of other devices related to nervous system and special senses) did not further describe the type of device related to nervous system and special senses. This is in contrast to its four comparable ICD-10-CM code translations listed in the previous table that provide more detailed and specific information than the ICD-9-CM diagnosis code and do specify the type of device. In reviewing the four ICD-10-CM diagnosis codes listed in the previous table and the devices they describe, we believe that that Z45.31 is more appropriately assigned to MDC 02 (Diseases and Disorders of the Eye) and codes Z45.320, Z45.321, and Z45.328 are more appropriately assigned to MDC 03 (Diseases and Disorders of the Ear, Nose, Mouth and Throat). We note that an ``implanted visual substitution device,'' also known as a ``visual prosthesis,'' is a medical implant designed to partially restore vision to a patient who is blind by directly stimulating the visual pathway in the retina or brain, essentially bypassing damaged photoreceptor cells in the eye and providing a basic visual perception through electrical stimulation. Bone conduction devices, also known as bone conduction hearing aids, amplify sound via bone conduction, or vibrations through the bones of the skull which directly stimulate a functioning cochlea. Cochlear devices and other implanted hearing devices are small electronic devices designed for patients with moderate to severe hearing loss caused by damage to the inner ear to help perceive sounds. We analyzed claims data from the September 2024 update of the FY 2024 MedPAR file to determine if there were any cases reported with diagnosis codes Z45.31, Z45.320, Z45.321, or Z45.328. One case was found in MS-DRG 983 (Extensive O.R. Procedures Unrelated to Principal Diagnosis without CC/MCC) reporting principal diagnosis Z45.321 and procedure code 09PE0SZ (Removal of hearing device from left inner ear, open approach) with costs of $5,530 and a length of stay of one day. We recognize that the volume of inpatient cases for patients with a principal diagnosis of Z45.31, Z45.320, Z45.321, or Z45.328 is low, however we believe that for clinical consistency, it is more appropriate for these cases to be assigned to MDCs that better describe the indication of the implanted devices of the special senses the codes describe. Accordingly, because the cases reporting principal diagnoses describing encounters for adjustment and management of implanted devices of the special senses are more clinically consistent in MDC 02 or MDC 03 depending on the type of device, and the diagnosis codes were initially assigned to MDC 01 MS-DRGs 091, 092, and 093 as a result of replication in the transition from ICD-9 to ICD-10 based MS-DRGs, we are proposing to reassign ICD-10-CM diagnosis code Z45.31 from MS-DRGs 091, 092, and 093 to MDC 02 MS-DRG 123 (Neurological Eye Disorders). We are also proposing to reassign ICD-10-CM diagnosis codes Z45.320, Z45.321, and Z45.328 from MS-DRGs 091, 092, and 093 to MDC 03 MS-DRGs 154, 155, and 156 (Other Ear, Nose, Mouth and Throat Diagnoses with MCC, with CC, and without CC/MCC, respectively). 4. MDC 05 (Diseases and Disorders of the Circulatory System) a. Endovascular Aneurysm Repair (EVAR) With Iliac Branch Procedures We received a request to create a new MS-DRG for cases reporting endovascular repair of abdominal aortic aneurysms that extend into at least one iliac artery to preserve blood flow to the external or internal iliac arteries. According to the requestor, aortic aneurysms extend into at least one of the iliac arteries in approximately 25% of patients with abdominal aortic aneurysms. The requestor (the manufacturer), stated that the GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis was approved by the Food and Drug Administration (FDA) in March of 2016 to be used exclusively with the GORE[supreg] EXCLUDER[supreg] Abdominal Aortic Aneurysm Endoprosthesis to isolate the common iliac artery from systemic blood flow and preserve blood flow in the external iliac and internal iliac arteries in patients with a common iliac or aortoiliac aneurysm, who have appropriate anatomy.\1\ According to the requestor, maintaining flow to the internal iliac artery and pelvic circulation using iliac branch devices or alternative techniques aims to decrease complications associated with artery occlusion.2 3 4 The requestor also stated that occluding the internal iliac artery can result in significant hip and/or [[Page 18030]] buttock claudication, erectile dysfunction, and colonic and spinal cord ischemia. --------------------------------------------------------------------------- \1\ van der Veen D, Holewijn S, Bellosta R, van Sterkenburg SMM, Heyligers JMM, Ficarelli I, G[oacute]mez Palon[eacute]s FJ, Mangialardi N, Mosquera NJ, Holden A, Reijnen MMPJ; IceBERG Study Collaboration. One Year Outcomes of an International Multicentre Prospective Cohort Study on the Gore Excluder Iliac Branch Endoprosthesis for Aorto-Iliac Aneurysms. Eur J Vasc Endovasc Surg. 2021 Aug;62(2):177-185. doi: 10.1016/j.ejvs.2021.04.006. Epub 2021 Jun 16. PMID: 34144884. \2\ Sousa LHDG, Baptista-Silva JCC, Vasconcelos V, Flumignan RLG, Nakano LCU. Internal iliac artery revascularisation versus internal iliac artery occlusion for endovascular treatment of aorto- iliac aneurysms. Cochrane Database of Systematic Reviews 2020, Issue 7. Art. No.: CD013168. DOI: 10.1002/14651858.CD013168.pub2. \3\ Parlani G, Verzini F, De Rango P, Brambilla D, Coscarella C, Ferrer C, Cao P. Long-term results of iliac aneurysm repair with iliac branched endograft: a 5-year experience on 100 consecutive cases. Eur J Vasc Endovasc Surg. 2012 Mar;43(3):287-92. doi: 10.1016/j.ejvs.2011.12.011. Epub 2012 Jan 10. PMID: 22240335. \4\ Taudorf M, Gr[oslash]nvall J, Schroeder TV, L[ouml]nn L. Endovascular Aneurysm Repair Treatment of Aortoiliac Aneurysms: Can Iliac Branched Devices Prevent Gluteal Claudication? J Vasc Interv Radiol. 2016 Feb;27(2):174-80. doi: 10.1016/j.jvir.2015.11.031. Epub 2015 Dec 22. PMID: 26706185. --------------------------------------------------------------------------- According to the requestor, endovascular aneurysm repair (EVAR) procedures that preserve blood flow to the iliac arteries are technically more challenging than conventional EVAR of the abdominal aorta, and they require increased procedure time, fluoroscopy time, and anesthesia time. The requestor stated that tortuosity and/or stenosis in the iliac territory may increase the complexity or even prevent the deployment of devices, leading to treatment failure or causing early occlusion of the branches. In such cases, some patients may develop symptoms of pelvic ischaemia.5 6 The requestor stated that current guidelines advocate the preservation of at least one internal iliac artery in patients with common iliac artery aneurysms, and iliac branched devices were developed to preserve the perfusion in the internal iliac artery.\7\ --------------------------------------------------------------------------- \5\ Donas KP, Criado FJ, Torsello G, Veith FJ, Minion DJ; PERICLES Registry Collaborators. Classification of Chimney EVAR- Related Endoleaks: Insights From the PERICLES Registry. J Endovasc Ther. 2017 Feb 1;24(1):72-74. doi: 10.1177/1526602816678994. Epub 2016 Nov 21. PMID: 27872319. \6\ Ghosh J, Murray D, Paravastu S, Farquharson F, Walker MG, Serracino-Inglott F. Contemporary management of aorto-iliac aneurysms in the endovascular era. Eur J Vasc Endovasc Surg. 2009 Feb;37(2):182-8. doi: 10.1016/j.ejvs.2008.11.001. Epub 2008 Nov 29. PMID: 19046903. \7\ van der Veen D, Holewijn S, Bellosta R, van Sterkenburg SMM, Heyligers JMM, Ficarelli I, G[oacute]mez Palon[eacute]s FJ, Mangialardi N, Mosquera NJ, Holden A, Reijnen MMPJ; IceBERG Study Collaboration. One Year Outcomes of an International Multicentre Prospective Cohort Study on the Gore Excluder Iliac Branch Endoprosthesis for Aorto-Iliac Aneurysms. Eur J Vasc Endovasc Surg. 2021 Aug;62(2):177-185. doi: 10.1016/j.ejvs.2021.04.006. Epub 2021 Jun 16. PMID: 34144884. --------------------------------------------------------------------------- The requestor also expressed concern that hospitals who treat Medicare patients with aortoiliac and common iliac aneurysms using endovascular procedures with endoprostheses are not classified appropriately based on the current MS-DRG assignment and the resources required. The requestor performed its own data analysis and indicated it found differences in resource utilization when comparing cases reporting standard EVAR of the abdominal aorta to cases reporting EVAR of the abdominal aorta combined with procedures to preserve flow to an iliac branch. According to the requestor, the disparity in resource coherency under the current MS-DRG assignment may reduce access to Medicare beneficiaries who could benefit from these procedures. The requestor stated a new MS-DRG would enable more precise payments and better resource coherency under the MS-DRGs. The procedure codes that describe EVAR using an abdominal aortic aneurysm (AAA) endoprosthesis and the procedure codes that describe EVAR using an iliac branch endoprosthesis (IBE) that are used to treat aortoiliac and iliac artery aneurysms, respectively, are listed in the following tables. Procedure Codes Describing EVAR Using an Abdominal Aortic Aneurysm (AAA) Endoprosthesis ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 04V03DZ................ Restriction of abdominal aorta with intraluminal device, percutaneous approach. 04V03EZ................ Restriction of abdominal aorta with branched or fenestrated intraluminal device, one or two arteries, percutaneous approach. 04V03FZ................ Restriction of abdominal aorta with branched or fenestrated intraluminal device, three or more arteries, percutaneous approach. ------------------------------------------------------------------------ Procedure Codes Describing EVAR Using an Iliac Branch Endoprosthesis (IBE) ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 04VC3DZ................ Restriction of right common iliac artery with intraluminal device, percutaneous approach. 04VC3EZ................ Restriction of right common iliac artery with branched or fenestrated intraluminal device, one or two arteries, percutaneous approach. 04VD3DZ................ Restriction of left common iliac artery with intraluminal device, percutaneous approach. 04VD3EZ................ Restriction of left common iliac artery with branched or fenestrated intraluminal device, one or two arteries, percutaneous approach. 04VE3DZ................ Restriction of right internal iliac artery with intraluminal device, percutaneous approach. 04VF3DZ................ Restriction of left internal iliac artery with intraluminal device, percutaneous approach. 04VH3DZ................ Restriction of right external iliac artery with intraluminal device, percutaneous approach. 04VJ3DZ................ Restriction of left external iliac artery with intraluminal device, percutaneous approach. ------------------------------------------------------------------------ Cases reporting a combination of these procedure codes (that is, any one procedure code from each list) for the endovascular treatment of aortoiliac and iliac artery aneurysms are currently assigned to MS- DRGs 268 and 269 (Aortic and Heart Assist Procedures Except Pulsation Balloon with MCC and without MCC, respectively). Based on its analysis of Medicare claims data using the previously listed codes in MS-DRGs 268 and 269, and to facilitate more precise payments for these procedures, the requestor recommended that CMS assign cases reporting a procedure code describing EVAR using an AAA endoprosthesis with a procedure code describing EVAR using an IBE to a proposed new MS-DRG titled, ``Concomitant Endovascular Abdominal Aorta and Iliac Branch Procedures''. In review of this request, we analyzed claims data from the September 2024 update of the FY 2024 MedPAR file for MS-DRGs 268 and 269 and for cases reporting standard EVAR using an AAA endoprosthesis compared to cases reporting EVAR using an AAA endoprosthesis with an IBE that are used to treat aortoiliac and iliac artery aneurysms with the previously listed procedure codes. The findings from our analysis are shown in the following table. [[Page 18031]] ------------------------------------------------------------------------ Average MS-DRG Number of length of Average cases stay costs ------------------------------------------------------------------------ MS-DRG 268--All cases................. 2,519 9.1 $62,984 MS-DRG 268--Cases reporting standard 1,500 7.4 63,877 EVAR using an AAA endoprosthesis..... MS-DRG 268--Cases reporting EVAR using 193 8.2 68,145 an AAA endoprosthesis with an IBE.... MS-DRG 269--All cases................. 10,108 2.0 39,165 MS-DRG 269--Cases reporting standard 8,655 1.8 38,562 EVAR using an AAA endoprosthesis..... MS-DRG 269--Cases reporting EVAR using 871 1.8 48,159 an AAA endoprosthesis with an IBE.... ------------------------------------------------------------------------ As shown in the table, we identified a total of 2,519 cases within MS-DRG 268 with an average length of stay of 9.1 days and average costs of $62,984. Of the 2,519 cases, we found 1,500 cases reporting standard EVAR using an AAA endoprosthesis with an average length of stay of 7.4 days and average costs of $63,877 and 193 cases reporting EVAR using an AAA endoprosthesis with an IBE with an average length of stay of 8.2 days and average costs of $68,145. The data show that the cases reporting standard EVAR using an AAA endoprosthesis have a shorter average length of stay (7.4 days versus 8.2 days) and lower average costs ($63,877 versus $68,145) compared to the average costs of the cases reporting EVAR using an AAA endoprosthesis with an IBE. The data further show that the 193 cases reporting EVAR using an AAA endoprosthesis with an IBE have a shorter average length of stay (8.2 days versus 9.1 days) and higher average costs ($68,145 versus $62,984) compared to the average length of stay and average costs of all the cases in MS-DRG 268. For MS-DRG 269, we identified a total of 10,108 cases with an average length of stay of 2.0 days and average costs of $39,165. Of the 10,108 cases, we found 8,655 cases reporting standard EVAR using an AAA endoprosthesis with an average length of stay of 1.8 days and average costs of $38,562 and 871 cases reporting EVAR using an AAA endoprosthesis with an IBE with an average length of stay of 1.8 days and average costs of $48,159. The data show that the cases reporting standard EVAR using an AAA endoprosthesis have a comparable average length of stay (1.8 days versus 1.8 days) and lower average costs ($38,562 versus $48,159) compared to the cases reporting EVAR using an AAA endoprosthesis with an IBE. The data further show that the 871 cases reporting EVAR using an AAA endoprosthesis with an IBE have a shorter average length of stay (1.8 days versus 2.0 days) and higher average costs ($48,159 versus $39,165) compared to the average length of stay and average costs of all the cases in MS-DRG 269. The findings suggest that the cases reporting EVAR using an AAA endoprosthesis with an IBE utilize greater resources compared to the cases reporting standard EVAR using an AAA endoprosthesis. We agree that patients who have aortoiliac and iliac aneurysms are a more complex population to treat, contributing to increased resource utilization. Based on our review and analysis of the cases reporting standard EVAR using an AAA endoprosthesis compared to the cases reporting EVAR using an AAA endoprosthesis with an IBE to treat aortoiliac and iliac artery aneurysms in MS-DRGs 268 and 269, we believe new MS-DRGs are warranted to differentiate the utilization of resources between standard EVAR to treat AAA and EVAR to treat AAA extending into the iliac artery. Consistent with our established process as discussed in section II.C.1.b. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, once the decision has been made to propose to make further modifications to the MS-DRGs, such as creating a new base MS-DRG, all five criteria to create subgroups must be met for the base MS-DRG to be split (or subdivided) by a CC subgroup. Therefore, we applied the criteria to create subgroups in a base MS-DRG. We note that, as shown in the table that follows, a three-way split of this proposed new base MS-DRG failed to meet the criterion that at least 500 or more cases are in each subgroup. It also failed to meet the criterion that there be at least a 20 percent difference in average costs between the CC and NonCC (without CC/MCC) subgroup and at least a $2,000 difference in average costs between the CC and NonCC (without CC/MCC) subgroup. The following table illustrates our findings. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRGs cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- With MCC........................................................ 193 8.2 $68,145 With CC......................................................... 419 2.3 48,415 Without CC/MCC.................................................. 452 1.3 47,921 ---------------------------------------------------------------------------------------------------------------- As discussed in section II.C.1.b. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, if the criteria for a three-way split fail, the next step is to determine if the criteria are satisfied for a two-way split. We therefore applied the criteria for a two-way split for the ``with MCC and without MCC'' subgroups. We note that, as shown in the table that follows, a two-way split of this base MS-DRG failed to meet the criterion that there be at least 500 cases in the with MCC subgroup. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRGs cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- With MCC........................................................ 193 8.2 $68,145 Without MCC..................................................... 871 1.8 48,159 ---------------------------------------------------------------------------------------------------------------- [[Page 18032]] We then applied the criteria for a two-way split for the ``with CC/ MCC'' and ``without CC/MCC'' subgroups. As shown in the table that follows, a two-way split of this base MS-DRG failed to meet the criterion that there be at least 500 or more cases in the without CC/ MCC subgroup and at least a 20 percent difference in average costs between the with CC/MCC and without CC/MCC subgroup. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRGs cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- With CC/MCC..................................................... 612 4.2 $54,637 Without CC/MCC.................................................. 452 1.3 47,921 ---------------------------------------------------------------------------------------------------------------- We note that because the criteria for both of the two-way splits failed, a split (or CC subgroup) is not warranted for the proposed new base MS-DRG. As a result, for FY 2026, we are proposing to create new base MS-DRG 213 (Endovascular Abdominal Aorta and Iliac Branch Procedures). The following table reflects a simulation of the proposed new base MS-DRG. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRGs cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- Proposed MS-DRG 213............................................. 1,064 3.0 $51,784 ---------------------------------------------------------------------------------------------------------------- b. Concomitant Single Valve Procedure With Open Surgical Ablation In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44836 through 44848), we discussed a two-part request we received to review the MS- DRG assignments for cases involving the surgical ablation procedure for atrial fibrillation. The first part of the request was to create a new classification of surgical ablation MS-DRGs to better accommodate the costs of open concomitant surgical ablations. The second part of the request was to reassign cases describing standalone percutaneous endoscopic surgical ablation. In the part of the request relating to the costs of open concomitant surgical ablations, the requestor identified the following potential procedure combinations that would comprise an ``open concomitant surgical ablation'' procedure. Open coronary artery bypass graft (CABG) + open surgical ablation Open mitral valve repair or mitral valve replacement (MVR) + open surgical ablation Open aortic valve repair or mitral valve replacement (AVR) + open surgical ablation Open MVR + open AVR + open surgical ablation Open MVR + open CABG + open surgical ablation Open MVR + open AVR + open CABG + open surgical ablation Open AVR + open CABG + open surgical ablation As discussed in the FY 2022 IPPS/LTCH PPS final rule, we examined claims data from the March 2020 update of the FY 2019 MedPAR file and the September 2020 update of the FY 2020 MedPAR file for cases reporting procedure code combinations describing open concomitant surgical ablations and stated our analysis showed while the average lengths of stay and average costs of cases reporting procedure code combinations describing open concomitant surgical ablations are higher than all cases in their respective MS-DRG, we found variation in the volume, length of stay, and average costs of the cases. In the FY 2022 IPPS/LTCH PPS final rule, for the reasons discussed, we finalized our proposal to revise the surgical hierarchy for the MS- DRGs in MDC 05 (Diseases and Disorders of the Circulatory System) to sequence MS-DRGs 231-236 (Coronary Bypass, with or without PTCA, with or without Cardiac Catheterization or Open Ablation, with and without MCC, respectively) above MS-DRGs 228 and 229 (Other Cardiothoracic Procedures with and without MCC, respectively), effective October 1, 2021. In addition, we also finalized the assignment of cases with a procedure code describing coronary bypass and a procedure code describing open ablation to MS-DRGs 233 and 234 and changed the titles of these MS-DRGs to ``Coronary Bypass with Cardiac Catheterization or Open Ablation with and without MCC, respectively'' to reflect this reassignment for FY 2022. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48845 through 48849), we discussed a request we received to again review the MS-DRG assignment of cases involving open concomitant surgical ablation procedures. The requestor stated they continue to believe that the average hospital costs for surgical ablation for atrial fibrillation demonstrates a cost disparity compared to all procedures within their respective MS-DRGs. The requestor suggested that when open surgical ablation is performed with MVR, or AVR or MVR/AVR + CABG that these procedures are either (1) assigned to a different family of MS-DRGs or (2) assigned to MS-DRGs 216 and 217 (Cardiac Valve and Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC and with CC, respectively) similar to what CMS did with CABG and open ablation procedures in the FY 2022 rulemaking to better accommodate the added cost of open concomitant surgical ablation. We stated our analysis using the September 2021 update of the FY 2021 MedPAR file reflected that the cases reporting an open concomitant surgical ablation code combination are predominately found in the higher (CC or MCC) severity level MS-DRGs of their current base MS-DRG assignment, suggesting that the patient's co-morbid conditions may also be contributing to the higher costs of these cases. Secondly, for the numerous procedure combinations that would comprise an ``open concomitant surgical ablation'' procedure, the increase in average costs appeared to directly correlate with the number of procedures performed. For example, cases that describe ``Open MVR + Open surgical ablation'' generally demonstrated costs that were lower than cases that describe ``Open MVR + Open AVR + Open CABG + Open surgical ablation.'' Therefore, we stated we believe that additional time was needed to allow for further analysis of the claims data to [[Page 18033]] determine to what extent the patient's co-morbid conditions are also contributing to higher costs and to identify other contributing factors that might exist with respect to the increased length of stay and costs of these cases in these MS-DRGs. For the reasons summarized, and after consideration of the public comments we received, we did not make any MS-DRG changes for cases involving the open concomitant surgical ablation procedures for FY 2023. As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58681 through 58690), we again received a request to review the MS-DRG assignment of cases involving open concomitant surgical ablation procedures. The requestor recommended that CMS reassign open concomitant surgical ablation procedures for atrial fibrillation (AF) from MS-DRGs 219, 220, and 221 (Cardiac Valve and Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 216, 217, and 218. The requestor further recommended that if CMS does not reassign cases involving open concomitant surgical ablation procedures to MS- DRGs 216, 217, and 218, in the alternative, CMS should create new MS- DRGs for all open mitral or aortic valve repair or replacement procedures with concomitant surgical ablation for AF to improve clinical coherence when three to four open heart procedures are performed in one setting. The requestor stated that cases reporting open surgical ablation procedures for AF performed during open valve repair/replacement procedures are typically assigned to MS-DRGs 216, 217, 218, 219, 220, and 221, with the majority of the cases being assigned to MS-DRGs 219, 220, and 221 because of the surgical hierarchy in MDC 05 and because there is less of a need for cardiac catheterization in these cases. We stated in the final rule that the requestor performed its own data analysis, and stated their analysis showed that the data continues to demonstrate that claims with open surgical ablation procedures for AF are not clinically similar to the remaining cases in MS-DRGs 219, 220, and 221, and there are significant differences in resource utilization that reflect those clinical differences. We noted in FY 2024 IPPS/LTCH PPS final rule that our analysis of the claims data suggested that it is the performance of an aortic valve repair or replacement procedure, a mitral valve repair or replacement procedure plus another concomitant procedure that is associated with increased hospital resource utilization, not solely the performance of open surgical ablation as suggested by the requestor, when compared to other cases in their respective MS-DRGs. Therefore, for the reasons discussed, we finalized our proposal to create MS-DRG 212 (Concomitant Aortic and Mitral Valve Procedures) in MDC 05 for cases reporting an aortic valve repair or replacement procedure, a mitral valve repair or replacement procedure, and another concomitant procedure. For this FY 2026 IPPS/LTCH PPS proposed rule, we again received a request to review the MS-DRG assignment of cases involving a single open surgical valve procedure with an open surgical ablation. The requestor recommended that CMS reassign cases involving a single open surgical valve procedure with an open surgical ablation from MS-DRGs 219, 220, and 221 (Cardiac Valve and Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC, with CC, and without CC/MCC, respectively) 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). The requestor also suggested that if finalized, the title for MS-DRGs 216, 217, and 218 should be revised to ``Cardiac valve and Other Major Cardiothoracic Procedures with Cardiac Catheterization or Open Ablation, with MCC, with CC or without CC/MCC, respectively.'' The requestor stated MS-DRGs primarily focus on the most resource intensive procedure, without fully accounting for the overall resource intensity and complexity of all procedures performed and stated treating AF as a secondary condition is one such example. The requestor stated that AF, if not treated early after diagnosis, continues to worsen and is associated with stroke and mortality risk, and significantly higher healthcare spending. According to the requestor, a majority of AF patients undergoing surgical ablation procedures are older and frailer than non-surgical ablation valvular patients, and these patients frequently require two or even three procedures during one hospital visit to treat multiple conditions (AF, valve disease, heart failure, blocked coronaries). The requestor further stated patients undergoing multiple cardiac procedures, including surgical ablation, typically require between two and four hours of additional time in the operating room, a longer length of stay, and are at an increased risk for adverse event in recovery and noted that much like cardiac catheterization procedures, in many instances adding surgical ablation to open valvular procedures also requires an atriotomy to better visualize the mitral valve and complete the surgical ablation, making these concomitant procedures significantly more complex than single valve procedures performed on their own. The requestor stated that the current MS-DRG assignments do not adequately pay hospitals for the resources associated with furnishing surgical ablation procedures and that therefore, it is increasingly becoming financially unviable for hospitals to perform these procedures to Medicare beneficiaries in a single admission. The requestor asserted that reassigning cases involving a single open surgical valve procedure with an open surgical ablation, which are currently assigned in MS-DRGs 219, 220, and 221, to MS-DRGs 216, 217, and 218 would accommodate the clinical complexity of performing two or more open heart procedures, would enhance clinical coherence for patients undergoing multiple procedures within MDC 05, would more accurately reflect associated costs and resource utilization, and would help minimize the need for multiple patient admissions. The requestor performed its own data analysis of the Standard Analytical File (SAF) FY 2022 Q1--Q3 report and stated they identified 1,938 cases involving a single open surgical valve procedure with an open surgical ablation that were assigned to MS-DRGs 219, 220, and 221. The requestor stated their analysis showed that the impact of reassigning the 1,938 cases would result in better resource alignment with minimal relative weight changes. Specifically, the requestor stated that their analysis showed that if the cases involving a single open surgical valve procedure with an open surgical ablation that are currently assigned to MS-DRGs 219, 220, and 221 were reassigned to MS-DRGs 216, 217, and 218, the relative weights of MS-DRGs 216, 217, 218, 219, 220, and 221 would change by - 5.35%, -4.48%, -2.59%, +0.47%, -0.93% and -0.12% respectively. As previously noted, the requestor recommended that we consider cases involving a single open surgical valve procedure with an open surgical ablation, however the requestor did not provide a specific list of procedure codes for our consideration. Therefore, we reviewed the ICD-10-PCS classification and identified 81 procedure codes describing open surgical valve procedures and eight procedure codes describing open [[Page 18034]] surgical ablation procedures. We refer readers to Table 6P.3a associated with this FY 2026 IPPS/LTCH PPS proposed rule (which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps), which sets forth the list of ICD-10-PCS procedure codes describing open surgical valve procedures and open surgical ablation procedures that we examined. To address this request and to understand the resource use for the subset of cases reporting procedure codes describing a single open surgical valve procedure with an open surgical ablation, without reporting a procedure code describing the performance of a cardiac catheterization, that are currently grouping to MS-DRGs 219, 220, and 221, we examined claims data from the September 2024 update of the FY 2024 MedPAR file for the average length of stay and average costs for these cases. Our findings are shown in the following table: MS-DRGs 219-221--Cases Reporting an Open Valve Procedure and an Open Surgical Ablation Procedure Without Reporting Cardiac Catheterization ------------------------------------------------------------------------ Average MS-DRG Number of length of Average cases stay costs ------------------------------------------------------------------------ 219........... All cases............. 13,222 10 $69,728 Cases reporting an 1,657 10.1 67,532 open valve procedure and an open surgical ablation procedure without reporting cardiac catheterization. 220........... All cases............. 9,636 6.2 49,514 Cases reporting an 999 6.9 53,603 open valve procedure and an open surgical ablation procedure without reporting cardiac catheterization. 221........... All cases............. 1,146 3.6 46,900 Cases reporting an 41 5.6 48,353 open valve procedure and an open surgical ablation procedure without reporting cardiac catheterization. ------------------------------------------------------------------------ As shown in the table, the data analysis performed indicates that the 1,657 cases in MS-DRG 219 reporting an open valve procedure and an open surgical ablation procedure, without a procedure code describing the performance of a cardiac catheterization, and with a secondary diagnosis code designated as an MCC have an average length of stay that is longer than the average length of stay for all the cases in MS-DRG 219 (10.1 days versus 10 days) and lower average costs when compared to all the cases in MS-DRG 219 ($67,532 versus $69,728). The difference in average costs is $2,196 ($69,728-$67,532 = $2,196) for the cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and with a secondary diagnosis code designated as a MCC in MS-DRG 219 when compared to all the cases in MS-DRG 219. In MS-DRG 220, the 999 cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and with a secondary diagnosis code designated as a CC have an average length of stay that is longer than the average length of stay for all the cases in MS-DRG 220 (6.9 days versus 6.2 days) and higher average costs when compared to all the cases in MS-DRG 220 ($53,603 versus $49,514). The difference in average costs is $4,089 ($53,603-$49,514 = $4,089) for the cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and with a secondary diagnosis code designated as a CC in MS-DRG 220 when compared to all the cases in MS-DRG 220. In MS-DRG 221, the 41 cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and without a secondary diagnosis code designated as a CC or MCC have an average length of stay that is longer than the average length of stay for all the cases in MS- DRG 221 (5.6 days versus 3.6 days) and higher average costs when compared to all the cases in MS-DRG 221 ($48,353 versus $46,900). The difference in average costs is $1,453 ($48,353-$46,900 = $1,453) for the cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and without a secondary diagnosis code designated as a CC or MCC in MS-DRG 221 when compared to all the cases in MS-DRG 221. We then examined the data for cases in MS-DRGs 216, 217, and 218, and our findings are shown in the following table: ------------------------------------------------------------------------ Average MS-DRG Description Number of length of Average cases stay costs ------------------------------------------------------------------------ 216........... Cardiac Valve and 5,137 13.6 $88,193 Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC. 217........... Cardiac Valve and 1,571 6.8 59,943 Other Major Cardiothoracic Procedures with Cardiac Catheterization with CC. 218........... Cardiac Valve and 251 2.9 61,733 Other Major Cardiothoracic Procedures with Cardiac Catheterization without CC/MCC. ------------------------------------------------------------------------ The data analysis performed indicates that the cases in MS-DRGs 219, 220, and 221 reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization have a generally longer average length of stay and lower average costs when compared to all cases in [[Page 18035]] MS-DRGs 216, 217, and 218. As shown in the table, the data analysis performed indicates that the 1,657 cases in MS-DRG 219 reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and with a secondary diagnosis code designated as an MCC have a shorter average length of stay (10.1 days versus 13.6 days) and lower average costs ($67,532 versus $88,193) when compared to all the cases in MS-DRG 216. The difference in average costs is $20,661 ($88,193-$67,532 = $20,661) for the cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and with a secondary diagnosis code designated as a MCC in MS-DRG 219 when compared to all the cases in MS-DRG 216. The 999 cases in MS-DRG 220 reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and with a secondary diagnosis code designated as a CC have a longer average length of stay (6.9 days versus 6.8 days) and lower average costs ($53,603 versus $59,943) when compared to all the cases in MS-DRG 217. The difference in average costs is $6,340 ($59,943-$53,603 = $6,340) for the cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and with a secondary diagnosis code designated as a CC in MS-DRG 220 when compared to all the cases in MS-DRG 217. The 41 cases in MS-DRG 221 reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and without a secondary diagnosis code designated as a CC or MCC have a longer average length of stay (5.6 days versus 2.9 days) and lower average costs ($48,353 versus $61,733) when compared to all the cases in MS-DRG 218. The difference in average costs is $13,380 ($61,733-$48,353 = $13,380) for the cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization, and without a secondary diagnosis code designated as a CC or MCC in MS-DRG 221 when compared to all the cases in MS-DRG 218. While the data analysis reflects that cases that report an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization generally demonstrate slightly higher average costs in their respective MS-DRGs, we believe these cases are more suitably grouped to MS-DRGs 219, 220, and 221 where they are currently assigned, based on the closer similarities in resource utilization compared to all the cases in their respective MS-DRG. As discussed in prior rulemaking (86 FR 44878), the MS-DRG system is a system of averages and it is expected that within the diagnostic related groups, some cases may demonstrate higher than average costs, while other cases may demonstrate lower than average costs. We also provide outlier payments to mitigate extreme loss on individual cases. Moreover, the data do not indicate cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization utilize similar resources when compared to the cases assigned to MS-DRGs 216, 217, and 218. The cases are not clinically coherent with regard to resource utilization as reflected in the greater differences in average costs. Further, in examining this request, we note that the requestor suggested that CMS reassign cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization from MS-DRGs 219, 220, and 221 (Cardiac Valve and Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 216, 217, and 218 for FY 2026, however, as discussed in prior rulemaking (86 FR 44830, 87 FR 48847, and 88 FR 58683), MS-DRGs 216, 217, and 218 are defined by the performance of cardiac catheterization. We continue to be concerned about the effect on clinical coherence of assigning cases reporting an open valve procedure and an open surgical ablation procedure that do not also have a cardiac catheterization procedure reported to MS-DRGs that are defined by the performance of that procedure. Our claims analysis for this FY 2026 IPPS/LTCH PPS proposed rule continues to reflect the difference in average costs demonstrated by the two cohorts, as cases reporting the performance of a cardiac catheterization in MS-DRGs 216, 217, and 218 continue to demonstrate higher average costs. As stated previously, our analysis of the claims data continues to reflect that cases reporting an open valve procedure and an open surgical ablation procedure without a procedure code describing the performance of a cardiac catheterization are clinically coherent in their currently assigned MS-DRGs. Therefore, we are proposing to maintain the structure of MS-DRGs 216, 217, and 218 for FY 2026. We are also proposing to maintain the title of MS-DRGs 216, 217, and 218 as ``Cardiac Valve and Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC, with CC, and without CC/MCC, respectively'' for FY 2026. c. Transcatheter Aortic Valve Replacement Procedures for Aortic Regurgitation Transcatheter aortic valve replacement (TAVR) is a minimally invasive procedure that involves a catheter being inserted into an artery, without an incision for most cases, and then guided to the heart. The catheter delivers the new valve without the need for the chest or heart to be surgically opened. For this FY 2026 IPPS/LTCH PPS proposed rule, we received a request to reassign cases reporting TAVR procedures for aortic regurgitation (AR) from MS-DRGs 266 and 267 (Endovascular Cardiac Valve Replacement with or without MCC, respectively) to what the requester described as a more clinically and cost cohesive MS-DRG such as MS-DRG 215 (Other Heart Assist System Implant) and to revise the title of MS-DRG 215 to ``Other Heart Assist System Implant or Endovascular Cardiac Regurgitant Valve Replacement Procedures.'' According to the requestor, Medicare patients with severe, symptomatic AR often present with chronic, congestive heart failure, which equates to significantly greater diastolic heart failure, atrial fibrillation, and concomitant kidney, liver, and biventricular failure. As a result, managing this systemic damage requires a multidisciplinary care team, comprising of implanting physicians, cardiac surgeons, imaging cardiologists, and heart failure specialists, similar to the management required for cases currently assigned to MS-DRG 215. Further, the requestor stated TAVR procedures for AR prevent patients from devolving into heart failure and are clinically more comparable to short term heart assist device support. The requestor stated regurgitant valve disease, such as AR, is a whole-heart cardiac disease that has systemic manifestations that leads to biventricular heart failure and non-cardiac morbidity, while stenotic valve disease, such as aortic stenosis (AS), is less often associated with non-cardiac dysfunction. According to the requestor, [[Page 18036]] managing a diagnosis of AR leads to inpatient lengths of stay that are double the duration of the length of stay of patients with AS, as management of AS only requires the involvement of the implanting physician and the cardiac surgeon. The requestor identified TAVR for AR with ICD-10-CM diagnosis code I35.1 (Nonrheumatic aortic (valve) insufficiency) and ICD-10-PCS procedure code 02RF38Z (Replacement of aortic valve with zooplastic tissue, percutaneous approach) and performed their own analysis of the FY2023 Final MedPAR data. The requestor stated they found the cases reporting a diagnosis of aortic regurgitation in MS-DRG 266 and 267 have 20% higher average costs (AR = $54,425 versus AS = $45,323), two times the length of stay (AR = 5 days versus AS = 2.5 days) and trigger outlier payments two times more often (AR = 11.43% versus AS = 5.82%) compared to the cases reporting a diagnosis of aortic stenosis in MS- DRGs 266 and 267. The requestor noted in order to perform their analysis, they excluded cases reporting procedure codes describing the insertion of a percutaneous short-term external heart assist device by removing cases that reported ICD-10-PCS procedure codes 02HA3RZ (Insertion of short-term external heart assist system into heart, percutaneous approach) and 5A0221D (Assistance with cardiac output using impeller pump, continuous) from their analyses, as the requestor asserted those procedure codes were reassigned to MS-DRGs 001 and 002 (Heart Transplant or Implant of Heart Assist System with MCC and without MCC, respectively) in FY 2024. As stated previously, the requestor identified TAVR procedures for AR with ICD-10-CM diagnosis code I35.1 (Nonrheumatic aortic (valve) insufficiency) and ICD-10-PCS procedure code 02RF38Z (Replacement of aortic valve with zooplastic tissue, percutaneous approach). In reviewing this request, we identified five additional ICD-10-CM diagnosis codes that also describe aortic regurgitation and included these codes in our analysis. The five ICD-10-CM diagnosis codes we identified are listed in the following table. ------------------------------------------------------------------------ ICD-10-CM code Description ------------------------------------------------------------------------ I06.1.............................. Rheumatic aortic insufficiency. I08.0.............................. Rheumatic disorders of both mitral and aortic valves. I08.2.............................. Rheumatic disorders of both aortic and tricuspid valves. I08.3.............................. Combined rheumatic disorders of mitral, aortic and tricuspid valves. I35.2.............................. Nonrheumatic aortic (valve) stenosis with insufficiency. ------------------------------------------------------------------------ Also, we identified eight additional ICD-10-PCS procedure codes that describe TAVR procedures as well, and similarly included these codes in our analysis. The eight ICD-10-PCS procedure codes we identified are listed in the following table. ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 02RF37H............................ Replacement of aortic valve with autologous tissue substitute, transapical, percutaneous approach. 02RF37Z............................ Replacement of aortic valve with autologous tissue substitute, percutaneous approach. 02RF38H............................ Replacement of aortic valve with zooplastic tissue, transapical, percutaneous approach. 02RF38N............................ Replacement of aortic valve with zooplastic tissue, using rapid deployment technique, percutaneous approach. 02RF3JH............................ Replacement of aortic valve with synthetic substitute, transapical, percutaneous approach. 02RF3JZ............................ Replacement of aortic valve with synthetic substitute, percutaneous approach. 02RF3KH............................ Replacement of aortic valve with nonautologous tissue substitute, transapical, percutaneous approach. 02RF3KZ............................ Replacement of aortic valve with nonautologous tissue substitute, percutaneous approach. ------------------------------------------------------------------------ To begin our analysis, we reviewed the GROUPER logic. The requestor is correct that nine ICD-10-PCS codes that describe TAVR procedures mentioned previously are currently assigned to MS-DRGs 266 and 267. The requestor is also correct that in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58690 through 58696), we discussed a request we received to reassign certain cases reporting procedure codes describing the insertion of a short-term external heart assist device from MS-DRG 215 to MS-DRGs 001 and 002. We stated temporary heart assist devices are intended to support blood pressure and provide increased blood flow to critical organs in patients with cardiogenic shock, by drawing blood out of the heart and pumping it into the aorta, partially or fully bypassing the left ventricle to provide adequate circulation of blood (replace or supplement left ventricle pumping) while also allowing damaged heart muscle the opportunity to rest and recover in patients who need short-term support. In the FY 2024 IPPS/LTCH PPS final rule, we stated that we examined the claims data and the data suggested that overall, cases reporting a procedure code describing the open insertion of a short-term external heart assist device may be more appropriately aligned with the average costs of the cases in MS-DRGs 001 and 002 in comparison to MS-DRG 215, even though the average length of stay is shorter. We also stated that we reviewed the clinical considerations along with this data analysis and agreed that cases reporting a procedure code that describes the open insertion of a short-term external heart assist device are generally more resource intensive and are clinically distinct from other cases reporting procedure codes describing the insertion of short-term external heart devices by other approaches currently assigned to MS-DRG 215. Therefore, for the reasons discussed and after consideration of the public comments we received, we finalized our proposal to reassign ICD-10-PCS code 02HA0RZ (Insertion of short-term external heart assist system into heart, open approach) from MS-DRG 215 in MDC 05 to Pre-MDC MS-DRGs 001 and 002 when reported as a standalone procedure for FY 2024. Under this finalization, procedure code 02HA0RZ no longer needs to be reported as part of a procedure code combination or procedure code ``cluster'' to satisfy the logic for assignment to MS-DRGs 001 and 002. We refer the reader to the ICD- [[Page 18037]] 10 MS-DRG Definitions Manual, Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER logic for MS-DRGs 001, 002, 215, 266 and 267. While the requestor stated that procedure code 02HA3RZ (Insertion of short-term external heart assist system into heart, percutaneous approach) and procedure code 5A0221D (Assistance with cardiac output using impeller pump, continuous) were reassigned to MS-DRGs 001 and 002 (Heart Transplant or Implant of Heart Assist System with MCC and without MCC, respectively) in FY 2024, we note that our finalization in the FY 2024 IPPS/LTCH PPS final rule did not involve modifying the MS- DRG assignment of procedure code 02HA3RZ or procedure code 5A0221D. In Version 42.1, cases reporting procedure codes 02HA3RZ and 5A0221D, continue to be assigned to MS-DRG 215. We refer the reader to Appendix E of the ICD-10 MS-DRG Definitions Manual, Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for the MS-DRG assignments of procedure codes 02HA0RZ, 02HA3RZ, and 5A0221D. Next, we examined claims data from the September 2024 update of the FY 2024 MedPAR file for MS-DRG 266 and 267 to identify cases reporting one of the six ICD-10-CM codes listed previously that describe aortic regurgitation as a principal or a secondary diagnosis with one of the nine procedure codes that describe a TAVR procedure. Our findings are shown in the following table: MS-DRGs 266-267--All Cases and Cases Reporting a Procedure Code Describing TAVR With a Principal or Secondary Diagnosis of Aortic Regurgitation ---------------------------------------------------------------------------------------------------------------- Average MS-DRG Number of length of Average costs cases stay ---------------------------------------------------------------------------------------------------------------- 266............................ All cases...................... 22,083 4.5 $55,402 Cases reporting a procedure 3,616 5.7 56,010 code describing TAVR with a principal or secondary diagnosis of aortic regurgitation. 267............................ All Cases...................... 36,405 1.5 43,282 Cases reporting a procedure 4,521 1.6 41,189 code describing TAVR with a principal or secondary diagnosis of aortic regurgitation. ---------------------------------------------------------------------------------------------------------------- As shown in the table, in MS-DRG 266, we identified a total of 22,083 cases with an average length of stay of 4.5 days and average costs of $55,402. Of those 22,083 cases, there were 3,616 cases reporting a procedure code describing TAVR with a principal or secondary diagnosis of aortic regurgitation, with average costs higher than the average costs in the FY 2024 MedPAR file for MS-DRG 266 ($56,010 compared to $55,402) and a longer average length of stay (5.7 days compared to 4.5 days). In MS-DRG 267, we identified a total of 36,405 cases with an average length of stay of 1.5 days and average costs of $43,282. Of those 36,405 cases, there were 3,616 cases reporting a procedure code describing TAVR with a principal or secondary diagnosis of aortic regurgitation, with average costs lower than the average costs in the FY 2024 MedPAR file for MS-DRG 267 ($41,189 compared to $43,282) and a longer average length of stay (1.6 days compared to 1.5 days). We then examined claims data from the September 2024 update of the FY 2024 MedPAR for MS-DRG 215. Our findings are shown in the following table. ---------------------------------------------------------------------------------------------------------------- Average MS-DRG Number of length of Average costs cases stay ---------------------------------------------------------------------------------------------------------------- 215............................................................. 3,257 8.2 $87,701 ---------------------------------------------------------------------------------------------------------------- Our analysis indicates that the cases assigned to MS-DRG 215 have much higher average costs ($87,701 versus $56,010 or $41,189) and a much longer length of stay (8.2 days versus 5.7 days or 1.6 days) than the cases reporting a procedure code describing TAVR with a principal or secondary diagnosis of aortic regurgitation currently assigned to MS-DRGs 266 or 267, respectively. Instead, the average costs and average length of stay for cases reporting a procedure code describing TAVR with a principal or secondary diagnosis of aortic regurgitation appear to be generally more aligned with the average costs and average length of stay for all cases in MS-DRGs 266 and 267, where they are currently assigned. In addition, based on our review of the clinical considerations, we do not believe the procedure codes describing a TAVR are clinically coherent with the procedure codes currently assigned to MS-DRG 215. Heart assist devices, such as ventricular assist devices and artificial heart systems, provide circulatory support by taking over most of the workload of the left ventricle. Blood enters the pump through an inflow conduit connected to the left ventricle and is ejected through an outflow conduit into the body's arterial system. Heart assist devices can provide temporary left, right, or biventricular support for patients whose hearts have failed and can also be used as a bridge for patients who are awaiting a heart transplant. While we agree that TAVR can be a treatment option for patients with severe AR who are at high risk for mortality or complications due to advanced age and multiple comorbidities, we do not believe the procedure codes describing TAVR should be assigned to MS-DRG 215. AR is a condition where the aortic valve doesn't close properly causing blood to leak back into the heart. While we acknowledge that if not treated AR can gradually worsen and lead to left ventricular enlargement and eventually heart failure, we believe that patients [[Page 18038]] with indications for heart assist devices tend to be more severely ill and these inpatient admissions are associated with greater resource utilization as evidenced by the higher average costs and longer lengths of stay. Therefore, for the reasons stated previously, we are proposing to maintain the GROUPER logic for MS-DRGs 266 and 267 for FY 2026. We are also proposing to maintain the title of MS-DRGs 215 as ``Other Heart Assist System Implant'' for FY 2026. d. Percutaneous Coronary Atherectomy In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58704 through 58712), we discussed a request we received to review the MS-DRG assignment of cases describing percutaneous coronary intravascular lithotripsy (IVL). Coronary IVL is utilized in a subset of percutaneous coronary intervention (PCI) procedures when the artery is severely calcified. According to the requestor, PCIs involving coronary IVL are clinically more complex because coronary IVL is a therapy deployed exclusively in severely calcified coronary lesions, and these lesion types are associated with longer procedure times and increased utilization of hospital resources. In analyzing this request, we stated in the FY 2024 IPPS/LTCH PPS final rule that the data analysis showed that the average costs of cases reporting percutaneous coronary IVL, with or without involving the insertion of an intraluminal device, were higher than for all cases in their respective MS-DRG. Therefore for FY 2024, taking into consideration that it clinically requires greater resources to perform coronary intravascular lithotripsy, and after consideration of the public comments we received, we finalized our proposal to create MS-DRG 323 (Coronary Intravascular Lithotripsy with Intraluminal Device with MCC), MS-DRG 324 (Coronary Intravascular Lithotripsy with Intraluminal Device without MCC) and MS-DRG 325 (Coronary Intravascular Lithotripsy without Intraluminal Device) in MDC 05. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69000 through 69002), we discussed requests to modify the GROUPER logic in a number of cardiac MS-DRGs under MDC 05 (Diseases and Disorders of the Circulatory System) for which we stated further research and analysis were required, and which we would continue to consider in connection with future rulemaking. Specifically, we discussed requests we received to modify the GROUPER logic of MS-DRGs 323, 324, and 325. In two separate but related requests, the requestors suggested that we add procedure codes that describe additional PCI procedures, such as percutaneous coronary rotational, laser, and orbital atherectomy, to the GROUPER logic of new MS-DRGs 323, 324, and 325. In the FY 2025 IPPS/LTCH PPS final rule, we noted that as stated in prior rule making (88 FR 58708), atherectomy is distinct from coronary lithotripsy in that each of these procedures are defined by clinically distinct definitions and objectives. We stated additional analysis to assess for unintended consequences across the classification was needed as we have made a distinction between the root operations used to describe atherectomy (Extirpation) and the root operation used to describe lithotripsy (Fragmentation) in evaluating other requests in rulemaking. We stated we would need to consider the application of these two root operations in other scenarios where we have also specifically stated that Extirpation is not the same as Fragmentation and do not warrant similar MS-DRG assignment (85 FR 58572 through 58573). Furthermore, as MS-DRGs 323, 324, and 325 had recently become effective on October 1, 2023 (FY 2024), we stated additional time was needed to review and evaluate extensive modifications to the structure of these MS-DRGs. For this FY 2026 IPPS/LTCH PPS proposed rule, we received a request to reassign percutaneous coronary atherectomy procedures from MS-DRGs 250 and 251 (Percutaneous Cardiovascular Procedures without Intraluminal Device with MCC and without MCC, respectively) and MS-DRGs 321 and 322 (Percutaneous Cardiovascular Procedures with Intraluminal Device with MCC or 4+ Arteries/Intraluminal Devices and without MCC, respectively) to MS-DRGs 323, 324, and 325 where cases reporting percutaneous coronary IVL are assigned. Atherectomy is a procedure used to remove plaque buildup from the inside of arteries. The requestor stated that coronary atherectomy and coronary IVL target the same step of the PCI treatment process (that is, reducing the burden of calcium by preparing the vessel prior to stent delivery). The requestor further stated that coronary atherectomy is more clinically similar to coronary IVL than other routine vessel preparation techniques (such as angioplasty) in that both coronary atherectomy and coronary IVL are used to modify severe coronary calcium, treat the same patient population, and have the same intended clinical use for complex vessel preparation. Complex vessel preparation is required to increase the diameter of an artery's lumen in severely calcified lesions and improves revascularization by debulking calcification which enables better intraluminal device deployment and improved drug uptake into the vessel wall. Similar to lithotripsy, after percutaneous atherectomy is performed, the provider can implant an intraluminal device, also called a stent, to keep the vessel open. According to the requestor, removing percutaneous coronary atherectomy procedures from their current MS-DRG assignments and assigning them to MS-DRGs 323, 324, and 325 would reduce cost variance and improve clinical coherence across all PCI MS-DRGs. The requestor also stated that as atherectomy procedures involve more complex calcified lesions and require greater resources, it is not clinically or cost coherent to maintain their current MS-DRG assignments, therefore creating a new MS-DRG for all cases involving percutaneous coronary atherectomy procedures was a reasonable alternative option if CMS did not agree with the reassignment of these cases to MS-DRGs 323, 324, and 325. The requestor identified eight ICD-10-PCS codes that they state describe percutaneous coronary atherectomy. The eight codes the requestor identified are listed in the following table. ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 02C03Z7............................ Extirpation of matter from coronary artery, one artery, orbital atherectomy technique, percutaneous approach. 02C03ZZ............................ Extirpation of matter from coronary artery, one artery, percutaneous approach. 02C13Z7............................ Extirpation of matter from coronary artery, two arteries, orbital atherectomy technique, percutaneous approach. 02C13ZZ............................ Extirpation of matter from coronary artery, two arteries, percutaneous approach. 02C23Z7............................ Extirpation of matter from coronary artery, three arteries, orbital atherectomy technique, percutaneous approach. 02C23ZZ............................ Extirpation of matter from coronary artery, three arteries, percutaneous approach. 02C33Z7............................ Extirpation of matter from coronary artery, four or more arteries, orbital atherectomy technique, percutaneous approach. [[Page 18039]] 02C33ZZ............................ Extirpation of matter from coronary artery, four or more arteries, percutaneous approach. ------------------------------------------------------------------------ While we agree with the requestor that the eight procedure codes listed in the previous table describe percutaneous coronary atherectomy, we note there are additional ICD-10-PCS codes that describe percutaneous coronary atherectomy in the GROUPER logic for MS- DRGs 250, 251, 321, and 322. Therefore, in reviewing this request, we identified 12 additional ICD-10-PCS procedure codes that also describe percutaneous or percutaneous endoscopic coronary atherectomy procedures and included these codes in our analysis. The 12 codes we identified are listed in the following table. ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 02C03Z6............................ Extirpation of matter from coronary artery, one artery, bifurcation, percutaneous approach. 02C04Z6............................ Extirpation of matter from coronary artery, one artery, bifurcation, percutaneous endoscopic approach. 02C04ZZ............................ Extirpation of matter from coronary artery, one artery, percutaneous endoscopic approach. 02C13Z6............................ Extirpation of matter from coronary artery, two arteries, bifurcation, percutaneous approach. 02C14Z6............................ Extirpation of matter from coronary artery, two arteries, bifurcation, percutaneous endoscopic approach. 02C14ZZ............................ Extirpation of matter from coronary artery, two arteries, percutaneous endoscopic approach. 02C23Z6............................ Extirpation of matter from coronary artery, three arteries, bifurcation, percutaneous approach. 02C24Z6............................ Extirpation of matter from coronary artery, three arteries, bifurcation, percutaneous endoscopic approach. 02C24ZZ............................ Extirpation of matter from coronary artery, three arteries, percutaneous endoscopic approach. 02C33Z6............................ Extirpation of matter from coronary artery, four or more arteries, bifurcation, percutaneous approach. 02C34Z6............................ Extirpation of matter from coronary artery, four or more arteries, bifurcation, percutaneous endoscopic approach. 02C34ZZ............................ Extirpation of matter from coronary artery, four or more arteries, percutaneous endoscopic approach. ------------------------------------------------------------------------ We refer the reader to the ICD-10 MS-DRG Definitions Manual, Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the GROUPER logic for MS-DRGs 250, 251, 321, and 322. To begin our analysis, we examined claims data from the September 2024 update of the FY 2024 MedPAR file for MS-DRGs 250, 251, 321, and 322 to identify cases reporting a procedure code describing percutaneous or percutaneous endoscopic coronary atherectomy and compared the results to all cases in their respective MS-DRG. Our findings are shown in the following table. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- 250............................ All cases...................... 3,047 4.4 $21,383 Cases reporting percutaneous or 493 4.6 25,139 percutaneous endoscopic coronary atherectomy. 251............................ All cases...................... 2,515 2.4 14,521 Cases reporting percutaneous or 340 2.5 18,121 percutaneous endoscopic coronary atherectomy. 321............................ All cases...................... 32,517 5.0 26,309 Cases reporting percutaneous or 3,307 5.1 31,886 percutaneous endoscopic coronary atherectomy. 322............................ All cases...................... 46,600 2.4 16,792 Cases reporting percutaneous or 3,134 2.5 20,889 percutaneous endoscopic coronary atherectomy. ---------------------------------------------------------------------------------------------------------------- As shown by the table, in MS-DRG 250, we identified a total of 3,047 cases, with an average length of stay of 4.4 days and average costs of $21,383. Of those 3,047 cases, there were 493 cases reporting percutaneous or percutaneous endoscopic coronary atherectomy without reporting the insertion of an intraluminal device, with higher average costs as compared to all cases in MS-DRG 250 ($25,139 compared to $21,383), and a longer average length of stay (4.6 days compared to 4.4 days). In MS-DRG 251, we identified a total of 2,515 cases with an average length of stay of 2.4 days and average costs of $14,521. Of those 2,515 cases, there were 340 cases reporting percutaneous or percutaneous endoscopic coronary atherectomy without reporting the insertion of an intraluminal device, with higher average costs as compared to all cases in MS-DRG 251 ($18,121 compared to $14,521), and a longer average length of stay (2.5 days compared to 2.4 days). In MS-DRG 321, we identified a total of 32,517 cases with an average length of stay of 5.0 days and average costs of $26,309. Of those 32,517 cases, there were 3,307 cases reporting percutaneous or percutaneous endoscopic coronary atherectomy with the insertion of an intraluminal device, with higher average costs as compared to all cases in MS-DRG 321 ($31,886 compared to $26,309), and a longer average length of stay (5.1 days compared to 5.0 days). In MS-DRG 322, we identified a total of 46,600 cases with an average length of stay of 2.4 days and average costs of $16,792. Of those 46,600 cases, there were 3,134 cases reporting percutaneous or percutaneous endoscopic coronary atherectomy with the insertion of an [[Page 18040]] intraluminal device, with higher average costs as compared to all cases in MS-DRG 322 ($20,889 compared to $16,792), and a longer average length of stay (2.5 days compared to 2.4 days). The data analysis shows that the average costs of cases reporting percutaneous or percutaneous endoscopic coronary atherectomy, with or without involving the insertion of an intraluminal device, are higher than for all cases in their respective MS-DRG. We then examined claims data from the September 2024 update of the FY 2024 MedPAR file for MS-DRGs 323, 324, and 325. Our findings are shown in the following table. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- 323............................................................. 4,429 6.0 $39,047 324............................................................. 4,877 2.9 28,809 325............................................................. 646 3.9 29,362 ---------------------------------------------------------------------------------------------------------------- In MS-DRG 323, we found a total of 4,429 cases with an average length of stay of 6.0 days and average costs of $39,047. In MS-DRG 324, we found a total of 4,877 cases with an average length of stay of 2.9 days and average costs of $28,809. In MS-DRG 325, we found a total of 646 cases with an average length of stay of 3.9 days and average costs of $29,362. The average costs of the 3,307 cases reporting percutaneous or percutaneous endoscopic coronary atherectomy with the insertion of an intraluminal device in MS-DRG 321 are $7,161 less than the average costs of all cases in MS-DRG 323 ($39,047-$31,886 = $7,161) and have an average length of stay that is less than the average length of stay of all cases in MS-DRG 323 (5.1 days versus 6.0 days). The average costs of the 3,134 cases reporting percutaneous or percutaneous endoscopic coronary atherectomy with the insertion of an intraluminal device in MS-DRG 322 are $7,920 less than the average costs of all cases in MS- DRG 324 ($28,809-$20,899 = $7,920) and have an average length of stay that is less than the average length of stay of all cases in MS-DRG 324 (2.5 days versus 2.9 days). The average costs of the 493 cases in MS- DRG 250 and the 340 cases in MS-DRG 251 reporting percutaneous or percutaneous endoscopic coronary atherectomy without reporting a procedure code describing the insertion of an intraluminal device are $4,223 and $11,241 less than the average costs of all cases in MS-DRG 325 ($29,362-$25,139 = $7,920; $29,362-$18,121 = $11,241), respectively. These 493 cases in MS-DRG 250 have an average length of stay that is more than the average length of stay of all cases in MS- DRG 325 (4.6 days versus 3.9 days) while the 340 cases in MS-DRG 251 have an average length of stay that is less than the average length of stay of all cases in MS-DRG 325 (2.5 days versus 3.9 days). Upon analysis of the claims data and our review of the request, we do not agree with reassigning cases reporting percutaneous or percutaneous endoscopic coronary atherectomy from MS-DRGs 250, 251, 321, and 322 to MS-DRGs 323, 324, and 325. While we agree that the performance of percutaneous or percutaneous endoscopic coronary atherectomy contributes to increased resource consumption for these PCI procedures, as previously noted, the data do not support that cases reporting percutaneous or percutaneous endoscopic coronary atherectomy, with or without involving the insertion of an intraluminal device, utilize similar resources when compared to coronary IVL procedures currently assigned to MS-DRGs 323, 324, and 325. Additionally, as stated previously and in prior rule making (88 FR 58708), coronary atherectomy is distinct from coronary lithotripsy in that each of these procedures are defined by clinically distinct definitions and objectives. We continue to believe that the root operation Extirpation is not the same as the root operation Fragmentation and do not warrant similar MS-DRG assignment (85 FR 58572 through 58573). We then explored alternative options, as was requested. As discussed in prior rulemaking (88 FR 58706), we continue to agree that clinically, the presence of severe calcification can increase the treatment difficulty and complexity of service. The data analysis clearly shows that cases reporting percutaneous or percutaneous endoscopic coronary atherectomy, with or without involving the insertion of an intraluminal device, have higher average costs and longer lengths of stay compared to all the cases in their assigned MS- DRG. For these reasons, we are proposing to create new MS-DRGs for cases reporting procedure codes describing percutaneous or percutaneous endoscopic coronary atherectomy involving the insertion of an intraluminal device, as well as a new MS-DRG for cases reporting procedure codes describing percutaneous or percutaneous endoscopic coronary atherectomy without the insertion of an intraluminal device to address the differential in resource consumption. To compare and analyze the impact of our suggested modifications, we ran a simulation using the most recent claims data from the September 2024 update of the FY 2024 MedPAR file. The following table illustrates our findings for all 6,441 cases reporting procedure codes describing percutaneous or percutaneous endoscopic atherectomy involving the insertion of an intraluminal device. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- Proposed new MS-DRG XXX Percutaneous Coronary Atherectomy with 6,441 3.8 $26,535 Intraluminal Device............................................ ---------------------------------------------------------------------------------------------------------------- We applied the criteria to create subgroups in a base MS-DRG as discussed in section II.C.1.b. of the preamble of this FY 2026 IPPS/ LTCH PPS proposed rule. As shown, a three-way split of the proposed new MS-DRG failed to meet the criterion that there be at least a 20% difference in average costs between the CC and NonCC subgroup. [[Page 18041]] ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- With MCC........................................................ 3,307 5.1 $31,886 With CC......................................................... 1,861 2.8 21,961 Without CC/MCC.................................................. 1,273 2 19,322 ---------------------------------------------------------------------------------------------------------------- As discussed in section II.C.1.b. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, if the criteria for a three-way split fail, the next step is to determine if the criteria are satisfied for a two-way split. We therefore applied the criteria for a two-way split for the ``with MCC'' and ``without MCC'' subgroups and found that all five criteria were met. The following table illustrates our findings. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- With MCC........................................................ 3,307 5.1 $31,886 Without MCC..................................................... 3,134 2.5 20,889 ---------------------------------------------------------------------------------------------------------------- For the proposed new MS-DRGs for cases reporting procedure codes describing percutaneous or percutaneous endoscopic atherectomy involving the insertion of an intraluminal device, 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 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. We then ran a simulation using the most recent claims data from the September 2024 update of the FY 2024 MedPAR file for all 833 cases reporting procedure codes describing percutaneous or percutaneous endoscopic atherectomy without the insertion of an intraluminal device. The following table illustrates our findings. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- Proposed new MS-DRG XXX Percutaneous Coronary Atherectomy 833 3.7 $22,275 without Intraluminal Device.................................... ---------------------------------------------------------------------------------------------------------------- We applied the criteria to create subgroups in a base MS-DRG as discussed in section II.C.1.b. of the preamble of this FY 2026 IPPS/ LTCH PPS proposed rule. As shown, a three-way split of the proposed new MS-DRG failed to meet the criterion that there be at least 500 cases in the MCC subgroup, CC subgroup, and NonCC subgroup. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRGs cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- With MCC........................................................ 493 4.6 $25,139 With CC......................................................... 257 2.7 19,080 Without CC/MCC.................................................. 83 2 15,151 ---------------------------------------------------------------------------------------------------------------- As discussed in section II.C.1.b. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, if the criteria for a three-way split fail, the next step is to determine if the criteria are satisfied for a two-way split. We therefore applied the criteria for a two-way split for the ``with MCC'' and ``without MCC'' subgroups. We note that, as shown in the table that follows, a two-way split of this base MS-DRG failed to meet the criterion that there be at least 500 cases in the with MCC and the without MCC subgroups. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRGs cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- With MCC........................................................ 493 4.6 $25,139 Without MCC..................................................... 340 2.5 18,121 ---------------------------------------------------------------------------------------------------------------- We then applied the criteria for a two-way split for the ``with CC/ MCC'' and ``without CC/MCC'' subgroups. As shown in the table that follows, a two-way split of this base MS-DRG also failed to meet the criterion that there be [[Page 18042]] at least 500 cases in the without CC/MCC subgroup. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRGs cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- With CC/MCC..................................................... 750 3.9 $23,063 Without CC/MCC.................................................. 83 2 15,151 ---------------------------------------------------------------------------------------------------------------- We note that because the criteria for both of the two-way splits failed, a split (or CC subgroup) is not warranted for the proposed new base MS-DRG. As a result, for FY 2026, we are proposing to create a base MS-DRG for cases reporting procedure codes describing percutaneous or percutaneous endoscopic atherectomy without the insertion of an intraluminal device. In summary, for FY 2026, taking into consideration that it clinically requires greater resources to perform percutaneous or percutaneous endoscopic coronary atherectomy, we are proposing to create two new MS-DRGs with a two-way severity level split for cases describing percutaneous or percutaneous endoscopic coronary atherectomy involving the insertion of an intraluminal device in MDC 05. We are also proposing to create a new base MS-DRG for cases describing percutaneous or percutaneous endoscopic coronary atherectomy without an intraluminal device. These proposed new MS-DRGs are proposed new MS-DRG 359 (Percutaneous Coronary Atherectomy with Intraluminal Device with MCC), proposed new MS-DRG 360 (Percutaneous Coronary Atherectomy with Intraluminal Device without MCC) and proposed new MS-DRG 318 (Percutaneous Coronary Atherectomy without Intraluminal Device). We refer the reader to Table 6P.4a and Table 6P.4b associated with this FY 2026 IPPS/LTCH PPS proposed rule (which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) for the list of procedure codes we are proposing to define in the logic for each of the proposed new MS-DRGs. We note that discussion of the surgical hierarchy for the proposed modification is discussed in section II.C.10. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule. e. Complex Aortic Arch Procedures For this FY 2026 IPPS/LTCH PPS proposed rule, we received two separate but related requests to review and reconsider the MS-DRG assignments for a subset of codes describing aortic arch procedures assigned to MS DRGs 216, 217, 218, 219, 220, and 221 (Cardiac Valve & Other Major Cardiothoracic Procedure with and without Cardiac Catheterization, with MCC, with CC, without CC/MCC, respectively). In this section of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we discuss each of these separate, but related requests. The first request was to reassign cases reporting a procedure code describing endovascular restriction of the thoracic aorta with a branched or fenestrated intraluminal device from MS-DRGs 219, 220, and 221 (Cardiac Valve and Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC, with CC, and without CC/MCC, respectively) to MS-DRG 216 (Cardiac Valve and Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC). Alternatively, the requestor stated CMS could consider reassigning other similar complex aortic arch branch procedures to MS-DRG 216. The requestor suggested that if finalized, the title for MS-DRG 216 should be revised to reflect ``Cardiac Valve and Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC or with Aortic Arch Branch Intraluminal Device.'' According to the requestor, the manufacturer of the GORE[supreg] TAG[supreg] Thoracic Branch Endoprosthesis (TBE), reassignment of the procedure code describing endovascular restriction of the thoracic aorta with a branched or fenestrated intraluminal device to MS-DRG 216 would result in higher payment and better account for the differences in resource use of the cases reporting this procedure than other cases in their respective MS-DRGs where they are currently assigned. The GORE[supreg] TAG[supreg] TBE provides endovascular repair of pathologies of the descending thoracic aorta requiring a proximal landing zone including the left subclavian artery. It is a modular device that consists of three implantable fabric tubes supported by a nitinol framework. The GORE[supreg] TAG[supreg] TBE is indicated for endovascular repair of lesions such as aortic aneurysms, traumatic transections, and dissections of the descending thoracic aorta with treatment extending to the aortic arch, while maintaining flow into the left subclavian artery (Zone 2 of the aortic arch), in patients who are at high risk for debranching subclavian procedures and who have appropriate anatomy. According to the requestor, patients with lesions in the aortic arch are often more clinically complex and more difficult to treat than patients with lesions in lower parts of the aorta due to vascular tortuosity, proximity to the heart, involvement of arch vessels that feed into the head and brain, and risk of stroke and paraplegia or paraparesis from emboli released into arteries that provide blood flow to the left arm and head. The requestor stated that for lesions involving the left subclavian artery, the only other treatment options available today include open surgical repair with a synthetic graft or a hybrid procedure which includes a non-branched endovascular device and an open surgical bypass procedure of the head vessels. Per the requestor, for arch lesions involving the brachiocephalic and left common carotid arteries, a TBE device enables hybrid treatment with one fewer bypass procedure. The requestor identified cases reporting endovascular restriction of the thoracic aorta with a branched or fenestrated intraluminal device by the presence of ICD-10-PCS codes 02VX3EZ (Restriction of thoracic aorta, ascending/arch with branched or fenestrated intraluminal device, one or two arteries, percutaneous approach) and 02VW3DZ (Restriction of thoracic aorta, descending with intraluminal device, percutaneous approach) on the same claim and performed its own analysis of the claims data. The requestor stated they found 90 cases reporting endovascular restriction of the thoracic aorta with a branched or fenestrated intraluminal device, and these cases are 49% (+$32,326), 60% (+$27,727), and 38% (+$15,432) more costly compared to all cases in MS-DRGs 219, 220, and 221, respectively. While acknowledging that cases reporting endovascular restriction of the thoracic aorta with a branched or fenestrated intraluminal device typically do not require a cardiac catheterization procedure, the requestor asserted that this claims analysis [[Page 18043]] demonstrates cases reporting endovascular restriction of the thoracic aorta with a branched or fenestrated intraluminal device require resources similar to cases in MS-DRG 216. As mentioned previously, the requestor stated we could also consider reassigning cases reporting procedure codes describing other complex aortic arch branch procedures to MS-DRG 216. The requestor stated to be considered a similar ``complex aortic arch procedure'' the case should report an ICD-10-PCS code describing the endovascular restriction of the thoracic aorta with a branched or fenestrated intraluminal device with an ICD-10-PCS code describing a Zone 0 or a Zone 1 Bypass procedure. Zone 0 is in the ascending aorta, proximal to the brachiocephalic artery and Zone 1 covers the portion of the aortic arch between the brachiocephalic artery and the left common carotid artery. The requestor identified cases reporting these ``other complex aortic arch procedures'' as cases reporting ICD-10-PCS codes as reflected in the following table. ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 02VX3EZ........................... Restriction of thoracic aorta, ascending/arch with branched or fenestrated intraluminal device, one or two arteries, percutaneous approach. with one of the following: 031409J....................... Bypass left subclavian artery to right extracranial artery with autologous venous tissue, open approach. 031409K....................... Bypass left subclavian artery to left extracranial artery with autologous venous tissue, open approach. 03140AJ....................... Bypass left subclavian artery to right extracranial artery with autologous arterial tissue, open approach. 03140AK....................... Bypass left subclavian artery to left extracranial artery with autologous arterial tissue, open approach. 03140JJ....................... Bypass left subclavian artery to right extracranial artery with synthetic substitute, open approach. 03140JK....................... Bypass left subclavian artery to left extracranial artery with synthetic substitute, open approach. 03140KJ....................... Bypass left subclavian artery to right extracranial artery with nonautologous tissue substitute, open approach. 03140KK....................... Bypass left subclavian artery to left extracranial artery with nonautologous tissue substitute, open approach. 03140ZJ....................... Bypass left subclavian artery to right extracranial artery, open approach. 03140ZK....................... Bypass left subclavian artery to left extracranial artery, open approach. 03LJ0CZ....................... Occlusion of left common carotid artery with extraluminal device, open approach. 03LJ0ZZ....................... Occlusion of left common carotid artery, open approach. 03LJ3BZ....................... Occlusion of left common carotid artery with bioactive intraluminal device, percutaneous approach. 03LJ3DZ....................... Occlusion of left common carotid artery with intraluminal device, percutaneous approach. 03LJ4CZ....................... Occlusion of left common carotid artery with extraluminal device, percutaneous endoscopic approach. 03LJ4ZZ....................... Occlusion of left common carotid artery, percutaneous endoscopic approach. 031J09J....................... Bypass left common carotid artery to right extracranial artery with autologous venous tissue, open approach. 031J09K....................... Bypass left common carotid artery to left extracranial artery with autologous venous tissue, open approach. 031J09Y....................... Bypass left common carotid artery to upper artery with autologous venous tissue, open approach. 031J0AJ....................... Bypass left common carotid artery to right extracranial artery with autologous arterial tissue, open approach. 031J0AK....................... Bypass left common carotid artery to left extracranial artery with autologous arterial tissue, open approach. 031J0AY....................... Bypass left common carotid artery to upper artery with autologous arterial tissue, open approach. 031J0JJ....................... Bypass left common carotid artery to right extracranial artery with synthetic substitute, open approach. 031J0JK....................... Bypass left common carotid artery to left extracranial artery with synthetic substitute, open approach. 031J0JY....................... Bypass left common carotid artery to upper artery with synthetic substitute, open approach. 031J0KJ....................... Bypass left common carotid artery to right extracranial artery with nonautologous tissue substitute, open approach. 031J0KK....................... Bypass left common carotid artery to left extracranial artery with nonautologous tissue substitute, open approach. 031J0KY....................... Bypass left common carotid artery to upper artery with nonautologous tissue substitute, open approach. 031J0ZJ....................... Bypass left common carotid artery to right extracranial artery, open approach. 031J0ZK....................... Bypass left common carotid artery to left extracranial artery, open approach. 031J0ZY....................... Bypass left common carotid artery to upper artery, open approach. ------------------------------------------------------------------------ In analyzing this request, we note the requestor is correct that the following ICD-10-PCS codes specifically describe procedures involving the GORE[supreg] TAG[supreg] TBE: 02VX3EZ (Restriction of thoracic aorta, ascending/arch with branched or fenestrated intraluminal device, one or two arteries, percutaneous approach), in combination with 02VW3DZ (Restriction of thoracic aorta, descending with intraluminal device, percutaneous approach). The requestor is also correct that procedure codes 02VX3EZ and 02VW3DZ are assigned to MS- DRGs 216, 217, 218, 219, 220, and 221. Additionally, we agree that the ICD-10-PCS codes as reflected in the previous table can describe other complex aortic arch procedures, and when reported MS-DRGs 216, 217, 218, 219, 220, and 221 would be assigned. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 42.1, which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software, for complete documentation of the GROUPER logic for MS-DRGs 216, 217, 218, 219, 220, and 221. We note that the GORE[supreg] TAG[supreg] TBE was approved for new technology add-on payments for FY 2023 (87 FR 48966 through 48969) FY 2024 (88 FR 58800), and FY 2025 (89 FR 69124). We refer readers to section II.E.5 of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule for a discussion regarding the proposed FY 2026 status of technologies approved for FY 2025 new technology add-on payments, including the GORE[supreg] TAG[supreg] TBE. To explore mechanisms to address this request and to understand the resource use for the subset of cases reporting procedure codes 02VX3EZ and 02VW3DZ, and cases reporting [[Page 18044]] ``other complex aortic arch procedures'', we began our analysis by examining claims data from the September 2024 update of the FY 2024 MedPAR file for cases assigned to MS-DRGs 216, 217, 218, 219, 220, and 221. Our findings are shown in the following table: MS-DRGs 216-221--Cases Reporting Endovascular Restriction of the Thoracic Aorta With a Branched or Fenestrated Intraluminal Device and Cases Reporting Other Complex Aortic Arch Procedures ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- 216............................ All cases...................... 5,137 13.6 $88,193 Cases reporting 02VX3EZ and 4 25.3 156,361 02VW3DZ. Cases reporting other complex 0 0 0 aortic arch procedures. 217............................ All cases...................... 1,571 6.8 59,943 Cases with 02VX3EZ and 02VW3DZ. 1 2 46,235 Cases reporting other complex 0 0 0 aortic arch procedures. 218............................ All cases...................... 251 2.9 61,733 Cases with 02VX3EZ and 02VW3DZ. 0 0 0 Cases reporting other complex 0 0 0 aortic arch procedures. 219............................ All cases...................... 13,222 10 69,728 Cases with 02VX3EZ and 02VW3DZ. 81 11.4 97,336 Cases reporting other complex 10 20.7 112,213 aortic arch procedures. 220............................ All cases...................... 9,636 6.2 49,514 Cases with 02VX3EZ and 02VW3DZ. 64 5.2 76,700 Cases reporting other complex 10 6.9 87,003 aortic arch procedures. 221............................ All cases...................... 1,146 3.6 46,900 Cases with 02VX3EZ and 02VW3DZ. 32 1.9 56,765 Cases reporting other complex 0 0 0 aortic arch procedures. ---------------------------------------------------------------------------------------------------------------- As shown in the table, the data analysis performed indicates that the 4 cases in MS-DRG 216 reporting procedure codes 02VX3EZ and 02VW3DZ have an average length of stay that is longer than the average length of stay for all the cases in MS-DRG 216 (25.3 days versus 13.6 days) and higher average costs when compared to all the cases in MS-DRG 216 ($156,361 versus $88,193). The difference in average costs is $68,168 ($156,361-$88,193 = $68,168) for the cases reporting procedure codes 02VX3EZ and 02VW3DZ in MS-DRG 216 when compared to all the cases in MS- DRG 216. There were zero cases reporting other complex aortic arch procedures in MS-DRG 216. In MS-DRG 217, the one case reporting procedure codes 02VX3EZ and 02VW3DZ has a length of stay that is shorter than the average length of stay for all the cases in MS-DRG 217 (2 days versus 6.8 days) and lower costs when compared to all the cases in MS-DRG 217 ($46,235 versus $59,943). The difference in average costs is $13,708 ($59,943-$46,235 = $13,708) for the cases reporting procedure codes 02VX3EZ and 02VW3DZ in MS-DRG 217 when compared to all the cases in MS-DRG 217. There were zero cases reporting other complex aortic arch procedures in MS-DRG 217. In MS-DRG 218, there were zero cases reporting procedure codes 02VX3EZ and 02VW3DZ or other complex aortic arch procedures. The 81 cases in MS-DRG 219 reporting procedure codes 02VX3EZ and 02VW3DZ have an average length of stay that is longer than the average length of stay for all the cases in MS-DRG 219 (11.4 days versus 10 days) and higher average costs when compared to all the cases in MS-DRG 219 ($97,336 versus $69,728). The difference in average costs is $27,608 ($97,336-$69,728 = $27,608) for the cases reporting procedure codes 02VX3EZ and 02VW3DZ in MS-DRG 219 when compared to all the cases in MS-DRG 219. The 10 cases in MS-DRG 219 reporting procedure codes describing other complex arch procedures have an average length of stay that is longer than the average length of stay for all the cases in MS- DRG 219 (20.7 days versus 10 days) and higher average costs when compared to all the cases in MS-DRG 219 ($112,213 versus $69,728). The difference in average costs is $42,485 ($112,213-$69,728 = $42,485) for the cases reporting procedure codes describing other complex arch procedures in MS-DRG 219 when compared to all the cases in MS-DRG 219. In MS-DRG 220, the 64 cases reporting procedure codes 02VX3EZ and 02VW3DZ have an average length of stay that is shorter than the average length of stay for all the cases in MS-DRG 220 (5.2 days versus 6.2 days) and higher average costs when compared to all the cases in MS-DRG 220 ($76,700 versus $49,514). The difference in average costs is $27,186 ($76,700-$49,514 = $27,186) for the cases reporting procedure codes 02VX3EZ and 02VW3DZ in MS-DRG 220 when compared to all the cases in MS-DRG 220. The 10 cases reporting procedure codes describing other complex arch procedures have an average length of stay that is longer than the average length of stay for all the cases in MS-DRG 220 (6.9 days versus 6.2 days) and higher average costs when compared to all the cases in MS-DRG 220 ($87,003 versus $49,514). The difference in average costs is $37,489 ($87,003-$49,514 = $37,489) for the cases reporting procedure codes describing other complex arch procedures in MS-DRG 220 when compared to all the cases in MS-DRG 220. In MS-DRG 221, the 32 cases reporting procedure codes 02VX3EZ and 02VW3DZ have an average length of stay that is shorter than the average length of stay for all the cases in MS-DRG 221 (1.9 days versus 3.6 days) and higher average costs when compared to all the cases in MS-DRG 221 ($56,765 versus $46,900). The difference in average costs is $9,865 ($56,765-$46,900 = $9,865) for the cases reporting procedure codes 02VX3EZ and 02VW3DZ in MS-DRG 221 when compared to all the cases in MS- DRG 221. There were zero cases reporting other complex aortic arch procedures in MS-DRG 221. [[Page 18045]] Our analysis of the claims data for cases reporting procedure codes 02VX3EZ and 02VW3DZ and cases reporting procedure codes describing other complex arch procedures demonstrated a relatively low volume of cases in comparison to all the cases in their respective MS-DRGs (that is, in 216, 217, 218, 219, 220, and 221). Analysis of the claims data also demonstrates that the cases had an average length of stay generally longer than all the cases in their respective MS-DRGs. The data analysis indicates that the average costs of the 182 cases reporting procedure codes 02VX3EZ and 02VW3DZ and the 20 cases reporting procedure codes describing other complex arch procedures are generally higher when compared to the average costs of all cases in MS- DRGs 216, 217, 218, 219, 220, and 221. Specifically, most of these cases have average costs that are considerably higher than the average costs of all cases in MS-DRG 216. We reviewed these data and do not believe that proposing to reassign the cases reporting procedure codes 02VX3EZ and 02VW3DZ and the cases reporting procedure codes describing other complex arch procedures to MS-DRG 216, even if there is no cardiac catheterization procedure reported and no secondary diagnosis designated as an MCC reported, would fully address the difference in resource utilization in these cases. Accordingly, we do not believe the data adequately support a potential reassignment of these cases to MS- DRG 216. Therefore we decided to further explore alternative options to ensure clinical coherence between these cases and the other cases with which they may potentially be grouped in conjunction with the separate but related request we received to review and reconsider the MS-DRG assignments for another subset of codes describing aortic arch procedures, as discussed later in this section. The second request we received was to reassign cases reporting thoracic aortic arch replacement combined with restriction of the descending thoracic aorta from MS-DRGs 219, 220, and 221 (Cardiac Valve and Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC, with CC, and without CC/MCC, respectively) 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). The requestor, the manufacturer of the ThoraflexTM Hybrid device (also known as the Terumo Aortic Hybrid device), stated that hospital resource utilization for cases involving the ThoraflexTM Hybrid device is significantly higher compared to all cases in MS-DRGs 216, 217, 218, 219, 220, and 221, creating substantial financial loss for the hospitals that offer this technology. The ThoraflexTM Hybrid device is a dual-purpose medical device that replaces the ascending aorta and aortic arch while also stabilizing and repairing the descending thoracic aorta in a single procedure. It is indicated for the open surgical repair or replacement of damaged or diseased vessels of the aortic arch and descending aorta with or without involvement of the ascending aorta in cases of aneurysm and/or dissection. According to the requestor, when the ThoraflexTM Hybrid device is implanted within the aorta, it creates a channel for the blood to bypass the damaged or diseased part of the vessel and keep flowing as the graft and stented sections of the implant replace the parts of the aorta that are not working properly. The requestor stated that aortic pathologies such as aneurysms and dissections that involve the aortic arch and descending thoracic aorta continue to present surgical challenges and carry risks such as stroke, cerebral malperfusion, paralysis, and renal malperfusion. These risks must be mitigated by intense and patient specific goal-oriented care. According to the requestor, hospitals treating aortic arch pathologies must be able to deploy rapid neurology, neurosurgery, and nephrology all within hours to ensure a good patient outcome. According to the requestor, all these attributes attest to the difficulty and complexity of thoracic aortic arch replacement combined with restriction of the descending thoracic aorta and care of the patient. The requestor identified cases reporting thoracic aortic arch replacement combined with restriction of the descending thoracic aorta by the presence of ICD-10-PCS code X2RX0N7 (Replacement of thoracic aorta, arch using branched synthetic substitute with intraluminal device, open approach, new technology group 7) in combination with X2VW0N7 (Restriction of thoracic aorta, descending using branched synthetic substitute with intraluminal device, open approach, new technology group 7) on the same claim and performed its own analysis of the claims data. The requestor stated they found that while the volume of cases reporting thoracic aortic arch replacement combined with restriction of the descending thoracic aorta is <1% of total volume in MS-DRGs 216, 217, 218, 219, 220, and 221, the average costs and average lengths of stay of these cases are significantly greater than all other cases in MS-DRG 216. In analyzing this request, we note the requestor is correct that the following ICD-10-PCS codes specifically describe procedures involving the ThoraflexTM Hybrid device: X2RX0N7 (Replacement of thoracic aorta arch with branched synthetic substitute with intraluminal device, new technology group 7) in combination with X2VW0N7 (Restriction of thoracic descending aorta with branched synthetic substitute with intraluminal device, new technology group 7). The requestor is also correct that procedure codes X2RX0N7 and X2VW0N7 are assigned to MS-DRGs 216, 217, 218, 219, 220, and 221. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 42.1, which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software, for complete documentation of the GROUPER logic for MS- DRGs 216, 217, 218, 219, 220, and 221. The ThoraflexTM Hybrid device was approved for new technology add-on payments for FY 2023 (87 FR 48974 through 48976), FY 2024 (88 FR 58800), and FY 2025 (89 FR 69124). We refer readers to section II.E.5 of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule for a discussion regarding the proposed FY 2026 status of technologies approved for FY 2025 new technology add-on payments, including the ThoraflexTM Hybrid device. To explore mechanisms to address this request and to understand the resource use for the subset of cases reporting procedure codes X2RX0N7 and X2VW0N7, we began our analysis by examining claims data from the September 2024 update of the FY 2024 MedPAR file for cases reporting the procedure code combination describing thoracic aortic arch replacement combined with restriction of the descending thoracic aorta assigned to MS-DRGs 216, 217, 218, 219, 220, and 221. Our findings are shown in the following table: [[Page 18046]] MS-DRGs 216-221--Cases Reporting Thoracic Aortic Arch Replacement Combined With Restriction of the Descending Thoracic Aorta ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- 216............................ All cases...................... 5,137 13.6 $88,193 Cases reporting X2RX0N7 and 20 23 158,920 X2VW0N7. 217............................ All cases...................... 1,571 6.8 59,943 Cases reporting X2RX0N7 and 2 21.5 160,014 X2VW0N7. 218............................ All cases...................... 251 2.9 61,733 Cases reporting X2RX0N7 and 0 0 0 X2VW0N7. 219............................ All cases...................... 13,222 10 69,728 Cases reporting X2RX0N7 and 61 16.9 154,134 X2VW0N7. 220............................ All cases...................... 9,636 6.2 49,514 Cases reporting X2RX0N7 and 14 8.9 84,004 X2VW0N7. 221............................ All cases...................... 1,146 3.6 46,900 Cases reporting X2RX0N7 and 1 3 97,825 X2VW0N7. ---------------------------------------------------------------------------------------------------------------- As shown in the table, the data analysis performed indicates that the 20 cases in MS-DRG 216 reporting procedure codes X2RX0N7 and X2VW0N7 have an average length of stay that is longer than the average length of stay for all the cases in MS-DRG 216 (23 days versus 13.6 days) and higher average costs when compared to all the cases in MS-DRG 216 ($158,920 versus $88,193). The difference in average costs is $70,727 ($158,920-$88,193 = $70,727) for the cases reporting procedure codes X2RX0N7 and X2VW0N7 in MS-DRG 216 when compared to all the cases in MS-DRG 216. In MS-DRG 217, the 2 cases reporting procedure codes X2RX0N7 and X2VW0N7 have an average length of stay that is longer than the average length of stay for all the cases in MS-DRG 217 (21.5 days versus 6.8 days) and higher average costs when compared to all the cases in MS-DRG 217 ($160,014 versus $59,943). The difference in average costs is $100,071 ($160,014-$59,943 = $100,071) for the cases reporting procedure codes X2RX0N7 and X2VW0N7 in MS-DRG 217 when compared to all the cases in MS-DRG 217. In MS-DRG 218, there were zero cases reporting procedure codes X2RX0N7 and X2VW0N7. The 61 cases in MS-DRG 219 reporting procedure codes X2RX0N7 and X2VW0N7 have an average length of stay that is longer than the average length of stay for all the cases in MS-DRG 219 (16.9 days versus 10 days) and higher average costs when compared to all the cases in MS-DRG 219 ($154,134 versus $69,728). The difference in average costs is $84,406 ($154,134-$69,728 = $84,406) for the cases reporting procedure codes X2RX0N7 and X2VW0N7 in MS-DRG 219 when compared to all the cases in MS-DRG 219. In MS-DRG 220, the 14 cases reporting procedure codes X2RX0N7 and X2VW0N7 have an average length of stay that is longer than the average length of stay for all the cases in MS-DRG 220 (8.9 days versus 6.2 days) and higher average costs when compared to all the cases in MS-DRG 220 ($84,004 versus $49,514). The difference in average costs is $34,490 ($84,004-$49,514 = $34,490) for the cases reporting procedure codes X2RX0N7 and X2VW0N7 in MS-DRG 220 when compared to all the cases in MS-DRG 220. In MS-DRG 221, the one case reporting procedure codes X2RX0N7 and X2VW0N7 has a length of stay that is shorter than the average length of stay for all the cases in MS-DRG 221 (3 days versus 3.6 days) and higher average costs when compared to all the cases in MS-DRG 221 ($97,825 versus $46,900). The difference in average costs is $50,925 ($97,825-$46,900 = $50,925) for the cases reporting procedure codes X2RX0N7 and X2VW0N7 in MS-DRG 221 when compared to all the cases in MS-DRG 221. We reviewed these data and note the average costs of the 98 cases reporting the procedure code combination describing thoracic aortic arch replacement combined with restriction of the descending thoracic aorta are higher when compared to the average costs of all cases in MS- DRGs 216, 217, 218, 219, 220, and 221. The difference in average costs of the 98 cases reporting the procedure code combination describing thoracic aortic arch replacement combined with restriction of the descending thoracic aorta is $56,445 ($144,638-$88,193 = $56,445) for the cases reporting procedure codes X2RX0N7 and X2VW0N7 when compared to all the cases in MS-DRG 216, which is the highest severity level ``with MCC'' MS-DRG. We reviewed these data and do not believe that proposing to reassign all cases reporting the procedure code combination describing thoracic aortic arch replacement combined with restriction of the descending thoracic aorta to MS-DRGs 216, 217, and 218, even if there is no cardiac catheterization procedure reported and no secondary diagnosis designated as an MCC reported, would fully address the difference in resource utilization in these cases as the average costs of the cases reporting procedure codes X2RX0N7 and X2VW0N7 are much higher when compared to all the cases in MS-DRG 216. Accordingly, we do not believe the data adequately support a potential reassignment of these cases to MS-DRGs 216, 217, and 218, respectively. We also do not believe that the small subset cases that report the procedure code combination describing thoracic aortic arch replacement combined with restriction of the descending thoracic aorta warrants the creation of a new MS-DRG at this time. As stated in prior rulemaking, the MS-DRGs are a classification system intended to group together diagnoses and procedures with similar clinical characteristics and utilization of resources. We generally seek to identify sufficiently large sets of claims data with a resource/cost similarity and clinical similarity in developing diagnosis related groups rather than smaller subsets. Moreover, as stated in prior rulemaking (85 FR 58472), we have concerns regarding making proposed MS-DRG changes based on a specific, single technology (the ThoraflexTM Hybrid device) identified by only one unique procedure code combination versus considering proposed changes based on a group of related procedure codes that can be reported to describe the same type or class of technology, which is more consistent with the intent of the MS-DRGs. [[Page 18047]] To explore other mechanisms to address this request, we then reexamined the separate but related request discussed previously to reassign cases reporting procedure codes describing endovascular restriction of the thoracic aorta with a branched or fenestrated intraluminal device and cases reporting other complex aortic arch procedures. In examining these requests, we note that the first requestor suggested that CMS reassign cases reporting procedure codes describing endovascular restriction of the thoracic aorta with a branched or fenestrated intraluminal device from MS-DRGs 219, 220, and 221 to MS-DRG 216 and the second requestor suggested that CMS reassign cases reporting the procedure code combination describing thoracic aortic arch replacement combined with restriction of the descending thoracic aorta without a procedure code describing the performance of a cardiac catheterization from MS-DRGs 219, 220, and 221 to MS-DRGs 216, 217, and 218 for FY 2026. As discussed in prior rulemaking (86 FR 44830, 87 FR 48847, and 88 FR 58683), MS-DRGs 216, 217, and 218 are defined by the performance of cardiac catheterization. We are concerned about the effect on clinical coherence of assigning cases that do not also have a cardiac catheterization procedure reported to MS-DRGs that are defined by the performance of that procedure. However, we do note that in our examination of both requests, the data analysis indicates that the average costs of these complex aortic arch procedures, such as the cases reporting procedure codes describing endovascular restriction of the thoracic aorta with a branched or fenestrated intraluminal device, the cases reporting the procedure code combination describing thoracic aortic arch replacement combined with restriction of the descending thoracic aorta, and the cases reporting other complex aortic arch procedures, are higher when compared to the average costs of all cases in MS-DRGs 216, 217, 218, 219, 220, and 221. Analysis of the claims data also suggests that these cases reporting complex aortic arch procedures are associated with increased hospital resource utilization. We reviewed these data and note, clinically, aortic arch pathologies are serious clinical conditions associated with an increased likelihood of death but also the potential for significant functional limitations. The aortic arch is the segment of the aorta that helps distribute blood to the head and upper extremities via the brachiocephalic trunk, the left common carotid, and the left subclavian artery. The aortic arch also plays a role in blood pressure homeostasis via baroreceptors found within the walls of the aortic arch that help prevent quick, drastic changes in blood pressure. Aortic aneurysms and aortic dissection that involve the aortic arch are associated with extremely high mortality and morbidity and the data analysis clearly shows that cases reporting complex aortic arch procedures have higher average costs and generally longer lengths of stay compared to all the cases in their assigned MS-DRG. Therefore, based on our review of the clinical issues and the claims data, we are proposing to create a new MS-DRG to better differentiate these complex aortic arch procedures from other cases in their respective MS-DRGs, based on treatment difficulty, clinical similarity, and resource use. To compare and analyze the impact of our suggested modifications, we ran a simulation using the claims data from the September 2024 update of the FY 2024 MedPAR file. ---------------------------------------------------------------------------------------------------------------- Average length Proposed new MS-DRG Number of cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- Proposed new MS-DRG XXX Complex Aortic Arch Procedures....... 300 11.2 $104,826 ---------------------------------------------------------------------------------------------------------------- For the cases reporting complex aortic arch procedures, we identified a total of 300 cases using the claims data from the September 2024 update of the FY 2024 MedPAR file, so the criterion that there are at least 500 or more cases in each subgroup could not be met. Therefore, we are not proposing to subdivide the proposed new MS-DRG for complex aortic arch procedures into severity levels. In summary, for FY 2026, taking into consideration that it clinically requires greater resources to perform complex aortic arch procedures, we are proposing to create a new base MS-DRG for cases reporting complex aortic arch procedures in MDC 05. The proposed new MS-DRG is proposed new MS-DRG 209 (Complex Aortic Arch Procedures). We refer the reader to Table 6P.5a associated with this FY 2026 IPPS/LTCH PPS proposed rule (which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for the list of procedure codes we are proposing to define in the logic for the proposed new MS-DRG. We note that discussion of the surgical hierarchy for the proposed modification is discussed in section II.C.10. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule. f. Deep Vein Thrombophlebitis Consistent with our annual review of the MS-DRGs, we consider changes in resource consumption, treatment patterns, technology, and any other factors that may change the relative use of hospital resources. In our review of the claims data from the September 2024 update of the FY 2024 MedPAR file, we identified a low volume of cases for MS-DRGs 294 and 295 (Deep Vein Thrombophlebitis with CC/MCC and without CC/MCC, respectively). Our findings are shown in the following table. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- 294............................................................. 146 4.1 $10,808 295............................................................. 0 0 0 ---------------------------------------------------------------------------------------------------------------- [[Page 18048]] A deep vein thrombophlebitis (DVT) is a blood clot that forms in one of the deep veins of the body, most commonly occurring in the veins of the pelvis, calf, or thigh. The 35 ICD-10-CM diagnosis codes describing deep vein thrombophlebitis currently assigned to MS-DRGs 294 and 295 are shown in the following table. Diagnosis Codes Describing Deep Venous Thrombophlebitis (DVT) in MS-DRGS 294-295 ------------------------------------------------------------------------ ICD-10-CM code Description ------------------------------------------------------------------------ I80.10............................ Phlebitis and thrombophlebitis of unspecified femoral vein. I80.11............................ Phlebitis and thrombophlebitis of right femoral vein. I80.12............................ Phlebitis and thrombophlebitis of left femoral vein. I80.13............................ Phlebitis and thrombophlebitis of femoral vein, bilateral. I80.201........................... Phlebitis and thrombophlebitis of unspecified deep vessels of right lower extremity. I80.202........................... Phlebitis and thrombophlebitis of unspecified deep vessels of left lower extremity. I80.203........................... Phlebitis and thrombophlebitis of unspecified deep vessels of lower extremities, bilateral. I80.209........................... Phlebitis and thrombophlebitis of unspecified deep vessels of unspecified lower extremity. I80.211........................... Phlebitis and thrombophlebitis of right iliac vein. I80.212........................... Phlebitis and thrombophlebitis of left iliac vein. I80.213........................... Phlebitis and thrombophlebitis of iliac vein, bilateral. I80.219........................... Phlebitis and thrombophlebitis of unspecified iliac vein. I80.221........................... Phlebitis and thrombophlebitis of right popliteal vein. I80.222........................... Phlebitis and thrombophlebitis of left popliteal vein. I80.223........................... Phlebitis and thrombophlebitis of popliteal vein, bilateral. I80.229........................... Phlebitis and thrombophlebitis of unspecified popliteal vein. I80.231........................... Phlebitis and thrombophlebitis of right tibial vein. I80.232........................... Phlebitis and thrombophlebitis of left tibial vein. I80.233........................... Phlebitis and thrombophlebitis of tibial vein, bilateral. I80.239........................... Phlebitis and thrombophlebitis of unspecified tibial vein. I80.241........................... Phlebitis and thrombophlebitis of right peroneal vein. I80.242........................... Phlebitis and thrombophlebitis of left peroneal vein. I80.243........................... Phlebitis and thrombophlebitis of peroneal vein, bilateral. I80.249........................... Phlebitis and thrombophlebitis of unspecified peroneal vein. I80.251........................... Phlebitis and thrombophlebitis of right calf muscular vein. I80.252........................... Phlebitis and thrombophlebitis of left calf muscular vein. I80.253........................... Phlebitis and thrombophlebitis of calf muscular vein, bilateral. I80.259........................... Phlebitis and thrombophlebitis of unspecified calf muscular vein. I80.291........................... Phlebitis and thrombophlebitis of other deep vessels of right lower extremity. I80.292........................... Phlebitis and thrombophlebitis of other deep vessels of left lower extremity. I80.293........................... Phlebitis and thrombophlebitis of other deep vessels of lower extremity, bilateral. I80.299........................... Phlebitis and thrombophlebitis of other deep vessels of unspecified lower extremity. I80.3............................. Phlebitis and thrombophlebitis of lower extremities, unspecified. I82.220........................... Acute embolism and thrombosis of inferior vena cava. I82.221........................... Chronic embolism and thrombosis of inferior vena cava. ------------------------------------------------------------------------ In light of the initial findings of only 146 cases for MS-DRG 294 and zero cases in MS-DRG 295, we further reviewed the MedPAR claims data for cases assigned to MS-DRGs 294 and 295 for the past 5 fiscal years. As reflected in the following tables, the data indicate that the number of cases grouping to MS-DRGs 294 and 295 has declined. ---------------------------------------------------------------------------------------------------------------- Number of Average length FY and MedPAR data reviewed for MS-DRG 294 cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- FY 2022 (FY 2020 MedPAR)........................................ 222 4.3 $8,962 FY 2023 (FY 2021 MedPAR)........................................ 227 4.2 9,325 FY 2024 (FY 2022 MedPAR)........................................ 177 4.8 9,665 FY 2025 (FY 2023 MedPAR)........................................ 178 4.6 10,404 FY 2026 (FY 2024 MedPAR)........................................ 146 4.1 10,808 ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Number of Average length FY and MedPAR data reviewed for MS-DRG 295 cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- FY 2022 (FY 2020 MedPAR)........................................ 20 3.4 $7,323 FY 2023 (FY 2021 MedPAR)........................................ 11 2.5 4,988 FY 2024 (FY 2022 MedPAR)........................................ 0 0 0 FY 2025 (FY 2023 MedPAR)........................................ 0 0 0 FY 2026 (FY 2024 MedPAR)........................................ 0 0 0 ---------------------------------------------------------------------------------------------------------------- [[Page 18049]] We note that, if, during our annual MS-DRG analysis we identify that there are only a few patients in a respective MS-DRG, consistent with our established process in deciding whether to propose to make further modifications, we consider if there have been potential changes in the clinical characteristics of the patients, treatment patterns, or resource utilization. A principle of the MS-DRGs and the characteristics of a meaningful DRG classification scheme is the ability to detect such changes and accordingly, propose clinically appropriate modifications that are also consistent with resource utilization. We have noted in prior rulemaking that we prefer to have a substantial number of cases in an MS-DRG because having larger clinical cohesive groups within an MS-DRG provides greater stability for annual updates to the relative payment weights. In light of these considerations, and the low volume of cases in MS-DRGs 294 and 295, we believed it was appropriate to further analyze how to potentially reclassify these cases. Accordingly, using the September 2024 update of the FY 2024 MedPAR file, we examined whether there were other MS-DRGs to which these cases could appropriately be reassigned. As part of this analysis, we also reviewed the base DRG by severity claims data for MS-DRG 294 because the MS-DRG includes cases reporting an MCC as well as cases reporting a CC. As previously noted, there were zero cases identified in MS-DRG 295, which would only consist of NonCC cases. Therefore, we analyzed the claims data to determine the number of cases, the average length of stay, and average costs for the 146 cases in MS-DRG 294 by severity level (1=MCC and 2=CC). Our findings are shown in the following table. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- 294-1........................................................... 45 5.4 $14,085 294-2........................................................... 101 3.5 9,348 ----------------------------------------------- 294 base DRG total.............................................. 146 4.1 10,808 ---------------------------------------------------------------------------------------------------------------- We note that medical MS-DRGs 299, 300, and 301 (Peripheral Vascular Disorders with MCC, with CC, and without CC/MCC, respectively) also include diagnoses describing other types of phlebitis and thrombophlebitis in the logic for case assignment, consistent with the diagnosis codes in the logic for case assignment to MS-DRGs 294 and 295. As such, we reviewed the claims data from the September 2024 update of the FY 2024 MedPAR file for MS-DRGs 299, 300, and 301 to examine the resource utilization associated with cases assigned to these MS-DRGs. Our findings are shown in the following table. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- 299............................................................. 14,129 5.5 $14,742 300............................................................. 18,038 3.9 9,757 301............................................................. 3,807 2.5 6,723 ---------------------------------------------------------------------------------------------------------------- As shown in the data, the 45 cases reporting an MCC in MS-DRG 294 have an average length of stay of 5.4 days with average costs of $14,085, which is comparable to the cases in MS-DRG 299 reporting an MCC that have an average length of stay of 5.5 days with average costs of $14,742. The 101 cases reporting a CC in MS-DRG 294 have an average length of stay of 3.5 days with average costs of $9,348, which is comparable to the cases in MS-DRG 300 reporting an CC that have an average length of stay of 3.9 days with average costs of $9,757. Based on our analysis and review of the cases grouping to MS-DRGs 294 and 295, we believe it is appropriate to delete these MS-DRGs and reassign the cases currently assigned to MS-DRGs 294 and 295 to MS-DRGs 299, 300, and 301, which are clinically consistent and also align with the resource utilization for these cases. Accordingly, for FY 2026, we are proposing to delete MS-DRGs 294 and 295 and reassign the previously listed 35 diagnosis codes describing deep vein thrombophlebitis to MS- DRGs 299, 300, and 301. We refer the reader to the ICD-10 MS-DRG Version 42.1 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 MS-DRGs 299, 300, and 301. 5. MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Hip or Knee Procedures With Periprosthetic Joint Infection We received a request to reassign cases reporting a hip or knee procedure with a principal diagnosis of periprosthetic joint infection (PJI) from the lower severity level ``without CC/MCC'' MS-DRG to the higher severity level ``with CC'' MS-DRG when there is no major complication or comorbidity (MCC) or complication or comorbidity (CC) reported. According to the requestor, PJI is a devastating healthcare condition that occurs in one percent to two percent (1% to 2%) of primary joint replacements.\8\ PJI is also the primary cause for revision arthroplasty in most developed markets. The requestor stated that patients undergoing revision for PJI experience higher mortality rates ranging from 0.8 to 4 percent at 1 year and 12.9 to 25.9 percent at 5 years following revision surgery. --------------------------------------------------------------------------- \8\ Corvec S, Portillo ME, Pasticci BM, Borens O, Trampuz A. Epidemiology and new developments in the diagnosis of prosthetic joint infection. Int J Artif Organs 2012;35:923-934. --------------------------------------------------------------------------- According to the requestor, management of PJI requires complex treatment strategies including multiple surgical revisions and long- term antimicrobial treatment, leading to substantially higher costs versus aseptic revision arthroplasty. The requestor asserted that when missed or undertreated, PJI leads to persistence of [[Page 18050]] infection and multiple surgical revisions causing poor function or disability, considerably impairing quality of life. The requestor stated that current treatment options for PJI include chronic suppressive antibiotics; debridement, antibiotics, and implant retention (DAIR); one-stage revision; two-stage revision; and amputation. According to the requestor, regardless of the treatment option selected for the knee or hip, the presence of PJI as the principal diagnosis appears to significantly increase the length of stay and the resource utilization of these cases in comparison to all other cases assigned to the respective MS-DRGs. Using the FY 2023 MedPAR file that informed FY 2025 rulemaking, the requestor stated it performed its own analysis of cases reporting PJI as the principal diagnosis. The requestor provided the following list of ICD-10-CM diagnosis codes it used to identify the presence of a PJI in the hip or knee joint. ------------------------------------------------------------------------ ICD-10-CM code Description ------------------------------------------------------------------------ T84.51XA.......................... Infection and inflammatory reaction due to internal right hip prosthesis, initial encounter. T84.51XD.......................... Infection and inflammatory reaction due to internal right hip prosthesis, subsequent encounter. T84.51XS.......................... Infection and inflammatory reaction due to internal right hip prosthesis, sequela. T84.52XA.......................... Infection and inflammatory reaction due to internal left hip prosthesis, initial encounter. T84.52XD.......................... Infection and inflammatory reaction due to internal left hip prosthesis, subsequent encounter. T84.52XS.......................... Infection and inflammatory reaction due to internal left hip prosthesis, sequela. T84.53XA.......................... Infection and inflammatory reaction due to internal right knee prosthesis, initial encounter. T84.53XD.......................... Infection and inflammatory reaction due to internal right knee prosthesis, subsequent encounter. T84.53XS.......................... Infection and inflammatory reaction due to internal right knee prosthesis, sequela. T84.54XA.......................... Infection and inflammatory reaction due to internal left knee prosthesis, initial encounter. T84.54XD.......................... Infection and inflammatory reaction due to internal left knee prosthesis, subsequent encounter. T84.54XS.......................... Infection and inflammatory reaction due to internal left knee prosthesis, sequela. ------------------------------------------------------------------------ The requestor stated that cases involving the DAIR procedure are commonly assigned to MS-DRGs 463, 464, and 465 (Wound Debridement and Skin Graft Except Hand for Musculoskeletal and Connective Tissue Disorders with MCC, with CC, and without CC/MCC, respectively), MS-DRGs 480, 481, and 482 (Hip and Femur Procedures Except Major Joint with MCC, with CC, and without CC/MCC, respectively) or MS-DRG 485, 486, and 487 (Knee Procedures with Principal Diagnosis of Infection with MCC, with CC, and without CC/MCC, respectively). According to the requestor, in each of the scenarios reviewed, the average cost and average length of stay for cases with a principal diagnosis of PJI that grouped to the ``with CC'' or ``without CC/MCC'' MS-DRG are similar or higher and longer than the other cases assigned to the same MS-DRGs. The requestor also stated that one-stage hip or knee revision procedures are typically assigned to MS-DRGs 466, 467, and 468 and the findings from their analysis showed the presence of a PJI as the principal diagnosis with a hip or knee revision procedure show a longer length of stay and a similar or higher average cost than for the other aseptic revision arthroplasties. In addition, the requestor stated that its analysis of cases reporting PJI with the last treatment option, amputation, assigned to MS-DRGs 474, 475, and 476 (Amputation for Musculoskeletal System and Connective Tissue Disorders with MCC, with CC, and without CC/MCC, respectively) also showed a longer average length of stay and higher average costs compared to all other non-PJI cases in MS-DRGs 474, 475, and 476, further supporting the request to reassign cases to the ``with CC'' severity level MS-DRG. In summary, the requestor specifically recommended the following modifications to the listed MS-DRGs for cases reporting a hip or knee procedure with a principal diagnosis of PJI: ------------------------------------------------------------------------ Current MS-DRG assignment Requested MS-DRG assignment ------------------------------------------------------------------------ 465 (Wound Debridement and Skin Graft MS-DRG 464 (Wound Debridement Except Hand for Musculoskeletal and and Skin Graft Except Hand for Connective Tissue Disorders without CC/ Musculoskeletal and Connective MCC). Tissue Disorders with CC). MS-DRG 468 (Revision of Hip or Knee MS-DRG 467 (Revision of Hip or Replacement without CC/MCC). Knee Replacement with CC). MS-DRG 476 (Amputation for MS-DRG 475 (Amputation for Musculoskeletal System and Connective Musculoskeletal System and Tissue Disorders without CC/MCC). Connective Tissue Disorders with CC). MS-DRG 482 (Hip and Femur Procedures MS-DRG 481 (Hip and Femur Except Major Joint without CC/MCC). Procedures Except Major Joint with CC). MS-DRG 487 (Knee Procedures with MS-DRG 486 (Knee Procedures Principal Diagnosis of Infection with Principal Diagnosis of without CC/MCC). Infection with CC). ------------------------------------------------------------------------ We reviewed claims data from the September 2024 update of the FY 2024 MedPAR file for MS-DRGs 463, 464, 465, 466, 467, 468, 474, 475, 476, 480, 481, 482, 485, 486, and 487 and for cases reporting a principal diagnosis of PJI with a hip or knee procedure. We refer the reader to Table 6P. 6a for the list of diagnosis codes we analyzed to identify a PJI and for the list of procedure codes we analyzed from the previously listed MS-DRGs to identify a hip or knee procedure. Findings from our analysis are shown in the following table. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG Description cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- 463............................ All cases...................... 3,909 14.2 $45,233 Cases with principal diagnosis 804 13.9 50,127 of PJI with hip or knee procedure. 464............................ All cases...................... 5,775 7.3 26,757 [[Page 18051]] Cases with principal diagnosis 1,358 7.7 32,474 of PJI with hip or knee procedure. 465............................ All cases...................... 1,496 3.0 16,794 Cases with principal diagnosis 237 4.3 22,689 of PJI with hip or knee procedure. 466............................ All cases...................... 4,282 9.0 43,314 Cases with principal diagnosis 460 11.2 40,433 of PJI with hip or knee procedure. 467............................ All cases...................... 17,682 4.1 30,612 Cases with principal diagnosis 947 6.5 28,505 of PJI with hip or knee procedure. 468............................ All cases...................... 12,986 1.8 24,921 Cases with principal diagnosis 160 4 23,978 of PJI with hip or knee procedure. 474............................ All cases...................... 2,417 12.2 35,707 Cases with principal diagnosis 112 13.6 47,240 of PJI with hip or knee procedure. 475............................ All cases...................... 2,634 7.3 19,577 Cases with principal diagnosis 166 7 20,739 of PJI with hip or knee procedure. 476............................ All cases...................... 322 3.5 10,454 Cases with principal diagnosis 27 4.1 14,101 of PJI with hip or knee procedure. 480............................ All cases...................... 26,238 7.3 26,430 Cases with principal diagnosis 136 11.7 38,407 of PJI with hip or knee procedure. 481............................ All cases...................... 62,141 4.9 19,153 Cases with principal diagnosis 234 7.4 24,138 of PJI with hip or knee procedure. 482............................ All cases...................... 13,842 3.5 14,886 Cases with principal diagnosis 30 4.6 19,122 of PJI with hip or knee procedure. 485............................ All cases...................... 1,297 9.5 29,761 Cases with principal diagnosis 521 9.6 31,779 of PJI with hip or knee procedure. 486............................ All cases...................... 2,574 6.0 19,679 Cases with principal diagnosis 985 5.8 21,376 of PJI with hip or knee procedure. 487............................ All cases...................... 632 4.1 14,615 Cases with principal diagnosis 194 4 16,616 of PJI with hip or knee procedure. ---------------------------------------------------------------------------------------------------------------- The findings show that the cases reporting a PJI with a hip or knee procedure in MS-DRGs 466, 467, and 468 have a slightly longer average length of stay and lower average costs compared to the average length of stay and average costs of all the cases in their respective MS-DRGs. Therefore, because the resource utilization of these cases is generally comparable to all the cases in their respective MS-DRGs, we believe the cases reporting a PJI in MS-DRGs 466, 467, and 468 appear to be grouping appropriately in their current MS-DRG assignment. The findings show that for the cases reporting a PJI with a hip or knee procedure in MS-DRGs 463, 464, 465, 474, 475, 476, 485, 486, and 487, the average length of stay is comparable to the average length of stay of all the cases in their respective MS-DRGs, however, the average length of stay for the cases reporting a PJI with a hip or knee procedure in MS-DRGs 480, 481, and 482 are notably longer compared to the average length of stay of all the cases in their respective MS- DRGs. Findings from our analysis also show that the average costs of the cases reporting a PJI with a hip or knee procedure in MS-DRGs 463, 464, 465, 474, 475, 476, 480, 481, and 482 are higher compared to the average costs of all the cases in their respective MS-DRGs with a difference in average costs of approximately $5,459 for cases reporting a PJI with a hip or knee procedure across MS-DRGs 463, 464, and 465, a difference in average costs of approximately $5,190 for cases reporting a PJI with a hip or knee procedure across MS-DRGs 474, 475, and 476, and a difference in average costs of approximately $7,306 for cases reporting a PJI with a hip or knee procedure across MS-DRGs 480, 481 and 482. However, because MS-DRGs 485, 486, and 487 currently include a principal diagnosis of infection in the logic for case assignment to these MS-DRGs, the difference in average costs for the cases reporting a PJI with a hip or knee procedure compared to the average costs of all the cases in their respective MS-DRG is minimal ($2,018, $1,697, and $2,001, respectively). Based on our review and analysis of the data, we disagree with the request to reassign PJI cases from the lower severity ``without CC/ MCC'' level MS-DRG to the higher severity ``with CC'' level MS-DRG suggested by the requestor as the average costs of the PJI cases in the ``without CC/MCC'' level are not comparable and do not align with the average costs of all the cases at the ``with CC'' level. In addition, our findings show that other than for MS-DRGs 466, 467, and 468, the cases reporting a PJI with a hip or knee procedure at the higher ``with CC'' level and the highest ``with MCC'' level have higher average costs compared to all the cases in their respective MS-DRG. For example, as reflected in the findings of our analysis for MS-DRGs 463, 464, and 465, if we were to reassign the 237 cases reporting a PJI with a hip or knee procedure with an average length of stay of 4.3 days and average costs of $22,689 from MS-DRG 465 to MS-DRG 464 where we found a total of 5,775 cases with an average length of stay of 7.3 days and average costs of $26,757, the 1,358 cases reporting a PJI with a hip or knee procedure with an average length of stay of 7.7 days and average costs of $32,474 in MS-DRG 464 and the 804 cases reporting a PJI with a hip or knee procedure with an average length of stay of 13.9 days and average costs of $50,127 in MS-DRG 463 would continue to not be comparable from a resource perspective as compared to all the cases in their assigned MS-DRGs. We believe the data support proposing a new base MS-DRG for the cases reporting a PJI with a hip or knee procedure in MS-DRGs 463, 464, 465, 474, 475, 476, 480, 481, and 482 to better reflect the complexity of services, resource utilization, and severity of illness of these patients. Consistent with our established process as discussed in section II.C.1.b. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, once the decision has been made to propose to make further modifications to the MS-DRGs, such as creating a new base MS-DRG, all five criteria to create subgroups must be met for the base MS-DRG to be split (or subdivided) by a CC subgroup. Therefore, we applied the criteria to [[Page 18052]] create subgroups in a base MS-DRG. We note that, as shown in the table that follows, a three-way split of this proposed new base MS-DRG failed to meet the criterion that at least 500 or more cases are in the without CC/MCC subgroup. The following table illustrates our findings. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRGs cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- With MCC........................................................ 1,052 13.6 $48,305 With CC......................................................... 1,758 7.6 30,256 Without CC/MCC.................................................. 293 4.3 21,505 ---------------------------------------------------------------------------------------------------------------- As discussed in section II.C.1.b. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, if the criteria for a three-way split fail, the next step is to determine if the criteria are satisfied for a two-way split. We therefore applied the criteria for a two-way split for the ``with MCC and without MCC'' subgroups and found that all five criteria were met. The following table illustrates our findings. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRGs cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- With MCC........................................................ 1,052 13.6 $48,305 Without MCC..................................................... 2,051 7.1 29,006 ---------------------------------------------------------------------------------------------------------------- For the proposed new MS-DRGs for cases reporting a PJI with a hip or knee procedure, 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 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. As a result, for FY 2026, we are proposing to create new MS-DRGs 403 and 404 (Hip or Knee Procedures with Principal Diagnosis of Periprosthetic Joint Infection with MCC and without MCC, respectively). The following table reflects a simulation of the proposed new MS-DRGs. ---------------------------------------------------------------------------------------------------------------- Number of Average length Proposed new MS-DRGs cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- Proposed MS-DRG 403............................................. 1,052 13.6 $48,305 Proposed MS-DRG 404............................................. 2,051 7.1 29,006 ---------------------------------------------------------------------------------------------------------------- b. Arthroscopy Consistent with our annual review of the MS-DRGs, we consider changes in resource consumption, treatment patterns, technology, and any other factors that may change the relative use of hospital resources. In our review of the claims data from the September 2024 update of the FY 2024 MedPAR file, we identified an extremely low volume of cases for MS-DRG 509 (Arthroscopy). Specifically, we found 16 cases with an average length of stay of 5.2 days and average costs of $18,239. An arthroscopy is a surgical procedure that allows orthopaedic surgeons to see the inside of a joint through a small incision and with specialized instruments (for example, arthroscope). The ICD-10-PCS codes describing arthroscopy and currently assigned to MS-DRG 509 are shown in the following table. Procedure Codes Describing Arthroscopy in MS-DRG 509 ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 0RJ04ZZ........................... Inspection of occipital-cervical joint, percutaneous endoscopic approach. 0RJ14ZZ........................... Inspection of cervical vertebral joint, percutaneous endoscopic approach. 0RJ34ZZ........................... Inspection of cervical vertebral disc, percutaneous endoscopic approach. 0RJ44ZZ........................... Inspection of cervicothoracic vertebral joint, percutaneous endoscopic approach. 0RJ54ZZ........................... Inspection of cervicothoracic vertebral disc, percutaneous endoscopic approach. 0RJ64ZZ........................... Inspection of thoracic vertebral joint, percutaneous endoscopic approach. 0RJ94ZZ........................... Inspection of thoracic vertebral disc, percutaneous endoscopic approach. 0RJA4ZZ........................... Inspection of thoracolumbar vertebral joint, percutaneous endoscopic approach. 0RJB4ZZ........................... Inspection of thoracolumbar vertebral disc, percutaneous endoscopic approach. 0RJE4ZZ........................... Inspection of right sternoclavicular joint, percutaneous endoscopic approach. 0RJF4ZZ........................... Inspection of left sternoclavicular joint, percutaneous endoscopic approach. 0RJG4ZZ........................... Inspection of right acromioclavicular joint, percutaneous endoscopic approach. 0RJH4ZZ........................... Inspection of left acromioclavicular joint, percutaneous endoscopic approach. [[Page 18053]] 0RJJ4ZZ........................... Inspection of right shoulder joint, percutaneous endoscopic approach. 0RJK4ZZ........................... Inspection of left shoulder joint, percutaneous endoscopic approach. 0RJL4ZZ........................... Inspection of right elbow joint, percutaneous endoscopic approach. 0RJM4ZZ........................... Inspection of left elbow joint, percutaneous endoscopic approach. 0RJN4ZZ........................... Inspection of right wrist joint, percutaneous endoscopic approach. 0RJP4ZZ........................... Inspection of left wrist joint, percutaneous endoscopic approach. 0RJQ4ZZ........................... Inspection of right carpal joint, percutaneous endoscopic approach. 0RJR4ZZ........................... Inspection of left carpal joint, percutaneous endoscopic approach. 0RJS4ZZ........................... Inspection of right carpometacarpal joint, percutaneous endoscopic approach. 0RJT4ZZ........................... Inspection of left carpometacarpal joint, percutaneous endoscopic approach. 0RJU4ZZ........................... Inspection of right metacarpophalangeal joint, percutaneous endoscopic approach. 0RJV4ZZ........................... Inspection of left metacarpophalangeal joint, percutaneous endoscopic approach. 0RJW4ZZ........................... Inspection of right finger phalangeal joint, percutaneous endoscopic approach. 0RJX4ZZ........................... Inspection of left finger phalangeal joint, percutaneous endoscopic approach. 0SJ04ZZ........................... Inspection of lumbar vertebral joint, percutaneous endoscopic approach. 0SJ34ZZ........................... Inspection of lumbosacral joint, percutaneous endoscopic approach. 0SJ54ZZ........................... Inspection of sacrococcygeal joint, percutaneous endoscopic approach. 0SJ64ZZ........................... Inspection of coccygeal joint, percutaneous endoscopic approach. 0SJ74ZZ........................... Inspection of right sacroiliac joint, percutaneous endoscopic approach. 0SJ84ZZ........................... Inspection of left sacroiliac joint, percutaneous endoscopic approach. 0SJ94ZZ........................... Inspection of right hip joint, percutaneous endoscopic approach. 0SJB4ZZ........................... Inspection of left hip joint, percutaneous endoscopic approach. 0SJC4ZZ........................... Inspection of right knee joint, percutaneous endoscopic approach. 0SJD4ZZ........................... Inspection of left knee joint, percutaneous endoscopic approach. 0SJF4ZZ........................... Inspection of right ankle joint, percutaneous endoscopic approach. 0SJG4ZZ........................... Inspection of left ankle joint, percutaneous endoscopic approach. 0SJH4ZZ........................... Inspection of right tarsal joint, percutaneous endoscopic approach. 0SJJ4ZZ........................... Inspection of left tarsal joint, percutaneous endoscopic approach. 0SJK4ZZ........................... Inspection of right tarsometatarsal joint, percutaneous endoscopic approach. 0SJL4ZZ........................... Inspection of left tarsometatarsal joint, percutaneous endoscopic approach. 0SJM4ZZ........................... Inspection of right metatarsal- phalangeal joint, percutaneous endoscopic approach. 0SJN4ZZ........................... Inspection of left metatarsal- phalangeal joint, percutaneous endoscopic approach. 0SJP4ZZ........................... Inspection of right toe phalangeal joint, percutaneous endoscopic approach. 0SJQ4ZZ........................... Inspection of left toe phalangeal joint, percutaneous endoscopic approach. ------------------------------------------------------------------------ In light of our initial findings of 16 cases for MS-DRG 509, we further reviewed the MedPAR claims data for cases assigned to MS-DRG 509 for the past 5 fiscal years. As reflected in the following table, the data indicate that the number of cases grouping to MS-DRG 509 has steadily declined. ---------------------------------------------------------------------------------------------------------------- Number of Average lenth FY and MedPAR data reviewed cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- FY 2022 (FY 2020 MedPAR)........................................ 25 3.9 $10,372 FY 2023 (FY 2021 MedPAR)........................................ 31 4.2 10,882 FY 2024 (FY 2022 MedPAR)........................................ 34 4.3 11,380 FY 2025 (FY 2023 MedPAR)........................................ 21 5.4 13,683 FY 2026 (FY 2024 MedPAR)........................................ 16 5.2 18,239 ---------------------------------------------------------------------------------------------------------------- We note that, if, during our annual MS-DRG analysis we identify that there are only a few patients in a respective MS-DRG, consistent with our established process, we consider if there have been potential changes in the clinical characteristics of the patients, treatment patterns, or resource utilization. A principle of the MS-DRGs and the characteristics of a meaningful DRG classification scheme is the ability to detect such changes and accordingly, propose clinically appropriate modifications that are also consistent with resource utilization. We believe that the volume of cases reporting the arthroscopy procedures in the inpatient setting has shifted to the outpatient setting over the years; it is usually performed as an outpatient procedure. Of the 16 cases found to report an arthroscopy procedure in the FY 2024 MedPAR data, 13 cases also reported another procedure. For example, one case that reported procedure code 0RJK4ZZ (Inspection of left shoulder joint, percutaneous endoscopic approach) also reported procedure code 0RBK4ZZ (Excision of left shoulder joint, percutaneous endoscopic approach). Procedure code 0RBK4ZZ is assigned to MS-DRGs 510, 511, and 512 (Shoulder, Elbow or Forearm Procedures, Except Major Joint Procedures with MCC, with CC, and without CC/MCC, respectively). However, because of the surgical hierarchy, the resulting assignment is MS-DRG 509. Using the September 2024 update of the FY 2024 MedPAR file, we also reviewed the base DRG by severity claims data for MS-DRG 509 to determine the number of cases, average length of stay and average costs for the 16 cases by severity level (1=MCC, 2=CC and 3=NonCC). Our findings are shown in the following table. [[Page 18054]] ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- 509-1........................................................... 4 5.5 $15,196 509-2........................................................... 7 6.1 27,880 509-3........................................................... 5 3.6 7,177 ----------------------------------------------- 509 base DRG total.......................................... 16 5.2 18,239 ---------------------------------------------------------------------------------------------------------------- Next, we reviewed the claims data from the September 2024 update of the FY 2024 MedPAR file for MS-DRGs 510, 511, and 512 (Shoulder, Elbow or Forearm Procedures, Except Major Joint Procedures with MCC, with CC, and without CC/MCC, respectively); MS-DRGs 513 and 514 (Hand or Wrist Procedures, Except Major Thumb or Joint Procedures with CC/MCC and without CC/MCC, respectively); and MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) because these MS-DRGs are considered to be clinically appropriate and consistent with the arthroscopy procedure code descriptions in MS-DRG 509 previously listed that specify the anatomic site. Our findings are shown in the following tables. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- 510............................................................. 916 6.4 $25,000 511............................................................. 2,538 4.3 18,701 512............................................................. 1,303 2.6 14,582 513............................................................. 1,335 5.0 14,219 514............................................................. 317 2.6 9,556 515............................................................. 4,095 8.4 28,466 516............................................................. 10,522 5.0 18,832 517............................................................. 5,951 2.9 14,067 ---------------------------------------------------------------------------------------------------------------- Based on our analysis and review of the cases grouping to MS-DRG 509, we believe it is appropriate to delete MS-DRG 509 and reassign the 47 procedure codes describing arthroscopy of various anatomic sites to clinically appropriate MS-DRGs that also align with the resource utilization for these cases. For example, of the 16 cases found to group to MS-DRG 509, in addition to identifying 13 cases reporting additional procedures as previously discussed, we also identified 11 cases reporting diagnosis codes designated as a CC or MCC where the average length of stay and average costs of those cases are comparable with the average length of stay and average costs of the cases in the MS-DRGs considered clinically appropriate for their reassignment. Therefore, for FY 2026, of the 47 procedure codes previously listed describing arthroscopy of various anatomic sites, we are proposing to:

1. Reassign the 8 procedure codes describing arthroscopy of the

shoulder or elbow joint to MS-DRGs 510, 511, and 512 (Shoulder, Elbow or Forearm Procedures, Except Major Joint Procedures with MCC, with CC, and without CC/MCC, respectively).

2. Reassign the 10 procedure codes describing arthroscopy of the

hand or wrist joint to MS-DRGs 513 and 514 (Hand or Wrist Procedures, Except Major Thumb or Joint Procedures with CC/MCC and without CC/MCC, respectively).

3. Reassign the 29 procedure codes describing arthroscopy of

various vertebral joints and other musculoskeletal joints 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). We refer the reader to Table 6P.7a for the detailed list of procedure codes with the proposed MS-DRG reassignments. c. MS-DRG Logic for MS-DRGs 456, 457, and 458 We identified an inconsistency in the GROUPER logic for MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with Spinal Curvature, Malignancy, Infection or Extensive Fusions with MCC, with CC, and without CC/MCC, respectively) related to the ICD-10-CM diagnosis codes describing a principal diagnosis of infection. The logic for case assignment to MS-DRGs 456, 457, and 458 as displayed in the ICD-10 MS- DRG Definitions Manual Version 42.1 (which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software) is comprised of four logic lists. The first logic list is entitled ``Spinal Fusion Except Cervical'' and is defined by a list of procedure codes designated as O.R. procedures that describe spinal fusion procedures of the thoracic, thoracolumbar, lumbar, lumbosacral, sacrococcygeal, and sacroiliac joint. (We note that 12 procedure codes describing Fusion of coccygeal joint were deleted effective with discharges beginning April 1, 2025, in version 42.1). The second logic list is entitled ``Spinal Curvature/Malignancy/Infection'' and is defined by a list of diagnosis codes describing spinal curvature, spinal malignancy, and spinal infection that are used to define the logic for case assignment when any one of the listed diagnosis codes is reported as the principal diagnosis. The third logic list is entitled ``OR Secondary Diagnosis'' and is defined by a list of diagnosis codes describing curvature of the spine that are used to define the logic for case assignment when any one of the listed codes is reported as a secondary diagnosis. The fourth logic list is entitled ``Extensive Fusions'' and is defined by a list of procedure codes designated as O.R. procedures that describe extensive spinal fusion procedures. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for [[Page 18055]] complete documentation of the GROUPER logic for MS-DRGs 456, 457, and 458. In the second logic list entitled ``Spinal Curvature/Malignancy/ Infection'' there are a subset of diagnosis codes describing spinal infections. In our review and analysis of MS-DRGs 456, 457, and 458, we identified additional diagnosis codes within the ICD-10-CM classification describing spinal infections that are not currently listed in the logic for case assignment to MS-DRGs 456, 457, and 458. Specifically, we identified the following 47 diagnoses that we believe are clinically appropriate to add to the existing diagnosis codes describing spinal infections in MS-DRGs 456, 457, and 458. ------------------------------------------------------------------------ ICD-10-CM code Description ------------------------------------------------------------------------ A02.24....................... Salmonella osteomyelitis. A54.40....................... Gonococcal infection of musculoskeletal system, unspecified. A54.41....................... Gonococcal spondylopathy. A54.43....................... Gonococcal osteomyelitis. A54.49....................... Gonococcal infection of other musculoskeletal tissue. M46.21....................... Osteomyelitis of vertebra, occipito- atlanto-axial region. M46.22....................... Osteomyelitis of vertebra, cervical region. M46.23....................... Osteomyelitis of vertebra, cervicothoracic region. M46.30....................... Infection of intervertebral disc (pyogenic), site unspecified. M46.31....................... Infection of intervertebral disc (pyogenic), occipito-atlanto-axial region. M46.32....................... Infection of intervertebral disc (pyogenic), cervical region. M46.33....................... Infection of intervertebral disc (pyogenic), cervicothoracic region. M46.34....................... Infection of intervertebral disc (pyogenic), thoracic region. M46.35....................... Infection of intervertebral disc (pyogenic), thoracolumbar region. M46.36....................... Infection of intervertebral disc (pyogenic), lumbar region. M46.37....................... Infection of intervertebral disc (pyogenic), lumbosacral region. M46.38....................... Infection of intervertebral disc (pyogenic), sacral and sacrococcygeal region. M46.39....................... Infection of intervertebral disc (pyogenic), multiple sites in spine. M46.50....................... Other infective spondylopathies, site unspecified. M46.51....................... Other infective spondylopathies, occipito- atlanto-axial region. M46.52....................... Other infective spondylopathies, cervical region. M46.53....................... Other infective spondylopathies, cervicothoracic region. M46.54....................... Other infective spondylopathies, thoracic region. M46.55....................... Other infective spondylopathies, thoracolumbar region. M46.56....................... Other infective spondylopathies, lumbar region. M46.57....................... Other infective spondylopathies, lumbosacral region. M46.58....................... Other infective spondylopathies, sacral and sacrococcygeal region. M46.59....................... Other infective spondylopathies, multiple sites in spine. M86.00....................... Acute hematogenous osteomyelitis, unspecified site. M86.09....................... Acute hematogenous osteomyelitis, multiple sites. M86.10....................... Other acute osteomyelitis, unspecified site. M86.19....................... Other acute osteomyelitis, multiple sites. M86.20....................... Subacute osteomyelitis, unspecified site. M86.29....................... Subacute osteomyelitis, multiple sites. M86.30....................... Chronic multifocal osteomyelitis, unspecified site. M86.39....................... Chronic multifocal osteomyelitis, multiple sites. M86.40....................... Chronic osteomyelitis with draining sinus, unspecified site. M86.49....................... Chronic osteomyelitis with draining sinus, multiple sites. M86.50....................... Other chronic hematogenous osteomyelitis, unspecified site. M86.59....................... Other chronic hematogenous osteomyelitis, multiple sites. M86.60....................... Other chronic osteomyelitis, unspecified site. M86.69....................... Other chronic osteomyelitis, multiple sites. M86.8X0...................... Other osteomyelitis, multiple sites. M86.8X9...................... Other osteomyelitis, unspecified sites. M86.9........................ Osteomyelitis, unspecified. T84.63XA..................... Infection and inflammatory reaction due to internal fixation device of spine, initial encounter. T84.69XA..................... Infection and inflammatory reaction due to internal fixation device of other site, initial encounter. ------------------------------------------------------------------------ Therefore, for clinical consistency and because these codes describe spinal infections that could reasonably require a spinal fusion procedure, we are proposing to add the previously listed diagnosis codes to the logic list entitled ``Spinal Curvature/ Malignancy/Infection'' in MS-DRGs 456, 457, and 458, effective October 1, 2025, for FY 2026. We also identified eight diagnosis codes currently listed in the second logic list entitled ``Spinal Curvature/Malignancy/Infection'' for case assignment to MS-DRGs 456, 457, and 458 that we believe are not clinically appropriate to maintain in the list. Specifically, we identified the following diagnoses. ------------------------------------------------------------------------ ICD-10-CM code Description ------------------------------------------------------------------------ M4850XA........................... Collapsed vertebra, not elsewhere classified, site unspecified, initial encounter for fracture. M4854XA........................... Collapsed vertebra, not elsewhere classified, thoracic region, initial encounter for fracture. M4855XA........................... Collapsed vertebra, not elsewhere classified, thoracolumbar region, initial encounter for fracture. M4856XA........................... Collapsed vertebra, not elsewhere classified, lumbar region, initial encounter for fracture. [[Page 18056]] M4857XA........................... Collapsed vertebra, not elsewhere classified, lumbosacral region, initial encounter for fracture. M4858XA........................... Collapsed vertebra, not elsewhere classified, sacral and sacrococcygeal region, initial encounter for fracture. M8008XA........................... Age-related osteoporosis with current pathological fracture, vertebra(e), initial encounter for fracture. M8088XA........................... Other osteoporosis with current pathological fracture, vertebra(e), initial encounter for fracture. ------------------------------------------------------------------------ The previously listed diagnosis codes do not describe a spinal curvature, malignancy or infection, rather they describe compression fractures of various anatomic sites (for example, collapsed vertebra) and osteoporosis is a condition where the bones become weakened leading to an increased risk of bone fracture. Therefore, for clinical consistency and to ensure accuracy in the logic for case assignment, we are proposing to remove the eight previously listed diagnosis codes from the logic list entitled ``Spinal Curvature/Malignancy/Infection'' in MS-DRGs 456, 457, and 458, effective October 1, 2025, for FY 2026. 6. 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. Based on the results of our review of the claims data from the September 2024 update of the FY 2024 MedPAR file of cases found to group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, we are proposing to move the cases reporting the procedures and/or principal diagnosis codes described in this section of this proposed 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.

1. Control of Bleeding in the Genitourinary Tract

During the review of the cases that group to MS-DRGs 981 through 983, we noted that when ICD-10-PCS procedure codes describing the control of bleeding in the genitourinary tract are reported in conjunction with ICD-10-CM diagnosis codes in MDC 16 (Diseases and Disorders of Blood, Blood Forming Organs, and Immunologic Disorders), the cases group to MS-DRGs 981 through 983. The five ICD-10-CM procedure codes reviewed, as well as their current MDC assignments, are found in the table: ------------------------------------------------------------------------ ICD-10-PCS code Description MDC ------------------------------------------------------------------------ 0W3R0ZZ................ Control bleeding in 05; 11; 12; 13; 17; 21; genitourinary 24 tract, open approach. 0W3R3ZZ................ Control bleeding in 05; 11; 12; 13; 17; 21; genitourinary 24 tract, percutaneous approach. 0W3R4ZZ................ Control bleeding in 05; 11; 12; 13; 17; 21; genitourinary 24 tract, percutaneous endoscopic approach. 0W3R7ZZ................ Control bleeding in 05; 11; 12; 13; 17; 21; genitourinary 24 tract, via natural or artificial opening. 0W3R8ZZ................ Control bleeding in 05; 11; 12; 13; 17; 21; genitourinary 24 tract, via natural or artificial opening endoscopic. ------------------------------------------------------------------------ We refer the reader to Appendix E of the ICD-10 MS-DRG Version 42.1 Definitions Manual, which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.html, for the MS-DRG assignment for each procedure code listed and further discussion of how each procedure code may be assigned to multiple MDCs and MS-DRGs under the IPPS. The principal diagnosis most frequently reported with the five ICD- 10-PCS procedure codes describing the control of bleeding in the genitourinary tract in MDC 16 is ICD-10-CM code D68.32 (Hemorrhagic disorder due to extrinsic circulating anticoagulants). Hemorrhagic disorder due to extrinsic circulating anticoagulants is a condition that occurs when bleeding is caused by anticoagulants or antithrombotics, which are medicines commonly used to treat or prevent blood clots by decreasing the amount of clotting proteins in the blood. We examined claims data from the September 2024 update of the FY 2024 MedPAR file to identify the average length of stay and average costs for cases reporting a procedure code describing the control of bleeding in the genitourinary tract with a principal diagnosis in MDC 16, which are currently grouping to MS-DRGs 981 through 983, as well as all cases in MS-DRGs 981 through 983. Our findings are shown in the following table. [[Page 18057]] MS-DRGs 981-983--All Cases and Cases Reporting a Procedure Code Describing the Control of Bleeding in the Genitourinary Tract and a Principal Diagnosis in MDC 16 ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- MS-DRG 981--All cases........................................... 19,155 11.7 $40,259 MS-DRG 981--Cases reporting procedure code describing the 23 9 27,900 control of bleeding in the genitourinary tract and a principal diagnosis in MDC 16............................................ MS-DRG 982--All cases........................................... 9,392 5.7 21,951 MS-DRG 982--Cases reporting procedure code describing the 64 4.3 13,462 control of bleeding in the genitourinary tract and a principal diagnosis in MDC 16............................................ MS-DRG 983--All cases........................................... 1,831 2.6 15,837 MS-DRG 983--Cases reporting procedure code describing the 5 2.8 9,416 control of bleeding in the genitourinary tract and a principal diagnosis in MDC 16............................................ ---------------------------------------------------------------------------------------------------------------- We then examined the MS-DRGs within MDC 16 and determined that the cases reporting procedure codes describing the control of bleeding in the genitourinary tract with a principal diagnosis in MDC 16 would most suitably group to 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), which contains 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. To determine how the resources for this subset of cases compared to cases in MS-DRGs 802, 803, and 804 as a whole, we examined the average costs and length of stay for cases in MS-DRGs 802, 803, and 804. Our findings are shown in this table. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- MS-DRG 802--All cases........................................... 417 11.6 $37,595 MS-DRG 803--All cases........................................... 452 5.3 16,762 MS-DRG 804--All cases........................................... 209 2.2 12,605 ---------------------------------------------------------------------------------------------------------------- We reviewed the data and noted for this subset of cases, the average costs are lower and the average length of stays are generally shorter than for cases in MS-DRGs 802, 803, and 804. However, we believe that when an ICD-10-PCS procedure code describing the control of bleeding in the genitourinary tract is reported with a principal diagnosis in MDC 16 (typically hemorrhagic disorder due to extrinsic circulating anticoagulants), the procedure is related to the principal diagnosis. Because a procedure code describing the control of bleeding in the genitourinary tract would be expected to be related to a principal diagnosis describing a hemorrhagic disorder due to extrinsic circulating anticoagulants, it is clinically appropriate for the procedures to group to the same MS-DRGs as the principal diagnoses. Therefore, we are proposing to add the five procedure codes listed previously to MDC 16. Under this proposal, cases reporting a procedure code describing the control of bleeding in the genitourinary tract with a principal diagnosis of a hemorrhagic disorder due to extrinsic circulating anticoagulants (diagnosis code D68.32) in MDC 16 would group to MS-DRGs 802, 803, and 804.

2. Removal of Infusion Device From Peritoneal Cavity

During the review of the cases that group to MS-DRGs 981 through 983, we noted that when ICD-10-PCS procedure codes describing the removal of an infusion device from the peritoneal cavity are reported in conjunction with ICD-10-CM diagnosis codes in MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs), the cases group to MS-DRGs 981 through 983. The three ICD-10-PCS procedure codes reviewed, as well as their current MDC assignments, are found in the table: ------------------------------------------------------------------------ ICD-10-PCS code Description MDC ------------------------------------------------------------------------ 0WPG03Z............................ Removal of infusion device 06; 21 from peritoneal cavity, open approach. 0WPG33Z............................ Removal of infusion device 06; 21 from peritoneal cavity, percutaneous approach. 0WPG43Z............................ Removal of infusion device 06; 21 from peritoneal cavity, percutaneous endoscopic approach. ------------------------------------------------------------------------ We refer the reader to Appendix E of the ICD-10 MS-DRG Version 42.1 Definitions Manual (which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.html) for the MS-DRG assignment for each procedure code listed and further discussion of how each procedure code may be assigned to multiple MDCs and MS-DRGs under the IPPS. The principal diagnosis most frequently reported with the three ICD-10-PCS procedure codes describing the removal of an infusion device from the peritoneal cavity in MDC 21 is ICD-10-CM code T85.71XA (Infection and inflammatory reaction due to peritoneal dialysis catheter, initial encounter). We examined claims data from the September 2024 update of the FY 2024 MedPAR file to identify the average length of stay and average costs for cases reporting a procedure code describing the removal of an infusion device from the peritoneal cavity with a principal diagnosis in MDC 21, which are currently grouping to MS-DRGs 981 through 983, as well as all cases in MS- [[Page 18058]] DRGs 981 through 983. Our findings are shown in the following table. MS-DRGs 981-983--All Cases and Cases Reporting a Procedure Code Describing the Removal of an Infusion Device From the Peritoneal Cavity and a Principal Diagnosis in MDC 21 ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- MS-DRG 981--All cases........................................... 19,155 11.7 $40,259 MS-DRG 981--Cases reporting procedure code describing the 85 8.8 25,556 removal of an infusion device from the peritoneal cavity and a principal diagnosis in MDC 21.................................. MS-DRG 982--All cases........................................... 9,392 5.7 21,951 MS-DRG 982--Cases reporting procedure code describing the 1 4 11,845 removal of an infusion device from the peritoneal cavity and a principal diagnosis in MDC 21.................................. MS-DRG 983--All cases........................................... 1,831 2.6 15,837 MS-DRG 983--Cases reporting procedure code describing the 0 0 0 removal of an infusion device from the peritoneal cavity and a principal diagnosis in MDC 21.................................. ---------------------------------------------------------------------------------------------------------------- We then examined the MS-DRGs within MDC 21 and determined that the cases reporting procedure codes describing the removal of an infusion device from the peritoneal cavity with a principal diagnosis in MDC 21 would most suitably group to MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries with MCC, with CC, and without CC/MCC, respectively), which contains other operating room procedures performed for injuries as further detailed below. To determine how the resources for this subset of cases compared to cases in MS-DRGs 907, 908, and 909 as a whole, we examined the average costs and length of stay for cases in MS-DRGs 907, 908, and 909. Our findings are shown in this table. ---------------------------------------------------------------------------------------------------------------- Number of Average length MS-DRG cases of stay Average costs ---------------------------------------------------------------------------------------------------------------- MS-DRG 907--All cases........................................... 7,754 9.4 $34,049 MS-DRG 908--All cases........................................... 6,625 4.8 17,938 MS-DRG 909--All cases........................................... 1,721 2.7 12,154 ---------------------------------------------------------------------------------------------------------------- We reviewed the data and noted for the subset of cases reporting procedure codes describing the removal of an infusion device from the peritoneal cavity with a principal diagnosis in MDC 21, the average costs are lower and the average length of stays are shorter than for cases in MS-DRGs 907, 908, and 909. However, we believe that when an ICD-10-PCS procedure code describing the removal of an infusion device from the peritoneal cavity is reported with a principal diagnosis in MDC 21 (typically infection and inflammatory reaction due to peritoneal dialysis catheter), the procedure is related to the principal diagnosis. Because a procedure code describing the removal of an infusion device from the peritoneal cavity would be expected to be related to a principal diagnosis describing an infected catheter used for peritoneal dialysis causing inflammation in the surrounding tissue, it is clinically appropriate for the procedures to group to the same MS-DRGs as the principal diagnoses. Therefore, we are proposing to add the three procedure codes listed previously to MDC 21. Under this proposal, cases reporting a procedure code describing the removal of an infusion device from the peritoneal cavity with a principal diagnosis of an infection and inflammatory reaction due to peritoneal dialysis catheter, initial encounter (diagnosis code T85.71XA) in MDC 21 would group to MS-DRGs 907, 908, and 909. In addition to the internal review of procedures producing assignment to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, 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. We did not receive any requests suggesting reassignment. 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 average 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 propose MS-DRG assignments for the cases in a similar manner. Generally, we propose to move only those procedures for which we have an adequate number of discharges to analyze the data. Additionally, 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 for the cases to be reassigned from one of the MS-DRG groups to the other. We did not receive any requests suggesting reassignment. Further, based on the results of our review of the claims data from the September 2024 update of the FY 2024 MedPAR file we did not identify any cases for reassignment. Therefore, for FY 2026 we are not proposing to move any cases reporting procedure codes from MS-DRGs 981 through 983 to MS-DRGs 987 through 989 or vice versa. [[Page 18059]] 7. Operating Room (O.R.) and Non-O.R. Procedures 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, we 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 proposed to be newly designated as O.R. procedures. As discussed in section II.C.13 of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we are making Table 6B.--New Procedure Codes--FY 2026 available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.html. We also refer readers to the ICD-10 MS-DRG Version 42.1 Definitions Manual at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/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 multiyear 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 (84 FR 19230) 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. 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 certain surgical approaches to evaluate whether to subdivide a subset of MS-DRGs based on a specific surgical approach. We stated 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. In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58540 through 58541), we provided a summary of the comments we had received in response to our request for 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 also stated that in consideration of the PHE, we believed it may be appropriate to allow additional time for the claims data to stabilize prior to selecting the timeframe to analyze for this review. For this FY 2026 IPPS/LTCH PPS proposed rule, we continue to believe additional time is necessary as we continue to develop our process and methodology. As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58749), we have signaled in prior rulemaking that the designation of an O.R. procedure encompasses more than the physical location of the hospital room in which the procedure may be performed; in other words, the performance of a procedure in an operating room is not the sole determining factor we will consider as we examine the designation of a procedure in the ICD-10-PCS classification system. 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 available in the ICD-10 claims data. We are considering the feedback received 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 as we continue to develop our process and [[Page 18060]] methodology and will provide more detail on this analysis and the methodology for conducting this comprehensive review in future rulemaking. We encourage the public to continue to submit feedback and comments on any other factors in consideration of our refinement efforts to recognize and differentiate consumption of resources under the ICD-10 MS-DRGs. For this FY 2026 IPPS/LTCH PPS proposed rule, we received requests regarding changing the designation of specific ICD-10-PCS procedure codes from non-O.R. to O.R. procedures. In this section of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we detail and respond to those requests. In this section of the preamble of this proposed rule, we also discuss the proposal we are making based on our internal review and analysis and the process that was utilized for evaluating each procedure code. For each procedure, we considered-- Whether the procedure would typically require the resources of an operating room; Whether it is an extensive or a non-extensive 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 the preamble of this FY 2026 IPPS/LTCH PPS proposed 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. For procedures that would not typically require the resources of an operating room, we determined if the procedure should affect the MS-DRG assignment. In cases where we are proposing to change the designation of procedure codes from non-O.R. procedures to O.R. procedures, we also are proposing 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-DRGs 981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS- DRGs 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, we did not specifically address that aspect in summarizing the request and our response to that request or the proposal we are making based on our internal review and analysis in this section of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule. b. Non-O.R. Procedures to O.R. Procedures (1) Open Drainage of the Mandible In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44895 through 44896), we discussed a request we received to change the designation of procedure codes 0N9R0ZZ (Drainage of maxilla, open approach), 0N9T0ZZ (Drainage of right mandible, open approach), and 0N9V0ZZ (Drainage of left mandible, open approach), from non-O.R. to O.R. procedures. In the FY 2022 final rule, we stated that we disagreed that the procedures describing the open drainage of the maxilla or mandible typically require the resources of an operating room. We stated that if admission is required for the treatment of a jaw infection, the admission is quite likely due to the need for IV antibiotics as opposed to the need for operating room resources in an inpatient setting. After consideration of the public comments we received, we finalized our proposal to maintain the non-O.R. designation of ICD-10-PCS procedure codes 0N9R0ZZ, 0N9T0ZZ, and 0N9V0ZZ, without modification, for FY 2022. For this FY 2026 IPPS/LTCH PPS proposed rule, we again received a request to change the designation of ICD-10-PCS codes 0N9T0ZZ (Drainage of right mandible, open approach), and 0N9V0ZZ (Drainage of left mandible, open approach), from non-O.R. to O.R. The requestor identified procedure code 0W950ZZ (Drainage of lower jaw, open approach) that is currently designated as an O.R. procedure and stated that the body part value of mandible is more specific than body part value of lower jaw. The requestor also stated that in the ICD-10-PCS classification, other procedure codes that describe drainage procedures performed on body parts deeper than subcutaneous tissue, such as muscles, tendons, and bone, are designated as O.R. procedures. Therefore, the requestor stated that procedure codes 0N9T0ZZ and 0N9V0ZZ should also be recognized as O.R. procedures for purposes of MS-DRG assignment. The requestor did not provide a specific list of the procedure codes that describe drainage procedures performed on body parts deeper than subcutaneous tissue, such as muscles, tendons, and bone, that are currently designated as O.R. procedures for CMS to review. In the ICD-10 MS-DRGs Definitions Manual Version 42.1, procedure codes 0N9T0ZZ and 0N9V0ZZ are currently designated as non-O.R. procedures for purposes of MS-DRG assignment. We reviewed this issue and continue to disagree that the procedures describing the open drainage of the mandible are typically performed in the operating room under general anesthesia. As discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44896), these procedures can be done in an oral surgeon's office, or an outpatient setting and are rarely performed in the inpatient setting. Therefore, we are proposing to maintain the current non-O.R. designation of ICD-10-PCS procedure codes 0N9T0ZZ and 0N9V0ZZ. In our review of this issue, we agree with the requestor that in the ICD-10 MS-DRGs Definitions Manual Version 42.1, procedure code 0W950ZZ (Drainage of lower jaw, open approach) is currently designated as an O.R. procedure for purposes of MS-DRG assignment. While we have stated in prior rulemaking that a correlation cannot be made between procedures performed in general anatomic regions and procedures performed in specific body parts because these procedures coded with the general anatomic regions body part represent a broader range of procedures that cannot be coded to a specific body part, we continue to believe if admission is required for the treatment of a jaw infection, the admission is quite likely due to the need for IV antibiotics as opposed to the need for operating room resources in an inpatient setting. Like procedures that describe the open drainage of mandible, procedures to drain the lower jaw can also be done in an oral surgeon's office or an outpatient setting and are rarely performed in the inpatient setting. We agree that procedures that describe the open drainage of mandible consume resources comparable to the related ICD- 10-PCS procedure code that describes the open drainage of the jaw. These procedures do not typically require the resources of an operating room and are not surgical in nature. Therefore, for clinical consistency, we are proposing to remove procedure code 0W950ZZ (Drainage of lower jaw, open approach) from the FY 2026 ICD-10 MS-DRGs Version 43 Definitions Manual in Appendix E--Operating [[Page 18061]] Room Procedures and Procedure Code/MS-DRG Index as an O.R. procedure. Under this proposal, this procedure would no longer impact MS-DRG assignment. (2) Introduction of Paclitaxel-Coated Balloon Catheter Technology In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69094 through 69096), we summarized and responded to comments we received regarding the O.R. designation and MS-DRG assignment of 16 procedure codes that describe introduction of the AGENTTM Paclitaxel-Coated Balloon Catheter technology that is indicated to treat coronary in- stent restenosis (ISR) in patients with coronary artery disease. The following procedure codes describing use of the AGENTTM Paclitaxel-Coated Balloon Catheter technology were finalized following the March 19, 2024, ICD-10 Coordination and Maintenance Committee meeting and made available via the CMS website on June 5, 2024, at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. We refer the reader to the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials for additional detailed information regarding the request, including a recording of the discussion and the related meeting materials. ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ XW0J3HA..................... Introduction of paclitaxel-coated balloon technology, one balloon into coronary artery, one artery, percutaneous approach, new technology group 10. XW0J3JA..................... Introduction of paclitaxel-coated balloon technology, two balloons into coronary artery, one artery, percutaneous approach, new technology group 10. XW0J3KA..................... Introduction of paclitaxel-coated balloon technology, three balloons into coronary artery, one artery, percutaneous approach, new technology group 10. XW0J3LA..................... Introduction of paclitaxel-coated balloon technology, four or more balloons into coronary artery, one artery, percutaneous approach, new technology group 10. XW0K3HA..................... Introduction of paclitaxel-coated balloon technology, one balloon into coronary artery, two arteries, percutaneous approach, new technology group 10. XW0K3JA..................... Introduction of paclitaxel-coated balloon technology, two balloons into coronary artery, two arteries, percutaneous approach, new technology group 10. XW0K3KA..................... Introduction of paclitaxel-coated balloon technology, three balloons into coronary artery, two arteries, percutaneous approach, new technology group 10. XW0K3LA..................... Introduction of paclitaxel-coated balloon technology, four or more balloons into coronary artery, two arteries, percutaneous approach, new technology group 10. XW0L3HA..................... Introduction of paclitaxel-coated balloon technology, one balloon into coronary artery, three arteries, percutaneous approach, new technology group 10. XW0L3JA..................... Introduction of paclitaxel-coated balloon technology, two balloons into coronary artery, three arteries, percutaneous approach, new technology group 10. XW0L3KA..................... Introduction of paclitaxel-coated balloon technology, three balloons into coronary artery, three arteries, percutaneous approach, new technology group 10. XW0K3LA..................... Introduction of paclitaxel-coated balloon technology, four or more balloons into coronary artery, two arteries, percutaneous approach, new technology group 10. XW0L3HA..................... Introduction of paclitaxel-coated balloon technology, one balloon into coronary artery, three arteries, percutaneous approach, new technology group 10. XW0L3JA..................... Introduction of paclitaxel-coated balloon technology, two balloons into coronary artery, three arteries, percutaneous approach, new technology group 10. XW0L3KA..................... Introduction of paclitaxel-coated balloon technology, three balloons into coronary artery, three arteries, percutaneous approach, new technology group 10. XW0M3LA..................... Introduction of paclitaxel-coated balloon technology, four or more balloons into coronary artery, four or more arteries, percutaneous approach, new technology group 10. ------------------------------------------------------------------------ For FY 2026, we received a request to reconsider the designation and MS-DRG assignment of the previously listed 16 procedure codes. Specifically, the requestor (the manufacturer) requested that the procedure codes be designated as O.R. procedures and assigned to the following surgical MS-DRGs: MS-DRG 250 Percutaneous Cardiovascular Procedures without Intraluminal Device with MCC MS-DRG 251 Percutaneous Cardiovascular Procedures without Intraluminal Device without MCC MS-DRG 321 Percutaneous Cardiovascular Procedures with Intraluminal Device with MCC or 4+ Arteries/Intraluminal Devices MS-DRG 322 Percutaneous Cardiovascular Procedures with Intraluminal Device without MCC MS-DRG 323 Coronary Intravascular Lithotripsy with Intraluminal Device with MCC MS-DRG 324 Coronary Intravascular Lithotripsy with Intraluminal Device without MCC MS-DRG 325 Coronary Intravascular Lithotripsy without Intraluminal Device According to the requestor, the root operation CMS identified as the most appropriate (that is, Introduction in the Administration section), and the predecessor code selected, (procedure code 3E073GC (Introduction of other therapeutic substance into coronary artery, percutaneous approach)), only involves a therapeutic substance being delivered via infusion or injection. The requestor stated that the procedure to administer the paclitaxel via the drug coated balloon (DCB) catheter is a surgical procedure as described in the instructions for use, with the drug delivery occurring using controlled prolonged balloon inflation during which the patient is monitored for signs of ischemia or arrythmia. The requestor stated that the procedure to deliver the paclitaxel is more appropriate as an O.R. procedure than a non-O.R. procedure. The requestor acknowledged that while the MS-DRG assignment for existing percutaneous coronary intervention (PCI) procedures is driven by vessel preparation or the use of an intraluminal device, it should not preclude the designation of the procedure codes identifying use of an AGENTTM Paclitaxel- Coated Balloon Catheter technology that describes the [[Page 18062]] delivery of the paclitaxel to the coronary vessel(s) as O.R. procedures. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69095 through 69096), we stated that under our established process, we reviewed the predecessor code and MS-DRG assignment most closely associated with the new procedure codes. We noted that because the procedure codes describing the use of an AGENTTM Paclitaxel-Coated Balloon Catheter are describing delivery of the paclitaxel to the coronary vessel(s), the predecessor code is 3E073GC, which is designated as a non-O.R. procedure and does not affect MS-DRG assignment. We also stated that, as discussed at the March 19, 2024, ICD-10 Coordination and Maintenance Committee meeting and in the commenters' feedback, a preparatory step (that is, vessel preparation by either angioplasty, atherectomy, or lithotripsy) is required to be performed first, before the AGENTTM Paclitaxel-Coated Balloon Catheter is deployed. We noted that each type of vessel preparation procedure is designated as an O.R. procedure and maps to one of the previously listed surgical MS-DRGs. We also noted that based on the surgical hierarchy, the reporting of one of the vessel preparation steps (that is, angioplasty, atherectomy, or lithotripsy), or placement of a new stent in connection with the use of the AGENTTM Paclitaxel-Coated Balloon Catheter would result in assignment to one of the previously listed surgical MS-DRGs. We noted that use of the AGENTTM Paclitaxel-Coated Balloon Catheter to deliver the paclitaxel to the coronary vessel(s) cannot occur in the absence of a surgical vessel preparation and therefore, it is the vessel preparation procedure that will determine the surgical MS-DRG assignment to one of the previously listed surgical MS-DRGs. We reviewed the instructions for use submitted by the requestor regarding the procedure to insert the drug-coated balloon catheter. The instructions for use state: Note: For optimal DCB results, adequate lesion preparation is essential. This should include predilatation with a non-coated coronary balloon. Intravascular imaging to guide lesion preparation and to assess the adequacy of the final result is strongly recommended. Caution: Lesion preparation is necessary to prevent delamination of the balloon's drug coating while traversing patient anatomy. The TransPax coating is designed to facilitate drug transfer into the vessel wall upon contact. Do not use the AGENT Drug-Coated Balloon Catheter for lesion preparation. We also note that the FDA-approved indication states, ``The AGENTTM Paclitaxel-Coated Balloon Catheter is intended to be used after appropriate vessel preparation in adult patients undergoing percutaneous coronary intervention (PCI) in coronary arteries 2.0 mm to 4.0 mm in diameter and lesions up to 26 mm in length for the purpose of improving myocardial perfusion when treating in-stent restenosis (ISR).'' We further note that, as reflected in the March 19, 2024, ICD- 10 Coordination and Maintenance Committee meeting materials, ``The AGENTTM Drug-Coated Balloon (DCB) has been designated by the FDA as an implant for PMA purposes. Per FDA guidance, the drug component is considered a permanent implant because it remains in the body for greater than 30 days.'' As such, we continue to disagree with designating the procedure to delivery paclitaxel to a coronary vessel as identified by any one of the previously listed 16 procedure codes as O.R. procedures. As stated earlier in this section, the MS-DRG assignment is dependent on the surgical vessel preparation procedure that would be reported when the AGENTTM Paclitaxel-Coated Balloon Catheter technology is used to deliver the paclitaxel to the coronary vessel(s) and result in assignment to one of the previously listed surgical MS-DRGs. We refer the reader to the ICD-10 MS-DRG Definitions Manual, Version 42.1 available in association with this FY 2026 IPPS/LTCH PPS proposed rule on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps for complete documentation of the GROUPER logic for the previously listed surgical MS-DRGs under MDC 05. For the reasons discussed, we are maintaining the designation of the 16 procedure codes describing use of the AGENTTM Paclitaxel- Coated Balloon Catheter technology as non-O.R. for FY 2026. (3) Endoscopic Drainage of the Ureter With Drainage Device During our internal review, we noted that procedure codes that describe drainage of the ureter with a drainage device, via a natural or artificial opening endoscopic approach, are not recognized as O.R. procedures for purposes of MS-DRG assignment. We identified the following three related codes: ------------------------------------------------------------------------ ICD-10-PCS code Description ------------------------------------------------------------------------ 0T9680Z..................... Drainage of right ureter with drainage device, via natural or artificial opening endoscopic. 0T9780Z..................... Drainage of left ureter with drainage device, via natural or artificial opening endoscopic. 0T9880Z..................... Drainage of bilateral ureters with drainage device, via natural or artificial opening endoscopic. ------------------------------------------------------------------------ Upon further review and consideration, we believe that procedure codes 0T9680Z, 0T9780Z, and 0T9880Z that describe the drainage of the ureter with a drainage device via a natural or artificial opening endoscopic approach warrant designation as O.R. procedures. These procedures involve the use of a cystoscope and include the insertion of a small tube (called a ureteral stent or drainage tube) into one or both of the ureters (the tubes that carry urine from the kidneys to the bladder) to drain urine from a blocked or partially blocked ureter and must be performed by a urologist who specializes in diagnosing and treating conditions of the urinary tract, genitals, and adrenal glands through surgery. These procedures are typically performed in an operating room under anesthesia, can take about 30 minutes or more, including preparation time, and require that a patient's vital signs be monitored by the health care team for the duration of the procedure. Therefore, we are proposing to add procedure codes 0T9680Z, 0T9780Z, and 0T9880Z to the FY 2026 ICD-10 MS-DRG Version 43 Definitions Manual in Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRG 264 (Other Circulatory System O.R. Procedures) in MDC 05 (Diseases and Disorders of the Circulatory System); MS-DRGs 656, 657, and 658 (Kidney and Ureter Procedures for Neoplasm, with MCC, with CC, and without CC/ MCC, respectively) and MS-DRGs 659, 660, and 661 (Kidney and Ureter Procedures for Non-Neoplasm, with MCC, with CC, and without CC/MCC, respectively) in [[Page 18063]] MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract); 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). 8. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2026 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 (NonCC, 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 an MCC, a CC, or a NonCC 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 assigning severity levels to new codes and 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 through 19246) 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 proposed 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 IPPS/LTCH PPS final rule, we generally did not finalize our proposed 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 NonCC to a CC. We stated that postponing adoption of the proposed 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 proposed severity level designation changes for FY 2020. 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 this methodology utilized to mathematically measure the impact on resource use. We refer readers to https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/Downloads/10082019ListingSessionTrasncriptandQandAsandAudioFile.zip for the transcript and audio file of the listening session. We also refer readers to https://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for the supplementary file containing the mathematical data generated using claims from the FY 2018 MedPAR file 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. In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58550 through 58554), we discussed our 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 nine guiding principles and plan to present the findings and proposals in future rulemaking. The nine guiding principles are 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 or management of care or both. 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 refer readers to the FY 2021 IPPS/LTCH PPS final rule for a complete summation of the comments we received for each of the nine guiding principles and our responses to those comments. In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25175 through 25180), as another interval step in our comprehensive review of the severity designations of ICD-10-CM diagnosis codes, we requested public comments on a potential change to the severity level designations for ``unspecified'' ICD-10-CM diagnosis codes that we [[Page 18064]] were considering adopting for FY 2022. Specifically, we noted we were considering changing the severity level designation of ``unspecified'' diagnosis codes to a NonCC where there are other codes available in that code subcategory that further specify the anatomic site. As summarized in the FY 2022 IPPS/LTCH PPS final rule, many commenters expressed concern with the potential severity level designation changes overall and recommended that CMS delay any possible change to the designation of these codes to give hospitals and their physicians time to prepare. After careful consideration of the public comments we received, we maintained the severity level designation of the ``unspecified'' diagnosis codes currently designated as a CC or MCC where there are other codes available in that code subcategory that further specify the anatomic site for FY 2022. We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 44916 through 44926) for a complete discussion of our response to public comments regarding the potential severity level designation changes. Instead, for FY 2022, we finalized a new Medicare Code Editor (MCE) code edit for ``unspecified'' codes, effective with discharges on and after April 1, 2022. We stated we believe finalizing this new edit would provide additional time for providers to be educated while not affecting the payment the provider is eligible to receive. We refer the reader to section II.D.14.e. of the preamble of the FY 2022 IPPS/LTCH PPS final rule (86 FR 44940 through 44943) for the complete discussion. As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48866), we stated that as the new unspecified edit became effective beginning with discharges on and after April 1, 2022, we believed it was appropriate to not propose to change the designation of any ICD-10-CM diagnosis codes, including the unspecified codes that are subject to the ``Unspecified Code'' edit, as we continue our comprehensive CC/MCC analysis to allow interested parties the time needed to become acclimated to the new edit. In the FY 2023 IPPS/LTCH proposed rule (87 FR 28177 through 28181), we also requested public comments on how the reporting of diagnosis codes in categories Z55-Z65 might improve our ability to recognize severity of illness, complexity of illness, and/or utilization of resources under the MS-DRGs. We stated we were also interested in receiving feedback on how we might otherwise foster the documentation and reporting of the diagnosis codes describing social and economic circumstances to more accurately reflect each health care encounter and improve the reliability and validity of the coded data. In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58755 through 58759), based on our analysis of the impact on resource use for the ICD-10-CM Z codes that describe homelessness and after consideration of public comments, we finalized changes to the severity levels for diagnosis codes Z59.00 (Homelessness, unspecified), Z59.01 (Sheltered homelessness), and Z59.02 (Unsheltered homelessness), from NonCC to CC. We stated our expectation that finalizing the changes would encourage the increased documentation and reporting of the diagnosis codes describing social and economic circumstances and serve as an example for providers that, when they document and report SDOH codes, CMS can further examine the claims data and consider future changes to the designation of these codes when reported as a secondary diagnosis. We further stated CMS would continue to monitor and evaluate the reporting of the diagnosis codes describing social and economic circumstances. In the FY 2025 proposed rule (89 FR 35995), we noted that since the FY 2021 IPPS/LTCH PPS final rule we have continued to solicit feedback regarding the nine guiding principles, as well as other possible ways we can incorporate meaningful indicators of clinical severity. We stated we had 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 when providing feedback or comments. We also noted in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26748 through 26750) we illustrated how the nine guiding principles might be applied in evaluating changes to the severity designations of diagnosis codes in our discussion of our proposed changes to the severity level designation for certain diagnosis codes that describe homelessness. After consideration of the ongoing feedback and comments we had received, we proposed to finalize the nine guiding principles. After consideration of the public comments received, and for the reasons discussed, we finalized the nine guiding principles as listed previously in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69076 through 69078). Accordingly, we stated that our evaluations to determine the extent to which the presence of a diagnosis code as a secondary diagnosis results in increased hospital resource use will include 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 the nine guiding principles. Additionally, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69079 through 69084), based on our analysis of the impact on resource use for the ICD-10-CM diagnosis codes that describe inadequate housing and housing instability, and after consideration of public comments, we finalized changes to the severity levels for seven diagnosis codes for FY 2025. For this FY 2026 IPPS/LTCH PPS proposed rule, we did not receive any requests to change the severity level designations of specific ICD- 10-CM diagnosis codes. At this time, we believe it is appropriate to continue to formulate future next steps in our comprehensive review of the severity designations of ICD-10-CM diagnosis codes, rather than proposing to change the designation of individual ICD-10-CM diagnosis codes. Therefore, we are not proposing any severity designation changes for FY 2026. As we continue our comprehensive CC/MCC analysis, we may consider proposing changes for other diagnosis codes in the future based on our analysis of the impact on resource use, per our methodology, as previously described, and consideration of the guiding principles consistent with our annual process and will provide more detail in future rulemaking. We have updated the Impact on Resource Use Files on the CMS website so that the public can review the mathematical data for the impact on resource use generated using claims from the FY 2019 through the FY 2024 MedPAR files. These files are posted on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software. For new diagnosis codes approved for FY 2026, consistent with our annual process for designating a severity level (MCC, CC, or NonCC) for new diagnosis codes, we first review the predecessor code designation, followed by review and consideration of other factors that may be relevant to the severity level designation, including the severity of illness, treatment difficulty, complexity of service and the resources utilized in the diagnosis or treatment of the condition. We note that this process does not automatically result in the new diagnosis code having the same designation as the predecessor code. We refer the reader to section II.C.9 of the preamble of this FY 2026 IPPS/LTCH [[Page 18065]] PPS proposed rule for the discussion of the proposed changes to the ICD-10-CM and ICD-10-PCS coding systems for FY 2026. c. Proposed Additions and Deletions to the Diagnosis Code Severity Levels for FY 2026 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 2026 and are available 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 2026; Table 6I.2--Proposed Deletions to the MCC List--FY 2026; Table 6J.1--Proposed Additions to the CC List--FY 2026; and Table 6J.2--Proposed Deletions to the CC List--FY 2026. d. Proposed CC Exclusions List for FY 2026 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 18886) 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 42.1 CC Exclusion List is included as Appendix C in the ICD-10 MS-DRG Definitions Manual (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) and includes three lists identified as Part 1, Part 2 and Part 3. 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 reported as the principal diagnosis, would cause the CC or MCC diagnosis to be considered as a NonCC. Part 2 is the list of diagnosis codes designated as an MCC only for patients discharged alive; otherwise, they are assigned as a NonCC. Part 3 is the list of diagnosis codes that are designated as a CC or MCC and included in the definition of the logic for the listed MS-DRGs. When reported as a secondary diagnosis and grouped to one of the listed MS-DRGs, the diagnosis is excluded from acting as a CC/MCC for severity in DRG assignment (that is, suppression logic). In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69093), we stated that, because commenters had raised concerns regarding the principal diagnoses listed under Part 1 of Appendix C--CC Exclusions List in Principal Diagnosis Collection Lists 1379 and 1380 that exclude diagnosis codes N18.5 (Chronic kidney disease, stage 5) and N18.6 (End stage renal disease) from acting as a CC or MCC under the CC exclusion logic in accordance with the list of five principles established in 1987, we intended to perform a broad review of the conditions in these lists to determine if any modifications are warranted and to ensure they continue to be clinically appropriate. We note that the Principal Diagnosis Collection List numbers may change because of updates that are made to the list annually through rulemaking. Therefore, while under Version 41.1 the principal diagnoses listed in Principal Diagnosis Collection List numbers 1379 and 1380 exclude diagnosis codes N18.5 and N18.6 from acting as a CC or MCC, under Version 42.1, the principal diagnoses listed in Principal Diagnosis Collection List numbers 1330 and 1331 exclude diagnosis codes N18.5 and N18.6 from acting as a CC or MCC. Accordingly, we reviewed the list of principal diagnosis codes listed in Principal Diagnosis Collection List numbers 1330 and 1331 that exclude diagnosis codes N18.5 and N18.6 from acting as a CC or MCC to assess clinical appropriateness. The findings from our review indicate several of the listed conditions, when reported as a principal diagnosis, are not applicable to exclude the designated N18.5 or N18.6 secondary CC/MCC diagnosis code under application of our five established principles finalized in the September 1, 1987, final notice (52 FR 33154) previously discussed. For example, diagnosis codes describing diabetes with other specified complications such as arthropathy, periodontal disease, or a foot ulcer, and diagnosis codes describing endometriosis, are not chronic and acute manifestations of, or closely related conditions to, chronic kidney disease, stage 5 (code N18.5) or end stage renal disease (code N18.6), nor are they describing codes for the same condition that cannot coexist. As previously described, the Principal Diagnosis Collection List numbers may change because of updates that are made to the list annually through rulemaking. We note that, under proposed Version 43, the proposed Principal Diagnosis Collection List number to exclude diagnosis codes N18.5 and N18.6 from acting as a CC or MCC is 1335. We are therefore proposing to remove the diagnosis codes listed in Table 6P.8a associated with this FY 2026 IPPS/LTCH PPS proposed rule and available via the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps from Principal Diagnosis Collection List number 1335 under proposed Version 43. Findings from our internal review also indicated that diagnosis code I12.9 (Hypertensive chronic kidney disease with stage 1 through stage 4 chronic kidney disease, or unspecified chronic kidney disease) is currently listed in Principal Diagnosis Collection List number 1331 and excludes diagnosis code N18.6 from acting as an MCC, however, diagnosis code I12.9 is not currently listed in the Principal Diagnosis Collection List number 1330 to exclude diagnosis code [[Page 18066]] N18.5. We believe it is clinically appropriate to add diagnosis code I12.9 to Principal Diagnosis Collection List number 1335 under Version 43 because it would not be expected that a secondary diagnosis of N18.5 would be reported with a principal diagnosis of I12.9. During our internal review we also identified diagnosis code I13.0 (Hypertensive heart and chronic kidney disease with heart failure and stage 1 through stage 4 chronic kidney disease, or unspecified chronic kidney disease) and diagnosis code I13.10 (Hypertensive heart and chronic kidney disease without heart failure, with stage 1 through stage 4 chronic kidney disease, or unspecified chronic kidney disease) that we believe are appropriate to add to Principal Diagnosis Collection List number 1335 to exclude diagnosis codes N18.5 and N18.6 from acting as a CC/MCC when reported because the conditions describe chronic kidney disease, stage 5 and end stage renal disease (ESRD) and it would not be clinically appropriate to have a principal diagnosis describing stage 1 through stage 4 chronic kidney disease reported with chronic kidney disease, stage 5 or ESRD. In summary, we are proposing to add diagnosis code I12.9 to Principal Diagnosis Collection List number 1335 to exclude diagnosis code N18.5 from acting as a CC, proposing to remove the diagnosis codes listed in Table 6P.8a associated with this FY 2026 IPPS/LTCH PPS proposed rule and available via the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps from Principal Diagnosis Collection List number 1335, and proposing to add diagnosis codes I13.0 and I13.10 to Principal Diagnosis Collection List number 1335 to exclude diagnosis codes N18.5 and N18.6 from acting as a CC/MCC. We intend to continue this type of internal review to ensure all the other Principal Diagnosis Collection lists reflect the appropriate codes in connection with the CC/MCC secondary diagnosis code that is excluded from acting as a CC/MCC. Any proposed changes to the lists will be discussed in future rulemaking. To inform future rulemaking, feedback and other suggestions may be submitted by October 20, 2025, and directed to MEARISTM at: https://mearis.cms.gov/public/home. We also performed an internal review of the diagnoses listed in Appendix C--Part 2: Codes That are Major CC Only if Patient Discharged Alive. The diagnoses listed in Part 2 of Appendix C are assigned as an MCC only for patients discharged alive, otherwise the codes are assigned as a NonCC. The diagnoses listed in Part 2 in Version 42.1 are shown in the following table. ------------------------------------------------------------------------ ICD-10-CM code Description ------------------------------------------------------------------------ I46.2............................. Cardiac arrest due to underlying cardiac condition. I46.8............................. Cardiac arrest due to other underlying condition. I46.9............................. Cardiac arrest, cause unspecified. I49.01............................ Ventricular fibrillation. R09.2............................. Respiratory arrest. R57.0............................. Cardiogenic shock. R57.1............................. Hypovolemic shock. R57.8............................. Other shock. ------------------------------------------------------------------------ In developing Appendix C--Part 2: Codes That are Major CC Only if Patient Discharged Alive (72 FR 47161 through 47168), the claims data were evaluated to determine if there was a difference in resource use between cases in which the patient was discharged alive or died during the hospital stay. For most secondary diagnoses, the charges were similar for the two groups. There were, however, a few diagnoses where the difference in charges and clinical considerations supported a different CC designation for patients who died before discharge. For these diagnoses, the patients who were discharged alive required significantly more hospital resources than the patients who died. Therefore, when reported as a secondary diagnosis, each of the diagnoses is designated as an MCC in cases where the patient is discharged alive and as a NonCC in cases where the patient died. We analyzed claims data from the September 2024 update of the FY 2024 MedPAR file for the diagnoses currently listed in Appendix C--Part 2. Our findings are reflected in the following table: -------------------------------------------------------------------------------------------------------------------------------------------------------- Patient discharged alive (without discharge Patient expired (with discharge status 20) status 20) ----------------------------------------------- ICD-10-CM code Description ------------------------------------------------ Number of Number of Avg LOS Average cost cases Avg LOS Average cost cases -------------------------------------------------------------------------------------------------------------------------------------------------------- I46.2.................... Cardiac arrest due to 8,241 11.6 $61,108 5,766 5.3 $33,173 underlying cardiac condition. I46.8.................... Cardiac arrest due to other 3,884 15.6 62,505 6,133 5.8 25,979 underlying condition. I46.9.................... Cardiac arrest, cause 13,121 13.3 59,732 28,437 5.2 24,933 unspecified. I49.01................... Ventricular fibrillation..... 10,705 9.9 52,118 6,788 4.6 28,949 R09.2.................... Respiratory arrest........... 367 8.7 33,536 375 5.5 17,280 R57.0.................... Cardiogenic shock............ 46,537 12.5 58,432 23,335 6.8 39,457 R57.1.................... Hypovolemic shock............ 32,614 10.8 39,051 6,476 8.3 38,697 R57.8.................... Other shock.................. 37,728 12.4 50,374 11,570 8.4 43,215 -------------------------------------------------------------------------------------------------------------------------------------------------------- As shown in the table, the data reflect that most of the conditions currently listed in Appendix C--Part 2, utilize hospital resources as expected, with the patients who were discharged alive (without discharge status 20) requiring significantly more hospital resources than the patients who expired (with discharge status 20), as demonstrated by the longer lengths of stay and higher average costs of these cases. We note however, that the resource utilization for cases reporting R57.1 (Hypovolemic shock) as a secondary diagnosis appear to be comparable whether the patient [[Page 18067]] was discharged alive or the patient expired. As reflected in the table, the claims data from the September 2024 update of the FY 2024 MedPAR file reflect that code R57.1 was reported as a secondary diagnosis in 32,614 cases where the patient was discharged alive. These cases had average costs of $39,051 and an average length of stay of 10.8 days. In the 6,476 cases where R57.1 was reported as a secondary diagnosis and the patient expired, the average costs were slightly lower ($38,697 versus $39,051) and the average length of stay was slightly shorter (8.3 days versus 10.8 days). We reviewed this issue and note clinically, the recommended treatment for hypovolemic shock is immediate intervention with fluid resuscitation with intravenous (IV) fluids, blood transfusions, and vasoactive drugs. Hypovolemic shock generally has a lower mortality rate and responds to timely treatment. As the claims data no longer reflect that patients reporting hypovolemic shock as secondary diagnosis that are discharged alive require significantly more hospital resources than the patients who expire, we are proposing to remove code R57.1 from the list found in Appendix C--Part 2: Codes That are Major CC Only if Patient Discharged Alive. Under this proposal, when reported as a secondary diagnosis, R57.1 (Hypovolemic shock) will be assigned as an MCC when the patient is discharged alive or if the patient expires. Based on our review, we considered if it was appropriate to add other diagnosis codes describing shock to Appendix C--Part 2. Specifically, we considered code T79.4XXA (Traumatic shock, initial encounter). ICD-10-CM diagnosis code T79.4XXA is currently designated as an MCC when reported as secondary diagnoses. Traumatic shock represents a unique pathological condition that begins with multiple, usually blunt, trauma and may conclude with acute respiratory distress syndrome, coagulopathy, sepsis, multiple organ dysfunction syndrome and death. We analyzed claims data from the September 2024 update of the FY 2024 MedPAR file for cases reporting T79.4XXA as a secondary diagnosis and our findings are reflected in the following table: -------------------------------------------------------------------------------------------------------------------------------------------------------- Patient discharged alive (without discharge Patient expired (with discharge status 20) status 20) ----------------------------------------------- ICD-10-CM code Description ------------------------------------------------ Number of Number of Avg LOS Average cost cases Avg LOS Average cost cases -------------------------------------------------------------------------------------------------------------------------------------------------------- T79.4XXA................. Traumatic shock, initial 1,187 16.1 $79,218 553 6.5 $48,880 encounter. -------------------------------------------------------------------------------------------------------------------------------------------------------- As reflected in the table, the claims data from the September 2024 update of the FY 2024 MedPAR file indicate that T79.4XXA was reported as a secondary diagnosis in 1,187 cases where the patient was discharged alive. These cases had average costs of $79,218 and an average length of stay of 16.1 days. In the 553 cases where T79.4XXA was reported as a secondary diagnosis and the patient expired, the average costs were considerably lower ($48,880 versus $79,218) and the average length of stay was much shorter (6.5 days versus 16.1 days). As the data reflect that cases reporting traumatic shock, initial encounter, as a secondary diagnosis for patients that are discharged alive require significantly more hospital resources than the patients who expire, we are proposing to add code T79.4XXA to the list found in Appendix C--Part 2: Codes That are Major CC Only if Patient Discharged Alive. Under this proposal, when reported as a secondary diagnosis, T79.4XXA (Traumatic shock, initial encounter) would be assigned as an MCC only when the patient is discharged alive. We are proposing changes to the ICD-10 MS-DRGs Version 43 CC Exclusion List based on the diagnosis code updates as discussed in section II.C.13. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule. Therefore, we have developed Table 6G.1.--Proposed Secondary Diagnosis Order Additions to the CC Exclusions List--FY 2026; Table 6G.2.--Proposed Principal Diagnosis Order Additions to the CC Exclusions List--FY 2026; Table 6H.1.--Proposed Secondary Diagnosis Order Deletions to the CC Exclusions List--FY 2026; and Table 6H.2.-- Proposed Principal Diagnosis Order Deletions to the CC Exclusions List--FY 2026. For Table 6G.1, each secondary diagnosis code proposed for addition to the CC Exclusion List is shown with an asterisk and the principal diagnoses proposed 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 proposed 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 proposed 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. Tables 6G.1., 6G.2., 6H.1., and 6H.2. associated with this FY 2026 IPPS/LTCH PPS proposed rule are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 9. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems To identify new, revised, and deleted diagnosis and procedure codes, for FY 2026, we have developed Table 6A.--New Diagnosis Codes, Table 6B.--New Procedure Codes, Table 6C.--Invalid Diagnosis Codes, Table 6D.--Invalid Procedure Codes, Table 6E.--Revised Diagnosis Code Titles, and Table 6F.--Revised Procedure Code Titles for this FY 2026 IPPS/LTCH PPS proposed rule. These tables are not published in the Addendum to this FY 2026 IPPS/LTCH PPS proposed rule, but are available 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 FY 2026 IPPS/LTCH PPS proposed rule. As discussed in section II.C.11. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, the code titles are adopted as part of the ICD-10 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. We are proposing 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. In [[Page 18068]] addition, 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. Consistent with our established process, we examined the MS-DRG assignment and the attributes (severity level and O.R. status) of the predecessor diagnosis or procedure code, as applicable, to inform our proposed assignments and designations. Specifically, we review the predecessor code and MS-DRG assignment most closely associated with the new diagnosis or procedure code, and in the absence of claims data, we consider other factors that may be relevant to the MS-DRG assignment, including the severity of illness, treatment difficulty, complexity of service and the resources utilized in the diagnosis and/or treatment of the condition. We note that this process does not automatically result in the new diagnosis or procedure code being proposed for assignment to the same MS-DRG or to have the same designation as the predecessor code. 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 FY 2026 IPPS/LTCH PPS proposed rule: Table 6A.--New Diagnosis Codes--FY 2026; Table 6B.--New Procedure Codes--FY 2026; Table 6C.--Invalid Diagnosis Codes--FY 2026; Table 6D.--Invalid Procedure Codes--FY 2026; Table 6E.--Revised Diagnosis Code Titles--FY 2026; Table 6F.--Revised Procedure Code Titles--FY 2026; Table 6G.1.--Proposed Secondary Diagnosis Order Additions to the CC Exclusions List--FY 2026; Table 6G.2.--Proposed Principal Diagnosis Order Additions to the CC Exclusions List--FY 2026; Table 6H.1.--Proposed Secondary Diagnosis Order Deletions to the CC Exclusions List--FY 2026; Table 6H.2.--Proposed Principal Diagnosis Order Deletions to the CC Exclusions List--FY 2026; Table 6I.1.--Proposed Additions to the MCC List--FY 2026; Table 6I.2.--Proposed Deletions to the MCC List--FY 2026; Table 6J.1.--Proposed Additions to the CC List--FY 2026; and Table 6J.2.--Proposed Deletions to the CC List--FY 2026. 10. Proposed Changes to the 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 FY 2026 IPPS/LTCH PPS proposed 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. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69100), we stated our intent to consider if the development of evaluation criteria would be useful for future proposed modifications to the surgical hierarchy for MS-DRGs that have meaningful changes to the clinical logic. We are continuing to examine what factors should be taken into account as we consider any future proposals. We welcome feedback and other suggestions to be submitted via the Medicare Electronic Application Request Information SystemTM (MEARISTM) at https://mearis.cms.gov/public/home by October 20, 2025. Based on the changes that we are proposing to make for FY 2026, as discussed in section II.C. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, our proposal for Appendix D MS-DRG Surgical Hierarchy by MDC and MS-DRG of the proposed ICD-10 MS-DRG Definitions Manual Version 43 to modify the existing surgical hierarchy in MDC 05 and MDC 08 for FY 2026 is illustrated in the following tables. We note that because the current methodology involves weighing the average costs of each MS-DRG in the surgical class by [[Page 18069]] frequency (that is, by the number of cases in the MS-DRG) to determine average resource consumption for the surgical class, that the surgical hierarchy of other MS-DRGs in the MDC may need to be adjusted based on the MS-DRG classification changes that are proposed to ensure that the average weighted cost for each base MS-DRG in each MDC are monotonically decreasing. We further note that the proposed Version 43 surgical hierarchy as illustrated in the following tables may be subject to further modifications based on the finalized changes to the MS-DRG classifications for FY 2026. ---------------------------------------------------------------------------------------------------------------- Current Proposed version 42 version 43 surgical surgical hierarchy hierarchy ---------------------------------------------------------------------------------------------------------------- MDC 05 (Diseases and Disorders of the Circulatory System) ---------------------------------------------------------------------------------------------------------------- Proposed New MS-DRG 209.................... Complex Aortic Arch Procedures..... N/A 1 MS-DRG 212................................. Concomitant Aortic and Mitral Valve 2 2 Procedures. MS-DRG 215................................. Other Heart Assist System Implant.. 1 3 MS-DRGs 216-218............................ Cardiac Valve and Other Major 3 4 Cardiothoracic Procedures with Cardiac Catheterization. MS-DRGs 231-232............................ Coronary Bypass with PTCA.......... 4 5 MS-DRG 275................................. Cardiac Defibrillator Implant with 6 6 Cardiac Catheterization. MS-DRG 317................................. Concomitant Left Atrial Appendage 5 7 Closure and Cardiac Ablation. MS-DRGs 219-221............................ Cardiac Valve and Other Major 3 8 Cardiothoracic Procedures without Cardiac Catheterization. MS-DRGs 233-234............................ Coronary Bypass with Cardiac 4 9 Catheterization or Open Ablation. Proposed New MS-DRG 213.................... Endovascular Abdominal Aorta with N/A 10 Iliac Branch Procedures. MS-DRGs 266-267............................ Endovascular Cardiac Valve 7 11 Replacement and Supplement Procedures. MS-DRGs 276-277............................ Cardiac Defibrillator Implant...... 6 12 MS-DRGs 268-269............................ Aortic and Heart Assist Procedures 8 13 Except Pulsation Balloon. MS-DRGs 235-236............................ Coronary Bypass without Cardiac 4 14 Catheterization. MS-DRG 245................................. AICD Generator Procedures.......... 14 15 MS-DRGs 270-272............................ Other Major Cardiovascular 11 16 Procedures. MS-DRGs 228-229............................ Other Cardiothoracic Procedures.... 9 17 MS-DRGs 319-320............................ Other Endovascular Cardiac Valve 10 18 Procedures. MS-DRGs 278-279............................ Ultrasound Accelerated and Other 20 19 Thrombolysis of Peripheral Vascular Structures. MS-DRGs 323-324............................ Coronary Intravascular Lithotripsy 17 20 with Intraluminal Device. MS-DRGs 239-241............................ Amputation for Circulatory System 12 21 Disorders Except Upper Limb and Toe. MS-DRG 265................................. AICD Lead Procedures............... 15 22 MS-DRGs 273-274............................ Percutaneous and Other Intracardiac 16 23 Procedures. MS-DRG 325................................. Coronary Intravascular Lithotripsy 17 24 without Intraluminal Device. MS-DRG 263................................. Vein Ligation and Stripping........ 25 25 MS-DRGs 252-254............................ Other Vascular Procedures.......... 21 26 Proposed New MS-DRGs 359-360............... Percutaneous Coronary Atherectomy N/A 27 with Intraluminal Device. MS-DRGs 242-244............................ Permanent Cardiac Pacemaker Implant 13 28 MS-DRGs 260-262............................ Cardiac Pacemaker Revision Except 24 29 Device Replacement. Proposed New MS-DRG 318.................... Percutaneous Coronary Atherectomy N/A 30 without Intraluminal Device. MS-DRGs 321-322............................ Percutaneous Cardiovascular 18 31 Procedures with Intraluminal Device. MS-DRGs 258-259............................ Cardiac Pacemaker Device 23 32 Replacement. MS-DRGs 255-257............................ Upper Limb and Toe Amputation for 22 33 Circulatory System Disorders. MS-DRGs 250-251............................ Percutaneous Cardiovascular 19 34 Procedures without Intraluminal Device. MS-DRG 264................................. Other Circulatory System O.R. 26 35 Procedures. ---------------------------------------------------------------------------------------------------------------- MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) ---------------------------------------------------------------------------------------------------------------- MS-DRGs 426-428............................ Multiple Level Combined Anterior 1 1 and Posterior Spinal Fusion Except Cervical. MS-DRG 402................................. Single Level Combined Anterior and 2 5 Posterior Spinal Fusion Except Cervical. MS-DRGs 429-430............................ Combined Anterior and Posterior 3 2 Cervical Spinal Fusion. MS-DRGs 456-458............................ Spinal Fusion Except Cervical with 4 3 Spinal Curvature, Malignancy, Infection or Extensive Fusions. MS-DRGs 447-448............................ Multiple Level Spinal Fusion Except 5 4 Cervical. Proposed New MS-DRGs 403-404............... Hip or Knee Procedures with N/A 6 Principal Diagnosis of Periprosthetic Joint Infection. MS-DRGs 450-451............................ Single Level Spinal Fusion Except 6 7 Cervical. MS-DRGs 461-462............................ Bilateral or Multiple Major Joint 7 10 Procedures of Lower Extremity. MS-DRGs 463-465............................ Wound Debridement and Skin Graft 8 8 Except Hand for Musculoskeletal and Connective Tissue Disorders. MS-DRGs 466-468............................ Revision of Hip or Knee Replacement 9 9 MS-DRGs 521-522............................ Hip Replacement with Principal 10 18 Diagnosis of Hip Fracture. MS-DRGs 469-470............................ Major Hip and Knee Joint 11 21 Replacement or Reattachment of Lower Extremity or Total Ankle Replacement. MS-DRGs 471-473............................ Cervical Spinal Fusion............. 12 11 [[Page 18070]] MS-DRGs 474-476............................ Amputation for Musculoskeletal 13 12 System and Connective Tissue Disorders. MS-DRGs 477-479............................ Biopsies of Musculoskeletal System 14 14 and Connective Tissue. MS-DRGs 480-482............................ Hip and Femur Procedures Except 15 19 Major Joint. MS-DRG 483................................. Major Joint or Limb Reattachment 16 13 Procedures of Upper Extremities. MS-DRGs 485-487............................ Knee Procedures with Principal 17 17 Diagnosis of Infection. MS-DRGs 488-489............................ Knee Procedures without Principal 17 27 Diagnosis of Infection. MS-DRGs 518-520............................ Back and Neck Procedures Except 18 20 Spinal Fusion or Disc Device or Neurostimulator. MS-DRGs 492-494............................ Lower Extremity and Humerus 19 15 Procedures Except Hip, Foot and Femur. MS-DRGs 495-497............................ Local Excision and Removal of 20 25 Internal Fixation Devices Except Hip and Femur. MS-DRGs 498-499............................ Local Excision and Removal of 21 16 Internal Fixation Devices of Hip and Femur. MS-DRGs 500-502............................ Soft Tissue Procedures............. 22 24 MS-DRGs 503-505............................ Foot Procedures.................... 23 23 MS-DRG 506................................. Major Thumb or Joint Procedures.... 24 29 MS-DRGs 507-508............................ Major Shoulder or Elbow Joint 25 26 Procedures. MS-DRGs 510-512............................ Shoulder, Elbow or Forearm 26 22 Procedures, Except Major Joint Procedures. MS-DRGs 513-514............................ Hand or Wrist Procedures, Except 27 28 Major Thumb or Joint Procedures. MS-DRGs 515-517............................ Other Musculoskeletal System and 28 30 Connective Tissue O.R. Procedures. ---------------------------------------------------------------------------------------------------------------- For issues pertaining to the surgical hierarchy, as with other MS- DRG related requests, we encourage interested parties to submit comments no later than October 20, 2025, via MEARISTM at https://mearis.cms.gov/public/home, so that they can be considered for possible inclusion in the annual proposed rule. 11. 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 Centers for Disease Control and Prevention's (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: https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-9-cm-diagnosis-procedure-codes-abbreviated-and-full-code-titles. The official list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS website at: https://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 proposed coding changes. These meetings provide an opportunity for representatives of recognized organizations in the coding field, such as the American Health Information Management Association (AHIMA), 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. Members of the public may submit comments on the proposed procedure code topics to CMS at: [email protected] and may submit comments on the proposed diagnosis code topics to the CDC/NCHS at: [email protected]. After considering the opinions expressed during 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 2026 at a public meeting held on September 10-11, 2024, and finalized the coding changes after consideration of comments received at the meetings and in writing by November 15, 2024. In lieu of holding its Spring 2025 meeting, the Committee solicited comments on the Spring 2025 ICD-10-PCS procedure code topics. The deadline for submitting comments on these code proposals is April 18, 2025. Any new diagnosis and procedure codes for which there is consensus of public support, and for which complete tabular and indexing changes would be made by June 2025 would be included in the October 1, 2025, update to the ICD-10-CM diagnosis and ICD-10-PCS procedure code sets. As discussed in earlier sections of the preamble of this FY 2026 IPPS/LTCH PPS proposed 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, Table 6D.--Invalid Procedure Codes, Table 6E.--Revised Diagnosis Code Titles, and Table 6F.--Revised Procedure Code [[Page 18071]] Titles for this FY 2026 IPPS/LTCH PPS proposed rule, which are available on the CMS website at: https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps. The code titles are adopted as part of the ICD-10 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 rule. Rather, they are available on the CMS website as discussed in section VI. of the Addendum to the proposed rule. Recordings for the virtual meeting discussions of the procedure codes at the Committee's September 10-11, 2024, meeting and the materials for the Spring 2025 ICD-10-PCS procedure code topics can be obtained from the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials. The materials for the topics relating to diagnosis codes discussed at the September 10-11, 2024, meeting can be found at: https://www.cdc.gov/nchs/icd/icd-10-maintenance/meetings.html. These websites also provide detailed information about the Committee, including information on requesting a new code, participating in a Committee meeting, timeline requirements, submitting comments, and meeting dates. We encourage commenters to submit questions and comments on coding issues involving diagnosis codes via email to: [email protected]. Questions and comments concerning the procedure codes should be submitted via email to: [email protected]. CMS implemented 50 new procedure codes including cardiac stereotactic body radiotherapy (SBRT), transplantation of the larynx, repositioning of long bones using a ring external fixation device with automated strut adjustment, supplementing the right atrium with heterotopic bioprosthetic valve(s), the administration of emapalumab- Izsg anti-IFNy monoclonal antibody, and the administration of tarlatamab-dlle antineoplastic into the ICD-10-PCS classification effective with discharges on and after April 1, 2025. The procedure codes are as follows: ---------------------------------------------------------------------------------------------------------------- Procedure code Description O.R. MDC MS-DRG ---------------------------------------------------------------------------------------------------------------- D228DZZ **...................... Stereotactic other N................... 05 317 photon radiosurgery of conduction mechanism. 0B118D6 *....................... Bypass trachea to N................... .............. .............. esophagus with intraluminal device, via natural or artificial opening endoscopic. 0CYS0Z0......................... Transplantation of Y................... 03 143-145 larynx, allogeneic, 04 166-168 open approach. 21 907-909 24 957-959 0CYS0Z1......................... Transplantation of Y................... 03 143-145 larynx, syngeneic, open 04 166-168 approach. 21 907-909 24 957-959 0DX80Z7......................... Transfer small intestine Y................... 13 748 to vagina, open 21 907-909 approach. 24 957-959 0DX84Z7......................... Transfer small intestine Y................... 13 748 to vagina, percutaneous 21 907-909 endoscopic approach. 24 957-959 0TT00Z0......................... Resection of right Y................... 11 656-661 kidney, open approach, 21 907-909 allogeneic. 24 957-959 0TT00Z1......................... Resection of right Y................... 11 656-661 kidney, open approach, 21 907-909 syngeneic. 24 957-959 0TT00Z2......................... Resection of right Y................... 11 656-661 kidney, open approach, 21 907-909 zooplastic. 24 957-959 0TT10Z0......................... Resection of left Y................... 11 656-661 kidney, open approach, 21 907-909 allogeneic. 24 957-959 0TT10Z1......................... Resection of left Y................... 11 656-661 kidney, open approach, 21 907-909 syngeneic. 24 957-959 0TT10Z2......................... Resection of left Y................... 11 656-661 kidney, open approach, 21 907-909 zooplastic. 24 957-959 0U7C7DJ *....................... Dilation of cervix with N................... .............. .............. intraluminal device, temporary, via natural or artificial opening. 10D10ZZ......................... Extraction of products Y................... 14 770 of conception, 796-798 retained, open approach. 3E0U0GC *....................... Introduction of other N................... .............. .............. therapeutic substance into joints, open approach. X2KA30A......................... Bypass left atrium using Y................... 05 270-272 conduit through 21 907-909 coronary sinus to right atrium, percutaneous approach, new technology group 10. X2U93YA......................... Supplement right atrium Y................... 05 266-267 with intraluminal device, heterotopic bioprosthetic valve(s), percutaneous approach, new technology group 10. [[Page 18072]] XNS40GA......................... Reposition right humeral Y................... 08 492-494 shaft with ring 21 907-909 external fixation 24 957-959 device with automated strut adjustment, open approach, new technology group 10. XNS43GA......................... Reposition right humeral Y................... 08 492-494 shaft with ring 21 907-909 external fixation 24 957-959 device with automated strut adjustment, percutaneous approach, new technology group 10. XNS50GA......................... Reposition left humeral Y................... 08 492-494 shaft with ring 21 907-909 external fixation 24 957-959 device with automated strut adjustment, open approach, new technology group 10. XNS53GA......................... Reposition left humeral Y................... 08 492-494 shaft with ring 21 907-909 external fixation 24 957-959 device with automated strut adjustment, percutaneous approach, new technology group 10. XNS60GA......................... Reposition right radius Y................... 08 510-512 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, open approach, new technology group 10. XNS63GA......................... Reposition right radius Y................... 08 510-512 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, percutaneous approach, new technology group 10. XNS70GA......................... Reposition left radius Y................... 08 510-512 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, open approach, new technology group 10. XNS73GA......................... Reposition left radius Y................... 08 510-512 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, percutaneous approach, new technology group 10. XNS80GA......................... Reposition right ulna Y................... 08 510-512 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, open approach, new technology group 10. XNS83GA......................... Reposition right ulna Y................... 08 510-512 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, percutaneous approach, new technology group 10. XNS90GA......................... Reposition left ulna Y................... 08 510-512 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, open approach, new technology group 10. XNS93GA......................... Reposition left ulna Y................... 08 510-512 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, percutaneous approach, new technology group 10. XNSA0GA......................... Reposition right upper Y................... 08 480-482 femur with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, open approach, new technology group 10. XNSA3GA......................... Reposition right upper Y................... 08 480-482 femur with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, percutaneous approach, new technology group 10. XNSB0GA......................... Reposition left upper Y................... 08 480-482 femur with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, open approach, new technology group 10. XNSB3GA......................... Reposition left upper Y................... 08 480-482 femur with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, percutaneous approach, new technology group 10. XNSC0GA......................... Reposition right lower Y................... 08 480-482 femur with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, open approach, new technology group 10. XNSC3GA......................... Reposition right lower Y................... 08 480-482 femur with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, percutaneous approach, new technology group 10. XNSD0GA......................... Reposition left lower Y................... 08 480-482 femur with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, open approach, new technology group 10. XNSD3GA......................... Reposition left lower Y................... 08 480-482 femur with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, percutaneous approach, new technology group 10. XNSE0GA......................... Reposition right femoral Y................... 08 480-482 shaft with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, open approach, new technology group 10. XNSE3GA......................... Reposition right femoral Y................... 08 480-482 shaft with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, percutaneous approach, new technology group 10. XNSF0GA......................... Reposition left femoral Y................... 08 480-482 shaft with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, open approach, new technology group 10. XNSF3GA......................... Reposition left femoral Y................... 08 480-482 shaft with ring 21 907-909 external fixation 24 956 device with automated strut adjustment, percutaneous approach, new technology group 10. [[Page 18073]] XNSG0GA......................... Reposition right tibia Y................... 08 492-494 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, open approach, new technology group 10. XNSG3GA......................... Reposition right tibia Y................... 08 492-494 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, percutaneous approach, new technology group 10. XNSH0GA......................... Reposition left tibia Y................... 08 492-494 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, open approach, new technology group 10. XNSH3GA......................... Reposition left tibia Y................... 08 492-494 with ring external 21 907-909 fixation device with 24 957-959 automated strut adjustment, percutaneous approach, new technology group 10. XW033MA *....................... Introduction of N................... .............. .............. emapalumab-lzsg anti- IFNy monoclonal antibody into peripheral vein, percutaneous approach, new technology group 10. XW033NA *....................... Introduction of N................... .............. .............. tarlatamab-dlle antineoplastic into peripheral vein, percutaneous approach, new technology group 10. XW043MA *....................... Introduction of N................... .............. .............. emapalumab-lzsg anti- IFNy monoclonal antibody into central vein, percutaneous approach, new technology group 10. XW043NA *....................... Introduction of N................... .............. .............. tarlatamab-dlle antineoplastic into central vein, percutaneous approach, new technology group 10. XXE5X5A *....................... Measurement of immune N................... .............. .............. response, whole blood cellular assessment via microfluidic deformability, new technology group 10. ---------------------------------------------------------------------------------------------------------------- * As the procedure codes are designated as non-O.R. procedures, there is no assigned MDC or MS-DRG. The ICD-10 MS-DRG assignment is dependent on the reported principal diagnosis, any secondary diagnoses defined as a complication or comorbidity (CC) or major complication or comorbidity (MCC), procedures or services performed, age, sex, and discharge status. ** Non-O.R. procedure affecting the MS-DRG assignment. The 50 procedure codes are also reflected in Table 6B.--New Procedure Codes, which is available on the CMS website at: https:// www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS. As with the other new procedure codes and MS-DRG assignments included in Table 6B in association with this FY 2026 IPPS/ LTCH PPS proposed rule, we are soliciting public comments on the most appropriate MDC, MS-DRG, and operating room status assignments for these codes for FY 2026, as well as any other options for the GROUPER logic. We note that Change Request (CR) 13917, Transmittal 12995, titled ``April 2025 Update to the Medicare Severity-Diagnosis Related Group (MS-DRG) Grouper and Medicare Code Editor (MCE) Version 42.1'' was issued on December 12, 2024 (available on the CMS website at: https://www.cms.gov/medicare/regulations-guidance/transmittals/2024-transmittals/r12995cp) regarding the release of an updated version of the ICD-10 MS-DRG GROUPER and Medicare Code Editor software, Version 42.1, effective with discharges on and after April 1, 2025, reflecting the new procedure codes. The updated software, along with the updated ICD-10 MS-DRG Version 42.1 Definitions Manual and the Definitions of Medicare Code Edits Version 42.1 manual is available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software. 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 the Medicare Modernization Act (Pub. L. 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. 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 were considered for an April 1 update if a strong and convincing case was made by the requestor during the Committee's public meeting. The request needed to identify the reason why a new code was needed in April for purposes of the new technology process. Meeting participants and those reviewing the Committee meeting materials were provided the opportunity to comment on the expedited request. We refer the reader to the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950) for further discussion of the implementation of this prior April 1 update for purposes of the new technology add-on payment process. However, as discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950 through 44956), we adopted an April 1 implementation date, in addition to the [[Page 18074]] annual October 1 update, beginning with April 1, 2022. We noted that the intent of this April 1 implementation date is to allow flexibility in the ICD-10 code update process. With this new April 1 update, CMS now uses the same process for consideration of all requests for an April 1 implementation date, including for purposes of the new technology add-on payment process (that is, the prior process for consideration of an April 1 implementation date only if a strong and convincing case was made by the requestor during the meeting no longer applies). We are continuing to use several aspects of our existing established process to implement new codes through the April 1 code update, which includes presenting proposals for April 1 consideration at the September ICD-10 Coordination and Maintenance Committee meeting, requesting public comments, reviewing the public comments, finalizing codes, and announcing the new codes with their assignments consistent with the new GROUPER release information. We note that under our established process, requestors indicate whether they are submitting their code request for consideration for an April 1 implementation date or an October 1 implementation date. The ICD-10 Coordination and Maintenance Committee makes efforts to accommodate the requested implementation date for each request submitted. However, the Committee determines which requests are to be presented for consideration for an April 1 implementation date or an October 1 implementation date. As discussed earlier in this section of the preamble of this FY 2026 IPPS/ LTCH PPS proposed rule, there were code proposals presented for an April 1, 2025, implementation at the September 10-11, 2024, Committee meetings. Following the receipt of public comments, the code proposals were approved and finalized, therefore, there were new codes implemented April 1, 2025. Consistent with the process we outlined for the April 1 implementation date, we announced the new codes in November 2024 and provided the updated code files in December 2024. The NCHS provided the ICD-10-CM Official Guidelines for Coding and Reporting in January 2025. By February 27, 2025, we made available the updated Version 42.1 ICD-10 MS-DRG GROUPER software and related materials on the CMS web page 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 are published on the CMS website at https://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/addendum. ICD-10-CM and ICD-10-PCS addendum and code title information are published on the CMS website at https://www.cms.gov/Medicare/Coding/ICD10. CMS also sends electronic files containing 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 be found on the CDC website at https://www.cdc.gov/nchs/icd/icd-10-cm/files.html. 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. The AHA also distributes coding update information to publishers and software vendors. For FY 2025, there are currently 74,044 diagnosis codes and 78,986 procedure codes. As displayed in Table 6A.--New Diagnosis Codes and in Table 6B.--New Procedure Codes associated with this FY 2026 IPPS/LTCH PPS proposed rule (and available on the CMS website at https:// www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS), there are 487 new diagnosis codes and 14 new procedure codes that have been finalized for FY 2026 at the time of the development of this FY 2026 IPPS/LTCH PPS proposed rule and 50 new procedure codes that were effective with discharges on and after April 1, 2025. The code titles are adopted as part of the ICD-10 Coordination and Maintenance Committee process. Thus, 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. 12. 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 would 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. Proposed Changes for FY 2026 As discussed in section II.C.3. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, for FY 2026, under MDC 01, we are proposing to add procedure code combinations that describe the insertion of multiple or single array generators and the insertion of neurostimulator lead into the brain or cerebral ventricle and the procedure code combinations that describe the insertion of a neurostimulator generator into the skull and the insertion of a neurostimulator lead into the brain to a new ``intracranial neurostimulator implant'' logic list in MS-DRGs 020, 021, and 022. A subset of the procedures currently assigned to MS-DRGs 023 and 024 are being proposed for reassignment to MS-DRGs 020, 021, and 022. We are also proposing to revise the title of MS-DRG 020 from ``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage with MCC'' to ``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator Implant with MCC''; revise the title of MS-DRG 021 from ``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage with CC'' to ``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator Implant with CC''; revise the title of MS-DRG 022 from ``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage without CC/ MCC'' to ``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator Implant without CC/MCC''; revise the title of MS-DRG 023 from ``Craniotomy with Major Device Implant or Acute Complex CNS Principal Diagnosis with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator'' to ``Craniotomy with Acute Complex CNS Principal Diagnosis with MCC or Antineoplastic Implant''; and revise the title of MS-DRG 024 from ``Craniotomy with Major Device Implant or Acute Complex CNS Principal [[Page 18075]] Diagnosis without MCC'' to ``Craniotomy with Acute Complex CNS Principal Diagnosis without MCC''. Additionally, as discussed in section II.C.4. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, for FY 2026, under MDC 05, we are proposing new MS-DRG 209 (Complex Aortic Arch Procedures) and new MS-DRG 213 (Endovascular Abdominal Aorta with Iliac Branch Procedures). A subset of the procedures currently assigned to MS-DRGs 216, 217, 218, 219, 220 and 221 are being proposed for assignment to proposed new MS- DRG 209 and a subset of the procedures currently assigned to MS-DRGs 268, 269, 270, 271, and 272 are being proposed for assignment to proposed new MS-DRG 213. 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 023, 024, 216, 217, 218, 219, 220, 221, 268, 269, 270, 271, and 272 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 following table. Therefore, we are proposing that if the applicable proposed MS-DRG changes are finalized, we also would add MS-DRGs 020, 021, and 022 and proposed new MS-DRGs 209 and 213 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 to the titles of MS-DRGs 023 and 024 in the list of MS-DRGs subject to the policy as reflected in the following table. We are also proposing to continue to include the existing MS-DRGs currently subject to the policy as displayed in the following table. ---------------------------------------------------------------------------------------------------------------- MDC MS-DRG MS-DRG title ---------------------------------------------------------------------------------------------------------------- Pre-MDC....................................... 001 Heart Transplant or Implant of Heart Assist System with MCC. Pre-MDC....................................... 002 Heart Transplant or Implant of Heart Assist System without MCC. 01............................................ 020 Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator Implant with MCC. 01............................................ 021 Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator Implant with CC. 01............................................ 022 Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator Implant without CC/MCC. 01............................................ 023 Craniotomy with Acute Complex CNS Principal Diagnosis with MCC or Antineoplastic Implant. 01............................................ 024 Craniotomy with Acute Complex CNS Principal Diagnosis without MCC. 01............................................ 025 Craniotomy and Endovascular Intracranial Procedures with MCC. 01............................................ 026 Craniotomy and Endovascular Intracranial Procedures with CC. 01............................................ 027 Craniotomy and Endovascular Intracranial Procedures without CC/MCC. 01............................................ 040 Peripheral, Cranial Nerve and Other Nervous System Procedures with MCC. 01............................................ 041 Peripheral, Cranial Nerve and Other Nervous System Procedures with CC or Peripheral Neurostimulator. 01............................................ 042 Peripheral, Cranial Nerve and Other Nervous System Procedures without CC/MCC. 03............................................ 140 Major Head and Neck Procedures with MCC. 03............................................ 141 Major Head and Neck Procedures with CC. 03............................................ 142 Major Head and Neck Procedures without CC/MCC. 05............................................ 209 Complex Aortic Arch Procedures. 05............................................ 213 Endovascular Abdominal Aorta with Iliac Branch Procedures. 05............................................ 215 Other Heart Assist System Implant. 05............................................ 216 Cardiac Valve and Other Major Cardiothoracic Procedure with Cardiac Catheterization with MCC. 05............................................ 217 Cardiac Valve and Other Major Cardiothoracic Procedure with Cardiac Catheterization with CC. 05............................................ 218 Cardiac Valve and Other Major Cardiothoracic Procedure with Cardiac Catheterization without CC/MCC. 05............................................ 219 Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheterization with MCC. 05............................................ 220 Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheterization with CC. 05............................................ 221 Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheterization without CC/MCC. 05............................................ 242 Permanent Cardiac Pacemaker Implant with MCC. 05............................................ 243 Permanent Cardiac Pacemaker Implant with CC. 05............................................ 244 Permanent Cardiac Pacemaker Implant without CC/ MCC. 05............................................ 245 AICD Generator Procedures. 05............................................ 258 Cardiac Pacemaker Device Replacement with MCC. 05............................................ 259 Cardiac Pacemaker Device Replacement without MCC. 05............................................ 260 Cardiac Pacemaker Revision Except Device Replacement with MCC. 05............................................ 261 Cardiac Pacemaker Revision Except Device Replacement with CC. 05............................................ 262 Cardiac Pacemaker Revision Except Device Replacement without CC/MCC. 05............................................ 265 AICD Lead Procedures. 05............................................ 266 Endovascular Cardiac Valve Replacement and Supplement Procedures with MCC. 05............................................ 267 Endovascular Cardiac Valve Replacement and Supplement Procedures without MCC. 05............................................ 268 Aortic and Heart Assist Procedures Except Pulsation Balloon with MCC. 05............................................ 269 Aortic and Heart Assist Procedures Except Pulsation Balloon without MCC. 05............................................ 270 Other Major Cardiovascular Procedures with MCC. 05............................................ 271 Other Major Cardiovascular Procedures with CC. 05............................................ 272 Other Major Cardiovascular Procedures without CC/ MCC. 05............................................ 275 Cardiac Defibrillator Implant with Cardiac Catheterization and MCC. 05............................................ 276 Cardiac Defibrillator Implant with MCC or Carotid Sinus Neurostimulator. [[Page 18076]] 05............................................ 277 Cardiac Defibrillator Implant without MCC. 05............................................ 319 Other Endovascular Cardiac Valve Procedures with MCC. 05............................................ 320 Other Endovascular Cardiac Valve Procedures without MCC. 08............................................ 461 Bilateral or Multiple Major Joint Procedures of Lower Extremity with MCC. 08............................................ 462 Bilateral or Multiple Major Joint Procedures of Lower Extremity without MCC. 08............................................ 466 Revision of Hip or Knee Replacement with MCC. 08............................................ 467 Revision of Hip or Knee Replacement with CC. 08............................................ 468 Revision of Hip or Knee Replacement without CC/ MCC. 08............................................ 469 Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity with MCC or Total Ankle Replacement. 08............................................ 470 Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity without MCC. 08............................................ 521 Hip Replacement with Principal Diagnosis of Hip Fracture with MCC. 08............................................ 522 Hip Replacement with Principal Diagnosis of Hip Fracture without MCC. ---------------------------------------------------------------------------------------------------------------- The final list of MS-DRGs subject to the IPPS policy for replaced devices offered without cost or with a credit will be included in the FY 2026 IPPS/LTCH PPS final rule and also will be issued to providers in the form of a Change Request (CR).

1. Data Sources for Developing the Relative Weights

Consistent with our established policy, in developing the MS-DRG relative weights for FY 2026, we are proposing 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 2024 MedPAR data used in this proposed rule include discharges occurring on October 1, 2023, through September 30, 2024, based on bills received by CMS through December 31, 2024, 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 2024 MedPAR file used in calculating the relative weights includes data for approximately 6,860,436 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 December 2024 update of the FY 2024 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 2026 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. In addition, the data exclude Rural Emergency Hospitals (REHs), including hospitals that subsequently became REHs after the period from which the data were taken. We note that the proposed FY 2026 relative weights are based on the ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes from the FY 2024 MedPAR claims data, grouped through the ICD-10 version of the proposed FY 2026 GROUPER (Version 43). The second data source used in the cost-based relative weighting methodology is the Medicare cost report data files from the Healthcare Cost Report Information System (HCRIS). In general, we use the HCRIS dataset that is 3 years prior to the IPPS fiscal year. Specifically, for this proposed rule, we used the December 2024 update of the FY 2023 HCRIS for calculating the FY 2026 cost-based relative weights. Consistent with our historical practice, for this FY 2026 proposed rule, we are providing the version of the HCRIS from which we calculated these 19 cost-to charge-ratios (CCRs) on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS. Click on the link on the left side of the screen titled ``FY 2026 IPPS Proposed Rule Home Page'' or ``Acute Inpatient Files for Download.''

2. Methodology for Calculation of the Relative Weights

a. General We calculated the proposed FY 2026 relative weights based on 19 CCRs. The methodology we are proposing to use to calculate the FY 2026 MS-DRG cost-based relative weights based on claims data in the FY 2024 MedPAR file and data from the FY 2023 Medicare cost reports is as follows: To the extent possible, all the claims were regrouped using the proposed FY 2026 MS-DRG classifications discussed in sections II.B. and II.C. of the preamble of this proposed 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 2024 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. Section 108 of the Further Consolidated Appropriations Act, 2020 provides that, for cost reporting periods beginning on or after October 1, 2020, costs related to hematopoietic stem cell acquisition for the purpose of an allogeneic hematopoietic stem cell transplant shall be paid on a reasonable [[Page 18077]] cost basis. We refer the reader to the FY 2021 IPPS/LTCH PPS final rule for further discussion of the reasonable cost basis payment for cost reporting periods beginning on or after October 1, 2020 (85 FR 58835 through 58842). For FY 2022 and subsequent years, we subtract the hematopoietic stem cell acquisition charges from the total charges on each transplant bill that showed hematopoietic stem cell 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 92.6 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 Present on Admission (POA) 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 https://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 that 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 2024, and consistent with how we have treated hospitals that participated in the BPCI Initiative, for FY 2025, 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 the FY 2025 IPPS/LTCH PPS final rule, we are also proposing to include all applicable data from subsection (d) hospitals participating in the Comprehensive Care for Joint Replacement (CJR) Model in our IPPS [[Page 18078]] 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 proposed national average CCRs developed from the FY 2023 cost report data. The 19 cost centers that we used in the relative weight calculation are shown in a supplemental data file, Cost Center HCRIS Lines Supplemental Data File, posted via the internet on the CMS website for this final rule and available at https://www.cms.gov/Medicare/Medicare- Fee-for-Service-Payment/AcuteInpatientPPS. The supplemental data file shows the lines on the cost report and the corresponding revenue codes that we used to create the 19 proposed national cost center CCRs. If we receive comments about the groupings in this supplemental data file, we may consider these comments as we finalize our policy. Consistent with historical practice, we account for rare situations of non-monotonicity in a base MS-DRG and its severity levels, where the mean cost in the higher severity level is less than the mean cost in the lower severity level, in determining the relative weights for the different severity levels. If there are initially non-monotonic relative weights in the same base DRG and its severity levels, then we combine the cases that group to the specific non-monotonic MS-DRGs for purposes of relative weight calculations. For example, if there are two non-monotonic MS-DRGs, combining the cases across those two MS-DRGs results in the same relative weight for both MS-DRGs. The relative weight calculated using the combined cases for those severity levels is monotonic, effectively removing any non-monotonicity with the base DRG and its severity levels. For this FY 2026 proposed rule, this calculation was applied to address non-monotonicity for cases that grouped to the following: MS-DRG 016 and MS-DRG 017, MS-DRG 095 and MS- DRG 096, MS-DRG 504 and MS-DRG 505, MS-DRG 797 and MS-DRG 798. In the supplemental file titled AOR/BOR File, we include statistics for the affected MS-DRGs both separately and with cases combined. We are inviting public comments on our proposals related to recalibration of the proposed FY 2026 relative weights and the changes in relative weights from FY 2025. b. Relative Weight Calculation for MS-DRG 018 In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58451 through 58453), we created MS-DRG 018 for cases that include procedures describing CAR T-cell therapies. We also finalized our proposal to modify our existing relative weight methodology to ensure that the relative weight for 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 (85 FR 58599 through 58600). Specifically, we stated that clinical trial claims that group to new MS-DRG 018 would not be included when calculating the average cost for 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. We stated that 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 was the average sales price of KYMRIAH and YESCARTA, 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 FY 2021 final rule. In addition, we stated 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 cases 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 cases can be identified in the historical data. We also finalized our proposal to calculate an 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. We calculate this adjustor by dividing the average cost for cases that we identify as clinical trial cases by the average cost for cases that we identify as non-clinical trial cases, 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 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. We stated that to the best of our knowledge, there were no claims in the historical data used in the calculation of this 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. In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58842), we also finalized an adjustment to the payment amount for applicable clinical trial and expanded access use immunotherapy cases that group to MS-DRG 018, and indicated that we would provide instructions for identifying these claims in separate guidance. Following the issuance of the FY 2021 IPPS/LTCH PPS final rule, we issued guidance \9\ stating that providers may enter a Billing Note NTE02 ``Expand Acc Use'' on the electronic claim 837I or a remark ``Expand Acc Use'' on a paper claim to notify the MAC of expanded access use of CAR T-cell therapy. In this case, the MAC would add payer-only condition code ``ZB'' so that Pricer will apply the payment adjustment in calculating payment for the case. In cases 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 provider may enter a Billing Note NTE02 ``Diff Prod Clin Trial'' on the electronic claim 837I or a remark ``Diff Prod Clin Trial'' on a paper claim. In this case, the MAC would add payer-only condition code ``ZC'' so that the Pricer will not apply the payment adjustment in calculating payment for the case. --------------------------------------------------------------------------- \9\ https://www.cms.gov/files/document/r10571cp.pdf. --------------------------------------------------------------------------- In the FY 2022 IPPS/LTCH PPS final rule, we revised MS-DRG 018 to include cases that report the procedure codes for CAR T-cell and non- CAR T-cell therapies and other [[Page 18079]] immunotherapies (86 FR 44798 through 44806). We also finalized our proposal to continue to use the proxy of standardized drug charges of less than $373,000 (86 FR 44965) to identify clinical trial claims. We also finalized use of this same proxy for the FY 2023 IPPS/LTCH PPS final rule (87 FR 48894). Following the issuance of the FY 2023 IPPS/LTCH PPS final rule, we issued guidance \10\ stating where there is expanded access use of immunotherapy, the provider may submit condition code ``90'' on the claim so that Pricer will apply the payment adjustment in calculating payment for the case. We stated that MACs would no longer append Condition Code `ZB' to inpatient claims reporting Billing Note NTE02 ``Expand Acc Use'' on the electronic claim 837I or a remark ``Expand Acc Use'' on a paper claim, effective for claims for discharges that occur on or after October 1, 2022. --------------------------------------------------------------------------- \10\ https://www.cms.gov/files/document/r11727cp.pdf. --------------------------------------------------------------------------- In the FY 2024 IPPS/LTCH PPS final rule, we explained that the MedPAR claims data now includes a field that identifies whether or not the claim includes expanded access use of immunotherapy. We stated that for the FY 2022 MedPAR claims data, this field identifies whether or not the claim includes condition code ZB, and for the FY 2023 MedPAR data and subsequent years, this field will identify whether or not the claim includes condition code 90. We further noted that the MedPAR files now also include a variable that indicates whether the claim includes the payer-only condition code ``ZC'', which identifies a case involving the clinical trial of a different product where the CAR T- cell, non-CAR T-cell, or other immunotherapy product is purchased in the usual manner. Accordingly, and as discussed further in the FY 2024 IPPS/LTCH PPS final rule, we finalized two modifications to our methodology for identifying clinical trial claims and expanded access use claims in MS- DRG 018 (88 FR 58791). First, we finalized to exclude claims with the presence of condition code ``90'' (or, for FY 2024 ratesetting, which was based on the FY 2022 MedPAR data, the presence of condition code ``ZB'') and claims that contain ICD-10-CM diagnosis code Z00.6 without payer-only code ``ZC'' that group to MS-DRG 018 when calculating the average cost for MS-DRG 018. Second, we finalized to no longer use the proxy of standardized drug charges of less than $373,000 to identify clinical trial claims and expanded access use cases when calculating the average cost for MS-DRG 018. Accordingly, we finalized that in calculating the relative weight for MS-DRG 018 for FY 2024, only those claims that group to MS-DRG 018 that (1) contain ICD-10-CM diagnosis code Z00.6 and do not include payer-only code ``ZC'' or (2) contain condition code ``ZB'' (or, for subsequent fiscal years, condition code ``90'') would be excluded from the calculation of the average cost for MS-DRG 018. Consistent with this, we also finalized modifications to our calculation of the 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. We refer readers to the FY 2024 IPPS/ LTCH PPS final rule for further discussion of these modifications (88 FR 58791). Consistent with the FY 2025 IPPS/LTCH PPS final rule, in this proposed rule, for FY 2026 we are proposing to continue to use our methodology as modified in the FY 2024 IPPS/LTCH PPS final rule for identifying clinical trial claims and expanded access use claims in MS- DRG 018, with an additional modification as discussed in this section. First, we exclude claims with the presence of condition code ``90'' and claims that contain ICD-10-CM diagnosis code Z00.6 without payer-only code ``ZC'' that group to MS-DRG 018 when calculating the average cost for MS-DRG 018. Second, we no longer use the proxy of standardized drug charges of less than $373,000 to identify clinical trial claims and expanded access use cases when calculating the average cost for MS-DRG 018. In section VI.H. of this proposed rule, we discuss our proposal to apply the payment adjustment for clinical trial and expanded access use immunotherapy cases to other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost. To mirror this proposed change within our relative weight methodology, we are proposing to also exclude claims with standardized drug charges below the median standardized drug charge of claims identified as clinical trials in MS-DRG 018 (that is, claims that contain ICD-10-CM diagnosis code Z00.6 and do not include payer-only code ``ZC'') when we calculate the average cost for MS-DRG 018. For this proposed rule, based on the December 2024 update of the FY 2024 MedPAR file, we estimate that the median standardized drug charge of claims identified as clinical trials in MS-DRG 018 (that is, claims that contain ICD-10- CM diagnosis code Z00.6 and do not include payer-only code ``ZC'') is $29,819. We are proposing to apply this policy for 2 years (that is, in our relative weight methodology for MS-DRG 018 for FYs 2026 and 2027), until the claims data reflects the addition of the condition code indicating that the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, which then would be able to be used to identify these cases such that they can be identified for exclusion from the calculation of the average cost of MS-DRG 018. We are also proposing, for the purpose of performing this trim, to update the median standardized drug charge of claims identified as clinical trials in MS-DRG 018 based on more recent data for the final rule. Accordingly, we are proposing that in calculating the relative weight for MS-DRG 018 for FY 2026, in identifying clinical trial claims and expanded access use claims and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, only those claims that group to MS-DRG 018 that (1) contain ICD- 10-CM diagnosis code Z00.6 and do not include payer-only code ``ZC'', (2) contain condition code ``90'', or (3) contain standardized drug charges below the median standardized drug charge of clinical trial cases in MS-DRG 018 would be excluded from the calculation of the average cost for MS-DRG 018. With respect to claims that group to MS-DRG 018 and are identified as clinical trials or involve expanded access use of the CAR T-cell therapy or other immunotherapy, we note that there are some cases that appear to include drug charges similar to cases not identified as clinical trials or involving expanded access use. These charges are generally in revenue center 0891, Cell Therapy Drug Charges. We are seeking comments on potential reasons for why claims identified as clinical trials or involving expanded access use, in which the provider would typically receive the product at no cost, would have charges in revenue center 0891, Cell Therapy Drug Charges. We are also proposing to continue to use the methodology as modified in the FY 2024 IPPS/LTCH PPS final rule to calculate the 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, with the same proposed modification as described previously to identify other cases where the immunotherapy product is not [[Page 18080]] purchased in the usual manner, such as obtained at no cost: Calculate the average cost for cases assigned to MS-DRG 018 that (a) contain ICD-10-CM diagnosis code Z00.6 and do not contain condition code ``ZC'', (b) contain condition code ``90'', or (c) contain standardized drug charges below the median standardized drug charge of clinical trial cases in MS-DRG 018. Calculate the average cost for all other cases assigned to MS-DRG 018. 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 applicable clinical trial or expanded access use cases, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, then add this adjusted case count to the non-clinical trial case count prior to calculating the average cost across all MS-DRGs. Under our proposal to continue to apply this methodology, with the proposed modification as described, based on the December 2024 update of the FY 2024 MedPAR file used for this proposed rule, we estimated that the average costs of cases assigned to MS-DRG 018 that are identified as clinical trial cases ($88,484) were 23 percent of the average costs of the cases assigned to MS-DRG 018 that are identified as non-clinical trial cases ($385,147). Accordingly, as we did for FY 2025, we are proposing to adjust the transfer-adjusted case count for MS-DRG 018 by applying the proposed adjustor of 0.23 to the applicable clinical trial and expanded access use immunotherapy cases, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, and 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. Therefore, in calculating the national average cost per case for purposes of this proposed rule, each case identified as an applicable clinical trial or expanded access use immunotherapy case, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, was adjusted by 0.23. As we did for FY 2025, we are applying the same adjustor for the applicable cases that group to MS-DRG 018 for purposes of budget neutrality and outlier simulations. We are also proposing to update the value of the adjustor based on more recent data for the final rule. d. Cap for Relative Weight Reductions In the FY 2023 IPPS/LTCH PPS final rule, we finalized a permanent 10-percent cap on the reduction in an MS-DRG's relative weight in a given fiscal year, beginning in FY 2023. We also finalized a budget neutrality adjustment to the standardized amount for all hospitals to ensure that application of the permanent 10-percent cap does not result in an increase or decrease of estimated aggregate payments. We refer the reader to the FY 2023 IPPS/LTCH PPS final rule for further discussion of this policy. In the Addendum to this IPPS/LTCH PPS proposed rule, we present the proposed budget neutrality adjustment for reclassification and recalibration of the FY 2026 MS-DRG relative weights with application of this cap. We are also making available on the CMS website a supplemental file demonstrating the application of the permanent 10 percent cap for FY 2026. For a further discussion of the proposed budget neutrality adjustment for FY 2026, we refer readers to the Addendum of this proposed rule.

3. Development of National Average Cost-To-Charge Ratios (CCRs)

We developed the proposed national average CCRs as follows: Using the FY 2023 cost report data, we removed CAHs, REHs, 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 proposed FY 2026 cost-based relative weights were then normalized by an adjustment factor of 1.92111 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. We then applied the permanent 10-percent cap on the reduction in a MS- DRG's relative weight in a given fiscal year; specifically for those MS-DRGs for which the relative weight otherwise would have declined by more than 10 percent from the FY 2025 relative weight, we set the proposed FY 2026 relative weight equal to 90 percent of the FY 2025 relative weight. The proposed relative weights for FY 2026 as set forth in Table 5 associated with this proposed rule and available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service- Payment/AcuteInpatientPPS reflect the application of this cap. The proposed 19 national average CCRs for FY 2026 are as follows: National Average CCRS ------------------------------------------------------------------------ Group CCR ------------------------------------------------------------------------ Routine Days................................................. 0.395 Intensive Days............................................... 0.341 Drugs and Cellular Therapies................................. 0.179 Supplies & Equipment......................................... 0.304 Implantable Devices.......................................... 0.265 Inhalation Therapy........................................... 0.149 Therapy Services............................................. 0.26 Anesthesia................................................... 0.074 Labor & Delivery............................................. 0.367 Operating Room............................................... 0.156 Cardiology................................................... 0.087 Cardiac Catheterization...................................... 0.100 Laboratory................................................... 0.099 Radiology.................................................... 0.124 MRIs......................................................... 0.066 CT Scans..................................................... 0.032 Emergency Room............................................... 0.141 [[Page 18081]] Blood and Blood Products..................................... 0.238 Other Services............................................... 0.330 ------------------------------------------------------------------------ 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 are proposing to use that same case threshold in recalibrating the proposed MS-DRG relative weights for FY 2026. Using data from the FY 2024 MedPAR file, there were 10 MS-DRGs that contain fewer than 10 cases. For FY 2026, because we do not have sufficient MedPAR data to set accurate and stable cost relative weights for these low-volume MS-DRGs, we are proposing to compute relative weights for the low-volume MS-DRGs by adjusting their final FY 2025 relative weights by the percentage change in the average weight of the cases in other MS-DRGs from FY 2025 to FY 2026. The crosswalk table is as follows. Low-Volume MS-DRGS ------------------------------------------------------------------------ Low-volume MS-DRG MS-DRG title Crosswalk to MS-DRG ------------------------------------------------------------------------ 010.................... Pancreas Transplant.... Final FY 2025 relative weight (adjusted by percent change in average weight of the cases in other MS- DRGs). 096.................... Bacterial and Final FY 2025 relative Tuberculous Infections weight (adjusted by of Nervous System percent change in without CC/MCC. average weight of the cases in other MS- DRGs). 218.................... Cardiac Valve and Other Final FY 2025 relative Major Cardiothoracic weight (adjusted by Procedures with percent change in Cardiac average weight of the Catheterization cases in other MS- without CC/MCC. DRGs). 789.................... Neonates, Died or Final FY 2025 relative Transferred to Another weight (adjusted by Acute Care Facility. percent change in average weight of the cases in other MS- DRGs). 790.................... Extreme Immaturity or Final FY 2025 relative Respiratory Distress weight (adjusted by Syndrome, Neonate. percent change in average weight of the cases in other MS- DRGs). 791.................... Prematurity with Major Final FY 2025 relative Problems. weight (adjusted by percent change in average weight of the cases in other MS- DRGs). 792.................... Prematurity without Final FY 2025 relative Major Problems. weight (adjusted by percent change in average weight of the cases in other MS- DRGs). 793.................... Full-Term Neonate with Final FY 2025 relative Major Problems. weight (adjusted by percent change in average weight of the cases in other MS- DRGs). 794.................... Neonate with Other Final FY 2025 relative Significant Problems. weight (adjusted by percent change in average weight of the cases in other MS- DRGs). 795.................... Normal Newborn......... Final FY 2025 relative weight (adjusted by percent change in average weight of the cases in other MS- DRGs). ------------------------------------------------------------------------

1. Background

Effective for discharges beginning on or after October 1, 2001, section 1886(d)(5)(K)(i) of the Act requires the Secretary to establish a mechanism to recognize the costs of 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. The regulations at 42 CFR 412.87 implement these provisions and Sec. 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 antimicrobial products may qualify under an alternative inpatient new technology add-on payment pathway, as set forth in the regulations at Sec. 412.87(c) and (d). We note that section 1886(d)(5)(K)(i) of the Act requires the Secretary to establish a mechanism to recognize the costs of new medical services and technologies under the payment system established under that subsection, which establishes the system for paying for the operating costs of inpatient hospital services. The system of payment for capital costs is established under section 1886(g) of the Act. Therefore, as discussed in prior rulemaking (72 FR 47307 through 47308), we do not include capital costs in the add-on payments for a new medical service or technology or make new technology add-on payments under the IPPS for capital-related costs. In this proposed 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 further 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), the FY 2020 IPPS/ LTCH PPS final rule (84 FR 42288 through 42300), and the FY 2021 IPPS/ LTCH PPS final rule (85 FR 58736 through 58742). a. New Technology Add-On Payment Criteria (1) Newness Criterion Under the first criterion, as reflected in Sec. 412.87(b)(2), a specific medical service or technology will no longer be considered ``new'' for purposes of new medical service or technology add-on payments after CMS has recalibrated the MS-DRGs, based on available data, to reflect the cost of the technology. We note that we do not consider a service [[Page 18082]] 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 marketing authorization, 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 market authorized 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 whether: (1) a product uses the same or a similar mechanism of action to achieve a therapeutic outcome; (2) a product is assigned to the same or a different MS-DRG; and (3) 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 Under the second criterion, Sec. 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 of the cases involving a new medical service or technology will exceed a threshold amount that is the lesser of 75 percent of the standardized amount (increased to reflect the difference between cost and charges) or 75 percent of one standard deviation beyond the geometric mean standardized charge for all cases in the MS-DRG to which the new medical service or technology is assigned (or the case-weighted average of all relevant MS-DRGs if the new medical service or technology occurs in many different MS-DRGs). The MS-DRG threshold amounts generally used in evaluating new technology add-on payment applications for FY 2026 are presented in a data file that is available, along with the other data files associated with the FY 2025 IPPS/LTCH PPS final rule, correction notice and interim final action with comment period, on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. We note that, under the policy finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58603 through 58605), beginning with FY 2022, we 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. 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 proposed thresholds for applications for new technology add-on payments for FY 2027 are presented in a data file that is available on the CMS website, along with the other data files associated with this FY 2026 proposed rule, by clicking on the FY 2026 IPPS Proposed Rule Home Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. 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 part 160 and subparts A and E of 45 CFR part 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 further information on this issue. (3) Substantial Clinical Improvement Criterion Under the third criterion at Sec. 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 Sec. 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 [[Page 18083]] 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 (84 FR 42288 through 42292) 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), that while FDA has regulatory responsibility for decisions related to marketing authorization (for example, approval, clearance, etc.), we do not rely upon FDA criteria in our evaluation of substantial clinical improvement for purposes of determining what services and technologies qualify for new technology add-on payments under Medicare. This criterion does not depend on the standard of safety and effectiveness on which FDA relies but on a demonstration of substantial clinical improvement in the Medicare population. b. Alternative Inpatient New Technology Add-On Payment Pathway Beginning with applications for FY 2021 new technology add-on payments, under the regulations at Sec. 412.87(c), a medical device that is part of FDA's Breakthrough Devices Program may qualify for the new technology add-on payment under an alternative pathway. Additionally, under the regulations at Sec. 412.87(d) for certain antimicrobial products, beginning with FY 2021, a drug that is designated by FDA as a Qualified Infectious Disease Product (QIDP), and, beginning with FY 2022, a drug that is approved by FDA under the Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD), may also qualify for the new technology add-on payment under an alternative pathway. We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297) and the FY 2021 IPPS/LTCH PPS final rule (85 FR 58737 through 58739) for further discussion on this policy. We note that CMS reviews the application based on the information provided by the applicant only under the alternative pathway specified by the applicant at the time of application submission. To receive approval for the new technology add-on payment under that alternative pathway, the technology must have the applicable FDA designation and meet all other requirements in the regulations in Sec. 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, a medical device designated under FDA's Breakthrough Devices Program \11\ that has received FDA marketing authorization will be considered 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 Sec. 412.87(b)(1) that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. Under this alternative pathway, a medical device that has received a Breakthrough Device designation, and then received FDA marketing authorization (that is, has been approved or cleared by, or had a De Novo classification request granted by, FDA) for the indication covered by the Breakthrough Device designation, will need to meet the requirements of Sec. 412.87(c). We note that in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58734 through 58736), we clarified 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 the FY 2021 IPPS/LTCH PPS final rule (85 FR 58734 through 58736) for further discussion regarding this clarification. --------------------------------------------------------------------------- \11\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program. --------------------------------------------------------------------------- (2) Alternative Pathway for Certain Antimicrobial Products For applications received for new technology add-on payments for certain antimicrobial products, beginning with FY 2021, if a technology is designated by FDA as a QIDP and received FDA marketing authorization, and, beginning with FY 2022, if a drug is approved under FDA's LPAD pathway and used for the indication approved under the LPAD pathway, it will be considered 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 alternative pathway for QIDPs and LPADs, a medical product that has received FDA marketing authorization and is designated by FDA as a QIDP or approved under the LPAD pathway will need to meet the requirements of Sec. 412.87(d). We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297) and FY 2021 IPPS/LTCH PPS final rule (85 FR 58737 through 58739) for further discussion on this policy. We note that, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58737 through 58739), we clarified that a new medical product seeking approval for the new technology add-on payment under the alternative pathway for QIDPs must receive FDA marketing authorization for the indication covered by the QIDP designation. We also finalized our policy to expand our alternative new technology add-on payment pathway for certain antimicrobial products to include products approved under the LPAD pathway and used for the indication approved under the LPAD pathway. c. 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 [[Page 18084]] 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. As noted previously, we do not include capital costs in the add-on payments for a new medical service or technology or make new technology add-on payments under the IPPS for capital-related costs (72 FR 47307 through 47308). For discharges occurring before October 1, 2019, under Sec. 412.88, if the costs of the discharge (determined by applying operating cost-to-charge ratios (CCRs) as described in Sec. 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), CMS 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 Sec. 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 Sec. 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 Sec. 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. For a new technology that is a medical product approved under FDA's LPAD pathway, beginning with discharges on or after October 1, 2020, if the costs of a discharge involving a new technology (determined by applying CCRs as described in Sec. 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 Sec. 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 certain antimicrobial products (QIDPs and LPADs)) 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 further discussion on the increase in the new technology add-on payment beginning with discharges on or after October 1, 2019. As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69245 through 69252), we finalized an increase in the new technology add-on payment percentage, reflected at Sec. 412.88(a)(2)(ii)(C) and (b)(2)(iv), that for certain gene therapies approved for new technology add-on payments in the FY 2025 IPPS/LTCH PPS final rule that are indicated and used specifically for the treatment of sickle cell disease (SCD), effective with discharges on or after October 1, 2024 and concluding at the end of the 2- to 3-year newness period for such therapy, if the costs of a discharge (determined by applying CCRs as described in Sec. [thinsp]412.84(h)) involving the use of such therapy for the treatment of SCD 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. We noted that these payment amounts would only apply to CasgevyTM (exagamglogene autotemcel) and LyfgeniaTM (lovotibeglogene autotemcel), when indicated and used specifically for the treatment of SCD, which were approved for new technology add-on payments in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69128 through 69135, and 89 FR 69188 through 69196). We note that, consistent with the prospective nature of the IPPS, we finalize the new technology add on payment amount for technologies approved or conditionally approved for new technology add-on payments in the final rule for each fiscal year and do not make mid-year changes to new technology add-on payment amounts. Updated cost information may be submitted and included in rulemaking to be considered for the following fiscal year. Section 503(d)(2) of the MMA (Pub. L. 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 the MMA, add-on payments for new medical services or technologies for FY 2005 and subsequent years have not been subjected to budget neutrality. d. 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 regulation at Sec. 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 specified 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. In the FY 2021 IPPS/LTCH PPS final rule, to more precisely describe the various types of FDA approvals, clearances and classifications that we consider under our new technology add-on payment policy, we finalized a technical clarification to the regulation to indicate that new technologies must receive FDA marketing authorization 12 13 (such as pre-market approval (PMA); 510(k) clearance; the granting of a De Novo classification request; or approval of a New Drug Application (NDA) or Biologics License Application (BLA)) by July 1 of the year prior to the beginning of the fiscal year for which the application is being considered (85 FR [[Page 18085]] 58742). Consistent with our longstanding policy, we consider FDA marketing authorization as representing that a product has received FDA approval or clearance, or has been granted a De Novo classification request when considering eligibility for the new technology add-on payment. --------------------------------------------------------------------------- \12\ How to Study and Market Your Device https://www.fda.gov/medical-devices/device-advice-comprehensive-regulatory-assistance/how-study-and-market-your-device. \13\ Types of Applications https://www.fda.gov/drugs/how-drugs-are-developed-and-approved/types-applications. --------------------------------------------------------------------------- Additionally, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58739 through 58742), we finalized our proposal to provide conditional approval for new technology add-on payment for a technology for which an application is submitted under the alternative pathway for certain antimicrobial products at Sec. 412.87(d) that does not receive FDA marketing authorization by July 1 prior to the particular fiscal year for which the applicant applied for new technology add-on payments, provided that the technology otherwise meets 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 before July 1 of the fiscal year for which the applicant applied for new technology add-on payments. As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958) and the FY 2025 IPPS/LTCH PPS final rule (89 FR 69242 through 69245), beginning with the new technology add-on payment applications for FY 2025, for technologies that are not already FDA market authorized for the indication that is the subject of the new technology add-on payment application, applicants must have a complete and active FDA market authorization request at the time of new technology add-on payment application submission and must provide documentation of FDA acceptance (for a 510k application or De Novo Classification request) or filing (for a PMA, NDA, or BLA) to CMS at the time of application submission, consistent with the type of FDA marketing authorization application the applicant has submitted to FDA. See Sec. 412.87(e) and further discussion in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958) and the FY 2025 IPPS/LTCH PPS final rule (89 FR 69242 through 69245). As we have discussed in prior rulemaking, we consider the application to be complete when the full application has been submitted to FDA and FDA has provided documentation to the applicant indicating that FDA has determined that the application is sufficiently complete to allow for substantive review by FDA. We recognize that FDA processes and documentation may change over time, and the acceptance or filing documentation may vary depending on the type of FDA marketing authorization application the applicant has submitted to FDA. For example, we understand that FDA considers submission of a 510(k) or De Novo Classification request to be accepted for substantive review after the completion of either a refuse to accept (RTA) review or a technical screening process.14 15 Submissions of 510(k) and De Novo Classification requests undergo a technical screening process when they are submitted to FDA using the electronic Submission Template And Resource (eSTAR) process; 510(k) and De Novo Classification requests that are not submitted via eSTAR undergo an RTA review. Accordingly, FDA provides applicants using eSTAR with a review assignment notification to indicate that FDA has completed its technical screening process and has determined that the application is sufficiently complete to allow for substantive review. Therefore, new technology add-on payment applicants that have submitted a 510(k) application or De Novo Classification request to FDA through eSTAR must submit a copy of the review assignment notification to CMS (at the time of new technology add-on payment application) to establish the application is sufficiently complete to allow for substantive review by the FDA. We note that PMAs submitted using eSTAR that complete technical screening will still undergo a subsequent filing review by FDA, after which an application is determined to be sufficiently complete to allow for substantive review; therefore, we continue to require documentation of FDA filing for these applications. --------------------------------------------------------------------------- \14\ FDA and Industry Actions on Premarket Notification (510(k)) Submissions: Effect on FDA Review Clock and Goals Guidance for Industry and Food and Drug Administration Staff Document issued on October 3, 2022. https://www.fda.gov/media/73507/download. \15\ FDA and Industry Actions on De Novo Classification Requests: Effect on FDA Review Clock and Goals Guidance for Industry and Food and Drug Administration Staff Document issued on October 3, 2022. https://www.fda.gov/media/107652/download. --------------------------------------------------------------------------- In addition, we recognize that FDA does not conduct a new filing review for NDA or BLA applications that were the subject of a Complete Response Letter (CRL) and were subsequently resubmitted to FDA, even though resubmissions are considered a new review cycle.16 17 Therefore, beginning with the new technology add-on applications submitted for FY 2027, these new technology add-on payment applicants must provide to CMS a copy of the resubmission acknowledgement letter from FDA that indicates that FDA considers the resubmission to be sufficient to restart a review clock and provides the new goal date for FDA review of the application. We further note that if there are other processes not described here, or if there are further changes to FDA's review processes, consistent with our policy, applicants must provide to CMS the most up-to-date documentation that indicates FDA has determined that the application is sufficiently complete to allow for substantive review by FDA. --------------------------------------------------------------------------- \16\ SOPP 8405.1: Procedures for Resubmissions to an Application or Supplement. Version: 8 Effective Date: November 13, 2022. https://www.fda.gov/media/84417/download. \17\ 21 CFR 314.110, Complete response letter to the applicant https://www.ecfr.gov/current/title-21/chapter-I/subchapter-D/part-314/subpart-D/section-314.110. --------------------------------------------------------------------------- In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958), we also finalized that, beginning with FY 2025 applications, in order to be eligible for consideration for the new technology add-on payment for the upcoming fiscal year, an applicant for new technology add-on payments must have received FDA marketing authorization by May 1 (rather than July 1) of the year prior to the beginning of the fiscal year for which the application is being considered (except for an application that is submitted under the alternative pathway for certain antimicrobial products), as reflected at Sec. 412.87(f)(2) and (3), as amended and redesignated in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958, 88 FR 59331). e. Pharmaceutical & Technology Ombudsman (PTO) Many interested parties (including device/biologic/drug developers or manufacturers, industry consultants, others) engage with CMS for coverage, coding, and payment questions or concerns. In order to streamline engagement by centralizing the different innovation pathways within CMS including new technology add-on payments, CMS utilizes the Pharmaceutical & Technology Ombudsman as an initial resource for interested parties. This Ombudsman is available to assist with all of the following: Help to point interested parties to or provide information and resources [[Page 18086]] where possible regarding process, requirements, and timelines. As necessary, coordinate and facilitate opportunities for interested parties to engage with various CMS components. Serve as a primary point of contact for interested parties and provide updates on developments where possible or appropriate. We receive many questions from parties interested in pursuing new technology add-on payments who may not be entirely familiar with working with CMS. While we encourage interested parties to first review our resources available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech, we know that there may be additional questions about the application process. Interested parties with further questions regarding Medicare's coverage, coding, and payment processes, and how they can navigate these processes, whether for new technology add-on payments or otherwise, should review the updated resource guide available at: https://www.cms.gov/medicare/coding-billing/guide-medical-technology-companies-other-interested-parties. Parties that would like to further discuss questions or concerns with CMS should contact the Pharmaceutical & Technology Ombudsman at [email protected]. f. Application Information for New Medical Services or Technologies Applicants for add-on payments for new medical services or technologies for FY 2027 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. CMS will review the application based on the information provided by the applicant under the pathway specified by the applicant at the time of application submission. 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 2027, once the application deadline has closed, CMS will post on its website a list of the applications submitted, along with a brief description of each technology as provided by the applicant. As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48986 through 48990), we finalized our proposal to publicly post online new technology add-on payment applications, including the completed application forms, certain related materials, and any additional updated application information submitted subsequent to the initial application submission (except certain volume, cost and other information identified by the applicant as confidential), beginning with the application cycle for FY 2024, at the time the proposed rule is published. We also finalized that with the exception of information included in a confidential information section of the application, cost and volume information, and materials identified by the applicant as copyrighted or not otherwise releasable to the public, the contents of the application and related materials may be posted publicly, and that we will not post applications that are withdrawn prior to publication of the proposed rule. We refer the reader to the FY 2023 IPPS/LTCH PPS final rule (87 FR 48986 through 48990) for further information regarding this policy. Beginning with the new technology add-on applications submitted for FY 2027, we intend to include certain cost criterion information in this public posting; however, consistent with our current policy, cost and volume information will not be publicly posted. Consistent with current practice, certain cost and volume information may still be summarized and discussed in the proposed rule, but we intend to provide more succinct information as part of the summaries in the proposed and final rules regarding the applicant's assertions as to how the medical service or technology meets the cost criterion. Specifically, beginning with the FY 2027 applications, the public posting will include the applicant's explanation of the cost analysis methodology, including the step-by-step explanation of the columns used in the cost analysis spreadsheet attachment, any optional comments provided by the applicant, and information about the case weighted threshold and final inflated case weighted standardized charge per case, as is currently subject to discussion in the cost criterion analysis for each eligible application in the proposed rule. The cost analysis spreadsheet attachment and other charge values provided in the applicant's responses would not be included in the public posting. We believe that including the described cost criterion information in the public posting will further improve and streamline our evaluation process, while also further supporting transparency and engagement with interested parties. 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 and has an expiration date of December 31, 2026.

2. Public Input Before Publication of a Notice of Rulemaking on Add-On

Payments Section 1886(d)(5)(K)(viii) of the Act, as amended by section 503(b)(2) of the MMA, 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. The process for evaluating new medical service and technology applications requires the Secretary to do all of the following: 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. 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 [[Page 18087]] technologies for FY 2026 prior to publication of the FY 2026 IPPS/LTCH PPS proposed rule, we published a notice in the September 13, 2024, Federal Register (89 FR 74962) and held a virtual town hall meeting on December 11, 2024. 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 2026 new medical service and technology add-on payment applications before the publication of the FY 2026 IPPS/LTCH PPS proposed rule. Approximately 200 individuals attended the virtual town hall meeting. We posted the recordings of the virtual town hall on the CMS web page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech. We considered each applicant's presentation made at the town hall meeting, as well as written comments received by the December 16, 2024, deadline, in our evaluation of the new technology add-on payment applications for FY 2026 in the development of the FY 2026 IPPS/LTCH PPS proposed rule. In response to the published notice and the December 11, 2024, New Technology Town Hall meeting, we received written comments regarding the applications for FY 2026 new technology add on payments. As explained earlier and in the Federal Register notice announcing the New Technology Town Hall meeting (89 FR 74962 through 74964), the purpose of the meeting was specifically to discuss the substantial clinical improvement criterion with regard to pending new technology add-on payment applications for FY 2026. Therefore, we are not summarizing any written comments in this proposed rule that are unrelated to the substantial clinical improvement criterion. In section II.E.5. of the preamble of this proposed rule, we summarize comments regarding individual applications, or, if applicable, indicate 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: https://www.cms.gov/medicare/coding-billing/icd-10-codes, 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. Proposed FY 2026 Status of Technologies Receiving New Technology

Add-On Payments for FY 2025 In this section of the proposed rule, we discuss the proposed FY 2026 status of 42 technologies approved for 39 new technology add-on payments for FY 2025, as set forth in the tables that follow. Specifically, we present our proposals to continue the new technology add-on payments for FY 2026 for those technologies that were approved for the new technology add-on payment for FY 2025, and which are still considered ``new'' for purposes of new technology add-on payments for FY 2026. We also present our proposals to discontinue new technology add-on payments for FY 2026 for those technologies that were approved for the new technology add-on payment for FY 2025, and which are no longer considered ``new'' for purposes of new technology add-on payments for FY 2026. 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, and, in general, we have extended 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). As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69238 through 69242), we finalized that, beginning with new technology add-on payments for FY 2026, in assessing whether to continue the new technology add-on payments for those technologies that are first approved for new technology add-on payments in FY 2025 or a subsequent year, we will extend new technology add-on payments for an additional fiscal year when the 3-year anniversary date of the product's entry onto the U.S. market occurs on or after October 1 of that fiscal year. This change is effective beginning with those technologies that are initially approved for new technology add-on payments in FY 2025 or a subsequent year. For technologies that were first approved for new technology add-on payments prior to FY 2025, including for technologies we determine to be substantially similar to those technologies, we continue to use the midpoint of the upcoming fiscal year (April 1) when determining whether a technology would still be considered ``new'' for purposes of new technology add-on payments. Table II.E-01.A lists the technologies that were first approved for new technology add-on payments prior to FY 2025, for which we are proposing to continue making new technology add-on payments for FY 2026 because they are still considered ``new'' for purposes of new technology add-on payments because the 3-year anniversary date of the product's entry onto the U.S. market occurs on or after April 1, 2026. This table also presents the newness start date, new technology add-on payment start date, 3-year anniversary date of the product's entry onto the U.S. market, relevant final rule citations from prior fiscal years, proposed maximum add-on payment amount, and coding assignments for each technology. We refer readers to the cited final rules in the following table for a complete discussion of the new technology add-on payment application, coding, and payment amount for these technologies, including the applicable indications and discussion of the newness start date. Table II.E-01.B lists the technologies that were first approved for new technology add-on payments in FY 2025, for which we are proposing to continue making new technology add-on payments for FY 2026 because they are still considered ``new'' for purposes of new technology add-on payments because the 3-year anniversary date of [[Page 18088]] the product's entry onto the U.S. market occurs on or after October 1, 2025. This table also presents the newness start date, new technology add-on payment start date, 3-year anniversary date of the product's entry onto the U.S. market, relevant final rule citations from prior fiscal years, proposed maximum add-on payment amount, and coding assignments for each technology. We refer readers to the cited final rules in the following table for a complete discussion of the new technology add-on payment application, coding, and payment amount for these technologies, including the applicable indications and discussion of the newness start date. We are inviting public comments on our proposals to continue new technology add-on payments for FY 2026 for the technologies listed in Tables II.E.-01.A and II.E.-01.B. Table II.E.-01.A--Proposed Continuation of Technologies Approved for FY 2025 New Technology Add-On Payments Still Considered New for FY 2026 Because the 3-Year Anniversary Date Will Occur on or After April 1, 2026 -------------------------------------------------------------------------------------------------------------------------------------------------------- 3-Year anniversary Proposed Technology Newness NTAP start date of entry Previous final rule maximum NTAP Coding used to identify start date date onto U.S. citations amount for FY cases eligible for NTAP market 2026 -------------------------------------------------------------------------------------------------------------------------------------------------------- 1. CYTALUX[supreg] (pafolacianine) 06/05/2023 10/01/2023 06/05/2026 88 FR 58810 through 58818 $2,762.50 8E0W0EN, 8E0W3EN, (lung indication). 89 FR 69120 through 69126 8E0W4EN, 8E0W7EN, or 8E0W8EN. 2. EPKINLYTM (epcoritamab-bysp) and 05/19/2023 10/01/2023 05/19/2026 88 FR 58818 through 58835 6,504.07 XW013S9, XW033P9, or COLUMVITM (glofitamab-gxbm). 89 FR 69120 through 69126 XW043P9. 3. AveirTM AR Leadless Pacemaker...... 06/29/2023 10/01/2023 06/29/2026 88 FR 58919 through 58923 10,725.00 X2H63V9. 89 FR 69120 through 69126 4. AveirTM Dual-Chamber Leadless 06/29/2023 10/01/2023 06/29/2026 88 FR 58923 through 58925 15,600.00 X2H63V9 in combination Pacemaker. 89 FR 69120 through 69126 with X2HK3V9.

5. Ceribell Status Epilepticus Monitor 05/23/2023 10/01/2023 05/23/2026 88 FR 58927 through 58930 913.90 XX20X89.

89 FR 69120 through 69126 6. DETOUR System...................... 06/07/2023 10/01/2023 06/07/2026 88 FR 58930 through 58932 16,250.00 X2KH3D9, X2KH3E9, 89 FR 69120 through 69126 X2KJ3D9, or X2KJ3E9. 7. DefenCath[supreg] (taurolidine/ 11/15/2023 01/01/2024 11/15/2026 88 FR 58942 through 58944 3,656.10 XY0YX28. heparin). 89 FR 69120 through 69126 8. Phagenyx[supreg] System............ 04/12/2023 10/01/2023 04/12/2026 88 FR 58935 through 58937 3,250.00 XWHD7Q7. 89 FR 69120 through 69126 9. REZZAYOTM (rezafungin for 07/19/2023 10/01/2023 07/19/2026 88 FR 58944 through 58946 4,387.50 XW033R9 or XW043R9. injection). 89 FR 69120 through 69126 10. TOPSTM System..................... 06/15/2023 10/01/2023 06/15/2026 88 FR 58940 through 58942 11,375.00 XRHB018 in combination 89 FR 69120 through 69126 with M48.062. 11. XACDURO[supreg] (sulbactam/ 05/23/2023 10/01/2023 05/23/2026 88 FR 58946 through 58948 13,680.00 XW033K9 or XW043K9 in durlobactam). 89 FR 69120 through 69126 combination with one of the following: Y95 and J15.61; OR J95.851 and B96.83. -------------------------------------------------------------------------------------------------------------------------------------------------------- Table II.E.-01.B--Proposed Continuation of Technologies Approved for FY 2025 New Technology Add-On Payments Still Considered New for FY 2026 Because the 3-Year Anniversary Date Will Occur on or After October 1, 2025 -------------------------------------------------------------------------------------------------------------------------------------------------------- 3-Year anniversary Proposed Technology Newness NTAP start date of entry Previous final rule maximum NTAP Coding used to identify start date date onto U.S. citations amount for FY cases eligible for NTAP market 2026 -------------------------------------------------------------------------------------------------------------------------------------------------------- 1. Annalise Enterprise CTB Triage--OH. 10/10/2023 10/01/2024 10/10/2026 89 FR 69205 through 69208 $241.39 XXE0X1A. 2. ASTar[supreg] System............... 04/26/2024 10/01/2024 04/26/2027 89 FR 69208 through 69210 97.50 XXE5X2A. 3. Edwards EVOQUETM Tricuspid Valve 02/01/2024 10/01/2024 02/01/2027 89 FR 69210 through 69213 31,850.00 X2RJ3RA. Replacement System (``EVOQUETM System''). [[Page 18089]]

4. GORE[supreg] EXCLUDER[supreg] 01/12/2024 10/01/2024 01/12/2027 89 FR 69213 through 69215 47,238.75 X2VE3SA.

Thoracoabdominal Branch Endoprosthesis (TAMBE Device). 5. LimFlowTM System................... 11/01/2023 10/01/2024 11/01/2026 89 FR 69215 through 69218 16,250.00 041M3JS, 041N3JS, 041P3JS, 041Q3JS, 041R3JS, 041S3JS, 041T3JS, or 041U3JS. 6. ParadiseTM Ultrasound Renal 11/7/2023 10/01/2024 11/07/2026 89 FR 69218 through 69221 14,950.00 X051329. Denervation System. 7. PulseSelectTM Pulsed Field Ablation 12/13/2023 10/01/2024 12/13/2026 89 FR 69221 through 69225 6,337.50 02583ZF. (PFA) Loop Catheter. 8. Symplicity SpyralTM Multi-Electrode 11/17/2023 10/01/2024 11/17/2026 89 FR 69225 through 69228 10,400.00 X05133A. Renal Denervation Catheter. 9. TriClipTM G4....................... 04/01/2024 10/01/2024 04/01/2027 89 FR 69228 through 69230 26,000.00 02UJ3JZ. 10. VADER[supreg] Pedicle System...... 02/26/2024 10/01/2024 02/26/2027 89 FR 69230 through 69236 28,242.50 XRH60FA, XRH63FA, XRH64FA, XRH70FA, XRH73FA, XRH74FA, XRH80FA, XRH83FA, XRH84FA, XRHA0FA, XRHA3FA, XRHA4FA, XRHB0FA, XRHB3FA, XRHB4FA, XRHC0FA, XRHC3FA, XRHC4FA, XRHD0FA, XRHD3FA, or XRHD4FA in combination with one of the following: M46.20, M46.22, M46.23, M46.24, M46.25, M46.26, M46.27, M46.30, M46.32, M46.33, M46.34, M46.35, M46.36, M46.37, M46.39, M46.40, M46.42, M46.43, M46.44, M46.45, M46.46, M46.47, M46.49, M46.50, M46.51, M46.52, M46.53, M46.54, M46.55, M46.56, M46.57, M46.59, M46.80, M46.82, M46.83, M46.84, M46.85, M46.86, M46.87, M46.89, M46.90, M46.92, M46.93, M46.94, M46.95, M46.96, M46.97, or M46.99. 11. ZEVTERATM (ceftobiprole 04/03/2024 10/01/2024 04/03/2027 89 FR 69236 through 69238 2,812.50 XW0335A or XW0435A. medocaril); ABSSSI and CABP indications. 12. ZEVTERATM (ceftobiprole 04/03/2024 10/01/2024 04/03/2027 89 FR 69236 through 69238 8,625.00 XW0335A or XW0435A in medocaril); SAB indication. combination with R78.81 (in combination with B95.61 or B95.62). 13. CASGEVYTM (exagamglogene 12/08/2023 10/01/2024 12/08/2026 89 FR 69128 through 69135 1,650,000.00 XW133J8 or XW143J8 in autotemcel); Sickle Cell Disease combination with one of indication. the following: D57.1, D57.20, D57.40, D57.42, D57.44, or D57.80. 14. HEPZATOTM KIT (melphalan for 01/08/2024 10/01/2024 01/08/2027 89 FR 69158 through 69170 118,625.00 XW053T9 in combination injection/hepatic delivery system). with 5A1C00Z. 15. LYFGENIATM (lovotibeglogene 12/08/2023 10/01/2024 12/08/2026 89 FR 69188 through 69196 2,325,000.00 XW133H9 or XW143H9. autotemcel). -------------------------------------------------------------------------------------------------------------------------------------------------------- Table II.E.-02 lists the technologies that were first approved for new technology add-on payments prior to FY 2025, including technologies determined to be substantially similar to such technologies, for which we are proposing to discontinue making new technology add-on payments for FY 2026 because they are no longer ``new'' for purposes of new technology add-on payments because the 3-year anniversary date of the product's entry onto the U.S. market occurs before April 1, 2026. This table also presents the newness start date, new technology add-on payment start date, the 3-year anniversary date of the product's entry onto the U.S. market, and relevant final rule citations from prior fiscal years. We refer readers to the cited final rules in the following table for a complete discussion of each new technology add-on payment application and the coding and payment amount for these technologies, including the applicable indications and discussion of the newness start date. [[Page 18090]] As discussed in section II.E.6. of the preamble of this proposed rule, BONESUPPORT, Inc. is also seeking new technology add-on payments for CERAMENT[supreg] G for FY 2026 for use in defects in the extremities of skeletally mature patients as an adjunct to systemic antibiotic therapy and surgical debridement as part of the standard treatment approach to open fractures. As discussed in the FY 2023 IPPS/ LTCH PPS final rule (87 FR 48961 through 48966), CERAMENT[supreg] G was approved for new technology add-on payments with an indication for use as a bone void filler in skeletally mature patients as an adjunct to systemic antibiotic therapy and surgical debridement (standard treatment approach to a bone infection) as part of the surgical treatment of osteomyelitis in defects in the extremities. For this proposed rule, we are proposing to discontinue new technology add-on payments for FY 2026 for CERAMENT[supreg] G when used for bone infections, as the technology will no longer be considered new for this indication. We believe cases involving the use of CERAMENT[supreg] G related to bone infections, which would no longer be eligible for new technology add-on payment in FY 2026, would be identified by the ICD- 10-PCS code XW0V0P7 (Introduction of antibiotic-eluting bone void filler into bones, open approach, new technology group 7) in combination with the ICD-10-CM codes in category M86 (Osteomyelitis). We are inviting public comments on the use of these codes to exclude the indication for use of CERAMENT[supreg] G related to bone infections, which would not be eligible for the new technology add-on payment for FY 2026, if approved. We are inviting public comments on our proposals to discontinue new technology add-on payments for FY 2026 for the technologies listed in Table II.E.-02 of the preamble of this proposed rule. --------------------------------------------------------------------------- \18\ As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69149 through 69155), we determined that ELREXFIOTM (elranatamab-bcmm) and TALVEYTM (talquetamab-tgvs) were substantially similar to TECVAYLI[supreg] (teclistamab-cqyv), which was first approved for new technology add-on payment in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58885 through 58891). 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 these technologies, November 9, 2022, the date TECVAYLI[supreg] became commercially available. As discussed previously in this section, for technologies that were first approved for new technology add-on payments prior to FY 2025, including for technologies we determine to be substantially similar to those technologies, we continue to use the midpoint of the upcoming fiscal year (April 1) when determining whether a technology would still be considered ``new'' for purposes of new technology add-on payments. Table II.E.-02--Proposed Discontinuation of Technologies Approved for FY 2025 New Technology Add-On Payments No Longer Considered New for FY 2026 Because 3-Year Anniversary Date Will Occur Prior to April 1, 2026 ---------------------------------------------------------------------------------------------------------------- 3-Year anniversary Technology Newness start NTAP start date of entry Previous final rule date date onto U.S. citations market ----------------------------------------------------------------------------------------------------------------

1. ThoraflexTM Hybrid Device.......... 04/19/2022 10/01/2022 04/19/2025 87 FR 48974 through

48975. 88 FR 58800. 89 FR 69120 through 69126.

2. ViviStim[supreg] Paired VNS System. 04/29/2022 10/01/2022 04/29/2025 87 FR 48975 through

48977. 88 FR 58800. 89 FR 69120 through 69126.

3. GORE[supreg] TAG[supreg] Thoracic 05/13/2022 10/01/2022 05/13/2025 87 FR 48966 through

Branch Endoprosthesis. 48969. 88 FR 58800. 89 FR 69120 through 69126.

4. CERAMENT[supreg] G (bone infection 05/17/2022 10/01/2022 05/17/2025 87 FR 48961 through

indication). 48966. 88 FR 58800. 89 FR 69120 through 69126.

5. iFuse Bedrock Granite Implant 05/26/2022 10/01/2022 05/26/2025 87 FR 48969 through

System. 48974. 88 FR 58800. 89 FR 69120 through 69126.

6. CYTALUX[supreg] (pafolacianine) 04/15/2022 10/01/2023 04/15/2025 88 FR 58804 through

(ovarian indication). 58810. 89 FR 69120 through 69126.

8. REBYOTATM (fecal microbiota, live- 01/23/2023 10/01/2023 01/23/2026 88 FR 58848 through

jslm) and VOWSTTM (fecal microbiota 58868. spores, live-brpk). 89 FR 69120 through 69126.

10. TECVAYLITM (teclistamab-cqyv)..... 11/09/2022 10/01/2023 11/09/2025 88 FR 58885 through

ELREXFIOTM (elranatamab-bcmm) and \18\ 10/01/ 58891. TALVEYTM (talquetamab-tgvs). 2024 89 FR 69120 through 69126. 89 FR 69149 through 69155.

13. SAINT Neuromodulation System...... 09/01/2022 10/01/2023 09/01/2025 88 FR 58937 through

58939. 89 FR 69120 through 69126. ---------------------------------------------------------------------------------------------------------------- 5. Proposed FY 2026 Applications for New Technology Add-On Payments (Traditional Pathway) As discussed previously, in the FY 2023 IPPS/LTCH PPS final rule, we finalized our policy to publicly post online applications for new technology add-on payment beginning with FY 2024 applications (87 FR 48986 through 48990). As noted in the FY 2023 IPPS/LTCH PPS final rule, we are continuing to summarize each application in this proposed rule. However, while we are continuing to provide discussion of the concerns or issues we identified with respect to applications submitted under the traditional pathway, we are providing more succinct information as part of the summaries in the proposed and final rules regarding the applicant's [[Page 18091]] assertions as to how the medical service or technology meets the newness, cost, and substantial clinical improvement criteria. We refer readers to https://mearis.cms.gov/public/publications/ntap for the publicly posted FY 2026 new technology add-on payment applications and supporting information (with the exception of certain cost and volume information, and information or materials identified by the applicant as confidential or copyrighted), including tables listing the ICD-10-CM codes, ICD-10-PCS codes, and/or MS-DRGs related to the analyses of the cost criterion for certain technologies for the FY 2026 new technology add-on payment applications. We received 19 applications for new technology add-on payments for FY 2026 under the new technology add-on payment traditional pathway. In accordance with the regulations under Sec. 412.87(f), applicants for FY 2026 new technology add-on payments must have received FDA marketing authorization by May 1 of the year prior to the beginning of the fiscal year for which the application is being considered. As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958) and the FY 2025 IPPS/LTCH PPS final rule (89 FR 69242 through 69245), we finalized that beginning with the new technology add-on payment applications for FY 2025, for technologies that are not already FDA market authorized for the indication that is the subject of the new technology add-on payment application, applicants must have a complete and active FDA market authorization request at the time of new technology add-on payment application submission and must provide documentation of FDA acceptance or filing to CMS at the time of application submission, consistent with the type of FDA marketing authorization application the applicant has submitted to FDA. See Sec. 412.87(e) and further discussion in the FY 2024 and FY 2025 IPPS/LTCH PPS final rules (88 FR 58948 through 58958, 89 FR 69242 through 69245). Of the 19 applications received under the traditional pathway, 2 applicants were not eligible for consideration for new technology add-on payment because they did not meet these requirements, and 3 applicants withdrew their applications prior to the issuance of this proposed rule. We are addressing the remaining 14 applications. a. AUCATZYL[supreg] (Obecabtagene Autoleucel) Autolus Therapeutics, Inc. submitted an application for new technology add-on payments for AUCATZYL[supreg] for FY 2026. According to the applicant, AUCATZYL[supreg] is a fast off-rate cluster of differentiation 19 (CD19) autologous chimeric antigen receptor (CAR) T- cell therapy with tumor burden-guided dosing designed to improve persistence and reduce immune-mediated toxicity. Per the applicant, AUCATZYL[supreg] is indicated for the treatment of adults with relapsed or refractory (R/R) B-cell precursor acute lymphoblastic leukemia (B- ALL). Please refer to the online application posting for AUCATZYL[supreg], available at https://mearis.cms.gov/public/publications/ntap/NTP241002GUJHV, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, AUCATZYL[supreg] was granted BLA approval from FDA on November 8, 2024, for the treatment of adults with R/R B-ALL. According to the applicant, AUCATZYL[supreg] was commercially available immediately after FDA approval. The applicant stated that a single treatment of AUCATZYL[supreg] consists of two intravenous infusions (given on Day 1 and Day 10 [2]) administered via a syringe or gravity- assisted infusion through a central or peripheral venous line over a few minutes. Per the applicant, each infusion is packaged in three or more infusion bags containing a cell dispersion of the target tumor burden-guided dose of 410 x 10\6\ CD19 CAR-positive viable T cells.\19\ --------------------------------------------------------------------------- \19\ The applicant stated that the first dose, infused on Day 1, is determined by the patient's bone marrow disease burden within 7 days prior to lymphodepletion, and the second dose, infused on Day 10 [2], is tailored for a total dose of 410 x 10\6\ CAR T cells to complete the single treatment of AUCATYZL[supreg]. --------------------------------------------------------------------------- The applicant stated that, effective October 1, 2024, the following ICD-10-PCS codes may be used to uniquely describe procedures involving the use of AUCATZYL:[supreg] XW0338A (Introduction of obecabtagene autoleucel into peripheral vein, percutaneous approach, new technology group 10) or XW0438A (Introduction of obecabtagene autoleucel into central vein, percutaneous approach, new technology group 10). The applicant stated that C91.00 (Acute lymphoblastic leukemia not having achieved remission), C91.01 (Acute lymphoblastic leukemia, in remission), or C91.02 (Acute lymphoblastic leukemia, in relapse) may be used to currently identify the R/R B-ALL indication for AUCATZYL[supreg] under the ICD-10-CM coding system. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that AUCATZYL[supreg] is not substantially similar to other currently available technologies because it has a distinct immune- modulating mechanism of action and first-in-class tumor burden-guided dosing indicated for the treatment of adults with R/R B-ALL, and that therefore, the technology meets the newness criterion. More specifically, the applicant asserted that AUCATZYL[supreg] is the only CAR T-cell therapy constructed using the differentiated 4-1BB co- stimulatory domain with a novel, proprietary low affinity, fast off- rate CAT19 binding domain, and tumor burden-guided dosing. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for AUCATZYL[supreg] for the applicant's complete statements in support of its assertion that AUCATZYL[supreg] is not substantially similar to other currently available technologies. [[Page 18092]] -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar No.............................. AUCATZYL[supreg] is not substantially similar to currently available T- mechanism of action to achieve a therapeutic cell therapies indicated for the treatment of adult R/R B-ALL, outcome? specifically TECARTUS[supreg] (brexucabtagene autoleucel), the only currently available CD19 CAR T-cell therapy for this population. Specifically, AUCATZYL[supreg] is designed to model physiological T- cell activation, and its CAR is constructed using the differentiated 4- 1BB co-stimulatory domain along with a proprietary and unique CAT19 binding domain, specifically designed to improve potency and persistence and to reduce immune-mediated toxicity. Shorter cell-cell contact resulting from the >40-fold lower affinity of CAT19 (off-rate of 3.7 minutes) compared with the FMC63 antigen-binding domain (off- rate of 2.8 hours) used in currently available CAR T-cell therapy, including TECARTUS[supreg], serves to reduce cytokine release and toxicity, reduces CAR T-cell exhaustion and enhances CAR T-cell persistence. The 4-1BB co-stimulatory domain is also highly differentiated from the CD28 co-stimulatory domain used in TECARTUS[supreg]; the 4-1BB distinct signaling pathway results in lower T-cell activation, increased mitochondrial biogenesis, greater oxidative metabolism, and sustained CAR T-cell persistence. AUCATZYL[supreg] is also specifically designed to follow a manageable, personalized tumor burden-guided dosing schedule to proactively mitigate risk of cytokine release syndrome (CRS) and immune effector cell-associated neurotoxicity syndrome (ICANS), addressing the potential for toxicity in older patients and for consideration of patients with higher disease burden. The first-in-class tumor burden- guided dosing of AUCATZYL[supreg] tailors administration based on the individual patient's disease burden and corresponding immunotoxicity risk and supports maximal control for the treating physician, while minimizing immune-related toxicities and maximizing treatment effect. Is the technology assigned to the same MS-DRG Yes............................. CMS has made the determination that ICD-10-PCS procedure codes as existing technologies? identifying all CAR T-cell therapies will map to Pre-MDC MS-DRG 018 (Chimeric antigen receptor (CAR) T-cell and other immunotherapies), including previously approved TECARTUS[supreg] indicated for adult R/R B-ALL. Patient claims for adult R/R B-ALL patients where AUCATZYL[supreg] is administered will also be mapped to Pre-MDC MS-DRG 018 and will be identified by unique, AUCATZYL[supreg]-specific ICD-10- PCS codes which have been approved by CMS with an effective date of October 1, 2024. Does new use of the technology involve the Yes............................. Inpatient cases involving adults with r/r B-ALL are identified by treatment of the same/similar type of existing ICD-10-CM diagnosis codes C91.00 (Acute lymphoblastic disease and the same/similar patient leukemia not having achieved remission), C91.01 (Acute lymphoblastic population when compared to an existing leukemia, in remission), and C91.02 (Acute lymphoblastic leukemia, in technology? relapse). These same ICD-10-CM diagnosis codes will identify adult R/R B-ALL patient types eligible for treatment with AUCATZYL[supreg], where the inpatient claims will be identified by unique AUCATZYL[supreg] ICD-10-PCS codes, XW0338A or XW0438A, effective October 1, 2024. Importantly, the eligible patient population for treatment with AUCATZYL[supreg] is expected to be expanded because of the substantial clinical benefits of its highly differentiated immune- modulating mechanism of action and the first-in-class tumor burden- guided dosing, namely because of a significantly improved safety profile with very low rates of severe CRS and ICANS and high, sustained remissions following the single treatment of AUCATZYL[supreg]. The promise of these clinically meaningful results after treatment with AUCATZYL[supreg] are especially important for the older Medicare population, the Hispanic population that faces worse survival outcomes than patients of other ethnicities, and others with overall poor health and high disease burden; today, these populations are either considered ineligible for currently available therapies or are at elevated risk following treatment or consolidation with allogenic hemopoietic stem cell transplant (HSCT). -------------------------------------------------------------------------------------------------------------------------------------------------------- We have the following concerns with regard to the newness criterion. We note that the applicant asserted that AUCATZYL[supreg] does not use the same or similar mechanism of action as existing technologies for R/R B-ALL in adults because AUCATZYL[supreg]'s co- stimulatory and binding domains differ from those of TECARTUS[supreg], which the applicant stated is the only other currently available CD19- directed CAR T-cell immunotherapy for this population. However, we note that in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41285 through 41291), with regard to the CAR T-cell therapies KYMRIAH[supreg] (tisagenlecleucel) and YESCARTA[supreg] (axicabtagene ciloleucel), we stated that although the two technologies were not completely the same in terms of manufacturing processes, co-stimulatory domains, and clinical profiles, these differences did not result in different mechanisms of action, and therefore, inferred that the technologies' mechanisms of action were the same. Similarly, we question whether differences in the co-stimulatory and binding domains for AUCATZYL[supreg] and TECARTUS[supreg] result in the use of a different mechanism of action. In addition, we note that KYMRIAH[supreg] is also a CD19-directed CAR T-cell immunotherapy, and it is indicated for the treatment of patients up to 25 years of age with R/R B-ALL. We believe that the mechanism of action for all three therapies is the binding to CD19 by a CAR construct, which results in T-cell activation and killing of malignant cells in the treatment of B-ALL. Furthermore, while the applicant also stated that AUCATZYL[supreg]'s personalized tumor burden-guided dosing schedule is first in class and differentiates it from other technologies' mechanisms of action, we are unclear how a technology's dosing schedule is relevant to its mechanism of action. Accordingly, as it appears that AUCATZYL[supreg], TECARTUS[supreg], and KYMRIAH[supreg] may use the same or similar mechanism of action to achieve a therapeutic outcome, are assigned to the same MS-DRG, and treat the same or similar patient population and disease, that is, adult patients with R/R B-ALL, we believe that these technologies may be substantially similar to each other. We note that, per our policy, if these technologies are substantially similar to each other, we use the earliest market availability date as the beginning of the newness period for the technologies. Therefore, if AUCATZYL[supreg] is substantially similar to TECARTUS[supreg] and KYMRIAH[supreg], we believe the newness period for this technology would begin on November 22, 2017, the date KYMRIAH[supreg] became commercially available.\20\ In addition, because the 3-year anniversary date of the KYMRIAH[supreg]'s entry onto the U.S. market (November 22, 2020) occurred in FY 2021, AUCATZYL[supreg] would no longer be considered new and would not be eligible for new technology add-on payments for FY 2026. We are interested in information on how these technologies may differ from each other with respect to the substantial similarity criteria and newness criterion. --------------------------------------------------------------------------- \20\ TECARTUS[supreg] received FDA approval on October 1, 2021, for treatment of adult patients with R/R B-ALL. https://www.fda.gov/drugs/resources-information-approved-drugs/fda-approves-brexucabtagene-autoleucel-relapsed-or-refractory-b-cell-precursor-acute-lymphoblastic. --------------------------------------------------------------------------- We are inviting public comment on whether AUCATZYL[supreg] meets the newness criterion, including whether AUCATZYL[supreg] is substantially similar to TECARTUS[supreg] and KYMRIAH[supreg] for purposes of new technology add-on payments. [[Page 18093]] With respect to the cost criterion, the applicant provided two analyses to demonstrate that AUCATZYL[supreg] meets the cost criterion. Each analysis followed the order of operations summarized in the following table. AUCATZYL[supreg] Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes, ICD-10-PCS codes, and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for AUCATZYL[supreg]. Claims identified...................... Scenario 1: 349 claims mapping to 9 MS-DRGs, with 56.16% of claims mapping to MS-DRG 834 (Acute Leukemia with MCC). Scenario 2: 2,013 claims mapping to 74 MS-DRGs, with 20.22% of claims mapping to MS-DRG 838 (Chemotherapy with Acute Leukemia as Secondary Diagnosis with CC or High Dose Chemotherapy Agent). Charges removed for prior technology... Per the applicant, the utilization of AUCATZYL[supreg] would replace chemotherapy charges and other CAR-T therapy utilization. The applicant removed 36.2% and 49.4% of radiology charges for cases in scenario 1 and 2, respectively. Per the applicant, these percentages were derived based on an analysis of the revenue center file from the 100% Inpatient SAF in FY 2023, which represent the share of all radiology charges attributable to chemotherapy, based on percentage of charges classified as chemotherapy observed in the SAF when ALL was a diagnosis. In addition, the applicant identified cases with CAR-T therapies and removed an amount equal to the therapy's wholesale acquisition cost (WAC) inflated by its estimated CAR-T cost-to-charge ratio of 0.2643. Finally, the applicant removed all ``Pharmacy Charges'' for claims with ICD-10-PCS codes of 3E03305 (Introduction of other antineoplastic into peripheral vein, percutaneous approach) and 3E04305 (Introduction of other antineoplastic into central vein, percutaneous approach) for other antineoplastics. The applicant did not remove indirect charges related to the prior technology. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2023 IPPS/LTCH PPS final rule correcting amendment. Inflation factor....................... The applicant applied an inflation factor of 8.406% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new technology... The applicant added charges for the new technology by dividing the estimated cost of the new technology by its estimated average cost-to- charge ratio of 0.2643 for CAR T-cell therapies. The applicant did not add indirect charges related to the new technology. Cost analysis results.................. Average case-weighted threshold amount: $1,554,026. Final inflated average case-weighted standardized charge per case: --Scenario 1: $2,315,730. --Scenario 2: $2,131,832. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in both scenarios, the applicant asserted that AUCATZYL[supreg] meets the cost criterion. We are inviting public comments on whether AUCATZYL[supreg] meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that AUCATZYL[supreg] represents a substantial clinical improvement over existing technologies because the results of the phase IB/II FELIX clinical study demonstrated that the differentiated design of AUCATZYL[supreg] and its first-in-class tumor burden-guided dosing drive substantial short- and long-term clinically meaningful improvements in treatment outcomes of adults with R/R B-ALL, with superior immune-mediated toxicity, thereby, reducing the risk of patients experiencing life-threatening toxicities in need for intensive care. The applicant further asserted that AUCATZYL[supreg], as a stand- alone therapy, may be considered standard of care for adults with R/R B-ALL. The applicant provided 3 published, peer-reviewed studies, six unpublished studies or presentations, and the AUCATZYL[supreg] prescribing information to support these claims, as well as 4 supplementary attachments and 7 background articles about CD19-directed CAR T-cell therapies, B-ALL-associated survival, and risk factors associated with access to B-ALL treatments.\21\ The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for AUCATZYL[supreg] for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \21\ Background articles are not included in the following table but can be accessed via the online posting for the technology. [[Page 18094]] ---------------------------------------------------------------------------------------------------------------- Applicant statements in support Supporting evidence provided by the applicant ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ---------------------------------------------------------------------------------------------------------------- AUCATZYL[supreg] is the first and only autologous Jabbour E, et al. Obecabtagene autoleucel (obe-cel) for CD19 CAR T-cell therapy with a novel, distinct relapsed/refractory adult B-cell acute lymphoblastic immune-modulating mechanism of action and first-in- leukemia (r/r B-ALL): impact of chimeric antigen receptor class tumor burden-guided dosing indicated for T-cell (CAR T) and tumor burden-guided dosing in the treatment of adult r/r B-ALL. FELIX Phase Ib/II study. Abstract. Society of Hematologic Oncology. 2024a. Jabbour E, et al. Obecabtagene Autoleucel (obe-cel, Auto1) in adults with relapsed/refractory B-cell acute lymphoblastic leukemia: overall survival, event-free survival and the potential impact of chimeric antigen receptor T-cell persistency and consolidative stem cell transplantation in the open-label single-arm FELIX phase Ib/II study. Oral presentation; American Society of Clinical Oncology Annual Meeting, 2024b. Roddie C, et al. Oral #222; American Society of Hematology Annual Meeting, 2023a. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ---------------------------------------------------------------------------------------------------------------- Following the single treatment of AUCATZYL[supreg], AUCATZYL prescribing information. www.autolus.com/media/ adult patients with r/r B-ALL experienced high aj4olbsd/aucatzyl-pi-08 nov2024.pdf. response rates, with superior immune-mediated Ghorashian S, et al. Enhanced CAR T cell expansion and toxicity compared to currently available CAR T-cell prolonged persistence in pediatric patients with ALL therapy. treated with a low-affinity CD19 CAR. Nat Med. 2019;25(9):1408-1414. Jabbour, 2024a, op. cit. Jabbour, 2024b, op. cit. Roddie C, et al. Durable responses and low toxicity after fast off-rate CD19 chimeric antigen receptor-T therapy in adults with relapsed or refractory B-cell acute lymphoblastic leukemia. J Clin Oncol. 2021;39(30):3352- 3363. Roddie, 2023a, op. cit. Roddie C, et al. Obecabtagene autoleucel in adults with B- cell acute lymphoblastic leukemia. N Engl J Med 2024a; DOI:10.1056/NEJMoa2406526. Roddie C, et al. Risk factors associated with sub-optimal outcomes following obecabtagene autoleucel (obe-cel) for relapsed/refractory B-cell acute lymphoblastic leukemia (R/R B-ALL): What we have learned from the FELIX trial ASH Annual Meeting. December 2024b. Shah BD, et al. Healthcare resource utilization and costs associated with managing CRS and ICANS in patients with relapsed/refractory adult B-cell acute lymphoblastic leukemia receiving obecabtagene autoleucel (obe-cel). ASH Annual Meeting. December 2024. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. Substantially improved CAR T persistence following Day W, et al. Droplet digital PCR and flow cytometry the single treatment of AUCATZYL[supreg] leads to sensitivity for measuring CAR T-cell kinetics in adult high, durable remission rates, without the need for patients with relapsed/refractory B-cell acute consolidative transplant. lymphoblastic leukemia treated with obecabtagene autoleucel. European Hematology Association Congress. June 2024. Poster. Jabbour, 2024b, op. cit. Jabbour E, et al. Obecabtagene autoleucel (obe-cel) for adult B-cell acute lymphoblastic leukemia (R/R B-ALL): deep molecular remission may predict better outcomes. ASH Annual Meeting. December 2024c. Park JH, et al. Obecabtagene autoleucel (obe-cel) for adults with B-cell acute lymphoblastic leukemia (R/R B- ALL) in the open-label, multi-center, global, single-arm, phase Ib/II FELIX study: the impact of bridging therapies on CAR T-cell expansion and persistence. ASH Annual Meeting. December 2024b. Roddie C, et al. Long-term efficacy and safety of obecabtagene autoleucel (obe-cel) in adult patients with relapsed/refractory B-cell acute lymphoblastic leukemia (r/r B-ALL); pooled analysis of ALLCAR19 and FELIX Phase Ib studies) or other B-cell malignancies (ALLCAR19 extension study). Poster 2114. American Society of Hematology Annual Meeting. 2023b. Roddie, 2024a, op. cit. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. AUCATZYL[supreg] may be an important, definitive Jabbour, 2024b, op. cit. stand-alone treatment for adult r/r B-ALL versus Park JH, et al. Relapsed/refractory B-Cell acute use as a bridging therapy. lymphoblastic leukemia (r/r B-ALL) obecabtagene autholeucel (obe-cel) consolidative allogeneic stem cell transplantation. Poster P-008 presented at Lymphoma, Leukemia and Myeloma Congress (LLM 2024). October 2024a. Roddie, 2023b, op. cit. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- We did not receive any written comments in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for AUCATZYL[supreg]. After review of the information provided by the applicant, we have the following concerns regarding whether AUCATZYL[supreg] meets the substantial clinical improvement criterion. First, we question whether there is any patient population with R/R B-ALL that is unresponsive to or ineligible for any of the currently available treatments for the condition. We note that under this assertion, the applicant stated that AUCATZYL[supreg] is the first and only autologous CD19-directed CAR T- cell therapy with a novel, distinct immune-modulating mechanism of action and first-in-class tumor burden-guided dosing indicated for the treatment of adult R/R B-ALL, which produces clinically advantageous results for these patients over currently available therapies, which the applicant stated is limited to TECARTUS[supreg] as it is the only CAR T-cell therapy approved for patients >=26 years old. However, the comparison of clinical outcomes does not demonstrate that a technology offers a treatment option for patients who have no other options due to being ineligible for or unresponsive to existing therapies, nor does the type of technology or dosing regimen. We note that the applicant provided three abstracts/presentations describing unpublished results from the phase Ib/II FELIX trial of AUCATZYL[supreg] as well as various background studies to support its claim.\22\ The FELIX trial is a multi-center, open-label, single-arm study that evaluates the efficacy and safety of AUCATZYL among R/R B-ALL patients, using complete remission (CR) [[Page 18095]] or complete remission with incomplete count recovery (CRi) per independent response review committee (IRRC) as the primary endpoint. In particular, the Jabbour et al. (2024a, 2024b) abstract and oral presentation provided the percent of patients with prior exposure to various existing treatments, and the Roddie et al. (2023b) presentation reported the subgroup analysis of clinical outcomes by prior treatments. However, none of the documents provided described patients who were unresponsive to or ineligible to receive TECARTUS[supreg]. Further, we note that being the first CAR T-cell therapy for a particular indication relates to mechanism of action and is not relevant to the demonstration of substantial clinical improvement. We also note that there are other treatments available for adult patients with R/R B-ALL such as Blincyto[supreg] (blinatumomab), Besponsa[supreg] (inotuzumab ozogamicin), and allogeneic stem cell transplant (allo-SCT), as well as KYMRIAH[supreg] which is FDA-approved in adults 18-25. Therefore, we are unclear which R/R B-ALL patients eligible for AUCATZYL[supreg] are unresponsive to or ineligible for treatment with any of these existing treatment options. --------------------------------------------------------------------------- \22\ Jabbour (2024a), op. cit.; Jabbour (2024b), op. cit.; Roddie (2023a), op. cit. --------------------------------------------------------------------------- We also question the applicant's assertion that following the single treatment of AUCATZYL[supreg], adult patients with r/r B-ALL experienced high response rates, with superior immune mediated toxicity compared to TECARTUS[supreg]. We note that the applicant provided the published FELIX trial which demonstrated overall remission [Complete Response (CR)/Complete Response with incomplete recovery (CRi)] rate of 77 percent and CR of 55 percent in the efficacy-evaluable pivotal cohort 2A of (n=94) as well as unpublished presentations/abstracts of the trial which included pooled data for all cohorts, different follow up periods, and subgroup analyses. The applicant stated that the response rates for AUCATZYL[supreg] were at least comparable to that reported for TECARTUS[supreg], and provided the phase 2 single-arm, open-label ZUMA-3 trial of TECARTUS[supreg], which demonstrated an overall remission rate and CR of 71 percent and 56 percent, respectively (n=55). The applicant also stated that the response rates seen with AUCATZYL[supreg] were achieved with superior immune-mediated toxicity with low rates of Grade >=3 CRS (2 percent) and/or ICANS (7 percent) compared to TECARTUS[supreg], where Grade >=3 CRS and ICANS have been observed in 24 percent and 25 percent of patients, respectively, in clinical studies and 7 percent and 38 percent, respectively, in real-world studies. However, we question the use of historical controls for comparing the clinical outcomes of AUCATZYL[supreg] and TECARTUS[supreg] without adjustments for the differences between the clinical trials for the two technologies. For example, there were several differences in baseline demographic and clinical attributes between FELIX, the pivotal trials for AUCATZYL[supreg], and ZUMA-3, the pivotal trial for TECARTUS[supreg]. These differences could confound the relationship between the intervention and clinical outcomes and reduce the validity of the results if they are not taken into account in the analysis of the findings. For example, AUCATZYL[supreg] recipients were in general older (median age: FELIX: 47 years; ZUMA-3: 40 years), had a higher percent Philadelphia chromosome positive (FELIX: 33 percent; ZUMA-3: 27 percent), had extramedullary disease at screening (FELIX: 25 percent; ZUMA-3: 11 percent); and had a lower tumor burden (median BM blast percent at screening: FELIX: 25 percent; ZUMA-3: 60 percent). AUCATZYL[supreg] recipients included a higher proportion of those previously treated with inotuzumab ozogamicin \23\ (FELIX: 31 percent; ZUMA-3: 22 percent), or allo-SCT (FELIX: 58 percent; ZUMA-3: 42 percent), but a lower proportion of those previously exposed to blinatumomab (FELIX: 39 percent; ZUMA-3: 45 percent).24 25 We question whether these baseline patient attributes in the trials could have impacted outcomes to the extent that differences between these attributes would impact comparisons in clinical outcomes between AUCATZYL[supreg] and TECARTUS[supreg]. --------------------------------------------------------------------------- \23\ Jabbour (2024b), op. cit. \24\ Jabbour (2024a), op. cit. \25\ Shah (2021), op. cit. --------------------------------------------------------------------------- With regard to the applicant's claim that AUCATZYL[supreg] may be an important, definitive stand-alone treatment for adult r/r B-ALL versus use as a bridging therapy, we note that among the 99 patients in the FELIX study who achieved CR or CRi, 40 (40 percent) experienced ongoing remission with subsequent stem cell transplant (SCT) or other therapy; 18 (18 percent) received subsequent SCT during remission, five (5 percent) started new anti-cancer therapy, and the remaining 36 patients (36 percent) either relapsed or died.\26\ We are unclear why AUCATZYL[supreg] was not a stand-alone treatment for the 23 percent of patients who underwent SCT or anti-cancer therapy subsequently. We are interested in the criteria that were used to determine whether a patient in remission should undergo subsequent SCT or not. Per the applicant, 17 percent of the patients at high risk for immune effector cell-associated hematotoxicity (HT), the most common side effect of CAR T therapy, and 21 percent of those at lower risk for HT proceeded to undergo allogeneic SCT (allo-SCT).\27\ We welcome information about factors besides HT that may also be used to inform decisions about the need for subsequent allo-SCT. --------------------------------------------------------------------------- \26\ Jabbour (2024b), op. cit. \27\ Roddie (2024b), op. cit. --------------------------------------------------------------------------- We are also concerned about potential confounders introduced by pooling the data from two independent trials with different study designs, and how those confounders might impact the validity of the findings related to AUCATZYL[supreg]'s impact on clinical outcomes. According to the applicant, Roddie et al. (2023b) pooled data from the ALLCAR19 (N=20) and FELIX trials (N=16).\28\ Per the applicant, the former was a multicenter, non-randomized open-label Phase 1 study in patients aged 16 years or older with B-cell malignancies, including B- ALL. The latter was a global, open-label, single-arm Phase Ib/II study enrolling patients ages 18 years or older with R/R B-ALL. We are interested in the differences between the ALLCAR19 and FELIX trials in terms of eligibility criteria, patients' prior exposure to B-ALL treatments, co-morbidities, and reasons for attrition. We question whether, and how, differences were accounted for in the analysis of clinical outcomes associated with AUCATZYL[supreg]. --------------------------------------------------------------------------- \28\ Roddie (2023b), op. cit. \29\ National Cancer Institute. Division of Cancer Control & Population Sciences. Surveillance, Epidemiology, and End Results (SEER) Surveillance Research Program (chrome-extension:// efaidnbmnnnibpcajpcglclefindmkaj/https://seer.cancer.gov/about/factsheets/SEER_Overview.pdf, accessed 1/23/2025). \30\ Sasaki K, Jabbour E, and Short NJ et al. Acute lymphoblastic leukemia: A population-based study of outcome in the United States based on the surveillance, epidemiology, and end results (SEER) database, 1980-2017. American Journal of Hematology 2021:96:650. --------------------------------------------------------------------------- Moreover, we are concerned about the availability of evidence on AUCATZYL's effects on the outcomes of the Medicare population of those age 65 years or older. According to a study using National Cancer Institute's Surveillance, Epidemiology, and End Result (SEER) database, which drew its data from population-based cancer registries covering 48 percent of the US population,\29\ between 1980 and 2017, while the majority (57 percent) of B-ALL patients were under the age of 15 years, 13 percent were 60 years of age or older.\30\ We note that the patient sample in Ghorashian et al. (2019) included those age 19 years or younger, [[Page 18096]] and the patient sample in Roddie et al. (2021) were age 16 years or older (median: 41.5 years, range: 17 to 62). We also note that the applicant's substantial clinical improvement claims for AUCATZYL[supreg] are specific to adults (18 years or older) with R/R B- ALL. However, the estimated five-year survival of B-ALL patients decreased from 85 percent for those under the age of 15, to 19 percent for those between the age of 60 and 69 years, and further to six percent for those age 70 years or older.\31\ We welcome evidence about the clinical outcomes of R/R B-ALL patients age 65 years or older who received AUCATZYL[supreg]. --------------------------------------------------------------------------- \31\ Sasaki (2021), op. cit. --------------------------------------------------------------------------- In addition, we are unclear whether the CD19-targeting CAR T therapy discussed in Ghorashian et al. (2019) was identical to AUCATZYL[supreg] or an earlier version of it. We note that Ghorashian et al. (2019) discussed a novel CD19 CAR (CAT-41BBz CAR),\32\ and Roddie et al. (2021) stated that they developed a novel second generation CD19-CAR (CAT19-41BB-Z) with a fast off rate.\33\ We welcome information about how the technology in Ghorashian et al. (2019) compares with AUCATZYL[supreg]. --------------------------------------------------------------------------- \32\ Ghorashian (2019), op. cit. \33\ Roddie (2021), op. cit. --------------------------------------------------------------------------- With regard to the applicant's assertion that AUCATZYL[supreg] represents a substantial clinical improvement because it substantially improves CAR T-cell persistence, we note that this relates to surrogate endpoints rather than clinical outcomes. The applicant provided the Day presentation (2024) which examined the association between CAR T-cell persistence and event-free survival among patients who received AUCATZYL[supreg] at six month post infusion.\34\ However, we note that while the applicant stated persistence of CAR T-cells is associated with improved event-free survival, CAR T-cell persistence is a surrogate measure and does not assess a clinical outcome as described under the regulations at Sec. 412.87(b)(1)(ii)(C). --------------------------------------------------------------------------- \34\ Day (2024), op. cit. --------------------------------------------------------------------------- In addition, we note that the applicant only asserted improved outcomes for AUCATZYL[supreg] over TECARTUS[supreg], and we did not receive any evidence comparing AUCATZYL[supreg] with other currently available treatments for adults with R/R B-ALL such as KYMRIAH[supreg] (approved in adults 18-25), as well as non-CAR T-cell therapies described previously, to demonstrate improved clinical outcomes. We welcome additional information comparing these therapies with AUCATZYL[supreg] in order to demonstrate that it provides a substantial clinical improvement over existing therapies. We are inviting public comments on whether AUCATZYL[supreg] meets the substantial clinical improvement criterion. b. AURLUMYNTM (Iloprost Injection) SERB Pharmaceuticals submitted an application for new technology add-on payments for AURLUMYNTM for FY 2026. According to the applicant, AURLUMYNTM is an intravenous form of iloprost associated with immediate generalized vasodilation, immunomodulation, and anti-inflammation indicated for the treatment of severe frostbite in adults to reduce the risk of digit amputations. Please refer to the online application posting for AURLUMYN\TM\, available at https://mearis.cms.gov/public/publications/ntap/NTP241007QK29V, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, FDA granted NDA approval for AURLUMYN\TM\ on February 13, 2024, for the treatment of severe frostbite in adults to reduce the risk of digit amputations. Per the applicant, the commercial launch of AURLUMYN\TM\ was delayed until the NDA sponsor could secure a capable commercial partner. Per the applicant, it acquired AURLUMYN\TM\ globally on October 18, 2024, and prepared for launch aligned with the beginning of the winter season. The applicant stated that the technology became available for sale on November 12, 2024. We are interested in additional information regarding the cause of any delay in the technology's commercial availability, including additional details about the preparation for launch that aligned with the beginning of the winter season. According to the applicant, AURLUMYN\TM\ is administered as a continuous intravenous (IV) infusion over 6 hours per day, increased in increments up to a maximum dose of 2 ng/kg/minute, for up to a maximum of 8 consecutive days. The applicant expects that AURLUMYN\TM\ will be dosed in the inpatient setting for 8 consecutive days using a total of eight single-use vials (one per day). According to the applicant, there are currently no ICD-10-PCS procedure codes to distinctly identify AURLUMYN\TM\. We note that the applicant submitted a request for a unique ICD-10-PCS procedure code for AURLUMYN\TM\ beginning in FY 2026. The applicant provided a list of diagnosis codes that may be used to currently identify the indication for AURLUMYN\TM\ under the ICD-10-CM coding system. Please refer to the online application posting for the complete list of ICD-10-CM codes provided by the applicant. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that AURLUMYN\TM\ is not substantially similar to other currently available technologies because it is the first-ever FDA- approved treatment for frostbite of any grade and is specifically indicated for the treatment of severe frostbite in adults to reduce the risk of finger or toe amputation, and therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for AURLUMYN\TM\ for the applicant's complete statements in support of its assertion that AURLUMYN\TM\ is not substantially similar to other currently available technologies. [[Page 18097]] -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of No..................... AURLUMYN\TM\ is the only IV form of iloprost available in the U.S. action to achieve a therapeutic outcome? AURLUMYN\TM\ is a stable synthetic analog of PGI2 and is a potent prostacyclin receptor agonist. Upon binding to the prostacyclin receptor, prostacyclin inhibits platelet activation and acts as a vasodilator. AURLUMYN\TM\ is associated with immediate generalized vasodilation, immunodulation, and anti-inflammation. AURLUMYN\TM\ has been associated with reductions in neutrophil adhesion and chemotaxis as well as downregulation of intracellular expression of IL-6 and TNF alpha in human monocytes. In addition, AURLUMYN\TM\ has been shown to enhance fibrinolysis, increase red cell deformability, and reduce white cell adhesion to endothelial cells. AURLUMYN\TM\ has also demonstrated activity with respect to increasing cAMP levels in human platelets via stimulation of adenylate cyclase, with resultant inhibition of platelet aggregation. AURLUMYN\TM\ inhibits arachidonic acid-induced vasoconstriction, which may be explained by its ability to counteract thromboxane. As a result of these properties, AURLUMYN\TM\ may mitigate vasoconstriction and microthrombosis to limit frostbite injury. Previously, access to medical frostbite treatment in the U.S. has been limited to agents not specifically studied or approved for frostbite. AURLUMYN\TM\ is not substantially similar to those agents used in case study and anecdotal reports, including nonsteroidal anti-inflammatory drugs, heparin, antibiotics, dextran, tetanus toxoid, immune globulin, antiplatelet agents, and anticoagulant therapy. AURLYMN\TM\ is also significantly differentiated from VENTAVIS[supreg] (iloprost) inhalation solution approved in 2004, and since discontinued, for the chronic treatment of pulmonary arterial hypertension and intended to be chronically administered. Is the technology assigned to the same MS-DRG as existing No..................... The 2023 MedPAR file contains no patient cases assigned to any MS- technologies? DRG representing frostbite cases treated with an FDA-approved therapy for severe frostbite. AURLUMYN\TM\ is the first-ever FDA- approved treatment for frostbite of any grade. It is expected AURLUMYN\TM\ administration cases will map to MS-DRGs based on the MS-DRG assignment logic for the case-specific diagnosis or procedural codes. Does new use of the technology involve the treatment of No..................... AURLUMYN\TM\ is the first-ever FDA-approved treatment for frostbite the same/similar type of disease and the same/similar of any grade and is specifically approved for the treatment of patient population when compared to an existing severe frostbite in adults to reduce the risk of finger or toe technology? amputation. -------------------------------------------------------------------------------------------------------------------------------------------------------- We note that the applicant asserted that AURLUMYN\TM\ is not assigned to the same MS-DRG as existing technologies. However, as the applicant also stated that AURLUMYN\TM\ will map to MS-DRGs based on diagnosis/procedure codes, we believe that the use of AURLUMYN\TM\ will not change the MS-DRG assignment and will, therefore, map to the same MS-DRGs as other treatments for severe frostbite. In addition, while the applicant asserted that AURLUMYN\TM\ does not treat the same or similar type of disease and the same or similar patient population as existing treatments because it is the first-ever FDA-approved treatment for frostbite, we note that there are other severe frostbite treatments that are commonly used including rapid rewarming, fasciotomy, thrombolysis, and sympathectomy. We are inviting public comments on whether AURLUMYN\TM\ is substantially similar to existing technologies and whether AURLUMYN\TM\ meets the newness criterion. With respect to the cost criterion, the applicant provided multiple analyses to demonstrate that AURLUMYN\TM\ meets the cost criterion. Each analysis followed the order of operations summarized in the following table. AURLUMYN\TM\ Cost Analysis ------------------------------------------------------------------------ ------------------------------------------------------------------------ Inclusion/exclusion criteria. For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for AURLUMYN\TM\. Claims identified............ Scenario 1: 103 claims mapping to nine MS- DRGs, with none of the MS-DRGs exceeding 13.59% of the total identified cases. Scenario 2: 159 claims mapping to 11 MS- DRGs, with 22.64% of claims mapping to MS-DRG 923 (Other Injury, Poisoning and Toxic Effect Diagnoses without CC). Charges removed for prior The applicant stated that no charges were technology. removed for a prior technology as a result of using AURLUMYN\TM\, and that there were no indirect charges related to a prior technology to be removed. Standardized charges......... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2023 IPPS/LTCH PPS final rule correcting amendment. Inflation factor............. The applicant applied an inflation factor of 8.4% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new For both scenarios 1 and 2, the applicant technology. added charges for the new technology by dividing the average cost of the new technology per inpatient stay by the national average cost-to-charge ratio of 0.178 for Drugs and Cellular Therapies from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. [[Page 18098]] Cost analysis results........ Scenario 1: --Average case-weighted threshold amount: $87,166. --Final inflated average case-weighted standardized charge per case: $353,509. Scenario 2: --Average case-weighted threshold amount: $73,762. --Final inflated average case-weighted standardized charge per case: $328,186. ------------------------------------------------------------------------ Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in both scenarios, the applicant asserted that AURLUMYN\TM\ meets the cost criterion. We are inviting public comments on whether AURLUMYN\TM\ meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that AURLUMYN\TM\ represents a substantial clinical improvement over existing technologies because AURLUMYN\TM\ substantially lowers the risk of digit amputation in severe frostbite cases. Additionally, the applicant claimed that, by reducing the risk of finger and toe amputations in adults with severe frostbite, AURLUMYN\TM\ mitigates debilitating, lifelong health-related, functional, and work-related impacts associated with digit amputation. The applicant provided four documents, including two studies and clinical practice guidelines to support these claims, as well as two background articles about a classification system for frostbite severity and the prevention and clinical treatment of frostbite.\35\ The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for AURLUMYN\TM\ for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \35\ Background articles are not included in the following table but can be accessed via the online posting for the technology. ------------------------------------------------------------------------ Supporting evidence provided by the Applicant statements in support applicant ------------------------------------------------------------------------ Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ------------------------------------------------------------------------ AURLUMYN\TM\ is the first-ever Cauchy E, et al. A controlled trial medical treatment for frostbite of a prostacyclin and rt-PA in the approved by the FDA and is treatment of severe frostbite. N specifically approved for Engl J Med 2011;364, 189-190. treatment of severe frostbite to Crooks S, et al. Effectiveness of reduce the risk of digit intravenous prostaglandin to reduce amputations. digital amputations from frostbite: an observational study. Canadian Journal of Emergency Medicine 2022;24, 622-629. McIntosh SE, et al. Wilderness Medical Society Clinical Practice Guidelines for the Prevention and Treatment of Frostbite. 2019 Update. Wilderness & Environmental Medicine 2019;30, S19-S32. McIntosh SE, et al. Wilderness Medical Society Clinical Practice Guidelines for the Prevention and Treatment of Frostbite: 2024 Update. Wilderness & Environmental Medicine 2024;35(2) 183-197. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. ------------------------------------------------------------------------ Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ------------------------------------------------------------------------ AURLUMYN\TM\ reduces the risk of Cauchy, 2011, op. cit. amputation of fingers and toes in Crooks, 2022, op. cit. adults with severe frostbite, McIntosh, 2019, op. cit. mitigating debilitating, lifelong McIntosh, 2024, op. cit. health-related, functional and work-related impacts of digit amputation. ------------------------------------------------------------------------ We did not receive any written comments in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for AURLUMYN\TM\. After review of the information provided by the applicant, we have the following concerns regarding whether AURLUMYN\TM\ meets the substantial clinical improvement criterion. With respect to the claim that AURLUMYN\TM\ offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments, we note that the applicant stated that AURLUMYN\TM\ is the first-ever FDA- approved medical treatment for severe frostbite to reduce the risk of digit amputations, but did not identify a patient group that is unresponsive to, or ineligible for, the standard-of-care treatment, where AURLUMYN\TM\ does offer a treatment option. The applicant provided two published studies that used AURLUMYN\TM\ to support this claim (Cauchy et al., 2011; Crooks et al., 2022). Cauchy et al. (2011), which was published as a letter to the editor, is a single site, open-label trial which randomized 47 healthy patients (aged 18 to 55 years) with severe frostbite after mountain rescue in France to receive either buflomedil, AURLUMYN\TM\, or AURLUMYN\TM\ plus recombinant tPA (rtPA), and assessed treatment efficacy based on bone scan scintigraphy to determine risk of amputation. The second study (Crooks et al., 2022) was a retrospective cohort study consisting of a medical records review in Calgary, Canada, a large city inclusive of an unhoused population. The study excluded patients due to superficial or grade 1 frostbite, resulting in 90 patients [[Page 18099]] with an interquartile age range of 31 to 53 years old. For frostbite treatment, these patients received either AURLUMYN\TM\ or the standard of care, which consisted of the local best practice without AURLUMYN\TM\. While these two studies compared treatment of patients with severe frostbite using AURLUMYN\TM\ to other treatments, neither study described a patient group that is unresponsive to, or ineligible for, existing treatment options where AURLUMYN\TM\ offers treatment. We further note that while the applicant also cited the Wilderness Medical Society Practice Guidelines (McIntosh et al., 2024) which included a strong recommendation for iloprost as the first-line treatment for severe (grades 3 and 4) frostbite less than 48 hours after thawing, and possibly for up to 72 hours post-thawing,\36\ the full statement in the Guidelines is that intravenous iloprost should be considered first-line therapy for grade 3 and 4 frostbite <72 hours after injury, when tPA is contraindicated, and in austere environments where tPA infusion is considered risky or evacuation to a treatment facility will be delayed. Additionally, the guidelines include other recommendations for treatments such as sympathectomy, fasciotomy, and hydrotherapy. Therefore, it appears that there are other treatment options for frostbite other than AURLUMYN\TM\. We would appreciate any additional information regarding which patient population AURLUMYN\TM\ can treat for severe frostbite, for which other existing treatments could not be used. --------------------------------------------------------------------------- \36\ McIntosh, S.E., Freer, L., Grissom, C.K., Rodway, G.W., Giesbrecht, G.G., McDevitt, M., Imray, C.H., Johnson, E.L., Pandey, P., Dow, J., & Hackett, P.H. (2024). Wilderness Medical Society Clinical Practice Guidelines for the Prevention and Treatment of Frostbite: 2024 Update. Wilderness & Environmental Medicine, 35(2). https://doi.org/10.1177/10806032231222359. --------------------------------------------------------------------------- With respect to the claim that AURLUMYN\TM\ significantly improves clinical outcomes relative to services or technologies previously available, the applicant stated that AURLUMYN\TM\ reduces the risk of amputation of fingers and toes in adults with severe frostbite, mitigating debilitating, lifelong health-related, functional, and work- related impacts of digit amputation. To support this claim, the applicant provided the two published studies and Wilderness Medical Society Practice Guidelines previously discussed (Cauchy et al., 2011; Crooks et al., 2022; McIntosh et al., 2024). The Cauchy et al. (2011) study found that the 16 patients treated with AURLUMYN\TM\ without rtPA resulted in no amputations, whereas the risk of amputation was greater in patients treated with buflomedil (60 percent, 9 of 15 patients) and patients treated with AURLUMYN\TM\ plus rtPA (19 percent, 3 of 16 patients). The Crooks et al. (2022) study found that 18 percent of grade 3 frostbite injuries and 46 percent of grade 4 frostbite injuries treated with AURLUMYN\TM\ resulted in digital amputation, compared to the standard of care groups where 44 percent of grade 3 frostbite injuries and 95 percent of grade 4 frostbite injuries resulted in amputations. However, we question whether the composition of the AURLUMYN\TM\ and standard of care treatment groups in these two published studies were sufficiently comparable and, consequently, whether outcomes demonstrated are clinically significant. Specifically, we question the accuracy of severity grading determinations and the resulting randomization process used to group patients in both studies due to the subjective nature of grading frostbite injuries that can evolve over time, and being that the grading of frostbite injuries in Crooks et al. (2022) was conducted using photographs and clinician health descriptions in the local electronic health record. We also note that, in Crooks et al. (2022), no patients in the control group were treated with tPA, despite tPA and heparin being available for severe injuries during the period of treatment with standard frostbite care. The absence of tPA in the control group raises questions about the adequacy of the comparator, given that the Wilderness Medical Society Practice Guidelines recommend tPA for select severe frostbite cases where timely administration is feasible. We also question the extent to which the quality of frostbite care in the control group may have varied, prior to the implementation of the protocol that implemented 5- day iloprost infusion. In addition, while the utility of recommendations in establishing evidence of clinically improved outcomes is limited, we further note that neither study provided direct comparison with therapies that are also strongly recommended by the Wilderness Medical Society, such as fasciotomy and hydrotherapy, or with other therapies that may have limited data availability, such as sympathectomy and hyperbaric oxygen therapy. We also have concerns about the generalizability of the Cauchy et al. (2011) and Crooks et al. (2022) studies to the Medicare population. We note that Cauchy et al. (2011) studied AURLUMYN\TM\ treatment in patients in France, whose mean age was 33.1 years and who had no notable medical or surgical history. As noted in the Crooks et al. (2022) study, which studied patients from a large Canadian city with a substantial unhoused population, the effects may not be as dramatic as results in other studies, owing to the differences in medical and social comorbidities in the study population. Similarly, the Medicare population may have significant differences from the Cauchy et al. (2011) study population, in physical and mental health and social complexities. We also question whether efficacy data from Cauchy et al. (2011) is generalizable to the Medicare population due to the study's location, small patient population, and patients' age. We note that these two published studies assessing AURLUMYN\TM\ were both conducted outside of the U.S and primarily included patients under the age of 55 years (range: 18 to 55 and 29 to 54 years, respectively). As noted in the AURLUMYN\TM\ prescribing information, clinical studies included insufficient numbers of patients aged 65 years and older to determine whether they respond differently than younger subjects.\37\ --------------------------------------------------------------------------- \37\ Eicos Sciences, Inc. Prescribing Information for AURLUMYN\TM\ (iloprost) injection, for intravenous use (revised 5/ 2024), section 8.5 Geriatric Use. Available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2024/217933s000lbl.pdf. --------------------------------------------------------------------------- We are inviting public comments on whether AURLUMYN\TM\ meets the substantial clinical improvement criterion. c. BREYANZI[supreg] (Lisocabtagene Maraleucel) Bristol Myers Squibb submitted an application for new technology add-on payments for BREYANZI[supreg] for FY 2026. According to the applicant, BREYANZI[supreg] is a CD19-directed, autologous CAR T-cell immunotherapy comprised of individually formulated CD8 and CD4 CAR T- cells, and it is indicated for the treatment of adult patients with relapsed/refractory (R/R) chronic lymphocytic leukemia or small lymphocytic lymphoma (CLL/SLL) who have received two or more prior lines of therapy (LOTs), including a Bruton tyrosine kinase inhibitor (BTKi) and a B-cell lymphoma 2 protein inhibitor (BCL2i). We note that BREYANZI[supreg] is also indicated for the treatment of adult patients with R/R large B-cell lymphoma, for which the applicant submitted an application for new technology add-on payments for FY 2021 and FY 2022, as discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44996 through 45008). Please refer to the online application posting for BREYANZI[supreg], available at https://mearis.cms.gov/public/ [[Page 18100]] publications/ntap/NTP24100722KTJ, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, BREYANZI[supreg] was granted accelerated approval for its supplemental Biologics License Application (sBLA) by FDA on March 14, 2024 for the treatment of adult patients with R/R CLL or SLL who have received two or more prior LOTs including a BTKi and a BCL2i.\38\ According to the applicant, BREYANZI[supreg] was commercially available immediately after FDA marketing authorization for the CLL/SLL indication. Per the applicant, for this indication, patients receive a one-time intravenous infusion of BREYANZI[supreg], which contains 90 to 110 x 10\6\ CAR- positive viable T-cells consisting of 1:1 CAR-positive viable T-cells of the CD8 and CD4 components, with each component supplied separately in one or more single-dose vials. --------------------------------------------------------------------------- \38\ Breyanzi. United States Prescribing Information (USPI), (revised 5/2024). According to the applicant, FDA has also approved BREYANZI[supreg] for several other indications, including for the treatment of adults with (1) R/R follicular lymphoma (FL) who have received two or more prior LOT (approved on 5/15/2024); (2) R/R mantle cell lymphoma (MCL) who have received at least two prior LOT, including a BTKi (approved on 5/30/2024); (3) R/R large B-cell lymphoma (LBCL) after two or more LOT, including diffuse large B- cell lymphoma (DLBCL) not otherwise specified (including DLBCL arising from indolent lymphoma), high-grade B-cell lymphoma, primary mediastinal LBCL, and FL grade 3B (approved on 2/5/2021); and (4) LBCL, including DLBCL, not otherwise specified (including DLBCL arising from indolent lymphoma), high-grade B-cell lymphoma, primary mediastinal LBCL, and FL grade 3B, who have either refractory disease to first-line chemoimmunotherapy or relapse within 12 months of first-line chemoimmunotherapy or refractory disease to first-line chemoimmunotherapy or relapse after first-line chemoimmunotherapy and are not eligible for hematopoietic stem cell transplant (HSCT) due to comorbidities or age (approved on 6/24/2022). (https://www.fda.gov/vaccines-blood-biologics/cellular-gene-therapy-products/breyanzi-lisocabtagene-maraleucel, accessed 3/27/2025). --------------------------------------------------------------------------- The applicant stated that, effective October 1, 2021, the following ICD-10-PCS codes could be used to uniquely describe procedures involving the use of BREYANZI[supreg]: XW033N7 (Transfusion of lisocabtagene maraleucel immunotherapy into peripheral vein) or XW043N7 (Transfusion of lisocabtagene maraleucel immunotherapy into central vein). The applicant provided the following list of codes may be used to currently identify the R/R SLL/CLL indication for BREYANZI[supreg] under the ICD-10-CM coding system: ------------------------------------------------------------------------ ICD-10-CM code Description ------------------------------------------------------------------------ C83.00....................... Small cell B-cell lymphoma, unspecified site. C83.01....................... Small cell B-cell lymphoma, lymph nodes of head, face, and neck. C83.02....................... Small cell B-cell lymphoma, intrathoracic lymph nodes. C83.03....................... Small cell B-cell lymphoma, intra- abdominal lymph nodes. C83.04....................... Small cell B-cell lymphoma, lymph nodes of axilla and upper limb. C83.05....................... Small cell B-cell lymphoma, lymph nodes of inguinal region and lower limb. C83.06....................... Small cell B-cell lymphoma, intrapelvic lymph nodes. C83.07....................... Small cell B-cell lymphoma, spleen. C83.08....................... Small cell B-cell lymphoma, lymph nodes of multiple sites. C83.09....................... Small cell B-cell lymphoma, extranodal and solid organ sites. C91.10....................... Chronic lymphocytic leukemia of B-cell type not having achieved remission. C91.12....................... Chronic lymphocytic leukemia of B-cell type in relapse. ------------------------------------------------------------------------ We are inviting public comments on the use of these ICD-10-CM diagnosis codes to identify the indication of R/R SLL or CLL for purposes of the new technology add-on payment, if approved. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that BREYANZI[supreg] is not substantially similar to other currently available technologies because BREYANZI[supreg] does not use the same or similar mechanism of action as other therapies approved for the treatment of R/R CLL/SLL, is not assigned to the same MS-DRG as other therapies currently approved for the treatment of R/R CLL/SLL, and does not involve treatment of the same or similar type of disease and patient population as other CAR T-cell therapies, and that therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for BREYANZI[supreg] for the applicant's complete statements in support of its assertion that BREYANZI[supreg] is not substantially similar to other currently available technologies. [[Page 18101]] -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of No..................... BREYANZI[supreg] is the first CAR T-cell therapy indicated for the action to achieve a therapeutic outcome? treatment of R/R CLL/SLL. This mechanism of action is not similar to any existing technology indicated for the treatment of R/R CLL/ SLL. Existing therapies include BTKis and BCL2is either alone or in combination with CD20 monoclonal antibodies. These classes of therapies are typically sequenced with BTKi as the first line of therapy, then BCL2i as the second line or therapy or vice versa depending on the preference of the patient and treating physician. Patients who experience intolerance to or disease progression after a BTKi and a BCL2i are limited to treatment via recycling of previous agents (unless refractory), chemoimmunotherapy, non- covalent BTKi, or phosphatidylinositol 3-kinase inhibitors (PI3Ki). BTKis, including ibrutinib, acalabrutinib, zanubrutinib, pirtobrutinib, work by inhibiting the B-cell receptor signaling pathway through the Bruton Tyrosine Kinase protein. BCL2is, including venetoclax, work by binding to the BCL2 protein in the mitochondria leading to apoptosis sensitization. Used in combination with CD20 monoclonal antibodies, such as rituximab, obinutuzumab, the two drugs synergize to induce direct induction of apoptosis, antibody-dependent cell-mediated cytotoxicity and complement-dependent lysis. Chemoimmunotherapy works through a variety of mechanisms that disrupt cellular replication leading to cell death. PI3Kis (idelalisb, duvelisib) work through the inhibition of the PI3K signaling pathway which regulates multiple downstream cellular pathways and is often associated with the development of malignancies. In contrast, BREYANZI[supreg] is a CAR T-cell therapy. A CAR is an artificial construct introduced into the DNA of a patient's T cells. The patient's T cells will then transcribe and translate this DNA into a protein, which resides at the surface of the T cell, with the extracellular/ targeting domain on the outside of the cell and the costimulatory and signaling domains, required for T-cell activation, on the inside of the cell. When the targeting domain binds to its target. CD19 in the case of BREYANZI[supreg], a signal is transmitted from the activation and costimulatory domain, that initiates proliferation of the T cell and secrete compounds that direct the immune system to kill the cell that is expressing the target. CAR binding to CD19 expressed in CLL/SLL cells induces activation and proliferation of CAR T cells, release of pro-inflammatory cytokines, and cytotoxic killing of target cells. No other therapy indicated for the treatment of R/R CLL/SLL has this mechanism of action. Is the technology assigned to the same MS-DRG as existing No..................... ICD-10-PCS codes XW033N7 (Transfusion of lisocabtagene maraleucel technologies? immunotherapy into peripheral vein) and XW043N7 (Transfusion of lisocabtagene maraleucel immunotherapy into central vein) are assigned to MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies). No other therapies indicated for the treatment of patients with R/R CLL/SLL are assigned to MS-DRG 018. Thus, BREYANZI[supreg] is anticipated to be the only technology indicated for R/R CLL/SLL assigned to MS-DRG 018. Does new use of the technology involve the treatment of No..................... BREYANZI[supreg] is the first CAR T-cell therapy approved for the the same/similar type of disease and the same/similar treatment of R/R CLL/SLL. Other approved CAR T-cell therapies patient population when compared to an existing treat other myelomas or lymphomas but are not sufficiently technology? analogous to R/R CLL/SLL to be considered the same or a similar disease or patient population, as described below. Because BREYANZI[supreg] is the first CAR T-cell therapy, regardless of target, indicated for the treatment of R/R CLL/SLL, it does not involve treatment of the same or similar type of disease and patient population when compared to existing CAR T-cell therapies. -------------------------------------------------------------------------------------------------------------------------------------------------------- We note that the applicant asserted that because BREYANZI[supreg] is the first CAR T-cell therapy, regardless of target, indicated for the treatment of R/R CLL/SLL, it does not involve treatment of the same or similar type of disease and patient population as existing technologies. However, there are other existing (non-CAR T-cell) treatments for patients with R/R CLL/SLL who have received two or more prior LOTs including a BTKi and a BCL2i, such as noncovalent BTKis, PI3Kis, or allogeneic HSCT, and therefore, we question whether BREYANZI[supreg] treats a different type of disease or patient population than existing technologies. We are inviting public comments on whether BREYANZI[supreg] is substantially similar to existing technologies and whether BREYANZI[supreg] meets the newness criterion. With respect to the cost criterion, the applicant provided an analysis to demonstrate that BREYANZI[supreg] meets the cost criterion. The analysis followed the order of operations summarized in the following table. BREYANZI[supreg] Cost Analysis ------------------------------------------------------------------------ ------------------------------------------------------------------------ Inclusion/exclusion criteria. For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for BREYANZI[supreg]. Claims identified............ 550 claims mapping to 11 MS-DRGs, with 30.00% of claims mapping to MS-DRG 840 (Lymphoma and Non-Acute Leukemia with MCC). [[Page 18102]] Charges removed for prior Per the applicant, it is possible that technology. BREYANZI[supreg] could replace other drug therapies during some patients' inpatient stays. The applicant removed 100% of drug charges from the identified cases, as it is difficult to identify the exact differences in drug regimens BREYANZI[supreg] patients would receive, both before and in conjunction with administration of BREYANZI[supreg]. The applicant stated this removal likely over-estimates charges for drugs that would be replaced by BREYANZI[supreg], as patients may receive some ancillary drug treatments in conjunction with their BREYANZI[supreg] administration. The applicant did not remove indirect charges related to prior therapies. Standardized charges......... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2025 IPPS/LTCH PPS final rule. Inflation factor............. The applicant applied an inflation factor of 12.87% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new The applicant added charges for the new technology. technology by dividing the cost of the new technology by the national average cost-to-charge ratio of 0.178 for Drugs and Cellular Therapies from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. Cost analysis results........ Average case-weighted threshold amount: $1,554,026. Final inflated average case-weighted standardized charge per case: $2,759,094. ------------------------------------------------------------------------ Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in all scenarios, the applicant asserted that BREYANZI[supreg] meets the cost criterion. We are inviting public comments on whether BREYANZI[supreg] meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that BREYANZI[supreg] demonstrates a substantial clinical improvement because R/R CLL/SLL patients who have received a prior BTKi and BCL2i have limited treatment options and outcomes are extremely poor. The applicant also asserted that BREYANZI[supreg] is the first and only CAR T-cell therapy indicated for this population, and in clinical studies, 20 percent of patients treated with BREYANZI[supreg] achieved complete response or remission (CR) and remained in CR through 22.4 months of follow-up. The applicant provided one article and two conference presentations regarding one clinical trial, and the BREYANZI[supreg] package insert to support these claims, as well as 11 background articles about CLL, SLL, and current treatment options.\39\ The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for BREYANZI[supreg] for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \39\ Background articles are not included in the following table but can be accessed via the online posting for the technology. ------------------------------------------------------------------------ Supporting evidence provided by the Applicant statements in support applicant ------------------------------------------------------------------------ Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ------------------------------------------------------------------------ BREYANZI[supreg] is the first and BREYANZI[supreg] (lisocabtagene only CAR T-cell therapy maraleucel) Prescribing specifically approved for the Information. 2024. treatment of R/R CLL and SLL Siddiqi, T., Maloney, D.G., patients who have received a Kenderian, S.S., Brander, D.M., prior covalent BTKi and BCL2i. Dorritie, K., Soumerai, J., Riedell, P.A., Shah, N.N., Nath, R., Fakhri, B., Stephens, D.M., Ma, S., Feldman, T., Solomon, S.R., Schuster, S.J., Perna, S.K., Tuazon, S.A., Ou, S.S., Papp, E., Peiser. L., Chen, Y., & Wierda, W.G. (2023a, August 19). Lisocabtagene maraleucel in chronic lymphocytic leukaemia and small lymphocytic lymphoma (TRANSCEND CLL 004): a multicentre, open-label, single-arm, phase 1-2 study. The Lancet, 402(10402), 641-654. https://doi.org/10.1016/S0140-6736 6736(23)01052-8. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. R/R CLL and SLL patients who The applicant provided background received a prior BTKi and BCL2i information to support this claim, have limited treatment options. which can be accessed via the online posting for the technology. ------------------------------------------------------------------------ Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ------------------------------------------------------------------------ R/R CLL/SLL patients who have The applicant provided background received a prior BTKi and BCL2i information to support this claim, experience poor outcomes on which can be accessed via the existing therapy. online posting for the technology. BREYANZI[supreg] is anticipated to BREYANZI[supreg] (lisocabtagene significantly improve clinical maraleucel) Prescribing outcomes in R/R CLL/SLL patients Information. 2024. who have received prior BTKi and Siddiqi, 2023a, op. cit. BCL2i therapy. Siddiqi T, Maloney DG, Kenderian SS, et al. Lisocabtagene Maraleucel in Relapsed or Refractory Chronic Lymphocytic Leukemia/Small Lymphocytic Lymphoma: 24-Month Median Follow-up of TRANSCEND CLL 004. Abstract presented at: 2023 ASH Annual Meeting; December 9-12, 2023b; San Diego, CA. Siddiqi T, Gauthier J, Kenderian SS, et al. Lisocabtagene Maraleucel (liso-cel) in Patients (pts) with Relapsed or Refractory (R/R) Chronic Lymphocytic Leukemia (CLL)/ Small Lymphocytic Lymphoma (SLL): Updated Follow-up of Transcend CLL 004. Abstract presented at: 2024 ASH Annual Meeting; December 7-10, 2024; San Diego, CA. ------------------------------------------------------------------------ [[Page 18103]] We also received a public comment in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for BREYANZI[supreg], which we are summarizing in this section. Comment: The applicant submitted a public comment in response to questions posed at the Town Hall meeting. With regard to a question asking about the discrepancy in the number of patients in the full efficacy set of the TRANSCEND CLL 004 trial in The Lancet article (Siddiqi et al., 2023a) versus the American Society of Hematology (ASH) conference slides (Siddiqi et al., 2023b), the applicant stated that, in the Siddiqi et al. article (2023a), the conforming status of CAR T- cell product for one patient was unavailable at data cutoff (September 29, 2022); therefore, the product for this patient was considered non- conforming, and the patient was excluded in the efficacy and safety analyses that required the receipt of conforming product. The applicant further explained that after data cutoff, the patient received conforming product, and thus, the ASH conference slides (Siddiqi et al., 2023b) included this patient in its safety and efficacy analyses. With regard to a question asking the applicant to speak to the issue of CR and how the applicant thinks about CR with minimal residual disease (MRD) versus nodal response, the applicant stated that the TRANSCEND CLL 004 study in the Siddiqi et al., article (2023a) assessed participant responses using the 2018 International Workshop on Chronic Lymphocytic Leukemia (iwCLL) criteria, which are the regulatory standard and based on nodal response and hematopoietic recovery and do not include MRD. The applicant further explained that with CLL, patients may have bulky lymph nodes, where with treatment, these patients may see resolution of nodal burden, but it may not resolve to <1.5 cm, which would qualify as a partial response (PR), and not CR per the 2018 iwCLL criteria. The applicant stated that there may be no evidence of residual disease based on blood or bone marrow measures in these patients. With regard to a question inquiring how efficacy (overall response rate (ORR) and progression-free survival (PFS)) with BREYANZI[supreg] compares to other existing therapies (such as Jaypirca[supreg] (pirtobrutinib)), and how the applicant considered treatment-emergent adverse events (TEAEs) for BREYANZI[supreg] versus other treatments for CLL/SLL, the applicant stated that there is limited real-world data using other agents in the post-BTKi and -BCL2i treatment setting. Per the applicant, these limited data suggest poor outcomes, details of which are included in the BREYANZI[supreg] application for new technology add-on payments. The applicant referred to the Siddiqi (2024) presentation slides, which discussed the effects of BREYANZI on the outcomes of all the TRANSCEND CLL 004 subjects (full population) and a subset of those with progression on a previously BTKi and venetoclax failure (referred to as the primary efficacy analysis set, or PEAS, in the rest of this review). According to the applicant, Siddiqi et al. (2024) reported the IRC-assessed CR rate of 20 percent and ORR of 48 percent for the full population treated with BREYANZI[supreg] at DL2, and the IRC-assessed CR of 20 percent and ORR of 44 percent for patients in the PEAS cohort. The applicant also noted that the Siddiqi (2024) presentation slides reported the median PFS (mPFS) of 18 months for the full population and 11.9 months for the PEAS cohort. The applicant stated that of the patients who achieved CR or incomplete count recovery (CRi), the mPFS was not reached (NR) for both the full population and the PEAS population. The applicant noted that this efficacy was a result of a single-dose, one-time infusion of BREYANZI[supreg], rather than a continuous treatment, and that this resulted in favorable long-term outcomes. Regarding toxicities, the applicant stated that cytokine response syndrome (CRS) and neurological adverse events are unique to cellular therapies and were overall well- managed in the TRANSCEND CLL 004 study (Siddiqi et al., 2023a), as previously described. The applicant added that no new safety signals were observed in CLL patients. Per the applicant, other common toxicities with cellular therapy include hematologic toxicities, which are also inherent with other targeted agents and were managed with supportive care. According to the applicant, Jaypirca[supreg] (pirtobrutinib), a non-covalent BTKi, is the other FDA-approved agent for patients with CLL/SLL who have received two or more prior LOTs, including a BTKi and BCL2i. Per the applicant, in the phase I-II Jaypirca[supreg] trial, the IRC-assessed ORR was reported as 70 percent, the CR rate reported as 0 percent, and the mPFS reported as 16.8 months.\40\ According to the applicant, the trial reported any grade adverse events including fatigue (31.5 percent), bleeding (42.6 percent), infections (71.0 percent), and neutropenia (32.5 percent), which are characteristic of this type of targeted agent. --------------------------------------------------------------------------- \40\ Mato, A.R., Woyach, J.A., Brown, J.R., Ghia, P., Patel, K., Eyre, T.A., Munir, T., Lech-Maranda, E., Lamanna, N., Tam, C.S., Shah, N.N., Coombs, C.C., Ujjani, C.S., Fakhri, B., Cheah, C.Y., Patel, M.R., Alencar, A.J., Cohen, J.B., Gerson, J.N., Flinn, I.W., Ma, S., Jagadeesh, D., Rhodes, J.M., Hernandez-Ilizaliturri, F., Zinzani, P.L., Seymour, J.F., Balbas, M., Nair, B., Abada, P., Wang, C., Ruppert, A.S., Wang, D., Tsai, D.E., Wierda, W.G., & Jurczak, W. (2023b, July 6). Pirtobrutinib after a Covalent BTK Inhibitor in Chronic Lymphocytic Leukemia. New England Journal of Medicine, 389(1), 33-44. https://doi.org/10.1056/NEJMoa2300696. --------------------------------------------------------------------------- With regard to a question about the breakdown between rates of CR and CRi in the TRANSCEND CLL 004 study (Siddiqi et al., 2023a), the applicant stated that the study's primary analysis, which had a data cutoff of September 29, 2022, reported that the CR rate was 18.4 percent (in 9 of 49 patients) and that among the nine patients who achieved CR/CRi, eight were in CR and one was in CRi. The applicant also reiterated that patients with R/R CLL/SLL who have failed prior BTKi and BCL2i treatment experience poor outcomes on existing therapy, and BREYANZI[supreg] substantially improved clinical outcomes for these patients. The applicant added that BREYANZI[supreg]'s outcomes were even more significant when considering the established safety profile and the fact that it is a one-time infusion treatment rather than continuous treatment. Response: We thank the applicant for its comments. After review of the information provided by the applicant and the public comment received in response to the New Technology Town Hall meeting, we have the following concerns regarding whether BREYANZI[supreg] meets the substantial clinical improvement criterion. First, we question whether there is a particular subpopulation for which BREYANZI[supreg] offers a treatment option that is unresponsive to or ineligible for other existing therapies. While the applicant asserted that BREYANZI[supreg] is the first and only CAR T-cell therapy for this indication, it also stated that there are other treatment options for this patient population, including non-covalent BTKis, such as Jaypirca[supreg], and PI3Ks, such as COPIKTRA[supreg].\41\ We note that being the first CAR T-cell therapy for a particular indication relates to mechanism of action and is not relevant to the demonstration of substantial clinical improvement. --------------------------------------------------------------------------- \41\ National Comprehensive Cancer Network. (2024, October 1). NCCN Clinical Practice Guidelines in Oncology (NCCN Guidelines[supreg]): Chronic Lymphocytic Leukemia/Small Lymphocytic Lymphoma. https://www.nccn.org/professionals/physician_gls/pdf/cll.pdf. --------------------------------------------------------------------------- [[Page 18104]] Secondly, while the applicant stated that BREYANZI[supreg] is anticipated to significantly improve clinical outcomes in R/R CLL/SLL patients who have received prior BTKi and BCL2i therapy, we have questions regarding the evidence provided in support of this claim. The applicant provided several studies based on the results of the TRANSCEND CLL 004 trial, including one published article (Siddiqi et al., 2023a), two conference presentations (Siddiqi et al., 2023b; Siddiqi et al., 2024), and the BREYANZI[supreg] package insert (2024). We note that the TRANSCEND CLL 004 trial was a single-arm study in which no historical controls were used to compare the effects of BREYANZI[supreg] on clinical outcomes. We also note that the applicant acknowledged the caveats inherent with direct cross-study comparisons due to differences between patient populations, baseline comorbidities, and the number and type of prior treatment regimens that subjects have received. In addition, the applicant stated that no head-to-head studies exist comparing BREYANZI[supreg] in CLL to currently available treatments. At the same time, the applicant asserted that BREYANZI[supreg]'s median time to next therapy was considerably longer than that observed in a real-world study of patients with CLL/SLL after prior treatment with a BTKi and B-cell lymphoma 2 inhibitors (6.6 months [95 percent CI, 3.6-10.a].\42\ Also, the applicant noted that patients with prior BTKi exposure who were venetoclax-na[iuml]ve would have improved outcomes had they received BREYANZI[supreg] earlier, before other early-line treatments.\43\ We are concerned about the validity of comparing the clinical outcomes of BREYANZI[supreg] and existing therapies to the extent those clinical outcomes were results of trials with different designs, and the patients in those studies were selected based on different inclusion/exclusion criteria and may have different baseline clinical characteristics. These differences may have an impact on clinical outcomes that was independent of BREYANZI[supreg] or the comparator treatments. Moreover, we note the differing results between BREYANZI[supreg] and other existing therapies in terms of the clinical outcomes cited by the applicant. For example, as previously described, BREYANZI[supreg] demonstrated a CR rate of 20 percent and ORR of 44 percent for patients in the PEAS cohort. According to the applicant, in a trial in which patients with R/R CLL/ SLL received Jaypirca[supreg], the CR rate and ORR was 0 percent and 70 percent respectively.\44\ Furthermore, according to the applicant, BREYANZI[supreg] resulted in PFS of 11.9 months for patients in the PEAS cohort in the TRASNCEND CLL 004 trial. However, we note that in the trial in which patients with R/R CLL/SLL received Jaypirca[supreg], the PFS was 16.8 months.\45\ We question how these mixed findings support the claim that BREYANZI[supreg] represents a substantial clinical improvement, given the higher values with respect to the existing therapies for particular outcome results. --------------------------------------------------------------------------- \42\ Siddiqi (2023b), op.cit. \43\ Siddiqi (2024), op.cit. \44\ Mato (2023b), op.cit. \45\ Mato (2023b), op.cit. --------------------------------------------------------------------------- In addition, with respect to the applicant's claims that R/R CLL/ SLL patients who received prior BTKi and BCL2i therapies have limited treatment options, and that patients with R/R CLL/SLL have poor outcomes on existing therapy, we question whether these claims support that BREYANZI[supreg] improves clinical outcomes for this patient population. We are inviting public comments on whether BREYANZI[supreg] meets the substantial clinical improvement criterion. d. COBENFYTM (Xanomeline and Trospium Chloride) Bristol Myers Squibb submitted an application for new technology add-on payments for COBENFYTM for FY 2026. According to the applicant, COBENFYTM is an oral combination drug consisting of xanomeline, a muscarinic agonist, and trospium chloride, a muscarinic antagonist, that is indicated for the treatment of schizophrenia in adults. Please refer to the online application posting for COBENFYTM, available at https://mearis.cms.gov/public/publications/ntap/NTP241007U99FM, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, COBENFYTM was granted NDA approval from FDA on September 26, 2024, for the treatment of schizophrenia in adults. The applicant stated that COBENFYTM became commercially available on October 9, 2024, and stated the delay in availability was due to a ramp-up period associated with distribution. We are interested in additional information regarding the cause of any delay in the technology's commercial availability, such as additional information about the ramp-up period for distribution. COBENFYTM has 3 approved dose strengths (50 mg/20 mg, 100 mg/20 mg, and 125 mg/30 mg) in capsule form. The recommended starting dosage is one 50 mg/20 mg capsule orally twice daily for at least 2 days. The dosage is increased to one 100 mg/20 mg capsule orally twice daily for at least 5 days and may be increased thereafter to one 125 mg/30 mg capsule orally twice daily based on patient tolerability and response. The applicant stated the per day treatment cost is the same across all dosages and the average length of stay for patients taking COBENFYTM is 7.5 days. According to the applicant, there are currently no ICD-10-PCS procedure codes to distinctly identify COBENFYTM. We note that the applicant submitted a request for approval for a unique ICD- 10-PCS procedure code for COBENFYTM beginning in FY 2026. The applicant provided the following list of diagnosis codes that may be used to currently identify the indication for COBENFYTM under the ICD-10-CM coding system: F20.0 (Paranoid schizophrenia), F20.1 (Disorganized schizophrenia), F20.3 (Undifferentiated schizophrenia), F20.89 (Other schizophrenia), F20.9 (Schizophrenia, unspecified), F25.0 (Schizoaffective disorder, bipolar type), F25.1 (Schizoaffective disorder, depressive type), F25.8 (Other schizoaffective disorders), and F25.9 (Schizoaffective disorder, unspecified). As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that COBENFYTM is not substantially similar to other currently available technologies because it is the first treatment for schizophrenia to target muscarinic receptors instead of dopamine. Per the applicant, COBENFYTM combines xanomeline, a muscarinic agonist, and trospium chloride, a muscarinic antagonist, which work together to stimulate muscarinic receptors in the brain while minimizing peripheral side effects; and its efficacy, safety, and tolerability have been established in acute and long-term trials providing a new option for patients; and therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for COBENFYTM for the applicant's complete statements in support of its assertion that COBENFYTM is not [[Page 18105]] substantially similar to other currently available technologies. -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of No..................... COBENFY\TM\ targets muscarinic receptors as opposed to dopamine action to achieve a therapeutic outcome? receptors, which has long been the standard of care. This novel mechanism marks a significant breakthrough in schizophrenia treatment. COBENFY\TM\ is a combination of xanomeline, a muscarinic agonist, and trospium chloride, a muscarinic antagonist, indicated for the treatment of schizophrenia in adults. Per the FDA label, the efficacy of COBENFY\TM\ is thought to be due to xanomeline's agonist activity at M1 and M4 muscarinic acetylcholine receptors in the central nervous system. Meanwhile, trospium chloride antagonizes the muscarinic receptors primarily in the peripheral tissues and does not measurably cross the blood brain barrier. In contrast, typical and atypical antipsychotics antagonize the dopamine receptors as pure antagonists or partial agonists and antagonists. With its unique mechanism of action, COBENFY\TM\ represents the first treatment in a distinct class of drugs for schizophrenia. Is the technology assigned to the same MS-DRG as existing Yes.................... The use of COBENFY\TM\ should not impact the MS-DRG assignment and technologies? COBENFY\TM\ should be assigned to the same MS-DRG as existing products. Does new use of the technology involve the treatment of Yes.................... While COBENFY\TM\ treats the same condition, schizophrenia in the same/similar type of disease and the same/similar adults, as other available technologies, COBENFY\TM\ stands apart patient population when compared to an existing due to the distinct patient population that could benefit from it. technology? While the current standard of care can be effective in managing symptoms of schizophrenia, studies have shown that approximately 40% of people with schizophrenia do not respond to therapy, and up to 60% experience a partial or inadequate improvement or intolerable side effects during therapy. Side effects from existing antipsychotics can include sedation, vision impairments, seizures, neuroleptic malignant syndrome, and motor disturbances, such as tremors and rigidity. Similarly, atypical antipsychotics are associated with significant weight gain, hyperlipidemia, insulin resistance/diabetes, heart-rate corrected QT interval (QTc) prolongation, extrapyramidal symptoms, tardive dyskinesia, and sexual dysfunction due to prolactin elevation. Breaking this cycle of trial and error is critical and highlights the urgent need for new treatment options. COBENFY\TM\'s unique mechanism of action and clinical profile provide a new therapeutic option for patients, many of whom have not responded to prior treatments. Its efficacy, safety, and tolerability have been demonstrated across both acute and long-term studies. In all placebo-controlled clinical trials, COBENFY\TM\ demonstrated statistically significant reductions in schizophrenia symptoms compared to placebo as measured by the Positive and Negative Syndrome Scale (PANSS) total score, the primary endpoint in the trial. While common adverse reactions of COBENFY\TM\ included nausea and dyspepsia, more severe gastrointestinal issues were rare. Additionally, COBENFY\TM\ does not have atypical antipsychotic class warnings and precautions and does not have a boxed warning. COBENFY\TM\'s favorable side effect profile, coupled with its efficacy, positions it as a valuable alternative for patients, including those who are unable or unwilling to take typical or atypical antipsychotics due to adverse events. -------------------------------------------------------------------------------------------------------------------------------------------------------- We are inviting public comments on whether COBENFYTM is substantially similar to existing technologies and whether COBENFYTM meets the newness criterion. With respect to the cost criterion, the applicant provided an analysis to demonstrate that COBENFYTM meets the cost criterion. The analysis followed the order of operations summarized in the following table. COBENFY\TM\ Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for COBENFY\TM\. Claims identified...................... 24,817 claims mapping to 9 MS-DRGs, with 93.45% of claims mapping to MS- DRG 885 (Psychoses). Charges removed for prior technology... The applicant did not remove direct or indirect charges related to the prior technology. Per the applicant, patients admitted to the hospital for schizophrenia treatment need to be stabilized. The applicant anticipated that patients will continue to receive their traditional treatments to maintain consistent care and that COBENFY\TM\ will be an additive treatment during a switching period where prescribers transition from traditional treatments to COBENFY\TM\ as a monotherapy. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2025 IPPS/LTCH PPS final rule. Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new technology... The applicant added charges for the new technology by dividing the average cost of the new technology per inpatient stay (treatment cost per day multiplied by an average 7.5 days per inpatient stay) by the national average cost-to-charge ratio of 0.178 for Drugs and Cellular Therapies from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. [[Page 18106]] Cost analysis results.................. Average case-weighted threshold amount: $43,788. Final inflated average case-weighted standardized charge per case: $44,511. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant asserted that COBENFYTM meets the cost criterion. We are inviting public comments on whether COBENFYTM meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that COBENFYTM represents a substantial clinical improvement over existing technologies because it is a first- in-class muscarinic agonist offering a new approach to treating schizophrenia by selectively targeting muscarinic receptors in the brain without targeting dopamine. The applicant further asserted that COBENFYTM has the potential to improve outcomes by addressing both positive and negative symptoms, which current drugs often inadequately manage, and that its unique mechanism reduces the risk of dopamine-related side effects, such as tardive dyskinesia (TD). The applicant stated that for these reasons, COBENFYTM offers a treatment option for adult patients with schizophrenia who are unresponsive to, or ineligible for, currently available treatments and significantly improves clinical outcomes relative to existing treatments. The applicant provided six articles regarding five studies to support these claims. We also note that two additional articles (Cornett et al., 2017 and Lieberman et al., 2005) \46\ submitted as supporting evidence would more appropriately be characterized as background articles because they do not directly assess the use of COBENFYTM.47 48 Instead, Cornett, et al. (2017) is a literature review of medication-induced TD, and Lieberman, et al. (2005) is a study reviewing the efficacy and side effect profile of other antipsychotic drugs in chronic schizophrenia. The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for COBENFYTM for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \46\ Background articles are not included in the following table but can be accessed via the online posting for the technology. \47\ Cornett, E.M., Novitch, M., Kaye, A.D., Kata, V., Kaye, A.M. Medication-Induced Tardive Dyskinesia: A Review and Update. Ochsner J. 2017 Summer;17(2):162-174. PMID: 28638290; PMCID: PMC5472076. \48\ Lieberman, J.A., Stroup, T.S., McEvoy, J.P., Swartz, M.S., Rosenheck, R.A., Perkins, D.O., . . . & Hsiao, J.K. (2005). Effectiveness of antipsychotic drugs in patients with chronic schizophrenia. The New England Journal of Medicine, 353(12), 1209- 1223. https://doi.org/10.1056/NEJMoa051688. ---------------------------------------------------------------------------------------------------------------- Applicant statements in support Supporting evidence provided by the applicant ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ---------------------------------------------------------------------------------------------------------------- COBENFY\TM\'s proven efficacy and side Amy Claxton, George Konis, Inder Kaul, Andrew C. Miller, Steven M. effect profile make it a valuable Paul, Stephen K. Brannan, Ronald Marcus (2024). Long-Term Metabolic option for patients who respond Outcomes Associated With KarXT (Xanomeline and Trospium): Interim inadequately to current treatments. Results From Pooled, Long-Term Safety Studies EMERGENT-4 and EMERGENT- 5. Presentation at the 2024 Annual Conference of the Schizophrenia International Research Society (SIRS), April 3-7, 2024, Florence, Italy. Kaul I, Sawchak S, Correll CU, Kakar R, Breier A, Zhu H, Miller AC, Paul SM, Brannan SK. Efficacy and safety of the muscarinic receptor agonist KarXT (xanomeline-trospium) in schizophrenia (EMERGENT-2) in the USA: results from a randomised, double-blind, placebo-controlled, flexible-dose phase 3 trial. Lancet. 2024a Jan 13;403(10422):160-170. doi: 10.1016/S0140-6736(23)02190-6. Epub 2023 Dec 14. Erratum in: Lancet. 2024a Jun 1;403(10442):2380. doi: 10.1016/S0140-6736(24)01041- 9. PMID: 38104575. Kaul I, Sawchak S, Walling DP, Tamminga CA, Breier A, Zhu H, Miller AC, Paul SM, Brannan SK. Efficacy and Safety of Xanomeline-Trospium Chloride in Schizophrenia: A Randomized Clinical Trial. JAMA Psychiatry. 2024b Aug 1;81(8):749-756. doi: 10.1001/ jamapsychiatry.2024.0785. Erratum in: JAMA Psychiatry. 2024 Aug 1;81(8):846. doi: 10.1001/jamapsychiatry.2024.2002. PMID: 38691387; PMCID: PMC11063924. COBENFY\TM\, due to its distinctive Brannan SK, Sawchak S, Miller AC, Lieberman JA, Paul SM, Breier A. mechanism of action, may be an Muscarinic Cholinergic Receptor Agonist and Peripheral Antagonist for effective treatment option for Schizophrenia. N Engl J Med. 2021 Feb 25;384(8):717-726. doi: 10.1056/ patients experiencing disruptive NEJMoa2017015. PMID: 33626254; PMCID: PMC7610870. negative symptoms. Kaul, 2024a, op. cit. Kaul, 2024b, op. cit. Weiden PJ, Breier A, Kavanagh S, et al. Antipsychotic efficacy of xanomeline-trospium: post hoc analysis of Positive and Negative Syndrome Scale categorical response rates, time course of response, and symptom domains of response in a phase 2 study. J Clin Psychiatry. 2022;83(3):21m14316. ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ---------------------------------------------------------------------------------------------------------------- COBENFY\TM\ improves clinical outcomes Scott Vuocolo, William P. Horan, Amy Claxton, Steven D. Targum, Inder by demonstrating a long-term reduction Kaul, Sharon Sawchak, Andrew C. Miller, Steven M. Paul, Stephen K. in positive and negative symptoms of Brannan. (2024, May). Efficacy of KarXT on Negative Symptoms in Acute schizophrenia and a persistently well- Schizophrenia: An Analysis of Pooled Data From 3 Trials. In Annual tolerated side-effect profile after a Meeting of the World Congress Collegium Internationale Neuro- year. Psychopharmacologicum (CINP). [[Page 18107]] COBENFY\TM\ offers a side-effect Kaul, 2024a, op. cit. profile that addresses a significant Kaul, 2024b, op. cit. gap in antipsychotic treatment and has the potential to enhance outcomes by improving tolerability and expanding treatment options. COBENFY\TM\ has the potential to Brannan, 2021, op. cit. improve clinical outcomes due to its Kaul, 2024a, op. cit. demonstrated efficacy in addressing Kaul, 2024b, op. cit. both negative and positive symptoms of Weiden, 2022, op. cit. schizophrenia. COBENFY\TM\ demonstrates statistically Brannan, 2021, op. cit. significant and clinically meaningful Kaul, 2024b, op. cit. reductions in the severity of illness, as measured by the Clinical Global Impressions-Severity scale (CGI-S), compared to placebo. ---------------------------------------------------------------------------------------------------------------- We also received a public comment in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for COBENFYTM, which we are summarizing in this section. Comment: The applicant submitted a public comment in response to questions posed at the Town Hall meeting and provided additional information. With regard to a question asking whether there was a statistically significant degree of long-term improvement for patients treated with COBENFYTM compared to placebo, the applicant referenced EMERGENT-4, a 52-week phase III outpatient, open-label extension clinical trial included with its application. The applicant stated that participants in this trial previously completed the treatment period of either the EMERGENT-2 or EMERGENT-3 trial, two 5-week, double-blind, placebo-controlled, phase III inpatient clinical trials and regardless of which treatment patients received in the EMERGENT-2 or EMERGENT-3 trial, all patients received COBENFYTM after week 5 during the open-label extension period (EMERGENT-4). The applicant noted that the EMERGENT-4 trial found that long-term treatment with COBENFYTM was associated with improvements in schizophrenia symptoms, regardless of participants' initial group during EMERGENT-2 and EMERGENT-3, and improvements were maintained throughout the study period. The applicant stated that, therefore, it expected no differences in symptom reduction between the two groups during the EMERGENT-4 study period. The applicant stated that the publication manuscript is currently in development with planned submission to a clinical journal in early 2025. With regard to a request for clarification as to the source of effect size data referenced during the Town Hall meeting, the applicant stated there are two large meta-analyses that report effect size ranges for first-generation (typical) and second-generation (atypical) antipsychotics, and that in these analyses, the effect size of commonly used antipsychotics in the U.S. ranges from 0.3 to 0.56.49 50 We note that effect size in these studies refer to treatments' mean differences, standardized mean differences, or risk ratios with 95 percent CIs in comparison to placebo. --------------------------------------------------------------------------- \49\ Leucht, S., Cipriani, A., Spineli, L., Mavridis, D., [Ouml]rey, D., Richter, F., Samara, M., Barbui, C., Engel, R.R., Geddes, J.R., Kissling, W., Stapf, M.P., L[auml]ssig, B., Salanti, G., & Davis, J.M. (2013). Comparative efficacy and tolerability of 15 antipsychotic drugs in schizophrenia: a multiple-treatments meta- analysis. The Lancet, 382(9896), 951-962. https://doi.org/10.1016/s0140-6736(13)60733-3. \50\ Huhn, M., Nikolakopoulou, A., Schneider-Thoma, J., Krause, M., Samara, M., Peter, N., Arndt, T., B[auml]ckers, L., Rothe, P., Cipriani, A., Davis, J., Salanti, G., & Leucht, S. (2019). Comparative Efficacy and Tolerability of 32 Oral Antipsychotics for the Acute Treatment of Adults with multi-episode schizophrenia: a Systematic Review and Network meta-analysis. The Lancet, 394(10202). https://doi.org/10.1016/s0140-(19)31135-3. --------------------------------------------------------------------------- With regard to a question asking for additional information as to the clinical significance of a 1.0-point improvement in PANSS negative subscale, the applicant stated it is generally accepted that a mean reduction of 15 points or greater from baseline on the PANSS total score, which evaluates positive and negative symptoms of schizophrenia, is considered clinically meaningful. The applicant also stated that across EMERGENT-1, EMERGENT-2, and EMERGENT-3 clinical trials, patients treated with COBENFYTM demonstrated statistically significant improvements in symptoms compared to placebo, with a mean PANSS total score reduction of >=15 points from baseline. Further, the applicant stated that all three trials evaluated the change in PANSS negative score from baseline as a secondary efficacy endpoint, and while there is less consensus regarding a clinically meaningful threshold for the PANSS negative subscale score, COBENFYTM demonstrated statistically significant PANSS negative subscale score reductions compared to placebo in the EMERGENT-1 and EMERGENT-2 clinical trials, with a least squares mean difference of -2.3 (p<0.001) and -1.8 (p=0.0055), respectively. The applicant noted that none of the three studies enrolled a patient population enriched for negative symptoms, and currently, there are no FDA-approved medications for the specific treatment of negative schizophrenia symptoms. With regard to an inquiry for additional information on long-term medication adherence in adult patients treated with COBENFYTM compared to other schizophrenia treatments, the applicant stated that it will initiate a real-world, prospective, patient registry study to understand COBENFYTM usage patterns and COBENFYTM's potential impacts among U.S. adults with schizophrenia. Response: We thank the applicant for its comments. After review of the information provided by the applicant and the public comment received in response to the New Technology Town Hall meeting, we have the following concerns regarding whether COBENFYTM meets the substantial clinical improvement criterion. We note that the applicant did not identify a patient population for which [[Page 18108]] COBENFYTM could be used that is unresponsive to or ineligible for other available treatments. The applicant asserted that COBENFYTM's efficacy and side effect profile make it a valuable option for patients who respond inadequately to current treatments and that COBENFYTM may be an effective treatment option for patients experiencing disruptive negative symptoms. To support these assertions, we note that the applicant provided data on COBENFYTM from three 5-week, randomized, double-blind trials (EMERGENT-1, EMERGENT-2, and EMERGENT-3) that compared COBENFYTM to placebo and from two unpublished 52-week open- label trials (EMERGENT-4 and EMERGENT-5). While the exclusion criteria are unknown for EMERGENT-5, we note that the other trials excluded patients with a history of treatment resistance to schizophrenia medications, and we therefore question how the trials demonstrate that COBENFYTM can treat patients unresponsive to other therapies. In addition, we did not receive data indicating that other antipsychotics cannot manage negative symptoms. We also note that if a patient experiences a side effect on one antipsychotic, they may not experience the same side effect on another antipsychotic. Similarly, if one antipsychotic does not work for a patient, it does not necessarily mean another typical or atypical antipsychotic would not work for that patient. Therefore, we question if COBENFYTM is the only treatment option for patients with inadequate response to current treatments or for those experiencing negative symptoms. The applicant also asserted that COBENFYTM significantly improves outcomes relative to previously available therapies. To support this assertion, the applicant provided data from three 5-week clinical trials (EMERGENT-1, EMERGENT-2, and EMERGENT-3) that compared COBENFYTM to placebo and a literature review on TD (Cornett et al., 2017). However, COBENFYTM was compared to placebo in these trials, and data was not provided comparing COBENFYTM to currently available therapies. We note that, per the applicant, there are more than 20 FDA-approved therapies for schizophrenia, and we are interested in additional information comparing clinical outcomes with COBENFYTM to these therapies, such as with regard to reduction in symptoms of schizophrenia and/or side effects, improved medication adherence, or other outcomes described under the regulations at Sec. 412.87(b)(1)(ii)(C), to inform an assessment of whether COBENFYTM provides a substantial clinical improvement over existing treatment options. In addition, with respect to the claim that COBENFYTM offers a side-effect profile that has the potential to enhance outcomes by improving tolerability and expanding treatment options, the applicant stated that the provided literature review on TD (Cornett et al., 2017) supports the theory that blockade of dopamine receptors by dopamine antagonists contributes to the development of TD, which COBENFYTM does not affect. We note that the study stated that typical antipsychotics are the most likely to cause TD while atypical antipsychotics may be associated with a decreased prevalence of TD, and we, therefore, are unclear if the applicant is stating that COBENFYTM may reduce the prevalence of TD only compared to typical antipsychotics. We also note that this literature review only discussed TD, which is one potential side effect of some schizophrenia treatments, and no other provided evidence related to rates of other potential side effects seen with existing schizophrenia treatment options such as cardiac arrhythmias, metabolic syndrome, and tremor were compared to the rates for COBENFYTM. We would appreciate further information comparing the overall benefit-risk profile of COBENFYTM to previously available antipsychotics in order to assess if COBENFYTM provides a substantial clinical improvement over other available therapies. We also note that the applicant stated that the EMERGENT trials demonstrated that COBENFYTM is well-tolerated and that measures of extrapyramidal symptoms, weight gain, and somnolence were similar between groups. However, given that the trials were only 5 weeks in duration and some side effects, such as tardive dyskinesia, can take longer to occur, we question whether these rates of adverse events may increase over time. For these reasons, we question the assertion that COBENFYTM improves tolerability and side-effects relative to previously available therapies. The applicant claimed that COBENFYTM demonstrates statistically significant and clinically meaningful reductions in the severity of illness compared to placebo, as measured by the Clinical Global Impression-Severity (CGI-S) scale. According to the applicant, the CGI-S is a global assessment tool used to rate the overall severity of a patient's illness, and rather than being specific to positive, negative, or cognitive symptoms, it instead gives an overall sense of how severe schizophrenia is perceived to be at a given time. However, we question long-term efficacy, given that the only data submitted for this claim was from two 5-week trials (EMERGENT-1 and EMERGENT-3). We are inviting public comments on whether COBENFYTM meets the substantial clinical improvement criterion. e. DuraGraft[supreg] (Vascular Conduit Solution) Marizyme, Inc. submitted an application for new technology add-on payments for DuraGraft[supreg] for FY 2026. Per the applicant, DuraGraft[supreg] is a first-in-class product used during coronary artery bypass grafting surgery (CABG) in adult patients to protect the vascular endothelia of harvested vascular grafts during the ischemic graft storage interval. As noted in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26795), Somahlution, Inc., acquired by Marizyme, Inc. in 2020, submitted and withdrew applications for new technology add-on payments for DuraGraft[supreg] for FY 2018 and FY 2019. The applicant also submitted an application for new technology add-on payments for FY 2020 and FY 2024, as summarized in the FY 2020 and FY 2024 IPPS/LTCH PPS proposed rules (84 FR 19305 through 19312, 88 FR 26795 through 26803), that it withdrew prior to the issuance of the FY 2020 and FY 2024 IPPS/LTCH PPS final rules (84 FR 42194, 88 FR 58804), respectively. The applicant also submitted an application for new technology add-on payments for FY 2025, but its application was not approved in the FY 2025 IPPS/LTCH PPS final rule because we were unable to determine that DuraGraft[supreg] represents a substantial clinical improvement over existing therapies (89 FR 69149). Please refer to the online application posting for DuraGraft[supreg] available at https://mearis.cms.gov/public/publications/ntap/NTP241007PUDEH, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, DuraGraft[supreg] was granted De Novo classification from FDA on October 4, 2023, as a solution indicated for adult patients undergoing CABG and is intended for flushing and storage of the saphenous vein grafts from harvesting through grafting for up to 4 hours. The applicant also stated that it received clearance from FDA for a labeled storage temperature change from refrigerated to controlled room temperature for DuraGraft[supreg] through a Special 510(k) in May 2024 so that it [[Page 18109]] could be stored in the OR. The applicant stated that it chose to launch the DuraGraft[supreg] product upon this label change, and that DuraGraft[supreg] will become commercially available on March 31, 2025. The applicant stated the refrigerated product was not placed on the US market, nor will it be, as only the controlled room temperature DuraGraft[supreg] product will be placed on the market. The applicant further explained that manufacturing with the updated labels could not begin until new labels were allowed by FDA, ordered from suppliers, and accepted into the Contract Manufacturing Organization Quality Management System (CMO QMS), which, per the applicant, is a process that takes 3 to 4 months. We would appreciate additional information regarding the cause for any delay in the technology's commercial availability. The applicant stated that, effective October 1, 2017, the following ICD-10-PCS code may be used to uniquely describe procedures involving the use of DuraGraft[supreg]: XY0VX83 (Extracorporeal introduction of endothelial damage inhibitor to vein graft, new technology group 3). The applicant provided a list of diagnosis codes that may be used to currently identify the indication for DuraGraft[supreg] under the ICD- 10-CM coding system. Please refer to the online application posting for the complete list of ICD-10-CM codes provided by the applicant. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that DuraGraft[supreg] is not substantially similar to other currently available technologies because DuraGraft[supreg] is a first- in-class product for use in adult patients undergoing CABG surgery and received FDA marketing authorization via a De Novo pathway. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for DuraGraft[supreg] for the applicant's complete statements in support of its assertion that DuraGraft[supreg] is not substantially similar to other currently available technologies. ---------------------------------------------------------------------------------------------------------------- Applicant Substantial similarity criteria response Applicant assertions regarding this criterion ---------------------------------------------------------------------------------------------------------------- Does the technology use the No.............. DuraGraft[supreg] is a first-in-class product and there is no same or similar mechanism of product that is similar with similar mechanism of action. action to achieve a Also, the response to FY2025 NTAP application concurred that therapeutic outcome? DuraGraft met the Newness Criterion and since then there are still no other technologies or products that have been introduced into the market that are similar or with similar mechanism of action. Is the technology assigned to Yes............. MS-DRGs used during CABG surgery are aligned to the same MS- the same MS-DRG as existing DRGs for which DuraGraft[supreg] is indicated. technologies? Does new use of the technology Yes............. DuraGraft[supreg] is used in the CABG patient population; involve the treatment of the however, there are no existing products with the same same/similar type of disease indication as DuraGraft[supreg] nor are there existing and the same/similar patient products similar to DuraGraft[supreg] used during CABG population when compared to an surgery. existing technology? ---------------------------------------------------------------------------------------------------------------- We note that in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69142 through 69143), we agreed that DuraGraft[supreg] has a unique mechanism of action compared to other vein graft storage solutions because it creates a reducing environment for vascular grafts to prevent oxidative damage which occurs during ischemic storage of grafts. We are inviting public comments on whether DuraGraft[supreg] is substantially similar to existing technologies and whether DuraGraft[supreg] meets the newness criterion. With respect to the cost criterion, the applicant provided an analysis to demonstrate that DuraGraft[supreg] meets the cost criterion. The analysis followed the order of operations summarized in the following table. DuraGraft[supreg] Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes, ICD-10-PCS codes, and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for DuraGraft[supreg]. Claims identified...................... 32,602 claims mapping to 65 MS-DRGs, with none exceeding more than 22.69% of the total identified cases. Charges removed for prior technology... The applicant removed 100% of blood charges and 25% of the charges associated with medical/surgical supplies for each case. The applicant did not remove indirect charges related to the prior technology. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2023 IPPS/LTCH PPS final rule correcting amendment. Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new technology... The applicant added charges for the new technology by dividing the cost of DuraGraft[supreg] by the national average cost-to-charge ratio of 0.297 for Supplies & Equipment from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. Cost analysis results.................. Average case-weighted threshold amount: $245,963. Final inflated average case-weighted standardized charge per case: $312,912. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant asserted that DuraGraft[supreg] meets the cost criterion. We are inviting public comments on whether DuraGraft[supreg] meets the cost criterion. [[Page 18110]] With regard to the substantial clinical improvement criterion, the applicant asserted that DuraGraft[supreg] represents a substantial clinical improvement over existing technologies because DuraGraft[supreg] significantly improves clinical outcomes including reducing long-term adverse events and mortality, improving myocardial protection and event-free survival, and reducing vein graft wall thickness compared to other intraoperative vein-graft preservation solutions. The applicant provided six documents to support these claims, including five studies and a pre-publication version of one of the studies, as well as a supplemental attachment providing responses to CMS's concerns and decision regarding the applicant's FY 2025 application for new technology add-on payments for DuraGraft[supreg], as discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69147 through 69149). The applicant also provided 44 background articles.\51\ Please see the online posting for DuraGraft[supreg] for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \51\ Background articles are not included in the following table but can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- Applicant statements in support Supporting evidence provided by the applicant ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #1: The technology significantly improves clinical outcomes relative to services or technologies previously available ---------------------------------------------------------------------------------------------------------------- Reduced Long-term Repeat Haime, M, McLean RR, and Kurgansky KE, et al (2018). Relationship Revascularization. between intra-operative vein graft treatment with DuraGraft[supreg] or saline and clinical outcomes after coronary artery bypass grafting, Expert Review of Cardiovascular Therapy, 16:12, 963-970. DOI: 10.1080/ 14779072.2018.1532289. Lopez-Menendez J, Castro-Pinto M, Fajardo E, Miguelena J, Martin M, Munoz R, Rodriguez-Roda J. Vein graft preservation with anendothelial damage inhibitor in isolated coronary artery bypass surgery: an observational propensity score-matched analysis. J Thorac Dis 2023;15(10):5549-5558. Marizyme, Inc. Substantial Clinical Improvement Discussion. The applicant provided background information to support this claim, which can be accessed via the online posting for the technology. Reduced 12 mo. Overall Mean Wall Perrault, LP, Carrier, M, and Voisine, P, et al (2021). Sequential Thickness (Whole Graft Analysis). multidetector computed tomography assessments after venous graft treatment solution in coronary artery bypass grafting. Journal of Thoracis and Cardiovascular Surgery. Jan. 2021, Vol. 161, Number 1, 96- 106. https://doi.org/10.1016/j.jtcvs.2019.10.115. Improved Myocardial Protection......... Szalkiewicz, P, Emmert, MY, and Heinisch, PP, et al (2022). Graft Preservation confers myocardial protection during coronary artery bypass grafting. Frontiers in Cardiovascular Medicine, July 2022, pp 1- 10. DOI 10.3389/fcvm.2022.922357. Reduction of long-term major adverse Haime, 2018, op. cit. cardiovascular events (MACE). Lopez-Menendez, 2023, op. cit. Reduced Mortality for at Least 3 Years Caliskan E, Misfeld M, Sandner, S, et al. Transatlantic analysis of post-CABG. patient profiles and mid-term survival after isolated coronary artery bypass grafting: a head-to-head comparison between the European DuraGraft Registry and the US STS Registry. Frontiers in Cardiovascular Medicine, Sept 2024, DOI 10.3389\fcmv.2024.1366460. Marizyme (2023) Internal Study Report Safety of DuraGraft: A Comparison to Standard of Care Graft Storage Solutions in Isolated CABG Patients in the Largest Worldwide CABG Registry 3-Year Follow-up Post-Market DuraGraft Registry vs. Standard of Care CABG in the STS Database. Unpublished. Significantly Better Event-free Lopez-Menendez, 2023, op. cit. Survival in Diabetic Patients and Those with Two or More SVGs. Decreased Rate of Change from 1-12 Perrault, 2021, op. cit. months for Maximum Graft Narrowing (Focal Stenosis). Reduced Long-term Non-fatal myocardial Haime, 2018, op. cit. infarction (MI). ---------------------------------------------------------------------------------------------------------------- We received a public comment in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for DuraGraft[supreg], which we summarize in this section. Comment: The applicant submitted a public comment to address questions raised at the Town Hall meeting. In response to questions asking about why DuraGraft[supreg] has an impact at 36-months and about results observed within 15 minutes post flushing and storage, the applicant referred to a peer-reviewed journal article by Pachuk et al. (2019) study, which compared the viability of human saphenous vein (HSV) segments flushed and submerged in either (a) DuraGraft[supreg] for one hour or heparinized saline (b) one hour, (c) 15 minutes or (d) 30 minutes and then stained for viability.\52\ The applicant submitted this article as background information as part of its FYs 2024, 2025, and 2026 new technology add-on payment applications. Per the applicant, the data showed that storage in saline resulted in loss of cell viability within 15 minutes and almost complete loss of viability following 30 minutes exposure to saline. The applicant noted that in contrast, viability of HSV segments is maintained following one hour storage/flushing with DuraGraft[supreg] (and even after several hours), which means that the vein segments must also have been viable earlier at 15 and 30 minutes; a time at which vein segments were dying or dead in saline. Per the applicant, it is therefore concluded that DuraGraft[supreg] provides a benefit even at 15-30 minutes of storage and flushing. The applicant also clarified how a single intraoperative exposure to DuraGraft[supreg] [[Page 18111]] can affect clinical outcomes years later. The applicant explained that DuraGraft[supreg] mitigates oxidative damage during bypass surgery, thereby reducing ischemia reperfusion injury (IRI) and its long-term effects.53 54 The applicant noted that IRI, characterized by oxidative stress and inflammation, leads to vein graft disease (VGD), which progresses through stages of intimal hyperplasia, stenosis, and occlusion.55 56 The applicant stated that clinical studies, which were included in its application and discussed in further detail later in this section, such as the Perrault et al. (2019) study, demonstrated that DuraGraft[supreg]-treated veins showed reduced wall thickening and lumen narrowing at 12 months. Additionally, the applicant stated that the Haime et al. (2018) study and the Caliskan et al. (2024) study \57\ indicated improved clinical outcomes and lower mortality rates in DuraGraft[supreg] patients. --------------------------------------------------------------------------- \52\ Pachuk, CJ, Rushton-Smith SK, & Emmert MY (2019). Intraoperative storage of saphenous vein grafts in coronary artery bypass grafting. Expert review of medical devices, 16(11), 989-997. https://doi.org/10.1080/17434440.2019.1682996. \53\ Shuhaiber, J.H., Evans, A.N., Massad, M.G., & Geha, A.S. (2002). Mechanisms and future directions for prevention of vein graft failure in coronary bypass surgery. European journal of cardio-thoracic surgery: official journal of the European Association for Cardio-thoracic Surgery, 22(3), 387-396. https://doi.org/10.1016/s1010-7940(02)00253-1. \54\ Osgood, M.J., Hocking, K.M., Voskresensky, I.V., Li, F.D., Komalavilas, P., Cheung-Flynn, J., & Brophy, C.M. (2014). Surgical vein graft preparation promotes cellular dysfunction, oxidative stress, and intimal hyperplasia in human saphenous vein. Journal of vascular surgery, 60(1), 202-211. https://doi.org/10.1016/j.jvs.2013.06.004. \55\ Murphy, G.J., & Angelini, G.D. (2004). Insights into the pathogenesis of vein graft disease: lessons from intravascular ultrasound. Cardiovascular ultrasound, 2, 8. https://doi.org/10.1186/1476-7120-2-8. \56\ Schwartz S.M. (1997). Smooth muscle migration in atherosclerosis and restenosis. The Journal of clinical investigation, 100(11 Suppl), S87-S89. \57\ The EU DuraGraft Registry is an ongoing European post- market study designed to support an international CABG registry database used to assess patients receiving DuraGraft[supreg] during CABG surgery. --------------------------------------------------------------------------- In response to our request for additional details on the study highlighting the impact of storage solutions on vein graft failure rates, based on a sub-analysis of the data from PREVENT IV trial (ClinicalTrials.gov: NCT00042081),\58\ the applicant explained that the PREVENT IV study was a large-scale prospective trial aimed at assessing the safety and efficacy of edifoligide in preventing vein graft failure (VGF) after CABG by inhibiting neointimal hyperplasia (Alexander et al., 2005). The applicant noted that the sub-analyses of the study data revealed that the intraoperative graft storage solution had the most significant correlation with VGF, with buffered saline solutions like Plasmalyte, Normasol, or Lactated Ringer reducing failure rates by 28 percent compared to blood and saline.59 60 61 The applicant stated that, despite this improvement, these solutions do not prevent ischemic or oxidative damage, as they merely maintain pH balance.\62\ The applicant asserted that, in contrast, DuraGraft[supreg] offers a unique mechanism by creating a reducing environment to prevent oxidative damage during ischemic storage, using L-glutathione and L- Ascorbic acid, which has been associated with reduced graft wall thickening and a significant three-year mortality benefit, and therefore, in no way should these liquids be compared to or considered similar to DuraGraft[supreg]. --------------------------------------------------------------------------- \58\ Alexander, J.H., Hafley, G., Harrington, R.A., Peterson, E.D., Ferguson, T.B., Lorenz, T.J., Goyal, A., Gibson, M., Mack, M.J., Gennevois, D., Bowman, S.D., & Jennings, L.K. (2005). Prevention of autogenous vein graft failure in coronary artery bypass procedures: Results of a multicenter trial of edifoligide for the prevention of vein graft failure in coronary artery bypass grafting (PREVENT IV). The Journal of the American Medical Association, 294(19), 2446-2454. https://doi.org/10.1001/jama.294.19.2446. \59\ Harskamp, R.E., Lopes, R.D., Baisden, C.E., de Winter, R.J., & Alexander, J.H. (2013). Saphenous vein graft failure after coronary artery bypass surgery: pathophysiology, management, and future directions. Annals of surgery, 257(5), 824-833. https://doi.org/10.1097/SLA.0b013e318288c38d. \60\ Murphy, G.J., & Angelini, G.D. (2004). Insights into the pathogenesis of vein graft disease: lessons from intravascular ultrasound. Cardiovascular ultrasound, 2, 8. https://doi.org/10.1186/1476-7120-2-8. \61\ Hess, C.N., Lopes, R.D., Gibson, C.M., Hager, R., Wojdyla, D.M., Englum, B.R., Mack, M.J., Califf, R.M., Kouchoukos, N.T., Peterson, E.D., & Alexander, J.H. (2014). Saphenous vein graft failure after coronary artery bypass surgery: insights from PREVENT IV. Circulation, 130(17), 1445-1451. https://doi.org/10.1161/CIRCULATIONAHA.113.008193. \62\ Hess, 2014, op. cit. --------------------------------------------------------------------------- Response: We thank the applicant for its comment. After review of the information provided by the applicant and the public comment received in response to the new technology add-on payment town hall meeting, we continue to have concerns regarding whether DuraGraft[supreg] meets the substantial clinical improvement criterion, as described in the FY 2025 IPPS/LTCH final rule (89 FR 69144 through 69149). First, with regard to comparison with currently available treatments, as previously stated in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69148), we are unclear how improvements demonstrated by use of DuraGraft[supreg] as compared to saline controls demonstrate substantial clinical improvement over other existing technologies without an assessment of comparative outcomes to the other vein graft preservation solutions. We note that all of the studies provided compared DuraGraft[supreg] to saline controls and not to other intraoperative buffered vein graft solutions such as PlasmaLyte, Normoscol, and Ringer's solution with respect to vein graft patency or clinical outcomes.\63\ We note that in its response to this concern from the FY 2025 IPPS/LTCH PPS final rule, the applicant stated that it tested against saline as it is still the most preferred wetting solution amidst dozens used as wetting solutions by surgeons in the United States according to the result of a survey published in JAMA.\64\ The applicant also stated that DuraGraft[supreg] was tested against other wetting solutions in preclinical and non-clinical studies with no difference seen in the results of mechanism compared to when saline was used as the control.\65\ However, we note that according to the same survey, among the 100 top-performing medical centers that conduct CABG, 40 percent reported using pH-buffered solution (commercially available or homegrown), compared to 28.9 percent reporting the use of saline, and 25.6 percent autologous blood. In addition, we are unclear how the lack of differences in the mechanism in pre-clinical and non-clinical studies relates to a demonstration of substantial clinical improvement over those therapies in Medicare patients undergoing CABG. While the applicant stated in its Town Hall comment that Ringers Lactate, Plasmalyte or Normosol buffered solutions are only used to keep grafts from drying out between harvesting and implantation and should not be compared to or considered similar to DuraGraft[supreg], as we noted in the FY 2025 IPPS/LTCH PPS final rule, studies have shown that vein graft storage solutions have differing effects on graft endothelium. We further note that previous studies have shown that saline alone is acidic and not beneficial for grafts, and that buffered solutions, such as PlasmaLyte, Normoscol, and Ringer's solution, are associated with lower VGF rates as compared to saline.\66\ We note that whether or not these other buffered solutions are the same or similar to DuraGraft[supreg] does not determine if their use is part of the standard of care for [[Page 18112]] purposes of assessing whether DuraGraft[supreg] represents a substantial clinical improvement as compared to existing technologies. We welcome comments on the comparison of DuraGraft[supreg] to saline alone versus other storage solutions used in contemporary CABG standards of care in the U.S. As these other solutions are also existing vein graft storage options, we would appreciate evidence comparing DuraGraft[supreg] to these currently available standard of care options to demonstrate post-CABG clinical improvement. --------------------------------------------------------------------------- \63\ Marizyme (2023) op. cit. \64\ William SE, Harskamp RE, and Bose S (2015). The Preservation and Handling of Vein Grafts in Current Surgical Practice: Findings of a Survey Among Cardiovascular Surgeons of Top- Ranked US Hospitals [verbar] Surgery [verbar] JAMA Surgery [verbar] JAMA Network. \65\ Marizyme (2023), op. cit. \66\ Harskamp RE, Alexander JH, Schulte PJ, Brophy CM, Mack MJ, Peterson ED, Williams JB, Gibson CM, Califf RM, Kouchoukos NT, Harrington RA, Ferguson TB Jr, Lopes RD. Vein Graft Preservation Solutions, Patency, and Outcomes After Coronary Artery Bypass Graft Surgery Follow-up From PREVENT IV Randomized Clinical Trial. JAMA Surg., 2014;149(8):798-805. --------------------------------------------------------------------------- Second, regarding interim or surrogate endpoints, as in previous years, the applicant stated that the use of DuraGraft[supreg] leads to reduced 12 month overall mean wall thickness and a decreased rate of change from 1 to 12 months (focal stenosis) for maximum graft narrowing (Perrault et al., 2021), and improved myocardial protection with lower troponin (hs-Tnl) values from 3 to 6 hours and up to 4 days (Szalkiewicz et al., 2022). However, as discussed previously in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69148), early anatomical changes associated with the development of VGD (such as changes in wall thickness and graft narrowing) are surrogate endpoints, and we similarly note that that hs-Tnl levels are also surrogate measure for peri-operative MI, and, therefore, they do not demonstrate a clinical outcome as described under the regulations at Sec. 412.87(b)(1)(ii)(C). We also remain concerned about the effects on the evidence provided of potential confounders that have not been taken into account in the study designs. We note that SVG failure is the result of a complex process involving multiple risk factors. Surgical risk factors other than the use of DuraGraft[supreg] may also contribute to post-CABG clinical outcomes. Thus, evidence about the effects of DuraGraft[supreg] on VGF may be confounded by factors related to pre- operative care (such as aspirin), intra-operative procedures and techniques (such as no touch harvesting, appropriate length of vein, vein graft storage, or transit time flow measurement, and post-CABG care management (such as lipid-lowering therapies and P2Y12 inhibitors). For example, we are concerned about whether the Haime study (2018) accounted for potential confounding effects of risk factors such as whether patients received beta-blockers before surgery, were on ventilation support for more than 12 hours, developed pneumonia or post-operative atrial fibrillation,\67\ were in pre-operative renal failure on dialysis or had a lower estimated glomerular filtration rate,\68\ or the type of post-acute care facility that patients were referred to,\69\ which may impact post-CABG outcomes. Similarly, we question whether the results of the Szalkiewicz (2022) study, based on a single-center study conducted in Austria, and the Lopez-Mendez (2023) study, based on a single-center study in Spain, could have been confounded by site-specific factors or by standard of CABG care specific to those two countries. --------------------------------------------------------------------------- \67\ Ibrahim KS, Kheirallah KA, Rahman A, et al. Factors affecting duration of stay in the intensive care unit after coronary artery bypass surgery and its impact on in-hospital mortality: a retrospective study. Journal of Cardiothoracic Surgery February 2024. 19(45). \68\ Chua TK, GAO F, Chia SY, et al. Long-term mortality after isolated coronary artery bypass grafting and risk factors for mortality. Journal of Cardiothoracic Surgery July 2024. 19(429). \69\ Sultana I, Errguntla M, Kum HC, et al. The interrelationships between the length of stay, readmission, and post-acute care referral in cardiac surgery patients. Health Analytics November 2022. Volume 2. --------------------------------------------------------------------------- We also note that the only new study provided by the applicant in its application for FY 2026 was the Caliskan et al. (2024) study,\70\ which is the published version of the Marizyme Internal Study Report (2023) that was also provided in its FY 2025 application. The applicant stated that this study demonstrates a three-year mortality benefit associated with the use of DuraGraft[supreg]. Per the applicant, the Caliskan et al. (2024) study compares patients in the European DuraGraft Registry (DuraGraft[supreg] cohort) who underwent isolated CABGs and were exposed to DuraGraft[supreg] between 2016 and 2019 to randomly selected patients in the U.S. Society of Thoracic Surgeons (STS) National DatabaseTM (US Cohort) for the same period. Using a propensity score model (PSM), the authors examined the mortality rate of 2,400 patients matched from each registry at 30-day, 12-, 24-, and 36-month post CABG. However, we question whether any results seen may have been affected by potential confounders. According to Caliskan et al. (2024), more than 95 percent of the U.S. hospitals performing CABG surgery report data to the STS, which captured almost all (98 percent) of the CABG surgeries in the U.S. We are interested in similar information about the European DuraGraft Registry, including its clinical site-selection standards and patient inclusion and exclusion criteria. We question whether these factors may have confounded the relationship between DuraGraft[supreg] and post-CABG mortality. In addition, we note that due to data availability, intra- operative risk factors, like the use of Transit Time-Flow Measurement,\71\ on-pump status, endoscopic harvest, and post-operative therapies known to minimize SVG failure, were not accounted for in the Caliskan (2024) study. The use of post-procedural therapies may also confound the effects of DuraGraft[supreg] on post-CABG outcomes. For example, SVG failure is up to five times more frequent in patients who are not treated with aspirin postoperatively, and lipid-lowering therapies, such as statin therapies, reduce SVG occlusion rates as well as adverse events after CABG.\72\ Additionally, we note that according to Lopez-Menendez et al. (2023), every CABG patient in its institution is discharged home with dual antiplatelet therapy for a duration of three months, along with high-dose statins and that the study groups adhered to this institutional protocol, with a 100 percent completion rate. We question whether post-surgical protocols like this might have confounded the treatment effects of DuraGraft[supreg] on mortality rates, especially those after 30-day post CABG. We also question the Caliskan team's finding (2024) that DuraGraft[supreg] had significant effects on all-cause mortality rates at 36-month post-CABG but not at 30-day, 12-, or 24-months. Per the applicant, the 36-month all-cause mortality estimate for the DuraGraft[supreg] cohort was 7.37 percent [95 percent, CI 6.36 to 8.53], compared to 9.65 percent [95 percent, CI 8.37 to 11.10] for the US cohort (log-rank p-value = 0.016). However, there was no significant difference in survival between the DuraGraft[supreg] and U.S. cohorts throughout 2 years post-CABG. We therefore question whether mortality at 36 months post-CABG may be associated with risk factors that emerged long after the CABG surgery. Moreover, we note that in Lopez-Menendez et al. (2023), in which 90 CABG patients whose veins were treated with DuraGraft[supreg] were matched with another 90 whose veins were treated with saline solution, the three-year mortality rate of the DuraGraft[supreg] group was not significantly different from that of the saline group. We welcome information about the mixed evidence from the Caliskan et al. (2024) and Lopez-Menendez et al. (2023) studies. --------------------------------------------------------------------------- \70\ Per the applicant, Caliskan et al. (2024) is based on the Marizyme internal study report. \71\ Lopez-Menendez (2023), op. cit. \72\ Willemsen, L, Janssen, P, Klein, P, Berg, JM, Therapies to improve vein graft patency after CABG, American College of Cardiology, February 8, 2021: Therapies to Improve Vein Graft Patency After CABG--American College of Cardiology. --------------------------------------------------------------------------- [[Page 18113]] Furthermore, the Caliskan study used all-cause mortality, rather than cardiac-related mortality, to represent clinical outcomes resulting from the use of DuraGraft[supreg], which may include deaths by other acute or chronic conditions and cannot be attributed to the quality of CABG-related care, including the use of DuraGraft[supreg]. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69149), we expressed concern that the Marizyme Internal Study (2023), which has the same content as Caliskan et al. (2024), only reported all-cause mortality and does not specify how many patients had mortality due to other causes that could not be attributed to use of a vein preservation solution other than DuraGraft[supreg]. We continue to have the concern that all-cause mortality may include deaths resulting from other conditions rather than heart diseases. We remain unclear whether DuraGraft[supreg] was the only factor that contributed to the differences in all-cause mortality rates between the treatment (DuraGraft[supreg]) and control groups. We also remain unclear in what ways the results demonstrated how DuraGraft[supreg] brought about the reduction in all-cause mortality. While we acknowledge that the use of all-cause mortality as a clinical outcome may be the result of data availability, it is unclear that DuraGraft[supreg] was the only differing factor between the arms, and how this demonstrates that it was DuraGraft[supreg] that effected this difference in mortality, rather than some other factor. We welcome information about the choice of this outcome as an indicator of the effects of DuraGraft[supreg] on clinical outcome improvement. We also note regarding the attrition rate for the DuraGraft[supreg] registry that, according to Caliskan et al. (2019),\73\ patients were contacted via mail, email, or telephone at one month, one year, and annually thereafter up to five years post CABG to determine whether cardiac-related adverse events and/or hospitalizations have occurred. We are unclear about the number of patients who were lost to follow up, the reasons for dropping out, and how these reasons were mapped to the definition of clinical outcomes. We also welcome information about how attrition impacted the number of patients in the treatment (DuraGraft[supreg]) and control groups at prespecified points of the follow-up period. --------------------------------------------------------------------------- \73\ Caliskan E, Sandner S, and Misfeld M, et al (2019) A novel endothelial damage inhibitor for the treatment of vascular conduits in coronary artery bypass grafting: protocol and rationale for the European, multicentre, prospective, observational DuraGraft registry. Journal of Cardiothoracic Surgery https://doi.org/10.1186/s13019-019-1010-z. --------------------------------------------------------------------------- We are inviting public comments on whether DuraGraft[supreg] meets the substantial clinical improvement criterion. f. FIBRYGA[supreg] (Fibrinogen (Human)) Octapharma USA, Inc. submitted an application for new technology add-on payments for FIBRYGA[supreg] for FY 2026. According to the applicant, FIBRYGA[supreg] is a concentrated form of human fibrinogen, indicated for fibrinogen supplementation in bleeding patients with acquired fibrinogen deficiency and the treatment of acute bleeding episodes in patients with congenital fibrinogen deficiency, including afibrinogenemia and hypofibrinogenemia. We note that the applicant is seeking new technology add-on payments for FIBRYGA[supreg] for FY 2026 specific to the 2024 supplemental Biologics License Application (sBLA) indicated for the fibrinogen supplementation in bleeding adult and pediatric patients with acquired fibrinogen deficiency. Please refer to the online application posting for FIBRYGA[supreg], available at https://mearis.cms.gov/public/publications/ntap/NTP241007YU8UR, for additional detail describing the technology and acquired fibrinogen deficiency. With respect to the newness criterion, according to the applicant, FIBRYGA[supreg] was granted supplemental BLA approval from FDA on July 31, 2024, expanding its previous BLA indication to include the fibrinogen supplementation in bleeding adult and pediatric patients with acquired fibrinogen deficiency indication and to update the U.S. prescribing information to include this indication.\74\ According to the applicant, FIBRYGA[supreg] became commercially available immediately after FDA approval for this expanded indicated use. The applicant stated that FIBRYGA[supreg] is administered intravenously with a recommended dose of 4g for adults per inpatient stay. --------------------------------------------------------------------------- \74\ Previous FDA approvals for FIBRYGA[supreg]: In 2017, FDA granted FIBRYGA[supreg] approval under a BLA application for the treatment of acute bleeding episodes in adults and adolescents >=12 years of age with congenital fibrinogen deficiency, including afibrinogenemia and hypofibrinogenemia. On December 23, 2020, FDA granted FIBRYGA[supreg] approval under a sBLA application for on- demand treatment of acute bleeding episodes to pediatric patients <12 years of age with congenital fibrinogen deficiency. --------------------------------------------------------------------------- According to the applicant, there are currently no ICD-10-PCS procedure codes to identify FIBRYGA[supreg]. We note that the applicant submitted a request for approval for a unique ICD-10-PCS procedure code for FIBRYGA[supreg] beginning in FY 2026. The applicant stated that D68.4 (Acquired coagulation factor deficiency) and O72.3 (Postpartum coagulation defects) may be currently used to identify the indication for FIBRYGA[supreg] under the ICD-10-CM coding system. We believe the relevant ICD-10-CM code to identify the indication of fibrinogen supplementation in bleeding adult and pediatric patients with acquired fibrinogen deficiency that is relevant to this new technology add-on payment application would be D68.4 (Acquired coagulation factor deficiency). We are inviting public comments on the use of this ICD-10- CM diagnosis code to identify this indication for purposes of the new technology add-on payment, if approved. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that FIBRYGA[supreg] is not substantially similar to other currently available technologies because it is the only FDA-approved therapy available to treat acquired fibrinogen deficiency in bleeding patients. According to the applicant, in patients experiencing a major bleeding event, acquired fibrinogen deficiency often goes untreated because cryoprecipitate cannot be delivered fast enough. The applicant further explained that FIBRYGA[supreg]'s storage and preparation characteristics allow it to be readily available, giving patients reliable access to therapy that is potentially lifesaving, and that therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for FIBRYGA[supreg] for the applicant's complete statements in support of its assertion that FIBRYGA[supreg] is not substantially similar to other currently available technologies. [[Page 18114]] -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of Yes.................... FIBRYGA[supreg] works by providing a source of fibrinogen the body action to achieve a therapeutic outcome? can use to form blood clots to stop bleeding. This is the same mechanism used by cryoprecipitate; however, FIBRYGA[supreg] provides a faster, safer, and more consistent dosage as compared to cryoprecipitate. Is the technology assigned to the same MS-DRG as existing Yes.................... It is not expected that the use of FIBRYGA[supreg] will affect the technologies? MS-DRG assignment. Does new use of the technology involve the treatment of No..................... FIBRYGA[supreg] is currently the only FDA-approved therapy for the same/similar type of disease and the same/similar treating acquired fibrinogen deficiency as a result of major patient population when compared to an existing bleeding. Fibrinogen is a key component in blood clot formation technology? and levels in the body drop fast and early during an emergent major bleeding event. Low levels of fibrinogen can lead to impaired blood clot formation which is life threatening. Cryoprecipitate, the current standard of care, requires long processing times and transport to the point of care. Because of this, patients suffering from acquired fibrinogen deficiency during this early, critical period of a major bleed are often not treated as clinicians do not have a quickly available option to supplement declining fibrinogen levels. This potentially leads to adverse outcomes ranging from longer ICU stays to exsanguination. FIBRYGA[supreg] can be stored at room temperature and reconstituted quickly. These two properties allow it to be stored near the point of care and delivered quickly to bleeding patients who might otherwise not have received therapy. For the first time, FIBRYGA[supreg] offers an FDA-approved rapid treatment option for acquired hypofibrinogenemia in emergent bleeds. -------------------------------------------------------------------------------------------------------------------------------------------------------- We note the following concerns with regard to the newness criterion. While the applicant asserted that FIBRYGA[supreg] is currently the only FDA-approved therapy for treating acquired fibrinogen deficiency as a result of major bleeding, we note that INTERCEPT[supreg] Fibrinogen Complex, which is the pathogen reduced cryoprecipitated fibrinogen complex (PRCFC) produced by the INTERCEPT[supreg] Blood System, is FDA-approved for the treatment and control of bleeding, including massive hemorrhage, associated with fibrinogen deficiency. The applicant further asserted that FIBRYGA[supreg] can be stored at room temperature, allowing it to be delivered quickly to bleeding patients and offering an FDA-approved rapid treatment option for acquired hypofibrinogenemia in emergent bleeds. However, we note that INTERCEPT[supreg] Fibrinogen Complex has a 5-day shelf life at room temperature and is immediately available in a ready-to-transfuse form as a fibrinogen source.75 76 Therefore, we question whether FIBRYGA[supreg] and INTERCEPT[supreg] Fibrinogen Complex involve the treatment of the same or similar type of disease and the same or similar patient population. In addition, we note that the applicant asserted that FIBRYGA[supreg] has the same mechanism of action used by cryoprecipitate and works by providing a source of fibrinogen the body can use to form blood clots to stop bleeding. We also note that INTERCEPT[supreg] Fibrinogen Complex provides a source of fibrinogen, and therefore, we question whether FIBRYGA[supreg] and INTERCEPT[supreg] Fibrinogen Complex have the same mechanism of action. We also note that the applicant asserted that use of FIBRYGA[supreg] is not expected to change the MS-DRG assignment for cases of acquired hypofibrinogenemia, and we therefore believe it would map to the same MS-DRGs as INTERCEPT[supreg] Fibrinogen Complex. --------------------------------------------------------------------------- \75\ Cerus Corporation. INTERCEPT[supreg] Blood System for Cryoprecipitation Package Insert For the manufacturing of Pathogen Reduced Cryoprecipitated Fibrinogen Complex. (Revised 5/2024). Available at: www.fda.gov/media/143996/download. \76\ https://intercept-usa.com/products/intercept-fibrinogen- complex/ #:~:text=INTERCEPT%C2%AE%20Fibrinogen%20Complex%20is,day%20post%2Dtha w%20shelf%20life. --------------------------------------------------------------------------- Therefore, as it appears that FIBRYGA[supreg] and INTERCEPT[supreg] Fibrinogen Complex may use the same or similar mechanism of action to achieve a therapeutic outcome, are assigned to the same MS-DRGs, and treat the same or similar patient population and disease, we believe that these technologies may be substantially similar to each other. We note that, per our policy, if these technologies are substantially similar to each other, we use the earliest market availability date as the beginning of the newness period for the technologies. Therefore, if FIBRYGA[supreg] is substantially similar to INTERCEPT[supreg] Fibrinogen Complex, we believe the newness period for this technology would begin on May 5, 2021, the date INTERCEPT[supreg] Fibrinogen Complex became commercially available.\77\ In addition, because the 3- year anniversary date of the INTERCEPT[supreg] Fibrinogen Complex's entry onto the U.S. market (May 5, 2024) occurred in FY 2024, FIBRYGA[supreg] would not be considered new and would not be eligible for new technology add-on payments for FY 2026. We are interested in information on how these technologies may differ from each other with respect to the substantial similarity criteria and newness criterion. --------------------------------------------------------------------------- \77\ INTERCEPT[supreg] Blood System received FDA approval on November 24, 2020, to produce PRCFC; however, as noted in FY 2022 IPPS/LTCH PPS final rule (86 FR 45149), the manufacturers stated that it was not available for sale until May 5, 2021. --------------------------------------------------------------------------- We are inviting public comment on whether FIBRYGA[supreg] meets the newness criterion, including whether FIBRYGA[supreg] is substantially similar to INTERCEPT[supreg] Fibrinogen Complex for purposes of new technology add-on payments. With respect to the cost criterion, the applicant provided an analysis to demonstrate that FIBRYGA[supreg] meets the cost criterion. The analysis followed the order of operations summarized in the following table. FIBRYGA[supreg] Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for FIBRYGA[supreg]. [[Page 18115]] Claims identified...................... 18,037 claims mapping to 468 MS-DRGs, with none exceeding more than 12.55% of the total identified cases. Charges removed for prior technology... The applicant did not remove any direct or indirect charges related to the prior technology. Per the applicant, FIBRYGA[supreg] is expected to be additive to current treatments and no charges were removed from the claims used in the analysis. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2025 IPPS/LTCH PPS final rule. Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new technology... The applicant added charges for the new technology by dividing the cost of the new technology by the national average cost-to-charge ratio of 0.246 for Blood and Blood Products from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. Cost analysis results.................. Average case-weighted threshold amount: $105,002. Final inflated average case-weighted standardized charge per case: $188,525. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant asserted that FIBRYGA[supreg] meets the cost criterion. We are inviting public comments on whether FIBRYGA[supreg] meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that FIBRYGA[supreg] represents a substantial clinical improvement over existing technologies because FIBRYGA[supreg] is the only currently available, FDA-approved, pharmaceutical-grade therapy for the treatment of acquired fibrinogen deficiency, and it provides a faster, more precise treatment option for patients with life-threatening bleeding. Additionally, the applicant asserted that patients receiving FIBRYGA[supreg] have better clinical outcomes relative to technologies previously available. The applicant provided four documents and the FIBRYGA[supreg] package insert to support these claims, as well as 17 background articles about the safety and efficacy of existing treatment options for fibrinogen supplementation. The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for FIBRYGA[supreg] for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. ---------------------------------------------------------------------------------------------------------------- Applicant statements in support Supporting evidence provided by the applicant ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ---------------------------------------------------------------------------------------------------------------- FIBRYGA[supreg] is the only FDA FIBRYGA[supreg] Package Insert: https://www.fda.gov/media/105864/ approved therapy for the treatment of download#:~:text=FIBRYGA%20is%20a%20human%20fibrinogen%20concentrate. acquired fibrinogen deficiency. ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ---------------------------------------------------------------------------------------------------------------- Pathogen inactivation makes Callum J, Farkouh ME, Scales DC, Heddle NM, Crowther M, Rao V, Hucke FIBRYGA[supreg] a potentially safer HP, Carroll J, Grewal D, Brar S, Bussi[egrave]res J, Grocott H, Harle source for fibrinogen supplementation C, Pavenski K, Rochon A, Saha T, Shepherd L, Syed S, Tran D, Wong D, in the treatment of bleeding. Zeller M, Karkouti K; FIBRES Research Group. Effect of Fibrinogen Concentrate vs Cryoprecipitate on Blood Component Transfusion After Cardiac Surgery: The FIBRES Randomized Clinical Trial. JAMA. 2019 Nov 26; 322(20):1966-1976. doi: 10.1001/jama.2019.17312. PMID: 31634905; PMCID: PMC6822637. FIBRYGA[supreg] Package Insert. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. As compared to cryoprecipitate, the Roy A, Stanford S, Nunn S, Alves S, Sargant N, Rangarajan S, Smith EA, current standard of care, Bell J, Dayal S, Cecil T, Tzivanakis A, Kruzhkova I, Solomon C, Knaub FIBRYGA[supreg] permits rapid S, Moran B, Mohamed F. Efficacy of fibrinogen concentrate in major correction of low serum fibrinogen abdominal surgery--A prospective, randomized, controlled study in levels in bleeding patients. cytoreductive surgery for pseudomyxoma peritonei. J Thromb Haemost. 2020 Feb;18(2):352-363. doi: 10.1111/jth.14665. Epub 2019 Nov 26. PMID: 31654548; PMCID: PMC7027898. FIBRYGA[supreg] Package Insert. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. FIBRYGA[supreg] decreases the use of Lunde J, Stensballe J, Wikkels[oslash] A, Johansen M, Afshari A. allogeneic blood products which are Fibrinogen concentrate for bleeding--a systematic review. Acta associated with higher rates of Anaesthesiol Scand. 2014 Oct;58(9):1061-74. doi: 10.1111/aas.12370. adverse events post-transfusion. Epub 2014 Jul 24. PMID: 25059813. Callum, 2019, op. cit. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. [[Page 18116]] FIBRYGA[supreg] is highly purified and Schulz PM, Gehringer W, N[ouml]hring S, M[uuml]ller S, Schmidt T, has consistent levels of fibrinogen, Kekeiss-Schertler S, Solomon C, Pock K, R[ouml]misch J. Biochemical permitting precise serum fibrinogen characterization, stability, and pathogen safety of a new fibrinogen correction without delivering unneeded concentrate (fibryga[supreg]). Biologicals. 2018 Mar;52:72-77. doi: components associated with adverse 10.1016/j.biologicals.2017.12.003. Epub 2018 Jan 12. PMID: 29336864. reactions. FIBRYGA[supreg] Package Insert. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- We did not receive any written comments in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for FIBRYGA[supreg]. After review of the supporting evidence provided by the applicant, we have the following concerns regarding whether FIBRYGA[supreg] meets the substantial clinical improvement criterion. While the applicant asserted that FIBRYGA[supreg] is the only FDA-approved technology for the treatment of acquired fibrinogen deficiency, we note that there are other available treatments, including cryoprecipitate and INTERCEPT[supreg] Fibrinogen Complex, which is FDA-approved for the treatment and control of bleeding, including massive hemorrhage, associated with fibrinogen deficiency, including those with acquired fibrinogen deficiency.\78\ We therefore question the assertion that FIBRYGA[supreg] offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments. --------------------------------------------------------------------------- \78\ Cerus Corporation. INTERCEPT[supreg] Blood System for Cryoprecipitation Package Insert For the manufacturing of Pathogen Reduced Cryoprecipitated Fibrinogen Complex. (Revised 5/2024). Available at: https://www.fda.gov/media/143996/download. --------------------------------------------------------------------------- With respect to the assertion that FIBRYGA[supreg] significantly improves clinical outcomes relative to services or technologies previously available, we note that the applicant claimed that pathogen inactivation makes FIBRYGA[supreg] a potentially safer source for fibrinogen supplementation, FIBRYGA[supreg] permits rapid correction of fibrinogen levels, and FIBRYGA[supreg] has consistent levels of fibrinogen which allow for precise serum fibrinogen correction without delivering unneeded components associated with adverse reactions, and that these claims demonstrate that FIBRYGA[supreg] improves outcomes. However, while for each of these three claims the applicant inferred that they potentially improve safety or outcomes, it did not provide data that tested or demonstrated improvements. Therefore, we are unclear how these claims relate to a demonstration of substantial clinical improvement over existing technologies because they do not pertain to clinical outcomes described at Sec. 412.87(b)(1)(ii)(C), such as a reduction in mortality or a decreased rate of at least one subsequent diagnostic or therapeutic intervention. For example, with regard to pathogen inactivation, while the applicant stated that the overall reduction in viral titers achieved with INTERCEPT[supreg] Fibrinogen Complex is lower than those achieved with FIBRYGA[supreg]'s manufacturing process, we note that the background studies that were provided discussed why pathogen activation is important but did not demonstrate reduced pathogen transmission as compared to existing options such as INTERCEPT[supreg] Fibrinogen Complex or cryoprecipitate in order to demonstrate improved outcomes. We further note that the FIBRES study, a randomized controlled trial of 827 patients requiring blood component transfusion after cardiac surgery at 11 Canadian hospitals, did not report differences between the FIBRYGA[supreg] and cryoprecipitate groups' adverse events associated with bloodborne pathogens, which may include fever, chills, nausea, vomiting, hypotension, tachycardia, abdominal pain, back pain, or disseminated intravascular coagulation, and we question if the length of patient follow-up (28 days) is sufficient to assess for bloodborne infection transmission.79 80 With regards to the claim that FIBRYGA[supreg] allows for precise serum fibrinogen correction without delivering unneeded components associated with adverse reactions, while the applicant provided a biochemical analysis of FIBRYGA[supreg] by Schulz et al. to demonstrate that FIBRYGA[supreg]'s manufacturing process leads to consistent levels of fibrinogen and low levels of von Willebrand factor, as well as background documents discussing levels of fibrinogen and other factors for cryoprecipitate and INTERCEPT[supreg] Fibrinogen Complex, these documents did not demonstrate precise fibrinogen correction using FIBRYGA[supreg] compared to other available treatment options. Also, while the applicant further stated that FIBRYGA[supreg]'s manufacturing process removes agents responsible for allergic transfusion reactions and transfusion related lung injury, the evidence provided did not assess these outcomes or otherwise demonstrate reduced incidence of these outcomes as compared to available standard of care treatments for the patient population. --------------------------------------------------------------------------- \79\ Association for the Advancement of Blood & Biotherapies. (2024). Circular of information for the use of human blood and blood components. American Red Cross, America's Blood Centers, Armed Services Blood Program. Retrieved on November 14, 2024, from https://www.aabb.org/docs/default-source/default-document-library/resources/circular-of-information-watermark.pdf. \80\ Bloch, E.M. (2024). Transfusion-transmitted bacterial infection. UpToDate. Retrieved December 16, 2024, from https://www.uptodate.com/contents/transfusion-transmitted-bacterial-infection. --------------------------------------------------------------------------- In addition, we note that none of the studies submitted demonstrated improvements in clinical outcomes, such as treatment emergent adverse events (TEAEs), length of ICU stay, and duration of hospitalization between FIBRYGA[supreg] and cryoprecipitate study treatment groups. We note the FIBRES study found that TEAEs (acute kidney injury, hepatobiliary disorders, and thromboembolic adverse events) were similar between both groups and found no differences in clinical outcomes between the groups (duration of mechanical ventilation, duration of ICU stay, and duration of hospitalization). We further note that the study authors disclosed several limitations of the FIBRES study, including the lack of standardized transfusion protocols, lack of strict timing of laboratory assessments, and the variability in the amount of fibrinogen in cryoprecipitate that make it difficult to interpret true differences in clinical outcomes between the two groups. Regarding the FORMA-05 study, a single-center, prospective, randomized control phase 2 study of 45 patients undergoing cytoreductive surgery for peritoneal malignancy, we note that this study did not demonstrate any differences in clinical outcomes for the FIBRYGA[supreg] arm over the cryoprecipitate arm. Rather, per the study, the median durations of surgery, artificial ventilation in the ICU, ICU stay, hospitalization, and intraoperative blood loss were comparable between groups, and there was no bleeding in [[Page 18117]] patients in either treatment group post-operatively through the assessments at 24 and 48 hours. We also note that both studies were conducted outside of the U.S., and the study populations were specific groups of surgical patients, which may impact the generalizability of these results to broader, more diverse clinical use cases for FIBRYGA[supreg] in the U.S. Medicare patient population. In addition, both studies compared FIBRYGA[supreg] with cryoprecipitate, and no studies comparing to the currently available INTERCEPT[supreg] Fibrinogen Complex were provided. While the applicant included the INTERCEPT[supreg] package insert, it contains only in vitro data and does not offer clinical comparisons. We are interested in information on clinical outcomes of FIBRYGA[supreg] in comparison to INTERCEPT[supreg] Fibrinogen Complex in order to evaluate whether the use of FIBRYGA[supreg] significantly improves clinical outcomes compared to available treatments. We also note regarding the applicant's claim that FIBRYGA[supreg] permits rapid correction of low serum fibrinogen levels in bleeding patients compared to cryoprecipitate, while the applicant stated that the FORMA-05 study demonstrated that FIBRYGA[supreg] was delivered to the patient 46 minutes faster than cryoprecipitate (0.90 hours (0.23) versus 1.30 hours (0.33), p<0.0001), this value does not measure the time to correction of fibrinogen levels. We further note that, in the study, the difference between arms decreased from 46 minutes to 24 minutes with regard to time to when the intervention was administered (2.02 hours 0.22 for FIBRYGA[supreg] and 2.42 hours 0.33 for cryoprecipitate), and the study did not measure time to correction of fibrinogen levels, though as noted, this is a surrogate measure and not a clinical outcome as described under the regulations at Sec. 412.87(b)(1)(ii)(C). Further, while the applicant also provided background studies to demonstrate the correlation between low serum fibrinogen and poor patient outcomes, and that faster replenishment is important, as noted, the FORMA-05 study did not demonstrate any differences in clinical outcomes between arms. We also note that the applicant stated that FIBRYGA[supreg] allows for more rapid availability due to its powder form which allows long-term storage at room temperature in proximity to patients, while INTERCEPT[supreg] Fibrinogen Complex, which can be also stored at room temperature for up to 5 days, must be kept in regulated blood bank storage distant from the patient even when thawed. However, no data was provided to demonstrate that time to administration of FIBRYGA[supreg], or time to serum fibrinogen correction with FIBRYGA[supreg], is faster than that of INTERCEPT[supreg] Fibrinogen Complex. In regard to the applicant's fourth claim that FIBRYGA[supreg] decreases the use of allogeneic blood products, which the applicant asserted are associated with higher rates of adverse events post- transfusion, we question whether the Lunde et al. (2014) and FIBRES studies provided in support of this claim showed that FIBRYGA[supreg] resulted in lower rates of post-transfusion adverse events. We note that Lunde et al. (2014) study was a systematic review of six RCTs that evaluated fibrinogen concentrate broadly to determine the evidence for its use and efficacy, but the studies included were varied in choice of comparator, including fresh frozen plasma (FFP), cryoprecipitate, or no comparator. We are also unclear whether the fibrinogen concentrate included in the study refers specifically to FIBRYGA[supreg], and therefore question whether the study provides evidence that FIBRYGA[supreg] demonstrates improved outcomes compared to cryoprecipitate. We further note that the study authors determined that data on continuous outcomes such as quantity of FFP, RBC or platelet transfused were statistically skewed, often with the median equaling zero, and that the comparison of fibrinogen concentrate to any comparator with respect to adverse events was not statistically significant. We also note that the six RCTs that the study is based on are more than 10 years old, and thus, we question whether the findings adequately represent the current standard of care for this patient population that may have evolved over the last decade. We further note that, although the FIBRES study was provided to demonstrate that FIBRYGA[supreg] decreases the use of allogeneic blood products, the study did not specifically report transfusion-related adverse events. We would be interested in additional data regarding transfusion-related adverse events, such as urticaria, wheezing, hypotension, tachycardia, nausea, vomiting and/or diarrhea, abdominal pain, severe dyspnea, pulmonary and/or laryngeal edema, and bronchospasm and/or laryngospasm.\81\ --------------------------------------------------------------------------- \81\ Association for the Advancement of Blood & Biotherapies, 2024, op. cit. --------------------------------------------------------------------------- We are inviting public comments on whether FIBRYGA[supreg] meets the substantial clinical improvement criterion. g. GRAFAPEX\TM\ (Treosulfan) Medexus Pharma, Inc. submitted an application for new technology add-on payments for GRAFAPEXTM for FY 2026. According to the applicant, GRAFAPEXTM is a novel conditioning agent for use in combination with fludarabine as a preparative regimen for allogeneic hematopoietic stem cell transplantation (allo-HSCT) in adult and pediatric patients one year of age and older with acute myeloid leukemia (AML) or myelodysplastic syndrome (MDS). We note that Medexus Pharma, Inc. submitted an application for new technology add-on payments for GRAFAPEXTM for FY 2023 under the name treosulfan, as summarized in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28296 through 28302), that it withdrew prior to the issuance of the FY 2023 IPPS/LTCH PPS final rule (87 FR 48920). Please refer to the online application posting for GRAFAPEXTM, available at https://mearis.cms.gov/public/publications/ntap/NTP241007WE8D6, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, GRAFAPEXTM was granted NDA approval from FDA on January 21, 2025, for use in combination with fludarabine as a preparative regimen for allo-HSCT in adult and pediatric patients one year of age and older with either AML or MDS. The applicant stated that GRAFAPEXTM became commercially available on February 20, 2025, because the applicant required time after FDA marketing authorization to build inventory and stock the third-party logistic wholesalers prior to commercial launch. We are interested in additional information regarding the cause of any delay in the technology's commercial availability, such as additional information about building inventory and stocking logistic wholesalers. According to the applicant, GRAFAPEXTM is administered via intravenous infusion in conjunction with fludarabine from either a 1g or 5g vial after reconstitution with a 20mL or 100mL solution. Per the package insert,\82\ the recommended dosage of GRAFAPEXTM is 10g/m\2\ body surface area per day, given as a 2-hour intravenous infusion on 3 consecutive days (day -4, -3, -2) in conjunction with fludarabine before hematopoietic stem cell infusion on day 0. Per the [[Page 18118]] applicant, based on the estimated average body size for Medicare patients being treated with GRAFAPEXTM and the labeling for a 3-day treatment, the estimated average dose per inpatient stay is 54g. --------------------------------------------------------------------------- \82\ Oncotec Pharma Produktion GmbH. GRAFAPEXTM [package insert]. (Revised 2/2025). Available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2025/214759s001lbl.pdf. --------------------------------------------------------------------------- According to the applicant, effective October 1, 2022, the following ICD-10-PCS codes may be used to uniquely describe procedures involving the use of GRAFAPEXTM: XW04388 (Introduction of treosulfan into central vein, percutaneous approach, new technology group 8) or XW03388 (Introduction of treosulfan into peripheral vein, percutaneous approach, new technology group 8). The applicant provided a list of diagnosis codes that may be used to currently identify the indication for GRAFAPEXTM under the ICD-10-CM coding system. Please refer to the online application posting for the complete list of ICD-10-CM codes provided by the applicant. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that GRAFAPEXTM is not substantially similar to other currently available technologies because GRAFAPEXTM is a new chemical entity with a unique structure and unique mechanism of action that permits it to be metabolized without the liver, resulting in reduced toxicity while still delivering effective treatment, including for older and/or more comorbid patients who are ineligible for myeloablative conditioning (MAC) and face higher relapse risk if reduced intensity conditioning (RIC) is used. The applicant stated that GRAFAPEXTM addresses the unmet need in this patient population and is the only FDA-approved allo-HSCT conditioning agent for AML and MDS, and that therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for GRAFAPEXTM for the applicant's complete statements in support of its assertion that GRAFAPEXTM is not substantially similar to other currently available technologies. -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of No..................... As a prodrug, GRAFAPEXTM is activated under normal physiological action to achieve a therapeutic outcome? conditions with its own distinct cytotoxic activity toward hematopoietic precursor cells. GRAFAPEXTM has a unique mechanism of action that permits it to bypass the liver when it metabolizes, resulting in reduced toxicity while still delivering effective treatment, including for older patients and/or patients with significant comorbidities who are ineligible for MAC. Other alkylating agents used to date in allo-HSCT conditioning--for example, busulfan, melphalan, cyclophosphamide--are all metabolized by the liver, which results in higher toxicity and leads to excess regimen-related morbidity and mortality observed in older and comorbid patients. GRAFAPEXTM's mechanism of action differs from other agents in this class because no other alkylating agent has a mechanism of action that bypasses treated patients' liver. GRAFAPEXTM also has a unique chemical structure resulting from two hydroxide (OH) bonds not present in other alkylating agents. Due to these OH bonds, GRAFAPEXTM's mechanism of alkylation is entirely different compared to busulfan and other alkylating agents. Its distinct structure and unique mechanism of alkylation further distinguish GRAFAPEXTM's mechanism of action. GRAFAPEXTM's activity is due to the spontaneous, pH-dependent conversion into a monoepoxide intermediate and diepoxybutan that bypasses liver metabolism. These epoxides alkylate and crosslink nucleophilic centers of DNA and other biological molecules involved in various physiological functions and are responsible for its stem cell depleting, immunosuppressive, and antineoplastic effects. Because GRAFAPEXTM uniquely bypasses liver metabolism, it reduces treatment-related toxicity compared to other alkylating agents used to date for allo-HSCT conditioning. Is the technology assigned to the same MS-DRG as existing Yes.................... Medexus anticipates that inpatient cases involving administration technologies? of GRAFAPEXTM typically will be assigned to MS-DRG 014--Allogeneic Bone Marrow Transplant--because, in a majority of cases, it is anticipated that a patient would undergo GRAFAPEXTM-based conditioning during the same inpatient admission as allo-HSCT itself. It is Medexus's understanding that other conditioning treatments prior to allo-HSCT also would typically be assigned to MS-DRG 014. Some cases also may be assigned to MS-DRG 004. [[Page 18119]] Does new use of the technology involve the treatment of No..................... GRAFAPEXTM offers a critical new treatment option for allo-HSCT the same/similar type of disease and the same/similar conditioning for a different patient population compared to patient population when compared to an existing existing technologies. Many patients--especially older patients technology? and/or patients with significant comorbidities who have AML or MDS--are ineligible for MAC and face higher relapse risk with RIC. Multiple studies discuss the unmet need for this patient population based on previously available regimens and show that GRAFAPEXTM-based regimens are particularly well-suited and provide significant clinical benefits for this patient population. If approved, GRAFAPEXTM will be the only FDA-approved allo-HSCT conditioning agent for AML and MDS. A landmark multicenter RCT discusses how allo-HSCT conditioning regimens available to date are not suitable for all patients, especially older and/or more comorbid patients--an important population for Medicare. The limits of MAC and RIC create an unmet medical need particularly for the growing number of older or comorbid AML and MDS transplantation candidates. Peer-reviewed studies confirm GRAFAPEXTM addresses the unmet need for this patient population, including studies comparing GRAFAPEXTM-based regimens to busulfan- , melphalan-, cyclophosphamide-, and TBI-based regimens. GRAFAPEXTM-based conditioning thus involves treatment of a different patient population compared to previously existing conditioning regimens. -------------------------------------------------------------------------------------------------------------------------------------------------------- With respect to the substantial similarity criteria, we note that GRAFAPEXTM is an alkylating agent like other drugs used in conditioning, such as busulfan and melphalan. While the applicant stated that GRAFAPEXTM has a unique mechanism of action and unique structure that allows it to bypass liver metabolism, reducing toxicity, we question whether bypassing liver metabolism is the mechanism of action of a conditioning agent, or if it instead relates to clinical outcomes, such as the side effect profile of GRAFAPEXTM. In regard to whether GRAFAPEXTM treats the same or similar type of disease and the same or similar patient population compared to existing technologies, we question whether GRAFAPEXTM treats a new patient population since MAC, nonmyeloablative conditioning (NMA), and RIC are all options for patients. Additionally, while MAC may not be preferred for older or comorbid patients, RIC and NMA may still be options for these patients. We are inviting public comments on whether GRAFAPEXTM is substantially similar to existing technologies and whether GRAFAPEXTM meets the newness criterion. With respect to the cost criterion, the applicant provided two analyses to demonstrate that GRAFAPEXTM meets the cost criterion. Each analysis followed the order of operations summarized in the following table. GRAFAPEXTM Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes, ICD-10-PCS codes, and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for GRAFAPEXTM. Claims identified...................... Scenario 1: 713 claims mapping to 2 MS-DRGs, with 98.46% of claims mapping to MS-DRG 014 (Allogeneic Bone Marrow Transplant) and 1.54% of claims mapping to MS-DRG 004 (Tracheostomy With MV >96 Hours Or Principal Diagnosis Except Face, Mouth And Neck Without Major O.R. Procedures). Scenario 2: 466 claims mapping to two MS-DRGs, with 97.64% of claims mapping to MS-DRG 014 (Allogeneic Bone Marrow Transplant) and 2.36% of claims mapping to MS-DRG 004 (Tracheostomy With MV >96 Hours Or Principal Diagnosis Except Face, Mouth And Neck Without Major O.R. Procedures). Charges removed for prior technology... The applicant removed 100% of charges associated with drugs and cellular therapies (revenue centers 025x, 026x, and 063x), as an estimate of the percentage of total charges that the technology would replace could not be determined. The applicant did not remove indirect charges related to the prior technology. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2023 IPPS/LTCH PPS final rule correcting amendment. Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new technology... The applicant added charges for the new technology by dividing the cost of the new technology by the national average cost-to-charge ratio of 0.178 for Drugs and Cellular Therapies from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. Cost analysis results.................. Scenario 1: --Average case-weighted threshold amount: $368,736. --Final inflated average case-weighted standardized charge per case: $559,537. Scenario 2: --Average case-weighted threshold amount: $368,795. --Final inflated average case-weighted standardized charge per case: $559,369. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in both scenarios, the applicant asserted that GRAFAPEXTM meets the cost criterion. [[Page 18120]] We are inviting public comments on whether GRAFAPEXTM meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that GRAFAPEXTM offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments because GRAFAPEXTM offers a critical new treatment option and addresses an unmet need for allo-HSCT conditioning for older and/or more comorbid patients who have AML or MDS and are ineligible for currently available MAC regimens and face higher relapse risk if a RIC regimen is used. Additionally, per the applicant, GRAFAPEXTM significantly improves clinical outcomes relative to existing technologies because GRAFAPEXTM-based conditioning has shown superiority in survival (in terms of overall and event-free survival) and non-relapse mortality, as well as significant reductions in adverse events, such as graft-versus-host disease (GVHD), veno-occlusive disease (VOD), and infections, compared to previously available regimens. The applicant provided 10 studies to support these claims, as well as 1 background article that, per the applicant, indicates that many patients with AML or MDS, especially those who are older and/or have significant comorbidities, are ineligible for MAC regimens, and face higher risk of relapse with RIC regimens.\83\ The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for GRAFAPEXTM for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \83\ Background articles are not included in the following table but can be accessed via the online posting for the technology. ------------------------------------------------------------------------ Applicant statements in Supporting evidence provided by the support applicant ------------------------------------------------------------------------ Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ------------------------------------------------------------------------ GRAFAPEXTM offers a Beelen DW, Iacobelli S, Koster L, et al. treatment option for allo- Fludarabine-treosulfan versus fludarabine- HSCT conditioning for older melphalan or busulfan-cyclophosphamide and/or more comorbid conditioning in older AML or MDS patients who have AML or patients--A clinical trial to registry MDS, who are ineligible for data comparison. Bone Marrow Transplant. currently available MAC 2024;59(5):670-679. regimens. Wedge E, Sengel[oslash]v H, Hansen JW, et al. Improved Outcomes after Allogenic Hematopoietic Stem Cell Transplantation with Fludarabine/Treosulfan for Patients with Myelodysplastic Syndromes. Biol Blood Marrow Transplant. 2020;26(6):1091- 1098. Fraccaroli A, Stauffer E, Haebe S, et al. Treosulfan-Versus Melphalan-Based Reduced Intensity Conditioning in HLA- Haploidentical Transplantation for Patients >= 50 Years with Advanced MDS/ AML. Cancers (Basel). 2024;16(16):2859. Bug G, Labopin M, Niittyvuopio, R, et al. Fludarabine/TBI 8 Gy versus fludarabine/ treosulfan conditioning in patients with AML in first complete remission: a study from the Acute Leukemia Working Party of the EBMT. Bone Marrow Transplant. 2023;58(6):710-716. Nagler A, Labopin M, Beelen D, et al. Long- term outcome after a treosulfan-based conditioning regimen for patients with acute myeloid leukemia: A report from the Acute Leukemia Working Party of the European Society for Blood and Marrow Transplantation. Cancer. 2017;123(14):2671-2679. Gavriilaki E, Sakellari Ioanna, Labopin, et al. Survival advantage of treosulfan plus fludarabine (FT14) compared to busulfan plus fludarabine (FB4) in active acute myeloid leukemia post allogeneic transplantation: an analysis from the European Society for Blood and Marrow Transplantation (EBMT) Acute Leukemia Working Party (ALWP). Bone Marrow Transplant. 2023;58(10):1084-1088. Pasic I, Moya TA, Remberger Mats, et al. Treosulfan- Versus Busulfan-based Conditioning in Allogeneic Hematopoietic Cell Transplantation for Myelodysplastic Syndrome: A Single-center Retrospective Propensity Score-matched Cohort Study. Transplant Cell Ther. 2024;30(7):681.e1- 681.e11. Chichra A, Nayak L, Kothari R, et al. Fludarabine melphalan versus fludarabine treosulfan for reduced intensity conditioning regimen in allogeneic hematopoietic stem cell transplantation: a retrospective analysis. Int J Hematol. 2024;119(1):71-79. Beelen DW, Stelljes M, Rem[eacute]nyi P, et al. Treosulfan compared with reduced- intensity busulfan improves allogeneic hematopoietic cell transplantation outcomes of older acute myeloid leukemia and myelodysplastic syndrome patients: Final analysis of a prospective randomized trial. Am J Hematol. 2022;97(8):1023-1034. Shimoni A, Robin M, Iacobelli S, et al. Allogeneic hematopoietic cell transplantation in patients with myelodysplastic syndrome using treosulfan based compared to other reduced-intensity or myeloablative conditioning regimens. A report of the chronic malignancies working party of the EBMT. Br J Haematol. 2021;195(3):417-428. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. ------------------------------------------------------------------------ [[Page 18121]] Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ------------------------------------------------------------------------ GRAFAPEXTM-based Beelen, 2024, op. cit. conditioning has shown Wedge, 2020, op. cit. superior outcomes for event- Fraccaroli, 2024, op. cit. free survival (EFS), Bug, 2023, op. cit. overall survival (OS), and Nagler, 2017, op. cit. non-relapse mortality Gavriilaki, 2023, op. cit. (NRM), and significant Pasic, 2024, op. cit. reductions in several Chichra, 2024, op. cit. adverse events. Beelen, 2022, op. cit. Shimoni, 2021, op. cit. ------------------------------------------------------------------------ We also received a public comment in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for GRAFAPEXTM, which we summarize in this section. Comment: The applicant submitted a public comment summarizing the claims from its application regarding why it believes GRAFAPEXTM meets the substantial clinical improvement criterion. Additionally, the applicant provided additional information related to questions raised at the Town Hall meeting. With regard to a question asking for clarification with respect to whether any of the studies cited by the applicant compared GRAFAPEXTM-based conditioning to other reduced-toxicity conditioning (RTC) regimens, the applicant stated the classification concept of MAC and RIC regimens was defined around 2009. According to the applicant, Spyridonidis et al. (2020) introduced a new tool for measuring conditioning regimen intensity, called transplant conditioning intensity (TCI).\84\ The applicant quoted Spyridonidis et al. (2020) and stated that TCI ``provides an improvement of the RIC/MAC classification'' and ``enable[s] the identification of a distinct subgroup of RIC and MAC conditioning regimens with an intermediate TCI [2.5-3.5] score that had identical outcomes and which are frequently referred [to] as `reduced toxicity conditioning'.'' The applicant further noted that Spyridonidis et al. (2020) developed the TCI scoring tool to address limitations of the currently used RIC/MAC classification scheme. The applicant suggested that other conditioning regimens could also be categorized as RTC regimens based on this publication's TCI scoring methodology and classification system.\85\ The applicant noted that although a number of publications continued to use the MAC/RIC classification system, rather than incorporating RTC terminology or other nomenclature reflecting the TCI scoring classification system, Spyridonidis et al. (2020) reflects a new paradigm shift in conditioning regimen classification. Based on the TCI scoring methodology, the applicant provided examples of peer-reviewed publications from its application where both the GRAFAPEXTM plus fludarabine arm and comparator arm in the study were conditioning regimens that the applicant believed would likely be scored as intermediate-intensity or RTC regimens, that is regimens with a TCI score of 2.5-3.5. The applicant provided the following three examples. --------------------------------------------------------------------------- \84\ Spyridonidis, A., Labopin, M., Savani, B.N., Niittyvuopio, R., Blaise, D., Craddock, C., Soci[eacute], G., Platzbecker, U., Beelen, D., Milpied, N., Cornelissen, J.J., Ganser, A., Huynh, A., Griskevicius, L., Giebel, S., Brissot, E., Malard, F., Esteve, J., Peric, Z., Baron, F., . . . Mohty, M. (2020). Redefining and measuring transplant conditioning intensity in current era: a study in acute myeloid leukemia patients. Bone Marrow Transplantation, 55(6), 1114-1125. https://doi.org/10.1038/s41409-020-0803-y. \85\ See Figure 1b in Spyridonidis et al. (2020) for additional regimens with transplant conditioning intensity scores of 2.5-3.5 (intermediate/RTC range). --------------------------------------------------------------------------- First, the applicant calculated TCI scores for the regimens compared in Gavriilaki et al. (2023) based on dosage and the Spyridonidis et al. (2020) methodology: fludarabine <160mg/m2 (0.5 TCI score) plus GRAFAPEXTM 42g (3 TCI score) equates to a TCI score of 3.5; fludarabine <160mg/m2 (0.5 TCI score) plus busulfan 12.8mg/kg (3 TCI score) equates to a TCI score of 3.5. The applicant reiterated that Gavriilaki et al. (2023) found that the GRAFAPEXTM-based conditioning demonstrated superiority in overall survival (44.4 percent vs. 34 percent (p = 0.009)) and was similar in non-relapse mortality compared to the busulfan-based conditioning treatment in patients with relapsed or refractory AML. Second, the applicant calculated TCI scores for the regimens compared in Pasic et al. (2024) based on dosage and the Spyridonidis et al. (2020) methodology: fludarabine 35mg/m2 x 4 (0.5 TCI score) plus GRAFAPEXTM (2 or 3 TCI score) (depending on dose) equals a TCI score of 2.5 or 3.5 (depending on the GRAFAPEXTM dosage); fludarabine 35mg/m2 x 4 (0.5 TCI score) plus busulfan 3.2mg/kg x 2 (1 TCI score) plus total body irradiation 2Gy (1 TCI score) equals a TCI score of 2.5. The applicant reiterated the results from this study, noting that the GRAFAPEXTM-based conditioning regimen demonstrated superiority in overall survival, event-free survival, and non-relapse mortality at 2 years follow-up, 2-year superiority in GVHD relapse-free survival (GRFS), and a lower percentage of patients requiring at least one hospital readmission at 1 year compared to the comparison group (fludarabine+busulfan+total body irridation). Third, the applicant calculated TCI scores for the regimens compared in Chichra et al. (2023) based on dosage and the Spyridonidis et al. (2020) methodology: fludarabine 30mg/m2 x 4 (0.5 TCI score) plus GRAFAPEXTM 12-14g/m2 (2 or 3 TCI) (depending on dose) equals a TCI score of 2.5 or 3.5 (depending on the GRAFAPEXTM dosage); fludarabine (0.5 TCI score) plus melphalan 140mg/m2 (2 TCI score) equals a TCI score of 2.5. The applicant restated the study's results, including that the GRAFAPEXTM-based conditioning group had fewer acute toxicities and fewer cases of severe mucositis and diarrhea compared to the melphalan-based conditioning group. The applicant also provided information related to the following three points from its slide presentation at the new technology add-on payment Town Hall: (1) previously available allo-HSCT conditioning agents and regimens create an unmet need for conditioning treatment that minimizes toxicity while maximizing efficacy, especially for older patients and/or those with significant comorbidities; (2) other conditioning agents used to date are all metabolized [[Page 18122]] by the liver, which results in higher toxicity and leads to ``excess regimen-related morbidity and mortality observed in older and comorbid patients;'' \86\ and (3) GRAFAPEXTM reduces treatment- related toxicity because it uniquely bypasses liver metabolism. The applicant restated information from its application, specifically citing the Beelan et al. (2022) study in which 27 percent of patients were ages 65 to 74 years. The applicant noted that this study did not analyze the liver metabolism of conditioning agents but that it found a GRAFAPEXTM and fludarabine conditioning regimen performed better than a busulfan and fludarabine conditioning regimen in regards to event-free survival, overall survival, and non-relapse mortality. The applicant also stated that other alkylating agents used to date in allo-HSCT conditioning, such as busulfan, melphalan, cyclophosphamide, are all metabolized by the liver and that such metabolism by the liver results in higher toxicity.\87\ --------------------------------------------------------------------------- \86\ Beelen, 2022, op. cit. \87\ Scheulen, M.E., Hilger, R.A., Oberhoff, C., Casper, J., Freund, M., Josten, K.M., Bornh[auml]user, M., Ehninger, G., Berdel, W.E., Baumgart, J., Harstrick, A., Bojko, P., Wolf, H.H., Schindler, A.E., & Seeber, S. (2000). Clinical phase I dose escalation and pharmacokinetic study of high-dose chemotherapy with treosulfan and autologous peripheral blood stem cell transplantation in patients with advanced malignancies. Clinical Cancer Research, 6(11), 4209- 16. https://aacrjournals.org/clincancerres/article/6/11/4209/199579/Clinical-Phase-I-Dose-Escalation-and. --------------------------------------------------------------------------- Response: We thank the applicant for its comments. After review of the information provided by the applicant and the public comment received in response to the New Technology Town Hall meeting, we have the following concerns regarding whether GRAFAPEXTM meets the substantial clinical improvement criterion. The applicant stated GRAFAPEXTM offers a conditioning treatment regimen option for older and/or more comorbid patients with AML or MDS who are ineligible for currently available MAC regimens due to their high toxicity and higher relapse risk with RIC regimens. The applicant provided 11 studies which it stated show that GRAFAPEXTM- based regimens reduce the toxicity, non-relapse related mortality, and treatment related mortality associated with MAC without resulting in the increased incidence of relapse associated with RIC. However, we note that in two studies provided by the applicant comparing a GRAFAPEXTM-based regimen to RIC, there was a higher rate of relapse with the GRAFAPEXTM-based regimen. Specifically, in Fraccaroli et al. (2024), patients treated with a GRAFAPEXTM regimen demonstrated a higher cumulative incidence of relapse compared to the melphalan treatment group (24 percent vs. 0 percent, p=0.006). Similarly, we note that Bug et al. (2023) found that a fludarabine plus GRAFAPEXTM conditioning regimen had a higher cumulative incidence of relapse (34.7 percent) compared to a fludarabine plus fractionated total body irradiation conditioning regimen (18.3 percent, p = 0.018). Additionally, as the applicant noted in its Town Hall comment, GRAFAPEXTM-based regimens are not the only intermediate- intensity or RTC regimens. Specifically, the applicant mentioned three additional RTC regimens in addition to GRAFAPEXTM-based regimens: fludarabine <160mg/m2 plus busulfan 12.8mg/kg, fludarabine 35mg/m2 x 4 plus busulfan 3.2mg/kg x 2 plus total body irradiation 2Gy, and fludarabine plus melphalan 140mg/m2. We also note that RIC and NMA are additional options for these patients. Therefore, we question if GRAFAPEXTM-based regimens are the only treatment options for patients ineligible for MAC. With respect to the assertion that GRAFAPEXTM significantly improves clinical outcomes relative to services or technologies previously available, the applicant stated that GRAFAPEXTM-based conditioning has shown superior outcomes for event-free survival, overall survival, and non-relapse mortality, as well as significant reductions in several adverse events. To support its statements, the applicant provided 1 randomized trial for GRAFAPEXTM and 9 retrospective studies, which were also cited in support of the prior claim. However, we question the generalizability of these studies to the Medicare population. First, none of the studies assessing GRAFAPEXTM evaluated the treatment in a U.S. population; rather, all of the studies were conducted outside the U.S, and we question whether differences in treatment guidelines and regimens between countries could affect generalizability to the Medicare population. Second, we note that, of the submitted studies directly assessing GRAFAPEXTM, 7 had a majority of participants in the GRAFAPEXTM treatment arm under 65 years and 1 study (Wedge et al., 2020) did not include any participants over 66 years of age in the GRAFAPEXTM treatment group, and we therefore question whether outcomes seen in these studies are generalizable to the Medicare population. Third, relative to the number of Medicare patients with AML or MDS who may be eligible for allo-HSCT, two studies (Chichra et al., 2023; Fraccaroli et al., 2024) included small sample sizes among the GRAFAPEXTM treatment arms. In particular, Chichra et al. (2023) only contained 11 patients in the matched sibling donor/matched unrelated (MRD/MUD) donor fludarabine plus GRAFAPEXTM group and 16 patients in the haploidentical (Haplo) donor fludarabine plus GRAFAPEXTM group. Fraccaroli et al. (2024) included only 21 patients in the melphalan group and 21 patients in the GRAFAPEXTM group. Given these small sample sizes, we question whether these studies would be generalizable to the Medicare population due to the potential influence of confounding variables. We also note that in Beelen et al. (2024), about half of the data was missing for the comorbidity index and over half of the data was missing regarding the disease risk, which are characteristics that could impact efficacy, making it difficult to fully compare the treatment groups. We further note that while some studies showed improved overall survival, a lower NRM, and reduced adverse events with the GRAFAPEXTM-based regimen, there were some conflicting results across studies. First, while the applicant stated GRAFAPEXTM-based regimens have shown improved overall survival (OS), we note that in Bug et al. 2023, Chichra et al. 2023, and Fraccaroli et al. 2024, OS was similar between the GRAFAPEXTM-based regimen and RIC. Specifically, 2-year OS was 67.8 percent in the GRAFAPEXTM-based regimen in Bug et al. 2023 and 66.9 percent in the fludarabine/TBI group (HR 1.08 (95 percent CI, 0.67-1.75)). In Chichra et al. 2023, 5-year OS was 53 percent in those treated with a GRAFAPEXTM-based regimen (Flu-Treo) and 62 percent in those treated with fludarabine/melphalan (Flu-Mel) in the MRD/MUD transplant group (p=0.694) and 28 percent in Flu-Treo and 41 percent in Flu-Mel in the Haplo transplant group (p=0.770). In Fraccaroli et al. (2024), the 2-year survival was 66 percent in both the fludarabine-cyclophosphamide-melphalan and fludarabine-cyclophosphamide-GRAFAPEXTM groups (p=0.8). Second, the applicant asserted superior outcomes for GRAFAPEXTM in non-relapse mortality (NRM). However, multiple studies showed that GRAFAPEXTM had a NRM rate that was higher than or similar to other technologies. Per Chichra et al. (2023), the 2-year NRM was similar between Flu-Treo and Flu-Mel in the MRD/MUD and Haplo groups, although the specific numbers were not provided in the [[Page 18123]] study. In Gavriilaki et al. (2023), NRM was similar between fludarabine/GRAFAPEXTM (FT14) (20.8 percent) and fludarabine/busulfan (FB4) (22.6 percent) (p=0.46). Shimoni et al. (2021) found that 5-year NRM was statistically highest among patients who received MAC (34 percent) followed by those who received fludarabine and GRAFAPEXTM (30 percent) and lowest among those who received RIC (27 percent) (p=0.008). In Wedge et al. (2020), 3-year NRM was not statistically different (p=0.425) with a NRM of 13.6 percent for fludarabine/GRAFAPEXTM, 33.3 percent for standard myeloablative (SMA) conditioning, and 17.9 percent for nonmyeloablative (NMA) conditioning. Third, the applicant claimed a significant reduction in several clinically significant adverse events and complications that often lead to treatment-related mortality (TRM), such as graft-versus-host disease (GVHD), veno-occlusive disease (VOD), life-threatening infections, and organ toxicities. However, some studies showed similar or higher rates of adverse effects with the GRAFAPEXTM-based regimen. Specifically, Fraccaroli et al. (2024) reported a similar frequency of GVHD and renal failure, with no cases of VOD in either group and no statistical comparison of infection rates presented. Per Beelen et al. (2022), the frequencies of treatment-emergent adverse events and serious adverse events were equally distributed between the study arms. The incidence of acute GVHD and chronic GVHD was similar between treatment groups or higher with the GRAFAPEXTM-based regimen in Chichra et al. (2023), Bug et al. (2023), Gavriilaki et al. (2023), and Pasic et al. (2024). In Shimoni et al. (2021), there was no statistical difference in chronic GVHD among the treatment groups and in Wedge et al. (2020), acute GVHD was similar between FluTreo and NMA. We are inviting public comments on whether GRAFAPEXTM meets the substantial clinical improvement criterion. h. IMDELLTRATM (Tarlatamab-Dlle) Amgen, Inc. submitted an application for new technology add-on payments for IMDELLTRATM for FY 2026. According to the applicant, IMDELLTRATM is a novel, first-in-class bispecific T-cell engager (BiTE[supreg]) molecule for the treatment of adult patients with extensive stage small cell lung cancer (ES-SCLC) with disease progression on or after platinum-based chemotherapy. According to the applicant, IMDELLTRATM works by binding to the delta- like ligand 3 (DLL3) antigen expressed on the surface of SCLC tumor cells and the cluster of differentiation 3 (CD3) co-receptor expressed on the surface of T cells, causing T-cell activation, release of inflammatory cytokines, and lysis of DLL3-expressing cells. Please refer to the online application posting for IMDELLTRATM, available at https://mearis.cms.gov/public/publications/ntap/NTP241007BQ3UB, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, IMDELLTRATM was granted accelerated approval of its BLA from FDA on May 16, 2024, for the treatment of adult patients with ES-SCLC with disease progression on or after platinum-based chemotherapy. According to the applicant, IMDELLTRATM was commercially available immediately after FDA approval. The applicant stated that the first dose of IMDELLTRATM is 1 mg and all subsequent doses are 10 mg, with all doses administered by a healthcare provider as a 1- hour intravenous (IV) infusion. Per the applicant, the average inpatient dose is 7.3 mg based on available data. The applicant noted the only inpatient data available is for patients who experience cytokine release syndrome (CRS) or immune effector cell-associated neurotoxicity syndrome (ICANS) after IMDELLTRATM and it is unknown how many patients without these adverse events would receive IMDELLTRATM on an inpatient basis. According to the applicant, there are currently no ICD-10-PCS procedure codes to distinctly identify IMDELLTRATM. We note that the applicant submitted a request for approval for unique ICD-10- PCS procedure codes for IMDELLTRATM beginning in FY 2026. The applicant provided a list of diagnosis codes that may be used to currently identify the indication for IMDELLTRATM under the ICD-10-CM coding system. Please refer to the online application posting for the complete list of ICD-10-CM (and PCS) codes provided by the applicant. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that IMDELLTRATM is not substantially similar to other currently available technologies because it has a unique mechanism of action as a BiTE[supreg] that simultaneously binds DLL3 on SCLC cells and CD3 on T cells and because it is the only therapy specifically studied and shown to improve outcomes for patients who are relapsed or refractory to two or more other therapies and those with treated, stable brain metastases, and that therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for IMDELLTRATM for the applicant's complete statements in support of its assertion that IMDELLTRATM is not substantially similar to other currently available technologies. [[Page 18124]] -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of No..................... IMDELLTRATM has a unique mechanism of action as the first and only action to achieve a therapeutic outcome? approved BiTE[supreg] therapy targeting DLL3 across all patient populations and as the only BiTE[supreg] therapy approved for SCLC. IMDELLTRATM's mechanism of action involves simultaneously binding the DLL3 antigen on a SCLC cell and the CD3 antigen on the patient's own T cells. The binding of IMDELLTRATM results in the formation of a synapse between T cells and DLL3-expressing cells, including tumor cells, leading to T-cell activation causing the release of inflammatory cytokines and lysis of DLL3-expressing cells. Thus, IMDELLTRATM is unique as the only T-cell directed immunotherapy approved for ES-SCLC. In contrast, other approved ES- SCLC treatments are cytotoxic chemotherapies that work by interfering with the ability of rapidly dividing cells to replicate and divide, which can lead to cell death in both cancerous and noncancerous cells. Lurbinectedin is an alkylating drug that binds to DNA, forming adducts that perturb the cell cycle and cause cell death in dividing cells. Topotecan and irinotecan are topoisomerase-1 inhibitors that bind topoisomerase- 1-DNA complex and inhibit the repair of double-strand breaks in DNA in dividing cells. IMDELLTRATM has a novel mechanism of action targeting DLL3 for the treatment of ES-SCLC and is differentiated from existing ES-SCLC treatments due to the uniqueness of both this target and its tissue expression profile, which results in activation of the T cell and lysis of DLL3-expressing SCLC cells. Is the technology assigned to the same MS-DRG as existing Yes.................... The use of IMDELLTRATM to treat ES-SCLC is not expected to change technologies? the MS-DRG assignment of the case. Does new use of the technology involve the treatment of No..................... IMDELLTRATM does not involve the treatment of the same or similar the same/similar type of disease and the same/similar type of disease or the same or similar patient population when patient population when compared to an existing compared to existing technology because IMDELLTRATM is the first technology? and only BiTE[supreg] therapy available for the treatment of patients with ES-SCLC who have had disease progression on or after platinum-based chemotherapy. Furthermore, although IMDELLTRATM is indicated to treat patients after relapsing on first line (1L) platinum-based chemotherapy, for the subset of these patients who have become relapsed or refractory (R/R) to two or more therapies, IMDELLTRATM is the only therapy that is approved by FDA and has been specifically studied and demonstrated improvements in this population. IMDELLTRATM also is the only FDA-approved second line therapy (2L) that has been studied in SCLC patients with treated, stable brain metastases. -------------------------------------------------------------------------------------------------------------------------------------------------------- We note that while the applicant asserted that IMDELLTRATM does not involve the treatment of the same or similar disease or patient population because it is the first BiTE[supreg] therapy for patients with ES-SCLC who have had disease progression on or after platinum-based chemotherapy, per the applicant, other FDA-approved therapies for the treatment of the same patient population (patients who have ES-SCLC with disease progression on or after platinum-based chemotherapy) are currently available, such as lurbinectedin and topotecan. Further, with respect to the applicant's statements that IMDELLTRA[supreg] is the only FDA-approved therapy that has been specifically studied and demonstrated improvements in the subset of ES-SCLC patients who have become R/R to two or more therapies or that have stable brain metastases, we believe that these assertions may be relevant to substantial clinical improvement rather than newness and these patients may still be treated with lurbinectedin or topotecan. Therefore, we question the applicant's assertion that IMDELLTRATM treats a unique patient population compared to existing technology. We are inviting public comments on whether IMDELLTRATM is substantially similar to existing technologies and whether IMDELLTRATM meets the newness criterion. With respect to the cost criterion, the applicant provided two analyses to demonstrate that IMDELLTRATM meets the cost criterion. Each analysis followed the order of operations summarized in the following table. IMDELLTRATM Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes, ICD-10-PCS codes, and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for IMDELLTRATM. Claims identified...................... Scenario 1: 788 claims mapping to 16 MS-DRGs, with 43.02% of claims mapping to MS-DRG 180 (Respiratory Neoplasms with MCC). Scenario 2: 459 claims mapping to 5 MS-DRGs, with 73.86% of claims mapping to MS-DRG 180 (Respiratory Neoplasms with MCC). Charges removed for prior technology... The applicant removed 100% of charges associated with drugs and cellular therapies to account for the chemotherapy agent IMDELLTRATM will replace. The applicant noted there may be removed charges for non- chemotherapy agents, but was conservative by removing 100% of the drug and cellular therapy charges. The applicant did not remove indirect charges related to the prior technology. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the standardization file posted with the FY 2025 IPPS/LTCH PPS final rule and the impact file posted with FY 2023 IPPS/LTCH PPS final rule. Inflation factor....................... The applicant applied an inflation factor of 12.9% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. [[Page 18125]] Charges added for the new technology... The applicant added charges for the new technology by dividing the cost of a 10 mg dose of the new technology by the national average cost-to- charge ratio of 0.178 for Drugs and Cellular Therapies from the FY 2025 IPPS/LTCH PPS final rule. Per the applicant, it repeated this calculation for the 1 mg step up dose to confirm that, even if this dose is administered in the inpatient setting, the final inflated average case-weighted standardized charge per case exceeds the average case-weighted threshold for the cost criterion. The applicant did not add indirect charges related to the new technology. Cost analysis results.................. Scenario 1: --Average case-weighted threshold amount: $102,317. --Final inflated average case-weighted standardized charge per case: $230,190. Scenario 2: --Average case-weighted threshold amount: $73,433. --Final inflated average case-weighted standardized charge per case: $203,476. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in both scenarios, the applicant asserted that IMDELLTRATM meets the cost criterion. We are inviting public comments on whether IMDELLTRATM meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that IMDELLTRATM represents a substantial clinical improvement over existing technologies because IMDELLTRATM offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments and the technology significantly improves clinical outcomes relative to services or technologies previously available. Specifically, per the applicant, IMDELLTRATM is a novel treatment option that offers substantial clinical improvement through deep and durable response for patients with ES-SCLC relapsed on platinum-based chemotherapy. The applicant further stated that IMDELLTRATM is the only approved DLL3-directed-CD3 T-cell engager for the treatment of ES-SCLC, for which there is a profound unmet need in this population who suffer from devastating outcomes and suboptimal care from limited and ineffective treatment options. The applicant provided four articles regarding outcomes from the phase I DeLLphi-300 and phase II DeLLphi-301 trials and the IMDELLTRATM prescribing information to support these claims, as well as 16 background articles about SCLC and existing treatments for the disease.\88\ The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for IMDELLTRATM for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \88\ Background articles are not included in the following table but can be accessed via the online posting for the technology. ------------------------------------------------------------------------ Supporting evidence provided by the Applicant statements in support applicant ------------------------------------------------------------------------ Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ------------------------------------------------------------------------ The majority of ES-SCLC patients The applicant provided background who are relapsed or refractory to information to support this claim, 1L treatment are, or become, which can be accessed via the unresponsive to previously online posting for the technology. approved 2L treatments. There are limited treatment Ahn M, Cho B, et al. Tarlatamab for options for ES-SCLC patients who Patients with Previously Treated have relapsed, and IMDELLTRATM is Small-Cell Lung Cancer. N Eng J a new option for SCLC patients Med. 2023;389:2063-75. who have relapsed and are IMDELLTRATM (tarlatamab-dlle) resistant to initial treatment injection, for intravenous use; options. Amgen, Inc., 2024. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. IMDELLTRATM is the first therapy Ahn, 2023, op. cit. that has shown meaningful Sands J, Cho BC, et al. Tarlatamab improvements in outcomes in the Sustained Clinical Benefit and subset of patients who have Safety in Previously Treated SCLC: failed two or more prior DeLLphi-301 Phase 2 Extended Follow- therapies. up. Oral presentation (#OA10.03) at 2024 World Conference on Lung Cancer in San Diego, California. September 9, 2024. Dingemans A, Ahn M, et al. DeLLphi- 301: Tarlatamab phase 2 trial in small cell lung cancer (SCLC)-- Efficacy and safety analyzed by presence of brain metastasis. J Clin Oncology. 2024;42:8015. Amgen, Inc., 2024, op. cit. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. ------------------------------------------------------------------------ Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ------------------------------------------------------------------------ Outcomes on existing therapies for The applicant provided background ES-SCLC continue to be very poor, information to support this claim, particularly as all previously which can be accessed via the approved therapies have high online posting for the technology. relapse rates. [[Page 18126]] IMDELLTRATM has shown substantial Sands, 2024, op. cit. clinically meaningful improvement Ahn, 2023, op. cit. in outcomes relative to other Amgen, Inc., 2024, op. cit. available therapies for ES-SCLC The applicant also provided patients. background information to support this claim, which can be accessed via the online posting for the technology. In ES-SCLC patients with stable Ahn, 2023, op. cit. brain metastases pre-treated with Dingemans, 2024, op. cit. two or more prior therapies, Amgen, Inc., 2024, op. cit. IMDELLTRATM showed similar Dowlati A, Hummel H-D, et al. clinical outcomes as patients Sustained Clinical Benefit and without brain metastases in post- Intracranial Activity of Tarlatamab hoc analysis. in Previously Treated Small Cell Lung Cancer: DeLLphi-300 Trial Update. J Clin Oncology. published online August 29, 2024. doi: 10.1200/JCO.24.00553. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. IMDELLTRATM has a generally Amgen, Inc., 2024, op. cit. manageable safety profile and a Ahn, 2023, op. cit. low incidence of treatment- The applicant also provided related neutropenia. background information to support this claim, which can be accessed via the online posting for the technology. ------------------------------------------------------------------------ We also received a public comment in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for IMDELLTRATM, which we are summarizing in this section. Comment: The applicant submitted a comment responding to questions raised at the Town Hall meeting. In response to a question regarding how the applicant controlled for differences in patient demographics when comparing to other studies, the applicant stated there is reliable information about patient demographics and outcomes in ES-SCLC patients on currently available treatment supporting that IMDELLTRATM is a substantial clinical improvement. The applicant referred to a number of studies included in its application to support the statement. First, the applicant noted that topotecan was evaluated in a randomized, multicenter study of patients with SCLC who had relapsed at least 60 days after completion of 1L therapy; patients with documented brain metastases were included and represented 11.2 percent of the topotecan arm of the study.\89\ The applicant also stated that lurbinectedin was evaluated in a phase II single-arm, open-label basket trial with SCLC patients who had previously failed on platinum-based chemotherapy; the patient population had a median age of 60 years and patients with brain metastases were excluded.\90\ Per the applicant, while topotecan and lurbinectedin registrational trials did not study a third line (3L) patient population, these therapies have been studied in the real-world setting for U.S. patients since their FDA approvals in 1996 and 2020, respectively, including analyses of real-world overall survival (rwOS).91 92 93 The applicant further stated that IMDELLTRATM was evaluated in a phase 2 multi- cohort, open-label trial in patients R/R to one platinum-based treatment and at least one other line of therapy, and were Eastern Cooperative Oncology Group (ECOG) performance-status grade < 2. Per the applicant, in this pre-treated population, approximately 33 percent of patients had received 3 or more therapies; of the 99 patients treated with IMDELLTRATM, 48 percent were 65 years of age or older and 10 percent were 75 years of age or older.\94\ In addition, per the applicant, there is a post-hoc analysis of the 23 percent of patients with stable, treated brain metastases receiving the FDA-approved dose.\95\ --------------------------------------------------------------------------- \89\ von Pawel J, Schiller J, et al. Topotecan Versus Cyclophosphamide, Doxorubicin, and Vincristine for the Treatment of Recurrent Small-Cell Lung Cancer. J Clin Oncology. 1999;17(2):658- 667. \90\ Trigo J, Subbiah V, et al. Lurbinectedin as second-line treatment for patients with small-cell lung cancer: a single-arm, open-label, phase 2 basket trial. Lancet Oncol. 2020;21(5):645-654. \91\ Borghaei H, Pundole X, Sangar[eacute] L, et al. Natural history of SCLC patients treated in third-line and beyond: A retrospective real world study. Lung Cancer. 2024;193:10781. doi:10.1016/j.lungcan.2024.107819. \92\ Coutinho AD, Shah M, Lunacsek OE, Eaddy M, & Willey JP. Real-world treatment patterns and outcomes of patients with small cell lung cancer progressing after 2 lines of therapy. Lung Cancer. 2019;127:53-58. \93\ Desai A, Smith C, et al. Real-World Outcomes With Lurbinectedin in Second-Line Setting and Beyond for Extensive Stage Small Cell Lung Cancer. Clinical Lung Cancer. 2023;24(8):689-695. \94\ Anh, 2023, op. cit. \95\ Dingemans, 2024, op. cit. --------------------------------------------------------------------------- With respect to a question regarding how the applicant compared IMDELLTRATM's overall response rate (ORR) to other therapies without data that shows the populations studied match, the applicant stated that as previously noted, there is a significant amount of clinical literature available regarding outcomes for ES-SCLC patients on currently available treatment to support the applicant's claims of substantial clinical improvement for IMDELLTRATM without the need for head-to-head studies, which are not required as part of the new technology add-on payment criteria. Further, the applicant noted that tumor response (for example, ORR) is considered a direct measure of drug antitumor activity, which can be adequately evaluated in a single-arm study. Additionally, the applicant stated that overall survival (OS) and progression-free survival (PFS) endpoints must be interpreted with caution in single-arm trials and confirmatory phase III trials are needed to confirm OS and PFS results. The applicant stated that it is clear from currently available literature that patients with ES-SCLC after failing on chemotherapy have extremely poor outcomes on existing therapies, where response and survival are measured in just a few months. The applicant again referred to a number of studies included in its application to support the statement. The applicant summarized the registrational trial results for the other currently FDA-approved treatments for adult 2L ES-SCLC patients and noted that topotecan demonstrated an ORR of 24.3 percent, a duration of response (DOR) of 3.3 months (14.4 weeks), a median PFS (mPFS) of 3.1 months (13.3 weeks), and a median OS (mOS) of 5.8 months (25 weeks) in its pivotal trial (n=107).\96\ The applicant stated lurbinectedin demonstrated an ORR of 35 percent, a DOR of 5.3 months, a mPFS of 3.5 months, and mOS of 9.3 months in its pivotal trial (n=105). The applicant noted, however, that this clinical trial data lacks evidence on patients with brain metastases per the trial's exclusion criteria.\97\ In addition, the applicant [[Page 18127]] noted that lurbinectedin failed to reach its primary endpoint of OS in the confirmatory phase 3 ATLANTIS trial.\98\ Further, the applicant referenced the real-world analysis of U.S. patients in the 3L setting by Borghaei et al. (2024), which found median rwOS was 5.3 months (n=326; 95 percent CI, 4.5-6.0) following initiation of 3L therapies (topotecan, lurbinectedin, immunotherapy, taxane monotherapy or platinum-based chemotherapy with immunotherapy). The applicant stated in addition that this analysis found the median time from SCLC diagnosis to 3L therapy initiation was 400 days. --------------------------------------------------------------------------- \96\ von Pawel, 1999, op. cit. \97\ Trigo, 2020, op. cit. \98\ Aix S, Ciuleanu T, et al. Combination lurbinectedin and doxorubicin versus physician's choice of chemotherapy in patients with relapsed small-cell lung cancer (ATLANTIS): a multicentre, randomised, open-label, phase 3 trial. Lancet Respir Med. 2023;11:74-86. --------------------------------------------------------------------------- Per the applicant, IMDELLTRATM had an ORR of 40 percent and a mDOR of 9.7 months, with 43 percent of responses ongoing at data cutoff in an extended follow-up analysis. In addition, the applicant stated mOS was 15.2 months and was similar regardless of progression- free interval (<90 days or 90+ days) after 1L platinum-based chemotherapy (n=100).\99\ The applicant further stated that based on a post-hoc analysis of the multi-cohort trial, efficacy outcomes were also similar for patients with stable, treated brain metastases and those without brain metastases.\100\ The applicant noted that Dingemans et al. (2024) found stable, treated brain metastases patients in the trial had an ORR of 54.5 percent, mPFS of 7.1 months, and mOS of 14.3 months. The applicant noted that IMDELLTRATM shows clinical improvement by allowing patients to possibly live for more than 4 to 6 months following initiation of 2L treatment. The applicant also noted that the American Society of Clinical Oncology (ASCO) recently came to a similar conclusion independently, as per the updated ASCO guideline on systemic therapy for SCLC submitted with respect to the substantial clinical improvement criteria.\101\ The applicant stated ASCO had the same information available to it with respect to outcomes on lurbinectedin, topotecan, and IMDELLTRATM as that provided by the applicant in its application, and updated ASCO guidelines stated that the cross-trial comparisons suggest that both lurbinectedin and IMDELLTRATM are more effective than topotecan or other agents, although the DOR of >9 months reported with IMDELLTRATM is substantially longer than that seen with other agents. --------------------------------------------------------------------------- \99\ Sands, 2024, op. cit. \100\ Dingemans, 2024, op. cit. \101\ Kalemkerian GP, Khurshid H, Ismaila N. Systemic Therapy for Small Cell Lung Cancer: ASCO Guideline Rapid Recommendation Update. JCO 0, JCO-24-02245. --------------------------------------------------------------------------- In addition to the studies submitted by the applicant in its application, the applicant noted that it has conducted an indirect treatment comparison (ITC) to evaluate the relative benefit in survival outcomes and response between IMDELLTRATM versus real-world physicians' choice of therapy from a historical control cohort captured in the U.S. Flatiron electronic health records database.\102\ The applicant provided the ITC's research protocol as additional background about how the ITC compared OS, PFS, and ORR,\103\ and indicated that the study results are expected to be available in March 2025. --------------------------------------------------------------------------- \102\ EMA, Real World Data Catalogues, Tarlatamab vs. Real-world Physicians' Choice Therapies in Patients with Relapsed or Refractory Small Cell Lung Cancer After Two or More Prior Lines of Treatment: Patient-level Indirect Treatment Comparison (ITC) of DeLLphi-301 vs. Flatiron Real-world Data; available at: https://catalogues.ema.europa.eu/node/4199/administrative-details. Accessed December 13, 2024. \103\ Per the applicant, the research protocol is available at https://catalogues.ema.europa.eu/system/files/2024-10/20240049_tarlatamab_Protocol-Published%20Amendment.pdf. --------------------------------------------------------------------------- Response: We thank the applicant for its comments. After review of the information provided by the applicant and the public comment received in response to the New Technology Town Hall meeting, we have the following concerns regarding whether IMDELLTRATM meets the substantial clinical improvement criterion. The applicant stated that IMDELLTRATM offers a treatment option for patients with 2L+ ES-SCLC that are unresponsive to, or ineligible for, currently available treatments, however it is unclear that these patients are unresponsive or ineligible for existing 2L+ treatments for ES-SCLC, such as lurbinectedin and topotecan. The applicant claimed that the majority of ES-SCLC patients who are relapsed or refractory to 1L treatment are or become unresponsive to previously approved 2L treatments. For this claim, the applicant provided background articles regarding treatment of ES-SCLC, but did not indicate a patient population that IMDELLTRATM treats that is ineligible or unresponsive to other 2L treatments. The applicant also claimed that there are limited treatment options for ES-SCLC patients who have relapsed and IMDELLTRATM is a new option for these patients. However, we note that having limited treatment options does not demonstrate that these patients are unresponsive or ineligible for any available therapies. In addition, while the applicant provided results from the pivotal DeLLphi-301 study of IMDELLTRATM stating that it is the first therapy that has shown meaningful outcome improvements in patients who have failed two or more prior therapies, the study did not list these therapies, and we also note that retreatment with platinum-based chemotherapy was considered an additional line of therapy per the study. Therefore, it is unclear that the study demonstrated that patients had failed existing 2L+ treatments, including lurbinectedin and topotecan. For these reasons, we question the assertion that IMDELLTRATM offers a treatment for a patient population unresponsive to, or ineligible for, currently available treatments. With respect to the applicant's statement that IMDELLTRA[supreg] improves clinical outcomes over existing technologies because outcomes on existing therapies for ES-SCLC continue to be very poor, particularly as all previously approved therapies have high relapse rates, and that, in the past 2 decades, relapsed ES-SCLC patients who have failed platinum-based chemotherapy have had few treatment options as only topotecan and lurbinectedin are FDA-approved and indicated for these patients, we note that the applicant provided outcome data for topotecan and lurbinectedin, in addition to highlighting that lurbinectedin, pembrolizumab, and nivolumab failed to show a benefit in OS in the confirmatory phase 3 clinical trials. However, the applicant did not provide relapse rates for current therapies, including IMDELLTRATM, and did not compare the provided outcome data to IMDELLTRATM, and therefore we question how this demonstrates that IMDELLTRATM improves clinical outcomes relative to these therapies. To support its other statements regarding improved outcomes for IMDELLTRATM, the applicant provided results from DeLLphi- 301, a phase 2, single arm, open-label, international trial which evaluated antitumor activity and safety of IMDELLTRATM in patients with advanced SCLC previously treated with two or more lines of therapy.\104\ However, we note that, of the 134 patients treated with the target dose of IMDELLTRATM, only 14 were from North America (without further specification on the country), and we question whether differences in treatment guidelines between countries could affect generalizability to the [[Page 18128]] Medicare population. We also note that 75 percent (101/134) of the patients who took the approved dose of 10 mg in DeLLphi-301 had a previous use of a programmed death ligand 1 (PD-L1) or programmed death 1 (PD-1) inhibitor,\105\ which are recommended as part of the initial therapy for ES-SCLC, and we therefore question whether the results of the DeLLphi-301 study were different between the group of patients who previously received these therapies versus those who did not. We further note that the applicant also provided the Sands et al. (2024) presentation and the Dingemans et al. (2024) abstract which are unpublished overviews that do not provide full details on the study methods; therefore, we do not have sufficient information to evaluate these studies. --------------------------------------------------------------------------- \104\ Anh, 2023, op. cit. \105\ Anh, 2023, op. cit. --------------------------------------------------------------------------- With respect to the claim that IMDELLTRATM has shown substantial clinically meaningful improvement in outcomes relative to other available therapies for ES-SCLC patients, the applicant provided outcomes for IMDELLTRATM from the DeLLphi-301 single arm, phase 2 trial and compared them to outcomes from trials for other approved treatments for patients who have relapsed on first-line chemotherapy. The applicant stated that IMDELLTRATM, lurbinectedin, and topotecan are FDA-approved and no treatments are specifically FDA-approved for 3L treatment. The applicant stated chemotherapy is a 3L treatment and has a mOS of 4.4 months, ORR of 21 percent, mDOR of 2.6 months, and mPFS of 2.3 months.\106\ The applicant also noted that lurbinectedin can be used as a 3L agent, but mOS was 5.6 months according to real world data.\107\ The applicant also stated IMDELLTRATM had an ORR of 40 percent, mDOR of 9.7 months, mPFS of 4.9 months, and mOS of 14.3 months,\108\ with an mOS of 15.2 months after extended follow-up.\109\ The applicant further noted that in a subgroup analysis of 22 patients with stable, treated brain metastases, IMDELLTRATM showed similar outcomes with an ORR of 54.5 percent, mPFS of 7.1 months, and mOS of 14.3 months.\110\ The applicant stated the registrational study for topotecan included patients with brain metastases and reported a mOS of only 5.8 months,\111\ while the pivotal phase II trial for lurbinectedin excluded patients with brain metastases and in a real-world analysis among 14 patients who received 3L therapy with lurbinectedin (11 of which with CNS metastases), the mOS was 5.6 months.\112\ However, we note that the applicant also stated in its Town Hall comment that tumor response (for example, ORR) can be adequately evaluated in a single-arm study, while OS and PFS endpoints must be interpreted with caution in single-arm trials and confirmatory phase 3 trials are needed to confirm OS and PFS results. Therefore, we question the applicant's use of OS and PFS to support improved clinical outcomes with IMDELLTRATM compared to previously available therapy. Additionally, the applicant stated that the trial demonstrated mOS of 14.3 months for IMDELLTRATM,\113\ and compared it to lurbinectedin's mOS of 5.6 months according to real world data,\114\ but we question whether it is appropriate to compare clinical trial and real world data. We note, for example, that the phase 2 single arm trial for lurbinectedin noted an OS of 9.3 months (Trigo et al. (2020)), and we therefore question how the applicant chose the historical control it used in these comparisons of outcomes. In addition, the applicant noted that ORR can be evaluated in a single-arm study and provides the ORR for IMDELLTRATM (40 percent in 3L therapy \115\ and 54.5 percent in patients with stable brain metastases \116\), but did not provide the ORR for topotecan or lurbinectedin in patients with stable brain metastases, nor in patients that are taking 3L therapy. Therefore, we question the applicant's assertion of improved clinical outcomes for IMDELLTRATM compared to previously available therapy. --------------------------------------------------------------------------- \106\ Coutinho, 2019, op. cit. \107\ Desai, 2023, op. cit. \108\ Ahn, 2023, op. cit. \109\ Sands, 2024, op. cit. \110\ Dingemans, 2024, op. cit. \111\ von Pawel, 1999, op. cit. \112\ Desai, 2023, op. cit. \113\ Ahn, 2023, op. cit. \114\ Desai, 2023, op. cit. \115\ Ahn, 2023, op. cit. \116\ Dingemans, 2024, op. cit. --------------------------------------------------------------------------- We agree with the applicant that head-to-head trials, while preferred, are not required for comparing currently available therapy. However, we note that among the clinical trial and real-world data provided for alternative therapies to IMDELLTRATM, there was no control for confounding variables to ensure similar patients were being compared to those who took IMDELLTRATM. Additionally, we note that the real-world data provided for lurbinectedin as third line therapy and the data for the subset of patients from DeLLphi-301 with brain metastases were small sample sizes of 14 and 22, respectively, which may limit generalizability of these results to the Medicare population as confounding variables could affect the results. We note that exclusion of patients with brain metastases from the pivotal phase 2 trial for lurbinectedin does not exclude use of this drug in this patient population. We further question the use of von Pawel et al. (1999) study of topotecan as a comparator to IMDELLTRATM since it was conducted approximately 25 years before the IMDELLTRATM phase 2 trial (Ahn et al., 2023) and included some highly varied patient outcomes (such as topotecan duration of responses ranging from 9.4-50.1 weeks). We note that guidelines and treatment protocols for SCLC have evolved over this extended period and the resulting changes in care standards may have impacted the outcomes observed from the older study versus the more recent one. In addition, the applicant stated that clinical trials of topotecan and lurbinectedin reported higher rates of >= Grade 3 neutropenia than reported in the DeLLphi-301 study with IMDELLTRATM monotherapy, but did not consider other serious adverse events such as cytokine release syndrome (CRS) or immune effector cell-associated neurotoxicity syndrome (ICANS), which are possible side effects for IMDELLTRATM but not for topotecan or lurbinectedin. We further note that there was no control for potential confounding variables in the patient populations in the comparisons of neutropenia rates, and it is therefore difficult to draw conclusions regarding relative side effect profiles among these different trials. We are inviting public comments on whether IMDELLTRATM meets the substantial clinical improvement criterion. i. IntelliSep Test Cytovale, Inc. submitted an application for new technology add-on payments for the IntelliSep[supreg] Test for FY 2026. According to the applicant, the IntelliSep[supreg] Test is a semi-quantitative test that assesses cellular host response via a microfluidic deformability cytometry of leukocyte biophysical properties and is intended for use in conjunction with clinical assessments and laboratory findings to aid in the early detection of sepsis with organ dysfunction for adults presenting to the Emergency Department (ED). The IntelliSep[supreg] Test generates an index value that falls within 1 of 3 discrete interpretation bands based on the probability of sepsis with organ dysfunction manifesting within the first 3 days after testing. [[Page 18129]] Please refer to the online application posting for the IntelliSep[supreg] Test, available at https://mearis.cms.gov/public/publications/ntap/NTP24100553685, for additional detail describing the technology and the disease diagnosed in part by the technology. With respect to the newness criterion, according to the applicant, the IntelliSep[supreg] Test was granted 510(k) clearance from FDA on December 20, 2022, for use in adult patients with signs and symptoms of infection who present to the ED. According to the applicant, the IntelliSep[supreg] Test was commercially available immediately after FDA marketing authorization. The applicant stated that one IntelliSep[supreg] Test is used per patient per inpatient stay. The applicant stated that, effective April 1, 2025, the following ICD-10-PCS procedure code may be used to uniquely describe procedures involving the use of the IntelliSep[supreg] Test: XXE5X5A (Measurement of immune response, whole blood cellular assessment via microfluidic deformability, new technology group 10). The applicant provided a list of diagnosis codes that may be used to currently identify the indication for the IntelliSep[supreg] Test using the ICD-10-CM coding system. Please refer to the online application posting for the complete list of ICD-10-CM codes provided by the applicant. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that the IntelliSep[supreg] Test is not substantially similar to other currently available technologies because the IntelliSep[supreg] Test is the only FDA-cleared test that uses a microfluidic deformability cytometry technique for early detection of sepsis in the ED regardless of whether the patient is admitted to the hospital or not and that therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for the IntelliSep[supreg] Test for the applicant's complete statements in support of its assertion that the IntelliSep[supreg] Test is not substantially similar to other currently available technologies. -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of No..................... The IntelliSep[supreg] Test is the only test that uses a action to achieve a therapeutic outcome? microfluidic deformability cytometry technique to measure the biophysical properties of thousands of individual leukocytes in rapid succession. These properties have been shown to differ in quiescent white blood cell populations when compared to those in septic patients, enabling for rapid assessment of the host response and the likelihood of having or developing sepsis. Other tests for sepsis exist, but these tests measure biomarker levels or gene expression to generate their signal. Is the technology assigned to the same MS-DRG as existing Yes.................... The use of any test to detect the presence of sepsis does not technologies? impact the MS-DRG assignment of the discharge. Does new use of the technology involve the treatment of No..................... While other tests can be used to detect the presence of sepsis, the the same/similar type of disease and the same/similar IntelliSep[supreg] Test is the first and only FDA-cleared test for patient population when compared to an existing early detection of sepsis with organ dysfunction in adult patients technology? with signs and symptoms of infection who present to the ED, regardless of whether the patient is admitted to the hospital or not. Other tests indicated for early detection of sepsis can only be administered after the patient has been admitted to the hospital. -------------------------------------------------------------------------------------------------------------------------------------------------------- With respect to the substantial similarity criteria, we note the following concerns. We note that the applicant did not compare the IntelliSep[supreg] Test's mechanism of action to those of other sepsis tests or detection tools, such as the Early Sepsis Indicator for monocyte distribution width (MDW), SeptiCyte[supreg] RAPID, and Sepsis ImmunoScoreTM. We further note that MDW measurement involves the assessment of white blood cells to detect pathogen-induced infections. Specifically, MDW measures the variability in peripheral monocyte morphologic characteristics that increase during early phases of infection after pathogen-induced monocyte activation.\117\ Notably, monocytes (measured for MDW) are one type of leukocyte, and the IntelliSep[supreg] Test also evaluates leukocytes in its mechanism of action.\118\ While the techniques of leukocyte measurement may differ, the subject of measurement appears to be the same or similar. Therefore, we question whether the IntelliSep[supreg] Test's measurement of leukocytes and their deformities is a unique mechanism of action, particularly in comparison to the Early Sepsis Indicator. Further, we question whether the measurement of different biomarkers or gene expression to determine the risk of sepsis is different than the measurement of leukocyte properties to determine the risk of sepsis. We are interested in information regarding how the IntelliSep[supreg] Test's mechanism of action differs from other such sepsis tests and detection tools. --------------------------------------------------------------------------- \117\ Malinovska, A., Hernried, B., Lin, A., Badaki-Makun, O., Fenstermacher, K., Ervin, A.M., Ehrhardt, S., Levin, S., & Hinson, J.S. (2023). Monocyte Distribution Width as a Diagnostic Marker for Infection: A Systematic Review and Meta-analysis. Chest, 164(1), 101-113. https://doi.org/10.1016/j.chest.2022.12.049. \118\ U.S. Food and Drug Administration. (2022). 510(k) approval letter for IntelliSep Test, 21 CFR 866.3215, device to detect and measure non-microbial analyte(s) in human clinical specimens to aid in assessment of patients with suspected sepsis. https://www.accessdata.fda.gov/cdrh_docs/pdf22/K220991.pdf. --------------------------------------------------------------------------- In addition, while the applicant stated that the use of the IntelliSep[supreg] Test does not involve treatment of the same or similar population and disease as existing technologies, we note that the IntelliSep[supreg] Test is a diagnostic tool to evaluate patients with suspected infection, as are other FDA-cleared sepsis diagnostic tools, such as those that calculate Quick Sequential Organ Failure Assessment (qSOFA) scores (for example, SpassageQ \119\ or NAVOY CDS[supreg] \120\). Furthermore, there are also other means of assessment, including body temperature, respiratory rate, heart rate, blood counts, and blood cultures, that are used to diagnosis sepsis. We also question whether a patient's location, whether in the ED, admitted to the hospital, or in the intensive care [[Page 18130]] unit (ICU) constitutes a different population. Further, we note that there are existing sepsis diagnostic technologies that are also approved for use in the ED such as the Early Sepsis Indicator and Sepsis ImmunoScoreTM, which were FDA market-authorized on March 18, 2019 and April 2, 2024, respectively.121 122 Therefore, it is unclear that there are no existing technologies other than the IntelliSep[supreg] Test that are involved with the diagnosis of sepsis in adult patients who have signs and symptoms of infection. --------------------------------------------------------------------------- \119\ https://www.accessdata.fda.gov/cdrh_docs/pdf23/K230386.pdf. \120\ https://www.accessdata.fda.gov/cdrh_docs/pdf24/K240558.pdf. \121\ https://www.accessdata.fda.gov/scrIpts/cdrh/cfdocs/cfpmn/pmn.cfm?id=K181599. \122\ https://www.accessdata.fda.gov/cdrh_docs/pdf23/DEN230036.pdf. --------------------------------------------------------------------------- We are inviting public comments on whether the IntelliSep[supreg] Test is substantially similar to existing technologies and whether the IntelliSep[supreg] Test meets the newness criterion. With respect to the cost criterion, the applicant provided an analysis to demonstrate that the IntelliSep[supreg] Test meets the cost criterion. The analysis followed the order of operations summarized in the following table. IntelliSep[supreg] Test Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for the IntelliSep[supreg] Test. Claims identified...................... 2,708,804 claims mapping to 717 MS-DRGs, with 18.86% of claims mapping to MS-DRG 871 (Septicemia or Severe Sepsis without MV >96 Hours with MCC). Charges removed for prior technology... Per the applicant, the IntelliSep[supreg] Test is not replacing a prior technology as it provides additional information to the clinician to determine if the patient has sepsis. As such, the applicant did not remove any estimated charges for a prior technology. The applicant stated that 25% of charges associated with Room and Board (revenue centers 011X-015X) and ICU/CCU (021X, 022X) were removed as the use of this technology can reduce average length of stay. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2023 IPPS/LTCH PPS final rule correcting amendment. Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new technology... The applicant added charges for the new technology by dividing the cost of the new technology by the national average cost-to-charge ratio of 0.102 for Laboratory from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. Cost analysis results.................. Average case-weighted threshold amount: $75,886. Final inflated average case-weighted standardized charge per case: $86,075. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant asserted that the IntelliSep[supreg] Test meets the cost criterion. We are inviting public comments on whether the IntelliSep[supreg] Test meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that the IntelliSep[supreg] Test represents a substantial clinical improvement over existing technologies because the IntelliSep[supreg] Test is the only technology that is FDA-cleared for use in the ED to rapidly assess immune activation and identify sepsis risk in approximately 10 minutes, providing actionable results that significantly impact clinical decision-making and patient outcomes. The applicant provided 9 studies to support these claims,\123\ as well as 19 background articles about international sepsis guidelines, antimicrobial therapy initiation, timing of antibiotic administration, and other topics related to sepsis detection. We note that two other articles were submitted as supporting evidence (Kraus et al., 2023; Rhee et al., 2017), which we believe should be characterized as background articles because they do not directly assess the use of the IntelliSep[supreg] Test.\124\ Instead, Kraus et al. (2023) focused on evaluating key attributes of rapid host response sepsis tests via an expert review panel, and Rhee et al. (2017) estimated the U.S. incidence of sepsis and sepsis trends using electronic health records. The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for the IntelliSep[supreg] Test for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \123\ One of these studies (Sheybani et al., 2024) is a published abstract that was retracted. \124\ Kraus, C.K., Nguyen, H.B., Jacobsen, R.C., Ledeboer, N.A., May, L.S., O'Neal, H.R., Jr., Puskarich, M.A., Rice, T.W., Self, W.H., & Rothman, R.E. (2023). Rapid identification of sepsis in the emergency department. Journal of the American College of Emergency Physicians Open, 4, e12984. https://doi.org/10.1002/emp2.12984. ---------------------------------------------------------------------------------------------------------------- Applicant statements in support Supporting evidence provided by the applicant ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #1: The 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. ---------------------------------------------------------------------------------------------------------------- IntelliSep[supreg] Test assists Sheybani, Roya, Matt Sorrells, Daniel Henning, et al. ``Evaluation of a physicians in identifying patients cellular host response test in sepsis diagnosis and risk- where sepsis is unlikely, allowing for stratification in emergency patients with hemodynamic or the more rapid pursuit of alternate cardiopulmonary instability'' CHEST 166, no. 4 (October 1, 2024): diagnoses. A2163-64. https://doi.org/10.1016/j.chest.2024.06.1335 O'Neal HR Jr., et al. Cellular host response sepsis test for risk stratification of patients in the emergency department: a pooled analysis. Acad Emerg Med. 2024a. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. [[Page 18131]] IntelliSep[supreg] Test allows O'Neal, 2024a, op. cit. clinicians to make early, appropriate Thomas CB, Hollis AK, Sorrells MG, et al. Evaluation of early-stage antibiotic decisions in patients with implementation results of a cellular host-response test in an suspected sepsis while pursuing emergency department setting. Presented at ECCMID 2024a. antimicrobial stewardship targets. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. IntelliSep[supreg] Test provides Jagneaux T, Grantham A, Richard K, et al. Novel Diagnostic for Patients clinicians with actionable results Presenting to the ED with Possible Infection. Association for sooner than pathogen-based detection Diagnostics & Laboratory Medicine Conference. July 31, 2024. systems. O'Neal, 2024a, op. cit. O'Neal HR Jr, Sheybani R, Janz DR, et al. Validation of a Novel, Rapid Sepsis Diagnostic for Emergency Department Use. Crit Care Explor. 2024b;6(2):e1026. Published 2024b Feb 7. doi:10.1097/ CCE.0000000000001026. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. IntelliSep[supreg] Test outperforms O'Neal, 2024a, op. cit. current sepsis diagnostic tools The applicant also provided background information to support this available for use in the Emergency claim, which can be accessed via the online posting for the Department. technology. IntelliSep[supreg] Test effectively O'Neal, 2024a, op. cit. differentiates sepsis from non- The applicant also provided background information to support this specific biomarker elevations in claim, which can be accessed via the online posting for the various clinical conditions. technology. Sepsis is a dysregulated response to Guillou L, Sheybani R, Jensen AE, et al. Development and validation of infection. IntelliSep[supreg] Test is a cellular host response test as an early diagnostic for sepsis. PLoS the only FDA-cleared test to assess One. 2021;16(4):e0246980. Published 2021 Apr 15. doi:10.1371/ immune response in patients presenting journal.pone.0246980. to the ED. O'Neal, 2024a, op. cit. Sorrells MG, Seo Y, Magnen M, et al. Biophysical Changes of Leukocyte Activation (and NETosis) in the Cellular Host Response to Sepsis. Diagnostics. 2023;13:1435. doi:10.3390/diagnostics13081435. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ---------------------------------------------------------------------------------------------------------------- IntelliSep[supreg] Test reduces door to Jagneaux, 2024, op. cit. bedtime for patients presenting with The applicant also provided background information to support this Occult sepsis who appear clinically claim, which can be accessed via the online posting for the stable by triage staff. technology. IntelliSep[supreg] Test identifies high-risk patients earlier, even when they appear clinically stable. IntelliSep[supreg] Test results enable O'Neal, 2024a, op. cit. ED providers to decrease use of Thomas, 2024a, op. cit. diagnostic images and testing, The applicant also provided background information to support this resulting in decreased exposure and claim, which can be accessed via the online posting for the associated risks. technology. IntelliSep[supreg] Test's rapid Jagneaux, 2024, op. cit. turnaround time allows for prompt Thomas C, Richard K, Grantham A, et al. Evaluation of early stage attention to infection source implementation results of a cellular host-response test in decreasing identification and control. sepsis mortality for patients presenting to the ED. Presented at: Society of Critical Care Medicine (SCCM) Annual Congress; February 23- 25, 2025; Orlando, Florida, USA. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. IntelliSep[supreg] Test aids in O'Neal, 2024a, op. cit. reducing risk of mortality amongst Jagneaux, 2024, op. cit. tested patients. Thomas, 2025, op. cit. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. IntelliSep[supreg] Test aids in O'Neal, 2024a, op. cit. reducing average length of stay (LOS) Jagneaux, 2024, op. cit. amongst tested patients. Thomas CB, Hollis A, Teague L, et al. The fiscal impact of a rapid sepsis diagnostic in the Emergency Department (ED). Presented at: 44th International Symposium on Intensive Care and Emergency Medicine (ISICEM); 2024b; Brussels, Belgium. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. IntelliSep[supreg] Test aids improved O'Neal, 2024a, op. cit. compliance with the CMS SEP-1 and Jagneaux, 2024, op. cit. Surviving Sepsis Campaign 3-hour The applicant also provided background information to support this bundle compliance. claim, which can be accessed via the online posting for the technology. IntelliSep[supreg] Test aids sepsis O'Neal, 2024a, op. cit. antibiotic initiation consistent with Jagneaux, 2024, op. cit. current consensus guidelines. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- [[Page 18132]] We also received a public comment in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for the IntelliSep[supreg] Test, which we summarize in this section. Comment: The applicant submitted a public comment in response to questions asked at the Town Hall regarding the comparison of the IntelliSep[supreg] Test to other sepsis tests, namely to technology that assesses MDW and SeptiCyte[supreg] RAPID. The applicant submitted an additional study (Sarani et al., 2024), which concluded that the IntelliSep[supreg] Test, along with von Willebrand factor (vWF)/ ADAMTS13 ratios, may be useful and appear to be superior to the traditional marker, MDW, for the early diagnosis of sepsis in patients visiting the ED.\125\ This 2024 study investigated the use of the IntelliSep[supreg] Test, MDW, and other biomarkers to diagnose sepsis in 44 patients (25 patients with a low probability of sepsis and 19 patients with a high probability of sepsis) who visited the ED at The University of Kansas Medical Center. The applicant noted that MDW is not widely used as a screening tool in the ED, which is where the IntelliSep[supreg] Test is indicated for use. Regarding comparison of the IntelliSep[supreg] Test to SeptiCyte[supreg] RAPID, the applicant stated that it believes a comparison between the two sepsis diagnostic tests is inappropriate given the differences in indicated uses for the tests, primarily the indicated location; IntelliSep[supreg] Test is indicated for use in the ED prior to the provider's decision to admit the patient, whereas SeptiCyte[supreg] RAPID is used first day post- admission to the ICU. The applicant cited a recent study that found only 16.1 percent of patients tested with the IntelliSep[supreg] Test are admitted to the ICU.\126\ --------------------------------------------------------------------------- \125\ Sarani, N., Dasgupta, A., Enders, M., Rowan, L., Elsarraj, H., Gralnek, S., Shay, M., Lemar, L.R., Simpson, S.Q., Cunningham, M.T., & Zheng, X.L. (2024). Clinical Utility of Recently Food and Drug Administration-Approved IntelliSep[supreg] Test (Sepsis Biomarker) for Early Diagnosis of Sepsis: Comparison with Other Biomarkers. Journal of Clinical Medicine, 13(16), 4852. https://doi.org/10.3390/jcm13164852. \126\ O'Neal, H.R., Jr, Sheybani, R., Kraus, C.K., Self, W.H., Shah, A.M., Thomas, C.B., Tse, H.T.K., & Scoggins, R. (2024b). Cellular host response sepsis test for risk stratification of patients in the emergency department: A pooled analysis. Academic Emergency Medicine, 31(9), 883-893. https://doi.org/10.1111/acem.14923. --------------------------------------------------------------------------- Response: We thank the applicant for its comments. After review of the information provided by the applicant and the public comment received in response to the New Technology Town Hall meeting, we have the following concerns regarding whether the IntelliSep[supreg] Test meets the substantial clinical improvement criterion. Regarding the new study provided by the applicant in the Town Hall comment, we note that Sarani et al. (2024) does not compare the IntelliSep[supreg] Test and MDW with respect to the ability to diagnose sepsis earlier or resulting clinical outcomes (for example, length of stay or mortality). The applicant made six claims in regard to the substantial clinical improvement assertion that the IntelliSep[supreg] Test offers the ability to diagnose sepsis in a patient population where the condition is currently undetectable or offers the ability to diagnose sepsis earlier in a patient population than allowed by currently available methods; however, we note that a number of these claims did not address this criterion. Specifically, the applicant stated that the IntelliSep[supreg] Test (1) allows clinicians to make early, appropriate antibiotic decisions in patients with suspected sepsis while pursuing antimicrobial stewardship targets; (2) outperforms current sepsis diagnostic tools available for use in the ED; (3) effectively differentiates sepsis from non-specific biomarker elevations in various clinical conditions; (4) is the only FDA-cleared test to assess dysregulated immune response to infection (sepsis) in patients presenting to the ED; and (5) has demonstrated a high NPV for sepsis and therefore allows for it to be ruled out where sepsis is unlikely. These claims discuss the reliability of the IntelliSep[supreg] Test outcomes or the potential benefits of sepsis risk stratification, or relate to not diagnosing sepsis, and do not address the ability of the IntelliSep[supreg] Test to diagnose a patient population where sepsis is currently undetectable or offer the ability to diagnose sepsis earlier than other technologies. We further note that none of the claims made by the applicant under this assertion provided a comparison of time to diagnosis to currently available sepsis diagnostics in order to demonstrate that the IntelliSep[supreg] Test can diagnose sepsis earlier than currently available methods. While the applicant provided O'Neal et al. (2024b), which established the 7.2 minute testing turnaround time for the IntelliSep[supreg] Test to support the claim that it provides clinicians with actionable results sooner than pathogen-based detection systems, the only other testing time provided as a comparison was from a study comparing time to positivity between the BacT/Alert and BACTEC blood culture systems (Butler-Laporte et al., 2020). We would appreciate evidence comparing time to diagnosis for the IntelliSep[supreg] Test and other existing sepsis detection tools also developed to address the length of time to definite sepsis diagnosis with blood cultures, such as Early Sepsis Indicator or Sepsis ImmunoScore, in order to demonstrate the applicant's assertion that the IntelliSep[supreg] Test allows for faster detection of sepsis compared to existing technologies. We further note that we did not receive any information demonstrating that clinicians changed the management of patients due to the use of the IntelliSep[supreg] Test. The Jagneaux et al. (2024) study measured time-to-bed assignment (TTB) when nurses at one medical center triaged patients in the ED waiting room, tested patients using the IntelliSep[supreg] Test, and placed patients with IntelliSep[supreg] Band 3 results in ED beds. The study showed that TTB for Band 3 was shorter than TTB for Band 1, but we question whether TTB between risk-stratified bands should be considered a change in management. The study did not include a control group or comparison to other sepsis tests or diagnostic tools to demonstrate differences in patient management between the use of the IntelliSep[supreg] Test and other standards of care. We further note that Jagneaux et al. (2024), which is an unpublished abstract, lacked details regarding the patient population, study protocol, and statistical analyses, and is only representative of a single medical center. We are therefore unclear whether the results may be influenced by potential confounding factors, and we question whether they are generalizable to other EDs or geographic regions as well as to the Medicare population. The applicant also made seven claims in regard to the substantial clinical improvement assertion that the IntelliSep[supreg] Test significantly improves clinical outcomes relative to services or technologies previously available. However, we note that a number of these claims do not address this criterion. In particular, the applicant stated that the IntelliSep[supreg] Test (1) reduces door-to- bed time for patients presenting with occult sepsis who appear clinically stable by triage staff; (2) allows for prompt attention to infection source identification and control through its rapid turnaround time; (3) aids improved compliance with the CMS SEP-1 and Surviving Sepsis Campaign 3-hour bundle compliance; and (4) aids sepsis antibiotic initiation consistent with current consensus guidelines. First, we question whether the claim that the IntelliSep[supreg] Test reduces door-to-bed time is an appropriate proxy for timely [[Page 18133]] antibiotic administration and the potential for subsequent clinical outcomes (such as mortality). The strength of the direct association between time from door-to-bed and clinical outcome improvement or whether any outcomes are inferred from surrogate endpoints is unclear. We also note that the provided evidence does not demonstrate whether the IntelliSep[supreg] Test is the driving factor, among all other tests and clinical practices, that allows timely infection source identification and control and, therefore, decreases mortality. Additionally, we are unclear about the direct association between the IntelliSep[supreg] Test and antibiotic initiation for sepsis consistent with current guidelines as this is also only inferred, and the IntelliSep[supreg] Test is one tool among others used to diagnose sepsis. We also question whether compliance with the CMS SEP-1 and Surviving Sepsis Campaign 3-hour bundles is intended as a proxy for decreased mortality that may occur from reducing the time to antibiotic administration. We note that a decrease in mortality is only inferred, and the provided evidence does not demonstrate that the IntelliSep[supreg] Test decreases mortality. We are unclear how these claims relate to a demonstration of substantial clinical improvement over existing technologies because these claims do not pertain to clinical outcomes described at Sec. 412.87(b)(1)(ii)(C), such as a reduction in mortality or a decreased rate of at least one subsequent diagnostic or therapeutic intervention. We also note that the claims and the provided evidence regarding the IntelliSep[supreg] Test's ability to significantly improve clinical outcomes relative to services or technologies previously available lack a comparison of the IntelliSep[supreg] Test to existing technologies used to diagnose sepsis, such as the previously discussed Early Sepsis Indicator, SeptiCyte[supreg] RAPID, and Sepsis ImmunoScore\TM\. While the applicant stated in its Town Hall comment that a comparison between the IntelliSep[supreg] Test and SeptiCyte[supreg] RAPID is inappropriate due to the differences in indicated location, we question whether the impact of testing different patients in different environments within a hospital would be relevant to clinical outcomes such as timely antibiotic administration and mortality. In addition, we note that both Early Sepsis Indicator and Sepsis ImmunoScore\TM\ are indicated for use in the ED. We are interested in comparative evidence for other sepsis diagnostic technologies in order to evaluate the IntelliSep[supreg] Test's clinical outcomes relative to other technologies. We also note that since much of the evidence provided across claims (Thomas et al. (2025); Thomas et al. (2024a); Thomas et al. (2024b)) is unpublished, the details provided do not include study protocols or statistical methods and measures. As such, we are unable to account for differences in the outcome measures or determine if the results are statistically significant. Further, because these study results are from one academic medical center, we question whether the results are generalizable to other hospitals and more broadly to the Medicare population. Where the Jagneaux et al. (2024) study was used to support claims regarding the IntelliSep[supreg] Test's ability to significantly improve clinical outcomes relative to services or technologies previously available, we also have the same concerns as previously discussed, including lack of details regarding the patient population, study protocol, and statistical analyses. In addition, with respect to the claim that IntelliSep[supreg] Test results enable ED providers to decrease the use of diagnostic images and testing, resulting in decreased exposure and associated risks, while Thomas et al. (2024a) evaluated the impact of the IntelliSep[supreg] Test on blood culture orders, antibiotic usage, and patients' LOS for 1,275 patients who presented to an ED with signs or symptoms of infection, we note that the study did not determine whether a decrease in these measures resulted in patients experiencing decreased exposure and associated risks or a significant improvement in clinical outcomes relative to technologies previously available. While the Jagneaux et al. (2024) study provided by the applicant did not measure mortality, the applicant provided the O'Neal, et al. (2024a) study, which did measure all-cause cumulative hospital mortality stratified by IntelliSep[supreg] bands; however, the study only compared the IntelliSep[supreg] Test to common traditional sepsis tests or detection tools, such as white blood cell count, procalcitonin, lactate, blood cultures, and the Sequential Organ Failure Assessment (SOFA). O'Neal et al. (2024a) did not provide hospital mortality data to demonstrate the IntelliSep[supreg] Test improved clinical outcomes relative to other technologies that are available, such as Early Sepsis Indicator, SeptiCyte[supreg] RAPID, and Sepsis ImmunoScore\TM\. Regarding the claim that the IntelliSep[supreg] Test aids in reducing average LOS among tested patients, the Thomas et al. (2024b) study submitted by the applicant found that incorporating the IntelliSep[supreg] Test and releasing its results to clinicians for 413 patients of a large U.S. academic medical center led to a reduction of 1.28 days for inpatients and 2.42 days for ICU patients, when compared to 196 patients in the control group for which the IntelliSep[supreg] Test was performed but not released to clinicians. We note that the study used control and intervention cohorts that were not concurrent, and we question the impact from varying confounders, such as changes in clinical policy. We note that the applicant also included background studies to demonstrate a positive association between longer hospital LOS and the probability of acquiring an infection, readmission, negative emotions, and increased hospital costs.\127\ However, these studies did not assess the IntelliSep[supreg] Test's ability to affect LOS, rates of infection, readmission, or other clinical outcomes. --------------------------------------------------------------------------- \127\ Hassan, M., Tuckman, H.P., Patrick, R.H., Kountz, D.S., & Kohn, J.L. (2010). Hospital length of stay and probability of acquiring infection. International Journal of Pharmaceutical and Healthcare Marketing, 4(4), 324-338. https://doi.org/10.1108/17506121011095182. --------------------------------------------------------------------------- Lastly, we question how much capability should be attributed to the IntelliSep[supreg] Test when making clinical judgments and improving clinical outcomes, and we welcome additional information. We are inviting public comments on whether the IntelliSep[supreg] Test meets the substantial clinical improvement criterion. j. Neuroguard IEP[supreg] 3-in-1 Carotid Stent and Post-Dilation Balloon System With Integrated Embolic Protection Contego Medical, Inc. submitted an application for new technology add-on payments for the Neuroguard IEP[supreg] 3-in-1 Carotid Stent and Post-Dilation Balloon System with Integrated Embolic Protection (Neuroguard IEP[supreg] System) for FY 2026. According to the applicant, the Neuroguard IEP[supreg] System combines a carotid stent with an integrated 40 [mu]m embolic protection filter and post-dilation balloon. Per the applicant, the Neuroguard IEP[supreg] System restores and maintains vessel patency while stabilizing plaque, and by capturing small emboli during critical phases, it reduces the risk of stroke during the procedure and helps prevent future stroke. Please refer to the online application posting for the Neuroguard IEP[supreg] System, available at https://mearis.cms.gov/public/publications/ntap/NTP241004CNKB9, for additional detail describing the technology and carotid artery disease. [[Page 18134]] With respect to the newness criterion, according to the applicant, the Neuroguard IEP[supreg] System was granted premarket approval (PMA) from FDA on October 11, 2024 for improving the carotid luminal diameter in subjects at high risk for adverse events from a carotid endarterectomy who require carotid revascularization and meet the criteria outlined below: patients with symptomatic stenosis of the common or internal carotid artery with >=50 percent as determined by angiography using North American Symptomatic Carotid Endarterectomy Trial (NASCET) methodology or patients with asymptomatic stenosis of the common or internal carotid artery with >=80 percent as determined by angiography using NASCET methodology; and patients with reference vessel diameters 4.0 mm to 8.0 mm. The applicant and FDA approval letter stated that this technology is also indicated for post-dilation of the stent component with simultaneous capture and removal of embolic material. According to the applicant, the Neuroguard IEP[supreg] System is used in conjunction with an available primary distal embolic protection device as described in the Instructions for Use. According to the applicant, the Neuroguard IEP[supreg] System was commercially available immediately after its FDA approval. Per the applicant, one Neuroguard IEP[supreg] System typically is used per inpatient stay. According to the applicant, there are currently no ICD-10-PCS procedure codes to distinctly identify the Neuroguard IEP[supreg] System. We note that the applicant submitted a request for approval for a unique ICD-10-PCS procedure code for the Neuroguard IEP[supreg] System beginning in FY 2026. The applicant stated that codes I65.21 (Occlusion and stenosis of right carotid artery), I65.22 (Occlusion and stenosis of left carotid artery), I65.23 (Occlusion and stenosis of bilateral carotid arteries), or I65.29 (Occlusion and stenosis of unspecified carotid artery) may be used to currently identify the indication for the Neuroguard IEP[supreg] System under the ICD-10-CM coding system. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that the Neuroguard IEP[supreg] System is not substantially similar to other currently available technologies because it is a first-in-class, novel device that uses a different mechanism of action compared to existing technologies by integrating a stent with a 40 [mu]m (3 to 4 times smaller than pores of traditional filters) embolic protection filter and a post-dilation balloon, aiming to streamline the procedure and increase the effectiveness of embolic protection during carotid stenting, and that no other similar device is currently available in the U.S., and therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for the Neuroguard IEP[supreg] System for the applicant's complete statements in support of its assertion that the Neuroguard IEP[supreg] System is not substantially similar to other currently available technologies. ---------------------------------------------------------------------------------------------------------------- Applicant Substantial similarity criteria response Applicant assertions regarding this criterion ---------------------------------------------------------------------------------------------------------------- Does the technology use the same No............. Multiple clinical studies have reported that the majority of or similar mechanism of action debris released during carotid stenting is less than 100 to achieve a therapeutic microns ([mu]m). The Neuroguard IEP[supreg] System features outcome? an innovative 40 [mu]m embolic protection filter, with pores 3-4 times smaller than traditional filters used in carotid artery stenting (CAS), providing a substantial clinical improvement in capturing those microembolic particles. Traditional embolic protection devices (EPDs) have pore sizes of 100 to 150 [mu]m, allowing smaller microemboli to pass through, which can result in strokes and cognitive impairment for patients. Unlike other technologies, the Neuroguard IEP[supreg] System offers continuous protection during the most critical phases of carotid stenting--stent deployment and balloon dilation--when the risk of plaque dislodgement is highest. Conventional EPDs cannot use smaller pores because they are open throughout the entire procedure and must permit sufficient flow to reduce the risk of thrombosis and complications. In contrast, the Neuroguard IEP[supreg] System integrated filter is open only during the critical phases allowing it to use smaller pores (40 [mu]m) without increasing thrombosis risk, delivering enhanced protection while maintaining safety. Unlike conventional CAS systems that rely solely on separate EPDs, the Neuroguard IEP[supreg] System's filter is integrated into the device and dynamically adjusted to create a complete seal against the artery wall, ensuring even the smallest micro-emboli are captured. This greatly reduces the risk of embolic particles traveling to the brain, demonstrating a substantial clinical improvement over existing technologies in stroke prevention. The Neuroguard IEP[supreg] System stent incorporates a hybrid design that balances flexibility and radial strength, enabling precise deployment and secure vessel scaffolding. This helps to minimize risks such as restenosis or stent migration, challenges often seen with traditional stents that compromise either flexibility or strength. The Neuroguard IEP[supreg] System's flexible segments facilitate deployment in challenging anatomy while maintaining long-term vessel support. The stent is designed to enhance precision, reduce trauma or migration risks, and allow for predictable deployment, helping to reduce procedural complications. By integrating embolic protection, stenting, and dilation into one device, the Neuroguard IEP[supreg] System eliminates the need or multiple devices, reducing catheter exchanges and procedural complexity. While traditional distal embolic protection devices have larger pores that allow micro-emoli to reach the brain, potentionally causing stroke or cognitive impairment, the Neuroguard IEP[supreg] System addresses this risk by capturing micro emboli, reducing the likelihood of such adverse events. This new mechanism of action offers a safer and more effective approach to treating carotid artery stenosis, representing a substantial clinical improvement over existing technologies. [[Page 18135]] Is the technology assigned to the Yes............ The Neuroguard IEP[supreg] System falls under the MS-DRGs same MS-DRG as existing related to procedures performed on the carotid arteries, technologies? which include stenting procedures. However, despite being assigned to the same MS-DRG, the Neuroguard IEP[supreg] System represents a distinct technological advancement that warrant separate consideration under the new technology add- on payment criteria. Its innovative approach to embolic protection and the demonstrated substantial clinical improvement over existing technologies justify the need for additional payment beyond the standard MS-DRG rates to ensure appropriate reimbursement and broader adoption of this superior technology. Does new use of the technology Yes............ The Neuroguard IEP[supreg] System is used to treat the same involve the treatment of the disease, carotid artery stenosis, in the same patient same/similar type of disease and population as existing carotid stent technologies. However, the same/similar patient it offers substantial clinical improvements, particularly population when compared to an in reducing the risk of stroke during the procedure. existing technology? Traditional CAS methods rely on separate EPDs, which have limitations in capturing small embolic particles, especially during the riskiest parts of the procedure-- stent deployment and balloon dilation. ---------------------------------------------------------------------------------------------------------------- We have the following concerns with regard to the newness criterion. While the applicant asserted that the Neuroguard IEP[supreg] System is novel in that it uses a new mechanism of action because its 40 [mu]m embolic protection filter has pores 3-4 times smaller than traditional filters used in CAS, we question whether this represents a new mechanism of action as both Neuroguard's filter and existing filters use a porous membrane to capture and remove embolic material while performing angioplasty and stenting procedures in carotid arteries. We note that the applicant asserted that this change in filter size may impact clinical outcomes, however, this is not relevant to mechanism of action. Furthermore, the Neuroguard IEP[supreg] System should always be used in conjunction with an available primary distal embolic protection device as described in the IFU,\128\ which suggests that its filter would not impact the mechanism of action of the device. We also note that there are other existing embolic protection filters used during CAS procedures that have the same 40-micron pore size, such as the Paladin Carotid Post-Dilation Balloon System with Integrated Embolic Protection (Paladin System with IEP) from the same manufacturer, which received FDA 510(k) clearance on September 6, 2018.\129\ --------------------------------------------------------------------------- \128\ Neuroguard IEP[supreg] 3-in-1 Carotid Stent, Post-Dilation Balloon System with Integrated Embolic Protection (https://www.accessdata.fda.gov/cdrh_docs/pdf24/P240009A.pdf). \129\ FDA. Section 510(k) premarket notification. Paladin Carotid Post-Dilation Balloon System with Integrated Embolic Protection. K181128. September 6, 2018 (https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpmn/pmn.cfm?id=K181128, accessed 2/5/2025). --------------------------------------------------------------------------- In addition, while the applicant asserted that the Neuroguard IEP[supreg] System has a new mechanism of action because it integrates a stent with an embolic protection filter that opens during stent deployment and balloon dilation to streamline the procedure and increase the effectiveness of embolic protection during CAS, we question how integrating existing procedural devices into one device to eliminate the need for multiple devices results in a different mechanism of action, as this appears to describe an ease-of-use feature rather than having an impact on the technology's therapeutic outcome of improving carotid luminal diameter for patients with stenosis of the carotid artery.\130\ It is unclear how the way in which the Neuroguard IEP[supreg] System treats carotid artery stenosis is different from the way in which the many existing carotid artery stents, filters, and post-dilation balloons available on the market, used together or as part of a system, treat carotid artery stenosis. Therefore, it appears these technologies may have the same or a similar mechanism of action as the Neuroguard IEP[supreg] System. We further note that the applicant stated that the Neuroguard IEP[supreg] System treats the same disease, carotid artery stenosis, in the same patient population as existing carotid stent technologies, and that it maps to the same MS- DRGs for carotid artery stenting procedures. --------------------------------------------------------------------------- \130\ FDA. Neuroguard IEP[supreg] 3-in-1 Carotid Stent, Post- Dilation Balloon System with Integrated Embolic Protection. Pre- market approval. October 11, 2024. --------------------------------------------------------------------------- Accordingly, as it appears that the Neuroguard IEP[supreg] System and existing carotid stents or stent systems, such as the GORE Carotid Stent, RX Acculink\TM\ Carotid Stent System, or Carotid WALLSTENT[supreg] Monorail[supreg] Endoprosthesis, or the Paladin System with IEP used with any available carotid artery stent, may use the same or similar mechanism of action to achieve a therapeutic outcome, would be assigned to the same MS-DRG, and would treat the same or similar patient population and disease, we question whether these technologies may be substantially similar to one another. We note that, per our policy, if technologies are substantially similar to each other, we use the earliest market availability date as the beginning of the newness period for the technologies. Accordingly, if we determine that the Neuroguard IEP[supreg] System is substantially similar to existing carotid stents or systems as described previously, because the 3-year anniversary of the FDA clearance of all these current technologies occurred prior to FY 2026,131 132 133 the Neuroguard IEP[supreg] System would not be considered new. --------------------------------------------------------------------------- \131\ The 3-year anniversary of FDA PMA approval for the RX Acculink TM Carotid Stent System was August 30, 2007. https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpma/pma.cfm?id=P040012. \132\ The 3-year anniversary of FDA PMA approval for Carotid WALLSTENT[supreg] Monorail[supreg] Endoprosthesis was October 23, 2011. https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpma/pma.cfm?id=P050019. \133\ The 3-year anniversary of FDA PMA approval for GORE Carotid Stent was November 1, 2021. https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpma/pma.cfm?ID=P180010. --------------------------------------------------------------------------- We are inviting public comment on whether the Neuroguard IEP[supreg] System is substantially similar to existing technologies and whether the Neuroguard IEP[supreg] System meets the newness criterion. With respect to the cost criterion, the applicant provided two analyses to demonstrate that the Neuroguard IEP[supreg] System meets the cost criterion. Each analysis followed the order of operations summarized in the following table. [[Page 18136]] Neuroguard IEP[supreg] System Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes, ICD-10-PCS codes, and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for the Neuroguard IEP[supreg] System. Claims identified...................... Scenario 1: 13,115 claims mapping to 69 MS-DRGs, with 49.68% claims mapping to MS-DRG 036 (Carotid Artery Stent Procedure Without CC/MCC). Scenario 2: 11,876 claims mapping to 3 MS-DRGs, with 54.86% of claims mapping to MS-DRG 036 (Carotid Artery Stent Procedure Without CC/MCC). Charges removed for prior technology... Per the applicant, use of the technology would replace current existing stent and dilating balloon technologies used in traditional carotid artery stenting. The applicant removed charges for the existing stent and dilating balloon by dividing the estimated costs by the national average cost-to-charge ratio of 0.259 for Implantable Devices from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not remove indirect charges related to the prior technology. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new technology... The applicant added charges for the new technology by dividing the cost of the new technology by the national average cost-to-charge ratio of 0.259 for Implantable Devices from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. Cost analysis results.................. Scenario 1: --Average case-weighted threshold amount: $101,119. --Final inflated average case-weighted standardized charge per case: $133,183. Scenario 2: --Average case-weighted threshold amount: $95,139. --Final inflated average case-weighted standardized charge per case: $116,240. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in both analyses, the applicant asserted that the Neuroguard IEP[supreg] System meets the cost criterion. We are inviting public comments on whether the Neuroguard IEP[supreg] System meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that the Neuroguard IEP[supreg] System represents a substantial clinical improvement over existing technologies because the Neuroguard IEP[supreg] System significantly improves clinical outcomes relative to technologies previously available by using a 40 [mu]m embolic protection filter that captures microemboli, unlike traditional filters (100-150 [mu]m) that miss smaller emboli, leading to higher stroke rates. Further, the applicant asserted that the Neuroguard IEP[supreg] System demonstrated a zero percent stroke rate in the PERFORMANCE I study, 1.3 percent at 30 days, and 1.8 percent at 12 months in the PERFORMANCE II study, demonstrating substantial clinical improvement compared to other CAS technologies. The applicant provided 2 studies to support its claims, as well as a supplemental document that presents the 30-day and 12-month stroke rates of carotid artery stents from clinical studies, and 8 background articles about other FDA-approved CAS or EPD technologies.\134\ The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for the Neuroguard IEP[supreg] System for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \134\ Background articles are not included in the following table but can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #1: The technology significantly improves clinical outcomes relative to services or technologies previously available ---------------------------------------------------------------------------------------------------------------- The Neuroguard IEP[supreg] System Langhoff R, Petrov I, Kedev S, et al., PERFORMACE 1 Study: Novel demonstrates a substantial clinical carotid stent system with integrated post-dilation balloon and embolic improvement over existing CAS protection device. Catheter Cardiovasc Interv. 2022 Nov;100(6):1090- technologies by integrating an embolic 1099. protection filter that minimizes the Gray WA, Metzger DC, Zidar J, et al. The PERFORMANCE II Trial: A risk of stroke and cognitive Prospective Multicenter Investigation of a Novel Carotid Stent System. impairment. JACC Cardiovasc Interv. Published online December 20, 2024. doi:10.1016/j.jcin.2024.10.031. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- We did not receive any written comments in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for the Neuroguard IEP[supreg] System. After review of the information provided by the applicant, we have the following concerns regarding whether the Neuroguard IEP[supreg] System meets the substantial clinical improvement criterion. With respect to the claim that the Neuroguard IEP[supreg] System demonstrates a substantial clinical improvement over existing CAS technologies by integrating an embolic protection filter that minimizes the risk of stroke and cognitive impairment, we note that the applicant has provided evidence comparing the effects of the Neuroguard IEP[supreg] System to historical controls based on several clinical trials, including the Xact[supreg] Carotid Stent System of the SECURITY trial,\135\ the ACCULINK carotid stent of the ARCHER [[Page 18137]] trial,\136\ the Carotid WALLSTENT and FilterWire EX/EZ of the BEACH trial,\137\ the GORE Carotid Stent of the SCAFFOLD trial,\138\ the S.M.A.R.T. or Precise stent with Angioguard or Angioguard XP, Cordis EPD of the SAPPHIRE trial,\139\ and Accunet and Acculink Systems of the CREST trial.\140\ However, we did not receive information comparing the Neuroguard IEP[supreg] System with other currently available treatments developed more recently, such as GORE Carotid Stent, Sterling SL Balloon Dilatation Catheters, or Paladin System, and we would appreciate additional information comparing these technologies in order to inform our assessment of substantial clinical improvement. --------------------------------------------------------------------------- \135\ FDA. SECURITY: Xact[supreg] Carotid Stent System--P040038/ S043. Summary of Safety and Effectiveness Data. Published August 5, 2004. (https://www.fda.gov/medical-devices/recently-approved-devices/xact-carotid-stent-system-p040038s043, accessed 1/24/2025). \136\ Gray, W.A., Hopkins, L.N., Yadav, S., et al. (2006). Protected carotid stenting in high-surgical-risk patients: The ARCHeR results Journal of Vascular Surgery 44(2): 258-269. \137\ Cohen, D.J., Amarenco, P., Cramer, M.J., et al. Carotid Artery Revascularization in High-Surgical-Risk Patients Using the Carotid WALLSTENT and FilterWire EX/EZ: 1-Year Outcomes in the BEACH Pivotal Group. J Am Coll Cardiol. 2008;51(4):427-434. doi:10.1016/ j.jacc.2007.10.022. \138\ Gray, W.A., Levy, E., Bacharach, J.M., et al. (2020). Evaluation of a novel mesh-covered stent for treatment of carotid stenosis in patients at high risk for endarterectomy: 1-year results of the SCAFFOLD trial. Catheter Cardiovasc Interv. 96:121-127. \139\ Yadav, J.S., Wholey, M.H., Kuntz, R.E., Fayad, P., Katzen, B.T., Mishkel, G.J., Bajwa, T.K., Whitlow, P., Strickman, N.E., Jaff, M.R., Popma, J.J., Snead, D.B., Cutlip, D.E., Firth, B.G., Ouriel, K., & Stenting and Angioplasty with Protection in Patients at High Risk for Endarterectomy Investigators (2004). Protected carotid-artery stenting versus endarterectomy in high-risk patients. The New England Journal of Medicine, 351(15), 1493-1501. https://doi.org/10.1056/NEJMoa040127. \140\ Brott, T.G., Hobson, R.W. 2nd, Howard, G., et al. Stenting versus endarterectomy for treatment of carotid-artery stenosis [published correction appears in N Engl J Med. 2010 Jul 29;363(5):498] [published correction appears in N Engl J Med. 2010 Jul 8;363(2):198]. N Engl J Med. 2010;363(1): 11-23. doi:10.1056/ NEJMoa0912321. --------------------------------------------------------------------------- In addition, we note that the applicant compared the Neuroguard IEP[supreg] System with historical controls based on externally controlled trials from at least a decade ago. While the results of the SCAFFOLD trial were published more recently, in 2020, other externally controlled trials were published or completed at least a decade earlier (SAPPHIRE: 2004; SECURITY: 2005; ARCHER: 2006; BEACH: 2008; CREST: 2010; ROADSTER: 2015). In particular, SAPPHIRE was conducted when CAS was new.\141\ We also note that the pre- and post-treatment protocols for the PERFORMANCE II trial were more comprehensive compared to those of the SAPPHIRE trial \142\ and that this may reflect changes in standards of care over the past two decades. For example, we note that the patients in the PERFORMANCE II had been given clopidogrel 75 mg (or equivalent) and aspirin 75 mg daily for one week before surgery, and dual antiplatelet therapy was required for at least 30 days after the procedure (and thereafter, at the physician's discretion and standard of care), whereas the patients in the SAPPHIRE trial were given an aspirin at a dose of 81 or 325 mg per day for at least 72 hours before the procedure and indefinitely after the procedure, and with clopidogrel 75 mg per day starting 24 hours before the procedure and continuing for two to four weeks after the procedure. We are also concerned that observed differences between the Neuroguard IEP[supreg] System and the historical controls may also reflect improvements in stent devices, access approaches, and embolic protection methods over the past decade that aimed at reducing the risk of stroke associated with CAS.\143\ Therefore, we question whether the observed lower stroke rate was at least partly the result of a more advanced and comprehensive treatment protocol. We also question whether growth in CAS volume, a multitude of commercially available FDA-approved carotid stents, changes in standard of care, and trends in the prevalence of diabetes and hypertension in the U.S. population during the last two decades were considered in the interpretation of the findings of the two PERFORMANCE trials. --------------------------------------------------------------------------- \141\ Yadav (2004), op. cit. \142\ Yadav (2004), op. cit. \143\ UpToDate. (2024). Overview of carotid artery stenting. UpToDate. Retrieved from https://www.uptodate.com/contents/overview- of-carotid-artery-stenting/ print?search=carotid%20artery%20stenting&source=search_result&selecte dTitle=1~3. --------------------------------------------------------------------------- We are also concerned about the use of historical controls, given the differences among the trials, and question how these differences were taken into account in the development of the performance goal and in the comparison with the Neuroguard IEP[supreg] System on improving clinical outcomes. First, those trials differed in study design (SECURITY: non-randomized; BEACH, SCAFFOLD: single-arm; SAPPHIRE: RCT; CREST: RCT permuted block design) and length of follow-up (SECURITY, BEACH, ARCHER: 365 days; other: 3 years). Because these trials were not uniform in study design, we question whether results from these trials are comparable to each other. We further question whether the applicable technologies can be compared based on the outcomes achieved across these trials without considering differences between the clinical trials with respect to whether randomization and/or blinding were used in the study protocols, how patients were recruited and enrolled, patients' baseline clinical attributes, or length of follow up.\144\ We also note that these trials defined some of their endpoints differently. For example, the SECURITY and SCAFFOLD trials measured 12- month outcomes, while the SAPPHIRE and ARCHER trials examined 31- to 365-day outcomes. While most of these trials assessed non-fatal myocardial infection (MI) and all-cause deaths, the BEACH trial reported Q-wave MI and neurologic deaths. Furthermore, we note that different inclusion criteria for asymptomatic patients were used, with the SAPPHIRE, SECURITY, BEACH, and SCAFFOLD trials including asymptomatic patients with >=80 percent stenosis, and the CREST trial >=70 percent stenosis. Regarding heterogeneity in the baseline clinical attributes of the patient samples, we note that the SECURITY, ARCHER, and BEACH trials included patients at least 80 years of age, while other trials did not. We further note that differences in the study population comorbidities and lesion characteristics may impact outcomes. In particular, the PERFORMANCE II trial had a higher proportion of diabetic patients (43 percent) than the SAPPHIRE (25 percent), CREST (31 percent), SECURITY (31 percent), and SCAFFOLD (40 percent) trials. Its proportion of patients with hypertension (93 percent) was higher than that of other trials (ARCHER: 84 percent; CREST: 86 percent; SAPPHIRE: 86 percent: BEACH: 89 percent). Its proportion of symptomatic patients (20 percent) was higher than that of the SCAFFOLD trial (13 percent), and lower than that of the ARCHER trial (24 percent). We are concerned that without adjusting for these differences across the trials, their results may not be comparable. We also question whether the lack of adjustment could have impacted accuracy of the performance goal which was based on the results of these trials. We welcome information about how these differences were accounted for in the development of the performance goal. We also welcome comments on how to consider the use of historical controls to compare the Neuroguard IEP[supreg] System's effects on clinical outcome improvement. Moreover, we are interested in information about the weighted objective performance criteria approach. Per the applicant, this approach adjusted for comorbid and anatomic [[Page 18138]] high-risk factors and was calculated based on data from the ARCHER, SECURITY, BEACH, and SCAFFOLD trials. We also welcome information about how the comparative studies were selected. --------------------------------------------------------------------------- \144\ Collignon O, Schritz A, Spezia R, et al. Implementing historical controls in oncology trials. The Oncologist 2021 (26):e858-e862. --------------------------------------------------------------------------- We also question whether the observed differences in clinical outcomes between the Neuroguard IEP[supreg] System and the performance goal based on the historical comparator trials are statistically significant and clinically meaningful. For example, the applicant stated that the Neuroguard IEP[supreg] System demonstrated the result of zero percent for both 30-day and 12-month stroke rates in the PERFORMANCE I study, and 1.3 percent for the 30-day and 1.8 percent 12- month stroke rates in the PERFORMANCE II study. The applicant further stated that these rates were significantly lower than published clinical trials with similar symptomatic and asymptomatic patient populations, ARCHER (6.9 percent), BEACH (4.5 percent), SCAFFOLD (1.0 percent) SAPPHIRE (4.8 percent), and CREST (4.1 percent). We note that the SCAFFOLD trial reported a 30-day stroke rate of 1.1 percent for the primary analysis population, compared to the 1.3 percent rate in the PERFORMANCE II study. We welcome information about whether these differences were statistically significant and clinically meaningful, and how statistical significance was determined. We also welcome information about the weighted Z-test for the primary endpoint and how it may fully account for variability in patient comorbidities or procedural differences and enhance generalizability. We are inviting public comments on whether the Neuroguard IEP[supreg] System meets the substantial clinical improvement criterion. k. RYSTIGGO[supreg] (Rozanolixizumab-Noli) UCB, Inc. submitted an application for new technology add-on payments for RYSTIGGO[supreg] for FY 2026. According to the applicant, RYSTIGGO[supreg] is a neonatal Fc receptor (FcRn) blocker indicated for the treatment of generalized myasthenia gravis (gMG) in adult patients who are anti-acetylcholine receptor (AChR) or anti-muscle-specific tyrosine kinase (MuSK) antibody positive (ab+). The applicant stated that gMG is a rare chronic autoimmune disorder in which antibodies destroy the communication between nerves and muscle, resulting in weakness of the skeletal muscles, particularly the eyes, mouth, throat, and limbs. Per the applicant, some gMG patients have MuSK ab+, a subtype of gMG that may lead to more severe symptoms and limited treatment options. Please refer to the online application posting for RYSTIGGO[supreg], available at https://mearis.cms.gov/public/publications/ntap/NTP2410073H0PQ, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, RYSTIGGO[supreg] was granted BLA approval from FDA on June 26, 2023, for the treatment of gMG in adult patients who are AChR ab+ or MuSK ab+. According to the applicant, RYSTIGGO[supreg] was not available for sale until July 20, 2023, the date on which the product was released from U.S. Customs after being shipped from an overseas manufacturing facility. Per the applicant, RYSTIGGO[supreg] is administered as a subcutaneous infusion once each week for 6 weeks. Per the applicant, RYSTIGGO[supreg] is available in single-dose vials that contain 280 mg, 420 mg, 560 mg, or 840 mg of RYSTIGGO[supreg] at a concentration of 140 mg/mL. The applicant noted it used the following equation to calculate the weighted average cost per inpatient stay: [(percent of patients whose weight aligns to the 3mL vial x cost of the 3mL vial) + (percent of patients whose weight aligns to the 4mL vial x cost of the 4mL vial) + (percent of patients whose weight aligns to the 6mL vial x cost of the 6mL vial/100%] x 2 doses. The applicant stated that the typical inpatient stay for patients with gMG is 11 to 13 days, and thus, 2 doses would usually be administered during a typical inpatient stay. According to the applicant, there are currently no ICD-10-PCS procedure codes to distinctly identify RYSTIGGO[supreg]. We note that the applicant submitted a request for approval for a unique ICD-10-PCS procedure code for RYSTIGGO[supreg] beginning in FY 2026. The applicant stated that G70.00 (Myasthenia gravis without (acute) exacerbation) and G70.01 (Myasthenia gravis with (acute) exacerbation) may be used to currently identify the indication for RYSTIGGO[supreg] under the ICD- 10-CM coding system. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that RYSTIGGO[supreg] is not substantially similar to other currently available technologies because, while other treatments are available for gMG, about 40 percent of patients continue to experience exacerbations, and that RYSTIGGO[supreg] is the only treatment for patients with gMG who are AChR or MuSK ab+, and that therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for RYSTIGGO[supreg] for the applicant's complete statements in support of its assertion that RYSTIGGO[supreg] is not substantially similar to other currently available technologies. -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of No..................... RYSTIGGO[supreg] is a subcutaneously infused monoclonal antibody action to achieve a therapeutic outcome? (mAb) that specifically targets FcRn with high affinity, permitting the accelerated removal of all subclasses of immunoglobulin G (IgG). There are specific differences in FcRn affinities between RYSTIGGO[supreg] and other FcRn inhibitors. RYSTIGGO[supreg] is the only FcRn inhibitor that is FDA-approved for MuSK ab+ gMG in adults. Is the technology assigned to the same MS-DRG as existing Yes.................... The administration of RYSTIGGO[supreg] to treat gMG is not expected technologies? to change the MS-DRG assignment of the discharge. Does new use of the technology involve the treatment of No..................... While other treatments are available for gMG, about 40% of patients the same/similar type of disease and the same/similar continue to experience gMG exacerbation, suggesting an inadequate patient population when compared to an existing response to existing treatment. RYSTIGGO[supreg] is the only FDA- technology? approved treatment for patients with gMG that are MuSK ab+. -------------------------------------------------------------------------------------------------------------------------------------------------------- [[Page 18139]] With respect to the substantial similarity criteria, while the applicant stated that RYSTIGGO[supreg] does not use the same or a similar mechanism of action as compared to existing technologies because there are specific differences in FcRn affinities between RYSTIGGO[supreg] and other FcRn inhibitors, we are unclear as to what the specific differences are and whether they rise to the level of a new mechanism of action. We note that VYVGART[supreg] is also an FcRn inhibitor approved for use in patients with gMG, and per FDA prescribing information, both technologies bind to the FcRn resulting in the reduction of circulating IgG.145 146 We welcome additional information about how the mechanism of action for RYSTIGGO[supreg] differs from other existing FDA-approved therapies, including FcRn inhibitors such as VYVGART[supreg]. We note that the applicant also stated that RYSTIGGO[supreg] does not involve the treatment of the same or similar type of disease and the same or similar patient population when compared to an existing technology because while there are other treatments for gMG, about 40 percent of patients continue to experience gMG exacerbation, suggesting an inadequate response to existing treatment and RYSTIGGO[supreg] is the only FDA-approved treatment for patients with gMG that are MuSK ab+. However, we note there are other standard of care treatment options for patients with AChR ab+ and MuSK ab+ gMG, such as pyridostigmine, glucocorticoid therapy, and plasmapheresis. In addition, VYVGART[supreg], ULTOMIRIS[supreg], ZILBRYSQ[supreg], and SOLIRIS[supreg] are also treatment options for patients with AChR ab+ gMG. Therefore, we question the assertion that RYSTIGGO[supreg] does not involve the treatment of the same or similar type of disease and the same or similar patient population when compared to existing technology. --------------------------------------------------------------------------- \145\ argenx U.S., Inc. VYVGART[supreg] (efgartigimod alfa-fcab) injection [Package Insert]. (Revised 8/2024). Available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2024/761195s004,761304s003lbl.pdf. \146\ UCB, Inc. RYSTIGGO[supreg] (rozanolixizumab-noli) injection, for subcutaneous use [Package Insert]. (Revised 6/2024). Available at: https://www.accessdata.fda.gov/spl/data/c6e71126-50c1-4ae2-9d82-b053d605b9cb/c6e71126-50c1-4ae2-9d82-b053d605b9cb.xml. --------------------------------------------------------------------------- We are inviting public comments on whether RYSTIGGO[supreg] is substantially similar to existing technologies and whether RYSTIGGO[supreg] meets the newness criterion. With respect to the cost criterion, the applicant provided an analysis to demonstrate that RYSTIGGO[supreg] meets the cost criterion. The analysis followed the order of operations summarized in the following table. RYSTIGGO[supreg] Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for RYSTIGGO[supreg]. Claims identified...................... 22,213 claims mapping to 641 MS-DRGs, with none exceeding more than 8.28% of the total identified cases. Charges removed for prior technology... Per the applicant, use of the technology may replace current drug charges for therapies. The applicant removed 100% of drug charges from the identified cases, which, as the applicant stated, is likely an overestimation of charges that would be replaced by RYSTIGGO[supreg] since patients may receive some ancillary drug treatments with RYSTIGGO[supreg]. The applicant did not remove indirect charges related to the new technology. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2025 IPPS/LTCH PPS interim final action with comment period. Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new technology... The applicant added charges for the new technology by dividing the cost of the new technology by the national average cost-to-charge ratio of 0.178 for Drugs and Cellular Therapies from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. Cost analysis results.................. Average case-weighted threshold amount: $80,760. Final inflated average case-weighted standardized charge per case: $236,731. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant asserted that RYSTIGGO[supreg] meets the cost criterion. We are inviting public comments on whether RYSTIGGO[supreg] meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that RYSTIGGO[supreg] represents a substantial clinical improvement over existing technologies because RYSTIGGO[supreg] is the only FDA-approved product for anti-MuSK ab+ gMG in adult patients, and is an option for patients unresponsive to, and not treated by, conventional therapies. The applicant also asserted that RYSTIGGO[supreg] significantly improves clinical outcomes relative to services or technologies previously available. The applicant provided seven articles regarding the MycarinG study and its open-label extension studies, as well as a meta-analysis regarding efficacy of newer therapies for MG, to support these claims. The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for RYSTIGGO[supreg] for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. [[Page 18140]] ---------------------------------------------------------------------------------------------------------------- Applicant statements in support Supporting evidence provided by the applicant ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ---------------------------------------------------------------------------------------------------------------- RYSTIGGO[supreg] is the only FDA- Habib AA, Sacconi S, Antonini G, et al. Efficacy and safety of approved therapy for gMG in adult rozanolixizumab in patients with muscle-specific tyrosine kinase patients who are MuSK ab+. antibody-positive generalised myasthenia gravis: a subgroup analysis of the randomised, double-blind, placebo-controlled, adaptive phase III MycarinG study. Ther Adv Neurol Disord. 2024a;17:1-16. Bril V, Druzdz A, Grosskreutz J, et al. Safety and efficacy of rozanolixizumab in patients with generalised myasthenia gravis (MycarinG): a randomised, double-blind, placebo-controlled, adaptive phase 3 study. Lancet Neurol. 2023a;22(5):383-394. Habib AA, Sacconi S, Pascuzzi RM, et al. Repeated cycles of rozanolixizumab treatment in patients with muscle-specific kinase antibody-positive generalized myasthenia gravis [Poster 203]. AANEM 2023. RYSTIGGO[supreg] provides a treatment Bril, 2023a, op. cit. option for adult patients with Vu T, Druzdz A, Habib AA, et al. Efficacy of rozanolixizumab in generalized myasthenia gravis (gMG) generalized myasthenia gravis: subgroup analyses from the randomized whose disease is not responsive to, phase 3 MycarinG study [Abstract 002951], AAN 2023. and not treated by, conventional therapies. ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ---------------------------------------------------------------------------------------------------------------- RYSTIGGO[supreg] offers further Bril V, Druzdz A, Grosskreutz J, et al. Long-term efficacy and safety clinical improvement in addition to of symptom-driven cyclical rozanolixizumab treatment in patients with standard of care (SOC) therapies for generalized myasthenia gravis: A pooled analysis of a Phase 3 study adult patients with gMG. and two open-label extension studies [P1-5.012]. Neurology. 2023b;100(17_supplement_2):3747. Sacconi S, Habib AA, Antonini G, et al. Rozanolixizumab in muscle- specific kinase autoantibody-positive myasthenia gravis: Further analyses from MycarinG study [Poster EPO-391]. EAN 2023. Sacc[agrave] F, Pane C, Espinosa PE, Sormani MP, Signori A. Efficacy of innovative therapies in myasthenia gravis: A systematic review, meta- analysis and network meta-analysis. Eur J Neurol. 2023;30:3854-3867. Habib AA, Kaminski HJ, Grosskreutz J, et al. Clinically meaningful improvement in physical fatigue and muscle weakness fatigability with rozanolixizumab: Post hoc analysis of MG Symptoms PRO responder rates in the MycarinG study [Poster P4-11-001]. AAN 2024b. ---------------------------------------------------------------------------------------------------------------- We also received written public comments in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for RYSTIGGO[supreg]. Comment: The applicant submitted a comment in response to questions raised at the Town Hall. Regarding a question on the differences in the sample sizes reported within the Bril et al. (2023a) study versus the FDA \147\ integrated review, the applicant restated the patient population included in the MycarinG study, as described in Bril et al. (2023a) and Habib et al. (2024a). Per the applicant, the information from the MycarinG study aligns with the product label.\148\ The applicant further noted that the number of study participants may vary based on the analysis conducted (intent to treat, data availability, study completion, etc.). The applicant emphasized that gMG is a rare disease, with the MuSK ab+ patient population being even rarer. According to the applicant, the number of patients in the MycarinG study is consistent with other rare disease treatment clinical trials and was acceptable to FDA. --------------------------------------------------------------------------- \147\ U.S. Food and Drug Administration, Center for Drug Evaluation and Research (2023). Integrated Review of BLA 761286 (RYSTIGGO[supreg]). U.S. Department of Health and Human Services. https://www.accessdata.fda.gov/drugsatfda_docs/nda/2023/761286Orig1s000IntegratedR.pdf. \148\ UCB, Inc., 2024, op. cit. --------------------------------------------------------------------------- Regarding a question asking about why the applicant used a post hoc 97.5 percent CI instead of a 95 percent CI for statistical significance in the MycarinG study, how such significance was found in the MuSK ab+ subgroup analysis when there were only 16 MuSK ab+ patients in the MycarinG study (discussed further later in this section), and how significance was only found in those treated in the 7mg/kg dose but not the 10mg/kg dose in the MG-ADL and not for either dose in the quantitative myasthenia gravis score (QMG) assessment, the applicant stated that the parallel gatekeeping approach was used for the primary and secondary endpoints. The applicant stated that this was a means of adjusting for multiple testing across the 2 dose arms and across the different endpoints, while maintaining an overall type 1 error rate of 5 percent. According to the applicant, in the primary endpoint, each dose arm was tested against placebo at two and a half percent. The applicant commented that the MuSK ab+ subgroup analysis was part of the planned efficacy analysis and that the results were clinically significant in having over a two-point reduction in MG-ADL, but noted that these results were not subject to planned statistical testing. The applicant also responded to a question on the validity of the MG-ADL and QMG used in the MycarinG study, including why the MG-ADL was used as the primary endpoint. The applicant stated that objective assessments were the primary endpoint for clinical trials related to gMG prior to 2017. The applicant stated that the REGAIN trial (Howard et al., 2017),\149\ evaluating eculizumab, was published in 2017 and was the first trial to introduce MG-ADL as a primary endpoint. According to the applicant, the current FDA standard evolved following the REGAIN trial, and, consistent with FDA direction to manufacturers, most ongoing phase 3 trials now rely on the MG-ADL as a primary endpoint, emphasizing patient-reported outcome measures which may be more sensitive to clinical change than QMG. The applicant further noted that currently available MG-specific outcome measures include objective, [[Page 18141]] patient-reported, and composite measures. Per the applicant, in the MycarinG study, patient-reported and objective measures were used as either primary or secondary endpoints. The applicant stated that several studies have been conducted to assess validity and correlation of different MG endpoints, and that expert consensus has recommended the use of standardized assessments such as MG-ADL or QMG scores in assessment of patients with gMG. The applicant included several articles on validation, correlation, and consensus on addressing variability in MG clinical trials.150 151 152 153 The applicant stated that it appreciates that CMS is not bound by FDA determinations, but asserted that it is practically impossible, particularly in rare disease trials, to use different assessment measures when government agencies suggest conflicting measurements. --------------------------------------------------------------------------- \149\ Howard, J.F., Jr, Freimer, M., O'Brien, F., Wang, J.J., Collins, S.R., Kissel, J.T. and (2017), QMG and MG-ADL correlations: Study of eculizumab treatment of myasthenia gravis. Muscle Nerve, 56: 328-330. https://doi.org/10.1002/mus.25529. \150\ Howard, 2017, op. cit. \151\ McPherson, T., Aban, I., Duda, P.W., Farzaneh-Far, R., Wolfe, G.I., Kaminski, H.J., Cutter, G., Lee, I., & of the MGTX Study Group (2020). Correlation of Quantitative Myasthenia Gravis and Myasthenia Gravis Activities of Daily Living scales in the MGTX study. Muscle & Nerve, 62(2), 261-266. https://doi.org/10.1002/mus.26910. \152\ Meisel, A., Sacc[agrave], F., Spillane, J., Vissing, J., & MG Collegium Sub-committee. (2024). Expert consensus recommendations for improving and standardising the assessment of patients with generalised myasthenia gravis. European Journal of Neurology, 31(7), e16280. https://doi.org/10.1111/ene.16280. \153\ Thomsen j.L.S, Andersen H. (2020). Outcome measures in clinical trials of patients with myasthenia gravis. Front Neurol. 11, 596382. https://doi.org/10.3389/fneur.2020.596382. --------------------------------------------------------------------------- Finally, in response to a question asking how RYSTIGGO[supreg] compares with existing standard of care therapies and specifically newer agents, the applicant stated that RYSTIGGO[supreg] was not compared against a treatment-na[iuml]ve placebo group for ethical reasons. Per the applicant, in the MycarinG trial, patients in the placebo and treatment groups were allowed to remain on their standard of care therapies, such as non-steroidal immunosuppressive therapy (methothrexate, cyclosporine, azathioprine, tacrolimus), steroids, and pyridostigmine, such that they were randomized to either the RZL+standard-of-care group or the placebo+standard-of-care group. The applicant stated that the MycarinG study therefore looked at the benefits of RYSTIGGO[supreg] beyond standard of care therapies. According to the applicant, for the reasons previously explained, there is no head-to-head comparison against other biologics or newer therapies available in treatment-na[iuml]ve patients. The applicant noted that currently available therapies also do not have an FDA indication for MuSK ab+ gMG. We also received a few comments expressing general support for new technology add-on payments for RYSTIGGO[supreg] stating that RYSTIGGO[supreg] offers a new and significant clinical improvement in care for gMG patients who are MuSK ab+. Response: We thank the applicant and commenters for their comments. After review of the information provided by the applicant and the public comments received in response to the New Technology Town Hall meeting, we have the following concerns regarding whether RYSTIGGO[supreg] meets the substantial clinical improvement criterion. While the applicant stated that RYSTIGGO[supreg] is the only FDA- approved therapy for gMG in adult patients who are MuSK ab+, and that this subtype is challenging to treat, as patients are usually unresponsive and often intolerant of pyridostigmine (a standard first- line MG therapy), we note that the applicant also stated that 3,4- diaminopyridine treatments may have mild to moderate effect. We further note that, as mentioned previously, other therapies such as pyridostigmine, glucocorticoid therapy, and plasmapheresis are also available options for these patients, and we therefore question that RYSTIGGO[supreg] offers a treatment option for patients with MuSK ab+ gMG who have no other treatment options. The applicant also stated that RYSTIGGO[supreg] provides a treatment option for the approximately 10 to 20 percent of patients with gMG whose disease is not responsive to, and not treated by, conventional therapies due to inadequate response or intolerable side effects, however, we question whether the evidence provided demonstrates that there is a population of patients with gMG with no other treatment options. To support this claim, the applicant provided the double-blind, placebo-controlled, phase 3 MycarinG study, which randomized 200 patients (1:1:1) to receive RYSTIGGO[supreg] 7 mg/ kg, RYSTIGGO[supreg] 10 mg/kg, or placebo in addition to their current gMG treatment (where permitted by the study inclusion criteria) for 6 weeks, as well as an abstract of a post hoc subgroup analysis of this study (Vu et al., 2023) which stratified trial results based on the number of prior therapies.\154\ The applicant stated that the MycarinG study demonstrated RYSTIGGO[supreg], in addition to standard of care, significantly improved clinical outcomes by reducing MG-ADL, QMG, and MG Composite (MGC) scores in adult patients with gMG, including those with prior standard of care treatments such as corticosteroids, parasympathomimetics, and non-steroidal immunosuppressants. We note that permitted concomitant medications were cholinesterase inhibitors, oral corticosteroids, azathioprine, ciclosporin, methotrexate, mycophenolate mofetil, and tacrolimus. All of these medications, except for cholinesterase inhibitors, required a stable dose. We question if the cholinesterase inhibitor dose may have affected the results of the study since the dose may not have been stable throughout the trial. In addition, other standard of care treatment options for patients were excluded, including rituximab products, VYVGART[supreg], ULTOMIRIS[supreg], ZILBRYSQ[supreg], and SOLIRIS[supreg], and we therefore question if RYSTIGGO[supreg] is the only treatment option for patients with gMG who have failed conventional therapy. --------------------------------------------------------------------------- \154\ Bril, 2023a, op. cit. --------------------------------------------------------------------------- The applicant also provided an abstract of a subgroup analysis (Vu et al., 2023) of the MycarinG study and stated the subgroup analysis demonstrated that RYSTIGGO[supreg] significantly improved outcomes based on a reduction in MG-ADL in patients who had previously undergone myasthenia gravis standard treatments based on stratification on number of prior therapies, excluding acetylcholinesterase inhibitors, but including corticosteroids, non-steroidal immunosuppressants, IVIg, and plasma exchange. However, it is unclear how a subgroup analysis on the number of prior therapies provides evidence that RYSTIGGO[supreg] is the only treatment option for patients unresponsive to conventional therapies. We also note that acetylcholinesterase inhibitors were excluded from this subgroup analysis, but these are part of the standard of care for MG. With respect to the applicant's assertion that RYSTIGGO[supreg] improves clinical outcomes over existing therapies, the applicant submitted three presentation posters (Bril et al., 2023b; Sacconi et al., 2023; Habib et al., 2024b) that provided efficacy and safety results from the MycarinG study and 2 open-label extension studies (MG0004 and MG007) which we note are not published or peer-reviewed. We note that two of the poster presentations (Bril et al., 2023b and Habib et al., 2024b) do not report the statistical significance of results and, therefore, we are uncertain as to how significant the results are. With regards to the MycarinG study, per the applicant's Town Hall comment, patients were allowed to remain on standard of care therapies such as non- [[Page 18142]] steroidal immunosuppressive therapy, steroids, and pyridostigmine. However, we note that various other standard of care therapies were excluded such as rituximab products, VYVGART[supreg], ULTOMIRIS[supreg], ZILBRYSQ[supreg], and SOLIRIS[supreg]. Without a comparison to these therapies, we question whether RYSTIGGO[supreg] improves clinical outcomes relative to all previously available therapies. Given the 6-week duration of the trial, we also question how natural changes in symptoms were accounted for since symptoms can wax and wane in patients with gMG. We further note that the MycarinG and the open-label extension studies involved only 8 weeks (MycarinG and MG0004) or 16 weeks (MG0007) of observation, which makes it more difficult to assess the frequency of prolonged remission rates and how the adverse event rates, such as for cancer and infection, compare with existing therapies. We are also interested in more information on the lack of a dose-response effect with RYSTIGGO[supreg]. For instance, there was a least squares mean (LSM) in MG-ADL of -7.28 in the rozanolixizumab (RLZ) 7 mg/kg group and -4.16 in the RLZ 10 mg/kg group within the MuSK ab+ population and an LSM of -3.03 in the RLZ 7 mg/kg group and a similar LSM of -3.36 in the RLZ 10 mg/kg group within the AChR ab+ population. We also note there is only about a 2 to 2.5-point difference between RYSTIGGO[supreg] and placebo for MG-ADL in the AChR ab+ subpopulation and the overall population. Specifically, for the AChR ab+ population, the LSM difference versus placebo in the RLZ 7 mg/ kg group was -1.94 and in the RLZ 10 mg/kg group was -2.26 and for the overall population, the LSM difference versus placebo was -2.59 in the RLZ 7 mg/kg group and -2.62 in the RLZ 10 mg/kg group. The applicant stated that these findings were statistically significant. We note that the study considered a 2-point difference in MG-ADL as a clinically meaningful improvement. We would appreciate clarification on how the study defined clinically meaningful improvement. In addition, with respect to the MuSK ab+ population in the MycarinG trial, we note there were 21 MuSK ab+ patients in the studies submitted by the applicant. We further note that the FDA Integrated Review for RYSTIGGO[supreg] indicated that 16 patients tested positive for the MuSK ab+ and we would appreciate clarification regarding this discrepancy in numbers. We note in its Town Hall comment that the applicant emphasized that gMG, particularly MuSK positive gMG, is a rare disease and the number of patients in the study is consistent with other rare disease treatment clinical trials and was acceptable to the FDA. However, we question if the results are generalizable to the Medicare population since only 2 patients treated with RYSTIGGO were from the U.S. and only 1 patient treated was 65 years or older.\155\ We also note that not all efficacy outcomes were statistically significant within the MuSK ab+ population. Specifically, the LSM difference in QMG between RYSTIGGO[supreg] and placebo was not statistically significant for either the RLZ 7 mg/kg group (97.5 percent confidence interval - 14.24, 0.41) nor the RLZ 10 mg/kg group (97.5 percent confidence interval -9.73, 3.45). Further, we note there appears to be a difference in the disease severity between the MuSK ab+ patients in the placebo and treatment arms. For example, results from Habib et al. (2024a) indicated that among the MuSK ab+ population of the MycarinG study, all patients with severe (Class IV) disease at baseline per the Myasthenia Gravis Foundation of America (MGFA) classification system were in the placebo arm (\3/8\), while individuals in the treatment groups all had mild or moderate (Class II or Class III) disease at baseline. We question how this difference may have impacted the placebo group's outcomes relative to the those of the treatment groups. Additionally, a higher percentage of patients were taking corticosteroids in the RYSTIGGO[supreg] groups (80 percent in 7 mg/kg group and 87.5 percent in 10 mg/kg group) compared to placebo (62.5 percent) and we question if this difference in background therapy could have affected the outcomes since oral corticosteroids were a permitted concomitant medication in the trial. We also note that the trial excluded individuals with severe oropharyngeal or respiratory weakness, and we question whether this exclusion would affect the generalizability of the results for this MuSK ab+ subpopulation, as the applicant indicated that patients with MuSK ab+ gMG tend to have more severe disease with a potential unmet need for treatment options. --------------------------------------------------------------------------- \155\ U.S. FDA CDER, 2023, op. cit. --------------------------------------------------------------------------- The applicant also provided a meta-analysis comparing innovative therapies in MG, stating that it demonstrated that anti-FcRn treatments such as RYSTIGGO[supreg] showed greater effects on QMG, MGC, and MG- QoL15 compared to complement inhibitors, with VYVGART[supreg] and RYSTIGGO[supreg] having the highest probabilities of being the most effective treatment for MG-ADL and QMG. However, we note that the same article indicated no significant difference in MG-ADL between complement inhibitors and anti-FcRn treatments. Additionally, we note that the analysis found that VYVGART[supreg] had the highest probability of being the best treatment, followed by RYSTIGGO[supreg].\156\ We note that we did not receive any other evidence comparing complement inhibitors or anti-FcRn treatments with RYSTIGGO[supreg] to demonstrate improved outcomes. Therefore, we would appreciate additional information comparing RYSTIGGO[supreg] to these other therapies in order to inform our assessment of whether RYSTIGGO[supreg] demonstrates a substantial clinical improvement over existing technologies. In addition, we note that the meta-analysis included seven clinical trials, only two of which included patients positive for MuSK ab+, MycarinG and ADAPT, a trial studying VYVGART[supreg]. The meta-analysis did not include trials studying other standard of care therapies in patients with MuSK ab+ gMG. Since the meta-analysis did not include a comparison of current therapies in patients with MuSK ab+ gMG, we question how this analysis demonstrates RYSTIGGO[supreg] improves clinical outcomes relative to previously available therapy for patients with MuSK ab+ gMG. --------------------------------------------------------------------------- \156\ Sacc[agrave], 2023, op. cit. --------------------------------------------------------------------------- We also note that, while the applicant stated that RYSTIGGO[supreg] meets patient preferences for convenience by its ability to be administered via a subcutaneous infusion by a healthcare provider, either at an infusion clinic or at home with nurse assistance, the applicant does not provide a comparison of administration to other available therapies. We would further appreciate additional information on how the administration method for RYSTIGGO[supreg] demonstrates that the technology significantly improves one or more of the clinical outcomes described under the regulations at Sec. 412.87(b)(1)(ii)(C). We are inviting public comments on whether RYSTIGGO[supreg] meets the substantial clinical improvement criterion. l. SYMVESSTM (Acellular Tissue Engineered Vessel-Tyod) Humacyte, Inc. submitted an application for new technology add-on payments for SYMVESSTM for FY 2026. According to the applicant, SYMVESSTM is a bioengineered, implantable blood vessel indicated for use in adults as a vascular conduit for extremity arterial injury when urgent [[Page 18143]] revascularization is needed to avoid imminent limb loss and when autologous vein grafting is not feasible. The applicant stated that SYMVESSTM is composed of organized extracellular matrix proteins in the tubular form of a blood vessel and is used to repair, bypass, or replace arteries that have sustained traumatic injuries. Please refer to the online application posting for SYMVESSTM, available at https://mearis.cms.gov/public/publications/ntap/NTP24100639G2M, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, SYMVESSTM was granted BLA approval from FDA on December 19, 2024, for use in adults as a vascular conduit for extremity arterial repair when urgent revascularization is needed to avoid imminent limb loss, and when autologous vein grafting is not feasible. The applicant stated that FDA required a lot release that shows results of all applicable tests prior to distribution of SYMVESSTM and that it submitted the required paperwork to FDA on December 26, 2024. The applicant stated that on February 26, 2025, FDA notified the applicant that the required review of commercial batch information was completed and authorized the applicant to commence commercial shipment; therefore, per the applicant, SYMVESSTM became commercially available as of February 26, 2025. Per the applicant, the average number of units of SYMVESSTM anticipated to be used per inpatient stay is 1 unit. The applicant stated that, effective October 1, 2024, the following ICD-10-PCS codes may be used to uniquely describe procedures involving the use of SYMVESSTM: X2R50WA (Replacement of right upper extremity artery using bioengineered human acellular vessel, open approach, new technology group 10), X2R60WA (Replacement of left upper extremity artery using bioengineered human acellular vessel, open approach, new technology group 10), X2R70WA (Replacement of right lower extremity artery using bioengineered human acellular vessel, open approach, new technology group 10), or X2R80WA (Replacement of left lower extremity artery using bioengineered human acellular vessel, open approach, new technology group 10). As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that SYMVESSTM is not substantially similar to other currently available technologies because it does not use the same or a similar mechanism of action compared to existing technologies, and that therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for SYMVESSTM for the applicant's complete statements in support of its assertion that SYMVESSTM is not substantially similar to other currently available technologies. -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of No..................... SYMVESSTM uses a unique mechanism of action compared to existing action to achieve a therapeutic outcome? guideline-recommended treatments for the anticipated indication. SYMVESSTM is a bioengineered implantable vessel that is grown from human cells and then decellularized. The resulting SYMVESSTM consists of extracellular matrix proteins, in the form of a tubular blood vessel, that stimulate patient cell recruitment after implantation. Cellular repopulation and remodeling of the SYMVESSTM result in a living, functional part of the vasculature. The autologous vein grafts' mechanism of action involves biological integration, promoting natural endothelial function, reducing thrombosis risk, and adapting to the arterial environment through arterialization. SYMVESSTM's mechanism of action offers several advantages: (1) reduces time to revascularization with an off-the-shelf option; (2) avoids vein harvesting complications; (3) provides a consistent conduit size; and (4) regenerates into a living blood vessel. The synthetic grafts' mechanism of action provides immediate revascularization but does not integrate into the host and is not remodeled by patient cells. Synthetic grafts are made of non- biodegradable polymers that often stimulate foreign body responses, fibrosis, and thrombosis when implanted into patients. Lacking native extracellular matrix proteins architecture, synthetic grafts also interact poorly with the patient's immune system, which raises the risk of graft infection in contaminated wound beds. SYMVESSTM, which is comprised of human extracellular matrix proteins, repopulates with cells, has a low infection rate, and does not stimulate fibrosis nor a foreign body reaction. The mechanism of action of ligation is to stop blood flow through the injured artery but without revascularization, while amputation functions by removing part or all the injured limb to prevent further complications and save a patient's life. SYMVESSTM offers an alternative by providing a vessel capable of restoring blood flow, preserving limb functionality. Is the technology assigned to the same MS-DRG as existing Yes.................... The use of SYMVESSTM will likely be assigned to the same MS-DRGs technologies? where existing technologies to treat significantly damaged arteries due to traumatic injuries, are assigned. [[Page 18144]] Does new use of the technology involve the treatment of Yes.................... SYMVESSTM is used to treat the same type of disease in a similar the same/similar type of disease and the same/similar patient population as existing technologies. Traumatic vascular patient population when compared to an existing injury can be caused by motor vehicle accidents, industrial technology? accidents, falls, gunshot wounds, knife wounds, etc. For all these types of injuries to the extremities, if an autologous vein is available for arterial repair, then such injuries are typically repaired using a harvested vein from the patient. However, regardless of the mechanism of injury, in some cases, an autologous vein is not available, or its use is not feasible in a given trauma situation. In some situations, there may not be enough time to harvest the vein, or the trauma surgeon may not have the necessary training to harvest a vein. Regardless of the situation, the patient or the injury mechanism, SYMVESSTM is anticipated to provide a new treatment option to patients where revascularization using a harvested autologous vein is not feasible. By addressing the needs of these specific patients, SYMVESSTM expands the treatment options available for saving life and limb following vascular trauma, ensuring better outcomes for a broader patient population. -------------------------------------------------------------------------------------------------------------------------------------------------------- We have the following concerns with regard to the newness criterion. The applicant stated that SYMVESSTM has a novel mechanism of action based on its manufacturing, composition, and post- operative regenerative properties. However, we are interested in more information about how the composition of SYMVESSTM is associated with its post-operative regenerative properties, and specifically how these regenerative properties are associated with its mechanism of action to achieve a therapeutic outcome, as well as how the association between SYMVESSTM's regenerative properties and mechanism of therapeutic action differs from that of autologous vein grafts. In addition, we question whether physiological changes, such as arterialization, cellular repopulation, and fibrosis, that occur after a conduit is implanted, should be considered part of the mechanism of action. We also note that the applicant stated that the mechanism of action of synthetic grafts is immediate revascularization, and we question whether that is not also the mechanism of action of SYMVESSTM and/or autologous vein grafts. We are inviting public comments on whether SYMVESSTM is substantially similar to existing technologies, including whether post- implantation physiological changes should be considered as part of a technology's mechanism of action, and whether SYMVESSTM meets the newness criterion. With respect to the cost criterion, the applicant provided an analysis to demonstrate that SYMVESSTM meets the cost criterion. The analysis followed the order of operations summarized in the following table. SYMVESSTM Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes, ICD-10-PCS codes, and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for SYMVESSTM. Claims identified...................... 1,540 claims mapping to 90 MS-DRGs, with 18.83% of claims mapping to MS- DRG 252 (Other Vascular Procedures with MCC). Charges removed for prior technology... Per the applicant, use of the technology would replace other implantable devices. The applicant removed 100% of charges for implantable devices from the identified cases, as to take a conservative approach in its cost analysis. The applicant did not remove any indirect charges related to the prior technology. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2025 IPPS/LTCH PPS interim final action with comment period. Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new technology... The applicant added charges for the new technology by dividing the cost of SYMVESSTM by the national average-cost-to-charge ratio of 0.259 for Implantable Devices from the FY 2025 IPPS/LTCH PPS final rule. Cost analysis results.................. Average case-weighted threshold amount: $143,227. Final inflated average case-weighted standardized charge per case: $423,141. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant asserted that SYMVESSTM meets the cost criterion. We are inviting public comments on whether SYMVESSTM meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that SYMVESSTM represents a substantial clinical improvement over existing technologies because SYMVESSTM is a new treatment option for patients with extremity vascular trauma where autologous vein grafts are infeasible, has improved secondary patency compared to synthetic grafts, and has lower amputation and infection rates. The applicant also stated that SYMVESSTM enables quicker perfusion of injured extremities compared to autologous grafts, reducing ischemia time and complication risks. The applicant provided 6 documents, including 2 studies and 2 FDA-related documents, to support these claims, as well as 10 background articles about extremity arterial trauma outcomes, trauma surgery clinical guidelines, and the impact of repair duration on extremity arterial injuries.\157\ The following table summarizes the applicant's assertions regarding the [[Page 18145]] substantial clinical improvement criterion. Please see the online posting for SYMVESSTM for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \157\ Background articles are not included in the following table but can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- Applicant statements in support Supporting evidence provided by the applicant ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ---------------------------------------------------------------------------------------------------------------- SYMVESSTM is the first and only Food and Drug Administration. U.S. Department of Health and Human bioengineered blood vessel approved for Services. Grant of Regenerative Medicine Advanced Therapy extremity vascular trauma. Designation for Human Acellular Vessel (HAV). U.S. Department of Health and Human Services, Food and Drug Administration. Granted May 2, 2023. Humacyte Global, Inc. Section 2.5 Clinical Overview: Biologics License Application 125812 for Human Acellular Vessel (HAV) (Excerpt Clinical Data). Submitted December 2023. Moore EE, Curi M, Namias N, et al. Bioengineered Human Arteries for the Repair of Vascular Injuries. JAMA Surg. Published online November 20, 2024. doi:10.1001/jamasurg.2024.4893. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. SYMVESSTM is a new treatment option for Humacyte Global, Inc, 2023, op. cit. patients with extremity vascular trauma, Humacyte Global, Inc. ATEV Clinical Overview--Vascular Trauma where autologous vein grafts are not Background and Cross-Population Generalizability. 2024a. feasible. Moore, 2024, op. cit. ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ---------------------------------------------------------------------------------------------------------------- Conduit infection rates are lower with Moore, 2024, op. cit. SYMVESSTM compared to synthetic grafts in Humacyte Global, Inc, 2023, op. cit. extremity vascular trauma. Humacyte Global, Inc, 2024a, op. cit. Humacyte. Data on File--Propensity Score Matched Analysis Results. 2024b. Wang, J., Blalock, S.K.F., Levitan, G.S., Prichard, H.L., Niklason, L.E., & Kirkton, R.D. (2023). ``Biological mechanisms of infection resistance in tissue-engineered blood vessels compared to synthetic expanded polytetrafluoroethylene grafts.'' Journal of Vascular Surgery: Vascular Science, 4, 100120. DOI: 10.1016/ j.jvssci.2023.100120. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. SYMVESSTM results in lower amputation Humacyte Global, Inc, 2023, op. cit. rates as compared to synthetic grafts. Humacyte Global, Inc, 2024a, op. cit. Humacyte. 2024b, op. cit. Moore, 2024, op. cit. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. SYMVESSTM significantly improves secondary Humacyte Global, Inc, 2023, op. cit. patency rates as compared to synthetic Humacyte Global, Inc, 2024a, op. cit. grafts. Humacyte. 2024b, op. cit. Moore, 2024, op. cit. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. SYMVESSTM enables quicker reperfusion of Humacyte Global, Inc, 2023, op. cit. injured extremities compared to Moore, 2024, op. cit. autologous vein grafts, reducing risk of The applicant also provided background information to support this complications and amputation. claim, which can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- We also received written public comments in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for SYMVESSTM, which we are summarizing in this section. Comment: Two commenters submitted comments on SYMVESSTM. A commenter stated that SYMVESSTM has not demonstrated non- inferiority to synthetic grafts or provided evidence for when SYMVESSTM should be used instead of a synthetic graft in any of what the commenter described as underpowered, non-comparative trauma clinical trials (V005 and the V017). The commenter stated that instead of conducting a head-to-head trial, synthetic graft benchmarks that compared unfavorably to SYMVESSTM were used in the V005 and V017 trials. The commenter stated that the total number of evaluable patients was only 51 (V005) and 16 in the observational study (V017), which was not enough to show significance. In terms of primary patency rate, which was the primary endpoint of the V005 and V017 trials, the commenter noted that primary patency is defined as intervention free functionality, and that graft literature reports primary patency rates in months to years. The commenter also noted that the applicant reported primary patency and adverse events data at 30-day endpoints, while most of these vascular grafts are in patients for months to years. The commenter also expressed concern that the applicant defines secondary patency as functionality after a thrombolytic intervention. The commenter stated that secondary patency data can be open to interpretation because multiple interventions may have been used to keep SYMVESSTM open, even if the technology is not functional. In terms of the Wang et al. (2023) study, which compared SYMVESSTM to ePTFE grafts [[Page 18146]] in patients requiring a conduit for hemodialysis, the commenter stated that 10 times more thrombotic events occurred in the SYMVESSTM group (N=126) versus the control (arteriovenous fistula, AVF) (N=12) group, and that there was twice as much stenosis in the SYMVESSTM group (N=228) versus the control group (N=115). The commenter was not supportive of approving new technology add-on payments for SYMVESSTM. The other commenter stated that SYMVESSTM does not represent a meaningful improvement of the standard of care. According to the commenter, the actual study cohort for the V005 trial was modified. Specifically, the study enrolled 72 patients and treated 69 with SYMVESSTM on an intention-to-treat basis (ITT), and only 51 were included in the analysis, representing an analysis on modified intention to treat basis (mITT). According to the commenter, the reasons given were that, of the 18 SYMVESSTM recipients who were not included in the analysis, 16 had iatrogenic injuries and 2 had thoracic injuries. Per the commenter, the 51-patient cohort was referred to as ITT, even though 69 actually received the product. The commenter also stated that to its knowledge, the data of the 18 patients have never been shared. The commenter also stated that the inclusion and exclusion criteria of the V017 trial were very different from those of the V005 trial. Per the commenter, the V017 trial may include patients who can be treated with either autologous veins or SYMVESSTM, and that any limb threatening injury could be included in the patient cohort. The commenter also noted that although the average Injury Severity Score (ISS) between V005 and V017 were similar (about 20.0), V017 has a much higher variance (standard deviation [SD]=18.9) than V005 (SD=10.5). The commenter also noted that the range of SD was not disclosed. Per the commenter, even one extremely high ISS could skew the average up if it was otherwise low, and that there were no exclusion criteria in V017 for ISS higher than 60. The commenter also stated that while SYMVESSTM may have superior initial uptake in the human body than PTFE grafts, its performance drops off significantly over time in both trauma and dialysis. The commenter stated that in terms of long-term patency, long-term graft studies show that after a year or two, the patency levels off, so even 12-months or 24-months is enough to make some highly educated guesses about the long-term patency of the product. In terms of secondary patency, the commenter noted that the 12- month rate for the combined samples of V005 and V017 was about 73 percent, and that, based on information from Humacyte's press release from August 2024,\158\ the 12-month secondary patency for V017 was 87 percent. According to the commenter, since V017 had a sample size of 16, and the combined sample size was 67, this would imply that the results from V005 were in fact much lower than those of V017. According to the commenter, solving (((X * 51) + (0.87 * 16))/67) = 0.73 yielded a 12-month secondary patency rate of 68.6 percent (X [ap] 0.686078) for V005 which was much lower than 78.9 percent, the applicant's 30-day synthetic grafts benchmark for secondary patency, and 18.4 percent lower than the secondary patency of V017 (87 percent). According to the commenter, the outcomes of the two trials were different, which it described as two obviously different data set results. The commenter speculated that the difference in the long-term outcomes of V005 and V017 can be explained by the baseline health of the patients in each trial. The commenter also stated that the difference in patency between the two trials was obvious if safety signals are considered. Per the commenter, according to the adverse event data of Moore study (2024), the patients in the V017 trial were implicitly much healthier than those in the V005 trial either at presentation in clinic or afterwards. The commenter stated that it would be unlikely for the two trials to have similar outcomes. The commenter questioned whether removing one of the inclusion criteria in V005, that patients who received SYMVESSTM would have to be unable to receive arteriovenous grafts (AVG), would increase the average health of the patients. --------------------------------------------------------------------------- \158\ Humacyte presents positive long-term results in ATEVTM in treatment of vascular trauma in military setting of Ukraine Humanitarian Program (https://investors.humacyte.com/news-releases/news-release-details/humacyte-presents-positive-long-term-results-atevtm-treatment, accessed 1/30/ 2025). --------------------------------------------------------------------------- The commenter also stated that the Moore study (2024) provided the confidence intervals for the amputation, infection, and death rates, but not for the ISS. Per the commenter, the mean (x) and standard deviation (SD) for the ISS were similar for the two trials (V005: x=20.8, SD=10.5; V017: x=20.1, SD=18.9). Per the commenter, three of the 16 patients in V017 had no ISS reported, and that the synthetic graft variance was much smaller (SD=2.4). According to the commenter, per the Moore team (2024), no deaths were attributed to SYMVESSTM.\159\ The commenter stated that overall survival is generally not differentiated this way in the literature, and that deaths resulting from injuries were counted as such regardless of whether the SYMVESSTM graft was patent or not. The commenter stated that the death rate for the two trials was 5.9 percent and zero percent, and that the death rate for the 2 trials combined was 3.5 percent, which was higher than the 3.4 percent synthetic graft benchmark for all-cause death. The commenter stated it believed this was probably due to thrombotic events caused by SYMVESSTM. The commenter also stated that the absence of p-value in the applicant's report of trial results made it hard to tell whether those results were due to chance. --------------------------------------------------------------------------- \159\ Moore (2024), op. cit. p. E5. --------------------------------------------------------------------------- In terms of the synthetic graft benchmarks, the commenter stated that historical comparisons are always a last resort way to compare two products in a clinical trial, and that it is hard to compare two trials that were run in different sites, on different people, under different conditions, at different periods in time. According to the commenter, previous clinical trials for the indication of vascular trauma had tested different technologies (autologous vein grafts, different synthetic grafts) on different types of patients (for example, civilian versus military) on different parts of the body for short- versus long- term. The commenter stated that trial results may be skewed by a historical control that performed much better or much worse than its comparator in a previous trial. In addition, the commenter stated that the way we treat thrombosis with post-graft drug regimens has evolved over time, and some studies found that the use of post-surgery prescription drugs can drastically impact outcomes. Per the commenter, those are the reasons that it becomes challenging to evaluate graft performance in 2024 using historical controls from 2004. The commenter asserted that head-to-head comparison is a feasible study design in trauma. The commenter noted that in Fox (2005), one of the papers in the meta-analysis of the Moore study (2024), the infection and amputation rates for the PTFE grafts were very high, and that all of the grafts had become infected and failed, resulting in amputation. Per the commenter, Fox mentioned that he had only examined one-third of all the patients, that the median ISS was 40 (range: 16-75), which, the commenter noted, was double the average for V005 (x=20.8) and V017 (x=20.1). According [[Page 18147]] to the commenter, Perkins (2016), another paper in the meta-analysis, analyzed 579 extremity injuries and showed that amputations happened more often among those with higher ISS. Moreover, the commenter stated that while the studies in the synthetic graft meta-analysis reported percent of patients who received a synthetic graft, infection rate, and amputation rate, only some reported whether the patients who received a synthetic graft developed infection or underwent amputation as a result of the synthetic graft. In addition, while the Moore study (2024) reported that the meta-analysis included 281 synthetic grafts, the commenter noted that it was unable to replicate that number. Moreover, the commenter stated that the Rudstrom paper (2008), another study in the meta-analysis, specifically looked at iatrogenic injuries. The commenter questioned why patients with iatrogenic injuries were excluded from the evaluable cohorts in the V005 and V017 trials, but the synthetic graft benchmarks included the results of patients with iatrogenic injuries. The commenter expressed doubt as to whether iatrogenic injuries were excluded from the meta-analysis. Furthermore, the commenter stated that SYMVESSTM should be compared with Artegraft[supreg], a biological off-the-shelf solution approved for trauma, hemodialysis, and lower extremity bypass surgeries and owned by LeMaitre. The commenter noted that according to the Statistical Analysis Plan for SYMVESSTM, besides the synthetic graft benchmarks, the applicant also created a non-autologous vein and non-synthetic graft benchmark.\160\ Per the commenter, this benchmark has not been shared publicly, and as a result, the results of what that benchmarking activity yielded or what the comparative to the Artegraft[supreg] or other xenografts look like remain unclear. --------------------------------------------------------------------------- \160\ Moore et al (2024), op. cit., Supplement 6: Statistical Analysis Plan for Systematic Literature Review and Meta-analysis. Version 2.0 Final, 25 May 2023, p. 6. --------------------------------------------------------------------------- Regarding the Wang study (2023), the commenter stated that the applicant did not demonstrate non-inferiority in months 18 and 24 and therefore failed the study. According to the commenter, although SYMVESSTM demonstrated initially superior secondary patency and uptake in the human body, there was significant degradation over time, which brings into question the robustness of the technology. Per the commenter, the finding that SYMVESSTM performed worse than ePTFE in terms of secondary patency after one year is important because if the technology needs to be replaced more often, this potentially introduces significant risk to the patient by needing to undergo an additional surgery. The commenter also added that the results from the SYMVESSTM studies conducted in America have generally lower secondary patency rates. Per the commenter, when interpreting the SYMVESSTM clinical data, only the U.S. data should be considered, especially given the large variance in the injury data and the fact that the applicant did not exclude patients who could have received an autologous vein graft. The commenter stated that those were the major variables that greatly influenced the outcome of the Moore study (2024). The commenter concluded that SYMVESSTM is inferior to standard of care alternatives that are already approved in trauma. Response: We thank the commenters for their comments. After review of the information provided by the applicant and the public comments received in response to the New Technology Town Hall meeting, we have the following concerns regarding whether SYMVESSTM meets the substantial clinical improvement criterion. We note that being the first and only bioengineered blood vessel for vascular trauma may relate to newness but does not explain how the technology treats patients unresponsive to or ineligible for existing treatment options. Additionally, while the applicant stated that SYMVESSTM is a treatment option for patients ineligible for autologous vein grafts, we note that these patients could still receive other available treatment options, which may include, but are not limited to: primary repair, shunting, use of synthetic or other graft for bypass or interposition grafting, and amputation. Therefore, it is unclear that SYMVESSTM offers a treatment option for patients ineligible for or unresponsive to currently available treatments. With respect to the assertion that SYMVESSTM significantly improves clinical outcomes relative to services or technologies previously available, the applicant stated that SYMVESSTM is associated with lower conduit infection and amputation rates, and significantly improves secondary patency rates compared to synthetic grafts. To support these claims, the applicant provided the Moore et al. (2024) study, which compared pooled results from two single-arm clinical trials using SYMVESSTM (V005 and V017) to synthetic graft benchmarks derived from a systematic review and meta-analysis of literature. However, we question the reliability and validity of the synthetic graft benchmarks against which Moore et al. (2024) compared SYMVESSTM effects on clinical outcomes. V005 was a prospective phase II/III trial of 69 civilian patients with vascular injuries at U.S. and Israeli level 1 trauma centers from September 2018 through June 2023. V017 was a retrospective trial of 19 wounded war fighters and other patients from a humanitarian program in Ukraine from June 2022 through June 2023. Moore et al. (2024) developed the three synthetic graft benchmarks based on a meta-analysis of 12 studies published between 2005 and 2022.161 162 163 164 165 166 167 168 169 170 171 172 Of these 12 studies, 7 used samples of [[Page 18148]] soldiers from the wars in Iraq and Afghanistan and 5 used samples of civilians in the U.S., Trinidad and Tobago, and Sweden. We note that these 12 studies were conducted using different trial designs, patient samples with different baseline demographic and clinical attributes, and during a long period of time when innovations and guidelines for management of extreme arterial injury continued to emerge and evolve. In addition, these studies used different inclusion and exclusion criteria for injury types and followed different documentation protocols for details about injuries. Furthermore, they implemented different treatments based on different surgical decisions, including Dacron or PTFE synthetic grafts, primary repair, shunting, oversew, reversed vein, or amputation. Half of these studies conducted follow-up periods on clinical outcomes, ranging from 36 days to 10 years. We are concerned that not accounting for these differences in the meta- analysis may confound the results on clinical outcomes and limit the reliability of the comparison between SYMVESSTM and synthetic grafts. In addition, more than half (N=7) of the 12 studies were published before 2019 and we question whether the meta-analysis sufficiently accounts for more recent advances in post-graft drug therapy and other recent advances in treatments for extremity vascular trauma. Moreover, we are concerned about whether there is any empirical evidence that the three synthetic graft benchmarks reflect the clinical outcomes that patients would attain if they have received guideline- based care for extremity vascular trauma. We note that none of the 12 studies made claims regarding the association between guideline-based implementation of synthetic graft treatments and extremity vascular trauma outcomes. Also, in 9 of the 12 studies, the number of synthetic graft recipients ranged from 3 to 16. We question if these samples were sufficiently powered to detect statistically significant and clinically meaningful differences between synthetic grafts and comparators on clinical outcomes. As previously discussed, only half of the 12 studies conducted follow up on clinical outcomes; however, none indicated whether the patients who received synthetic grafts remained in the trial throughout the follow-up periods. Consequently, we are interested in additional information on the reliability and validity of Moore et al. (2024) study's synthetic graft benchmarks, which were developed based on 12 studies with heterogeneous study designs, injury types, interventions, and follow-up protocols. Additionally, we note that the patient samples in the V005 and V017 trials may not be comparable to those in the 12 studies. We are interested in whether and how the differences, such as the availability of treatments and standard of care, between the V005 trial's SYMVESSTM recipients and the 12 studies' patient populations were accounted for in the meta-analysis and interpretation of the clinical outcomes of the Moore et al. (2024) study. --------------------------------------------------------------------------- \161\ Fox, C.J., Gillespie, D.L., O'Donnell, S.D., Rasmussen, T.E., Goff, J.M., Johnson, C.A., Galgon, R.E., Sarac, T.P., & Rich, N.M. (2005). Contemporary management of wartime vascular trauma. Journal of Vascular Surgery, 41(4), 638-644. https://doi.org/10.1016/j.jvs.2005.01.010. \162\ Laverty, R.B., Brock, S.G., Walters, T.J., & Kauvar, D.S. (2021). Outcomes of Arterial Grafts for the Reconstruction of Military Lower Extremity Arterial Injuries. Annals of Vascular Surgery, 76, 59-65. https://doi.org/10.1016/j.avsg.2021.03.006. \163\ Lin CH, Consuegra MDL, Lin TS, Revisiting Management Strategies for Popliteal Artery Injuries. Ann Plast Surg. 2022 Mar 1;88(1s Suppl 1):S44-S49. \164\ Perkins ZB, Yet B, Glasgow S, Marsh DWR, Tai NRM, Rasmussen TE, Long-term, patient-centered outcomes of lower- extremity vascular trauma. J Trauma Acute Care Surg. 2018 Jul;85(1S Suppl 2):S104-S111. \165\ Ramdass, M.J., & Harnarayan, P. (2017). A decade of major vascular trauma: Lessons learned from gang and civilian warfare. Annals of the Royal College of Surgeons of England, 99(1), 70-75. https://doi.org/10.1308/rcsann.2016.0296. \166\ Rayamajhi S, Murugan N, Nicol A, et al. Penetrating femoral artery injuries: an urban trauma centre experience. Eur J Trauma Emerg Surg 2019 Oct;45(5):909-917. \167\ Rudstr[ouml]m H, Bergqvist D, Ogren M, Bj[ouml]rck M, Iatrogenic vascular injuries in Sweden. A nationwide study 1987- 2005. Eur J Vasc Endovasc Surg. 2008 Feb;35(2):131-8. \168\ Sharrock AE, Tai N, Perkins Z, et al. Management and outcome of 597 wartime penetrating lower extremity arterial injuries from an international military cohort. J Vasc Surg. 2019 Jul;70(1):224-232. \169\ Stonko DP, Betzold RD, Abdou H, et al. AAST PROOVIT Study Group. In-hospital outcomes in autogenous vein versus synthetic graft interposition for traumatic arterial injury: A propensity- matched cohort from PROOVIT. J Trauma Acute Care Surg. 2022 Feb 1;92(2):407-412. \170\ Urrechaga E, Jabori S, Kang N, et al. Traumatic Lower Extremity Vascular Injuries and Limb Salvage in a Civilian Urban Trauma Center. Ann Vasc Surg. 2022 May;82:30-40. \171\ Vertrees A, Fox CJ, Quan RW, Cox MW, Adams ED, Gillespie DL, The use of prosthetic grafts in complex military vascular trauma: a limb salvage strategy for patients with severely limited autologous conduit. J Trauma. 2009 Apr;66(4):980-3. \172\ Watson JD, Houston R 4th, Morrison JJ, Gifford SM, Rasmussen TE, A retrospective cohort comparison of expanded polytetrafluorethylene to autologous vein for vascular reconstruction in modern combat casualty care. Ann Vasc Surg. 2015;29(4):822-9. --------------------------------------------------------------------------- We further note that the Moore et al. (2024) study also combined the results of the V005 and V017 trials for comparison to the synthetic grafts benchmarks, and we question whether the combined results can be generalized to the Medicare population. In the combined sample (N=67), the 51 civilian patients of the V005 trial accounted for 76 percent of the combined total, while the 16 military patients of the V017 trial accounted for 24 percent of the combined total. We question whether the combined results can be extrapolated to a civilian or military population. In addition, we note that while the average age of both of the trials' patient populations were comparable (V005: 33.5 years; V017: 34.2 years); they differed in the distribution of a number of variables, including the types of injuries and trauma. As a result, we question whether it is appropriate to combine the results from these trials, and whether any outcomes from the trials are generalizable to the Medicare population, which may have a different distribution of various types of injuries and trauma. We also note that the applicant acknowledged the lack of Medicare-aged study participants in the Moore et al. (2024) study, and stated that the proportion (3 percent) of Medicare-aged patients in the V005 and V017 clinical trials was comparable to that in clinical databases (4.6 percent in the National Trauma Data Bank[supreg] (NTDB[supreg]) and 4.5 percent in the PROspective Observational Vascular Injury Trial (PROOVIT) registry). According to the applicant, the V005 and V017 trials included two patients at least 65 years of age who experienced vascular or extremity trauma (Humacyte Global, Inc., 2023). The applicant compared the percent of SYMVESSTM recipients 65 years of age or older with that of trauma patients in the PROOVIT registry, which includes data of vascular injuries from 14 level 1 or 2 trauma centers in the U.S. since February 2013 (DuBose et al., 2015).\173\ According to the applicant, the PROOVIT registry included 47 patients who were 65 years of age or older and had vascular or extremity trauma. Both of the SYMVESSTM patients over the age of 65 in the V005 and V017 trials had lower extremity trauma but no upper extremity trauma. In comparison, 43 percent of the patients in the PROOVIT registry had lower extremity trauma, and 57 percent had upper extremity trauma. Therefore, we continue to question whether the findings of the V005 and V017 trials are generalizable to the Medicare population. --------------------------------------------------------------------------- \173\ DuBose JJ, Savage SA, and Fabian TC, et al. (2015). The American Association for the Surgery of Trauma PROspective Observation Vascular Injury Treatment (PROOVIT) registry: Multicenter data on modern vascular injury diagnosis, management, and outcomes. Journal of Trauma and Acute Care Surgery 78(2). --------------------------------------------------------------------------- We are also concerned that the sample sizes of the 2 trials in the Moore et al. (2024) study were too small to ensure that the estimates for clinical outcomes were reliable, as the V017 trial included only 16 cases and the V005 trial included 51. We note that the sample size for the V005 trial was calculated for analyzing 30-day patency rate, which was the primary endpoint of the trial.\174\ The Moore team estimated that at least 40 cases would be needed to yield sufficient power for the testing of patency rate at 30 days after implant. However, whether a sample size yields sufficient power depends partly on the effect size, that is, the difference in outcomes between subjects receiving treatments versus control that is statistically significant and clinically meaningful. We question whether, due to the sample size for the V005 trial, the study findings with respect to patency, infections, amputations, and death are sufficient to support that the technology provides a substantial clinical improvement over existing technologies with respect to these outcomes. --------------------------------------------------------------------------- \174\ Moore (2024), op.cit. Supplement #2, Statistical Analysis Plan for CLO-PRO-V005, Version 8. p. 10. --------------------------------------------------------------------------- Moreover, we note that there are differences in the outcome data for the V005 trial in the Moore (2024) study and the SYMVESSTM United States Prescribing Information (USPI).\175\ We note that the USPI reports clinical outcomes for the two trials separately and does not present the combined outcomes. We also note that the clinical outcomes data for V017 are identical between the Moore study (2024) and Section 14, Clinical Studies, of the [[Page 18149]] USPI. For the V005 trial, the Moore study (2024) reported the primary patency rate as 84.3 percent (43/51),\176\ and the USPI 66.7 percent (36/54).\177\ Thus for primary patency, SYMVESSTM exceeded the synthetic graft benchmark (78.9 percent) according to the Moore study, but not according to the USPI. In terms of secondary patency, the Moore study (2024) reported the rate as 90.2 percent (46/51), the USPI 72.2 percent (39/54). Therefore, for secondary patency, SYMVESSTM exceeded the synthetic grafts benchmarks according to the Moore study (2024), but not according to the USPI. In terms of amputation, the Moore study (2024) reported the 30-day rate as 9.8 percent (5/51), the USPI reported 30-day limb salvage rate as 75.9 percent (41/54), or 24.1 percent (13/54) in terms of 30-day amputation rate. In terms of limb salvage, therefore, SYMVESSTM's performance exceeded the synthetic graft benchmark (24.3 percent) according to the Moore study (2024), and was comparable according to the USPI. Also, while the Moore study (2024) reported a 30-day all- cause mortality rate (5.9 percent), which was higher than the corresponding synthetic grafts benchmark (3.4 percent), the USPI does not provide any mortality rates. Given the variation by data source as to whether SYMVESSTM performed better than the synthetic grafts benchmarks for primary and secondary patency and amputation rates, we question the applicant's assertion of clinical improvement compared to synthetic grafts. --------------------------------------------------------------------------- \175\ Humacyte Global, Inc. SYMVESS USPI [Package Insert]. (Revised 12/2024). Available at: https://www.fda.gov/media/184625/download?attachment. \176\ Moore (2024), op. cit., Table 2. \177\ SYMVESS USPI, op. cit. Table 2. --------------------------------------------------------------------------- Regarding Wang et al. (2023), a prospective, multicenter, phase III randomized clinical trial comparing the effects of SYMVESSTM to that of synthetic ePTFE grafts as an arteriovenous conduit for hemodialysis access in patients with ESRD, we note that the study sample did not assess patients with vascular trauma, and both arms were made up of dialysis patients, who are in general immunocompromised and have comorbidities, unlike trauma patients.\178\ The differences in clinical profiles between ESRD and trauma patients may confound the difference between the two groups in conduit-related infection rate, limb salvage rate, and other graft-related clinical outcomes. While the applicant provided this study to demonstrate that SYMVESSTM provides improved infection rate compared to synthetic grafts, we question the extent to which the infection rates of SYMVESSTM in ESRD patients can be extrapolated to patients with extreme arterial injury, for which the technology is indicated. --------------------------------------------------------------------------- \178\ U.S. Centers for Disease Control and Prevention. (2023, May 11). People Who Are Immunocompromised: Know how to protect yourself and what to do if you get sick. U.S. Department of Health and Human Services, Centers for Disease Control and Prevention. https://archive.cdc.gov/www_cdc_gov/coronavirus/2019-ncov/need-extra-precautions/people-who-are-immunocompromised.html. --------------------------------------------------------------------------- We also note that while the applicant provided studies comparing SYMVESSTM to synthetic grafts to demonstrate improved outcomes, we remain unclear about how the clinical outcomes of SYMVESSTM recipients compare to those who receive other currently available treatments for extremity vascular trauma, like cryopreserved human grafts or xenografts. We would be interested in additional evidence comparing SYMVESSTM and these grafts in order to inform our assessment of substantial clinical improvement over existing technologies. Lastly, we question the applicant's claim that SYMVESSTM enables quicker reperfusion of injured extremities compared to autologous vein grafts which reduces the risk of complications. According to the indication, SYMVESSTM is used when autologous vein graft is not feasible. Thus, SYMVESSTM would not be an alternative for nor comparable to autologous vein grafts. We welcome clarification or further information about this claim. We are inviting public comments on whether SYMVESSTM meets the substantial clinical improvement criterion. m. TECELRA[supreg] (Afamitresgene Autoleucel) Adaptimmune, LLC submitted an application for new technology add-on payments for TECELRA[supreg] for FY 2026. According to the applicant, TECELRA[supreg] is a melanoma-associated antigen A4 (MAGE-A4)-directed genetically modified autologous T-cell immunotherapy (also referred to as an autologous T-cell receptor (TCR) therapy) indicated for the treatment of adults with unresectable or metastatic synovial sarcoma who have received prior chemotherapy, are HLA-A*02 subtype positive, and whose tumor expresses the MAGE-A4 antigen. Per the applicant, TECELRA[supreg] is composed of T cells genetically modified to express affinity-enhanced TCRs specific to the MAGE-A4 protein, which is expressed by synovial sarcoma tumor cells at varying frequencies. Please refer to the online application posting for TECELRA[supreg], available at https://mearis.cms.gov/public/publications/ntap/NTP241004LTDY2, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, TECELRA[supreg] was granted BLA accelerated approval from FDA on August 1, 2024 for treatment of adults with unresectable or metastatic synovial sarcoma who have received prior chemotherapy; are HLA- A*02:01P, HLA-A*02:02P, HLA-A*02:03P, or HLA-A*02:06P positive; and whose tumor expresses the MAGE-A4 antigen as determined by FDA-approved or cleared companion diagnostic devices. Per the applicant, TECELRA[supreg] was commercially available immediately after receiving FDA marketing authorization. The applicant stated that TECELRA[supreg] is a single, one-time, patient-specific treatment delivered as an intravenous infusion containing 2.68 x 10\9\ to 10 x 10\9\ MAGE-A4 TCR positive T-cells, in one or more infusion bag(s). The applicant stated that, effective October 1, 2022, the following ICD-10-PCS codes may be used to uniquely describe procedures involving the use of TECELRA[supreg]: XW03368 (Introduction of afamitresgene autoleucel immunotherapy into peripheral vein, percutaneous approach, new technology group 8) or XW04368 (Introduction of afamitresgene autoleucel immunotherapy into central vein, percutaneous approach, new technology group 8). As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that TECELRA[supreg] is not substantially similar to other currently available technologies because TECELRA[supreg] is the first FDA-approved engineered TCR T-cell therapy with a unique mechanism of action that is distinct from that of other marketed therapeutic products, the only therapy approved for synovial sarcoma assigned to MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-Cell and Other Immunotherapies), and the only therapy studied specifically in the synovial sarcoma patient population and FDA-approved specifically for the treatment of synovial sarcoma. Therefore, according to the applicant, the technology meets the newness criterion. The following table summarizes the applicant's assertions [[Page 18150]] regarding the substantial similarity criteria. Please see the online application posting for TECELRA[supreg] for the applicant's complete statements in support of its assertion that TECELRA[supreg] is not substantially similar to other currently available technologies. -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of No..................... TECELRA[supreg]'s mechanism of action is distinct from that of action to achieve a therapeutic outcome? other marketed therapeutic products. TECELRA[supreg] is a type of adoptive cell therapy, which are innovative cancer immunotherapies that involve collecting lymphocytes (white blood cells, or peripheral blood mononuclear cells) from the patient for the purpose of genetically modifying and expanding the lymphocytes to improve their tumor-fighting capabilities before returning the re- engineered cells to the patient. Although CAR T-cell therapies are also adoptive cell therapies, their mechanism of action is different compared to TCR T-cell therapies such as TECELRA[supreg]. Specifically, CAR T-cell therapies use an antibody-derived single-chain antibody-variable fragment (scFv) that recognizes cell surface antigens. By contrast, TCR T-cell therapies recognize a specific peptide presented at the cancer cell surface as peptide-HLA complexes. TECELRA[supreg] is comprised of T cells that have hypervariable CDRs modified to express affinity to the MAGE-A4 protein, which is expressed in certain solid tumors at varying frequencies. TECELRA[supreg] is the first and only FDA-approved MAGE-A4 targeted therapy of any kind. Although other therapies are utilized for the treatment of patients with unresectable or metastatic synovial sarcoma who have received prior chemotherapy, pazopanib (VOTRIENT), a small molecule antiangiogenic tyrosine kinase inhibitor, is the only agent indicated for second-line (2L) treatment of soft tissue sarcoma (STS). Is the technology assigned to the same MS-DRG as existing No..................... As reflected in the FY 2025 Medicare IPPS Final Rule, CMS assigned technologies? TECELRA[supreg]'s unique ICD-10-PCS codes (XW03368 (Introduction of afamitresgene autoleucel immunotherapy into peripheral vein, percutaneous approach, new technology group 8) and XW04368 (Introduction of afamitresgene autoleucel immunotherapy into central vein, percutaneous approach, new technology group 8)) to MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-Cell and Other Immunotherapies). TECELRA[supreg] is the only therapy approved for synovial sarcoma assigned to MS-DRG 018 and the only TCR T-cell therapy assigned to MS-DRG 018. Other technologies assigned to MS- DRG 018 do not treat synovial sarcoma and have different mechanisms of action. Does new use of the technology involve the treatment of No..................... TECELRA[supreg] is the first FDA-approved engineered TCR T-cell the same/similar type of disease and the same/similar therapy and the only therapy specifically studied in and approved patient population when compared to an existing for synovial sarcoma patients. Synovial sarcoma is a specific form technology? of STS and is a rare disease that tends to occur in younger individuals, with a median age of initial clinical presentation being in the third decade of life. Prior to TECELRA[supreg], there were no FDA-approved therapies specifically for the treatment of synovial sarcoma. Pazopanib was studied in broader STS populations that included a subgroup of patients with synovial sarcoma (less than 10% of patients) but was not approved by FDA specifically for the treatment of synovial sarcoma. No other technology is specifically indicated for the treatment of adult patients with synovial sarcoma. To the extent other therapies are used for the treatment of synovial sarcoma off-label consistent with National Comprehensive Cancer Network (NCCN) clinical guidelines, synovial sarcoma patients were mere subpopulations of a larger STS subject pool across multiple histologies and without formal a priori subgroup efficacy analyses. Thus, we know of no studies in which synovial sarcoma patients were the focus population to determine safety and efficacy of the treatments. -------------------------------------------------------------------------------------------------------------------------------------------------------- We note that the applicant stated that TECELRA[supreg] is the only FDA-approved therapy specifically studied and approved for patients with synovial sarcoma, therefore, it does not involve the treatment of a similar type of disease or patient population as existing technologies. While the applicant stated that other therapies in the National Comprehensive Cancer Network Clinical Practice Guidelines (NCCN Guidelines[supreg]), such as pazopanib, are indicated for use in the broader STS population rather than specifically for synovial sarcoma, we note that synovial sarcoma is a type of STS. Consequently, we question whether existing treatments indicated for STS, which can be used for the treatment of specific subtypes of STS such as synovial sarcoma, would treat the same or similar patient population as TECELRA[supreg]. We are inviting public comments on whether TECELRA[supreg] is substantially similar to existing technologies and whether TECELRA[supreg] meets the newness criterion. With respect to the cost criterion, the applicant provided four analyses to demonstrate that TECELRA[supreg] meets the cost criterion. Each analysis followed the order of operations summarized in the following table. TECELRA[supreg] Cost Analysis ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for TECELRA[supreg]. [[Page 18151]] Claims identified...................... Scenario 1: 1,123 claims mapping to MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-Cell and Other Immunotherapies). Scenario 2: 374 claims mapping to MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-Cell and Other Immunotherapies). Scenario 3: 374 claims mapping to MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-Cell and Other Immunotherapies). Scenario 4: 2,174 claims mapping to 37 MS-DRGs, with 10.81% of claims mapping to MS-DRG 464 (Wound Debridement and Skin Graft Except Hand for Musculoskeletal System and Connective Tissue Disorders with CC). Charges removed for prior technology... Scenarios 1-3: Per the applicant, claim charges for cell and gene therapy products were removed when they were reported on the claims. For all other claims, the applicant removed the total drug charges from the claims. The applicant stated that removing all drugs charges is an overestimate of charges needing to be removed. Scenario 4: Per the applicant, no prior technology charges were removed since these cases likely do not include any high-cost therapies like MS-DRG 018 does. The applicant did not remove indirect charges related to the prior technology in all four scenarios. Standardized charges................... The applicant used the standardization formula provided in Appendix A of the application. Inflation factor....................... The applicant applied an inflation factor of 8.406% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new technology... The applicant added charges for the new technology by dividing the wholesale acquisition cost of the new technology by the national average cost-to-charge ratio of 0.178 for Drugs and Cellular Therapies from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. Cost analysis results.................. Average case-weighted threshold amount: $1,554,026. Final inflated average case-weighted standardized charge per case: --Scenario 1: $4,286,667. --Scenario 2: $4,383,746. --Scenario 3: $4,207,244. --Scenario 4: $4,186,358. ---------------------------------------------------------------------------------------------------------------- Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in all four scenarios, the applicant asserted that TECELRA[supreg] meets the cost criterion. We are inviting public comments on whether TECELRA[supreg] meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that TECELRA[supreg] represents a substantial clinical improvement over existing technologies because TECELRA[supreg] is the first and only FDA-approved therapy for eligible patients with unresectable or metastatic synovial sarcoma; is a new treatment option for eligible patients with unresectable or metastatic synovial sarcoma, who are unresponsive to existing systemic therapies after first-line (1L) progression; offers significant clinical improvement in overall response rate (ORR) and overall survival (OS) compared to existing therapies; and is well-tolerated with a manageable safety profile. The applicant provided 1 published study, TECELRA[supreg]'s prescribing information, and an FDA press release to support these claims, as well as 15 background articles about TCR T-cell therapies, expression of MAGE-A4 in tumors, the prevalence of HLA-A subtypes, other 2L synovial sarcoma treatments, and the burden of illness for patients with synovial sarcoma and myxoid/round cell liposarcoma (MRCLS).\179\ The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for TECELRA[supreg] for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \179\ Background articles are not included in the following table but can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- Applicant statements in support Supporting evidence provided by the applicant ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ---------------------------------------------------------------------------------------------------------------- TECELRA[supreg] is the first and only FDA Press Release. FDA Approves First Gene Therapy to Treat Adults with FDA-approved engineered TCR T-cell Metastatic Synovial Sarcoma. August 2, 2024. Available from: https:// therapy. www.fda.gov/news-events/press-announcements/fda-approves-first-gene- therapy-treat-adults-metastatic-synovial-sarcoma. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. TECELRA[supreg] is the first and only U.S. Food and Drug Administration, 2024, op. cit. FDA-approved therapy for patients with The applicant also provided background information to support this unresectable or metastatic synovial claim, which can be accessed via the online posting for the sarcoma. technology. [[Page 18152]] TECELRA[supreg] is a new treatment D'Angelo SP, Araujo DM, Abdul Razak AR, et al. Afamitresgene autoleucel option for patients with unresectable/ for advanced synovial sarcoma and myxoid round cell liposarcoma metastatic synovial sarcoma, (SPEARHEAD-1): an international, open-label, phase 2 trial (2024): unresponsive to existing systemic Lancet 403;10435:1460-1471. therapies after first-line progression TECELRA [package insert]. Philadelphia, PA: Adaptimmune, LLC; 2024. due to limited effectiveness, ORRs and The applicant also provided background information to support this OS. claim, which can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ---------------------------------------------------------------------------------------------------------------- TECELERA[supreg] offers a significant D'Angelo, 2024, op. cit. clinical improvement in ORR and OS as Adaptimmune, 2024, op. cit. compared to existing therapies. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. TECELERA[supreg] is well tolerated and D'Angelo, 2024, op. cit. has a manageable safety profile. Adaptimmune, 2024, op. cit. The applicant also provided background information to support this claim, which can be accessed via the online posting for the technology. ---------------------------------------------------------------------------------------------------------------- We did not receive any written comments in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for TECELRA[supreg]. After review of the supporting evidence provided by the applicant, we have the following concerns regarding whether TECELRA[supreg] meets the substantial clinical improvement criterion. With respect to the assertion that TECELRA[supreg] offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments, we note that TECELRA[supreg] being the first approved TCR therapy may relate to mechanism of action under the newness criterion, but is not relevant to the demonstration of substantial clinical improvement. Further, while the applicant stated that TECELRA[supreg] is the first and only therapy approved specifically for patients with unresectable or metastatic synovial sarcoma, we note that synovial sarcoma is a subtype of the broader STS group. According to the applicant, there were no therapies approved by the FDA specifically for synovial sarcoma, and pazopanib and trabectedin are two therapies that may be used to manage synovial sarcoma in subsequent-line settings. However, according to the NCCN Clinical Guidelines[supreg] for STS, there are other available treatments that treat advanced and metastatic STS, including synovial sarcoma, which include pazopanib and trabectedin. Therefore, we question whether the applicant's claim supports that TECELRA[supreg] offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments given there are other available treatments for patients with STS that would also treat patients with unresectable or metastatic synovial sarcoma. In addition, while the applicant stated that TECELRA[supreg] is a new treatment option for patients with unresectable or metastatic synovial sarcoma unresponsive to existing systemic therapies after previous 1L treatments such as anthracycline- based or ifosfamide-based therapy due to limited effectiveness, ORR, and OS, it is unclear whether this patient population is unresponsive to or ineligible for other existing treatments such as trabectedin, in which higher response rates of 27-51% have been reported.\180\ We note that while patients in the SPEARHEAD-1 study received multiple previous lines of systemic therapy, the study did not list these therapies while noting that bridging therapy, including pazopanib, trabectedin, ifosfamide, or doxorubicin, was permissible between leukapheresis and lymphodepletion at the investigators' discretion. Therefore, we question whether TECELRA[supreg] offers a treatment for a patient population unresponsive to, or ineligible for, currently available treatments. --------------------------------------------------------------------------- \180\ Takahashi M, Takahashi S, Araki N, et al. Efficacy of trabectedin in patients with advanced translocation-related sarcomas: pooled analysis of two phase II studies. Oncologist 2017; 22: 979-88. --------------------------------------------------------------------------- With regard to the claim that TECELRA[supreg] offers a significant clinical improvement in ORR and OS compared to existing therapies, the applicant provided the SPEARHEAD-1 phase II clinical trial (D'Angelo et al., 2024), which assessed TECELRA[supreg]'s efficacy in 44 patients (aged 16 to 75 years) with metastatic or unresectable synovial sarcoma who previously received at least 1 prior line of anthracycline- containing or ifosfamide-containing chemotherapy. The SPEARHEAD-1 study found that synovial sarcoma patients treated with TECELRA[supreg] had an ORR of 39 percent and a median OS (mOS) of 16.9 months. According to the applicant, the study demonstrated a higher ORR and longer mOS than those from historical studies with pazopanib (18.9 percent, 10.3 months), trabectedin (12.3 percent, 10.4 months), gemcitabine/docetaxel (4.5-5.0 percent, 8.4-14 months), and regorafenib (8 percent, 13.4 months).181 182 183 184 The applicant also stated that, although listed in the NCCN Clinical Guidelines[supreg] for STS, eribulin, dacarbazine, temozolomide, and vinorelbine have not been adequately studied in previously treated unresectable or metastatic synovial sarcoma patients, and therefore, their effectiveness for this patient population cannot be determined (NCCN, 2024). However, we note that patients with unresectable or metastatic synovial sarcoma treated with TECELRA[supreg] demonstrated a mOS of [[Page 18153]] 16.9 months, which is similar to the historical benchmark results from patients treated with gemcitabine/docetaxel (8.4 to 14 months) and regorafenib (13.4 months). In addition, we note that the mOS for SPEARHEAD-1 non-responders was comparable to existing therapies, and we question whether the baseline characteristics of the study population, such as biomarkers of resistance to TECELRA[supreg] rather than the treatment itself, may account for the observed survival outcomes. Furthermore, we note that TECELRA[supreg] is indicated for patients with tumors expressing the MAGE-A4 tumor antigen, and we question whether the provided historical benchmark results for other treatments in which study participants were not tested for biomarkers, such as MAGE-A4, may represent different target populations from that of TECELRA[supreg]. Finally, we note that the applicant compared the clinical outcomes from the SPEARHEAD-1 study to historical controls without appropriate statistical adjustments to account for differences in study designs. We question whether these differences may introduce confounders which could reduce the validity of the results of the comparison. --------------------------------------------------------------------------- \181\ Carroll, C., Patel, N., Gunsoy, N.B., Stirnadel-Farrant, H.A., & Pokras, S. (2022). Meta-analysis of pazopanib and trabectedin effectiveness in previously treated metastatic synovial sarcoma (second-line setting and beyond). Future Oncology, 18(32), 3651-3665. https://doi.org/10.2217/fon-2022-0348. \182\ Pender, A., Davis, E.J., Chauhan, D., Messiou, C., Al- Muderis, O., Thway, K., . . . & Jones, R.L. (2018). Poor treatment outcomes with palliative gemcitabine and docetaxel chemotherapy in advanced and metastatic synovial sarcoma. Medical Oncology, 35, 1-5. https://doi.org/10.1007/s12032-018-1193-5. \183\ Tansir, G., Rastogi, S., Kumar, A., Barwad, A., Mridha, A.R., Dhamija, E., . . . & Bhoriwal, S. (2023). A phase II study of gemcitabine and docetaxel combination in relapsed metastatic or unresectable locally advanced synovial sarcoma. BMC Cancer, 23(1), 639. https://doi.org/10.1186/s12885-023-11099-4. \184\ Mir, O., Brodowicz, T., Italiano, A., Wallet, J., Blay, J.Y., Bertucci, F., . . . & Penel, N. (2016). Safety and efficacy of regorafenib in patients with advanced soft tissue sarcoma (REGOSARC): a randomised, double-blind, placebo-controlled, phase 2 trial. The Lancet Oncology, 17(12), 1732-1742. https://doi.org/10.1016/S1470-2045(16)30507-1. --------------------------------------------------------------------------- With respect to the claim that TECELRA[supreg] is well-tolerated and has a manageable safety profile, the applicant stated that the SPEARHEAD-1 clinical trial found that 75 percent of patients experienced cytokine release syndrome (CRS), with only one patient experiencing grade >=3 CRS, and one patient experienced symptoms consistent with grade 1 immune effector cell-associated neurotoxicity syndrome (ICANS). The applicant stated that, compared to CAR T-cell therapies, the CRS associated with TECELRA[supreg] is modest (Tsimberidou et al., 2021). However, we are unclear why the applicant compared the safety profile of TECELRA[supreg] to CAR T-cell therapies (which are not approved for use in STS) rather than other available therapies that treat unresectable or metastatic synovial sarcoma. Therefore, we are interested in evidence comparing TECELRA[supreg]'s safety profile to other, non-CAR T-cell treatments for unresectable or metastatic synovial sarcoma. The applicant also stated that because TECELRA[supreg] is a single administration, recipients are less likely to experience repeated adverse events from the infusion compared to treatments requiring multiple/regular continuous or cyclical administrations; however, we question the basis for this claim as the applicant did not provide any supporting evidence. We are inviting public comments on whether TECELRA[supreg] meets the substantial clinical improvement criterion. n. ZIIHERA[supreg] (Zanidatamab-hrii) Jazz Pharmaceuticals, Inc. submitted an application for new technology add-on payments for ZIIHERA[supreg] for FY 2026. According to the applicant, ZIIHERA[supreg] is a bispecific human epidermal growth factor receptor 2 (HER2)-directed antibody for the treatment of adults with previously treated, unresectable or metastatic HER2- positive (IHC 3+) biliary tract cancer (BTC). Please refer to the online application posting for ZIIHERA[supreg], available at https://mearis.cms.gov/public/publications/ntap/NTP240925MW5YD, for additional detail describing the technology and the disease treated by the technology. With respect to the newness criterion, according to the applicant, ZIIHERA[supreg] was granted BLA approval from FDA on November 20, 2024, for the treatment of adults with previously treated, unresectable or metastatic HER2-positive (IHC 3+) BTC as detected by an FDA-approved test. According to the applicant, ZIIHERA[supreg]'s market availability was delayed to allow for final packaging with FDA approved labels and package inserts as well as to allow time for shipment to channel distribution points, therefore, ZIIHERA[supreg] became commercially available as of December 2, 2024. We are interested in additional information regarding the cause of any delay in the technology's commercial availability, such as related to packaging and shipment to channel distribution points. According to the applicant, ZIIHERA[supreg] is administered intravenously in doses of 20 mg/kg once every 2 weeks until disease progression or unacceptable toxicity; therefore, the dose per inpatient stay is 1,400 mg. The applicant stated that effective October 1, 2024, the following ICD-10-PCS codes may be used to uniquely describe procedures involving the use of ZIIHERA[supreg]: XW033CA (Introduction of zanidatamab antineoplastic into peripheral vein, percutaneous approach, new technology group 10) or XW043CA (Introduction of zanidatamab antineoplastic into central vein, percutaneous approach, new technology group 10). The applicant stated that C22.1 (Intrahepatic bile duct carcinoma), C23 (Malignant neoplasm of gallbladder), C24.0 (Malignant neoplasm of extrahepatic bile duct), C24.8 (Malignant neoplasm of overlapping sites of biliary tract), C24.9 (Malignant neoplasm of biliary tract, unspecified); or Z51.11 (Encounter for antineoplastic chemotherapy) may be used to currently identify the indication for ZIIHERA[supreg] under the ICD-10-CM coding system. As previously discussed, if a technology meets all three of the substantial similarity criteria under the newness criterion, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purpose of new technology add-on payments. With respect to the substantial similarity criteria, the applicant asserted that ZIIHERA[supreg] is not substantially similar to other currently available technologies because ZIIHERA[supreg]'s novel and distinct mechanisms of action are not the same or substantially similar to those of other currently available therapies used for the treatment of adults with previously treated, unresectable/metastatic HER2+ (IHC 3+) BTC. In addition, the applicant asserted that ZIIHERA[supreg] is the first and only bispecific HER2-directed antibody indicated for this population, and that therefore, the technology meets the newness criterion. The following table summarizes the applicant's assertions regarding the substantial similarity criteria. Please see the online application posting for ZIIHERA[supreg] for the applicant's complete statements in support of its assertion that ZIIHERA[supreg] is not substantially similar to other currently available technologies. [[Page 18154]] -------------------------------------------------------------------------------------------------------------------------------------------------------- Substantial similarity criteria Applicant response Applicant assertions regarding this criterion -------------------------------------------------------------------------------------------------------------------------------------------------------- Does the technology use the same or similar mechanism of No..................... ZIIHERA[supreg] is not the same or substantially similar to any action to achieve a therapeutic outcome? therapies currently used to treat adults with previously treated, unresectable/metastatic HER2+ (IHC 3+) BTC. It is a bispecific HER2-directed, biparatopic antibody that simultaneously binds to 2 nonoverlapping, distinct sites on HER2: the ECD4 and ECD2 domains. Trans-binding of ZIIHERA[supreg] with HER2 results in receptor crosslinking, clustering, and internalization, which leads to a reduction of HER2 from the cell surface. It reduces phosphorylation of HER2 family members (including EGFR, HER2, and HER3), downstream signaling, and ligand-dependent and -independent proliferation. Distinctly, ZIIHERA[supreg] potently induces CDC, ADCC, and ADCP. ZIIHERA[supreg] is substantially differentiated mechanistically and clinically from currently available anti-HER2 agents: HERCEPTIN[supreg], indicated for the treatment of HER2- overexpressing breast cancer and metastatic gastric or gastroesophageal junction adenocarcinoma; PERJETA[supreg], indicated for use in combination with HERCEPTIN[supreg] and DOCETAXEL for HER2+ metastatic breast cancer; and ENHERTU[supreg], indicated for HER2+ and HER2-low breast cancer, non-small cell lung cancer (NSCLC) activating HER2 mutations, HER2+ gastric or gastroesophageal junction adenocarcinoma, and HER2+ solid tumors (not specifically studied in BTC), when no other satisfactory treatment options for unresectable/metastatic HER2 (IHC 3+) BTC exist. ZIIHERA[supreg]'s distinct mechanisms of action were confirmed in preclinical models where ZIIHERA[supreg] exhibited improved antitumor activity compared with HERCEPTIN[supreg] alone and HERCEPTIN[supreg]PERJETA[supreg] in head-to-head comparisons across a range of tumors and HER2 expression levels: 1) ZIIHERA[supreg] binds adjacent HER2 reorganization not observed with HERCEPTIN[supreg] or PERJETA[supreg]; 2) ZIIHERA[supreg], but not HERCEPTIN[supreg] or HERCEPTIN[supreg]+PERJETA[supreg], elicit potent CDC against high HER2-expressing tumor cells in vitro (the only HER2 agent that can elicit CDC); and 4) ZIIHERA[supreg] mediates HER2 internalization and downregulation, inhibition of both cell signaling and tumor growth, ADCC and ADCP, and shows superior in vivo antitumor activity compared to HERCEPTIN[supreg]+PERJETA[supreg] in a HER2-expressing xenograft model. ZIIHERA[supreg] is also highly differentiated mechanistically and clinically from chemotherapeutic regimens or other therapies used in first line (1L) and second line (2L) treatment of BTC. It is not a chemotherapy. Its unique asymmetric design, its biparatopic bispecific binding, and ability to induce HER2 receptor crosslinking is believed to drive the multiple mechanisms of action of ZIIHERA[supreg] and its clinical activity as a single agent. ZIIHERA[supreg] is the first and only bispecific HER2-directed antibody indicated for the treatment of adults with previously treated, unresectable/metastatic HER2+ (IHC 3+) BTC. Is the technology assigned to the same MS-DRG as existing Yes.................... While ZIIHERA[supreg] will not map to MS-DRGs distinct from other technologies? treatments administered to patients diagnosed with BTC, patient cases receiving intravenous infusion of ZIIHERA[supreg] will be identified by unique ICD-10-PCS procedures codes for ZIIHERA[supreg] administration: XW033CA and XW043CA, effective October 1, 2024. Does new use of the technology involve the treatment of No..................... ZIIHERA[supreg] is the first and only bispecific HER2-directed, the same/similar type of disease and the same/similar biparatopic antibody approved by FDA for the treatment of adults patient population when compared to an existing with previously treated, unresectable/metastatic HER2+ (IHC 3+) technology? BTC. Results from the pivotal, single-arm phase IIb HERIZON-BTC-01 study support ZIIHERA[supreg] having meaningful clinical benefit and potential as a new standard of care for patients with HER2+ (IHC 3+) BTC. -------------------------------------------------------------------------------------------------------------------------------------------------------- After review of the information provided by the applicant, we note that while the applicant stated that ZIIHERA[supreg] is the first and only bispecific HER2-directed, biparatopic antibody approved by FDA for the treatment of adults with previously treated, unresectable/ metastatic HER2+ (IHC 3+) BTC, there are several existing treatment options for patients with unresectable/metastatic HER2+ (IHC 3+) BTC such as FOLFOX, FOLFIRI, STIVARGA[supreg], or ENHERTU[supreg].\185\ Therefore, it is unclear how ZIIHERA[supreg] treats a new patient population or disease as compared to these existing treatments. --------------------------------------------------------------------------- \185\ National Comprehensive Care Network (NCCN). (2024, November 27). NCCN Guidelines Version 5.2024 Biliary Tract Cancers. Retrieved on January 8, 2025, from https://www.nccn.org. --------------------------------------------------------------------------- We are inviting public comments on whether ZIIHERA[supreg] is substantially similar to existing technologies and whether ZIIHERA[supreg] meets the newness criterion. With respect to the cost criterion, the applicant provided multiple analyses to demonstrate that ZIIHERA[supreg] meets the cost criterion. Each analysis followed the order of operations summarized in the following table. ZIIHERA[supreg] Cost Analysis ------------------------------------------------------------------------ ------------------------------------------------------------------------ Inclusion/exclusion criteria...... For the Inclusion/Exclusion criteria used in the Cost Analysis, including the data source and lists of ICD-10-CM codes, ICD-10-PCS codes, and MS-DRGs used by the applicant, see the cost criterion codes and MS-DRGs attachment included in the online posting for ZIIHERA[supreg]. Claims identified................. Scenario 1: 152 claims mapping to 13 MS-DRGs, with 12.50% of claims mapping to MS-DRG 847 (Chemotherapy Without Acute Leukemia as Secondary Diagnosis with CC). Scenario 2: 3,807 claims mapping to 30 MS-DRGs, with 44.44% of claims mapping to MS-DRG 435 (Malignancy of Hepatobiliary System or Pancreas with MCC). [[Page 18155]] Charges removed for prior Per the applicant, the utilization technology. of ZIIHERA[supreg] would replace chemotherapy charges. The applicant removed 15.9% of radiology charges from identified cases in which BTC was the primary diagnosis and removed 19.9% of radiology charges from identified cases in which BTC was a secondary diagnosis. Per the applicant, these percentages were derived based on an analysis of the revenue center file from the 100% Inpatient Standard Analytic File (SAF) in FY 2023. The applicant estimated the percentage of chemotherapy therapy-related radiology charges for each set of cases by dividing the sum of charges for chemotherapy-related revenue codes (0331, 0332, 0335) by the sum of charges for the revenue codes comprising total radiology charges. The applicant did not remove indirect charges related to the prior technology. Standardized charges.............. The applicant used the standardization formula provided in Appendix A of the application. The applicant used all relevant values reported in the impact file posted with the FY 2023 IPPS/LTCH PPS final rule correcting amendment. Inflation factor.................. The applicant applied an inflation factor of 8.406% to the standardized charges, based on the inflation factor used to calculate outlier threshold charges in the FY 2025 IPPS/LTCH PPS final rule. Charges added for the new The applicant added charges for the technology. new technology by dividing the cost of the new technology by the national average cost-to-charge ratio of 0.178 for Drugs and Cellular Therapies from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add indirect charges related to the new technology. Cost analysis results............. Scenario 1: --Average case-weighted threshold amount: $87,202. --Final inflated average case- weighted standardized charge per case: $197,284. Scenario 2: --Average case-weighted threshold amount: $93,683. --Final inflated average case- weighted standardized charge per case: $209,487. ------------------------------------------------------------------------ Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in both scenarios, the applicant asserted that ZIIHERA[supreg] meets the cost criterion. We are inviting public comments on whether ZIIHERA[supreg] meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserted that ZIIHERA[supreg] represents a substantial clinical improvement over existing technologies because it is a bispecific HER2-directed antibody with multiple, distinct mechanisms of action and a differentiated clinical profile, and it is the first and only FDA-approved treatment for HER2+ (IHC 3+) BTC. In addition, the applicant asserted that ZIIHERA[supreg] fulfills an unmet need for this patient population by providing an optimal chemotherapy-free treatment option, where patients also have the potential to achieve meaningfully improved clinical benefits. The applicant provided 1 study and 2 poster presentations of the same study to support these claims, as well as 3 background articles on other treatments for advanced BTC.\186\ The following table summarizes the applicant's assertions regarding the substantial clinical improvement criterion. Please see the online posting for ZIIHERA[supreg] for the applicant's complete statements regarding the substantial clinical improvement criterion and the supporting evidence provided. --------------------------------------------------------------------------- \186\ Background articles and supplemental material are not included in the following table but can be accessed via the online posting for the technology. ------------------------------------------------------------------------ Supporting evidence provided by the Applicant statements in support applicant ------------------------------------------------------------------------ Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments ------------------------------------------------------------------------ ZIIHERA[supreg] is the first and Pant S, et al. Zanidatamab in only bispecific HER2-directed previously treated HER2-positive antibody for the treatment of biliary tract cancer: overall adults with previously treated, survival and longer follow-up from unresectable/metastatic HER2+ the phase 2b HERIZON-BTC-01 study. (IHC 3+) BTC. American Society of Clinical Oncology annual meeting. 2024. Abstract; Poster 4091. Harding JJ, et al. Zanidatamab for HER2-amplified, unresectable, locally advanced or metastatic biliary tract cancer (HERIZON-BTC- 01): a multicentre, single-arm, phase 2b study. Lancet Oncol. 2023;24(7):772-82. The applicant also provided background information and supplemental material to support this claim, which can be accessed via the online posting for the technology. ------------------------------------------------------------------------ Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative to services or technologies previously available ------------------------------------------------------------------------ In HERIZON-BTC-01, ZIIHERA[supreg] Pant, 2024, op. cit. demonstrated clinical benefit of Harding, 2023, op. cit. sustained/durable response rates The applicant also provided and longer overall survival background information and compared to previously reported supplemental material to support outcomes of 2L therapies for this claim, which can be accessed advanced BTC. via the online posting for the technology. [[Page 18156]] Treatment with ZIIHERA[supreg] Pant, 2024, op. cit. provides a marked clinical Harding, 2023, op. cit. benefit with a significantly The applicant also provided higher response rate than background information and previously reported for currently supplemental material to support preferred 2L chemotherapy regimen. this claim, which can be accessed via the online posting for the technology. The overall benefit:risk Harding, 2023, op. cit. assessment of ZIIHERA[supreg] is Wasan H, et al. Health-related favorable. ZIIHERA[supreg] quality of life outcomes in fulfills an unmet medical need patients with zanidatamab-treated and provides an option for HER2-positive biliary tract cancer patients to receive clinical in the Phase 2b HERIZON-BTC-01 benefit with a low risk of harm. study. Presented at European Society for Medical Oncology (ESMO) 2023; Poster presentation, Poster 101P. Pant, 2024, op. cit. The applicant also provided background information and supplemental material to support this claim, which can be accessed via the online posting for the technology. ------------------------------------------------------------------------ We did not receive any written comments in response to the New Technology Town Hall meeting notice published in the Federal Register regarding the substantial clinical improvement criterion for ZIIHERA[supreg]. After review of the information provided by the applicant, we have the following concerns regarding whether ZIIHERA[supreg] meets the substantial clinical improvement criterion. With respect to the assertion that ZIIHERA[supreg] offers a treatment option for a patient population unresponsive to or ineligible for existing therapies, the applicant stated that ZIIHERA[supreg] is the first and only FDA- approved bispecific HER2-directed antibody for the treatment of adults with previously treated, unresectable/metastatic HER2+ (IHC 3+) BTC. However, we note that while the target (HER2+) and type of therapy (bispecific antibody) for a particular indication may relate to mechanism of action under the newness criterion, it is not relevant to the demonstration of substantial clinical improvement. Further, we note that the applicant stated that FOLFOX is the preferred subsequent line therapy option for these patients, and we also note that NCCN guidelines list additional available therapies including: FOLFIRI, ENHERTU[supreg], and HERCEPTIN[supreg] plus TUKYSA[supreg]. We further note that while the applicant provided studies describing outcomes from the HERIZON-BTC-01 trial of ZIIHERA[supreg] as well as background studies describing outcomes for other treatment options in 2L advanced BTC, the studies did not demonstrate that patients eligible for treatment with ZIIHERA[supreg] are unable to receive other existing therapies. Therefore, we question whether ZIIHERA[supreg] offers a treatment option for a patient population unresponsive to, or ineligible for other existing therapies. With respect to the assertion that ZIIHERA[supreg] significantly improves clinical outcomes relative to services or technologies previously available, the applicant provided 1 published peer-reviewed study of HERIZON-BTC-01 (Harding et al., 2023) and 2 poster presentations that are analyses of HERIZON-BTC-01 (Pant et al., 2024; Wasan et al., 2023) in support of its claims. Harding et al. (2023) and Pant et al. (2024) provided results of the phase IIB HERIZON-BTC-01, a global, multicenter, single arm, cohort study assessing ZIIHERA[supreg] treatment in 87 patients with HER2+ BTC, which were grouped into cohorts based on immunohistochemistry (IHC): cohort 1, n=80 (HER2+ (IHC 2+ or IHC 3+)) and cohort 2, n=7 (IHC 0 or IHC 1+). We note that the HERIZON-BTC-01 study did not compare ZIIHERA[supreg] outcomes to outcomes for other existing treatments, and therefore we question the extent to which this can be relied upon for a finding of substantial clinical improvement. We note that 63 percent of the study's patients were enrolled at clinical trial sites in Asia, and we question whether the location of the clinical trial sites being outside of the US could affect the generalizability of the findings to the U.S. Medicare patient population. We also question whether the study's sample size may have impacted the ability to perform or interpret comparative analyses within and between the two different patient cohorts. With respect to the applicant's claim that, in HERIZON-BTC-01 study (Harding et al., 2023), ZIIHERA[supreg] demonstrated a clinical benefit of sustained/durable response rates, longer OS, and a significantly higher response rate compared to previously reported outcomes of 2L advanced BTC therapies, we note that while the applicant provided background studies comparing FOLFOX and FOLFIRI to ZIIHERA[supreg], the supporting evidence provided did not compare ZIIHERA[supreg] to other FDA-approved therapies used for unresectable/metastatic BTC such as ENHERTU[supreg]. The applicant stated that ZIIHERA[supreg]'s median confirmed objective response rate (cORR) of 51.6 percent represents a marked clinical benefit for the target population, which is approximately 10-fold higher than the previously reported median ORR for FOLFOX and significantly more than the historical response rate of 7.7 percent for 2L chemotherapy regimens, noting the highest historical rate reported of 14.8 percent was seen in the FOLFIRI regimen. However, we question whether the differences in the studies' reported responses are comparable given that the studies are different in design, protocol, and methodology, which may limit the ability to interpret the outcomes. While the applicant stated that FOLFOX chemotherapy regimen remains the preferred 2L treatment of advanced BTC, as there are other treatments used in the 2L+ treatment of advanced BTC, we would appreciate additional information on the comparison of outcomes with ZIIHERA[supreg] to those with other FDA-approved therapies used for advanced/metastatic BTC. With respect to the claim that ZIIHERA[supreg] has a manageable safety profile with favorable tolerability in adults with previously treated, unresectable/metastatic HER2+ (IHC 3+) BTC, the applicant stated that, in contrast to chemotherapy regimens used as 2L or later therapies, ZIIHERA[supreg] as a single agent is well tolerated in the pretreated BTC patient population and the resulting adverse events are manageable. In support of this claim, the applicant provided results of the HERIZON-BTC-01 study (Harding et al., 2023, Wasan et al., 2023, and Pant et al., 2024), which measured safety and quality of life in 87 patients. We are concerned that the safety and quality of life data were combined in both the Harding et al. (2023) and Pant et al. (2024) studies for cohort 1 (n=80) (HER2+ (IHC 3+ or IHC 2+)) and cohort 2 (n=7) (IHC 1+ or IHC 0), and the Wasan paper reported from cohort 1 (HER2+ (IHC 3+ or IHC 2+)). Therefore, [[Page 18157]] these studies did not provide data on safety and treatment-related adverse events for IHC 3+ BTC patients separately. We note that since ZIIHERA[supreg] is indicated for use in patients with HER2+ (IHC 3+) BTC only, we question whether the inclusion of patients with HER2+ (IHC 2+) BTC and patients with IHC 1+ or IHC 0 BTC is appropriate to demonstrate outcomes for HER2+ (IHC 3+) BTC patients specifically. We question whether this analysis provides sufficient evidence as to ZIIHERA[supreg]'s overall benefit-risk profile and how it compares to other treatments given that Wasan et al. and Pant et al., which are unpublished and non-peer-reviewed conference posters, do not include full details of the study and methodology, which therefore may limit our ability to interpret the results. We further note that HERIZON-BTC- 01 was a single arm study and that the clinical outcome and HRQoL data are not specific to IHC 3+ BTC patients, in accordance with ZIIHERA[supreg]'s FDA indication. We are inviting public comments on whether ZIIHERA[supreg] meets the substantial clinical improvement criterion. 6. Proposed FY 2026 Applications for New Technology Add-On Payments (Alternative Pathways) As discussed previously, beginning with applications for FY 2021, a medical device designated under FDA's Breakthrough Devices Program that has received marketing authorization for the indication covered by the Breakthrough Device designation, may qualify for the new technology add-on payment under an alternative pathway. Additionally, beginning with FY 2021, a medical product that is designated by FDA as a Qualified Infectious Disease Product (QIDP) and has received marketing authorization for the indication covered by the QIDP designation, and, beginning with FY 2022, a medical product that is a new medical product approved under FDA's Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD) and used for the indication approved under the LPAD pathway, may also qualify for the new technology add-on payment under an alternative pathway. Under an alternative pathway, a technology will be considered 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 represents an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. These technologies must still be within the 2-to-3-year newness period to be considered ``new,'' and must also still meet the cost criterion. As discussed previously, in the FY 2023 IPPS/LTCH PPS final rule, we finalized our proposal to publicly post online applications for new technology add-on payment beginning with FY 2024 applications (87 FR 48986 through 48990). As noted in the FY 2023 IPPS/LTCH PPS final rule, we are continuing to summarize each application in this proposed rule. However, while we are continuing to provide discussion of the concerns or issues we identified with respect to applications submitted under the alternative pathway, we are providing more succinct information as part of the summaries in the proposed and final rules regarding the applicant's assertions as to how the medical service or technology meets the applicable new technology add-on payment criteria. We refer readers to https://mearis.cms.gov/public/publications/ntap for the publicly posted FY 2026 new technology add-on payment applications and supporting information (with the exception of certain cost and volume information, and information or materials identified by the applicant as confidential or copyrighted), including tables listing the ICD-10-CM codes, ICD-10-PCS codes, and/or MS-DRGs related to the analyses of the cost criterion for certain technologies for the FY 2026 new technology add-on payment applications. In addition, for certain FY 2026 new technology add-on payment applications, we are making available separate tables listing the ICD-10-CM codes and/or ICD-10-PCS codes that we believe would be used to identify cases relevant to the Breakthrough Device-designated indications, or would be appropriate to exclude for cases related to FDA market authorized indications that are not covered by the Breakthrough Device designation indications, for purposes of the new technology add-on payment, if approved, in Table 10 associated with this proposed rule, available via the internet on the CMS website at https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps. Click on the link on the left side of the screen titled ``FY 2026 IPPS Proposed Rule Home Page'' or ``Acute Inpatient--Files for Download''. Please see section VI of the Addendum for additional information regarding tables associated with this proposed rule. We received 34 applications for new technology add-on payments for FY 2026 under the new technology add-on payment alternative pathway. As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958) and the FY 2025 IPPS/LTCH PPS final rule (89 FR 69242 through 69245), we finalized that beginning with the new technology add-on payment applications for FY 2025, for technologies that are not already FDA market authorized for the indication that is the subject of the new technology add-on payment application, applicants must have a complete and active FDA market authorization request at the time of new technology add-on payment application submission and must provide documentation of FDA acceptance or filing to CMS at the time of application submission, consistent with the type of FDA marketing authorization application the applicant has submitted to FDA. See Sec. 412.87(e) and further discussion in the FY 2024 and the FY 2025 IPPS/ LTCH PPS final rules (88 FR 58948 through 58958; 89 FR 69242 through 69245). Of the 34 applications received under the alternative pathway, 1 application was not eligible for consideration for new technology add-on payment because it did not meet these requirements; and 4 applicants withdrew their applications prior to the issuance of this proposed rule. Of the remaining 29 applications, 27 of the technologies received a Breakthrough Device designation from FDA. The remaining two applications were designated as a QIDP by FDA. We did not receive any applications for technologies approved through the LPAD pathway. In accordance with the regulations under Sec. 412.87(f)(2), applicants for new technology add-on payments for FY 2026 for Breakthrough Devices must have FDA marketing authorization by May 1 of the year prior to the beginning of the fiscal year for which the application is being considered. Under Sec. 412.87(f)(3), applicants for new technology add-on payments for FY 2026 for QIDPs and technologies approved under the LPAD pathway must have FDA marketing authorization by July 1 of the year prior to the beginning of the fiscal year for which the application is being considered. The policy finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58742) provides for conditional approval for a technology for which an application is submitted under the alternative pathway for certain antimicrobial products (QIDPs and LPADs) at Sec. 412.87(d) that does not receive FDA marketing authorization by July 1 prior to the particular fiscal year for which the applicant applied for new technology add-on payments, provided that the technology receives FDA [[Page 18158]] marketing authorization before July 1 of the fiscal year for which the applicant applied for new technology add-on payments. We refer the reader to the FY 2021 IPPS/LTCH final rule for a complete discussion of this policy (85 FR 58737 through 58742). As we did in the FY 2025 IPPS/LTCH PPS proposed rule, for applications under the alternative new technology add-on payment pathway, in this proposed rule we are making a proposal to approve or disapprove each of these 29 applications for FY 2026 new technology add-on payments. Therefore, in this section of the preamble of this proposed rule, we provide a table summarizing background information and the cost analysis for each alternative pathway application and propose whether or not each technology would be eligible for the new technology add-on payment for FY 2026. 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) and FY 2021 IPPS/LTCH PPS final rule (85 FR 58715 through 58733) for further discussion of the alternative new technology add-on payment pathways for these technologies. a. Alternative Pathway for Breakthrough Devices

1. 4WEB Medical Ankle Truss System

The following table summarizes the information provided in the new technology add-on payment application for the 4WEB Medical Ankle Truss System. We note that 4WEB Medical, Inc. submitted an application for new technology add-on payments for the 4WEB Medical Ankle Truss System for FY 2024, as summarized in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26924 through 26926), which the applicant withdrew prior to the issuance of the FY 2024 IPPS/LTCH PPS final rule (88 FR 58919). BILLING CODE 4120-01-P [[Page 18159]] [GRAPHIC] [TIFF OMITTED] TP30AP25.001 [[Page 18160]] [GRAPHIC] [TIFF OMITTED] TP30AP25.002 After review of the information provided by the applicant, since the indication for which the applicant received 510(k) clearance is included within the scope of the Breakthrough Device designation indication, it appears that the FDA-cleared indication is appropriate for consideration for new technology add-on payment under the alternative pathway criteria. We agree with the applicant that the 4WEB Medical ATS meets the cost criterion and are therefore proposing to approve the 4WEB Medical ATS for new technology add-on payments for FY 2026 for use as an accessory to the Stryker T2 Ankle Arthrodesis Nail or the Stryker Valor Hindfoot Fusion Nail as part of a TCC fusion construct in a salvage procedure following failed ankle arthrodesis or failed ankle arthroplasty for patients at risk for loss of limb. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the 4WEB Medical ATS to the hospital to be $23,500 per patient. Per the applicant, one 4WEB Medical ATS is used per patient per hospital discharge. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the 4WEB Medical ATS would be $15,275 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the 4WEB Medical ATS meets the cost criterion and our proposal to approve new technology add-on payments for the 4WEB Medical ATS for FY 2026.

2. AeroPace[supreg] System

The following table summarizes the information provided in the new technology add-on payment application for the AeroPace[supreg] System. [[Page 18161]] [GRAPHIC] [TIFF OMITTED] TP30AP25.003 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant received PMA approval from FDA is [[Page 18162]] included within the scope of the Breakthrough Device designation indication, it appears that the FDA-approved indication is appropriate for consideration for new technology add-on payment under the alternative pathway criteria. We note that the applicant stated that the technology is not yet available for sale because it would take time following FDA approval to finalize its commercial operations and market materials to include the final labeling and regulatory information. We are interested in additional information regarding the cause for any delay in the technology's market availability, as it received FDA approval on December 4, 2024, and the applicant states that it is not expected to be commercially available until October 1, 2025. We agree with the applicant that the AeroPace[supreg] System meets the cost criterion and are therefore proposing to approve the AeroPace[supreg] System for new technology add-on payments for FY 2026, for use to improve weaning success--increase weaning, reduce ventilator days, and reduce reintubation--in patients ages 18 years or older on MV >=96 hours and who have not weaned. The applicant has not provided an estimate for the cost of the AeroPace[supreg] System at the time of this proposed rule. The applicant stated that the operating components include the AeroPace[supreg] Catheter and the Airway Sensor. The applicant also noted the capital components of the AeroPace[supreg] Neurostimulation Console, Catheter Cable, Handheld Controller, and Airway Sensor Cable. Because section 1886(d)(5)(K)(i) of the Act requires that the Secretary establish a mechanism to recognize the costs of new medical services or technologies under the payment system established under that subsection, which establishes the system for payment of the operating costs of inpatient hospital services, we do not include capital costs in the add-on payments for a new medical service or technology or make new technology add-on payments under the IPPS for capital-related costs (86 FR 45145). As noted, the applicant stated that the cost of the AeroPace[supreg] Neurostimulation Console, Catheter Cable, Handheld Controller, and Airway Sensor Cable are capital costs. Therefore, it appears that these components are not eligible for new technology add- on payment because, as discussed in prior rulemaking and as noted, we only make new technology add-on payments for operating costs (72 FR 47307 through 47308). We expect the applicant to submit cost information prior to the final rule, and we will provide an update regarding the new technology add-on payment amount for the technology, if approved, in the final rule. Any new technology add-on payment for the AeroPace[supreg] System would be subject to our policy under Sec. 412.88(a)(2) where we limit new technology add-on payment 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. We invite public comments on whether the AeroPace[supreg] System meets the cost criterion and our proposal to approve new technology add-on payments for the AeroPace[supreg] System for FY 2026.

3. AGENTTM Paclitaxel-Coated Balloon Catheter

The following table summarizes the information provided in the new technology add-on payment application for the AGENTTM Paclitaxel-Coated Balloon Catheter. BILLING CODE 4120-01-P [[Page 18163]] [GRAPHIC] [TIFF OMITTED] TP30AP25.004 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant received PMA approval from FDA is [[Page 18164]] included within the scope of the Breakthrough Device designation indication, it appears that the FDA-approved indication is appropriate for consideration for new technology add-on payment under the alternative pathway criteria.\187\ --------------------------------------------------------------------------- \187\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program. --------------------------------------------------------------------------- We agree with the applicant that the AGENTTM Paclitaxel- Coated Balloon Catheter meets the cost criterion and are therefore proposing to approve the AGENTTM Paclitaxel-Coated Balloon Catheter for new technology add-on payments for FY 2026 for use after appropriate vessel preparation in adult patients undergoing PCI in coronary arteries 2.0 mm to 4.0 mm in diameter and lesions up to 26 mm in length for the purpose of improving myocardial perfusion when treating ISR. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the AGENTTM Paclitaxel-Coated Balloon Catheter to the hospital to be $6,175 per patient. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the AGENTTM Paclitaxel- Coated Balloon Catheter would be $4,013.75 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the AGENTTM Paclitaxel-Coated Balloon Catheter meets the cost criterion and our proposal to approve new technology add-on payments for the AGENTTM Paclitaxel-Coated Balloon Catheter for FY 2026.

4. alfapump[supreg] System

The following table summarizes the information provided in the new technology add-on payment application for the alfapump[supreg] system. BILLING CODE 4120-01-P [[Page 18165]] [GRAPHIC] [TIFF OMITTED] TP30AP25.005 [[Page 18166]] [GRAPHIC] [TIFF OMITTED] TP30AP25.006 BILLING CODE 4120-01-C As noted, the applicant stated that the technology is not expected to be commercially available until July 2025 due to its internal production capacity and the phased roll out plan into Liver Transplant centers. We are interested in additional information regarding any delay, such as whether the technology would be available for sale during its phased roll out plan. We agree with the applicant that the alfapump[supreg] system meets the cost criterion and are therefore proposing to approve the alfapump[supreg] system for new technology add-on payments for FY 2026, in adult patients with refractory or recurrent ascites due to liver cirrhosis for the removal of excess peritoneal fluid from the peritoneal cavity into the bladder. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the alfapump[supreg] system to the hospital to be $30,000 per patient. Per the applicant, the alfapump[supreg] system is a single patient use implantable device, and one device is used per hospital stay. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the alfapump[supreg] system would be $19,500 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the alfapump[supreg] system meets the cost criterion and our proposal to approve new technology add-on payments for the alfapump[supreg] system.

5. aprevo[supreg]-C Cervical Interbody Fusion Device

The following table summarizes the information provided in the new technology add-on payment application for the aprevo[supreg]-C cervical interbody fusion device. BILLING CODE 4120-01-P [[Page 18167]] [GRAPHIC] [TIFF OMITTED] TP30AP25.007 [[Page 18168]] [GRAPHIC] [TIFF OMITTED] TP30AP25.008 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant received 510(k) clearance from FDA is included within the scope of the Breakthrough Device designation, it appears that the FDA 510(k) clearance indication is appropriate for consideration for new technology add-on payment under the alternative pathway criteria. We note that the applicant stated that the technology is expected to be commercially available starting October 1, 2025, to align with the start of the new technology add-on payment. We are interested in additional information regarding the cause for any delay in the technology's market availability as the technology received FDA clearance on November 15, 2024. We agree with the applicant that the aprevo[supreg]-C cervical interbody fusion device meets the cost criterion and are therefore proposing to approve the aprevo[supreg]-C cervical interbody fusion device for new technology add-on payments for FY 2026, as interbody fusion devices indicated at one or more levels of the cervical spine (C2-T1) in patients with the following degenerative cervical conditions: cervical disc disease, instability, trauma including fractures, deformity defined as kyphosis, lordosis, or scoliosis, cervical spondylotic myelopathy, spinal stenosis, and failed previous fusion. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the aprevo[supreg]-C cervical interbody fusion device to the hospital to be $32,500 per patient. The applicant stated that the average number of cervical interbody fusion (CIBF) devices per procedure is 4.42 if the patient has a deformity and 1.7 if the patient has a degenerative condition. Per the applicant, based on the projected mix between these diagnoses, the average number of aprevo[supreg]-C CIBF per procedure is expected to be 3.25. The applicant stated that the selling price will be $19,000 for the first level, and $6,000 for each additional level. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the aprevo[supreg]-C cervical interbody fusion device would be $21,125 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the aprevo[supreg]-C cervical interbody fusion device meets the cost criterion and our proposal to approve new technology add-on payments for the aprevo[supreg]-C cervical interbody fusion device for FY 2026.

6. CERAMENT[supreg] G

The following table summarizes the information provided in the new technology add-on payment application for CERAMENT[supreg] G. BILLING CODE 4120-01-P [[Page 18169]] [GRAPHIC] [TIFF OMITTED] TP30AP25.009 BILLING CODE 4120-01-C We note that under the eligibility criteria for approval under the alternative pathway for certain transformative devices, only the use of [[Page 18170]] the technology for the indication that corresponds to the technology's Breakthrough Device designation would be eligible for the new technology add-on payment. Therefore, only the use of CERAMENT[supreg] G for open fractures, 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 2026. We note that CERAMENT[supreg] G is also indicated for use for bone infections and was approved for new technology add-on payment for that indication in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48961 through 48966). As discussed in section II.E.4. of the preamble of this proposed rule, we are proposing to discontinue making new technology add-on payments for FY 2026 for use of CERAMENT[supreg] G for bone infections. We believe cases involving the use of CERAMENT[supreg] G related to bone infections, which would no longer be eligible for new technology add-on payment in FY 2026, would be identified by the ICD-10-PCS code XW0V0P7 (Introduction of antibiotic-eluting bone void filler into bones, open approach, new technology group 7) in combination with the ICD-10-CM codes in category M86 (Osteomyelitis). We are inviting public comments on the use of these codes to exclude the indication for use of CERAMENT[supreg] G related to bone infections, which would not be eligible for the new technology add-on payment for FY 2026, if approved. We agree with the applicant that CERAMENT[supreg] G meets the cost criterion and are therefore proposing to approve CERAMENT[supreg] G for new technology add-on payments for FY 2026 for use as a bone void filler intended for use in defects in the extremities of skeletally mature patients as an adjunct to systemic antibiotic therapy and surgical debridement as part of the standard treatment approach to open fractures. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost to the hospital to be $8,750 per patient. The applicant stated that the cost of 10 cc of CERAMENT[supreg] G would be $8,750, and expected that 10 cc of CERAMENT[supreg] G would be used per patient as indicated in a long- term study of 81 patients with open fractures.\188\ We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of CERAMENT[supreg] G would be $5,687.50 for FY 2026 (that is, 65 percent of the average cost of the technology). --------------------------------------------------------------------------- \188\ Henry, J, Ali, A., and Elkhidir, I et al. (2023). Long- term follow-up of open Gustilo-Anderson IIIB fractures treated with an adjuvant local antibiotic hydroxyapatite bio-composite. Cureus 15(5): e39103. DOI 10.7759/cureus.39103. --------------------------------------------------------------------------- We invite public comments on whether CERAMENT[supreg] G meets the cost criterion and our proposal to approve new technology add-on payments for CERAMENT[supreg] G for FY 2026.

7. Dexcom G7 Hospital Continuous Glucose Monitoring (CGM) System

The following table summarizes the information provided in the new technology add-on payment application for the Dexcom G7 Hospital CGM System. BILLING CODE 4120-01-P [[Page 18171]] [GRAPHIC] [TIFF OMITTED] TP30AP25.010 BILLING CODE 4120-01-C After review of the information provided by the applicant, we note that under the eligibility criteria for approval under the alternative pathway for [[Page 18172]] certain transformative devices, only the use of the technology for the indication that corresponds to the technology's Breakthrough Device designation would be eligible for the new technology add-on payment for FY 2026. As noted by the applicant, the expected De Novo indication is not limited to insulin-treated diabetes patients, as noted in the Breakthrough Device designation. Therefore, it appears that only the use of the Dexcom G7 Hospital CGM System for insulin-treated diabetes, and the FDA Breakthrough Device designation it received for that use, would be relevant for purposes of the new technology add-on payment application for FY 2026. We believe the relevant ICD-10-CM codes to identify the Breakthrough Device-designated indication for use of the technology in insulin-treated diabetes patients would be the ICD-10-CM code Z79.4 (Long term (current) use of insulin) in combination with: the ICD-10-CM codes in the categories E08 (Diabetes mellitus due to underlying condition), E09 (Drug or chemical induced diabetes mellitus), E11 (Type 2 diabetes mellitus), or E13 (Other specified diabetes mellitus), or the ICD-10-CM codes in the subcategories O24.1 (Pre-existing type 2 diabetes mellitus, in pregnancy, childbirth and the puerperium), O24.3 (Unspecified pre-existing diabetes mellitus in pregnancy, childbirth and the puerperium), O24.8 (Other pre-existing diabetes mellitus in pregnancy, childbirth, and the puerperium), or O24.9 (Unspecified diabetes mellitus in pregnancy, childbirth and the puerperium). Insulin-treated diabetes patients may also be identified by: the ICD- 10-CM codes in category E10 (Type 1 diabetes mellitus), the ICD-10-CM codes in the subcategory O24.0 (Pre-existing type 1 diabetes mellitus, in pregnancy, childbirth and the puerperium), or the ICD-10-CM codes O24.414 (Gestational diabetes mellitus in pregnancy, insulin controlled), O24.424 (Gestational diabetes mellitus in childbirth, insulin controlled), or O24.434 (Gestational diabetes mellitus in the puerperium, insulin controlled). We are inviting public comments on the use of these ICD-10-CM diagnosis codes to identify the Breakthrough Device-designated indication for purposes of the new technology add-on payment, if approved. We agree with the applicant that the Dexcom G7 Hospital CGM System meets the cost criterion and are therefore proposing to approve the Dexcom G7 Hospital CGM System for new technology add-on payments for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025. The applicant has not provided an estimate for the cost of the Dexcom G7 Hospital CGM System at the time of this proposed rule. The applicant stated that the following components are included for the cost of the technology: the operating cost of the Dexcom G7 Hospital CGM Wearable Sensor and Applicator, and the capital cost of the Dexcom G7 Hospital CGM System Display App. Because section 1886(d)(5)(K)(i) of the Act requires that the Secretary establish a mechanism to recognize the costs of new medical services or technologies under the payment system established under that subsection, which establishes the system for payment of the operating costs of inpatient hospital services, we do not include capital costs in the add-on payments for a new medical service or technology or make new technology add-on payments under the IPPS for capital-related costs (86 FR 45145). As noted, the applicant stated that the cost of the Dexcom G7 Hospital CGM System Display App is a capital cost. Therefore, it appears that this component is not eligible for new technology add-on payment because, as discussed in prior rulemaking and as noted, we only make new technology add-on payments for operating costs (72 FR 47307 through 47308). We expect the applicant to submit cost information prior to the final rule, and we will provide an update regarding the new technology add-on payment amount for the technology, if approved, in the final rule. Any new technology add-on payment for the Dexcom G7 Hospital CGM System would be subject to our policy under Sec. 412.88(a)(2) where we limit new technology add-on payment 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. We invite public comments on whether the Dexcom G7 Hospital CGM System meets the cost criterion and our proposal to approve new technology add-on payments for the Dexcom G7 Hospital CGM System for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025.

8. DrugSorb-ATR Device

The following table summarizes the information provided in the new technology add-on payment application for the DrugSorb-ATR Device. BILLING CODE 4120-01-P [[Page 18173]] [GRAPHIC] [TIFF OMITTED] TP30AP25.011 BILLING CODE 4120-01-C After review of the information provided by the applicant, we agree with the applicant that the DrugSorb-ATR device meets the cost criterion and are therefore proposing to approve the DrugSorb-ATR device for new technology add-on payments for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the DrugSorb-ATR device to the hospital to be $7,000 per patient. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the DrugSorb-ATR device would be $4,550 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the DrugSorb-ATR device meets the cost criterion and our proposal to approve new technology add-on payments for the DrugSorb-ATR [[Page 18174]] device for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025.

9. Emily's Care Nourish Test System (Model 1)

The following table summarizes the information provided in the new technology add-on payment application for the Emily's Care Nourish Test System (Model 1). BILLING CODE 4120-01-P [GRAPHIC] [TIFF OMITTED] TP30AP25.012 [[Page 18175]] BILLING CODE 4120-01-C After review of the information provided by the applicant, we note that under the eligibility criteria for approval under the alternative pathway for certain transformative devices, only the use of the technology for the indication that corresponds to the technology's Breakthrough Device designation would be eligible for the new technology add-on payment for FY 2026. Therefore, only the use of the Emily's Care Nourish Test System (Model 1) for VLBW neonates and infants in the NICU, 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 2026. We note the following concerns with respect to the cost criterion. We are unclear how the applicant identified the 25,000 claims used in its cost analysis, including the type of source data and the data year that were used to identify cases. The applicant did not provide a completed cost criterion codes and MS-DRGs worksheet and we are unclear how ICD-10-PCS and/or -CM codes were used to identify potential cases representing patients that may be eligible for use of the Emily's Care Nourish Test System (Model 1). We note that MS-DRGs 790 and 791 identified by the applicant may represent a patient population broader than those cases that would be included within the scope of the Breakthrough Device designation indication that is appropriate for consideration for new technology add-on payment under the alternative pathway criteria (VLBW neonates and infants less than 6 months of age in the NICU), and we question whether using these MS-DRGs without additional inclusion and/or exclusion criteria would be representative of cases eligible for new technology add-on payment. Furthermore, it appears that the applicant did not identify relevant cases from a claims database such as the MedPAR file for its cost analysis, but instead calculated a case volume based on assumptions using the number of total live births in the United States. In addition, we question the assumptions used in the cost analysis regarding the potential Medicare volume for the technology. As noted in the FDA clearance letter for this device,\189\ its intended patient population is newborns, including preterm, and infants. The applicant asserts that after a premature infant is delivered, the infant may be eligible for Medicare coverage if it qualifies under specific criteria, such as disability or end-stage renal disease (ESRD). Although we agree that infants may be eligible for Medicare if they have ESRD and need regular dialysis or have had a kidney transplant,\190\ we note that Medicare Part A entitlement--for inpatient hospital services--based on child disability benefit entitlement can never begin before the month the person attains age 20 (or age 18 if the individual's disability is Amyotrophic Lateral Sclerosis).\191\ --------------------------------------------------------------------------- \189\ https://www.accessdata.fda.gov/cdrh_docs/pdf23/K234088.pdf. \190\ Centers for Medicare & Medicaid Services. End-stage renal disease (https://www.medicare.gov/basics/end-stage-renal-disease, accessed 1/16/2024). \191\ Centers for Medicare & Medicaid Services. Original Medicare (Part A and B) Eligibility and Enrollment (https://www.cms.gov/medicare/enrollment-renewal/health-plans/original-part-a-b, accessed 1/16/2024). --------------------------------------------------------------------------- Furthermore, we are unclear how the average charge per case (unstandardized with no case weight) was calculated as it is unclear what claims data was used to determine the average charges for MS-DRG 790 and MS-DRG 791. We are also unclear as to the applicant's methodology for calculating the average charge per case (unstandardized with case weight), as it appears the applicant multiplied the average charge per case (unstandardized with no case weight) by 5.6671 for the charges in MS-DRG 790, and by 3.8704 for the charges in MS-DRG 791. Although the applicant did not remove charges related to the technology being replaced, we note that the applicant stated that targeted fortification leads to a decreased length of stay (LOS) by 2.5 days, and we question if charges should be removed to account for the decreased LOS for patients using this technology. We are also unclear as to the applicant's methodology for calculating the average standardized charge per case as the applicant used the same values from the average charge per case (unstandardized with case weight), which were the average charge per case (unstandardized with no case weight) multiplied by 5.6671 for the charges in MS-DRG 790, and by 3.8704 for the charges in MS-DRG 791. To calculate the inflated average standardized charge per case, the applicant applied an inflation factor of 1.04118 percent. We would be interested in additional information regarding the basis for using this inflation factor and how it corresponds to the source data and year used for the cost analysis. We note the applicant added direct and indirect charges related to the new technology. However, although the applicant identified a cost- to-charge ratio of 0.36 for intensive inpatient admission days, it is unclear how this cost-to-charge ratio was used to convert costs for the technology and indirect costs to charges, and how these charges were calculated using the costs of the device itself or costs related to additional time for training or measuring milk. Therefore, because the applicant has not provided sufficient information as part of its cost analysis to demonstrate that the Emily's Care Nourish Test System (Model 1) meets the cost criterion, we are proposing to disapprove new technology add-on payments for the Emily's Care Nourish Test System (Model 1) for FY 2026. However, in the event we receive updated information to establish that the Emily's Care Nourish Test System (Model 1) meets the cost criterion, we are providing the following information regarding the new technology add-on payment. We note the applicant states that the technology, which received FDA clearance on May 3, 2024, is expected to be commercially available May 1, 2025, and we would appreciate more information about the cause for any delay in the commercial availability of the device following FDA clearance. We believe the relevant ICD-10-CM codes to identify the Breakthrough Device-designated indication for use of the technology in VLBW neonates and infants would be the following codes: ------------------------------------------------------------------------ ICD-10-CM code Description ------------------------------------------------------------------------ P05.01............................ Newborn light for gestational age, less than 500 grams. P05.02............................ Newborn light for gestational age, 500-749 grams. P05.03............................ Newborn light for gestational age, 750-999 grams. P05.04............................ Newborn light for gestational age, 1,000-1,249 grams. P05.05............................ Newborn light for gestational age, 1,250-1,499 grams. P05.11............................ Newborn small for gestational age, less than 500 grams. [[Page 18176]] P05.12............................ Newborn small for gestational age, 500-749 grams. P05.13............................ Newborn small for gestational age, 750-999 grams. P05.14............................ Newborn small for gestational age, 1,000-1,249 grams. P05.15............................ Newborn small for gestational age, 1,250-1,499 grams. P07.00............................ Extremely low birth weight newborn, unspecified weight. P07.01............................ Extremely low birth weight newborn, less than 500 grams. P07.02............................ Extremely low birth weight newborn, 500-749 grams. P07.03............................ Extremely low birth weight newborn, 750-999 grams. P07.14............................ Other low birth weight newborn, 1,000-1,249 grams. P07.15............................ Other low birth weight newborn, 1,250-1,499 grams. ------------------------------------------------------------------------ We are inviting public comments on the use of these ICD-10-CM diagnosis codes to identify the Breakthrough Device-designated indication for purposes of the new technology add-on payment, if approved. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost to the hospital for the Emily's Care Nourish Test System (Model 1) to be $3,000 per patient before discounts and $1,800 after discounts, based on the contents of the kit, which provides enough supplies for testing over a typical NICU stay (36 tests). The applicant stated the contents of the kit include: 36 test strips, pipettes, reference cards, 2 control solutions, and a reusable lightbox (iPhone not included). The applicant also provided additional information on the costs for the annual use of the technology to the hospital of $25,000, consisting of $10,000 for the kit including the lease of the lightbox and iPhone, and $15,000 for the device's operation (labor, testing milk, analysis interpretation, adjustment of feeding protocols). However, we note that the costs to the hospital, per patient, per inpatient stay remains unclear, and that the provided costs also include additional costs related to use of the device as well as capital costs for the lease of the lightbox and iPhone. As we have discussed in prior rulemaking, when determining a new technology add-on payment, we provide payment based on the cost of the actual technology (such as the drug or device itself) and not for additional costs related to the use of the device (86 FR 45146). Therefore, we would not include costs of staff labor for the device's operation in the relevant costs for purposes of determining the new technology add-on payment amount. In addition, because section 1886(d)(5)(K)(i) of the Act requires that the Secretary establish a mechanism to recognize the costs of new medical services or technologies under the payment system established under that subsection, which establishes the system for payment of the operating costs of inpatient hospital services, we do not include capital costs in the add-on payments for a new medical service or technology or make new technology add-on payments under the IPPS for capital-related costs (86 FR 45145). The costs to lease the lightbox and iPhone are capital costs. As such, these components would not be eligible for new technology add-on payment because, as discussed in prior rulemaking and as noted, we only make new technology add-on payments for operating costs (72 FR 47307 through 47308). Without a breakdown of the costs of this technology to the hospital, per patient, per inpatient stay, for the operating components of the kit, we are unable to identify the relevant costs for purposes of determining the new technology add-on payment amount. In addition, the applicant had indicated that the cost of the device would be discounted to hospitals, and the Medicare program expects providers to take advantage of available discounts.\192\ It is unclear how potential discounts would affect the relevant estimated operating costs of the device. We would be interested in additional information regarding the current or anticipated average cost of the technology to the hospital per inpatient stay. --------------------------------------------------------------------------- \192\ Medicare Department of Health & Human Services (DHHS) Provider Reimbursement Manual Part 1--Chapter 8, Purchase Discounts; Allowances; Refunds of Expenses (Date: March 8, 2013) https://www.cms.gov/regulations-and-guidance/guidance/transmittals/downloads/r456pr1.pdf. --------------------------------------------------------------------------- We invite public comments on whether the Emily's Care Nourish Test System (Model 1) meets the cost criterion and our proposal to disapprove new technology add-on payments for the Emily's Care Nourish Test System (Model 1) for FY 2026. We also invite public comments on the operating costs for the device, in the event we receive updated information to establish that the Emily's Care Nourish Test System (Model 1) meets the cost criterion.

10. Esprit\TM\ BTK Everolimus Eluting Resorbable Scaffold System

The following table summarizes the information provided in the new technology add-on payment application for the EspritTM BTK Everolimus Eluting Resorbable Scaffold System. BILLING CODE 4120-01-P [[Page 18177]] [GRAPHIC] [TIFF OMITTED] TP30AP25.013 [[Page 18178]] [GRAPHIC] [TIFF OMITTED] TP30AP25.014 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant has received FDA marketing authorization is included within the scope of the Breakthrough Device designation indication, it appears that the FDA marketing authorization is appropriate for consideration for new technology add-on payment under the alternative pathway criteria.\193\ --------------------------------------------------------------------------- \193\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program. --------------------------------------------------------------------------- We agree with the applicant that the EspritTM BTK Everolimus Eluting Resorbable Scaffold meets the cost criterion and are therefore proposing to approve the EspritTM BTK Everolimus Eluting Resorbable Scaffold for new technology add-on payments for FY 2026 for the indication of improving luminal diameter in infrapopliteal lesions in patients with CLTI and total scaffolding length up to 170 mm with a reference vessel diameter of >=2.5 mm and <=4 mm. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the EspritTM BTK Everolimus Eluting Resorbable Scaffold to the hospital to be $6,000 per patient. According to the applicant, the costs of the technology include the EspritTM BTK Scaffold ($2,750) and the EspritTM BTK Delivery System ($250). The applicant stated that per the IDE Clinical Study, on average two EspritTM BTK Everolimus Eluting Resorbable Scaffolds were used per patient. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the EspritTM BTK Everolimus Eluting Resorbable Scaffold would be $3,900 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the EspritTM BTK Everolimus Eluting Resorbable Scaffold meets the cost criterion and our proposal to approve new technology add-on payments for the EspritTM BTK Everolimus Eluting Resorbable Scaffold for FY 2026.

11. EUROPA\TM\ Posterior Cervical Fusion System

The following table summarizes the information provided in the new technology add-on payment application for the EUROPATM Posterior Cervical Fusion System. BILLING CODE 4120-01-P [[Page 18179]] [GRAPHIC] [TIFF OMITTED] TP30AP25.015 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant has received FDA marketing authorization is [[Page 18180]] included within the scope of the Breakthrough Device designation indication, it appears that the FDA marketing authorization is appropriate for consideration for new technology add-on payment under the alternative pathway criteria. According to the applicant, the technology, which received FDA clearance on November 19, 2024, is not yet available for sale due to project timelines. The applicant stated that the technology is not expected to be commercially available until the fourth quarter of 2025. We are interested in additional information regarding the cause of any delay in the technology's market availability. We agree with the applicant that the EUROPATM Posterior Cervical Fusion System meets the cost criterion and are therefore proposing to approve the EUROPATM Posterior Cervical Fusion System for new technology add-on payments for FY 2026, to provide immobilization and stabilization of spinal segments as an adjunct to fusion for the acute and chronic instabilities of the cervical spine (Cl to C7) and the upper thoracic spine (T1 to T3) listed in both the Breakthrough Device designation and FDA clearance letter. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the EUROPATM Posterior Cervical Fusion System to the hospital to be $123,920 per patient. According to the applicant, there are approximately 374 different components associated with the technology, including Pedicle Screws, Set Screws, Rods, and Connectors, all of which are operating costs and new components. The applicant stated that the majority of posterior cervical fusion procedures are inpatient Medicare procedures in most hospitals, but there may be exceptions based on individual clinical practice. Per the applicant, most of these procedures are C1-T3 or C2-T3 with some exceptions being 2-3 levels. The applicant calculated the total cost based on the unit prices of the implants used in a construct (Rod $9,000.00; Pedicle Screw $5,000.00; Smooth Shank Screw $5,000.00; Set Screw $500.00; Connector $4,000.00), weighted by the length of the construct (1- through 9-level), and the percentage of those procedures across different levels of fusion (10 percent for 2- through 4-level; 90 percent for 5 or more levels). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 412.88(a)(2)(ii)(B), 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 proposing that the maximum new technology add-on payment for a case involving the use of the EUROPATM Posterior Cervical Fusion System would be $80,548 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the EUROPATM Posterior Cervical Fusion System meets the cost criterion and our proposal to approve new technology add-on payments for the EUROPATM Posterior Cervical Fusion System for FY 2026.

12. iFuse TORQ TNTTM Implant System

The following table summarizes the information provided in the new technology add-on payment application for the iFuse TORQ TNTTM Implant System. BILLING CODE 4120-01-P [[Page 18181]] [GRAPHIC] [TIFF OMITTED] TP30AP25.016 [[Page 18182]] [GRAPHIC] [TIFF OMITTED] TP30AP25.017 BILLING CODE 4120-01-C After review of the information provided by the applicant, we note that under the eligibility criteria for approval under the alternative pathway for certain transformative devices, only the use of the technology for the indication that corresponds to the technology's Breakthrough Device designation would be eligible for the new technology add-on payment for FY 2026. As noted by the applicant, the FDA clearance describes an additional indication for sacroiliac joint fusion for augmenting immobilization and stabilization of the sacroiliac joint in skeletally mature patients undergoing sacropelvic fixation as part of a lumbar or thoracolumbar fusion, which is not included in the Breakthrough Device designation. Therefore, it appears that this indication is not relevant for purposes of the new technology add-on payment application for FY 2026. Please see Table 10.2.--iFuse TORQ TNTTM Implant System associated with this proposed rule for the list of ICD-10-PCS procedure codes that we believe would be appropriate to exclude when reported in combination with use of the iFuse TORQ TNTTM Implant System. We are inviting public comments on the exclusion of cases reporting these ICD-10-PCS procedure codes in combination with the procedure codes that identify use of the iFuse TORQ TNTTM Implant System for augmenting immobilization and stabilization of the sacroiliac joint in skeletally mature patients undergoing sacropelvic fixation as part of a lumbar or thoracolumbar fusion, which would not be eligible for new technology add-on payment, if approved. We agree with the applicant that the iFuse TORQ TNTTM Implant System meets the cost criterion and are therefore proposing to approve the iFuse TORQ TNTTM Implant System for new technology add-on payments for FY 2026 when used for fracture fixation of the pelvis, including acute, non-acute and nontraumatic fractures and sacroiliac joint fusion for sacroiliac joint dysfunction including sacroiliac joint disruption and degenerative sacroiliitis. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the iFuse TORQ TNTTM Implant System to the hospital to be $6,573 per patient. The applicant stated that the iFuse TORQ TNTTM Implant System includes the operating unit costs of the TNT Implant ($3,150), Drill Bit ($200), Guide Pin ($100), Blunt Pin ($100), and Washer ($50). The applicant estimated the average number of each component used per case for pelvic fixation and sacroiliac joint fusion cases separately, and calculated the costs of the new technology by multiplying the component costs by the average number of components used per case. The applicant used internal sales data to estimate the percentages of pelvic fixation (80 percent) and sacroiliac joint (20 percent) fusion cases in an average hospital. The applicant then calculated the total cost of the iFuse TORQ TNTTM Implant System to the hospital by taking the weighted average of the cost per pelvic fixation case and cost per sacroiliac joint fusion case. It appears that the TNT Implant and Washers are components of the Breakthrough device. However, the Drill Bit, Guide Pin, and Blunt Pin are instrumentation used for the implantation of the TNT Implant. As we have discussed in prior rulemaking, when determining a new technology add-on payment, we provide payment based on the cost of the actual technology (such as the drug or device itself) and not for additional costs related to the use of the device (86 FR 45146). It appears that the cost of the instrumentation (the Drill Bit, Guide Pin, and Blunt Pin) are costs related to the use of the technology, rather than a cost of the technology itself. In addition, it is not clear if the Drill Bit, Guide Pin, and Blunt Pin are new and unique components for this technology, or if they may be reused and/or may be purchased separately in support of other technologies. Therefore, it appears any add-on payment for the iFuse TORQ TNTTM Implant System would include only the weighted average cost per pelvic fixation case and cost per [[Page 18183]] sacroiliac joint fusion case of the TNT Implant and Washers ($6,093). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the iFuse TORQ TNTTM Implant System would be $3,960.45 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the iFuse TORQ TNTTM Implant System meets the cost criterion and our proposal to approve new technology add-on payments for the iFuse TORQ TNTTM Implant System for FY 2026.

13. Merit Wrapsody[supreg] Cell Impermeable Endoprosthesis (CIE)

The following table summarizes the information provided in the new technology add-on payment application for the Merit Wrapsody[supreg] Cell Impermeable Endoprosthesis (CIE). BILLING CODE 4120-01-P [[Page 18184]] [GRAPHIC] [TIFF OMITTED] TP30AP25.018 [[Page 18185]] [GRAPHIC] [TIFF OMITTED] TP30AP25.019 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant received PMA approval from FDA is included within the scope of the Breakthrough Device designation indication, it appears that the FDA-approved indication is appropriate for consideration for new technology add-on payment under the alternative pathway criteria. We note that the application stated that commercialization of the device was initiated on January 2, 2025, with 3 purchase orders in 3 days. We are interested in additional information regarding any delay in commercial availability between its FDA approval on December 19, 2024, and the date commercialization was initiated, including if the device was available for sale prior to January 2, 2025. We agree with the applicant that the Merit Wrapsody[supreg] CIE meets the cost criterion and are therefore proposing to approve the Merit Wrapsody[supreg] CIE for new technology add-on payments for FY 2026, for use in hemodialysis patients for the treatment of stenosis or occlusion within the dialysis access outflow circuit, including stenosis or occlusion in the peripheral veins of individuals with an AV fistula or at the venous anastomosis of a synthetic AV graft. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the cost of the Merit Wrapsody[supreg] CIE to the hospital to be $5,800 per patient, inclusive of all components and accessories. The applicant also provided an additional cost for operating room time because the facility operation room time may be 8-12 minutes greater than similar current procedures. However, as discussed in prior rulemaking, when determining a new technology add-on payment, we provide payment based on the cost of the actual technology (such as the drug or device itself) and not for additional costs related to the use of the device, such as the ongoing use of the device including maintenance and processing fees. For example, if a technology required an extra hour of operating room time, or reduced the amount of procedure time, we would neither add nor deduct costs based on this, and would only consider the actual cost of the technology at the time of purchase in our determination of the add-on payment (86 FR 45146). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the Merit Wrapsody[supreg] CIE would be $3,770 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the Merit Wrapsody[supreg] CIE meets the cost criterion and our proposal to approve new technology add-on payments for the Merit Wrapsody[supreg] CIE for FY 2026.

14. Minima Stent System

The following table summarizes the information provided in the new technology add-on payment application for the Minima Stent System. BILLING CODE 4120-01-P [[Page 18186]] [GRAPHIC] [TIFF OMITTED] TP30AP25.020 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant received PMA approval from FDA is included within the scope of the Breakthrough Device designation indication, it appears that the FDA-approved indication is appropriate for consideration for new technology add-on payment under the alternative pathway criteria.\194\ --------------------------------------------------------------------------- \194\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program. --------------------------------------------------------------------------- With respect to the cost criterion, we note that the applicant identified 6 relevant MS-DRGs using 8 ICD-10-PCS codes that most closely resemble the procedure to insert and/or dilate the great vessels using the Minima Stent System. Per the applicant, the Minima Stent System is used in the pediatric population and no cases appear in Medicare data; therefore, the applicant used CY 2022 and CY 2023 Medicare charge and discharge data accessed via Definitive Healthcare as well as data from the AOR/BOR File published as part of the FY 2025 IPPS/LTCH PPS final rule, correction notice and interim final action with comment period Data and Supplemental Files and FY 2023 IPPS/LTCH PPS final rule and correcting amendment files. However, we question whether using the total charges for the Medicare claims within the 6 identified MS-DRGs would provide an accurate estimate for eligible cases in a pediatric patient population where the Minima Stent System would be used. Subject to the applicant adequately addressing this concern, we would agree that the technology meets the cost criterion and are proposing to approve the Minima Stent System for new technology add-on payments for FY 2026 for use in the treatment of native or acquired pulmonary artery stenoses or coarctation of the aorta in neonates, infants, and children at least 1.5 kg in weight. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the Minima Stent [[Page 18187]] System to the hospital to be $34,900 per patient. Per the applicant, total cost per inpatient stay was calculated based on the assumption that only one unit will be used per patient for each inpatient stay. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the Minima Stent System would be $22,685 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the Minima Stent System meets the cost criterion and our proposal to approve new technology add-on payments for the Minima Stent System for FY 2026.

15. MY01 Continuous Compartmental Pressure Monitor

The following table summarizes the information provided in the new technology add-on payment application for the MY01 Continuous Compartmental Pressure Monitor. BILLING CODE 4120-01-P [[Page 18188]] [GRAPHIC] [TIFF OMITTED] TP30AP25.021 [[Page 18189]] [GRAPHIC] [TIFF OMITTED] TP30AP25.022 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant has received FDA marketing authorization is included within the scope of the Breakthrough Device designation indication, it appears that the FDA marketing authorization is appropriate for consideration for new technology add-on payment under the alternative pathway criteria.\195\ --------------------------------------------------------------------------- \195\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program. --------------------------------------------------------------------------- According to the applicant, the MY01 Mobile Application is not yet available for use because the applicant is completing final testing of the application before it is available for download. We are interested in additional information on when the MY01 Continuous Compartmental Pressure Monitor, which is the subject of this new technology add-on payment application, became available for sale. We agree with the applicant that the MY01 Continuous Compartmental Pressure Monitor meets the cost criterion and are therefore proposing to approve the MY01 Continuous Compartmental Pressure Monitor for new technology add-on payments for FY 2026, for real-time and continuous measurement of the muscle compartment pressure. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the MY01 Continuous Compartmental Pressure Monitor to the hospital to be $3,250 per patient. Per the applicant, only one device is used per inpatient stay, and the companion MY01 Mobile Application is provided at no additional cost for any physician registered to use the device. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the MY01 Continuous Compartmental Pressure Monitor would be $2,112.50 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the MY01 Continuous Compartmental Pressure Monitor meets the cost criterion and our proposal to approve new technology add-on payments for the MY01 Continuous Compartmental Pressure Monitor for FY 2026.

16. Nelli Seizure Monitoring System

The following table summarizes the information provided in the new technology add-on payment application for the Nelli Seizure Monitoring System. We note that Neuro Event Labs, Inc. submitted an application for new technology add-on payments for the Nelli Seizure Monitoring System for FY 2023, as summarized in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28341 through 28342), but the technology did not meet the applicable deadline for FDA approval or clearance of the technology and, therefore, was not eligible for consideration for new technology add-on payments for FY 2023 (87 FR 48960). We note that the applicant also submitted an application for new technology add-on payments for FY 2024, as summarized in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26940 through 26942), that it withdrew prior to the issuance of the FY 2024 IPPS/LTCH PPS final rule (88 FR 58919). BILLING CODE 4120-01-P [[Page 18190]] [GRAPHIC] [TIFF OMITTED] TP30AP25.023 BILLING CODE 4120-01-C After review of the information provided by the applicant, we agree with the applicant that the Nelli Seizure Monitoring System meets the cost [[Page 18191]] criterion and are therefore proposing to approve the Nelli Seizure Monitoring System for new technology add-on payments for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the Nelli Seizure Monitoring System to the hospital to be $1,000 per patient for the cost of the analysis during the hospital visit. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the Nelli Seizure Monitoring System would be $650 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the Nelli Seizure Monitoring System meets the cost criterion and our proposal to approve new technology add-on payments for the Nelli Seizure Monitoring System for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025.

17. Positive Blood Culture (PBC) Separator With Selux AST System

The following table summarizes the information provided in the new technology add-on payment application for the PBC Separator with Selux AST System. We note that Selux Diagnostics, Inc. submitted an application for new technology add-on payments for the PBC Separator with Selux AST System for FY 2024 under the name Selux NGP System, as summarized in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26946 through 26949), that it withdrew prior to the issuance of the FY 2024 IPPS/LTCH PPS final rule (88 FR 58919). BILLING CODE 4120-01-P [[Page 18192]] [GRAPHIC] [TIFF OMITTED] TP30AP25.024 [[Page 18193]] [GRAPHIC] [TIFF OMITTED] TP30AP25.025 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant received 510(k) clearance from FDA is included within the scope of the Breakthrough Device designation indication, it appears that the FDA-cleared indication is appropriate for consideration for new technology add-on payment under the alternative pathway criteria. We agree with the applicant that the PBC Separator with Selux AST System meets the cost criterion and are therefore proposing to approve the PBC Separator with Selux AST System for new technology add-on payments for FY 2026 for use as an automated inoculum preparation system that uses lysis, centrifugation and sequential optical density measurements to generate a McFarland equivalent suspension from positive blood culture samples that can be used for quantitative in vitro AST by the Selux AST System. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the PBC Separator with Selux AST System to the hospital to be $135.04 per patient. Per the applicant, the cost per patient includes $80 for the Selux AST Gram Negative and Selux AST Gram Positive AST Kit, $50 for the Selux AST Positive Blood Culture Kit, $4.79 for the Selux AST Analyzer Reagent Kit, and $0.25 for the Selux AST Waste Kit. We note that according to the applicant, the Selux AST System has been granted multiple previous FDA clearances for a different indication and sample type.\196\ However, per the applicant, the Breakthrough Device designation is for the Selux Positive Blood Culture Separator and Selux [AST] System. The previous FDA clearances for the Selux AST System were not considered Breakthrough Devices. Therefore, it appears that the components of the Selux AST System, including the Selux AST Gram Negative and Selux AST Gram Positive AST Kit, Selux AST Analyzer Reagent Kit, and Selux AST Waste Kit are eligible for new technology add-on payment only when used in conjunction with the PBC Separator on positive blood culture samples. We further note that the Selux AST System first received FDA 510(k) clearance on January 18, 2023, and therefore the components of the Selux AST System would still be new for FY 2026. --------------------------------------------------------------------------- \196\ https://www.accessdata.fda.gov/cdrh_docs/pdf21/K211759.pdf and https://www.accessdata.fda.gov/cdrh_docs/pdf21/K211748.pdf. --------------------------------------------------------------------------- We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the PBC Separator with Selux AST System would be $87.78 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the PBC Separator with Selux AST System meets the cost criterion and our proposal to approve new technology add-on payments for the PBC Separator with Selux AST System for FY 2026.

18. PearlMatrix P-15 Peptide Enhanced Bone Graft

The following table summarizes the information provided in the new technology add-on payment application for the PearlMatrix P-15 Peptide Enhanced Bone Graft. BILLING CODE 4120-01-P [[Page 18194]] [GRAPHIC] [TIFF OMITTED] TP30AP25.026 BILLING CODE 4120-01-C After review of the information provided by the applicant, we agree with the applicant that the PearlMatrix P-15 Peptide Enhanced Bone Graft [[Page 18195]] meets the cost criterion and are therefore proposing to approve the PearlMatrix P-15 Peptide Enhanced Bone Graft for new technology add-on payments for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the PearlMatrix P-15 Peptide Enhanced Bone Graft to the hospital to be $6,500 per patient, for one 10 cc kit used per inpatient stay. The applicant provided the following cost breakdown of each component: bone graft peptide ($3,120 operating cost and $780 capital cost), porcine anorganic bone mineral ($780 operating cost and $195 capital cost), and fibrous collagen matrix ($1,300 operating cost and $325 capital cost). Because section 1886(d)(5)(K)(i) of the Act requires that the Secretary establish a mechanism to recognize the costs of new medical services or technologies under the payment system established under that subsection, which establishes the system for payment of the operating costs of inpatient hospital services, we do not include capital costs in the add-on payments for a new medical service or technology or make new technology add-on payments under the IPPS for capital-related costs (86 FR 45145). As noted, the applicant stated, there are capital costs of $1,300 for the bone graft peptide, porcine anorganic bone mineral, and fibrous collagen matrix. Therefore, it appears that these costs are not eligible for new technology add-on payment because, as discussed in prior rulemaking and as noted, we only make new technology add-on payments for operating costs (72 FR 47307 through 47308). We note that any new technology add-on payment for the PearlMatrix P-15 Peptide Enhanced Bone Graft would include only the operating costs of $5,200 for the bone graft peptide, porcine anorganic bone mineral, and fibrous collagen matrix. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Any new technology add-on payment for the PearlMatrix P-15 Peptide Enhance Bone Graft would be subject to our policy under Sec. 412.88(a)(2) where we limit new technology add-on payment 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 proposing that the maximum new technology add-on payment for a case involving the use of the PearlMatrix P-15 Peptide Enhanced Bone Graft would be $3,380 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the PearlMatrix P-15 Peptide Enhanced Bone Graft meets the cost criterion and our proposal to approve new technology add-on payments for the PearlMatrix P-15 Peptide Enhanced Bone Graft for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025.

19. Provizio[supreg] SEM Scanner

The following table summarizes the information provided in the new technology add-on payment application for the Provizio[supreg] SEM Scanner. BILLING CODE 4120-01-P [[Page 18196]] [GRAPHIC] [TIFF OMITTED] TP30AP25.027 BILLING CODE 4120-01-C After review of the information provided by the applicant, we agree with the applicant that the Provizio[supreg] SEM Scanner meets the cost criterion and are therefore proposing to approve the Provizio[supreg] SEM Scanner for new technology add-on payments for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the Provizio[supreg] SEM Scanner to the hospital to be $631.84 per patient, based on the cost of the [[Page 18197]] Single-Use Disposable Provizio[supreg] SEM Sensor ($17.95) with a two- scan frequency per day, and an anticipated average length of stay (LOS) of 17.6 days. Per the applicant, the average LOS was determined by analyzing the FY2023 MedPAR data, and the weighted average LOS for all MS-DRGs (765 DRGs) was 5.1 days. According to the applicant, the average LOS for MS-DRGs (444 MS-DRGs) with patients who developed sacral and heel pressure ulcers (PUs) during the stay was 24.9 days, and the average LOS for the same MS-DRGs for cases without PUs was 10.3 days. The applicant expected that the LOS for these MS-DRGs would be reduced from 24.9 to 10.3 days for patients using the device. The applicant noted that the MedPAR data describes the number of cases with PUs, and that it is possible that individual patients may have multiple PUs, such as at the sacrum and heel. Per the applicant, in these cases, the scanner would be used on the remaining anatomies at risk of PUs through the average LOS of 24.9 days. Per the applicant, the midpoint between the average LOS for cases without PUs and cases with PUs is 17.6 days. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Any new technology add-on payment for the Provizio[supreg] SEM Scanner would be subject to our policy under Sec. 412.88(a)(2) where we limit new technology add-on payment 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 proposing that the maximum new technology add-on payment for a case involving the use of the Provizio[supreg] SEM Scanner would be $410.70 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the Provizio[supreg] SEM Scanner meets the cost criterion and our proposal to approve new technology add-on payments for the Provizio[supreg] SEM Scanner for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025.

20. RECELL[supreg] Autologous Cell Harvesting Device

The following table summarizes the information provided in the new technology add-on payment application for the RECELL[supreg] Autologous Cell Harvesting Device. BILLING CODE 4120-01-P [[Page 18198]] [GRAPHIC] [TIFF OMITTED] TP30AP25.028 [[Page 18199]] [GRAPHIC] [TIFF OMITTED] TP30AP25.029 BILLING CODE 4120-01-C After review of the information provided by the applicant, we note that the RECELL[supreg] Autologous Cell Harvesting Device is also indicated for acute partial-thickness thermal burn wounds and acute full-thickness thermal burn wounds. However, we note that under the eligibility criteria for approval under the alternative pathway for certain transformative devices, only the use of the technology for the indication that corresponds to the technology's Breakthrough Device designation would be eligible for the new technology add-on payment for FY 2026. Therefore, only the use of the RECELL[supreg] Autologous Cell Harvesting Device for acute nonthermal full thickness skin wounds after traumatic avulsion, surgical excision (for example, necrotizing soft tissue infection), or resection (for example, skin cancer), and the FDA Breakthrough Device designation it received for those uses, are relevant for purposes of the new technology add-on payment application for FY 2026. Please see Table 10.1.A.-RECELL[supreg] Autologous Cell Harvesting Device associated with this proposed rule for the list of relevant ICD- 10-CM diagnosis codes that we believe would identify the Breakthrough Device-designated indication of acute nonthermal full thickness skin wounds after traumatic avulsion. Please see Table 10.1.B.- RECELL[supreg] Autologous Cell Harvesting Device associated with this proposed rule for the list of relevant ICD-10-PCS procedure codes that we believe would be appropriate to report in combination with use of the RECELL[supreg] Autologous Cell Harvesting Device to identify use of the technology for the Breakthrough Device-designated indication of acute nonthermal full thickness skin wounds after surgical excision (for example, necrotizing soft tissue infection) or resection (for example, skin cancer). We are inviting public comments on the use of these ICD-10-CM diagnosis and ICD-10-PCS procedure codes to identify use of the technology for the Breakthrough Device-designated indications for purposes of the new technology add-on payment, if approved. We agree with the applicant that the RECELL[supreg] Autologous Cell Harvesting Device meets the cost criterion and are therefore proposing to approve the RECELL[supreg] Autologous Cell Harvesting Device for new technology add-on payments for FY 2026, when used in combination with meshed autografting for acute full-thickness thermal burn wounds in pediatric and adult patients and full-thickness skin defects after traumatic avulsion (for example, degloving) or surgical excision (for example, necrotizing soft tissue infection) or resection (for example, skin cancer). Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the RECELL[supreg] Autologous Cell Harvesting Device to the hospital to be $7,500 per device. The applicant estimated that, on average, one device is used per inpatient stay for patients with a full-thickness skin defect. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the RECELL[supreg] Autologous Cell Harvesting Device would be $4,875 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the RECELL[supreg] Autologous Cell Harvesting Device meets the cost criterion and our proposal to approve new technology add-on payments for the RECELL[supreg] Autologous Cell Harvesting Device for FY 2026.

21. Restor3d TIDALTM Fusion Cage

The following table summarizes the information provided in the new [[Page 18200]] technology add-on payment application for the restor3d TIDALTM Fusion Cage. We note that restor3d submitted an application for new technology add-on payments for the restor3d TIDALTM Fusion Cage for FY 2025, as summarized in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36124 through 36125), that it withdrew prior to the issuance of the FY 2025 IPPS/LTCH PPS final rule (89 FR 69204). BILLING CODE 4120-01-P [[Page 18201]] [GRAPHIC] [TIFF OMITTED] TP30AP25.030 BILLING CODE 4120-01-C After review of the information provided by the applicant, we agree with the applicant that the restor3d TIDALTM Fusion Cage meets the cost criterion and are therefore proposing to approve the restor3d TIDALTM Fusion [[Page 18202]] Cage for new technology add-on payments for FY 2026 subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the cost of the restor3d TIDALTM Fusion Cage to the hospital to be $27,995 per patient. In addition, the applicant noted the costs related to the technology for required supporting instruments and materials consist of one unit each of the Instrument Kit ($6,995), TTC Fusion Nail ($7,500), and Graft Material ($1,500). The applicant estimated the total cost to the hospital to be $43,990 for each procedure per patient, including the related cost of the technology. As we discussed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36125) and in prior rulemaking, when determining a new technology add-on payment, we provide payment based on the cost of the actual technology (such as the drug or device itself) and not for additional costs related to the use of the device (86 FR 45146). Based on the information provided by the applicant, the cost of the Instrument Kit is included in the costs of the supporting instruments and materials for each procedure related to the use of the technology, rather than the cost of the technology itself. In addition, it appears that the TTC Fusion Nail and Bone Graft are not new and unique components for this technology and can be purchased separately in support of other technologies. Furthermore, we note that the Instrument Kit is not included in the Breakthrough Device designation, and it therefore appears that only the restor3d TIDALTM Fusion Cage would be designated as the Breakthrough Device once market authorized and would be eligible for new technology add-on payments under the alternative pathway. Therefore, it appears any add-on payment for the restor3d TIDALTM Fusion Cage would include only the cost of the restor3d TIDALTM Fusion Cage ($27,995). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the restor3d TIDALTM Fusion Cage would be $18,196.75 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the restor3d TIDALTM Fusion Cage meets the cost criterion and our proposal to approve new technology add-on payments for the restor3d TIDALTM Fusion Cage for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025.

22. ShortCutTM

The following table summarizes the information provided in the new technology add-on payment application for the ShortCutTM. BILLING CODE 4120-01-P [[Page 18203]] [GRAPHIC] [TIFF OMITTED] TP30AP25.031 BILLING CODE 4120-01-C After review of the information provided by the applicant, we agree with the applicant that the ShortCutTM meets the cost criterion and are therefore proposing to approve the ShortCutTM for new technology add-on payments for FY 2026 for use as a splitting device of bioprosthetic aortic valve leaflets to facilitate valve-in-valve procedures for patients at risk for coronary obstruction. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the ShortCutTM to the hospital to be $15,000 per patient. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the ShortCutTM would be $9,750 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the ShortCutTM meets the cost criterion and our proposal to approve new technology add-on payments for the ShortCutTM for FY 2026.

23. Spur Peripheral Retrievable Stent System

The following table summarizes the information provided in the new technology add-on payment application for the Spur Peripheral Retrievable Stent System. BILLING CODE 4120-01-P [[Page 18204]] [GRAPHIC] [TIFF OMITTED] TP30AP25.032 BILLING CODE 4120-01-C After review of the information provided by the applicant, with regard to the cost criterion, we note that the applicant provided a list of ICD-10-CM codes to identify indications relevant to use of the technology for patients with de novo or restenotic lesions in the infrapopliteal arteries. However, in the cost analysis, the applicant used only ICD-10-PCS codes to identify eligible cases. We question whether using a combination of ICD-10-CM and ICD-10-PCS codes would more accurately identify eligible cases. Subject to the applicant adequately addressing this concern, we would agree that the Spur Peripheral Retrievable Stent System meets the cost criterion and are therefore proposing to approve the Spur Peripheral Retrievable Stent System for new technology add-on payments for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025. The applicant has not provided an estimate for the cost of the Spur Peripheral Retrievable Stent System at the time of this proposed rule. We expect the applicant to submit cost information prior to the final rule, and we will provide an update regarding the new technology add-on payment amount for the technology, if approved, in the final rule. Any new technology add-on payment for the Spur Peripheral Retrievable Stent System would be subject to our policy under Sec. 412.88(a)(2) where we limit new [[Page 18205]] technology add-on payment 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. We invite public comments on whether the Spur Peripheral Retrievable Stent System meets the cost criterion and our proposal to approve new technology add-on payments for the Spur Peripheral Retrievable Stent System for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025.

24. The WiSE CRT System

The following table summarizes the information provided in the new technology add-on payment application for The WiSE CRT System. BILLING CODE 4120-01-P [[Page 18206]] [GRAPHIC] [TIFF OMITTED] TP30AP25.033 BILLING CODE 4120-01-C After review of the information provided by the applicant, we agree with the applicant that The WiSE CRT System meets the cost criterion and are therefore proposing to approve The WiSE CRT System for new technology add-on payments for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of The WiSE CRT System to the hospital to be $63,300 per patient. The components include the electrode [[Page 18207]] and catheter ($21,970), the delivery sheath ($2,590), the battery ($12,870), and the transmitter ($25,870). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of The WiSE CRT System would be $41,145 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether The WiSE CRT System meets the cost criterion and our proposal to approve new technology add-on payments for The WiSE CRT System for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025.

25. TriVerity Test

The following table summarizes the information provided in the new technology add-on payment application for the TriVerity Test. BILLING CODE 4120-01-P [[Page 18208]] [GRAPHIC] [TIFF OMITTED] TP30AP25.034 BILLING CODE 4120-01-C After review of the information provided by the applicant, we note the applicant stated that the technology was not commercially available immediately [[Page 18209]] after FDA clearance. We are interested in additional information regarding the cause of any delay in the technology's commercial availability, including the significance of building up TriVerity cartridge inventory on its availability for routine clinical use. With regard to the cost criterion, the applicant stated the technology is used as an aid to differentiate bacterial infections, viral infections, and non-infectious illness, as well as the likelihood of disease progression in adult patients. However, the applicant included diagnosis codes related to sepsis of newborn in the second cost criterion analysis. We question whether diagnosis codes related to newborns are applicable to this technology because it is indicated for use in adult patients, and whether the applicant should remove these diagnosis codes to identify eligible cases more accurately. Subject to the applicant adequately addressing this concern, we would agree that the technology meets the cost criterion and propose to approve the TriVerity Test for new technology add-on payments for FY 2026, for use in conjunction with clinical assessments and other laboratory findings as an aid to differentiate bacterial infections, viral infections, and non-infectious illness, as well as to determine the likelihood of 7-day need for mechanical ventilation, vasopressors, and/or renal replacement therapy in adult patients with suspected acute infection or suspected sepsis presenting to the emergency department. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the TriVerity Test to the hospital to be $388 per patient. The applicant stated that there would be two components for the operating cost of the technology: the TriVerity Cartridge ($375) and the PAXgene Blood RNA Tube ($13). Per the applicant, the PAXgene Blood RNA Tube is an FDA- cleared tube distributed by BD and is a necessary component for hospitals to use the TriVerity Test. The applicant stated that hospitals can purchase the PAXgene Blood RNA Tubes directly from BD or from the applicant. Although the applicant stated that the PAXgene Blood RNA Tube is a new component of the device, we note that the PAXgene Blood RNA Tube is also commercially available for other uses as a standalone sample collection device, and received FDA marketing authorization as early as April 18, 2005.\197\ Therefore, it appears that only the cost of the TriVerity Cartridge is appropriate for consideration for new technology add-on payment. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the TriVerity Test would be $243.75 for FY 2026 (that is, 65 percent of the average cost of the technology). --------------------------------------------------------------------------- \197\ https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpmn/denovo.cfm?id=DEN050003. --------------------------------------------------------------------------- We invite public comments on whether the TriVerity Test meets the cost criterion and our proposal to approve new technology add-on payments for the TriVerity Test for FY 2026.

26. Ventura[supreg] Interatrial Shunt System

The following table summarizes the information provided in the new technology add-on payment application for the Ventura[supreg] Interatrial Shunt System. BILLING CODE 4120-01-P [[Page 18210]] [GRAPHIC] [TIFF OMITTED] TP30AP25.035 BILLING CODE 4120-01-C After review of the information provided by the applicant, we note that with regard to the unique ICD-10-PCS procedure code used to identify the use [[Page 18211]] of this technology, the applicant stated that ICD-10-PCS procedure code 02173J6 (Bypass left atrium to right atrium with synthetic substitute, percutaneous approach) describes implantation of an interatrial shunt. The applicant stated that it expects the Ventura[supreg] Interatrial Shunt System to be the first interatrial shunt to receive FDA approval and that it therefore will be the only technology reported under this code. However, we believe that other technologies currently in clinical trials may also be able to be reported using this code. Therefore, we believe that the ICD-10-CM diagnosis code Z00.6 (Encounter for examination for normal comparison and control in clinical research program) should be used in combination with the ICD-10-PCS procedure code 02173J6 to exclude new technology add-on payment for cases involving technologies that are used in clinical trial settings, as costs for the investigational item or service, itself unless otherwise covered outside of the clinical trial, are not covered by Medicare under the routine costs of a clinical trial.\198\ We are inviting public comments on the use of this ICD-10-CM diagnosis code to exclude cases involving technologies that are used in clinical trial settings, which would not be eligible for the new technology add-on payment, if approved. --------------------------------------------------------------------------- \198\ Routine Costs in Clinical Trials 310.1 (Effective Date of this Version 05/27/2024) https://www.cms.gov/medicare-coverage-database/view/ncd.aspx?ncdid=1&ncdver=3&. --------------------------------------------------------------------------- We agree with the applicant that the Ventura[supreg] Interatrial Shunt System meets the cost criterion and are therefore proposing to approve the Ventura[supreg] Interatrial Shunt System for new technology add-on payments for FY 2026 subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the Ventura[supreg] Interatrial Shunt System to the hospital to be $34,000 per device, and one unit of the shunt system would be furnished during an inpatient stay. The components include the Ventura[supreg] Interatrial Shunt ($32,000) and the Ventura[supreg] Interatrial Shunt Delivery System ($2,000). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the Ventura[supreg] Interatrial Shunt System would be $22,100 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the Ventura[supreg] Interatrial Shunt System meets the cost criterion and our proposal to approve new technology add-on payments for the Ventura[supreg] Interatrial Shunt System for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2025.

27. VITEK[supreg] REVEALTM AST System

The following table summarizes the information provided in the new technology add-on payment application for the VITEK[supreg] REVEALTM AST System. BILLING CODE 4120-01-P [[Page 18212]] [GRAPHIC] [TIFF OMITTED] TP30AP25.036 [[Page 18213]] [GRAPHIC] [TIFF OMITTED] TP30AP25.037 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant received 510(k) clearance is included within the scope of the Breakthrough Device designation indication, it appears that the FDA-cleared indication is appropriate for consideration for new technology add-on payment under the alternative pathway criteria.\199\ --------------------------------------------------------------------------- \199\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program. --------------------------------------------------------------------------- We note the applicant stated the device was not commercially available until October 21, 2024, due to lead times in the supply chain and implementation of system modifications due to FDA requirements. We are interested in additional information regarding the cause for any delay in the technology's commercial availability, as it received FDA clearance on June 20, 2024, and it is not clear how lead times in the supply chain affected its availability on the market and what system modifications were required. We agree with the applicant that the VITEK[supreg] REVEALTM AST System meets the cost criterion and are therefore proposing to approve the VITEK[supreg] REVEALTM AST System for new technology add-on payments for FY 2026, indicated for susceptibility testing direct from positive blood culture samples signaled positive by a continuous monitoring blood culture system and confirmed to contain gram-negative bacilli by Gram stain. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of the VITEK[supreg] REVEALTM AST System to the hospital to be $125 per patient for the VITEK[supreg] REVEALTM Sensor Array. Per the applicant, while there are additional capital costs for the technology, these costs were not included in the device's cost to the hospital per patient per inpatient stay. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 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 are proposing that the maximum new technology add-on payment for a case involving the use of the VITEK[supreg] REVEALTM AST System would be $81.25 for FY 2026 (that is, 65 percent of the average cost of the technology). We invite public comments on whether the VITEK[supreg] REVEALTM AST System meets the cost criterion and our proposal to approve new technology add-on payments for the VITEK[supreg] REVEALTM AST System for FY 2026. b. Alternative Pathways for Qualified Infectious Disease Products (QIDPs)

1. EMBLAVEOTM (Aztreonam-Avibactam)

The following table summarizes the information provided in the new technology add-on payment application for EMBLAVEOTM (also referred to as ATM-AVI). BILLING CODE 4120-01-P [[Page 18214]] [GRAPHIC] [TIFF OMITTED] TP30AP25.038 BILLING CODE 4120-01-C After review of the information provided by the applicant, since the indication for which the applicant received NDA approval is included within the scope of the QIDP designation indication, it appears that the FDA-approved indication is appropriate for consideration for new technology add-on payment under the alternative pathway criteria. We note that the applicant stated that the technology is expected to be commercially available by Q3 of CY 2025 due to product availability. We are interested in additional information regarding the cause for any delay in the technology's market availability as the technology received FDA approval on February 7, 2025. We agree with the applicant that EMBLAVEOTM meets the cost criterion and are therefore proposing to approve EMBLAVEOTM for new technology add-on payments for FY 2026 for use in patients 18 years and older who have limited or no alternative options for the treatment of cIAI. The applicant has not provided an estimate for the cost of EMBLAVEOTM at the time of this proposed rule. We expect the applicant to submit cost information prior to the final rule, and we will provide an update regarding the new technology add-on payment amount for the technology, if approved, in the final rule. Any new technology add-on payment for EMBLAVEOTM would be subject to our policy under Sec. [thinsp]412.88(a)(2)(ii)(B) where we limit new technology add-on payment for QIDPs to the lesser of 75 percent of the average cost of the technology, or 75 percent of the costs in excess of the MS-DRG payment for the case. We invite public comments on whether EMBLAVEOTM meets the cost criterion and our proposal to approve new technology add-on payments for EMBLAVEOTM for FY 2026.

2. CONTEPOTM (Fosfomycin)

The following table summarizes the information provided in the new technology add-on payment application for CONTEPOTM (fosfomycin). We note [[Page 18215]] that Nabriva Therapeutics submitted an application for CONTEPOTM for FY 2021 and FY 2022, as summarized in the FY 2021 and FY 2022 IPPS/LTCH PPS proposed rules (85 FR 32682 through 32683; 86 FR 25390 through 25392), and received conditional approval subject to the technology receiving FDA marketing authorization before July 1 of the particular fiscal year for which the applicant applied for new technology add-on payments (85 FR 58723 through 58725; 86 FR 45154 through 45155). CONTEPOTM did not receive FDA marketing authorization by the applicable July 1 deadlines, and was therefore not eligible for new technology add-on payments for FY 2021 or FY 2022 (86 FR 44972; 87 FR 48909). Per the applicant, Meitheal Pharmaceuticals Inc. has acquired the rights to CONTEPOTM in the U.S. and is submitting the new technology add-on payment application for FY 2026. BILLING CODE 4120-01-P [[Page 18216]] [GRAPHIC] [TIFF OMITTED] TP30AP25.039 [[Page 18217]] [GRAPHIC] [TIFF OMITTED] TP30AP25.040 BILLING CODE 4120-01-C After review of the information provided by the applicant, we note the applicant states that the technology is expected to be commercially available within 3 months of FDA approval, and we would appreciate more information on the reasons for any delay in the commercial availability of CONTEPOTM following FDA approval. We agree with the applicant that CONTEPOTM meets the cost criterion and are therefore proposing to approve CONTEPOTM for new technology add-on payments for FY 2026, subject to the technology receiving FDA marketing authorization for the indication corresponding to the QIDP designation by July 1, 2025. As an application submitted under the alternative pathway for certain antimicrobial products at Sec. 412.87(d), CONTEPOTM is eligible for conditional approval for new technology add-on payments if it does not receive FDA marketing authorization by July 1, 2025, provided that the technology receives FDA marketing authorization before July 1 of the fiscal year for which the applicant applied for new technology add-on payments (that is, July 1, 2026), as provided in Sec. 412.87(f)(3). If CONTEPOTM receives FDA marketing authorization before July 1, 2026, 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 FDA marketing authorization is received on or after July 1, 2026, no new technology add-on payments would be made for cases involving the use of CONTEPOTM for FY 2026. Based on preliminary information from the applicant at the time of this proposed rule, the applicant anticipates the total cost of CONTEPOTM to the hospital to be $11,700 per patient. The applicant estimated that each vial costs $325 and that 3 doses are needed each day for an average treatment duration of 12 days. We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule. Under Sec. 412.88(a)(2)(ii)(B), we limit new technology add-on for technologies designated as QIDPs to the lesser of 75 percent of the average cost of the technology, or 75 percent of the costs in excess of the MS-DRG payment for the case. As a result, we are proposing that the maximum new technology add-on payment for a case involving the use of CONTEPOTM would be $8,775 for FY 2026 (that is, 75 percent of the average cost of the technology). We invite public comments on whether CONTEPOTM meets the cost criterion and our proposal to approve new technology add-on payments for CONTEPOTM for FY 2026, subject to the technology receiving FDA marketing authorization consistent with its QIDP designation by July 1, 2025.

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 proposed FY 2026 hospital wage index based on the statistical areas appears under section III.B. of the preamble of this proposed 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, IV. The aforementioned information collection requirements are in Worksheet S-3, Parts II, III, IV. of the information collection request titled ``Hospitals and Health Care Complex Cost Report (CMS Form 2552-10)''. The information collection request is currently approved under OMB control number is 0938-0050 and has a September 30, 2025, expiration date. We plan to submit the information collection request to OMB for reapproval in the near future. In accordance with the PRA, the resubmission process will be announced in the Federal Register providing the public with the requisite notice and comment periods which will be separate from those associated with this rulemaking. Section 1886(d)(3)(E) of the Act 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 proposed adjustment for FY 2026 is discussed in section II.B. of the Addendum to this proposed rule. As discussed in section III.I. of the preamble of this proposed 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 proposed budget neutrality adjustment for FY 2026 is discussed in section II.A.4.b. of the Addendum to this proposed rule. [[Page 18218]] 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 to construct an occupational mix adjustment to the wage index. The information collection request is currently approved under OMB control number is 0938-0907 and has a September 30, 2025, expiration date. We plan to submit the information collection request to OMB for reapproval in the near future. In accordance with the PRA, the resubmission process will be announced in the Federal Register providing the public with the requisite notice and comment periods which will be separate from those associated with this rulemaking. A discussion of the occupational mix adjustment that we are proposing to apply to the FY 2026 wage index appears under section III.E. of the preamble of this proposed rule.

2. Core-Based Statistical Areas (CBSAs) for the Proposed FY 2026

Hospital Wage Index 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 (69 FR 49026 through 49032), we delineate hospital labor market areas based on OMB- established Core-Based Statistical Areas (CBSAs). In the July 16, 2021, Federal Register (86 FR 37777), OMB finalized a schedule for future updates based on results of the decennial Census updates to commuting patterns from the American Community Survey (ACS). In accordance with that schedule, on July 21, 2023, OMB released Bulletin No. 23-01. The current statistical areas (which were implemented beginning with FY 2025) are based on revised OMB delineations issued on July 21, 2023, in OMB Bulletin No. 23-01. According to OMB, the delineations reflect the 2020 Standards for Delineating Core Based Statistical Areas (``the 2020 Standards''), which appeared in the Federal Register on July 16, 2021 (86 FR 37770 through 37778), and the application of those standards to Census Bureau population and journey-to-work data (that is, 2020 Decennial Census, the ACS, and Census Population Estimates Program data) (we refer to these revised OMB delineations as the ``new OMB delineations'' in this proposed rule). A copy of OMB Bulletin No. 23-01 may be obtained at https://bidenwhitehouse.archives.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf. We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69253 through 69266) for a full discussion of our implementation of the new OMB delineations for the FY 2025 wage index. For FY 2026, we are proposing to continue using the new OMB delineations that we adopted beginning with FY 2025 to calculate the area wage indexes and the transition periods, which we discuss below.

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. The Federal Information Processing Standard (FIPS) county codes are maintained by the U.S. Census Bureau. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through 38130), we adopted a policy to use 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. We refer the reader to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through 38130) for a complete discussion of our adoption of FIPS county codes. For FY 2026, we are proposing to continue to use only the FIPS county codes for purposes of crosswalking counties to CBSAs. For FY 2026, Tables 2 and 3 associated with this proposed 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 county code updates.

1. Cost Reporting Periods Beginning in FY 2022 for FY 2026 Wage Index

The proposed FY 2026 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2022 (the FY 2025 wage indexes were based on data from cost reporting periods beginning during FY 2021). The proposed FY 2026 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 including direct patient care (which includes nursing), 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)). 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 modified in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49505 through 49508)) and other deferred compensation costs. Consistent with the wage index methodology for FY 2025, the proposed wage index for FY 2026 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 Graduate Medical Education (GME) (teaching physicians and residents) and certified registered nurse anesthetists (CRNAs), and other subprovider components that are not paid under the IPPS. The proposed FY 2026 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, as explained in the FY 2004 IPPS final rule (68 FR 45397 through 45398), salaries, hours, and wage-related costs of Critical Access Hospitals (CAHs) are excluded from the wage index as we believe that removing CAHs from the wage index is prudent policy, given the substantial negative impact these hospitals have on the wage indexes in the areas where they are located and the minimal impact they have on the wage indexes of other areas. We refer the reader to the FY 2004 IPPS final rule (68 FR 45397 through 45398) for a complete discussion regarding the exclusion of CAHs from the wage index. Similar to our treatment of CAHs, as discussed later in this section, we exclude Rural Emergency Hospitals (REHs) from the wage index. 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 [[Page 18219]] labor costs, are excluded from the calculation of the wage index.

2. 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, in the calendar year (CY) 2025 ESRD PPS final rule (89 FR 89097-89116), CMS finalized a new ESRD PPS-specific wage index that will be used to adjust ESRD PPS payments for geographic differences in area wages. We refer the reader to the CY 2025 ESRD PPS final rule for complete details regarding ESRD wage index. We further 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.

3. Verification of Worksheet S-3 Wage Data

The wage data for the proposed FY 2026 wage index were obtained from Worksheet S-3, Parts II, III and IV of the Medicare cost report, CMS Form 2552-10 (OMB Control Number 0938-0050 with an expiration date September 30, 2025) for cost reporting periods beginning on or after October 1, 2021, and before October 1, 2022. For wage index purposes, we refer to cost reports beginning on or after October 1, 2021, and before October 1, 2022, as the ``FY 2022 cost report,'' the ``FY 2022 wage data,'' or the ``FY 2022 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 FY 2026 wage index includes FY 2022 data submitted to us as of January 31, 2025. 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 note, in previous fiscal years, we reviewed and evaluated the audited wage data, and the impacts of the COVID-19 PHE on such data. For FY 2026, we have not identified any significant issues with the FY 2022 wage data itself in terms of our audits of this data. As usual, the data was audited by the Medicare Administrative Contractors (MACs), and there were no significant issues reported across the data for all hospitals. We requested that our Medicare Administrative Contractors (MACs) revise or verify data elements that resulted in specific edit failures. For the proposed FY 2026 wage index, we identified and excluded 79 providers with aberrant data that should not be included in the wage index. If data elements for some of these providers are corrected, we intend to include data from those providers in the final FY 2026 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 verification of questionable data elements and to transmit any changes to the wage data no later than March 21, 2025. In constructing the proposed FY 2026 wage index, we included the wage data for facilities that were IPPS hospitals in FY 2022, 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 believe that 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. As discussed in the FY 2004 IPPS final rule (68 FR 45397 through 45398) and FY 2025 IPPS/LTCH final rule (89 FR 69268), any hospital that is designated as a CAH or REH 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 2026 wage index, we removed 7 hospitals that converted to CAH status and 5 hospitals that converted to REH status on or after January 24, 2024, the cut-off date for CAH and REH exclusion from the FY 2025 wage index, and through and including January 24, 2025, the cut-off date for CAH and REH exclusion from the FY 2026 wage index. In summary, we calculated the FY 2026 wage index using the Worksheet S-3, Parts II and III wage data of 3,027 hospitals. For the proposed FY 2026 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 2026 wage index associated with this proposed rule (available via the internet on the CMS website), includes separate wage data for the campuses of 29 multicampus hospitals. The following chart lists the multicampus hospitals by CMS certification number (CCN) and the FTE percentages on which the wages and hours of each campus were allotted to their respective labor market areas: ---------------------------------------------------------------------------------------------------------------- CCN of main Full-time Full-time CCN of second sub Full-time campus of equivalent CCN of sub campus equivalent campus of equivalent multicampus percentage of of multicampus percentage of sub multicampus percentage of hospital main campus hospital campus hospital second sub campus ---------------------------------------------------------------------------------------------------------------- 050121 0.86 05B121 0.14 ................. ................. 070010 0.85 07B010 0.15 ................. ................. 070022 0.99 07B022 0.01 ................. ................. 100029 0.52 10B029 0.48 ................. ................. 140010 0.81 14B010 0.19 ................. ................. 220074 0.9 22B074 0.1 ................. ................. 310069 0.17 31B069 0.83 ................. ................. 330103 0.69 33B103 0.31 ................. ................. 330195 0.9 33B195 0.1 ................. ................. 330214 0.77 33B214 0.23 ................. ................. 330234 0.79 33B234 0.21 ................. ................. 340040 0.93 34B040 0.07 ................. ................. 340115 0.82 34B115 0.13 34C115 0.05 [[Page 18220]] 360020 0.97 36B020 0.03 ................. ................. 390115 0.82 39B115 0.18 ................. ................. 390142 0.83 39B142 0.17 ................. ................. 390307 0.89 39B307 0.11 ................. ................. 420004 0.96 42B004 0.04 ................. ................. 450033 0.96 45B033 0.04 ................. ................. 450330 0.96 45B330 0.04 ................. ................. 460051 0.77 46B051 0.23 ................. ................. 510022 0.94 51B022 0.06 ................. ................. 520009 0.72 52B009 0.28 ................. ................. 520030 0.98 52B030 0.02 ................. ................. 520189 0.72 52B189 0.28 ................. ................. 670062 0.84 67B062 0.16 ................. ................. 670102 0.68 67B102 0.32 ................. ................. 670107 0.69 67B107 0.31 ................. ................. 670116 0.66 67B116 0.34 ................. ................. ---------------------------------------------------------------------------------------------------------------- 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. We also note that provider 340115 has an additional second sub campus located in a different CBSA then the main campus and its other sub campus. Therefore, in order to uniquely identify this second sub campus, we have placed a ``C'' in the third position of the CCN.

4. Process for Requests for Wage Index Data Corrections

a. Process for Hospitals To Request Wage Index Data Corrections The preliminary, unaudited Worksheet S-3 wage data files for the proposed FY 2026 wage index were made available on May 23, 2024, through the internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/wage-index-files/fy-2026-wage-index-home-page. The FY 2026 preliminary Worksheet S-3 wage data file inadvertently contained cost report data with a begin date before 10/01/2021 and cost report data with a begin date after 10/01/2022. We removed these cost reports and added cost reports that were inadvertently omitted from the file originally posted on May 23. Therefore, on June 20, 2024, we posted an updated FY 2026 preliminary Worksheet S-3 wage data file. On January 31, 2025, we posted a public use file (PUF) at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/wage-index-files/fy-2026-wage-index-home-page containing FY 2026 wage index data available as of January 31, 2025. 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, 2021, through September 30, 2022; that is, FY 2022 wage data), a tab with the occupational mix data (which includes data from the CY 2022 occupational mix survey, Form CMS- 10079), a tab containing the Worksheet S-3 wage data of hospitals deleted from the January 31, 2025 wage data PUF, and a tab containing the CY 2022 occupational mix data of the hospitals deleted from the January 31, 2025 occupational mix PUF. In a memorandum dated January 31, 2025, we instructed all MACs to inform the IPPS hospitals that they service of the availability of the January 31, 2025, wage index data PUFs, and the process and timeframe for requesting revisions in accordance with the FY 2026 Hospital Wage Index Development Time Table available at https://www.cms.gov/files/document/fy-2026-hospital-wage-index-development-time-table.pdf. 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 https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums. In a memorandum dated April 17, 2024, 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 2022 occupational mix survey data files posted on May 23, 2024, and the process and timeframe for requesting revisions. If a hospital wished to request a change to its data as shown in the May 23, 2024, preliminary wage data files 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, 2024. Hospitals were notified of these deadlines 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 1, 2024, 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 2025. CMS published the wage index PUFs that included hospitals' revised wage index data on January 31, 2025. Hospitals had until February 18, 2025, to submit requests to the MACs to correct errors in the January 31, 2025, 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, 2025, PUF. [[Page 18221]] Hospitals also were required to submit sufficient documentation to support their requests. Hospitals' requests and supporting documentation must have been received by the MAC by the February deadline (that is, by February 18, 2025, for the FY 2026 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 21, 2025. 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) is April 4, 2025. Data that were incorrect in the preliminary or January 31, 2025, wage index data PUFs, but for which no correction request was received by the February 18, 2025, deadline, are not considered for correction at this stage. In addition, April 4, 2025, is the deadline for hospitals to dispute data corrections made by CMS of which the hospital was notified after the January 31, 2025, PUF and at least 14 calendar days prior to April 4, 2025 (that is, March 21, 2025), 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 4, 2025, for the FY 2026 wage index). We refer readers to the FY 2026 Hospital Wage Index Development Time Table for complete details. Hospitals are given the opportunity to examine Table 2 associated with this proposed rule, which is 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/payment/prospective-payment-systems/acute-inpatient-pps/wage-index-files/fy-2026-wage-index-home-page. Table 2 associated with the proposed rule contains each hospital's proposed adjusted average hourly wage used to construct the wage index values for the past 3 years, including the proposed FY 2026 wage index, which was constructed from FY 2022 data. We note that the proposed hospital average hourly wages shown in Table 2 only reflect changes made to a hospital's data that were transmitted to CMS by late January 2025. We plan to post the final wage index data PUFs on April 30, 2025, on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/wage-index-files/fy-2026-wage-index-home-page. The April 2025 PUFs are 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 (the process for disputing revisions submitted to CMS by the MACs by March 21, 2025, 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), as previously described. After the release of the April 2025 wage index data PUFs, changes to the wage and occupational mix data can 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 21, 2025. Requests for correction of errors that were not, but could have been, identified during the hospital's review of the January 31, 2025, 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 2025 final wage index data PUFs, a hospital believes that its wage or occupational mix data are incorrect due to a MAC or CMS error in the entry or tabulation of the final data, the hospital is given the opportunity to notify both its MAC and CMS regarding why the hospital believes an error exists and provide all supporting information, including relevant dates (for example, when it first became aware of the error). The hospital is required to send its request to CMS and to the MAC so that it is received no later than May 30, 2025. May 30, 2025, is also the deadline for hospitals to dispute data corrections made by CMS of which the hospital is notified on or after 13 calendar days prior to April 4, 2025 (that is, March 22, 2025), and at least 14 calendar days prior to May 30, 2025 (that is, May 16, 2025), that did not arise from a hospital's request for revisions. (Data corrections made by CMS of which a hospital is notified on or after 13 calendar days prior to May 30, 2025 (that is, May 17, 2025), may be appealed to the Provider Reimbursement Review Board (PRRB)). In accordance with the FY 2026 Hospital Wage Index Development Time Table posted on the CMS website at https://www.cms.gov/files/document/fy-2026-hospital-wage-index-development-time-table.pdf, the May appeals are required to be submitted to CMS through an online submission process or through email. We refer readers to the FY 2026 Hospital Wage Index Development Time Table for complete details. Verified corrections to the wage index data received timely (that is, by May 30, 2025) by CMS and the MACs will be incorporated into the final FY 2026 wage index, which will be effective October 1, 2025. 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 2026 payment rates. Accordingly, 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 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 2025, they have an opportunity to detect any data entry or [[Page 18222]] tabulation errors made by the MAC or CMS before the development and publication of the final FY 2026 wage index by August 2025, and the implementation of the FY 2026 wage index on October 1, 2025. 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 30, 2025, we retain the right to make midyear changes to the wage index under very limited circumstances. Specifically, in accordance with Sec. 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 30, 2025, for the FY 2026 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 Sec. 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 30, 2025, deadline for the FY 2026 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 30, 2025 deadline for the FY 2026 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; 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 Sec. 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. b. Process for Data Corrections by CMS After the January 31, 2025, Public Use File (PUF) The process set forth with the wage index timetable discussed in section III.C.4. of the preamble of this proposed 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 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, 2025, 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 the need for which 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 [[Page 18223]] 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 would correct that data error, and the hospital's average hourly wage would 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, 2025, 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 review of such corrections (as described earlier and in the FY 2018 IPPS/LTCH PPS final rule) promote additional transparency in instances where CMS makes data corrections after the January 31, 2025 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 2026 Hospital Wage Index Development Time Table, as well as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156).

C. Method for Computing the Proposed FY 2026 Unadjusted Wage Index

The method used to compute the proposed FY 2026 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 2021 IPPS/LTCH PPS final rule (see 85 FR 58758 through 58761), and we are not proposing any changes to this methodology. We have restated our methodology in this section the preamble of this proposed 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 2026, these were data from cost reports for cost reporting periods beginning on or after October 1, 2021, and before October 1, 2022). In addition, we included data from hospitals that had cost reporting periods beginning prior to the October 1, 2021, begin date and extending into FY 2022 but that did not have any cost report with a begin date on or after October 1, 2021, and before October 1, 2022. We include this data 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 data applicable to the fiscal year wage data being used to compute the wage index for those hospitals. We note that, if a hospital had more than one cost reporting period beginning during FY 2022 (for example, a hospital had two short cost reporting periods beginning on or after October 1, 2021, and before October 1, 2022), 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 [[Page 18224]] salaries and hours to be allocated to the excluded areas by multiplying the previously discussed 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 the 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, 2021, through April 15, 2023, for private industry hospital workers from data obtained from the Bureau of Labor Statistics' (BLS') Office of Compensation and Working Conditions. We use the ECI because it reflects the price increase associated with total compensation (salaries plus fringe benefits) 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 are not proposing to make any changes to the usage of the ECI for FY 2026. The factors used to adjust the hospital's data are based on the midpoint of the cost reporting period, as indicated in this proposed 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 CBSAs' 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). 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 proposed FY 2026 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 and contains the area wage indexes), we include a footnote to indicate to which CBSA this policy applies. This CBSA's wage index is calculated as described, based on the FY 2020 IPPS/LTCH PPS final rule methodology (84 FR 42305). 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. We refer readers to section II. of Appendix B of this proposed 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 proposed rule and available via the internet on the CMS website. The 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). 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 [[Page 18225]] 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 ECI for compensation for each 30-day increment from October 14, 2021, through April 15, 2023, for private industry hospital workers from the BLS' Office of Compensation and Working Conditions data. 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 are not proposing any changes to the usage of the ECI for FY 2026. 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. Midpoint of Cost Reporting Period ------------------------------------------------------------------------ After Before Adjustment factor ------------------------------------------------------------------------ 10/14/2021 11/15/2021 1.07227 11/14/2021 12/15/2021 1.06742 12/14/2021 01/15/2022 1.06250 01/14/2022 02/15/2022 1.05755 02/14/2022 03/15/2022 1.05259 03/14/2022 04/15/2022 1.04772 04/14/2022 05/15/2022 1.04303 05/14/2022 06/15/2022 1.03854 06/14/2022 07/15/2022 1.03412 07/14/2022 08/15/2022 1.02967 08/14/2022 09/15/2022 1.02518 09/14/2022 10/15/2022 1.02072 10/14/2022 11/15/2022 1.01637 11/14/2022 12/15/2022 1.01212 12/14/2022 01/15/2023 1.00797 01/14/2023 02/15/2023 1.00393 02/14/2023 03/15/2023 1.00000 03/14/2023 04/15/2023 0.99617 ------------------------------------------------------------------------ For example, the midpoint of a cost reporting period beginning January 1, 2022, and ending December 31, 2022, is June 30, 2022. An adjustment factor of 1.03412 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, 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 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 Division O, Title VI (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 2026, there is no Puerto Rico-specific overall average hourly wage or wage index. Based on the previously described methodology, the proposed FY 2026 unadjusted national average hourly wage is the following: Proposed FY 2026 Unadjusted National Average Hourly Wage: $57.70

D. Proposed Occupational Mix Adjustment to the FY 2026 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, 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 2022 Medicare Wage Index Occupational Mix Survey for the FY

2026 Wage Index Section 304(c) of Appendix F, Title III 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 and to measure the earnings and paid hours of employment for such hospitals by occupational category. As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69275 through 69278), we collected data in 2022 to compute the occupational mix adjustment for the FY 2025, FY 2026, and FY 2027 wage indexes. The FY 2026 occupational mix adjustment is based on a calendar year (CY) 2022 survey. Hospitals were required to submit their completed 2022 surveys (Form CMS-10079, OMB Control Number 0938-0907, expiration date January 31, 2026) to their MACs by July 1, 2023. The preliminary, unaudited CY 2022 survey data were posted on the CMS website on July 12, 2023. As with the Worksheet S-3, Parts II and III cost report wage data, as part of the FY 2026 desk review process, the MACs revised or verified data elements in hospitals' occupational mix surveys that resulted in certain edit failures.

2. Calculation of the Occupational Mix Adjustment for FY 2026

For FY 2026, we are proposing 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 2026 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, 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 [[Page 18226]] 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 proposed rule (which is available via the internet on the CMS website), which contains the proposed FY 2026 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 proposed 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 proposed FY 2026 wage index. For the proposed FY 2026 wage index, we used the Worksheet S-3, Parts II and III wage data of 3,029 hospitals, and we used the occupational mix surveys of 2,945 hospitals for which we also had Worksheet S-3 wage data, which represented a ``response'' rate of 97 percent (2,945/3,029). For the proposed FY 2026 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 2026 occupational mix adjusted national average hourly wage is the following: Proposed FY 2026 Occupational Mix Adjusted National Average Hourly Wage: $57.63

3. Proposed Occupational Mix Adjustment and the Proposed FY 2026

Occupational Mix Adjusted Wage Index As discussed in section III.E. of the preamble of this proposed rule, for FY 2026, we are applying the occupational mix adjustment to 100 percent of the FY 2026 wage index. We calculated the occupational mix adjustment using data from the 2022 occupational mix survey, using the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582-51586). Based on the 2022 occupational mix survey data, the proposed FY 2026 national average hourly wages for each occupational mix nursing subcategory as calculated in Step 2 of the occupational mix calculation are as follows: ------------------------------------------------------------------------ Average Occupational mix nursing subcategory hourly wage ------------------------------------------------------------------------ National RN.................................................. $60.47 National LPN and Surgical Technician......................... 35.06 National Nurse Aide, Orderly, and Attendant.................. 23.53 National Medical Assistant................................... 23.15 National Nurse Category...................................... 50.12 ------------------------------------------------------------------------ The proposed 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 2022 occupational mix survey data, we determined (in Step 7 of the occupational mix calculation) the following: National Percentage of Hospital Employees in the Nurse Category: 45% National Percentage of Hospital Employees in the All Other Occupations Category: 55%

E. Hospital Redesignations and Reclassifications

The following sections III.E.1 through III.E.4 discuss revisions to the wage index based on hospital redesignations and reclassifications. Specifically, hospitals may have their geographic area changed for wage index payment by applying for urban to rural reclassification under section 1886(d)(8)(E) of the Act (implemented at Sec. 412.103), reclassification by the Medicare Geographic Classification Review Board (MGCRB) under section 1886(d)(10) of the Act, Lugar status redesignations under section 1886(d)(8)(B) of the Act, or a combination of the foregoing.

1. Urban to Rural Reclassification Under Section 1886(d)(8)(E) of the

Act, Implemented at Sec. 412.103 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 Sec. 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 (such hospitals are referred to herein as ``Sec. 412.103 hospitals''). 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 2024 IPPS/LTCH final rule (88 FR 58971 through 58977) for a review of our policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49004) to calculate the rural floor with the wage data of urban hospitals reclassifying to rural areas under Sec. 412.103, and discussion of our modification to the calculation of the rural wage index and its implications for the rural floor. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41369 through 41374), we codified certain policies regarding multicampus hospitals in the regulations at Sec. Sec. 412.92, 412.96, 412.103, and 412.108. We stated that reclassifications from urban to rural [[Page 18227]] under Sec. 412.103 apply to the entire hospital (that is, the main campus and its remote location(s)). We also stated that a main campus of a hospital cannot obtain Sole Community Hospital (SCH), Rural Referral Center (RRC), or Medicare Dependent Hospital (MDH) status, or rural reclassification under Sec. 412.103, independently or separately from its remote location(s), and vice versa. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49012 and 49013), we added Sec. 412.103(a)(8) to clarify that for a multicampus hospital, approved rural reclassification status applies to the main campus and any remote location located in an urban area, including a main campus or any remote location deemed urban under section 1886(d)(8)(B) of the Act. If a remote location of a hospital is located in a different CBSA than the main campus of the hospital, it is CMS' longstanding policy to assign that remote location a wage index based on its own geographic area to comply with the statutory requirement to adjust for geographic differences in hospital wage levels (section 1886(d)(3)(E) of the Act). Hospitals are required to identify and allocate wages and hours based on FTEs for remote locations located in different CBSAs on Worksheet S- 2, Part I, Lines 165 and 166 of form CMS-2552-10. In calculating wage index values, CMS identifies the allocated wage data for these remote locations in Table 2 with a ``B'' in the 3rd position of the CCN. These remote locations of hospitals with Sec. 412.103 rural reclassification status in a different CBSA are identified in Table 2, and hospitals should evaluate potential wage index outcomes for their remote location(s) when withdrawing or terminating MGCRB reclassification, or canceling Sec. 412.103 rural reclassification status. We also note that in the FY 2025 IPPS/LTCH PPS Final Rule (89 FR 69279 through 69280), we reminded hospitals located in rural areas becoming urban under the adoption of the revised OMB delineations in FY 2025 that if they have SCH, MDH, or RRC status, they may choose to apply for a Sec. 412.103 urban to rural reclassification if qualifying criteria are met to maintain the SCH, MDH, or RRC status. We advised hospitals to evaluate their options and if desired, apply for Sec. 412.103 urban to rural reclassification before the beginning of FY 2025, to avoid a lapse in SCH, MDH, or RRC status at the beginning of FY 2025. We note that the ``Am I Rural'' tool currently available on the Rural Health Information Hub \200\ website at https://www.ruralhealthinfo.org/am-i-rural was updated on November 21, 2024, based on data provided by the Federal Office of Rural Health Policy which is available at https://www.hrsa.gov/rural-health/about-us/what-is-rural/data-files. As discussed at Sec. 412.103(f), the duration of an approved rural reclassification remains in effect without need for reapproval unless there is a change in the circumstances under which the classification was approved. If a hospital located in an urban area was approved for a rural reclassification under Sec. 412.103(a)(1), that reclassification would no longer be valid if the hospital is no longer located within a rural census tract of an MSA as determined by the Federal Office of Rural Health Policy (FORHP) of the Health Resources and Services Administration (HRSA). Therefore, we encourage all hospitals and CAHs with active rural reclassifications under section 1886(d)(8)(E) of the Act to review their original reclassification application and determine whether the reclassification status would still apply. --------------------------------------------------------------------------- \200\ The Rural Health Information Hub is supported by the Health Resources and Services Administration (HRSA) of HHS under Grant Number U56RH05539 (Rural Assistance Center for Federal Office of Rural Health Policy Cooperative Agreement). Any information, content, or conclusions on this website are those of the authors and should not be construed as the official position or policy of, nor should any endorsements be inferred by HRSA, HHS or the U.S. Government. --------------------------------------------------------------------------- Finally, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69280), CMS finalized a policy regarding terminated or ``tied-out'' hospitals, to address our concerns regarding the impacts these hospitals would have on rural wage index values. Specifically, we finalized a policy that Sec. 412.103 reclassifications would be considered cancelled for the purposes of calculating the area wage index for any hospital with a CCN listed as terminated or ``tied-out'' as of the date that the hospital ceased to operate with an active CCN. We stated that we would obtain and review the best available CCN termination status lists as of the Sec. 412.103(b)(6) ``lock-in'' date (60 days after the proposed rule for the FY is displayed in the Federal Register), consistent with the wage index development timeline. The lock-in date is used to determine whether a hospital has been approved for Sec. 412.103 reclassification in time for that status to be included in the upcoming year's wage index development. We noted that our policy to consider Sec. 412.103 reclassifications cancelled for the purposes of calculating area wage index for any hospital with a CCN listed as terminated or ``tied-out'' is not intended to alter or affect the qualification for Critical Access Hospital (CAH), Sole Community Hospital (SCH), or Rural Emergency Hospital (REH) statuses or to have other effects unrelated to hospital wage index calculations. The rural reclassification status would remain in effect for any period that the original PPS hospital remains in operation with an active CCN. For REH qualification requirement purposes, this would include the date of enactment of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260), which was December 27, 2020.

2. General Policies and Effects of MGCRB Reclassification and Treatment

of Dual Reclassified Hospitals Under section 1886(d)(10) of the Act, the 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). 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 not later than 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 Sec. Sec. 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). 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 Sec. 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 Sec. 412.103 from the calculation of the rural floor, but we reverted to the pre-FY 2020 policy in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49002 through 49004). Hospitals that are geographically located in States without any rural areas are ineligible to apply for rural reclassification in accordance with the provisions of Sec. 412.103. [[Page 18228]] 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 Sec. 412.103 urban to rural and MGCRB reclassifications. Prior to this amendment to the regulations, hospitals had to choose between a Sec. 412.103 urban to rural reclassification which confers other rural benefits (Medicare provisions such as payments to disproportionate share hospitals (DSHs), and non-Medicare payment provisions, such as the 340B Drug Pricing Program administered by HRSA) besides the wage index under section 1886(d) of the Act or a reclassification under the MGCRB to solely increase its wage index. Under the amended regulations, a hospital that has an active MGCRB reclassification and is then approved for an urban to rural reclassification under Sec. 412.103 will not lose its MGCRB reclassification. Additionally, a hospital is no longer required to cancel its Sec. 412.103 reclassification in order to be approved for an MGCRB reclassification. By amending the regulations and allowing a hospital to pursue reclassification under the MGCRB while also maintaining a rural reclassification under Sec. 412.103, hospitals are accorded the benefits of a Sec. 412.103 urban to rural reclassification and the ability to use distance and average hourly wage criteria designated for rural hospitals to obtain a higher wage index value through an MGCRB reclassification. We note, for wage index calculation and payment purposes, when there is both a Sec. 412.103 reclassification and an MGCRB reclassification, the MGCRB reclassification controls for wage index calculation and payment purposes. Prior to FY 2024, we excluded hospitals with Sec. 412.103 urban to rural 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 considered 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), in which we finalized the April 21, 2016, IFC, for a full discussion of the effect of simultaneous reclassifications under both the Sec. 412.103 and the MGCRB processes on wage index calculations. For FY 2024 and subsequent years, we refer readers to the FY 2024 IPPS/LTCH PPS final rule for discussion of our policy to include hospitals with a Sec. 412.103 reclassification that also have an active MGCRB reclassification to another area in the calculation of the reclassified rural wage index (88 FR 58971 through 58977).

3. MGCRB Reclassification Issues for FY 2026

a. FY 2026 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. There are 639 hospitals approved for wage index reclassifications by the MGCRB starting in FY 2026. Because MGCRB wage index reclassifications are effective for 3 years, for FY 2026, hospitals reclassified beginning in FY 2024 or FY 2025 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 280 hospitals approved for wage index reclassifications in FY 2024 that will continue for FY 2026, and 278 hospitals approved for wage index reclassifications in FY 2025 that will continue for FY 2026. Of all the hospitals approved for reclassification for FY 2024, FY 2025, and FY 2026, 1,197 hospitals (approximately 36 percent of IPPS hospitals) are in a MGCRB reclassification status for FY 2026 (with 279 of these hospitals reclassified back to their urban geographic location). We note that several of the 639 hospitals approved for MGCRB reclassifications beginning in FY 2026 may opt to withdraw this status after the final rule, and a prior year reclassification may become effective in its place. We refer readers to section III.F.3.b. of the preamble of this proposed rule for information on the effects of implementation of new OMB labor market area delineations on reclassified hospitals. Under the regulations at Sec. 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 of filing for public inspection of the proposed rule at the website of the Office of the Federal Register, or within 7 calendar days of receiving a decision of the Administrator's in accordance with Sec. 412.273, whichever is later. For information about the current process for withdrawing, terminating, or canceling a previous withdrawal or termination of a 3- year reclassification for wage index purposes, we refer readers to Sec. 412.273, as well as section III.E.3.b. of the preamble of this proposed rule, and 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 was 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). Applications for FY 2027 reclassifications are due to the MGCRB by September 2, 2025 (Note: While the deadline for reclassification applications is not later than 13 months prior to the start of the fiscal year for which reclassification is sought, usually by September 1, the Board has historically allowed submission up to the first business day in September, which is September 2, 2025, due to Labor Day). This is also the current deadline for canceling a previous wage index reclassification withdrawal or termination under Sec. 412.273(d) for the FY 2026 cycle. Applications and other information about MGCRB reclassifications may be obtained beginning in mid-July 2025 via the internet on the CMS website at https://www.cms.gov/medicare/regulations-guidance/geographic-classification-review-board. This collection of information was previously approved under OMB Control Number 0938-0573, which expired on January 31, 2021. A reinstatement of this PRA package is currently being developed. The public will have an opportunity to review and submit comments regarding the reinstatement of this PRA package through a public notice and comment period separate from this rulemaking. b. Proposed Revisions to Sec. 412.273 To Simplify MGCRB Reinstatements As discussed in the previous section, under the regulations at Sec. 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 [[Page 18229]] MGCRB issues a decision, provided the request for withdrawal is received by the MGCRB within 45 days of the date of filing for public inspection of the proposed rule at the website of the Office of the Federal Register, or within 7 calendar days of receiving a decision of the Administrator's in accordance with Sec. 412.273, whichever is later. Hospitals may also terminate an existing approved reclassification, effective for the second and third year of the three year reclassification period or both, provided the request for termination is received by the MGCRB within 45 days of the date of filing for public inspection of the proposed rule at the website of the Office of the Federal Register, or within 7 calendar days of receiving a decision of the Administrator's in accordance with Sec. 412.273, whichever is later. Furthermore, these withdrawal and termination requests may be cancelled by submitting a request by the next application deadline for MGCRB application, reinstating the withdrawn or terminated reclassification for the remaining years of the reclassification. We believe this process allows hospitals to maintain flexibility in choosing the optimal reclassification status for any given fiscal year, while balancing the need for consistency and predictability of the wage index system. However, we also believe the regulations Sec. 412.273 can be confusing and contain complicated definitions and language. We are proposing revisions to multiple paragraphs of Sec. 412.273 to clarify current policy and revise definitions in a more straightforward and understandable manner. The first consideration is CMS's definitions of a withdrawal and a termination in Sec. 412.273(a). Termination refers to the termination of an already existing 3-year MGCRB reclassification where such reclassification has already been in effect for 1 or 2 years, and there are 1 or 2 years remaining on the 3-year reclassification. A termination is effective only for the full fiscal year(s) remaining in the 3-year period at the time the request is received. Requests for terminations for part of a fiscal year are not considered. Withdrawal refers to the withdrawal of a 3-year MGCRB reclassification that has not yet gone into effect or where the MGCRB has not yet issued a decision on the application. Stated generally, a withdrawal is an action taken upon a reclassification that has either not yet been reviewed by the MGCRB, or an approved reclassification due to go into effect in that upcoming fiscal year, and a termination is an action taken on an approved reclassification that has already gone into effect. There are policy considerations for defining withdrawals and terminations separately. For example, county group reclassification withdrawals must include all parties to the application, while a termination may be submitted by any individual hospital that is party to the application. For reasons discussed later in this section, we continue to believe this is the appropriate policy. However, we believe that specifically citing this policy exception in regulation is more straightforward than maintaining differing definitions for substantially similar actions. Therefore, for consistency and simplicity we are proposing to modify the definition of a withdrawal to only include requests made prior to a decision being made by the MGCRB. The definition of termination would encompass all post-decision actions to forgo the upcoming years of an approved reclassification. Specifically, we are proposing to modify Sec. 412.273(a) to provide that a termination refers to the termination of an approved 3-year MGCRB reclassification. A termination is effective only for the full fiscal year(s) remaining in the 3-year period at the time the request is received. Requests for terminations for part of a fiscal year are not considered. We would also specify that a withdrawal refers to the withdrawal of a 3-year MGCRB reclassification where the MGCRB has not yet issued a decision on the application. We are also proposing to remove Sec. 412.273(c)(1)(i) and (ii) and revise paragraph (c)(1) to indicate that a request for withdrawal must be received by the MGCRB at any time before the MGCRB issues a decision on the application. There is also a current process for cancelling an eligible withdrawal or termination in order to make the reclassification effective for any remaining years of the 3-year reclassification period. We note that this process is widely referring to as a request for ``reinstatement.'' To provide clarity and consistency, we are proposing to modify several references in Sec. 412.273(d) from ``cancelling'' or a ``cancellation'' to ``reinstating'' or ``reinstatement.'' As we are proposing that withdrawals be limited to applications prior to approval, a proposed reinstatement would only apply to the proposed modified definition of a termination. Therefore, we are proposing to delete the references to withdrawals from Sec. 412.273(d)(1). As discussed earlier in this section, we continue to believe that all parties to a county group reclassification must participate on any action prior to the effective date of a group reclassification. Under current policy, this would include whether to withdraw a reclassification in the timeframe described at Sec. 412.273(c)), and whether to cancel an approved reclassification withdrawal request to reinstate the remaining second and third year of the approved group reclassification, as described at Sec. 412.273(d)(2). We believe that requiring these actions to include all parties to the group reclassification reduces the possibility of one or more parties withdrawing from a reclassification to the benefit or detriment of other hospitals reclassified to that labor market area. For example, a hospital may be incentivized to withdraw a potentially beneficial reclassification if the exclusion of its wage data in the reclassified area would increase the wage index value. This type of manipulation of reclassification policy does not encourage stability or predictability of wage index system and is contrary to the concept of providing hospitals in a county an opportunity to obtain a reclassification that they may not be able to obtain through an individual reclassification. Therefore, we are proposing to continue the current policy by modifying the current regulation to explicitly state that the proposed modified withdrawal requests and proposed modified termination and reinstatement requests made prior to the effective date of the reclassification (that is, any request made prior to the first year the reclassification goes into effect), must include all parties to the application. Specifically, we are proposing to modify Sec. 412.273(e), by modifying paragraph (e)(2) to state that a request to terminate an approved individual reclassification must be submitted in writing to the MGCRB according to the method prescribed by the MGCRB and adding a new paragraph (e)(3) specifying that a request to terminate or reinstate an approved group reclassification must be submitted in writing to the MGCRB according to the method prescribed by the MGCRB. A request to terminate or reinstate an approved group reclassification that has not yet gone into effect must include all hospitals party to the reclassification. Termination requests for group reclassification for the second or third year of the 3-year wage index reclassification period and reinstatement requests for a group reclassification effective for the third [[Page 18230]] year of the 3-year wage index reclassification period may be submitted by any individual hospital that is party to the reclassification. We believe that this proposal to explicitly state this policy regarding county group reclassification in regulation reduces confusion for hospitals and more clearly addresses our intent. To provide clarity, we are also proposing to state that a termination of a 3-year reclassification defined at Sec. 412.273(d)(4) is not eligible to be reinstated. This type of termination of an approved reclassification occurs when a hospital receives a different MGCRB reclassification in a subsequent fiscal year. Under current policy, hospitals may effectively choose between accepting a newly approved reclassification, or to withdraw it and ``fallback'' to a previously approved reclassification. We believe this provides sufficient flexibility for hospitals to obtain the most beneficial reclassification. However, once an approved reclassification goes into effect, we believe it is appropriate to permanently terminate other previously approved reclassifications. Doing so provides a degree of predictability and consistency in the wage index calculations by limiting hospitals to a total of two potential MGCRB reclassification options. This is the current policy of CMS and the current practice of the MGCRB. We are proposing specifically state this policy in regulation by providing in Sec. 412.273(d)(4) that the terminated reclassification in such a case is not eligible for reinstatement. We are proposing the preceding changes to become effective for requests made beginning in FY 2026. The current policies and definitions will continue for the remainder of FY 2025. We note that hospitals currently use the Office of Hearings Case and Document Management System (OH CDMS) to enter and maintain their MGCRB cases, and to correspond with the Office of Hearings. We are aware that the proposed changes will require system changes to the OH CDMS, and there could be some delay in revising certain terminology. However, nothing in the section is intended to significantly modify current policies and practices. Instead, it serves to clarify and simplify the process of determining whether an approved reclassification should be accepted and applied in a given fiscal year. We also believe that in making these changes, the regulation will provide clearer instructions to hospitals. Finally, we note that under the current and proposed policies, there is no negative effect for a hospital to reinstate (cancel a withdrawal or termination) for a subsequent year, as the reclassification could be terminated in the following year, and hospitals are eligible to reapply for wage index reclassification to a different labor market area. When eligible, a large majority of hospitals already do this, as it provides greater flexibility and options for wage index reclassification. Before the introduction of the OH CDMS, these reinstatement requests were often submitted simultaneously with a withdrawal or termination request. However, in the online system, the option to reinstate is typically only made available after all withdrawal and termination requests have been processed. We have considered a policy modification to make termination requests effective for only one fiscal year. That is, all requests to withdraw or terminate a reclassification made in the timeframe specified at Sec. 412.273(c) would automatically be reinstated for any remaining fiscal years, without the need of a second action to reinstate it. We have not fully evaluated the impact of such a policy but may consider it in future rulemaking.

4. 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 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 issuance of the proposed rule in the Federal Register) 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 the issuance of the proposed rule in the Federal Register for that particular fiscal year. We indicated that such reinstatement requests may be sent electronically to [email protected]. 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 [email protected]. 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. When applicable, this election would result in a cancelation of a hospital's rural reclassification status under Sec. 412.103, effective October 1, 2025. We also inform hospitals that for the request to be approved, the hospital must withdraw or terminate any active MGCRB reclassification. All requests, once approved, will remain in effect for the remainder of the 3-year out-migration adjustment period. 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 outmigration 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 [[Page 18231]] 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.

F. Wage Index Adjustments: Rural Floor, Imputed Floor, State Frontier

Floor, Out-Migration Adjustment, Low Wage Index Hospital, and Cap on Wage Index Decrease Policies The following adjustments to the wage index are listed in the order that they are generally applied. First, the rural floor, imputed floor, and state frontier floor provide a minimum wage index. The rural floor at section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33) provides that the wage index for hospitals in urban areas of a State may not be less than the wage index applicable to hospitals located in rural areas in that State. The imputed floor at section 1886(d)(3)(E)(iv) of the Act provides a wage index minimum for all- urban states. The state frontier floor at section 1886(d)(3)(E)(iii) of the Act requires that hospitals in frontier states cannot be assigned a wage index of less than 1.0000. Next, the out-migration adjustment at section 1886(d)(13)(A) of the Act is applied, potentially increasing 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. For FY 2026 and subsequent fiscal years, as discussed later in this section, after considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, we are proposing to discontinue the low wage index hospital policy. Because we are proposing to discontinue the low wage index hospital policy for FY 2026 and subsequent fiscal years, we would no longer apply a low wage index budget neutrality factor to the standardized amounts. Finally, all hospital wage index decreases are capped at 95 percent of the hospital's final wage index in the prior fiscal year, according to the policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021).

1. Rural Floor

Section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 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 the Patient Protection and Affordable Care Act (Pub. L. 111-148) also requires that a national budget neutrality adjustment be applied in implementing the rural floor. Based on the FY 2026 wage index associated with this proposed rule (which is available on the CMS website), and based on the calculation of the rural floor including the wage data of hospitals that have reclassified as rural under Sec. 412.103, we estimate that 565 hospitals would receive the rural floor in FY 2026. The budget neutrality impact of the proposed application of the rural floor is discussed in section II.A.4.e. of Addendum A of this proposed rule. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48784), CMS finalized a policy change to calculate the rural floor in the same manner as we did prior to the FY 2020 IPPS/LTCH PPS final rule, in which the rural wage index sets the rural floor. We stated that for FY 2023 and subsequent years, we would include the wage data of Sec. 412.103 hospitals that have no Medicare Geographic Classification Review Board (MGCRB) reclassification in the calculation of the rural floor, and include the wage data of such hospitals in 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. In the FY 2024 IPPS/LTCH final rule (88 FR 58971 through 58977), we finalized a policy change beginning that year to include the data of all Sec. 412.103 hospitals, even those that have an MGCRB reclassification, in the calculation of the rural floor and 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. We explained that after revisiting the case law, prior public comments, and the relevant statutory language, we agreed that the best reading of section 1886(d)(8)(E)'s text that CMS ``shall treat the [Sec. 412.103] hospital as being located in the rural area'' is that it instructs CMS to treat Sec. 412.103 hospitals the same as geographically rural hospitals for the wage index calculation. Accordingly, in the FY 2024 IPPS/LTCH PPS final rule, we finalized a policy to include hospitals with Sec. 412.103 reclassification along with geographically rural hospitals in all rural wage index calculations, and to exclude ``dual reclass'' hospitals (hospitals with simultaneous Sec. 412.103 and MGCRB reclassifications) that are implicated by the hold harmless provision at section 1886(d)(8)(C)(ii) of the Act. (For additional information on these changes, we refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 58971 through 58977).)

2. Imputed Floor

In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we adopted the imputed floor policy as a temporary 3-year regulatory measure to address concerns from hospitals in all-urban States that have stated that they are disadvantaged by the absence of rural hospitals to set a wage index floor for those States. We extended the imputed floor policy eight times since its initial implementation, the last of which was adopted in the FY 2018 IPPS/LTCH PPS final rule and expired on September 30, 2018. We refer readers to further discussions of the imputed floor in the IPPS/LTCH PPS final rules from FYs 2014 through 2019 (78 FR 50589 through 50590, 79 FR 49969 through 49971, 80 FR 49497 through 49498, 81 FR 56921 through 56922, 82 FR 38138 through 38142, and 83 FR 41376 through 41380, respectively) and to the regulations at Sec. 412.64(h)(4). For FYs 2019, 2020, and 2021, hospitals in all-urban states received a wage index that was calculated without applying an imputed floor, and we no longer included the imputed floor as a factor in the national budget neutrality adjustment. Section 9831 of the American Rescue Plan Act of 2021 (Pub. L. 117- 2), enacted on March 11, 2021, amended section 1886(d)(3)(E)(i) of the Act and added section 1886(d)(3)(E)(iv) of the Act to establish a minimum area wage index for hospitals in all-urban States for discharges occurring on or after October 1, 2021. Specifically, section 1886(d)(3)(E)(iv)(I) and (II) of the Act provides that for discharges occurring on or after October 1, 2021, the area wage index applicable to any hospital in an all-urban State may not be less than the minimum area wage index for the fiscal year for hospitals in that State established using the methodology described in Sec. 412.64(h)(4)(vi) as in effect for FY 2018. Unlike the imputed floor that was in effect from FYs 2005 through 2018, section 1886(d)(3)(E)(iv)(III) of the Act provides that the imputed floor wage index shall not be applied in a budget neutral manner. Section 1886(d)(3)(E)(iv)(IV) of the Act provides that, for purposes of the imputed floor wage index under clause (iv), the term all-urban State means a State in which there are no rural areas (as defined in section 1886(d)(2)(D) of the Act) or a State in which there are no hospitals classified as rural under section 1886 of the Act. Under this definition, given that it applies for purposes of the imputed floor wage index, we consider a hospital to be classified as rural under section [[Page 18232]] 1886 of the Act if it is assigned the State's rural area wage index value. Effective beginning October 1, 2021 (FY 2022), section 1886(d)(3)(E)(iv) of the Act reinstated the imputed floor wage index policy for all-urban States, with no expiration date, using the methodology described in Sec. 412.64(h)(4)(vi) as in effect for FY 2018. We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45176 through 45178) for further discussion of the original imputed floor calculation methodology implemented in FY 2005 and the alternative methodology implemented in FY 2013. Based on data available for this proposed rule, States that will be all-urban States as defined in section 1886(d)(3)(E)(iv)(IV) of the Act, and thus hospitals in such States that will be eligible to receive an increase in their wage index due to application of the imputed floor for FY 2026, are identified in Table 3 (which is available on the CMS website) associated with this proposed rule. The regulations at Sec. 412.64(e)(1) and (4) and (h)(4) and (5) implement the imputed floor required by section 1886(d)(3)(E)(iv) of the Act for discharges occurring on or after October 1, 2021. The imputed floor will continue to be applied for FY 2026 in accordance with the policies adopted in the FY 2022 IPPS/LTCH PPS final rule. For more information regarding our implementation of the imputed floor required by section 1886(d)(3)(E)(iv) of the Act, we refer readers to the discussion in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45176 through 45178).

3. State Frontier Floor for FY 2026

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 Sec. 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).) We are not proposing any changes to the frontier floor policy for FY 2026. In this proposed rule, 40 hospitals would receive the frontier floor value of 1.0000 for their FY 2026 proposed 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 proposed FY 2026 wage index are identified in Table 3 associated with this proposed rule, which is available via the internet on the CMS website.

4. Proposed 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 out-migration 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 prior IPPS/LTCH PPS final rules, we have applied the same policies, procedures, and computations since FY 2012. 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. We also stated that we would consider determining out-migration adjustments based on data from the next Census or other available data, as appropriate. As discussed above in section III.A.2., in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69253 through 69266), CMS adopted revised delineations from the OMB Bulletin 23-01, published July 21, 2023. The revised delineations incorporated population estimates based on the 2020 decennial census, as well as updated journey-to-work commuting data. The Census Bureau once again worked with CMS to provide an alternative dataset based on the latest available data on where residents in each county worked, for use in developing a new out- migration adjustment based on new commuting patterns. We analyzed commuting data compiled by the Census Bureau that were derived from a custom tabulation of the ACS, utilizing 2016 through 2020 data. The Census Bureau produces county level commuting flow tables every 5 years using non-overlapping 5-year ACS estimates. The data include demographic characteristics, home and work locations, and journey-to- work travel flows. The custom tabulation requested by CMS was specific to general medical and surgical hospital and specialty (except psychiatric and substance use disorder treatment) hospital employees (hospital sector Census code 8191/NAICS code 6221 and 6223) who worked in the 50 States, Washington, DC, and Puerto Rico and, therefore, provided information about commuting patterns of workers at the county level for residents of the 50 States, Washington, DC, and Puerto Rico. For the ACS, the Census Bureau selects a random sample of addresses where workers reside to be included in the survey, and the sample is designed to ensure good geographic coverage. The ACS samples approximately 3.5 million resident addresses per year.\201\ The results of the ACS are used to formulate descriptive population estimates, and, as such, the sample on which the dataset is based represents the actual figures that would be obtained from a complete count. --------------------------------------------------------------------------- \201\ According to the Census Bureau, the effects of the public health emergency (PHE) on ACS activities in 2020 resulted in a lower number of addresses (~2.9 million) in the sample, as well as fewer interviews than a typical year. --------------------------------------------------------------------------- In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69301), we finalized that for [[Page 18233]] FY 2025 and subsequent years, the out-migration adjustment would be based on the data derived from the previously discussed custom tabulation of the ACS utilizing 2016 through 2020 (5-year) Microdata. As discussed earlier, we believe that these data are the most appropriate to establish qualifying counties, because they are the most accurate and up-to-date data that are available to us. For FY 2026, we are not proposing any changes to the methodology or data source for calculating the out-migration adjustment. Specifically, we are proposing that the FY 2026 out-migration adjustments continue to be based on the same policies, procedures, and computation that were used for the FY 2012 out-migration adjustment. We have applied these same policies, procedures, and computations since FY 2012, and we believe they continue to be appropriate for FY 2026. 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). Table 2 of this proposed rule (which is available on the CMS website) lists the proposed out-migration adjustments for the FY 2026 wage index. In addition, Table 4A associated with this proposed rule, ``List of Counties Eligible for the Out Migration Adjustment under Section 1886(d)(13) of the Act'' (also available on the CMS website), consists of the following: A list of counties that are eligible for the outmigration adjustment for FY 2026 identified by FIPS county code, the proposed FY 2026 out-migration adjustment, and the number of years the adjustment will be in effect. We refer readers to section V.I. of the Addendum of this proposed rule for instructions on accessing IPPS tables that are posted on the CMS websites identified in this proposed rule.

5. Discontinuation of the Low Wage Index Hospital Policy and Budget

Neutrality Adjustment In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 42339), we finalized a policy to address increasing wage index disparities, based in part on comments we received in response to our request for information included in our FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20372 through 20377). Accordingly, we finalized a policy that provided certain low wage index hospitals with an opportunity to increase employee compensation without the usual lag in those increases being reflected in the calculation of the wage index (as they would expect to do if not for the lag). We accomplished this by temporarily 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. We increased 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 (the low wage index hospital policy). When we adopted the low wage index hospital policy in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through 42328), we stated our intention that this policy would be effective for at least 4 years, beginning in FY 2020, to allow employee compensation increases implemented by these hospitals sufficient time to be reflected in the wage index calculation. We also stated we intended to revisit the issue of the duration of this policy in future rulemaking as we gained experience under the policy. For FY 2024, we continued to apply the low wage index hospital policy and the related budget neutrality adjustment (88 FR 58977 through 58980). In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69301 through 69308), we adopted an extension of the low wage index hospital policy and the related budget neutrality adjustment effective for at least three more years, beginning in FY 2025, in order for sufficient wage data from after the end of the COVID-19 Public Health Emergency to become available. On July 23, 2024, the Court of Appeals for the D.C. Circuit held that the Secretary lacked authority under section 1886(d)(3)(E) of the Act or under the ``adjustments'' language of section 1886(d)(5)(I)(i) of the Act to adopt the low wage index hospital policy for FY 2020, and that the policy and related budget neutrality adjustment must be vacated.\202\ After considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, in the interim final action with comment period (IFC) titled ``Medicare Program; Changes to the Fiscal Year 2025 Hospital Inpatient Prospective Payment System (IPPS) Rates Due to Court Decision'' (referred to herein as the FY 2025 IFC) (89 FR 80405 through 80421), we recalculated the FY 2025 IPPS hospital wage index to remove the low wage index hospital policy for FY 2025. We also removed the low wage index budget neutrality factor from the FY 2025 standardized amounts. We refer the reader to the applicable year final rule discussions (FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 42339); FY 2024 IPPS/LTCH PPS final rule (88 FR 58977 through 58980)) regarding the implementation of the low wage index hospital policy and the FY 2025 IFC for a complete discussion regarding the removal of the low wage index hospital policy for FY 2025. --------------------------------------------------------------------------- \202\ Bridgeport Hosp. v. Becerra, 108 F.4th 882, 887-91 & n.6 (D.C. Cir. 2024). --------------------------------------------------------------------------- For FY 2026 and subsequent fiscal years, after considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, we are proposing to discontinue the low wage index hospital policy. Because we are proposing to discontinue the low wage index hospital policy for FY 2026 and subsequent fiscal years, we would no longer apply a low wage index budget neutrality factor to the standardized amounts.

6. Cap on Wage Index Decreases and Budget Neutrality Adjustment

In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021), we finalized a wage index cap policy and associated budget neutrality adjustment for FY 2023 and subsequent fiscal years. Under this policy, we apply a 5-percent cap on any decrease to a hospital's wage index from its wage index in the prior FY, regardless of the circumstances causing the decline. A hospital's wage index will not be less than 95 percent of its final wage index for the prior FY. If a hospital's prior FY wage index is calculated with the application of the 5-percent cap, the following year's wage index will not be less than 95 percent of the hospital's capped wage index in the prior FY. We note, the FY 2025 wage index was established in the FY 2025 Interim Final Action with Comment (IFC) which removed the low wage index hospital policy (89 FR 80405 through 80421). Therefore, for FY 2026, the prior year wage index for purposes of the cap would be based on the wage index established in the IFC. We also note that in that same IFC, we established a transitional payment exception for FY 2025. The 5- percent cap for FY 2026 would be applied irrespective of the FY 2025 transitional payment exception. We finally note, as discussed below, that for FY 2026 we are also proposing a transitional payment exception that addresses the effects of the removal of the low wage index hospital policy. This proposed transitional payment exception would be applied after the application of the 5-percent cap. [[Page 18234]] Except for newly opened hospitals, we apply the cap for a FY using the final wage index applicable to the hospital on the last day of the prior FY. A newly opened hospital will be paid the wage index for the area in which it is geographically located for its first full or partial fiscal year, and it will not receive a cap for that first year, because it will not have been assigned a wage index in the prior year. The wage index cap policy is reflected at Sec. 412.64(h)(7). We apply the cap in a budget neutral manner through a national adjustment to the standardized amount each fiscal year. For more information about the wage index cap policy and associated budget neutrality adjustment, we refer readers to the discussion in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021). For FY 2026, we would apply the wage index cap and associated budget neutrality adjustment in accordance with the policies adopted in the FY 2023 IPPS/LTCH PPS final rule. We note that the budget neutrality adjustment will be updated, as appropriate, based on the final rule data. We refer readers to the Addendum of this proposed rule for further information regarding the budget neutrality calculations.

7. Proposed Transition for the Discontinuation of the Low Wage Index

Hospital Policy As discussed above, in the FY 2025 IFC we recalculated the FY 2025 IPPS hospital wage index to remove the low wage index hospital policy for FY 2025. We also removed the low wage index budget neutrality factor from the FY 2025 standardized amounts. For FY 2026 and subsequent fiscal years, consistent with the FY 2025 IFC, after considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra, we are proposing to discontinue the low wage index hospital policy. Because we are proposing to discontinue the low wage index hospital policy for FY 2026 and subsequent fiscal years, we would no longer apply the low wage index budget neutrality factor to the standardized amounts. In the past, we have established temporary transition policies when there have been significant changes to payment policies, and we have limited the duration of each transition in order to phase in the effects of those payment policy changes. In taking this temporary approach in the past, we have sought to mitigate short-term instability and payment fluctuations that can negatively impact hospitals consistent with principles of certainty and predictability under prospective payment systems. For example, CMS has recognized that hospitals in certain areas may experience a negative impact on their IPPS payment due to the adoption of revised OMB delineations for wage index purposes and has finalized transition policies to mitigate negative financial impacts and provide stability to year-to-year wage index variations. We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49956 through 49962) for a discussion of the transition period finalized when CMS adopted revised OMB delineations after the 2010 decennial census. For FY 2025, consistent with our past practice, we established an interim transition policy for hospitals significantly impacted by the removal of the FY 2025 low wage index hospital policy using our authority under section 1886(d)(5)(I) of the Act. Specifically, the transitional payment exception for FY 2025 for those hospitals is equal to the additional FY 2025 amount a hospital would have been paid under the IPPS if its FY 2025 wage index were equal to 95 percent of its FY 2024 wage index. For a discussion of the removal of the low wage index hospital policy and the establishment of the interim transition policy, we refer readers to the FY 2025 IFC (89 FR 80405 through 80421). We currently have a wage index cap policy at 42 CFR 412.64(h)(7), under which we apply a 5-percent cap on any decrease to a hospital's wage index from its wage index in the prior FY in a budget neutral manner, regardless of the circumstances causing the decline, so that a hospital's final wage index for the upcoming fiscal year will not be less than 95 percent of its final wage index from the prior fiscal year. In accordance with 42 CFR 412.64(e)(1)(ii), CMS applies a budget neutrality adjustment to offset the increase in total payments resulting from the application of that cap. Some hospitals that previously benefitted from the low wage index hospital policy would experience decreases of 10 percent or more over the two years from their FY 2024 wage index (with the low wage index hospital policy applied) to their proposed FY 2026 wage index (that is, approximately 5 percent or more per year over that time period). Similar to how 42 CFR 412.64(h)(7) would operate, and how our interim transitional policy established in the FY 2025 IFC for these hospitals operates in FY 2025, we are proposing to establish a narrow transitional exception to the calculation of FY 2026 payments for these hospitals. As described above, if the combined payment effect of the FY 2025 wage index and the transitional payment exception for FY 2025 had been attributable solely to the FY 2025 wage index, then the wage index cap policy at 42 CFR 412.64(h)(7) would have mitigated these FY 2026 wage index decreases and would have done so in a budget neutral manner under our current regulations. As discussed in the FY 2025 IFC (89 FR 80407- 80408), while CMS is not necessarily required by the statute to budget neutralize every exception or adjustment under section 1886(d)(5)(I), it has often done so by exercising its discretion under section 1886(d)(5)(I) of the Act twice: first to adopt an exception or adjustment, and then again to make that exception or adjustment budget neutral.\203\ For the FY 2025 interim transition policy, under the unique circumstances and due to the timing of the appellate court's decision in Bridgeport Hosp. v. Becerra so close to the beginning of FY 2025, we declined to exercise our discretion to budget neutralize that interim FY 2025 transition policy. We stated that unlike most policies relevant to the calculation of the hospital wage index, the timing of the court's decision shortly before the beginning of the fiscal year necessitated swift action by the agency via an IFC, rather than providing for prior notice and opportunity for comment. The agency's action in that IFC was intended to promote certainty regarding FY 2025 IPPS payments in light of the reasoning of Bridgeport, which risked creating ongoing confusion for hospitals extending into FY 2025 about the amount of their IPPS payments. In that circumstance, the lack of an opportunity to notify interested parties in a notice of proposed rulemaking about changes to their wage index that would result from budget neutralizing the transition policy, and for the agency to consider before the policy's effective date issues hospitals might raise when commenting on those changes, weighed in favor of an approach that did not adversely affect the significant majority of hospitals. For these reasons, and as discussed in the IFC, we declined to budget neutralize the interim FY 2025 transition policy. --------------------------------------------------------------------------- \203\ For example, CMS has stated in the past that it would exercise its discretion under section 1886(d)(5)(I) of the Act to make the low wage index hospital policy budget neutral even if budget neutrality were not required by statute (88 FR 58979). --------------------------------------------------------------------------- In contrast, we are proposing the FY 2026 transition policy under very different circumstances. We are not facing the timing constraints of a court decision issued shortly before the beginning of a fiscal year that necessitated swift action through an IFC to promote certainty and prevent ongoing confusion by hospitals. Rather, [[Page 18235]] we are proposing the FY 2026 transition policy through the normal course of our annual rulemaking for the IPPS, which will allow both for advance notice of the policy and for us to consider issues interested parties might raise in comments on this proposed rule. We are proposing to make this policy budget neutral through an adjustment applied to the standardized amount for all hospitals because (1) the wage index cap policy at 42 CFR 412.64(h)(7) would have mitigated these FY 2026 wage index decreases had the combined payment effect of the FY 2025 wage index and the transitional payment exception been reflected solely in the FY 2025 wage index, and it would have done so in a budget neutral manner under our current regulations, and (2) the circumstances described above that caused us to decline to budget neutralize the interim FY 2025 transition policy are not applicable to the proposed FY 2026 transition policy. In addition, we note that implementing the proposed FY 2026 transition policy in a budget neutral manner would be consistent with past practice. For example, we budget neutralized the FY 2015 wage index transition budget neutrality policy discussed earlier (79 FR 49956 through 49962). As we have discussed in other instances (89 FR 19398), we believed, and continue to believe, that transition policies should not increase estimated aggregate Medicare payments beyond the payments that would be made had we never proposed these transition policies. Therefore, we are proposing to use our authority under section 1886(d)(5)(I)(i) of the Act twice. First, we are proposing to adopt a narrow transitional exception to the calculation of FY 2026 IPPS payments for low wage index hospitals significantly impacted by the discontinuation of the low wage index hospital policy. Second, we are exercising our authority again to do so in a budget neutral manner.204 205 We refer the reader to section II.A.4.g. of the Addendum of this proposed rule for complete details regarding the application of the proposed transition for the discontinuation of the low wage index hospital policy budget neutrality factor. --------------------------------------------------------------------------- \204\ We note that even more so than was the case for the FY 2025 interim transition policy, the scope and magnitude of the proposed FY 2026 transitional policy are much smaller than the low wage index hospital policy. As discussed in section VI. of the preamble of this proposed rule, we estimate only 52 hospitals out of the over 3,000 hospitals paid under the IPPS would receive proposed FY 2026 transitional exception payments, and the total payment impact of the proposed transitional policy is an increase in IPPS operating payments by approximately $27 million. For the FY 2025 interim transition policy the corresponding figures were 113 hospitals and an increase in IPPS operating payments by approximately $37 million (89 FR 80417). \205\ We note that because creating an exception to the calculation of the FY 2026 payments is in this circumstance functionally equivalent to adjusting the FY 2026 payments, the proposed transitional exception can be alternatively considered a proposed transitional adjustment. --------------------------------------------------------------------------- The transitional exception policy we are proposing applies to hospitals that benefitted from the FY 2024 low wage index hospital policy. For those hospitals, we compare the hospital's proposed FY 2026 wage index to the hospital's FY 2024 wage index. If the hospital is significantly impacted by the discontinuation of the low wage index hospital policy, meaning the hospital's proposed FY 2026 wage index is decreasing by more than 9.75 percent \206\ from the hospital's FY 2024 wage index, then the transitional payment exception for FY 2026 for that hospital would be equal to the additional FY 2026 amount the hospital would be paid under the IPPS if its FY 2026 wage index were equal to 90.25 percent \207\ of its FY 2024 wage index.\208\ We note this proposed transitional payment exception would be applied after the application of the 5-percent cap described at 42 CFR 412.64(h)(7). For example, assume the FY 2024 wage index for a hospital that benefitted from the low wage index hospital policy is 0.7600, and the hospital's proposed FY 2026 wage index is 0.6500. (If applicable, this proposed FY 2026 wage index value would include the 5-percent cap based on a comparison of the hospital's FY 2026 wage index prior to application of the 5-percent cap, to the hospital's FY 2025 wage index. We note the FY 2025 wage index that will be used in this comparison is generally the FY 2025 wage index listed in Table 2 from the FY 2025 IFC in the column labeled ``FY 2025 Wage Index With Cap''. We note all hospitals, regardless of whether the cap was applied to their FY 2025 wage index, have a value in the column ``FY 2025 Wage Index With Cap''. Hospitals that did not have a cap applied to their FY 2025 wage index will display a wage index in this column without the cap.) The hospital's proposed FY 2026 wage index is decreasing by more than 9.75 percent from the hospital's FY 2024 wage index [that is, 0.6500 < 0.6859 where 0.6859 = (0.9025 times 0.7600)]. The proposed transitional payment exception for FY 2026 for this hospital is equal to the additional amount the hospital would be paid under the IPPS if its FY 2026 wage index were equal to 0.6859, which is 90.25 percent of 0.7600, its FY 2024 wage index. --------------------------------------------------------------------------- \206\ Under the wage index cap policy at 42 CFR 412.64(h)(7), a hospital's wage index for a FY cannot be lower than 0.95 * its wage index from the prior FY. Over a 2-year period if its wage index were decreasing by more than 5 percent each year, this would mean a hospital's wage index for a FY cannot be lower than (0.95*0.95) times its wage index from two years earlier. Similarly for our proposed FY 2026 transitional exception policy, we are proposing that a hospital is significantly impacted by the discontinuation of the low wage index hospital policy if its FY 2026 wage index is less than (0.95*0.95) of its FY 2024 wage index, which equates to a decrease of more than 9.75 percent. \207\ 90.25 percent = 95 percent for FY 2025 * 95 percent for FY 2026. \208\ We note that we are not proposing to change the FY 2026 wage index values under section 1886(d)(3)(E) for hospitals eligible for the proposed FY 2026 transitional exception policy on the basis of the exception; the proposed change would be applied as a separate step only for purposes of determining the hospitals' FY 2026 IPPS payments. --------------------------------------------------------------------------- Under the capital IPPS, the adjustment for local cost variation is based on the hospital wage index value that is applicable to the hospital under the operating IPPS. We adjust the capital standard Federal rate so that the effects of the annual changes in the geographic adjustment factor (GAF) are budget neutral. The low wage index hospital policy has been reflected in the capital IPPS GAFs since FY 2020 (84 FR 42638). The removal of the low wage index hospital policy for FY 2025 also affects the FY 2025 GAFs. Because we are now no longer applying the low wage index hospital policy in FY 2025, we are also no longer making an adjustment to the FY 2025 capital standard Federal rate to ensure budget neutrality for the low wage index hospital policy. As discussed previously, for FY 2025 we believe it is appropriate to establish a transition policy for low wage hospitals significantly impacted by the removal of the low wage index hospital policy. As discussed in the FY 2025 IFC (89 FR 80408), since FY 2023, the GAFs reflect the wage index cap policy that limits any decrease to a hospital's wage index from its wage index in the prior FY, regardless of the circumstances causing the decline, to 95 percent of its prior year value. As described previously, some hospitals that previously benefitted from the low wage index hospital policy would experience decreases of 10 percent or more over the two years from their FY 2024 wage index (with the low wage index hospital policy applied) to their proposed FY 2026 wage index (that is, approximately 5 percent or more per year over that time period). As such, similar to the FY 2025 interim transition policy established in the FY 2025 IFC, we are proposing to make a budget neutral [[Page 18236]] equivalent exception under the capital IPPS.

G. FY 2026 Wage Index Tables

In this FY 2026 IPPS/LTCH PPS proposed rule, we have included the following wage index tables: Table 2 titled ``Case-Mix Index and Wage Index Table by CCN''; Table 3 titled ``Wage Index Table by CBSA''; Table 4A 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 proposed rule for a discussion of the wage index tables for FY 2026.

H. Proposed Labor-Related Share for the FY 2026 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 results in a higher payment. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45208), we rebased and revised the hospital market basket to a 2018- based IPPS hospital market basket, which replaced the 2014-based IPPS hospital market basket, effective beginning October 1, 2021. Using the 2018-based IPPS market basket, we finalized a labor-related share of 67.6 percent for discharges occurring on or after October 1, 2021. In addition, in FY 2022, we implemented this revised and rebased labor- related share in a budget neutral manner (86 FR 45193, 86 FR 45529 through 45530). 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. As described in section IV. of the preamble of this proposed rule, effective beginning FY 2026, we are proposing to rebase and revise the IPPS market basket to reflect a 2023 base year. We also are proposing to recalculate the labor-related share for discharges occurring on or after October 1, 2025, using the proposed 2023-based IPPS market basket. As discussed in Appendix A of this proposed rule, we are proposing this rebased and revised labor-related share in a budget neutral manner. However, consistent with section 1886(d)(3)(E) of the Act, we would 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. 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. As described in section IV. of the preamble of this proposed rule, beginning with FY 2026, we are proposing to include in the labor- related share the national average proportion of operating costs that are attributable to the following cost categories in the 2023-based IPPS market basket: 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 as measured in the proposed 2023-based IPPS market basket. Therefore, for FY 2026, we are proposing to use a labor-related share of 66.0 percent for discharges occurring on or after October 1, 2025. As discussed in section V.B. of the preamble of this proposed 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 2026, we are not proposing a Puerto Rico-specific labor-related share percentage or a nonlabor-related share percentage. Tables 1A and 1B, which are published in section VI. of the Addendum to this FY 2026 IPPS/LTCH PPS proposed rule and available via the internet on the CMS website, reflect the national labor-related share. Table 1C, in section VI. of the Addendum to this FY 2026 IPPS/ LTCH PPS proposed rule and available via the internet on the CMS website, reflects the national labor-related share for hospitals located in Puerto Rico. For FY 2026, for all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are less than or equal to 1.0000, we are proposing to apply 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 2026, we are proposing to apply the wage index to a labor-related share of 66.0 percent of the national standardized amount. [[Page 18237]]

A. Background

Effective for cost reporting periods beginning on or after July 1, 1979, we developed and adopted a hospital input price index (that is, the hospital market basket for operating costs). Although ``market basket'' technically describes the mix of goods and services used in providing hospital care, this term is also commonly used to denote the input price index (that is, cost category weights and price proxies combined) derived from that market basket. Accordingly, the term ``market basket'' as used in this document refers to the hospital input price index. The percentage change in the market basket reflects the average change in the price of goods and services hospitals purchase in order to provide inpatient care. We first used the market basket to adjust hospital cost limits by an amount that reflected the average increase in the prices of the goods and services used to provide hospital inpatient care. This approach linked the increase in the cost limits to the efficient utilization of resources. Since the inception of the IPPS, the projected change in the hospital market basket has been the integral component of the update factor by which the prospective payment rates are updated every year. An explanation of the hospital market basket used to develop the prospective payment rates was published in the Federal Register on September 1, 1983 (48 FR 39764). We also refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45207) in which we discussed the most recent previous rebasing of the hospital input price index. The hospital market basket is a fixed-weight, Laspeyres-type price index. A Laspeyres-type price index measures the change in price, over time, of the same mix of goods and services purchased in the base period. Any changes in the quantity or mix of goods and services (that is, intensity) purchased over time relative to the base period are not measured. The index itself is constructed in three steps. First, a base period is selected (in this proposed rule, we propose to use 2023 as the base period) and total base period costs are estimated for a set of mutually exclusive and exhaustive spending categories, with the proportion of total costs that each category represents being calculated. These proportions are called cost weights. Second, each cost category is matched to an appropriate price or wage variable, referred to as a ``price proxy.'' In almost every instance, these price proxies are derived from publicly available statistical series that are published on a consistent schedule (preferably at least on a quarterly basis). Finally, the cost weight for each cost category is multiplied by the level of its respective price proxy. The sum of these products (that is, the cost weights multiplied by their price index levels) for all cost categories yields the composite index level of the market basket in a given period. Repeating this step for other periods produces a series of market basket levels over time. Dividing an index level for a given period by an index level for an earlier period produces a rate of growth in the input price index over that timeframe. As previously noted, the market basket is described as a fixed- weight index because it represents the change in price over time of a constant mix (quantity and intensity) of goods and services needed to provide hospital services. The effects on total costs resulting from changes in the mix of goods and services purchased subsequent to the base period are not measured. For example, a hospital hiring more nurses to accommodate the needs of patients would increase the volume of goods and services purchased by the hospital but would not be factored into the price change measured by a fixed-weight hospital market basket. Only when the index is rebased would changes in the quantity and intensity be captured, with those changes being reflected in the cost weights. Therefore, we rebase the market basket periodically so that the cost weights reflect recent changes in the mix of goods and services that hospitals purchase (hospital inputs) to furnish inpatient care between base periods. We last rebased the hospital market basket cost weights effective for FY 2022 (86 FR 45194 through 45207), with 2018 data used as the base period for the construction of the market basket cost weights. For this FY 2026 IPPS/LTCH PPS proposed rule, we propose to rebase the IPPS operating market basket to reflect the 2023 cost structure for IPPS hospitals and to revise applicable cost categories and price proxies used to determine the IPPS market basket, as discussed in this proposed rule. We also propose to rebase and revise the Capital Input Price Index (CIPI) as described in section IV.D. of the preamble of this proposed rule. In the following section, we provide an overview of the proposed IPPS market basket, describe the proposed methodologies for developing the cost weights, and provide information on the proposed price proxies. Then, we present the proposed FY 2026 market basket update and labor-related share based on the proposed 2023-based IPPS market basket.

B. Rebasing and Revising the IPPS Market Basket

The terms ``rebasing'' and ``revising,'' while often used interchangeably, actually denote different activities. ``Rebasing'' means moving the base year for the structure of costs of an input price index (for example, in this proposed rule, we propose to shift the base year cost structure for the IPPS hospital index from 2018 to 2023). ``Revising'' means changing data sources or price proxies used in the input price index. As published in the FY 2006 IPPS final rule (70 FR 47403), in accordance with section 404 of Public Law 108-173, CMS determined a new frequency for rebasing the hospital market basket. We established a rebasing frequency of every 4 years and, therefore, we propose to rebase and revise the IPPS market basket effective for the FY 2026 IPPS update since it was last rebased effective for the FY 2022 IPPS update (the base year for the cost weights is being updated from 2018 to 2023). We invite public comments on our proposed methodology discussed in this section of this proposed rule, for deriving the proposed 2023-based IPPS market basket.

1. Development of Cost Categories and Weights

a. Use of Medicare Cost Report Data The major source of expenditure data for developing the proposed rebased and revised hospital market basket cost weights is the 2023 Medicare cost reports. These 2023 Medicare cost reports are for cost reporting periods beginning on and after October 1, 2022, and before October 1, 2023. We propose to use 2023 as the base year because we believe that the 2023 Medicare cost reports represent the most recent, complete set of Medicare cost report data available to develop cost weights for IPPS hospitals at the time of rulemaking. As was done in previous rebasings, these cost reports are from IPPS hospitals only (hospitals excluded from the IPPS (including CAHs and rural emergency hospitals) are not included) and are based on IPPS Medicare-allowable operating costs. IPPS Medicare-allowable operating costs are costs that are eligible to be paid under the IPPS. For example, the IPPS market basket excludes home health agency (HHA) costs as these costs would [[Page 18238]] be paid under the HHA PPS and, therefore, these costs are not IPPS Medicare-allowable costs. The current set of instructions for the Medicare cost reports for hospitals (Form 2552-10, OMB Control Number 0938-0050) can be found in Chapter 40 at the following website (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935). The major types of costs underlying the proposed 2023-based IPPS market basket are derived from the Medicare cost reports (Form 2552-10, OMB Control Number 0938-0050). Specifically, we propose to use the Medicare cost reports for seven specific types of costs: Wages and Salaries, Employee Benefits, Contract Labor, Pharmaceuticals, Professional Liability Insurance (Malpractice), Blood and Blood Products, and Home Office/Related Organization Contract Labor. A residual category is then estimated and reflects all remaining costs not captured in the seven types of costs identified previously. The 2018-based IPPS market basket similarly used the Medicare cost reports. In order to create a market basket that is representative of IPPS hospitals serving Medicare patients and to help ensure the major cost weights accurately reflect the percent of total Medicare-allowable operating costs, as defined in this proposed rule, we propose to apply edits to remove reporting errors and outliers. Specifically, the IPPS Medicare cost reports used to calculate the market basket cost weights exclude any providers that reported costs less than or equal to zero for the following categories: total Medicare inpatient costs (Worksheet D-1, Part II, column 1, line 49); Medicare PPS payments (Worksheet E, Part A, column 1, line 59); Total salary costs (Worksheet S-3, Part II, column 2, line 1). We also limited our sample to providers that had a Medicare cost reporting period that was between 10 and 14 months. The final sample used includes roughly 2,900 Medicare cost reports (about 93 percent of the universe of IPPS Medicare cost reports for 2023). The sample of providers is representative of the national universe of providers by ownership-type (proprietary, nonprofit, and government) and by urban/rural status. In this proposed rule, we calculate total Medicare-allowable operating costs for each hospital to be equal to noncapital costs (Worksheet B, Part I, column 26 less Worksheet B, Part II, column 26) that are attributable to the Medicare-allowable cost centers of the hospital. We propose that Medicare-allowable cost centers are lines 30 through 35, 50 through 60, 62 through 76, 90, 91, 92.01, 93, 96 and 97. This is the same methodology that was used for the 2018-based IPPS market basket. (1) Wages and Salaries Costs To derive wages and salaries costs for the Medicare-allowable cost centers, we propose to first calculate total unadjusted wages and salaries costs as reported on Worksheet S-3, Part II, column 4, line 1. We then propose to remove the wages and salaries attributable to non- Medicare-allowable cost centers (that is, excluded areas) as well as a portion of overhead wages and salaries attributable to these excluded areas. This is the same methodology that was used to derive wages and salaries costs for the 2018-based IPPS market basket. Specifically, we propose to calculate excluded area wages and salaries as equal to the sum of Worksheet S-3, Part II, column 4, lines 3, 4.01, 5, 6, 7, 7.01, 8, 9, and 10 less Worksheet A, column 1, lines 20 and 23. Overhead wages and salaries are attributable to the entire IPPS facility. Therefore, we propose to only include the proportion attributable to the Medicare-allowable cost centers. Specifically, we propose to estimate the proportion of overhead wages and salaries that are not attributable to Medicare-allowable cost centers (that is, excluded areas) by first calculating the ratio of total Medicare- allowable operating costs (as previously defined) to total facility operating costs (Worksheet B, Part I, column 26, line 202 less Worksheet B, Part I, column 0, lines 1 and 2). We then propose to multiply this ratio by total overhead wages and salaries (Worksheet S- 3, Part II, column 4, lines 26, 27, 29 through 32, 34, and 36 through 43) to estimate Medicare allowable overhead wages and salaries. The difference between total overhead wages and salaries and Medicare allowable overhead wages and salaries is equal to the overhead wages and salaries attributable to the excluded areas. Therefore, we propose wages and salaries costs used for the 2023- based IPPS market basket are equal to total wages and salaries costs less: (a) excluded area wages and salaries costs; and (b) overhead wages and salaries costs attributable to the excluded areas. (2) Employee Benefits Costs We propose to derive employee benefits costs using a similar methodology as the wages and salaries costs; that is, reflecting employee benefits costs attributable to the Medicare-allowable cost centers. First, we calculate total unadjusted employee benefits costs as the sum of Worksheet S-3, Part II, column 4, lines 17, 18, 20, 22, and 25.52. We then exclude those employee benefits attributable to the overhead wages and salaries for the non-Medicare-allowable cost centers (that is, excluded areas). Employee benefits attributable to the non- Medicare-allowable cost centers are derived by multiplying the ratio of total employee benefits (equal to the sum of Worksheet S-3, Part II, column 4, lines 17, 18, 19, 20, 21, 22, 22.01, 23, 24, 25, 25.50, 25.51, 25.52, and 25.53) to total wages and salaries (Worksheet S-3, Part II, column 4, line 1) (which we hereafter refer to as the ``IPPS benefits ratio'') by excluded overhead wages and salaries (as previously described in section IV.B.1.a.(1) of the preamble of this proposed rule for wages and salaries costs). The same methodology was used in the 2018-based IPPS market basket. Therefore, we propose employee benefit costs used for the 2023- based IPPS market basket are equal to total employee benefit costs less: (a) excluded area benefit costs; and (b) overhead benefit costs attributable to the excluded areas. (3) Contract Labor Costs Contract labor costs are primarily associated with direct patient care services. Contract labor costs for services such as accounting, billing, and legal are estimated using other government data sources as described in this proposed rule. We propose to derive contract labor costs for the 2023-based IPPS market basket as the sum of Worksheet S- 3, Part II, column 4, lines 11, 13, and 15. The same methodology was used in the 2018-based IPPS market basket. (4) Professional Liability Insurance Costs We propose that professional liability insurance (PLI) costs (often referred to as malpractice costs) be equal to premiums, paid losses, and self-insurance costs reported on Worksheet S-2, Part I, columns 1 through 3, line 118.01. The same methodology was used for the 2018- based IPPS market basket. (5) Pharmaceuticals Costs We propose to calculate pharmaceuticals costs as total costs reported for the Pharmacy cost center (Worksheet B, Part I, column 0, line 15) and Drugs Charged to Patients cost center (Worksheet B, Part I, column 0, line 73) less wages and salaries attributable to these two cost centers [[Page 18239]] (Worksheet S-3, Part II, column 4, line 40 and Worksheet A, column 1, line 73) less estimated employee benefits attributable to these two cost centers. We propose to estimate the employee benefits costs by multiplying the IPPS benefits ratio as described in section IV.B.1.a.(2) of the preamble of this proposed rule by total wages and salaries costs for the Pharmacy and Drugs Charged to Patients cost centers (equal to the sum of Worksheet S-3, Part II, column 4, line 40 and Worksheet A, column 1, line 73). The same methodology was used for the 2018-based IPPS market basket. (6) Blood and Blood Products Costs We propose to calculate blood and blood products costs as total costs reported for the Whole Blood & Packed Red Blood Cells cost center (Worksheet B, Part I, column 0, line 62) and the Blood Storing, Processing, & Transfusing cost center (Worksheet B, Part I, column 0, line 63) less wages and salaries attributable to these two cost centers (Worksheet A, column 1, lines 62 and 63) less estimated employee benefits attributable to these two cost centers. We estimate these employee benefits costs by multiplying the IPPS benefits ratio as described in section IV.B.1.a.(2) of the preamble of this proposed rule by total wages and salaries for the Whole Blood & Packed Red Blood Cells and Blood Storing, Processing, & Transfusing cost centers (equal to the sum of Worksheet A, column 1, lines 62 and 63). The same methodology was used for the 2018-based IPPS market basket. (7) Home Office/Related Organization Contract Labor Costs We propose to determine home office/related organization contract labor costs using data reported on Worksheet S-3, Part II, column 4, lines 14.01, 14.02, 25.50, and 25.51. The same methodology was used for the 2018-based IPPS market basket. b. Final Major Cost Category Computation After we derived costs for the major cost categories for each provider using the Medicare cost report data as previously described, we propose to address data outliers using the following steps. First, for each of the major cost weights except the Home Office/ Related Organization Contract Labor cost weight, we propose to trim the data to remove outliers (a standard statistical process) by: (step 1) requiring that major expenses (such as Wages and Salaries costs) and total Medicare-allowable operating costs be greater than zero; (step 2) dividing the costs for each of the six categories (calculated as previously described in this section) by total Medicare-allowable operating costs to obtain cost weights for each PPS hospital; and (step 3) excluding the top and bottom five percent of the major cost weight (for example, Wages and Salaries costs as a percent of total Medicare- allowable operating costs). We note that missing values are assumed to be zero consistent with the methodology for how missing values were treated in the 2018-based IPPS market basket. For the Home Office/Related Organization Contract Labor cost weight, we propose to exclude outliers using a slightly different method by (step 1) requiring that total Medicare-allowable operating costs are greater than zero; (step 2) dividing the home office/related organization contract labor costs (calculated as previously described in this section) by total Medicare-allowable operating costs to obtain a cost weight for each PPS hospital; and (step 3) applying a trim that excludes those reporters with a Home Office/Related Organization Contract Labor cost weight above the 99th percentile. This allows all providers' Medicare-allowable costs to be included, even if their home office/related organization contract labor costs were reported to be zero. The Medicare cost report data (Worksheet S-2, Part I, line 140) indicate that not all hospitals have a home office. IPPS hospitals without a home office would report administrative costs that might typically be associated with a home office in the Wages and Salaries and Employee Benefits cost weights, or these costs would be reflected in the residual cost weight if they purchased these types of services from external contractors. We believe the trimming methodology that excludes those who report a Home Office/Related Organization Contract Labor cost weight above the 99th percentile is appropriate as it removes extreme outliers while also allowing providers with zero home office/related organization contract labor costs to be included in the Home Office/Related Organization Contract Labor cost weight calculation. After the outliers have been removed, we sum the costs for each category across all remaining providers. We then divide this by the sum of total Medicare-allowable operating costs across all remaining providers to obtain a cost weight for the proposed 2023-based IPPS market basket for the given category. This is the same methodology used for the 2018-based IPPS market basket. The trimming process is done individually for each cost category so that providers excluded from one cost weight calculation are not automatically excluded from another cost weight calculation. We note that these proposed trimming methods are the same types of edits performed for the 2018-based IPPS market basket, as well as other PPS market baskets (including but not limited to SNF market basket and home health market basket). We note that for each of the cost weights we evaluated the distribution of providers and costs by ownership-type, and by urban/rural status. For all of the cost weights, the trimmed sample was nationally representative. Finally, we calculate the residual ``All Other'' cost weight that reflects all remaining costs that are not captured in the seven cost categories listed. Table IV-01 shows the major cost categories and their respective cost weights as derived from the Medicare cost reports. Table IV-01--Major Cost Categories as Derived From the Medicare Cost Reports ------------------------------------------------------------------------ Proposed 2023- Major cost categories 2018-based IPPS based IPPS market market basket basket ------------------------------------------------------------------------ Wages and Salaries................ 39.7 37.8 Employee Benefits................. 11.3 9.8 Contract Labor.................... 2.0 3.6 Professional Liability Insurance 1.0 1.0 (Malpractice).................... Pharmaceuticals................... 7.1 7.4 Blood and Blood Products.......... 0.6 0.5 Home Office/Related Organization 5.9 6.7 Contract Labor................... [[Page 18240]] All Other......................... 32.4 33.2 ------------------------------------------------------------------------ From 2018 to 2023, the Wages and Salaries and Employee Benefits cost weights as calculated directly from the Medicare cost reports decreased by 1.9 percentage points and 1.5 percentage points, respectively, while the Contract Labor cost weight increased by 1.6 percentage points. As we did for the 2018-based IPPS market basket (86 FR 45198), we propose to allocate contract labor costs to the Wages and Salaries and Employee Benefits cost weights based on their relative proportions for employed labor under the assumption that contract labor costs are comprised of both wages and salaries and employee benefits. The contract labor allocation proportion for wages and salaries is equal to the Wages and Salaries cost weight as a percent of the sum of the Wages and Salaries cost weight and the Employee Benefits cost weight. Using the 2023 Medicare cost report data, this percentage is 79 percent. Therefore, we propose to allocate approximately 79 percent of the Contract Labor cost weight to the Wages and Salaries cost weight and 21 percent to the Employee Benefits cost weight. The 2018-based IPPS market basket allocated 78 percent of the Contract Labor cost weight to the Wages and Salaries cost weight. Table IV-02 shows the Wages and Salaries and Employee Benefits cost weights after contract labor allocation for the 2018-based IPPS market basket and the proposed 2023-based IPPS market basket. In aggregate, the Compensation cost weight (calculated using more detailed decimal places) decreased from 53.0 percent to 51.1 percent, or 1.9 percentage points. Table IV-02--Wages and Salaries and Employee Benefits Cost Weights After Contract Labor Allocation ------------------------------------------------------------------------ Proposed 2023- Major cost categories 2018-based IPPS based IPPS market market basket basket ------------------------------------------------------------------------ Total Compensation................ 53.0 51.1 Wages and Salaries................ 41.2 40.6 Employee Benefits................. 11.7 10.5 ------------------------------------------------------------------------ Note: Detail may not add to total due to rounding. c. Derivation of the Detailed Cost Weights To further divide the ``All Other'' residual cost weight estimated from the 2023 Medicare cost report data into more detailed cost categories, we propose to use the 2017 Benchmark I-O, ``The Use Table (Supply-Use Framework),'' for NAICS 622000, Hospitals, published by the Bureau of Economic Analysis (BEA). These data are publicly available at the following website: https://www.bea.gov/industry/input-output-accounts-data. The BEA Benchmark I-O data are generally scheduled for publication every 5 years on a lagged basis, with the most recent data available for 2017. The 2017 Benchmark I-O data are derived from the 2017 Economic Census and are the building blocks for BEA's economic accounts. Therefore, they represent the most comprehensive and complete set of data on the economic processes or mechanisms by which output is produced and distributed.\209\ BEA also produces Annual I-O estimates. However, while based on a similar methodology, these estimates reflect less comprehensive and less detailed data sources and are subject to revision when benchmark data become available. Instead of using the less detailed Annual I-O data, we propose to inflate the detailed 2017 Benchmark I-O data forward to 2023 by applying the annual price changes from the respective price proxies to the appropriate market basket cost categories that are obtained from the 2017 Benchmark I-O data and calculated the cost shares that each cost category represents using the inflated data. These resulting 2023 cost shares were applied to the residual ``All Other'' cost weight to obtain the detailed cost weights for the proposed 2023-based IPPS market basket. For example, the cost for Food: Direct Purchases represents 4.0 percent of the sum of the residual ``All Other'' 2017 Benchmark I-O Hospital Expenditures inflated to 2023. Therefore, the Food: Direct Purchases cost weight represents 4.0 percent of the proposed 2023-based IPPS market basket's ``All Other'' cost category (33.2 percent), yielding a Food: Direct Purchases proposed cost weight of 1.3 percent in the proposed 2023- based IPPS market basket (0.040 x 33.2 percent = 1.3 percent). For the 2018-based IPPS market basket (86 FR 45198), we used the same methodology utilizing the 2012 Benchmark I-O data (aged to 2018). --------------------------------------------------------------------------- \209\ https://www.bea.gov/papers/pdf/IOmanual_092906.pdf. --------------------------------------------------------------------------- Using this methodology, we propose to derive 17 detailed cost categories from the proposed 2023-based IPPS market basket residual cost weight (33.2 percent). These categories are: (1) Fuel: Oil and Gas; (2) Electricity and Other Non-Fuel Utilities; (3) Food: Direct Purchases; (4) Food: Contract Services; (5) Chemicals; (6) Medical Instruments; (7) Rubber and Plastics; (8) Paper and Printing Products; (9) Miscellaneous Products; (10) Professional Fees: Labor-Related; (11) Administrative and Facilities Support Services; (12) Installation, Maintenance, and Repair Services; (13) All Other: Labor-Related Services; (14) Professional Fees: Nonlabor-Related; (15) Financial Services; (16) Telephone Services; and (17) All Other: Nonlabor-Related Services. We note that these are the same categories that were used in the 2018-based IPPS market basket.

2. Selection of Proposed Price Proxies

After computing the proposed 2023 cost weights for the IPPS market basket, it was necessary to select appropriate wage and price proxies to reflect the rate of price change for each expenditure category. With the exception of the [[Page 18241]] proxy for professional liability insurance (PLI), all the proxies we are proposing are based on Bureau of Labor Statistics (BLS) data and are grouped into one of the following BLS categories: Producer Price Indexes--Producer Price Indexes (PPIs) measure the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services (https://www.bls.gov/ppi/). Consumer Price Indexes--Consumer Price Indexes (CPIs) measure the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services (https://www.bls.gov/cpi/). CPIs are only used when the purchases are similar to those of retail consumers rather than purchases at the producer level, or if no appropriate PPIs are available. Employment Cost Indexes--Employment Cost Indexes (ECIs) measure the rate of change in employee wage rates and employer costs for employee benefits per hour worked. These indexes are fixed-weight indexes and strictly measure the change in wage rates and employee benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) as price proxies for input price indexes because they are not affected by shifts in occupation or industry mix, and because they measure pure price change and are available by both occupational group and by industry. The industry ECIs are based on the NAICS and the occupational ECIs are based on the Standard Occupational Classification System (SOC). We evaluated the price proxies using the criteria of reliability, timeliness, availability, and relevance: Reliability. Reliability indicates that the index is based on valid statistical methods and has low sampling variability. Widely accepted statistical methods ensure that the data were collected and aggregated in a way that can be replicated. Low sampling variability is desirable because it indicates that the sample reflects the typical members of the population. (Sampling variability is variation that occurs by chance because only a sample was surveyed rather than the entire population.) Timeliness. Timeliness implies that the proxy is published regularly, preferably at least once a quarter. The market basket levels are updated quarterly, and therefore, it is important for the underlying price proxies to be up-to-date, reflecting the most recent data available. We believe that using proxies that are published regularly (at least quarterly, whenever possible) helps to ensure that we are using the most recent data available to update the market basket. We strive to use publications that are disseminated frequently, because we believe that this is an optimal way to stay abreast of the most current data available. Availability. Availability means that the proxy is publicly available. We prefer that our proxies are publicly available because this will help ensure that our market basket updates are as transparent to the public as possible. In addition, this enables the public to be able to obtain the price proxy data on a regular basis. Relevance. Relevance means that the proxy is applicable and representative of the cost category weight to which it is applied. We believe the proposed PPIs, CPIs, and ECIs selected meet these criteria. Therefore, we believe that they continue to be the best proxy of price changes for the cost categories to which they would be applied. In this proposed rule, we present a detailed explanation of the price proxies that we propose for each cost category weight. a. Wages and Salaries We propose to use the ECI for Wages and Salaries for All Civilian Workers in Hospitals (BLS series code CIU1026220000000I) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. b. Employee Benefits We propose to use the ECI for Total Benefits for All Civilian Workers in Hospitals to proxy the price growth of this cost category. This ECI is calculated using the ECI for Total Compensation for All Civilian Workers in Hospitals (BLS series code CIU1016220000000I) and the relative importance of wages and salaries within total compensation. This is the same price proxy used in the 2018-based IPPS market basket. c. Fuel: Oil and Gas For the proposed 2023-based IPPS market basket, we propose to use a blend of the PPI Industry for Petroleum Refineries (NAICS 3241), PPI for Other Petroleum and Coal Products (NAICS 32419) and the PPI Commodity for Natural Gas. Our analysis of the Bureau of Economic Analysis' 2017 Benchmark I-O data for NAICS 622000 Hospitals shows that Petroleum Refineries expenses account for approximately 86 percent, Other Petroleum and Coal Products expenses account for about 7 percent and Natural Gas expenses account for approximately 7 percent of Hospitals' (NAICS 622000) total Fuel: Oil and Gas expenses. Therefore, we propose to use a blend of 86 percent of the PPI Industry for Petroleum Refineries (BLS series code PCU324110324110), 7 percent of the PPI for Other Petroleum and Coal Products (BLS series code PCU32419) and 7 percent of the PPI Commodity Index for Natural Gas (BLS series code WPU0531) as the price proxy for this cost category. The 2018-based IPPS market basket used a 90/10 blend of the PPI Industry for Petroleum Refineries and PPI Commodity for Natural Gas, reflecting the 2012 I-O data (86 FR 45199). We believe that the three proposed price proxies are the most technically appropriate indices available to proxy the price growth of the Fuel: Oil and Gas cost category in the proposed 2023-based IPPS market basket. d. Electricity and Other Non-Fuel Utilities We propose to use the PPI Commodity for Commercial Electric Power (BLS series code WPU0542) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. e. Professional Liability Insurance We propose to proxy price changes in hospital professional liability insurance premiums (PLI) using percentage changes as estimated by the CMS Hospital Professional Liability Index. To generate these estimates, we collect commercial insurance medical liability premiums for a fixed level of coverage while holding nonprice factors constant (such as a change in the level of coverage). This is the same price proxy used in the 2018-based IPPS market basket. f. Pharmaceuticals We propose to use the PPI Commodity for Pharmaceuticals for Human Use, Prescription (BLS series code WPUSI07003) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. g. Food: Direct Purchases We propose to use the PPI Commodity for Processed Foods and Feeds (BLS series code WPU02) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. h. Food: Contract Services We propose to use the CPI for Food Away From Home (All Urban Consumers) (BLS series code [[Page 18242]] CUUR0000SEFV) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. i. Chemicals Similar to the 2018-based IPPS market basket, we propose to use a four-part blended PPI as the proxy for the Chemicals cost category in the proposed 2023-based IPPS market basket. The proposed blend is composed of the PPI Industry for Industrial Gas Manufacturing, Primary Products (BLS series code PCU325120325120P), the PPI Industry for Other Basic Inorganic Chemical Manufacturing (BLS series code PCU32518- 32518), the PPI Industry for Other Basic Organic Chemical Manufacturing (BLS series code PCU32519-32519), and the PPI Industry for Other Miscellaneous Chemical Product Manufacturing (BLS series code PCU325998325998). For the proposed 2023-based IPPS market basket, we propose to derive the weights for the PPIs using the 2017 Benchmark I-O data. The 2018-based IPPS market basket used the 2012 Benchmark I-O data to derive the weights for the four PPIs (86 FR 45200). Table IV-03 shows the proposed weights for each of the four PPIs used to create the blended index compared to those used for the 2018- based IPPS market basket. Table IV-03--Blended Chemical PPI Weights ---------------------------------------------------------------------------------------------------------------- 2018-based Proposed 2023- NAICS Name IPPS weights based IPPS (%) weights (%) ---------------------------------------------------------------------------------------------------------------- 325120................................. PPI Industry for Industrial Gas 19 26 Manufacturing. 325180................................. PPI Industry for Other Basic Inorganic 13 10 Chemical Manufacturing. 325190................................. PPI Industry for Other Basic Organic 60 49 Chemical Manufacturing. 325998................................. PPI Industry for Other Miscellaneous 8 15 Chemical Product Manufacturing. ---------------------------------------------------------------------------------------------------------------- j. Blood and Blood Products We propose to use the PPI Industry for Blood and Organ Banks (BLS series code PCU621991621991) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. k. Medical Instruments We propose to use a blended price proxy for the Medical Instruments category, as shown in Table IV-04. The 2017 Benchmark I-O data shows the majority of medical instruments and supply costs are for NAICS 339112--Surgical and medical instrument manufacturing costs (approximately 64 percent) and NAICS 339113--Surgical appliance and supplies manufacturing costs (approximately 36 percent). To proxy the price changes associated with NAICS 339112, we propose using the PPI Commodity for Surgical and medical instruments (BLS series code WPU1562). To proxy the price changes associated with NAICS 339113, we propose to use a 50/50 blend of the PPI Commodity for Medical and surgical appliances and supplies (BLS series code WPU1563) and the PPI Commodity for Miscellaneous products, Personal safety equipment and clothing (BLS series code WPU1571). We propose to include the latter price proxy as it would reflect personal protective equipment including but not limited to face shields and protective clothing. The 2017 Benchmark I-O data does not provide specific expenses for these products; however, we recognize that this category reflects costs faced by IPPS hospitals. These are the same price proxies used in the 2018- based IPPS market basket. Table IV-04--Blended Medical Instruments PPI Weights ---------------------------------------------------------------------------------------------------------------- 2018-based Proposed 2023- NAICS Name IPPS weights based IPPS (%) weights (%) ---------------------------------------------------------------------------------------------------------------- 339112................................. PPI Commodity for Surgical and medical 56 64 instruments. 339113................................. PPI--Commodity for Medical and surgical 22 18 appliances and supplies. PPI Commodity for Miscellaneous 22 18 products, Personal safety equipment and clothing. ---------------------------------------------------------------------------------------------------------------- l. Rubber and Plastics We propose to use the PPI Commodity for Rubber and Plastic Products (BLS series code WPU07) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. m. Paper and Printing Products We propose to use a 61/39 blend of the PPI Commodity for Publications Printed Matter and Printing Material (BLS Series Code WPU094) and the PPI Commodity for Converted Paper and Paperboard Products (BLS series code WPU0915) to proxy the price growth of this cost category. The 2017 Benchmark I-O data shows that 61 percent of paper and printing expenses are for Printing (NAICS 323110) and the remaining expenses are for Paper manufacturing (NAICS 322). The 2018- based IPPS market basket (86 FR 45201) used the PPI Commodity for Converted Paper and Paperboard Products (BLS series code WPU0915) as this comprised the majority of expenses as reported in the 2012 Benchmark I-O data. n. Miscellaneous Products We propose to use the PPI Commodity for Finished Goods Less Food and Energy (BLS series code WPUFD4131) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. o. Professional Fees: Labor-Related We propose to use the ECI for Total Compensation for Private Industry Workers in Professional and Related (BLS series code CIU2010000120000I) to proxy the price growth of this category. It includes occupations such as legal, accounting, and engineering services. This is the same price proxy used in the 2018-based IPPS market basket. [[Page 18243]] p. Administrative and Facilities Support Services We propose to use the ECI for Total Compensation for Private Industry Workers in Office and Administrative Support (BLS series code CIU2010000220000I) to proxy the price growth of this category. This is the same price proxy used in the 2018-based IPPS market basket. q. Installation, Maintenance, and Repair Services We propose to use the ECI for Total Compensation for All Civilian Workers in Installation, Maintenance, and Repair (BLS series code CIU1010000430000I) to proxy the price growth of this cost category. This is the same proxy used in the 2018-based IPPS market basket. r. All Other: Labor-Related Services We propose to use the ECI for Total Compensation for Private Industry Workers in Service Occupations (BLS series code CIU2010000300000I) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. s. Professional Fees: Nonlabor-Related We propose to use the ECI for Total Compensation for Private Industry Workers in Professional and Related (BLS series code CIU2010000120000I) to proxy the price growth of this category. This is the same price proxy that we proposed to use for the Professional Fees: Labor-Related cost category and the same price proxy used in the 2018- based IPPS market basket. t. Financial Services We propose to use the ECI for Total Compensation for Private Industry Workers in Financial Activities (BLS series code CIU201520A000000I) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. u. Telephone Services We propose to use the CPI for Telephone Services (BLS series code CUUR0000SEED) to proxy the price growth of this cost category. This is the same price proxy used in the 2018-based IPPS market basket. v. All Other: Nonlabor-Related Services We propose to use the CPI for All Items Less Food and Energy (BLS series code CUUR0000SA0L1E) to proxy the price growth of this cost category. We believe that using the CPI for All Items Less Food and Energy avoids double counting of changes in food and energy prices as they are already captured elsewhere in the market basket. This is the same price proxy used in the 2018-based IPPS market basket. Table IV-05 sets forth the proposed 2023-based IPPS market basket, including the cost categories and their respective weights and price proxies. For comparison purposes, the corresponding 2018-based IPPS market basket cost weights also are listed. Table IV-05--2023-Based IPPS Market Basket Cost Categories, Cost Weights, and Price Proxies Compared to 2018- Based IPPS Market Basket Cost Weights ---------------------------------------------------------------------------------------------------------------- 2018-based Proposed 2023- IPPS market based IPPS Proposed 2023-based IPPS market Cost categories basket cost market basket basket price proxies weights cost weights ----------------------------------------------------------------------------------------------------------------

B. Employee Benefits \1\............... 11.7 10.5 ECI for Total Benefits for All

Civilian Workers in Hospitals. 2. Utilities............................... 2.3 1.8 ...................................

B. Fuel: Oil and Gas................... 0.8 0.4 Blend of PPIs.

3. Professional Liability Insurance........ 1.0 1.0 CMS Hospital Professional Liability Insurance Premium Index. 4. All Other............................... 43.8 46.0 ...................................

A. All Other Products.................. 18.4 20.5 ...................................

(1.) Pharmaceuticals............... 7.1 7.4 PPI Commodity for Pharmaceuticals for Human Use, Prescription. (2.) Food: Direct Purchases........ 1.6 1.3 PPI Commodity for Processed Foods and Feeds. (3.) Food: Contract Services....... 1.8 2.2 CPI for Food Away From Home. (4.) Chemicals..................... 0.6 0.6 Blend of PPIs. (5.) Blood and Blood Products...... 0.6 0.5 PPI Industry for Blood and Organ Banks. (6.) Medical Instruments........... 4.1 5.3 Blend of PPIs. (7.) Rubber and Plastics........... 0.6 0.7 PPI Commodity for Rubber and Plastic Products. (8.) Paper and Printing Products... 0.9 0.9 Blend of PPIs. (9.) Miscellaneous Products........ 1.2 1.5 PPI Commodity for Finished Goods less Food and Energy.

B. Labor-Related Services.............. 14.7 14.8 ...................................

(1.) Professional Fees: Labor- 8.6 10.0 ECI for Total Compensation for Related. Private Industry Workers in Professional and Related. (2.) Administrative and Facilities 1.1 0.8 ECI for Total Compensation for Support Services. Private Industry Workers in Office and Administrative Support. (3.) Installation, Maintenance and 2.4 1.5 ECI for Total Compensation for Repair Services. Civilian Workers in Installation, Maintenance, and Repair. (4.) All Other: Labor-Related 2.6 2.6 ECI for Total Compensation for Services. Private Industry Workers in Service Occupations.

C. Nonlabor-Related Services........... 10.7 10.7 ...................................

(1.) Professional Fees: Nonlabor- 7.0 7.0 ECI for Total Compensation for Related. Private Industry Workers in Professional and Related. [[Page 18244]] (2.) Financial Services............ 1.4 1.8 ECI for Total Compensation for Private Industry Workers in Financial Activities. (3.) Telephone Services............ 0.4 0.3 CPI for Telephone Services. (4.) All Other: Nonlabor-Related 1.8 1.5 CPI for All Items less Food and Services. Energy. -------------------------------- Total.......................... 100.0 100.0 ................................... ---------------------------------------------------------------------------------------------------------------- Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying one decimal and, therefore, the detail may not add to the total due to rounding. 1 Contract labor is distributed to wages and salaries and employee benefits based on the share of total compensation that each category represents. Table IV-06 compares both the historical and forecasted percent changes in the 2018-based IPPS market basket and the proposed 2023- based IPPS market basket. The forecasted growth rates in Table IV-06 are based on IHS Global Inc.'s (IGI's) fourth quarter 2024 forecast with historical data through third quarter 2024. Table IV-06--2018-Based and Proposed 2023-Based IPPS Hospital Market Basket Percent Change, FY 2021 Through FY 2028 ------------------------------------------------------------------------ Proposed 2023- 2018-based IPPS based IPPS market Fiscal year (FY) market basket basket percent percent change change ------------------------------------------------------------------------ Historical data: FY 2021....................... 3.0 2.8 FY 2022....................... 5.7 5.3 FY 2023....................... 4.8 4.9 FY 2024....................... 3.6 3.7 Average FYs 2021-2024......... 4.3 4.2 Forecast: FY 2025....................... 3.4 3.5 FY 2026....................... 3.3 3.2 FY 2027....................... 3.1 3.0 FY 2028....................... 2.9 2.9 Average FYs 2025-2028......... 3.2 3.2 ------------------------------------------------------------------------ Source: IHS Global, Inc., 4th Quarter 2024 forecast. The average percent change of the proposed 2023-based IPPS market basket is 0.1 percentage point lower than the average percent change of the 2018-based IPPS market basket over the FY 2021 through FY 2024 time period. For FY 2026, the proposed 2023-based IPPS market basket is projected to increase 3.2 percent, which is 0.1 percentage point lower than the FY 2026 projected increase of the 2018-based IPPS market basket. The lower projected increase of the proposed 2023-based IPPS market basket compared to the 2018-based IPPS market basket is primarily a result of the lower compensation cost weight in the proposed 2023-based IPPS market basket. The compensation cost weights in the proposed 2023-based and 2018-based IPPS market basket were calculated from the hospital Medicare cost reports using the same methodology. 3. Labor-Related Share Under section 1886(d)(3)(E) of the Act, the Secretary estimates from time to time the proportion of payments that are labor-related. Section 1886(d)(3)(E) of the Act states that the Secretary shall adjust the proportion, (as estimated by the Secretary from time to time) of hospitals' costs which are attributable to wages and wage-related costs, of the DRG prospective payment rates. We refer to the proportion of hospitals' costs that are attributable to wages and wage-related costs as the ``labor-related share.'' The labor-related share is used to determine the proportion of the national PPS 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. For this proposed rule, we propose to include in the labor-related share the national average proportion of operating costs that are attributable to the following cost categories in the proposed 2023-based IPPS market basket: 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, as we did in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45204). Similar to the 2018-based IPPS market basket, for the proposed 2023-based IPPS market basket we propose to classify expenses into the Professional Fees: Labor-Related cost category using the Benchmark I-O data, and then for this rebasing supplement these estimates with data obtained from the Medicare hospital cost report regarding the proportion of expenses classified as professional fees (for example, advertising, legal services, accounting and auditing, engineering, and [[Page 18245]] management consulting) that are purchased within the local area labor market. The 2018-based IPPS market basket (86 FR 45204 through 45205) used a survey of hospitals conducted by CMS in 2008 (OMB Control Number 0938-1036) to supplement the Benchmark I-O data and determine this proportion. Effective for transmittal 18 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r18p240i), the hospital Medicare cost report (CMS Form 2552-10, OMB No. 0938-0050) Worksheet S-2, Part I collects information on whether a hospital purchased professional services (for example, legal, accounting, tax preparation, bookkeeping, payroll, advertising, and management/ consulting services or both) from an unrelated organization and if the majority of these expenses were purchased from unrelated organizations located outside of the main hospital's local area labor market. For the proposed 2023-based IPPS market basket, we propose to determine the proportion of expenses classified as professional fees that meet our definition of labor-related services based on the Medicare cost report data. Based on these data, approximately 73 percent of IPPS hospitals (approximately 2,100) purchased professional services from an unrelated organization in 2023 as reported on Worksheet S-2, Part I, column 1, line 123 (that is, answered Yes) and also indicated whether the majority of these expenses are purchased outside their local labor market (reported Yes or No on Worksheet S-2, Part I, column 2, line 123). Of those hospitals, 37 percent of them purchased the majority of these expenses from unrelated organizations located in a CBSA outside of the main hospital CBSA as reported on Worksheet S-2, Part I, column 2, line 123. For these reporters (which accounted for 32 percent of total Medicare allowable operating costs) that indicated they purchased the majority of these services outside of the local labor market, we need to estimate a specific proportion of these services that are purchased inside the local labor market. For these reporters, we use 25 percent (the median of 1 percent to 49 percent range) to estimate of the proportion of these services that are purchased inside of the local labor market. For the remaining reporters (which accounted for 68 percent of total Medicare allowable operating costs) that indicated they purchased the majority of these services inside the local labor market we use 75 percent (the median of 51 percent to 100 percent). To estimate the overall proportion of expenses classified as professional fees that meet our definition of labor- related services (that is, reflects services purchased inside of the local labor market), for the first group of reporters we multiply 32 percent times 25 percent, which yields an estimate of 8 percent, and for the second group of reporters multiply 68 percent times 75 percent, which yields an estimated proportion of 51 percent. Combining these two measures yields 59 percent (8 percent plus 51 percent), which reflects the overall proportion of total Medicare allowable operating expenses that are purchased inside the local labor market and would be reflected in our labor-related measure. Therefore, we propose to allocate 59 percent of the Benchmark I-O expenses classified as professional fees to estimate Professional Fees: Labor-Related cost weight, and 41 percent of the Benchmark I-O expenses classified as professional fees to estimate Professional Fees: Nonlabor-Related cost weight. In the proposed 2023-based IPPS market basket, expenses classified as professional fees that are subject to allocation represent approximately 9.8 percent of total operating costs. Based on the Medicare cost report results, we propose to apportion 5.8 percentage points of the 9.8 percentage point figure into the Professional Fees: Labor-Related cost category (59 percent of 9.8 percent) and designate the remaining approximately 4.0 percentage points into the Professional Fees: Nonlabor-Related cost category (41 percent of 9.8 percent). We note that in the 2018-based IPPS market basket given the data available from the 2008 survey, we classified some expenses from the 2012 Benchmark I-O data as Professional Fees: Labor-Related, some expenses as Professional Fees: Nonlabor-Related, and some expenses as professional fees subject to allocation based on the survey. We then applied the 2008 survey results to the following specific categories of expenses: Legal services, Accounting, tax preparation, bookkeeping, and payroll services, Architectural, engineering and related services, and Management consulting services. However, for the 2023-based IPPS market basket, we are proposing to revise the methodology to now use the data as reported on the Medicare cost reports (Worksheet S-2, Part I) to allocate all of the expenses we propose to classify as professional fees costs from the 2017 Benchmark I-O data. The impact of this proposed change is an increase in the proposed 2023-based Professional Fees: Labor-Related cost weight of about one percentage point. In addition to the professional services listed earlier, we also classify a proportion of the Home Office/Related Organization Contract Labor cost weight into the Professional Fees: Labor-Related cost category as was done in the previous rebasing. We believe that many of these costs are labor-intensive and vary with the local labor market. However, data indicate that not all IPPS hospitals with home offices have home offices located in their local labor market. Therefore, we propose to include in the labor-related share only a proportion of the Home Office/Related Organization Contract Labor cost weight based on the methodology described in this proposed rule. For the proposed 2023-based IPPS market basket, based on Medicare cost report data, we found that approximately 71 percent of IPPS hospitals reported some type of home office information on their Medicare cost report for 2023 (for example, city, State, and zip code). Using the data reported on the Medicare cost report, we compared the location of the hospital with the location of the hospital's home office. We then determined the proportion of home office/related organization contract labor cost that should be allocated to the labor- related share based on the percent of the home office/related organization contract labor costs for those hospitals that had home offices located in their respective local labor markets--defined as being in the same MSA. We determined a hospital's and home office's MSAs using their zip code information from the Medicare cost report. Based on these data, we determined the proportion of costs that should be allocated to the labor-related share based on the percent of hospital home office/related organization contract labor costs (equal to the sum of Worksheet S-3, Part II, column 4, lines 14.01, 14.02, 25.50, and 25.51). Using this methodology, we determined that 62 percent of hospitals' home office compensation costs were for home offices located in their respective local labor markets. Therefore, we propose to allocate 62 percent of Home Office/Related Organization Contract Labor cost weight to the labor-related share. The 2018-based IPPS market basket used a 60 percent proportion, which was based on the same methodology and the 2018 Medicare cost report data. In the proposed 2023-based IPPS market basket, the Home Office/ Related Organization Contract Labor cost weight that is subject to allocation based on the home office allocation methodology [[Page 18246]] represented 6.7 percent of total operating costs. Based on the results of the home office analysis, as previously discussed, we apportioned approximately 4.2 percentage points of the 6.7 percentage points figure into the Professional Fees: Labor-Related cost category and designated the remaining approximately 2.6 percentage points into the Professional Fees: Nonlabor-Related cost category.\210\ In summary, based on the two previously mentioned allocations, we apportioned 10.0 percentage points (sum of the professional fees (5.8 percentage points) and Home Office/ Related Organization Contract Labor cost weight (4.2 percentage points)) into the Professional Fees: Labor-Related cost category. Using these two methods, we then apportion 6.6 percentage points (sum of the professional fees (4.0 percentage points) and Home Office/Related Organization Contract Labor cost weight (2.6 percentage points)) to the Professional Fees: Nonlabor-related cost category to be included with other costs classified as Professional Fees: Nonlabor-Related (approximately 0.4 percentage point), resulting in a proposed Professional Fees: Nonlabor-related cost weight of 7.0 percent. The resulting proposed 2023-based Professional Fees: Labor-related cost weight is about 1.4 percentage points higher than the 2018-based Professional Fees: Labor-related cost weight. --------------------------------------------------------------------------- \210\ Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying one decimal and therefore, the detail may not add to the total due to rounding. --------------------------------------------------------------------------- Table IV-07 presents a comparison of the proposed 2023-based labor- related share and the 2018-based labor-related share. As discussed in section IV.B.1.b. of the preamble of this proposed rule, the Wages and Salaries and Employee Benefits cost weights reflect contract labor costs. Table IV-07--Comparision of the 2018-Based Labor-Related Share and the Proposed 2023-Based Labor-Related Share ------------------------------------------------------------------------ Proposed 2023- 2018-based IPPS based IPPS market market basket basket cost cost weights weights ------------------------------------------------------------------------ Wages and Salaries................ 41.2 40.6 Employee Benefits................. 11.7 10.5 Professional Fees: Labor-Related.. 8.6 10.0 Administrative and Facilities 1.1 0.8 Support Services................. Installation, Maintenance, and 2.4 1.5 Repair Services.................. All Other: Labor-Related Services. 2.6 2.6 ------------------------------------- Total Labor-Related Share..... 67.6 66.0 ------------------------------------------------------------------------ Note: Detail may not add to total due to rounding. Using the cost category weights from the proposed 2023-based IPPS market basket, we calculated a labor-related share of 66.0 percent, 1.6 percentage points lower than the current labor-related share of 67.6 percent. This downward revision to the labor-related share is primarily the result of incorporating the more recent 2023 Medicare cost report data for Wages and Salaries, Employee Benefits, and Contract Labor costs. This is partially offset by an increase in the Professional Fees: Labor-Related cost weight. Therefore, we propose to use a labor-related share of 66.0 percent for discharges occurring on or after October 1, 2025. We continue to believe, as we have stated in the past, that these operating cost categories are related to, influenced by, or vary with the local markets. Therefore, our definition of the labor-related share continues to be consistent with section 1886(d)(3) of the Act. We note that section 403 of Public Law 108-173 amended sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless 62 percent would result in lower payments to a hospital than would otherwise be made.

C. Market Basket for Certain Hospitals Presently Excluded From the IPPS

As explained in the FY 2006 IPPS final rule (70 FR 47396 through 47398), beginning with FY 2006, we have used the percentage increase in the IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, and RNHCIs. Consistent with the regulations at Sec. Sec. 412.23(g) and 413.40(a)(2)(ii)(A) and (c)(3)(viii), we also have used the percentage increase in the IPPS operating market basket to update target amounts for short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. In the FY 2018 IPPS/LTCH PPS final rule, we rebased and revised the IPPS operating market basket to a 2014 base year, effective for FY 2018 and subsequent fiscal years (82 FR 38158 through 38175), and finalized the use of the percentage increase in the 2014-based IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa for FY 2018 and subsequent fiscal years. Effective for the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45207), we rebased and revised the IPPS operating market basket to a 2018 base year. Therefore, we used the percentage increase in the 2018-based IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa for FY 2022 and subsequent fiscal years. As discussed in this section IV. of the preamble of this proposed rule, we propose to rebase and revise the IPPS operating market basket to a 2023 base year. We continue to believe that it is appropriate to use the increase in the IPPS operating market basket to update the target amounts for these excluded facilities, as discussed in prior rulemaking. Therefore, we propose to use the percentage increase in the proposed 2023-based IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern [[Page 18247]] Mariana Islands, and American Samoa for FY 2026 and subsequent fiscal years. Accordingly, for FY 2026, the rate-of increase percentage to be applied to the target amount for these hospitals would be the FY 2026 percentage increase in the proposed 2023-based IPPS operating market basket. Furthermore, we are proposing that if more recent data become available for the FY 2026 IPPS/LTCH PPS final rule, we would use such data, if appropriate, to calculate the IPPS operating market basket rate of increase for FY 2026.

D. Rebasing and Revising the Capital Input Price Index (CIPI)

The CIPI was originally described in the FY 1993 IPPS final rule (57 FR 40016). There have been subsequent discussions of the CIPI presented in the IPPS proposed and final rules. The FY 2022 IPPS/LTCH PPS final rule (86 FR 45208 through 45213) described the most recent rebasing and revising of the CIPI to a 2018 base year, which reflected the capital cost structure of IPPS hospitals available at that time. Effective for FY 2026, we are proposing to rebase and revise the CIPI to a 2023 base year to reflect a more current structure of capital costs for IPPS hospitals. We invite public comments on our proposed methodology discussed in this section of this proposed rule, for deriving the proposed 2023-based CIPI. This proposed 2023-based CIPI was derived using data from the 2023 cost reports for IPPS hospitals, which includes providers whose cost reporting period began on or after October 1, 2022, and prior to September 30, 2023. We are also proposing to start with the same subset of Medicare cost reports from IPPS hospitals as previously described in section IV.B.1.a. of the preamble of this proposed rule. As with the 2018-based index, we are proposing to develop two sets of weights to derive the proposed 2023-based CIPI. The first set of weights identifies the proportion of hospital capital expenditures attributable to each expenditure category, while the second set of weights is a set of relative vintage weights for depreciation and interest. The set of vintage weights is used to identify the proportion of capital expenditures within a cost category that is attributable to each year over the useful life of the capital assets in that category. A more thorough discussion of vintage weights is provided later in this section. Using 2023 Medicare cost reports (CMS Form 2552-10, OMB Control number 0938-0050), we are able to obtain capital costs for the following categories: Depreciation, Interest, Lease, and Other. Specifically, we are proposing to determine what proportion of total capital costs that each category represents using the data reported by IPPS hospitals on Worksheet A-7, Part III. We are proposing that Depreciation costs are equal to the sum of Worksheet A-7, Part III, column 9, lines 1 and 2. We are proposing that Interest costs are equal to the sum of Worksheet A-7, Part III, column 11, lines 1 and 2. We are proposing that Lease costs are equal to the sum of Worksheet A-7, Part III, column 10, lines 1 and 2. We are proposing that Other costs are equal to the sum of Worksheet A-7, Part III, columns 12 through 14, lines 1 and 2. We are proposing that Total Capital costs are equal to the sum of Worksheet A-7, Part III, column 15, lines 1 and 2. We are proposing to derive cost weights for each IPPS hospital for each CIPI cost category by calculating the ratio of the costs reported for each cost category (for example, Depreciation) to Total Capital costs. Finally, we are proposing to apply a set of simultaneous trims based on these derived cost weights to remove outliers. Specifically, we are proposing to only include cost reports for providers where their Depreciation cost weight is between 25 percent and 90 percent; Interest cost weight is between 0 and 75 percent, Lease cost weight is between 0 and 50 percent and Total Capital costs are greater than zero and less than Total Facility Costs reported on Worksheet B, Part I, column 26, line 202. The trimming process is done simultaneously on each cost category so that if a cost weight is outside the specific range for one or more of the cost weight criteria mentioned, the provider is excluded from the sample. We note that these proposed trimming methods are the same types of edits performed for the 2018-based CIPI. We then are proposing to sum the costs for each cost category (Depreciation, Interest, Lease, and Other) and divide each sum by the sum of Total Capital costs for this same set of IPPS hospitals. The ratio of the total costs for each category to the sum of Total Capital costs represents the cost weight for each of the Depreciation, Interest, Lease and Other cost categories. This is the same methodology as was used for the 2018-based CIPI. As shown in the left column of Table IV- 08, in 2023 depreciation expenses accounted for 67.2 percent of total capital costs, interest expenses accounted for 15.2 percent, leasing expenses accounted for 11.6 percent, and other capital expenses accounted for 6.0 percent. We also are proposing to allocate lease costs across each of the remaining capital cost categories as was done in the 2018-based CIPI. We are proposing to proportionally distribute leasing costs among the cost categories of Depreciation, Interest, and Other, reflecting the assumption that the underlying cost structure of leases is similar to that of capital costs in general. As was done for the 2018-based CIPI, we are proposing to assume that 10 percent of the lease costs as a proportion of total capital costs represents overhead and to assign those costs to the Other capital cost category accordingly. Therefore, we are assuming that approximately 1.2 percent (11.6 percent x 0.1) of total capital costs represent lease costs attributable to overhead, and we are proposing to add this 1.2 percent to the 6.0 percent Other cost category weight. We are then proposing to distribute the remaining lease costs (10.4 percent, or 11.6 percent-1.2 percent) proportionally across the three cost categories (Depreciation, Interest, and Other) based on the proportion that these categories comprise of the sum of the Depreciation, Interest, and Other cost categories (excluding lease expenses). For example, the Other cost category represented 6.7 percent of all three cost categories (Depreciation, Interest, and Other) prior to any lease expenses being allocated. This 6.7 percent is applied to the 10.4 percent of remaining lease expenses so that another 0.7 percent of lease expenses as a percent of total capital costs is allocated to the Other cost category. Therefore, the resulting proposed Other cost weight is 7.8 percent (calculated using unrounded numbers, which is approximately equal to 6.0 percent + 1.2 percent + 0.7 percent). This is the same methodology used for the 2018-based CIPI. The resulting cost weights of the proposed allocation of lease expenses are shown in the right column of Table IV-08. [[Page 18248]] Table IV-08--Proposed Allocation of Lease Expenses for the Proposed 2023- Based CIPI ------------------------------------------------------------------------ Proposed cost Proposed cost shares obtained shares after from medicare allocation of Cost categories cost reports lease expenses (percent of total (percent of total capital costs) capital costs) ------------------------------------------------------------------------ Depreciation...................... 67.2 75.1 Interest.......................... 15.2 17.0 Lease............................. 11.6 ................. Other............................. 6.0 7.8 ------------------------------------------------------------------------ Note: Detail may not add to 100 percent due to rounding. Finally, we are proposing to further divide the Depreciation and Interest cost categories. We are proposing to separate the Depreciation cost category into the following two categories: (1) Building and Fixed Equipment and (2) Movable Equipment. We also are proposing to separate the Interest cost category into the following two categories: (1) Government/Nonprofit; and (2) For-profit. These are the same categories used for the 2018-based CIPI. To disaggregate the depreciation cost weight, we needed to determine the percent of total depreciation costs for IPPS hospitals (after the allocation of lease costs) that are attributable to building and fixed equipment, which we hereafter refer to as the ``fixed percentage.'' After applying the trim requiring that the Depreciation cost weight is between 25 percent and 90 percent as described previously, for the providers remaining, we calculate the fixed percentage as the ratio of the sum of building and fixed equipment depreciation (Worksheet A-7, Part III, column 9, line 1) to the sum of total depreciation (sum of Worksheet A-7, Part III column 9, lines 1 and 2). Based on the 2023 IPPS Medicare cost reports, we have determined that depreciation costs for building and fixed equipment account for approximately 52 percent of total depreciation costs, while depreciation costs for movable equipment account for approximately 48 percent of total depreciation costs. This is the same methodology used for the 2018-based CIPI. As was done for the 2018-based CIPI, we are proposing to apply this fixed percentage to the depreciation cost weight (after leasing costs are included) to derive a Depreciation cost weight attributable to Building and Fixed Equipment and a Depreciation cost weight attributable to Movable Equipment. To disaggregate the Interest cost weight, we needed to determine the percent of total interest costs for IPPS hospitals that are attributable to government and nonprofit facilities, which we hereafter refer to as the ``nonprofit percentage,'' because interest price pressures tend to differ between nonprofit and for-profit facilities. After applying the trim requiring that the Interest cost weight is between 0 percent and 75 percent as described previously, for the providers remaining, we calculate the nonprofit percentage as the ratio of the sum of interest costs (Worksheet A-7, Part III, column 11, lines 1 and 2) for government and nonprofit facilities to the sum of total interest costs for all facilities. This is the same methodology used for the 2018-based CIPI. The nonprofit percentage determined using this method is 91 percent. Table IV-09 provides a comparison of the 2018- based CIPI cost weights and the proposed 2023-based CIPI cost weights. After the capital cost category weights were computed, it was necessary to select appropriate price proxies to reflect the rate-of-increase for each expenditure category. We are proposing to use the same price proxies as were used in the 2018-based CIPI, which are listed in Table IV-09. We also are proposing to continue to vintage weight the capital price proxies for Depreciation and Interest to capture the long-term consumption of capital. This vintage weighting method is the same general method that was used for the 2018-based CIPI (with a proposed change to the data source used to derive the vintage weights) and is described later in this section of this proposed rule. For the Depreciation--Building and Fixed Equipment cost category, we are proposing to continue to use the BEA Chained Price Index for Private Fixed Investment in Structures, Nonresidential, Hospitals and Special Care (BEA Table 5.4.4. Price Indexes for Private Fixed Investment in Structures by Type) as the price proxy. This BEA index is intended to capture prices for construction of facilities such as hospitals, nursing homes, hospices, and rehabilitation centers. For the Depreciation--Movable Equipment cost category, we are proposing to continue to use the PPI Commodity for Machinery and Equipment (BLS series code WPU11) as the price proxy. This price index reflects price inflation associated with a variety of machinery and equipment that would be utilized by hospitals including but not limited to communication equipment, computers, and medical equipment. For the Nonprofit Interest cost category, we are proposing to continue to use the average yield on domestic municipal bonds (Bond Buyer 20-bond index) as the price proxy. For the For-profit Interest cost category, we are proposing to continue to use the iBoxx AAA Corporate Bond Yield index as the price proxy. For the Other capital cost category (including insurances, taxes, and other capital-related costs), we are proposing to continue to use the CPI for Rent of Primary Residence (All Urban Consumers) (BLS series code CUUS0000SEHA) as the price proxy. We believe that these price series continue to be the most appropriate proxies for IPPS capital costs that meet our selection criteria of relevance, timeliness, availability, and reliability. [[Page 18249]] Table IV-09--Proposed 2023-Based CIPI Cost Weights and Price Proxies Compared to 2018-Based CIPI Cost Weights ---------------------------------------------------------------------------------------------------------------- 2018 cost Proposed 2023 Cost categories weights cost weights Proposed price proxy ---------------------------------------------------------------------------------------------------------------- Total...................................... 100.0 100.0 Depreciation........................... 76.8 75.1 Building and Fixed Equipment....... 39.3 39.3 BEA's Chained Price Index for Private Fixed Investment in Structures, Nonresidential, Hospitals and Special Care. Movable Equipment.................. 37.5 35.9 PPI Commodity for Machinery and Equipment. Interest............................... 16.6 17.0 Government/Nonprofit............... 14.9 15.4 Average Yield on Domestic Municipal Bonds (Bond Buyer 20-Bond Index). For-Profit......................... 1.7 1.6 Average Yield on iBoxx AAA Corporate Bonds. Other...................................... 6.6 7.8 CPI for Rent of Primary Residence. ---------------------------------------------------------------------------------------------------------------- Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying one decimal and therefore, the detail may not add to the total due to rounding. Because capital is acquired and paid for over time, capital expenses in any given year are determined by both past and present purchases of physical and financial capital. The proposed vintage- weighted 2023-based CIPI is intended to capture the long-term consumption of capital, using vintage weights for depreciation (physical capital) and interest (financial capital). These vintage weights reflect the proportion of capital purchases attributable to each year of the expected life of building and fixed equipment, movable equipment, and interest. Vintage weights are an integral part of the CIPI. Capital costs are inherently complicated and are determined by complex capital purchasing decisions, over time, based on such factors as interest rates and debt financing. In addition, capital is depreciated over time instead of being consumed in the same period it is purchased. By accounting for the vintage nature of capital, we are able to provide an accurate and stable annual measure of price changes. Annual nonvintage price changes for capital are unstable due to the volatility of interest rate changes and, therefore, do not reflect the actual annual price changes for IPPS capital costs. The CIPI reflects the underlying stability of the capital acquisition process. To calculate the vintage weights for depreciation and interest expenses, we first needed a time series of capital purchases for building and fixed equipment and movable equipment. We found no single source that provides an appropriate time series of capital purchases by hospitals for all of the components of capital purchases previously noted. For the 2018-based CIPI, we calculated capital purchases using data on total expenses from the American Hospital Association (AHA) for the years 1964 through 2018 and the method was described in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45210). The data from AHA are no longer available beyond 2020 and, therefore, for the 2023-based CIPI, we are proposing to use an alternative data source for deriving the capital purchases needed to calculate the vintage weights. Specifically, we are proposing to obtain a time series of building and fixed equipment acquisitions (that is, purchases) and movable equipment acquisitions using two different data sources. For the years 1996 through 2023, we are proposing to use data from Worksheet A-7 on the Medicare cost report as reported by IPPS hospitals (with the exception of 2002 through 2004 due to the temporary discontinuation of Worksheet A-7 from the Medicare cost report in those years). For the years 1977 through 1995 we are proposing to use the growth rates in the building and fixed equipment and movable equipment acquisitions derived using our previous method used for the 2018-based CIPI (based on AHA data) to extrapolate the levels from the Medicare cost report back in time. Below we provide the proposed steps for calculating capital acquisitions (that is, capital purchases) used to derive the vintage weights for the proposed 2023-based CIPI. Step 1--We obtain data from Worksheet A-7 of the Medicare cost reports and apply basic trims. Specifically, for 1996 through 2010 we use the CMS Form 2552-96, OMB Control number 0938-0050 and for 2010 through 2023 we use the CMS Form 2552-10, OMB Control number 0938-0050 (where 2010 data were collected using both forms). Specific cost report references in this discussion are based on the CMS Form 2552-10, OMB Control number 0938-0050. For each of the years 1996 through 2001 and 2005 through 2023, we propose to apply a set of general trims based on data obtained from Worksheet A-7 requiring that total capital costs (sum of Worksheet A-7, part III, column 15, lines 1 and 2) are greater than zero; beginning values of building and fixed equipment (sum of Worksheet A-7, part I, column 1, lines 2 through 5) and movable equipment (sum of Worksheet A-7, part I, column 1, lines 6 and 7) are greater than zero; ending asset values of building and fixed equipment and movable equipment are greater than zero; building and fixed equipment depreciation is greater than zero; movable equipment depreciation is greater than zero; building and fixed equipment acquisitions are greater than zero; movable equipment acquisitions are greater than zero as well as total facility costs (Worksheet B, part I, column 26, line 202) are greater than zero. In addition to these basic edits, we also propose to remove outliers in the data by trimming separately the top and bottom 1 percent building and fixed equipment useful lives and top and bottom 1 percent movable equipment useful lives. We first calculate the building and fixed equipment useful life and movable equipment useful life for each hospital for the years 1996 through 2001 and 2005 through 2023. The expected life of any asset can be determined by dividing the value of the asset (excluding fully depreciated assets) by its current year depreciation amount. This calculation yields the estimated expected life of an asset if the rates of depreciation were to continue at current year levels, assuming straight-line depreciation. We propose to calculate the building and fixed equipment useful life as the ending value of fixed assets (sum of Worksheet [[Page 18250]] A-7, part I, column 6, lines 2 through 5, less sum of Worksheet A-7, part I, column 7, lines 2 through 5) divided by fixed asset depreciation (Worksheet A-7, part III, column 9, line 1). We propose to calculate the movable equipment useful life as the ending value of movable assets (sum of Worksheet A-7, part I, column 6, lines 6 through 7, less sum of Worksheet A-7, part I, column 7, lines 6 through 7) divided by movable depreciation (Worksheet A-7, part III, column 9, line 2). For the remaining hospitals (after applying the top and bottom 1 percent trim on useful lives), we obtain a time series of building and fixed equipment acquisitions (sum of Worksheet A-7, part I, columns 2 and 3, lines 2 through 5) and a time series of movable equipment acquisitions (sum of Worksheet A-7, part I, columns 2 and 3, lines 6 through 7). Step 2--Due to the temporary discontinuation of Worksheet A-7 from the Medicare cost reports for the years 2002 through 2004, we need to derive the building and fixed equipment acquisitions and movable equipment acquisitions using a slightly different methodology. First, for each of the years 1996 through 2001 and 2005 through 2023 we calculate the annual ratio of the sum of building and fixed equipment acquisitions from Worksheet A-7 to the sum of building and fixed equipment ending asset values from Worksheet G. We next estimate these fixed ratios for 2002 through 2004 (when Worksheet A-7 data are not available) by straight-line interpolating the ratios between 2001 and 2005. Finally, we multiply these fixed ratios for 2002 through 2004 by the total ending building and fixed equipment asset values (as reported on Worksheet G). This results in an estimate of building and fixed equipment acquisitions for the years 2002 through 2004. We use this same methodology to derive movable equipment acquisitions using the movable equipment data. We note that the total ending asset values from Worksheet G are calculated after the application of a set of general trims (similar to those in Step 1) requiring total capital costs to be greater than zero and ending asset values of building and fixed equipment and movable equipment (as reported on Worksheet G) to be greater than zero. Step 3--As done with prior vintage weights (including those used in the 2018-based CIPI), we propose to use a time series of capital acquisitions of more than 50 years in the derivation of the vintage weights. Since we only have Medicare cost report data back to 1996, we are proposing to derive capital acquisitions for the prior period based on the capital acquisitions used to derive the vintage weights for the 2018-based CIPI based on AHA data. Specifically, beginning with the 1996 acquisition level derived in Step 1 (first year of data available from the Medicare cost reports) we propose to apply the growth rate of acquisitions derived using the prior method going back to 1977. We do this separately for both building and fixed equipment acquisitions and movable equipment acquisitions. As done in prior CIPI rebasings (including the 2018-based CIPI), in order to derive the proposed vintage weights, we need to calculate the average useful lives for building and fixed equipment and movable equipment based on the most recent Medicare cost report data. As previously described in Step 1, we propose to calculate the average building and fixed equipment useful life using 2023 Medicare cost report data as the ending asset value of building and fixed equipment (sum of Worksheet A-7, part I, column 6, lines 2 through 5, less sum of Worksheet A-7, part I, column 7, lines 2 through 5) divided by building and fixed equipment depreciation (Worksheet A-7, part III, column 9, line 1). We propose to calculate the average movable equipment useful life using 2023 Medicare cost report data as the ending asset value of movable equipment (sum of Worksheet A-7, part I, column 6, lines 6 through 7, less sum of Worksheet A-7, part I, column 7, lines 6 through 7) divided by movable equipment depreciation (Worksheet A-7, part III, column 9, line 2). Using this proposed method, we determined the average expected life of building and fixed equipment to be equal to 28 years, and the average expected life of movable equipment to be equal to 12 years. For the expected life of interest, we believe that vintage weights for interest should represent the average expected life of building and fixed equipment because, based on previous research described in the FY 1997 IPPS final rule (61 FR 46198), the expected life of hospital debt instruments and the expected life of buildings and fixed equipment are similar. We note that the 2018-based CIPI was based on an expected average life of building and fixed equipment of 27 years and an expected average life of movable equipment of 12 years. For the building and fixed equipment and movable equipment vintage weights, we are proposing to use the real annual capital-related purchase amounts for each asset type to capture the actual amount of the physical acquisition, net of the effect of price inflation. These real annual capital-related purchase amounts are produced by deflating the nominal annual purchase amount (as calculated in Steps 1 through 3) by the associated price proxy as provided earlier in this proposed rule. For the interest vintage weights, we are proposing to use the total nominal annual capital-related purchase amounts to capture the value of the debt instrument (including, but not limited to, mortgages and bonds). Using these capital purchases time series specific to each asset type, we are proposing to calculate the vintage weights for building and fixed equipment, for movable equipment, and for interest. The vintage weights for each asset type are deemed to represent the average purchase pattern of the asset over its expected life (in the case of building and fixed equipment and interest, 28 years, and in the case of movable equipment, 12 years). For each asset type, we are proposing to use the time series of annual capital purchases amounts available from 1977 to 2023. These data allow us to derive twenty 28- year periods of capital purchases for building and fixed equipment and interest, and thirty-five 12-year periods of capital purchases for movable equipment. For each 28-year period for building and fixed equipment and interest, or 12-year period for movable equipment, we are proposing to calculate annual vintage weights by dividing the capital- related purchase amount in any given year by the total amount of purchases over the entire 28-year or 12-year period. This calculation was done for each year in the 28-year or 12-year period and for each of the periods for which we have data. We then calculated the average vintage weight for a given year of the expected life by taking the average of these vintage weights across the multiple periods of data. This is the same methodology used for the 2018-based CIPI but using 27 years and 12 years and reflecting data through 2018. The vintage weights for the proposed 2023-based CIPI and the 2018- based CIPI are presented in Table IV-10. While we are proposing an alternative methodology for calculating the vintage weights due to the discontinuation of AHA data, Table IV-10 shows this change had limited impact on the results. We note that using the proposed 2023-based vintage weights instead of the 2018-based vintage weights has a minimal impact on the overall CIPI update (averaging 0.0 percent over FY 2021 through FY 2026). [[Page 18251]] Table IV-10--Proposed 2023-Based CIPI and 2018-Based CIPI Vintage Weights -------------------------------------------------------------------------------------------------------------------------------------------------------- Building and fixed equipment Movable equipment Interest ----------------------------------------------------------------------------------------------- Year \1\ 2018-based 27 Proposed 2023- 2018-based 12 Proposed 2023- 2018-based 27 Proposed 2023- years based 28 years years based 12 years years based 28 years -------------------------------------------------------------------------------------------------------------------------------------------------------- 1....................................................... 0.026 0.024 0.064 0.066 0.015 0.014 2....................................................... 0.028 0.025 0.069 0.069 0.016 0.016 3....................................................... 0.029 0.026 0.072 0.072 0.018 0.017 4....................................................... 0.031 0.027 0.075 0.075 0.019 0.018 5....................................................... 0.032 0.028 0.078 0.079 0.021 0.020 6....................................................... 0.032 0.029 0.082 0.082 0.022 0.021 7....................................................... 0.033 0.030 0.086 0.085 0.023 0.022 8....................................................... 0.034 0.030 0.088 0.089 0.026 0.024 9....................................................... 0.036 0.031 0.091 0.092 0.028 0.025 10...................................................... 0.036 0.031 0.095 0.094 0.029 0.026 11...................................................... 0.036 0.032 0.099 0.097 0.029 0.028 12...................................................... 0.036 0.033 0.101 0.100 0.031 0.030 13...................................................... 0.037 0.034 .............. .............. 0.033 0.031 14...................................................... 0.038 0.035 .............. .............. 0.036 0.033 15...................................................... 0.039 0.036 .............. .............. 0.039 0.035 16...................................................... 0.040 0.037 .............. .............. 0.041 0.037 17...................................................... 0.041 0.038 .............. .............. 0.044 0.039 18...................................................... 0.042 0.039 .............. .............. 0.046 0.041 19...................................................... 0.041 0.039 .............. .............. 0.047 0.043 20...................................................... 0.041 0.040 .............. .............. 0.049 0.045 21...................................................... 0.042 0.041 .............. .............. 0.052 0.047 22...................................................... 0.042 0.042 .............. .............. 0.053 0.049 23...................................................... 0.042 0.043 .............. .............. 0.055 0.051 24...................................................... 0.042 0.044 .............. .............. 0.055 0.053 25...................................................... 0.041 0.046 .............. .............. 0.057 0.056 26...................................................... 0.041 0.047 .............. .............. 0.058 0.058 27...................................................... 0.041 0.047 .............. .............. 0.059 0.060 28...................................................... .............. 0.047 .............. .............. .............. 0.062 ----------------------------------------------------------------------------------------------- Total............................................... 1.000 1.000 1.000 1.000 1.000 1.000 -------------------------------------------------------------------------------------------------------------------------------------------------------- Note: Numbers may not add to total due to rounding. \1\ Vintage weight in the last year (for example, year 28 for the proposed 2023-based CIPI) is applied to the most recent data point and prior vintage weights are applied going back in time. For example, year 28 vintage weight would be applied to the 2026q3 fixed price proxy level, year 27 vintage weight would be applied to the 2025q3 fixed price proxy level, etc. The process of creating vintage-weighted price proxies requires applying the vintage weights to the price proxy index where the last applied vintage weight in Table IV-10 is applied to the most recent data point. We have provided on the CMS website an example of how the vintage weighting price proxies are calculated, using example vintage weights and example price indices. The example can be found under the following CMS website link: https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information in the zip file titled ``Weight Calculations as described in the IPPS FY 2010 Proposed Rule.'' Table IV-11 in this section of this proposed rule compares both the historical and forecasted percent changes in the 2018-based CIPI and the proposed 2023-based CIPI. Over the most recent historical period, the proposed 2023-based CIPI increases at a slightly lower rate, on average, than the 2018-based CIPI primarily due to rebasing the CIPI from 2018 to 2023 and updating the base year cost weights. Table IV-11--Comparison of 2018-Based and Proposed 2023-Based Capital Input Price Index, Percent Change, FY 2021 Through FY 2028 ------------------------------------------------------------------------ CIPI, 2018- Proposed CIPI, Fiscal year based 2023-based ------------------------------------------------------------------------ Historical Data: FY 2021............................. 1.0 0.8 FY 2022............................. 2.0 1.8 FY 2023............................. 3.0 2.8 FY 2024............................. 2.8 2.7 Average FYs 2021-2024............... 2.2 2.0 Forecast: FY 2025............................. 2.7 2.6 FY 2026............................. 2.7 2.6 FY 2027............................. 2.6 2.5 FY 2028............................. 2.5 2.4 [[Page 18252]] Average FYs 2025-2028............... 2.6 2.5 ------------------------------------------------------------------------ Source: IHS Global, Inc., 4th quarter 2024 forecast. IHS Global, Inc. forecasts a 2.6 percent increase in the proposed 2023-based CIPI for FY 2026, as shown in Table IV-11. The underlying vintage-weighted price increases for depreciation (including building and fixed equipment and movable equipment) and interest (including government/nonprofit and for-profit) based on the proposed 2023-based CIPI are included in Table IV-12. Table IV-12--Proposed 2023-Based Capital Input Price Index Percent Changes, Total and Depreciation and Interest Components--FYs 2021 Through 2028 ---------------------------------------------------------------------------------------------------------------- Fiscal year Total Depreciation Interest ---------------------------------------------------------------------------------------------------------------- Historical Data: FY 2021................................................... 0.8 1.8 -3.7 FY 2022................................................... 1.8 2.7 -2.8 FY 2023................................................... 2.8 3.3 -1.5 FY 2024................................................... 2.7 3.3 -1.1 Forecast: FY 2025................................................... 2.6 3.2 -0.8 FY 2026................................................... 2.6 3.2 -0.8 FY 2027................................................... 2.5 3.1 -1.0 FY 2028................................................... 2.4 3.0 -1.2 ---------------------------------------------------------------------------------------------------------------- Source: IHS Global, Inc., 4th quarter 2024 forecast. The FY 2026 percentage increase based on the proposed 2023-based CIPI is 0.1 percentage point lower than the increase based on the 2018- based CIPI when rounded, as shown in Table IV-11. Rebasing the CIPI from 2018 to 2023 and updating the base year cost weights lowered the FY 2026 update by approximately 0.1 percentage point, which was partially offset by the incorporation of the 2023-based vintage weights.

A. General Discussion

Section 1886(d)(5)(F) of the Act provides for additional Medicare payments to subsection (d) hospitals \211\ 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 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 more commonly used method, is based on the hospital's disproportionate patient percentage (DPP), described below, under which the DSH payment adjustment is based a complex statutory formula which includes the hospital's geographic designation, the number of beds in the hospital, and the level of the hospital's DPP. --------------------------------------------------------------------------- \211\ See section 1886(d)(1)(B) of the Act for the definition of a ``subsection (d) hospital''. --------------------------------------------------------------------------- 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. ------------------------------------------------------------------------ DSH eligibility Qualifying criteria ------------------------------------------------------------------------ Statutory Formula............ A hospital that has a disproportionate patient percentage equal to or exceeding 15 percent may qualify for the Medicare DSH adjustment. We refer readers to 42 CFR 412.106 for the specific eligibility criteria and payment formulas. [[Page 18253]] ``Pickle Method''............ A hospital that is located in an urban area and has 100 or more beds may qualify to 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 patients with low incomes. ------------------------------------------------------------------------ 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 Sec. 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 Sec. 412.105(b). Section 3133 of the Patient Protection and Affordable Care Act (Pub. L. 111-148), 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. 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 on the basis of the hospital's DPP 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. Since FY 2014, section 1886(r) of the Act has required that hospitals that are eligible for DSH payments under section 1886(d)(5)(F) of the Act receive 2 separately calculated payments: Medicare DSH Payment: An empirically justified DSH payment equal to 25% of the amount determined under the statutory formula in section 1886(d)(5)(F) of the Act. Medicare DSH Uncompensated Care Payment: An uncompensated care payment determined as the product of 3 factors, as discussed in this section. Specifically, section 1886(r)(1) of the Act provides that the Secretary shall pay to such subsection (d) 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.\212\ We refer to this payment as the ``empirically justified Medicare DSH payment.'' --------------------------------------------------------------------------- \212\ https://www.medpac.gov/document/march-2007-report-to-the-congress-medicare-payment-policy/. --------------------------------------------------------------------------- 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) hospitals 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. In other words, the first factor of the uncompensated care payment calculation is 75 percent of the payments that would otherwise be made as Medicare DSH payments 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). As discussed in a later section, we note that the second factor is computed based on estimates of the total U.S population. 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.'' In brief, the uncompensated care payment for an individual hospital is determined as the product of the following 3 factors: Factor 1: 75% of the total amount of DSH payments that would otherwise be made under section 1886(d)(5)(F) of the Act. Factor 2: 1 minus the percent change in the percent of individuals who are uninsured. Factor 3: The hospital's uncompensated care amount relative to the uncompensated care amount for all hospitals that receive DSH payments, expressed as a percentage. 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 [[Page 18254]] 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 was 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 of the periods selected to develop such estimates.

B. Eligibility for Empirically Justified Medicare DSH Payments and

Uncompensated Care Payments 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 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 empirically justified Medicare DSH payment made to a subsection (d) hospital under section 1886(r)(1) of the Act, the Secretary shall pay to ``such subsection (d) hospitals'' the uncompensated care payment. Section 1886(r)(2)'s reference to ``such subsection (d) hospitals'' refers to hospitals that receive empirically justified Medicare DSH payments under section 1886(r)(1) 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 explained 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 (that is, eligibility to receive empirically justified Medicare DSH payments) for the applicable fiscal year (using the most recent data that are available). For this proposed rule, we estimated DSH status for all hospitals using the most recent available SSI ratios and information from the most recent available Provider Specific File. We note that FY 2021 SSI ratios available on the CMS website were the most recent available SSI ratios at the time of developing this proposed rule.\213\ If more recent data on DSH eligibility becomes available before the final rule, we would use such data in the final rule. --------------------------------------------------------------------------- \213\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh. --------------------------------------------------------------------------- Our final determinations of a hospital's eligibility for uncompensated care and empirically justified Medicare DSH payments will be based on the hospital's actual DSH status at cost report settlement for FY 2026. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and in the rulemakings 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. Eligible hospitals include the following: 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 section 1886(r) of the Act (78 FR 50623 and 79 FR 50006). Sole community hospitals (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 fiscal year (based on the best available data at that time) subject to settlement through the cost report. If they receive interim empirically justified Medicare DSH payments in a fiscal year, they will also be eligible to receive interim uncompensated care payments for that fiscal year on a per discharge basis. 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. 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 interim empirically justified Medicare DSH and interim uncompensated care payments as we do for all other IPPS hospitals. Recently enacted legislation has extended the MDH program through September 30, 2025. We refer readers to section V.F. of the preamble of this proposed rule for further discussion of the MDH program. We will continue to make a determination concerning an MDH's eligibility for interim empirically justified Medicare DSH and uncompensated care payments based on the hospital's estimated DSH status for the applicable fiscal year. IPPS hospitals that elect to participate in the Bundled Payments for Care Improvement Advanced (BPCI Advanced) model, will continue to be paid under the IPPS and, therefore, are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments until the Model's final performance year, which ends on December 31, 2025. For further information regarding the BPCI Advanced model, we refer readers to the CMS website at https://innovation.cms.gov/innovation-models/bpci-advanced. Transforming Episode Accountability Model (TEAM) is a new episode-based payment model. Hospitals participating in TEAM would continue to be paid under the IPPS and, therefore, are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments. The model's start date is January 1, 2026. Ineligible hospitals include the following: Maryland hospitals are not eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the payment methodology of section 1866(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 [[Page 18255]] Total Cost of Care (TCOC) Model, which began on January 1, 2019. Under the Maryland TCOC Model, which concludes on December 31, 2026, Maryland hospitals are not paid under the IPPS and are ineligible to receive empirically justified Medicare DSH payments and uncompensated care payments under section 1886(r) of the Act. SCHs that are paid under their hospital-specific rate are not eligible for Medicare DSH and uncompensated care payments (78 FR 50623 and 50624). 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).\214\ The period of participation for the last hospital in the demonstration under this most recent legislative authorization will end on June 30, 2028. Under the payment methodology that applies during this most recent extension of the demonstration program, participating hospitals do not receive empirically justified Medicare DSH payments, and they are excluded from receiving interim and final uncompensated care payments. At the time of development of this proposed rule, we believe 16 hospitals may participate in the demonstration program at the start of FY 2026. We note that if at the time of developing the final rule there is a different number of hospitals projected to participate in the demonstration program during FY 2026, we would use updated information in the FY 2026 final rule. --------------------------------------------------------------------------- \214\ The Rural Community Hospital Demonstration Program was extended for a subsequent 5-year period by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-148). The period of performance for this 5-year extension period ended on December 31, 2016. Section 15003 of the 21st Century Cures Act (Pub. L. 114-255), enacted on 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. The period of performance for this 5-year extension period ended December 31, 2021. The Consolidated Appropriations Act, 2021 (Pub. L. 116-260) amended section 410A of Public Law 108-173 to extend the demonstration program for an additional 5-year period. ---------------------------------------------------------------------------

C. 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 Secretary 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 Medicare Administrative Contractors (MACs) to simply adjust subsection (d) hospitals' interim claim payments to an amount equal to 25 percent of what would have been paid if section 1886(r) of the Act did not apply. We also made corresponding changes to the hospital cost report so that these empirically justified Medicare DSH payments could 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 https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.

D. Supplemental Payment for Indian Health Service (IHS) and Tribal

Hospitals and Puerto Rico Hospitals In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 49051), we established a new supplemental payment for IHS/Tribal hospitals and hospitals located in Puerto Rico for FY 2023 and subsequent fiscal years. This payment was established to help to mitigate the impact of the decision to discontinue the use of low- income insured days as a proxy for uncompensated care costs for these hospitals and to prevent undue long-term financial disruption for these providers. The regulations located at 42 CFR 412.106(h) govern the supplemental payment. In brief, the supplemental payment for a fiscal year is determined as the difference between the hospital's base year amount and its uncompensated care payment for the applicable fiscal year as determined under Sec. 412.106(g)(1). The base year amount is the hospital's FY 2022 uncompensated care payment adjusted by one plus the percent change in the total uncompensated care amount between the applicable fiscal year (that is, FY 2026 for purposes of this rulemaking) and FY 2022, where the total uncompensated care amount for a fiscal year is determined as the product of Factor 1 and Factor 2 for that year. If the base year amount is equal to or lower than the hospital's uncompensated care payment for the current fiscal year, then the hospital would not receive a supplemental payment because the hospital would not be experiencing financial disruption in that year as a result of the use of uncompensated care data from the Worksheet S-10 in determining Factor 3 of the uncompensated care payment methodology. For FY 2026, we are not proposing any changes to the methodology for determining supplemental payments and we will calculate the supplemental payments to eligible IHS/Tribal and Puerto Rico hospitals consistent with the methodology described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 49051) and Sec. 412.106(h). As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49048 and 49049), the eligibility and payment processes for the supplemental payment are consistent with the processes for determining eligibility to receive interim and final uncompensated care payments adopted in FY 2014 IPPS/LTCH PPS final rule. We note that the MAC will make a final determination with respect to a hospital's eligibility to receive the supplemental payment for a fiscal year, in conjunction with its final determination of the hospital's eligibility for DSH payments and uncompensated care payments for that fiscal year.

E. 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, which are discussed in the next sections.

1. Proposed Calculation of Factor 1 for FY 2026

Section 1886(r)(2)(A) of the Act establishes Factor 1 in the calculation of the uncompensated care payment. The regulations located at 42 CFR 412.106(g)(1)(i) govern the Factor 1 calculation. Under a prospective payment system, we would not know the precise aggregate Medicare DSH [[Page 18256]] payment amounts that would be paid for a fiscal year until cost report settlement for all IPPS hospitals is completed, which occurs several years after the end of the 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, we would not know the precise aggregate empirically justified Medicare DSH payment amounts that would be paid for a fiscal year until cost report settlement for all IPPS hospitals is completed. Thus, section 1886(r)(2)(A)(ii) of the Act provides authority to estimate this amount. In brief, Factor 1 is the difference between the Secretary's estimates of: (1) the amount that would have been paid in Medicare DSH payments for the fiscal year, in the absence of section 1886(r) of the Act; 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 this FY 2026 IPPS/LTCH PPS proposed rule consistent with the policy that has applied since the FY 2014 final rule (78 FR 50627 through 50631), we are determining Factor 1 from the most recently available estimates of the aggregate amount of Medicare DSH payments that would be made for FY 2026 in the absence of section 1886(r)(1) of the Act and the aggregate amount of empirically justified Medicare DSH payments that would be made for FY 2026, both as calculated by CMS' Office of the Actuary (OACT). Consistent with the policy that has applied in previous years, these estimates will not be revised or updated subsequent to publication of our final projections in the FY 2026 IPPS/LTCH PPS final rule. For this proposed rule, to calculate both estimates, we used the most recently available projections of Medicare DSH payments for the fiscal year, as calculated by OACT using the most recently filed Medicare hospital cost reports with Medicare DSH payment information and the most recent DPPs and Medicare DSH payment adjustments provided in the IPPS Impact File. The projection of Medicare DSH payments for the fiscal year is also partially based on OACT's Part A benefits projection model, which projects, among other things, inpatient hospital spending. Projections of DSH payments additionally require projections of expected increases in utilization and case-mix. The assumptions that were used in making these inpatient hospital spending, utilization, and case-mix projections and the resulting estimates of DSH payments for FY 2023 through FY 2026 are discussed later in this section and in the table titled ``Factors Applied for FY 2023 through FY 2026 to Estimate Medicare DSH Expenditures Using FY 2022 Baseline.'' For purposes of calculating Factor 1 and modeling the impact of this FY 2026 IPPS/LTCH PPS proposed rule, we used OACT's January 2025 Medicare DSH estimates, which were based on data from the December 2024 update of the Medicare Hospital Cost Report Information System (HCRIS) and the FY 2025 IPPS/LTCH PPS final rule IPPS Impact File, published in conjunction with the publication of the FY 2025 IPPS/LTCH PPS final rule. Because SCHs that are projected to be paid under their hospital- specific rate are ineligible for empirically justified Medicare DSH payments and uncompensated care payments, they were excluded from the January 2025 Medicare DSH estimates. Because Maryland hospitals are not paid under the IPPS, they are also ineligible for empirically justified Medicare DSH payments and uncompensated care payments and were also excluded from OACT's January 2025 Medicare DSH estimates. The 16 hospitals that CMS expects will participate in the Rural Community Hospital Demonstration Program in FY 2026 were also excluded from OACT's January 2025 Medicare DSH estimates because under the payment methodology that applies during the demonstration, these hospitals are not eligible to receive empirically justified Medicare DSH payments or uncompensated care payments. For this proposed rule, using the data sources previously discussed, OACT's January 2025 estimates of Medicare DSH payments for FY 2026 without regard to the application of section 1886(r)(1) of the Act is approximately $15.682 billion. Therefore, also based on OACT's January 2025 Medicare DSH estimates, the estimate of empirically justified Medicare DSH payments for FY 2026, with the application of section 1886(r)(1) of the Act, is approximately $3.92 billion (or 25 percent of the total amount of estimated Medicare DSH payments for FY 2026). Under Sec. 412.106(g)(1)(i), Factor 1 is the difference between these two OACT estimates. Therefore, in this proposed rule, we are determining that Factor 1 for FY 2026 would be $11.761 billion, which is equal to 75 percent of the total amount of estimated Medicare DSH payments for FY 2026 ($15.682 billion minus $3.92 billion). We note that consistent with our approach in previous rulemakings, OACT intends to use more recent data that may become available for purposes of projecting the final Factor 1 estimates for the FY 2026 IPPS/LTCH PPS final rule. We note that the Factor 1 estimates for IPPS/LTCH PPS proposed rules are generally consistent with the economic assumptions and actuarial analysis used to develop the President's Budget estimates under current law, and Factor 1 estimates for IPPS/LTCH PPS final rules are generally consistent with those used for the Midsession Review of the President's Budget.\215\ Consistent with historical practice, we expect the Midsession Review will have updated economic assumptions and actuarial analysis, which will be used for the development of Factor 1 estimates in the FY 2026 IPPS/LTCH PPS final rule. --------------------------------------------------------------------------- \215\ As we have in the past, for additional information on the development of the President's Budget, we refer readers to the Office of Management and Budget website at https://www.whitehouse.gov/omb/budget. --------------------------------------------------------------------------- For a general overview of the principal steps involved in projecting future inpatient costs and utilization, we refer readers to the ``2024 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/oact/tr/2024.\216\ 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. --------------------------------------------------------------------------- \216\ 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. --------------------------------------------------------------------------- In this proposed rule, we include information regarding the data sources, methods, and assumptions employed by OACT's actuaries in determining our estimate of Factor 1. In summary, we indicate the historical HCRIS data update OACT used to estimate Medicare DSH payments; we explain that the most recent Medicare DSH payment adjustments provided in the IPPS Impact File were used, and we provide the components of all the update factors that were applied to the historical data to estimate the Medicare DSH payments for the upcoming fiscal year, along with [[Page 18257]] the associated rationale and assumptions. The discussion also includes descriptions of the ``Other'' and ``Discharges'' assumptions. OACT's estimates for FY 2026 for this proposed rule began with a baseline of $13.018 billion in Medicare DSH expenditures for FY 2022. The following table shows the factors applied to update this baseline through the current estimate for FY 2026: Factors Applied for FY 2023 Through FY 2026 To Estimate Medicare DSH Expenditures Using FY 2022 Baseline -------------------------------------------------------------------------------------------------------------------------------------------------------- IPPS hospital Estimated DSH FY market basket Discharges Case-mix Other Total payment (in update factor billions) * -------------------------------------------------------------------------------------------------------------------------------------------------------- 2023.............................................................. 1.043 0.994 0.990 1.0504 1.0784 14.038 2024.............................................................. 1.031 0.998 0.997 1.0310 1.0573 14.842 2025.............................................................. 1.029 0.991 1.005 0.9976 1.0228 15.180 2026 **........................................................... 1.024 0.999 1.005 1.0048 1.0331 15.682 -------------------------------------------------------------------------------------------------------------------------------------------------------- * Rounded. ** The FY 2026 figures reflect the proposed inpatient hospital market basket percentage increase and productivity adjustment and are based on the 4th quarter 2024 IHS Global Inc. (IGI) forecast, the most recent forecast available at the time of development of this proposed rule. In this table, the discharges column shows the changes in the number of Medicare FFS inpatient hospital discharges. The discharge figures for FY 2023 and FY 2024 are based on Medicare claims data that have been adjusted by a completion factor to account for incomplete claims data. The discharge figures for FY 2025 and FY 2026 are assumptions based on recent historical experience and assumptions related to how many beneficiaries will be enrolled in MA plans. The case-mix column shows the estimated change in case-mix for IPPS hospitals. The case-mix figures for FY 2023 and FY 2024 are based on actual claims data adjusted by a completion factor to account for incomplete claims data. The case-mix figures for FY 2025 and for FY 2026 are assumptions based on the 2012 ``Review of Assumptions and Methods of the Medicare Trustees' Financial Projections'' report by the 2010-2011 Medicare Technical Review Panel.\217\ --------------------------------------------------------------------------- \217\ https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/reportstrustfunds/downloads/technicalpanelreport2010-2011.pdf. --------------------------------------------------------------------------- The ``Other'' column reflects the change in other factors that contribute to the Medicare DSH estimates. These factors include the difference between the total inpatient hospital discharges and IPPS discharges and various adjustments to the payment rates that have been included over the years but are not reflected in the other columns. In addition, the ``Other'' column includes a factor for the estimated changes in Medicaid enrollment through FY 2023. The following table shows the factors that are included in the ``IPPS Hospital Market Basket Update Factor'' column of the previous table: ---------------------------------------------------------------------------------------------------------------- IPPS hospital market FY basket percentage Productivity Documentation Total update increase adjustment and coding percentage ---------------------------------------------------------------------------------------------------------------- 2023.................................... 4.1 0.3 0.5 4.3 2024.................................... 3.3 0.2 0.0 3.1 2025.................................... 3.4 0.5 0.0 2.9 2026.................................... 3.2 0.8 0.0 2.4 ---------------------------------------------------------------------------------------------------------------- Note: All figures in this table are the final inpatient hospital updates for the applicable fiscal year, except for the FY 2026 figures. The FY 2026 figures reflect the proposed inpatient hospital market basket percentage increase and productivity adjustment and are based on the 4th quarter 2024 IGI forecast, the most recent forecast available at the time of development of this proposed rule. We refer readers to section V.B. of the preamble of this proposed rule for a complete discussion of the inpatient hospital market basket update for FY 2026. We are inviting public comments on our proposed Factor 1 for FY 2026. IV. Proposed Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2026 (Sec. 412.106)

2. Calculation of Proposed Factor 2 for FY 2026

a. 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). We are continuing to use the methodology that was used in FY 2018 through FY 2025 to determine Factor 2 for FY 2026--to use the National Health Expenditure Accounts (NHEA) data to determine the percent change in the percent of individuals who are uninsured. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198) for a complete discussion of the NHEA and why we determined, and continue to believe, that it is the data source for the rate of uninsurance that, on balance, best meets all our considerations and is consistent with the statutory requirement that the estimate of the rate of uninsurance be based on data from the Census Bureau or other sources the Secretary determines appropriate. [[Page 18258]] In brief, the NHEA represents the government's official estimates of economic activity (spending) within the health sector. The NHEA includes comprehensive enrollment estimates for total private health insurance (PHI) (including direct-purchase 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. 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. To compute Factor 2 for FY 2026, the first metric that is needed is the proportion of the total U.S. population that was uninsured in 2013. For a complete discussion of the approach OACT used to prepare the NHEA's estimate of the rate of uninsurance in 2013, including the data sources used, we refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 58998-58999). The next metrics needed to compute Factor 2 for FY 2026 are projections of the rate of uninsurance in both CY 2025 and CY 2026 for the total U.S. population. On an annual basis, OACT projects enrollment and spending trends for the coming 10-year period. The most recent projections are for 2023 through 2032 and were published on June 12, 2024. Those projections used the latest NHEA historical data that were available at the time of their construction (that is, historical data through 2022). The NHEA projection methodology accounts for expected changes in enrollment across all of the categories of insurance coverage previously listed. For a complete discussion of how the NHEA data account for expected changes in enrollment across all the categories of insurance coverage previously listed, we refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 58999). b. Proposed Factor 2 for FY 2026 Using these data sources and the previously described methodologies, at the time of developing this proposed rule, OACT has estimated that the uninsured rate for the historical, baseline year of 2013 was 14 percent, and that the uninsured rates for CYs 2025 and 2026 were 7.7 percent and 8.7 percent, respectively. As required by section 1886(r)(2)(B)(ii) of the Act, the Chief Actuary of CMS certified these estimates. We refer readers to OACT's Memorandum on Certification of Rates of Uninsured prepared for this FY 2026 IPPS/LTCH PPS proposed rule for further details on the methodology and assumptions that were used in the projection of these rates of uninsurance.\218\ --------------------------------------------------------------------------- \218\ https://www.cms.gov/files/document/certification-rates-uninsured-2026-proposed-rule.pdf. --------------------------------------------------------------------------- As with the CBO estimates on which we based Factor 2 for fiscal years before FY 2018, the NHEA estimates are for a calendar year. Under the approach originally adopted in the FY 2014 IPPS/LTCH PPS final rule, we use a weighted average approach to project the rate of uninsurance for each fiscal year. We continue to believe that, in order to estimate the rate of uninsurance during a fiscal year 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, in this FY 2026 IPPS/LTCH PPS proposed rule, we are continuing to apply the weighted average approach used in past fiscal years to estimate this proposed rule's rate of uninsurance for FY 2026. OACT certified the estimate of the rate of uninsurance for FY 2026 determined using this weighted average approach to be reasonable and appropriate for purposes of section 1886(r)(2)(B)(ii) of the Act. We note that we may 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 2026. The calculation of the proposed Factor 2 for FY 2026 is as follows: Percent of individuals without insurance for CY 2013: 14 percent. Percent of individuals without insurance for CY 2025: 7.7 percent. Percent of individuals without insurance for CY 2026: 8.7 percent. Percent of individuals without insurance for FY 2026: (0.25 times 0.077) + (0.75 times 0.087) = 8.5 percent. FY 2026's proposed Factor 2 is calculated as 1 minus the percent change in the percent of individuals without insurance between CY 2013 and FY 2026. Proposed Factor 2 is as follows: 1-[verbar]((0.14-0.085)/ 0.14)[verbar] = 1-0.3929 = 0.6071. We are proposing that Factor 2 for FY 2026 would be 60.71 percent. The proposed FY 2026 uncompensated care amount is equivalent to proposed Factor 1 multiplied by proposed Factor 2, which is $7,140,406,650. We are inviting public comments on our proposed Factor 2 for FY 2026.

3. Calculation of Proposed Factor 3 for FY 2026

a. 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 for us 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 [[Page 18259]] 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. For a discussion of the methodology, we used to calculate Factor 3 for fiscal years 2014 through 2022, we refer readers to the FY 2024 IPPS/LTCH final rule (88 FR 59001 and 59002). b. Background on the Methodology Used To Calculate Factor 3 for FY 2024 and Subsequent Years Section 1886(r)(2)(C) of the Act governs the selection of the data to be used in calculating Factor 3 and 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 a subsection (d) 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 50634 through 50647), 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 for a fiscal year and for those hospitals that we do not estimate will qualify for Medicare DSH payments for that fiscal year but that may ultimately qualify for Medicare DSH payments for that fiscal year at the time of cost report settlement. As described in the FY 2022 IPPS/LTCH PPS final rule, commenters expressed concerns that the use of only 1 year of data to determine Factor 3 would lead to significant variations in year-to-year uncompensated care payments. Some stakeholders recommended the use of 2 years of historical data from Worksheet S-10 data of the Medicare cost report (86 FR 45237). In the FY 2022 IPPS/LTCH PPS final rule, we stated that we would consider using multiple years of data when the vast majority of providers had been audited for more than 1 fiscal year under the revised reporting instructions. Audited FY 2020 cost reports were available for the development of the FY 2024 IPPS/LTCH PPS proposed and final rules. Feedback from previous audits and lessons learned were incorporated into the audit process for the FY 2020 reports. In consideration of the comments discussed in the FY 2022 IPPS/LTCH PPS final rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49036 through 49047), we finalized a policy of using a multi-year average of audited Worksheet S-10 data to determine Factor 3 for FY 2023 and subsequent fiscal years. We explained our belief that this approach would be generally consistent with our past practice of using the most recent single year of audited data from the Worksheet S-10, while also addressing commenters' concerns regarding year-to-year fluctuations in uncompensated care payments. Under this policy, we used a 2-year average of audited FY 2018 and FY 2019 Worksheet S-10 data to calculate Factor 3 for FY 2023. We also indicated that we expected FY 2024 would be the first year that 3 years of audited data would be available at the time of rulemaking. For FY 2024 and subsequent fiscal years, we finalized a policy of using a 3-year average of the uncompensated care data from the 3 most recent fiscal years for which audited data are available to determine Factor 3. Consistent with the approach that we followed when multiple years of data were previously used in the Factor 3 methodology, if a hospital does not have data for all 3 years used in the Factor 3 calculation, we will determine Factor 3 based on an average of the hospital's available data. For IHS and Tribal hospitals and Puerto Rico hospitals, we use the same multi-year average of Worksheet S-10 data to determine Factor 3 for FY 2024 and subsequent fiscal years as is used to determine Factor 3 for all other DSH- eligible hospitals (in other words, hospitals eligible to receive empirically justified Medicare DSH payments for a fiscal year) to determine Factor 3. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49033 through 49047), we also modified our policy regarding cost reports that start in one fiscal year and span the entirety of the following fiscal year. Specifically, in the rare cases when we use a cost report that starts in one fiscal year and spans the entirety of the subsequent fiscal year to determine uncompensated care costs for the subsequent fiscal year, we would not use the same cost report to determine the hospital's uncompensated care costs for the earlier fiscal year. We explained that using the same cost report to determine uncompensated care costs for both fiscal years would not be consistent with our intent to smooth year-to-year variation in uncompensated care costs. As an alternative, we finalized our proposal to use the hospital's most recent prior cost report, if that cost report spans the applicable period.\219\ --------------------------------------------------------------------------- \219\ For example, in determining Factor 3 for FY 2023, we did not use the same cost report to determine a hospital's uncompensated care costs for both FY 2018 and FY 2019. Rather, we used the cost report that spanned the entirety of FY 2019 to determine uncompensated care costs for FY 2019 and used the hospital's most recent prior cost report to determine its uncompensated care costs for FY 2018, provided that cost report spanned some portion of FY 2018. --------------------------------------------------------------------------- (1) Scaling Factor In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69323), we continued the policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042) to address the effects of calculating Factor 3 using data from multiple fiscal years, in which we apply a scaling factor to the Factor 3 values calculated for all DSH-eligible hospitals so that total uncompensated care payments to hospitals that are projected to be DSH- eligible for a fiscal year will be consistent with the estimated amount available to make uncompensated care payments for that fiscal year. Pursuant to that policy, we divide 1 (the expected sum of all DSH- eligible hospitals' Factor 3 values) by the actual sum of all DSH- eligible hospitals' Factor 3 values and then multiply the quotient by the uncompensated care payment determined for each DSH-eligible hospital to obtain a scaled uncompensated care payment amount for each hospital. This process is designed to ensure that the sum of the scaled uncompensated care payments for all hospitals that are projected to be DSH-eligible is consistent with the estimate of the total amount available to make uncompensated care payments for the applicable fiscal year. (2) New Hospital Policy for Purposes of Factor 3 In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69323), we continued our new hospital policy that was modified in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042) and initially adopted in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42370 through 42371) to determine Factor 3 for new hospitals. Consistent with our policy of using [[Page 18260]] multiple years of cost reports to determine Factor 3, we defined new hospitals as hospitals that do not have cost report data for the most recent year of data being used in the Factor 3 calculation. Under this definition, the cut-off date for the new hospital policy is the beginning of the fiscal year after the most recent year for which audits of the Worksheet S-10 data have been conducted. For FY 2026, the FY 2022 cost reports are the most recent year of cost reports for which audits of Worksheet S-10 data have been conducted. Thus, hospitals with CMS Certification Numbers (CCNs) established on or after October 1, 2022, would be subject to the new hospital policy for FY 2026. Under our modified new hospital policy, if a new hospital has a preliminary projection of being DSH-eligible based on its most recent available disproportionate patient percentage, it may receive interim empirically justified DSH payments. However, new hospitals will not receive interim uncompensated care payments because we would have no uncompensated care data on which to determine what those interim payments should be. The MAC will make a final determination concerning whether the hospital is eligible to receive Medicare DSH payments at cost report settlement. In FY 2025, while we continued to determine the numerator of the Factor 3 calculation using the new hospital's uncompensated care costs reported on Worksheet S-10 of the hospital's cost report for the current fiscal year, we determined Factor 3 for new hospitals using a denominator based solely on uncompensated care costs from cost reports for the most recent fiscal year for which audits have been conducted. In addition, we applied a scaling factor to the Factor 3 calculation for a new hospital.\220\ --------------------------------------------------------------------------- \220\ In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042), we explained our belief that applying the scaling factor is appropriate for purposes of calculating Factor 3 for all hospitals, including new hospitals and hospitals that are treated as new hospitals, to improve consistency and predictability across all hospitals. --------------------------------------------------------------------------- (3) Newly Merged Hospital Policy In the FY 2025 IPPS/LTCH PPS final rule (89 FR 690323 through 690324), we continued our policy of treating hospitals that merge after the development of the final rule for the applicable fiscal year similar to new hospitals. As explained in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50021), for these newly merged hospitals, we do not have data currently available to calculate a Factor 3 amount that accounts for the merged hospital's uncompensated care burden. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50021 and 50022), we finalized a policy under which Factor 3 for hospitals that we do not identify as undergoing a merger until after the public comment period and additional review period following the publication of the final rule or that undergo a merger during the fiscal year will be recalculated similar to new hospitals. Consistent with the policy adopted in the FY 2015 IPPS/LTCH PPS final rule, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 690323 through 690324), we stated that we would continue to treat newly merged hospitals in a similar manner to new hospitals, such that the newly merged hospital's final uncompensated care payment will be determined at cost report settlement where the numerator of the newly merged hospital's Factor 3 will be based on the cost report of only the surviving hospital (that is, the newly merged hospital's cost report) for the current fiscal year. However, if the hospital's cost reporting period includes less than 12 months of data, the data from the newly merged hospital's cost report will be annualized for purposes of the Factor 3 calculation. Consistent with the methodology used to determine Factor 3 for new hospitals described in section IV.E.3. of the preamble of this proposed rule, we continued our policy for determining Factor 3 for newly merged hospitals using a denominator that is the sum of the uncompensated care costs for all DSH-eligible hospitals, as reported on Worksheet S-10 of their cost reports for the most recent fiscal year for which audits have been conducted. In addition, we apply a scaling factor, as discussed in section IV.E.3. of the preamble of this proposed rule, to the Factor 3 calculation for a newly merged hospital. In the FY 2025 IPPS/LTCH PPS final rule, we explained that consistent with past policy, interim uncompensated care payments for the newly merged hospital would be based only on the data for the surviving hospital's CCN available at the time of the development of the final rule. (4) CCR Trim Methodology The calculation of a hospital's total uncompensated care costs on Worksheet S-10 requires the use of the hospital's cost to charge ratio (CCR). In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69324), we continued the policy of trimming CCRs, which we adopted in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49043), for FY 2025. Under this policy, we apply the following steps to determine the applicable CCR separately for each fiscal year that is included as part of the multi-year average used to determine Factor 3: Step 1: Remove Maryland hospitals. In addition, we will remove all- inclusive rate providers because their CCRs are not comparable to the CCRs calculated for other IPPS hospitals. Step 2: Calculate a CCR ``ceiling'' for the applicable fiscal year with the following data: for each IPPS hospital that was not removed in Step 1 (including hospitals that are not DSH-eligible), we use cost report data to calculate a CCR by dividing the total costs on Worksheet C, Part I, Line 202, Column 3 by the charges reported on Worksheet C, Part I, Line 202, Column 8. (Combining data from multiple cost reports from the same fiscal year is not necessary, as the longer cost report will be selected.) The ceiling is calculated as 3 standard deviations above the national geometric mean CCR for the applicable fiscal year. This approach is consistent with the methodology for calculating the CCR ceiling used for high-cost outliers. Remove all hospitals that exceed the ceiling so that these aberrant CCRs do not skew the calculation of the statewide average CCR. Step 3: Using the CCRs for the remaining hospitals in Step 2, determine the urban and rural statewide average CCRs for the applicable fiscal year for hospitals within each State (including hospitals that are not DSH-eligible), weighted by the sum of total hospital discharges from Worksheet S-3, Part I, Line 14, Column 15. Step 4: Assign the appropriate statewide average CCR (urban or rural) calculated in Step 3 to all hospitals, excluding all-inclusive rate providers, with a CCR for the applicable fiscal year greater than 3 standard deviations above the national geometric mean for that fiscal year (that is, the CCR ``ceiling''). Step 5: For hospitals that did not report a CCR on Worksheet S-10, Line 1, we assign them the statewide average CCR for the applicable fiscal year as determined in step 3. After completing these steps, we re-calculate the hospital's uncompensated care costs (Line 30) for the applicable fiscal year using the trimmed CCR (the statewide average CCR (urban or rural, as applicable)). (5) Uncompensated Care Data Trim Methodology After applying the CCR trim methodology, there are rare situations where a hospital has potentially aberrant uncompensated care data for a fiscal year that are unrelated to its CCR. Therefore, under the trim methodology for potentially aberrant uncompensated [[Page 18261]] care costs (UCC) that was included as part of the methodology for purposes of determining Factor 3 in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58832), if the hospital's uncompensated care costs for any fiscal year that is included as a part of the multi-year average are an extremely high ratio (greater than 50 percent) of its total operating costs in the applicable fiscal year, we will determine the ratio of uncompensated care costs to the hospital's total operating costs from another available cost report, and apply that ratio to the total operating expenses for the potentially aberrant fiscal year to determine an adjusted amount of uncompensated care costs for the applicable fiscal year.\221\ --------------------------------------------------------------------------- \221\ For example, if a hospital's FY 2018 cost report is determined to include potentially aberrant data, data from its FY 2019 cost report would be used for the ratio calculation. --------------------------------------------------------------------------- However, we note that we have audited the Worksheet S-10 data that will be used in the Factor 3 calculation for a number of hospitals. Because the UCC data for these hospitals have been subject to audit, we believe that there is increased confidence that if high uncompensated care costs are reported by these audited hospitals, the information is accurate. Therefore, as we explained in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58832), we determined it is unnecessary to apply the UCC trim methodology for a fiscal year for which a hospital's UCC data have been audited. In rare cases, hospitals that are not currently projected to be DSH-eligible and that do not have audited Worksheet S-10 data may have a potentially aberrant amount of insured patients' charity care costs (line 23 column 2). In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69324 through 69325), we stated that in addition to the UCC trim methodology, we will continue to apply an alternative trim specific to certain hospitals that do not have audited Worksheet S-10 data for one or more of the fiscal years that are used in the Factor 3 calculation. For FY 2023 and subsequent fiscal years, in the rare case that a hospital's insured patients' charity care costs for a fiscal year are greater than $7 million and the ratio of the hospital's cost of insured patient charity care (line 23 column 2) to total uncompensated care costs (line 30) is greater than 60 percent, we will not calculate a Factor 3 for the hospital at the time of proposed or final rulemaking. This trim will only impact hospitals that are not currently projected to be DSH-eligible; and therefore, are not part of the calculation of the denominator of Factor 3, which includes only uncompensated care costs for hospitals projected to be DSH-eligible. Consistent with the approach adopted in the FY 2022 IPPS/LTCH PPS final rule, if a hospital would be trimmed under both the UCC trim methodology and this alternative trim, we will apply this trim in place of the existing UCC trim methodology. We continue to believe this alternative trim more appropriately addresses potentially aberrant insured patient charity care costs compared to the UCC trim methodology, because the UCC trim is based solely on the ratio of total uncompensated care costs to total operating costs and does not consider the level of insured patients' charity care costs. Similar to the approach initially adopted in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45245 and 45246), in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69324), we also stated that we would continue to use a threshold of 3 standard deviations from the mean ratio of insured patients' charity care costs to total uncompensated care costs (line 23 column 2 divided by line 30) and a dollar threshold that is the median total uncompensated care cost reported on most recent audited cost reports for hospitals that are projected to be DSH-eligible. We stated that we continued to believe these thresholds are appropriate to address potentially aberrant data. We also continued to include Worksheet S-10 data from IHS/Tribal hospitals and Puerto Rico hospitals consistent with our policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 49051). In addition, we continued our policy adopted in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49044) of applying the same threshold amounts originally calculated for the FY 2019 reports to identify potentially aberrant data for FY 2025 and subsequent fiscal years to facilitate transparency and predictability. If a hospital subject to this trim is determined to be DSH-eligible at cost report settlement, the MAC will calculate the hospital's Factor 3 using the same methodology used to calculate Factor 3 for new hospitals. c. Methodology for Calculating Factor 3 for FY 2026 For FY 2026, consistent with Sec. 412.106(g)(1)(iii)(C)(11), we are following the same methodology as applied in FY 2024 and described in the previous section of the preamble of this proposed rule to determine Factor 3 using the most recent 3 years of audited cost reports, from FY 2020, FY 2021, and FY 2022. Consistent with our approach for FY 2025, for FY 2026, we are also applying the scaling factor, new hospital, newly merged hospital, CCR trim methodology, UCC trim, and alternative trim methodology policies discussed in the previous section of the preamble of this proposed rule. For purposes of the FY 2026 IPPS/LTCH PPS proposed rule, we are using reports from the December 2024 HCRIS extract to calculate Factor 3. We intend to use the March 2025 update of HCRIS to calculate the final Factor 3 for the FY 2026 IPPS/LTCH PPS final rule. Thus, for FY 2026, we will use 3 years of audited Worksheet S-10 Part 1 data to calculate Factor 3 for all eligible hospitals, including IHS and Tribal hospitals and Puerto Rico hospitals that have a cost report for 2013, following the below steps. We note that we are clarifying in these steps our use of Worksheet S-10, Part I, rather than Worksheet S-10, Part II, to calculate Factor 3. Step 1: Select the hospital's longest cost report for each of the most recent 3 years of fiscal year (FY) audited cost reports (FY 2020, FY 2021, and FY 2022). Alternatively, in the rare case when the hospital has no cost report for a particular year because the cost report for the previous fiscal year spanned the more recent fiscal year, the previous fiscal year cost report will be used in this step. In the rare case that using a previous fiscal year cost report results in a period without a report, we would use the prior year report, if that cost report spanned the applicable period.\222\ In general, we note that, for purposes of the Factor 3 methodology, references to a fiscal year cost report are to the cost report that spans the relevant fiscal year. --------------------------------------------------------------------------- \222\ For example, if a hospital does not have a FY 2020 cost report because the hospital's FY 2019 cost report spanned the FY 2020 time period, we will use the FY 2019 cost report that spanned the FY 2020 time period for this step. Using the same example, where the hospital's FY 2019 report is used for the FY 2020 time period, we will use the hospital's FY 2018 report if it spans some of the FY 2019 time period. We will not use the same cost report for both the FY 2020 and the FY 2019 time periods. --------------------------------------------------------------------------- Step 2: Annualize the UCC from Worksheet S-10, Part I, Line 30, if a 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: Combine adjusted and/or annualized uncompensated care costs for hospitals that merged using the merger policy. Step 4: Calculate Factor 3 for all DSH-eligible hospitals using annualized uncompensated care costs (Worksheet S-10, Part I, Line 30) based on cost report data from the most recent 3 years [[Page 18262]] of audited cost reports (from Step 1, 2 or 3). New hospitals and other hospitals that are treated as if they are new hospitals for purposes of Factor 3 are excluded from this calculation. Step 5: Average the Factor 3 values from Step 4; that is, add the Factor 3 values, and divide that amount by the number of cost reporting periods with data to compute an average Factor 3 for the hospital. Multiply by a scaling factor, as discussed in the previous section of the preamble of this proposed rule. As we explained previously in this section, for FY 2026, we are also applying the scaling factor, new hospital, newly merged hospital, CCR trim methodology, UCC trim, and alternative trim methodology policies discussed in the previous section of the preamble of this proposed rule. For a hospital that is subject to either of the trims for potentially aberrant data (the UCC trim and alternative trim methodology explained in the previous section of the preamble of this proposed rule) and is ultimately determined to be DSH-eligible at cost report settlement, its uncompensated care payment will be calculated only after the hospital's reporting of insured charity care costs on its FY 2026 Worksheet S-10 has been reviewed. Accordingly, the MAC will calculate a Factor 3 for the hospital only after reviewing the uncompensated care information reported on Worksheet S-10 of the hospital's FY 2026 cost report. Then we will calculate Factor 3 for the hospital using the same methodology used to determine Factor 3 for new hospitals. Specifically, the numerator will reflect the uncompensated care costs reported on the hospital's FY 2026 cost report, while the denominator will reflect the sum of the uncompensated care costs reported on Worksheet S-10 of the FY 2022 cost reports of all DSH- eligible hospitals. In addition, we will apply a scaling factor, as discussed previously, to the Factor 3 calculation for the hospital. Under the CCR trim methodology, for purposes of this proposed rule, the statewide average CCR was applied to 8 hospitals' FY 2020 reports, of which 2 hospitals had FY 2020 Worksheet S-10 data. The statewide average CCR was applied to 10 hospitals' FY 2021 reports, of which 4 hospitals had FY 2021 Worksheet S-10 data. The statewide average CCR was applied to 8 hospitals' FY 2022 reports, of which 2 hospitals had FY 2022 Worksheet S-10 data. For purposes of the FY 2026 IPPS/LTCH PPS final rule, consistent with our Factor 3 methodology since the FY 2014 IPPS/LTCH PPS final rule (78 FR 50642), we intend to use data from the March 2025 HCRIS extract for this calculation, which would be the latest quarterly HCRIS extract that is publicly available at the time of the development of the FY 2026 IPPS/LTCH PPS final rule. Regarding requests from providers to amend and/or reopen previously audited Worksheet S-10 data for the most recent 3 cost reporting years that are used in the methodology for calculating Factor 3, we note that MACs follow normal timelines and procedures. For purposes of the Factor 3 calculation for the FY 2026 IPPS/LTCH PPS final rule, any amended reports and/or reopened reports would need to have completed the amended report and/or reopened report submission processes by the end of March 2025. In other words, if the amended report and/or reopened report is not available for the March HCRIS extract, then that amended and/or reopened report data would not be part of the FY 2026 IPPS/LTCH PPS final rule's Factor 3 calculation. We note that the March HCRIS data extract will be available during the comment period for this proposed rule if providers want to verify that their amended and/or reopened data is reflected in the March HCRIS extract. d. Per-Discharge Amount of Interim Uncompensated Care Payments for FY 2026 Since FY 2014, we have made interim uncompensated care payments during the fiscal year on a per-discharge basis. Typically, we use a 3- year average of the number of discharges for a hospital to produce an estimate of the amount of the hospital's uncompensated care payment per discharge. Specifically, the hospital's total uncompensated care payment amount for the applicable fiscal year is divided by the hospital's historical 3-year average of discharges computed using the most recent available data to determine the uncompensated care payment per discharge for that fiscal year. As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69328- 69329), we finalized a policy to use a 3-year average of the most recent years of available historical discharge data to calculate a per- discharge payment amount that would be used to make interim uncompensated care payments to each projected DSH-eligible hospital during FY 2026 and subsequent fiscal years, codified at 42 CFR 412.106(i)(1). We are applying this policy for FY 2026. Interim uncompensated care payments made to a hospital during the fiscal year are reconciled following the end of the year to ensure that the final payment amount is consistent with the hospital's prospectively determined uncompensated care payment for the fiscal year. As we explained in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69329 through 69330), we also finalized a voluntary process in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58833 and 58834), through which a hospital may submit a request to its MAC for a lower per-discharge interim uncompensated care payment amount, including a reduction to zero, once before the beginning of the fiscal year and/or once during the fiscal year. In conjunction with this request, the hospital must provide supporting documentation demonstrating that there would likely be a significant recoupment at cost report settlement if the per- discharge amount is not lowered (for example, recoupment of 10 percent or more of the hospital's total uncompensated care payment, or at least $100,000). For example, a hospital might submit documentation showing a large projected increase in discharges during the fiscal year to support reduction of its per-discharge uncompensated care payment amount. As another example, a hospital might request that its per- discharge uncompensated care payment amount be reduced to zero midyear if the hospital's interim uncompensated care payments during the year have already surpassed the total uncompensated care payment calculated for the hospital. Under the policy we finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58833 through 58834), the hospital's MAC will evaluate these requests and the supporting documentation before the beginning of the fiscal year and/or with midyear requests when the historical average number of discharges is lower than the hospital's projected discharges for the current fiscal year. If, following review of the request and the supporting documentation, the MAC agrees that there likely would be significant recoupment of the hospital's interim Medicare uncompensated care payments at cost report settlement, the only change that will be made is to lower the per-discharge amount either to the amount requested by the hospital or another amount determined by the MAC to be appropriate to reduce the likelihood of a substantial recoupment at cost report settlement. If the MAC determines it would be appropriate to reduce the interim Medicare uncompensated care payment per-discharge amount, that updated amount will be used for purposes of the outlier payment calculation for the remainder of the fiscal year. We are continuing to [[Page 18263]] apply this policy for FY 2026. We refer readers to the Addendum in the FY 2023 IPPS/LTCH final rule for a more detailed discussion of the steps for determining the operating and capital Federal payment rate and the outlier payment calculation (87 FR 49431 through 49432). No change would be made to the total uncompensated care payment amount determined for the hospital on the basis of its Factor 3. In other words, any change to the per-discharge uncompensated care payment amount will not change how the total uncompensated care payment amount will be reconciled at cost report settlement. e. Process for Notifying CMS of Merger Updates and To Report Upload Issues As we have done for every proposed and final rule beginning in FY 2014, in conjunction with this proposed rule, we will publish on the CMS website a table listing Factor 3 for hospitals that we estimate will receive empirically justified Medicare DSH payments in FY 2026 (that is, those hospitals that will receive interim uncompensated care payments during the fiscal year), and for the remaining subsection (d) hospitals and subsection (d) Puerto Rico hospitals that have the potential of receiving an uncompensated care payment in the event that they receive an empirically justified Medicare DSH payment for the fiscal year as determined at cost report settlement. However, we note that a Factor 3 will not be published for new hospitals and hospitals that are subject to the alternative trim for hospitals with potentially aberrant data that are not projected to be DSH-eligible. We will also publish a supplemental data file containing a list of the mergers that we are aware of and the computed uncompensated care payment for each merged hospital. In the DSH uncompensated care supplemental data file, we list new hospitals and the 8 hospitals that would be subject to the alternative trim for hospitals with potentially aberrant data that are not projected to be DSH-eligible, with a N/A in the Factor 3 column. Hospitals have 60 days from the date of public display of the FY 2026 IPPS/LTCH PPS proposed rule in the Federal Register to review the table and supplemental data file published on the CMS website in conjunction with this proposed rule and to notify CMS in writing of issues related to mergers and/or to report potential upload discrepancies due to MAC mishandling of Worksheet S-10 data during the report submission process.\223\ Comments raising issues or concerns that are specific to the information included in the table and supplemental data file should be submitted by email to the CMS inbox at [email protected]. We will address comments related to mergers and/or reporting upload discrepancies submitted to the CMS DSH inbox as appropriate in the table and the supplemental data file that we publish on the CMS website in conjunction with the publication of the FY 2026 IPPS/LTCH PPS final rule. All other comments submitted in response to our proposals for FY 2026 must be submitted in one of the three ways found in the ADDRESSES section of the proposed rule before the close of the comment period in order to be assured consideration. In addition, we note that the CMS DSH inbox is not intended for Worksheet S-10 audit process related emails, which should be directed to the MACs. --------------------------------------------------------------------------- \223\ For example, if the report does not reflect audit results due to MAC mishandling, or the most recent report differs from a previously accepted, amended report due to MAC mishandling. ---------------------------------------------------------------------------

A. Proposed Changes to MS-DRGs Subject to Postacute Care Transfer

Policy and MS-DRG Special Payments Policies (Sec. 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 Sec. 412.4(c) defines postacute care transfers. Our policy set forth in Sec. 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 (Sec. 412.4(f)(1)). Transfer cases also are eligible for outlier payments. In general, the outlier threshold for transfer cases, as described in Sec. 412.80(b), is equal to (Fixed- Loss Outlier threshold for Nontransfer Cases adjusted for geographic variations in costs/Geometric Mean Length of Stay for the MS-DRG) * (Length of Stay for the Case plus 1 day). We established the criteria set forth in Sec. 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 at subparagraph 1886(d)(5)(J) of the Act directs CMS 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, Sec. 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 (Sec. 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 [[Page 18264]] 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 (Sec. 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. In the FY 2019 IPPS/ LTCH PPS final rule (83 FR 41394), we made conforming amendments to Sec. 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. 2. Proposed Changes for FY 2026 As discussed in the preamble of this proposed rule, based on our analysis of FY 2024 MedPAR claims data, CMS proposed to make changes to a number of MS-DRGs, effective for FY 2026. Specifically, we are proposing the following changes: Adding ICD-10-PCS codes describing restriction and replacement of the thoracic aorta, and bypass and occlusion of the subclavian and carotid arteries, to proposed new MS-DRG 209 (Complex Aortic Arch Procedures). Adding ICD-10-PCS codes describing restriction of the abdominal aorta and restriction of the iliac artery to proposed new MS- DRG 213 (Endovascular Abdominal Aorta with Iliac Branch Procedures). Reassigning ICD-10-PCS codes describing extirpation of matter from coronary arteries to proposed new MS-DRG 318 (Percutaneous Coronary Atherectomy without Intraluminal Device). Reassigning ICD-10-PCS codes describing extirpation of matter from coronary arteries and adding ICD-10-PCS codes describing dilation of coronary arteries and insertion of an intraluminal or other device to proposed new MS-DRGs 359 and 360 (Percutaneous Coronary Atherectomy with Intraluminal Device with MCC and without MCC, respectively). Adding ICD-10-CM diagnosis codes describing periprosthetic joint infection and ICD-10-PCS procedure codes describing hip or knee procedures to proposed new MS-DRGs 403 and 404 (Hip or Knee Procedures with Principal Diagnosis of Periprosthetic Joint Infection with MCC and without MCC, respectively). Deleting MS-DRGs 294 and 295 (Deep Vein Thrombophlebitis with CC/MCC and without CC/MCC, respectively) and reassigning the ICD- 10-CM codes to MS-DRGs 299, 300, and 301 (Peripheral Vascular Disorders with MCC, with CC, and without CC/MCC, respectively). Deleting MS-DRG 509 (Arthroscopy) and reassigning the ICD- 10-PCS codes describing inspection of various anatomic sites to their respective clinically appropriate MS-DRGs. Adding ICD-10-CM diagnosis codes describing the insertion of a radioactive element into the brain to MS-DRG 023 (Craniotomy with Major Device Implant or Acute Complex CNS Principal Diagnosis with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator). When proposing changes to MS-DRGs that involve adding, deleting, and reassigning procedure or diagnosis codes between proposed new and revised MS-DRGs, we continue to believe it is necessary to evaluate the affected MS-DRGs to determine whether they should be subject to the postacute care transfer policy. Considering the proposed changes to the MS-DRGs for FY 2026, according to the regulations under Sec. 412.4(d), we evaluated the proposed new MS-DRGs using the general postacute care transfer policy criteria and data from the FY 2024 MedPAR file. 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 evaluated any current MS-DRGs if we estimate that more than 5 percent of the current cases would shift from the current assigned MS- DRGs to proposed new MS-DRGs, or to a current MS-DRG from a proposed revised or deleted MS-DRG. For existing MS-DRGs 321 and 322 (Percutaneous Cardiovascular Procedures with Intraluminal Device with MCC or 4+ arteries/ intraluminal devices, and without MCC, respectively), we determined that more than 5 percent of the current cases would shift from the current assigned MS-DRGs to proposed new MS-DRGs 359 and 360. We also determined that for MS-DRGs 463, 464, and 465 (Wound Debridement and Skin Graft Except Hand for Musculoskeletal and Connective Tissue Disorders with MCC, with CC, and without MCC/CC, respectively), more than 5 percent of the current cases would shift from the current assigned MS-DRGs to proposed new MS-DRGs 403 and 404. We note that for all other proposed changes, the relative volume of cases shifting to or from current MS-DRGs does not exceed the 5 percent threshold. 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 Sec. 412.4(f)(6). We note that proposed new MS-DRGs 403 and 404 would qualify to be included on the list of MS-DRGs that are subject to the postacute care transfer policy. We therefore are proposing to add proposed new MS-DRGs 403 and 404 to the list of MS-DRGs that are subject to the postacute care transfer policy. We note that MS-DRGs 463, 464 and 465 are currently subject to the postacute care transfer policy. As a result of our review, these MS- DRGs, 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. Using the December 2024 update of the FY 2024 MedPAR file, we have developed the following chart which sets forth the most recent analysis of the postacute care transfer policy criteria completed for this proposed rule with respect to each of these proposed new or revised MS- DRGs. For the FY 2026 final rule, we intend to update this analysis using the most recent available data at that time. [[Page 18265]] List of Proposed New or Revised MS-DRGs Subject to Review of Postacute Care Transfer Policy Status for FY 2026 ---------------------------------------------------------------------------------------------------------------- Percent of Postacute shortstay Proposed care Short-stay postacute care FY 2025 postacute Proposed new Total transfer postacute transfers to postacute care or revised MS-DRG title cases cases (55th care all cases transfer transfer MS-DRG percentile: transfer (55th policy policy 1,028) cases percentile: status status 9.654%) ---------------------------------------------------------------------------------------------------------------- 209........... Complex Aortic 334 * 181 34 10.2% New......... No. Arch Procedures. 213........... Endovascular 1,163 * 185 0 * 0 New......... No. Abdominal Aorta with Iliac Branch Procedures. 318........... Percutaneous 915 * 164 7 * 0.8 New......... No. Coronary Atherectomy without Intraluminal Device. 359........... Percutaneous 3,027 * 876 65 * 2.2 New......... No. Coronary Atherectomy with Intraluminal Device with MCC. 360........... Percutaneous 3,934 * 398 36 * 0.9 New......... No. Coronary Atherectomy with Intraluminal Device without MCC. 321........... Percutaneous 30,850 8710 798 * 2.6 No.......... No. Cardiovascular Procedures with Intraluminal Device with MCC or 4+ arteries/ intraluminal devices. 322........... Percutaneous 46,159 4254 0 * 0 No.......... No. Cardiovascular Procedures with Intraluminal Device without MCC. 403........... Hip or Knee 1,250 1071 494 39.5 New......... Yes. Procedures with Principal Diagnosis of Periprosthetic Joint Infection with MCC. 404........... Hip or Knee 2,400 1995 682 28.4 New......... Yes. Procedures with Principal Diagnosis of Periprosthetic Joint Infection without MCC. 463........... Wound 3,477 2865 1244 35.8 Yes......... Yes. Debridement and Skin Graft Except Hand for Musculoskeleta l and Connective Tissue Disorders with MCC. 464........... Wound 4,959 3714 1124 22.7 Yes......... Yes. Debridement and Skin Graft Except Hand for Musculoskeleta l and Connective Tissue Disorders with CC. 465........... Wound 1,357 * 688 0 * 0 Yes......... Yes.** Debridement and Skin Graft Except Hand for Musculoskeleta l and Connective Tissue Disorders without CC/MCC. ---------------------------------------------------------------------------------------------------------------- * Indicates a current postacute care transfer policy criterion that the MS-DRG did not meet. ** As described in the policy at 42 CFR 412.4(d)(3)(ii)(D), MS-DRGs that share the same base MS-DRG will all qualify under the postacute care transfer policy if any one of the MS-DRGs that share that same base MS-DRG qualifies. During our annual review of proposed new or revised MS-DRGs and analysis of the December 2024 update of the FY 2024 MedPAR file, we reviewed the list of proposed revised or new MS-DRGs that qualify to be included on the list of MS-DRGs subject to the postacute care transfer policy for FY 2026 to determine if any of these MS-DRGs would also be subject to the special payment methodology policy for FY 2026. Based on our analysis of the proposed changes to the MS-DRGs included in the proposed rule, we determined that proposed new and revised MS-DRGs 404 and 464 meet the criteria for the MS-DRG special payment methodology. As described in the regulations at Sec. 412.4(f)(6)(iv), MS-DRGs that share the same base MS-DRG will all qualify under the MS-DRG special payment policy if any one of the MS- DRGs that share that same base MS-DRG qualifies. Therefore, we are proposing that MS-DRGs 403, 404, 463, 464, and 465 would be subject to the MS-DRG special payment methodology, effective for FY 2026. For the FY 2026 final rule, we intend to update this analysis using the most recent available data at that time. List of Proposed New or Revised MS-DRGs Subject to Review of Special Payment Policy Status for FY 2026 ---------------------------------------------------------------------------------------------------------------- 50 Percent Geometric Average of average FY 2025 Proposed Proposed new or mean charges of charges for special special revised MS-DRG MS-DRG title length of 1-day all cases payment policy payment policy stay discharges within MS- status status DRG ---------------------------------------------------------------------------------------------------------------- 403.............. Hip or Knee 10.57 $0 $130,572 New............ Yes.* Procedures with Principal Diagnosis of Periprosthetic Joint Infection with MCC. 404.............. Hip or Knee 5.58 87,126 72,946 New............ Yes. Procedures with Principal Diagnosis of Periprosthetic Joint Infection without MCC. 463.............. Wound Debridement 10.58 58,384 114,609 No............. Yes.* and Skin Graft Except Hand for Musculoskeletal and Connective Tissue Disorders with MCC. 464.............. Wound Debridement 5.40 71,548 68,604 No............. Yes. and Skin Graft Except Hand for Musculoskeletal and Connective Tissue Disorders with CC. 465.............. Wound Debridement 1.97 69,981 44,134 No............. Yes.* and Skin Graft Except Hand for Musculoskeletal and Connective Tissue Disorders without MCC/CC. ---------------------------------------------------------------------------------------------------------------- * As described in the policy at 42 CFR 412.4(f)(6)(iv), MS-DRGs that share the same base MS-DRG will all qualify under the special payment transfer policy if any one of the MS-DRGs that share that same base MS-DRG qualifies. [[Page 18266]]

1. Proposed FY 2026 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 2026, we are setting the applicable percentage increase by applying the adjustments listed in this section in the same sequence as we did for FY 2025. (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 2026 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 multifactor productivity (MFP) (the productivity adjustment) in accordance with section 1886(b)(3)(B)(xi)(II) of the Act. 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 productivity adjustment may result in the applicable percentage increase being less than zero. As published in the FY 2006 IPPS final rule (70 FR 47403), in accordance with section 404 of Public Law 108-173, CMS determined a new frequency for rebasing the hospital market basket of every 4 years. In compliance with section 404 of Public Law 108-173, in the FY 2022 IPPS/ LTCH PPS final rule (86 FR 45194 through 45204), we replaced the 2014- based IPPS operating and capital market baskets with the rebased and revised 2018-based IPPS operating and capital market baskets beginning in FY 2022. Consistent with our established frequency of rebasing the IPPS market basket every 4 years, in this FY 2026 IPPS/LTCH PPS proposed rule, we are proposing to rebase and revise the IPPS market basket to a 2023 base year, effective beginning in FY 2026. We are proposing to base the FY 2026 market basket update used to determine the applicable percentage increase for the IPPS on IHS Global Inc.'s (IGI's) fourth quarter 2024 forecast of the proposed 2023-based IPPS market basket rate-of-increase with historical data through third quarter 2024, which is estimated to be 3.2 percent. We are also proposing that if more recent data subsequently become available (for example, a more recent estimate of the market basket update), we would use such data, if appropriate, to determine the FY 2026 market basket update in the final rule. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the productivity 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 U.S. Department of Labor's Bureau of Labor Statistics (BLS) publishes the official measures of private nonfarm business productivity for the U.S. economy. We note that previously the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private nonfarm business multifactor productivity. Beginning with the November 18, 2021, release of productivity data, BLS replaced the term multifactor productivity (MFP) with total factor productivity (TFP). BLS noted that this is a change in terminology only and will not affect the data or methodology. As a result of the BLS name change, the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as private nonfarm business total factor productivity. However, as mentioned, the data and methods are unchanged. Please see www.bls.gov for the BLS historical published TFP data. A complete description of IGI's TFP projection methodology is available on the CMS website at https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information. In addition, we note that beginning with the FY 2022 IPPS/LTCH PPS final rule, we refer to this adjustment as the productivity adjustment rather than the MFP adjustment, to more closely track the statutory language in section 1886(b)(3)(B)(xi)(II) of the Act. We note that the adjustment continues to rely on the same underlying data and methodology. For FY 2026, we are proposing a productivity adjustment of 0.8 percent. Similar to the proposed market basket rate-of-increase, for this proposed rule, the estimate of the proposed FY 2026 productivity adjustment is based on IGI's fourth quarter 2024 forecast. As noted previously, we are proposing that if more recent data subsequently become available, we would use such data, if appropriate, to determine the FY 2026 productivity adjustment for the final rule. Based on these data, we have determined four proposed applicable percentage increases to the standardized amount for FY 2026, as specified in the following table: Table VI.B-01--Proposed FY 2026 Applicable Percentage Increases for the IPPS -------------------------------------------------------------------------------------------------------------------------------------------------------- Hospital submitted Hospital did NOT Hospital did NOT quality data and is Hospital submitted submit quality data submit quality data FY 2026 a meaningful EHR quality data and is NOT and is a meaningful and is NOT a user a meaningful EHR user EHR user meaningful EHR user -------------------------------------------------------------------------------------------------------------------------------------------------------- Proposed Market Basket Rate[dash]of[dash]Increase......... 3.2 3.2 3.2 3.2 Proposed Adjustment for Failure to Submit Quality Data 0.0 0.0 -0.8 -0.8 under Section 1886(b)(3)(B)(viii) of the Act............. [[Page 18267]] Proposed Adjustment for Failure to be a Meaningful EHR 0.0 -2.4 0.0 -2.4 User under Section 1886(b)(3)(B)(ix) of the Act.......... Proposed Productivity Adjustment under Section -0.8 -0.8 -0.8 -0.8 1886(b)(3)(B)(xi) of the Act............................. Proposed Applicable Percentage Increase Applied to 2.4 0.0 1.6 -0.8 Standardized Amount...................................... -------------------------------------------------------------------------------------------------------------------------------------------------------- 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 Sec. 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 Sec. 412.64(d)(2) for a hospital that does not submit quality data and Sec. 412.64(d)(3) for a hospital that is not a meaningful EHR user, less a productivity adjustment. 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 is also 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. As discussed in section V.F. of the preamble of this proposed rule, section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025 extended the MDH program through FY 2025. Therefore, under current law, the MDH program will expire for discharges on or after October 1, 2025. We refer readers to section V.F. of the preamble of this proposed rule for further discussion of the MDH program. We note that if the MDH program were to be extended by law into FY 2026, the proposed updates to the hospital-specific rates for SCHs as described in this section would also apply to the hospital-specific rates for MDHs for FY 2026. For FY 2026, we are proposing the following updates to the hospital-specific rates applicable to SCHs: A proposed update of 2.4 percent for a hospital that submits quality data and is a meaningful EHR user (as defined in section 1886(n) of the Act); a proposed update of 0.0 percent for a hospital that submits quality data and is not a meaningful EHR user; a proposed update of 1.6 percent for a hospital that fails to submit quality data and is a meaningful EHR user; and a proposed update of -0.8 percent for a hospital that fails to submit quality data and is not an meaningful EHR user. As previously discussed, we are proposing that if more recent data subsequently become available (for example, a more recent estimate of the market basket update and the productivity adjustment), we would use such data, if appropriate, to determine the market basket update and the productivity adjustment in the final rule.

2. Proposed FY 2026 Puerto Rico Hospital Update

Section 602 of Public Law 114-113 amended section 1886(n)(6)(B) of the Act to specify that subsection (d) Puerto Rico hospitals are eligible for incentive payments for the meaningful use of certified EHR technology, effective beginning FY 2016. In addition, section 1886(n)(6)(B) of the Act was amended to specify that the adjustments to the applicable percentage increase under section 1886(b)(3)(B)(ix) of the Act apply to subsection (d) Puerto Rico hospitals that are not meaningful EHR users, effective beginning FY 2022. Accordingly, for FY 2022, section 1886(b)(3)(B)(ix) of the Act in conjunction with section 602(d) of Public Law 114-113 requires that any subsection (d) Puerto Rico hospital that is not a meaningful EHR user as defined in section 1886(n)(3) of the Act and not subject to an exception under section 1886(b)(3)(B)(ix) of the Act will have ``three-quarters'' of the applicable percentage increase (prior to the application of other statutory adjustments), or three-quarters of the applicable market basket rate-of-increase, reduced by 33\1/3\ percent. The reduction to three-quarters of the applicable percentage increase for subsection (d) Puerto Rico hospitals that are not meaningful EHR users increases to 66\2/3\ percent for FY 2023, and, for FY 2024 and subsequent fiscal years, to 100 percent. (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.) The regulations at 42 CFR 412.64(d)(3)(ii) reflect the current law for the update for subsection (d) Puerto Rico hospitals for FY 2022 and subsequent fiscal years. In the FY 2019 IPPS/LTCH PPS final rule, we finalized the payment reductions (83 FR 41674). For FY 2026, consistent with section 1886(b)(3)(B) of the Act, as amended by section 602 of Public Law 114-113, we are setting the applicable percentage increase for Puerto Rico hospitals by applying the following adjustments in the following sequence. Specifically, the applicable percentage increase under the IPPS for Puerto Rico hospitals will be equal to the rate of-increase in the hospital market basket for IPPS hospitals in all areas, subject to 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 Puerto Rico hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act, and then subject to the productivity adjustment at section 1886(b)(3)(B)(xi) of the Act. As noted previously, section 1886(b)(3)(B)(xi) of the Act states that application of the productivity adjustment may result in the applicable percentage increase being less than zero. Based on IGI's fourth quarter 2024 forecast of the proposed 2023- based IPPS market basket update with historical data through third quarter 2024, for this FY 2026 IPPS/LTCH PPS proposed rule, in accordance with section 1886(b)(3)(B) of the Act, as discussed previously, for Puerto Rico hospitals we are proposing a market basket update of 3.2 percent less a productivity adjustment of 0.8 percentage point. Therefore, for FY 2026, depending on whether a Puerto [[Page 18268]] Rico hospital is a meaningful EHR user, there are two possible applicable percentage increases that could be applied to the standardized amount. Based on these data, we determined the following proposed applicable percentage increases to the standardized amount for FY 2026 for Puerto Rico hospitals: For a Puerto Rico hospital that is a meaningful EHR user, we are proposing a FY 2026 applicable percentage increase to the operating standardized amount of 2.4 percent (that is, the FY 2026 estimate of the proposed market basket rate-of-increase of 3.2 percent less 0.8 percentage point for the proposed productivity adjustment). For a Puerto Rico hospital that is not a meaningful EHR user, we are proposing a FY 2026 applicable percentage increase to the operating standardized amount of 0.0 percent (that is, the FY 2026 estimate of the proposed market basket rate-of-increase of 3.2 percent, less an adjustment of 2.4 percentage points (the proposed market basket rate-of-increase of 3.2 percent x 0.75 for failure to be a meaningful EHR user), and less 0.8 percentage point for the proposed productivity adjustment). As noted previously, we are proposing that if more recent data subsequently become available, we would use such data, if appropriate, to determine the FY 2026 market basket update and the productivity adjustment for the FY 2026 IPPS/LTCH PPS final rule. Table VI.B-02--Proposed FY 2026 Applicable Percentage Increases for Puerto Rico Hospitals Under the IPPS ------------------------------------------------------------------------ Hospital is a FY 2026 meaningful EHR Hospital is NOT a user meaningful EHR user ------------------------------------------------------------------------ Proposed Market Basket Rate-of- 3.2 3.2 Increase....................... Proposed Adjustment for Failure 0.0 -2.4 to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act..................... Proposed Productivity Adjustment -0.8 -0.8 under Section 1886(b)(3)(B)(xi) of the Act..................... Proposed Applicable Percentage 2.4 0.0 Increase Applied to Standardized Amount............ ------------------------------------------------------------------------

C. Rural Referral Centers (RRCs) Annual Updates to Case-Mix Index (CMI)

and Discharge Criteria (Sec. 412.96) Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at 42 CFR 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 the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 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 the Balanced Budget Act of 1997 (Pub. L. 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 through 46000), 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 47087), 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 (42 CFR 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 42 CFR 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 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. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45217), in light of the COVID-19 PHE, we amended the regulations at 42 CFR 412.96(h)(1) to provide for the use of the best available data rather than the latest available data in calculating the national and regional CMI criteria. We also amended the regulations at 42 CFR 412.96(c)(1) to indicate that the individual hospital's CMI value for discharges during the same Federal fiscal year used to compute the national and regional CMI values is used for purposes of determining whether a hospital qualifies for RRC classification. We also amended the regulations 42 CFR 412.96(i)(1) and (2), which describe the methodology for calculating the number of discharges criteria, to provide for the use of the best available data rather than the latest available or most recent data when calculating the regional discharges for RRC classification.

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 [[Page 18269]] 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 42 CFR 412.96(c)(1)(ii). The proposed national median CMI value for FY 2026 is based on the CMI values of all urban hospitals nationwide, and the proposed regional median CMI values for FY 2026 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 42 CFR 413.75). These proposed values are based on discharges occurring during FY 2024 (October 1, 2023, through September 30, 2024), and include bills posted to CMS' records through December 2024. We believe that this is the best available data for use in calculating the proposed national and regional median CMI values and is consistent with our proposal to use of the FY 2024 MedPAR claims data for FY 2026 ratesetting. In this FY 2026 IPPS/LTCH PPS proposed rule, we are proposing 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, 2025, they must have a CMI value for FY 2024 that is at least-- 1.7802 (national--all urban); or The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in 42 CFR 413.75) calculated by CMS for the census region in which the hospital is located. The proposed median CMI values by region are set forth in the following table. We intend to update the proposed CMI values in the FY 2026 IPPS/LTCH PPS final rule to reflect the updated FY 2024 MedPAR file, which will contain data from additional bills received through March 2025. ------------------------------------------------------------------------ Proposed case-mix Region index value ------------------------------------------------------------------------ 1. New England (CT, ME, MA, NH, RI, VT)............ 1.499 2. Middle Atlantic (PA, NJ, NY).................... 1.56165 3. East North Central (IL, IN, MI, OH, WI)......... 1.6175 4. West North Central (IA, KS, MN, MO, NE, ND, SD). 1.73965 5. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, 1.635 WV)............................................... 6. East South Central (AL, KY, MS, TN)............. 1.5901 7. West South Central (AR, LA, OK, TX)............. 1.78085 8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)....... 1.8092 9. Pacific (AK, CA, HI, OR, WA).................... 1.7793 ------------------------------------------------------------------------ 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. For FY 2026, we are proposing to update the regional standards based on discharges for urban hospitals' cost reporting periods that began during FY 2023 (that is, October 1, 2022, through September 30, 2023), which are the latest cost report data available at the time this proposed rule was developed. We believe that this is the best available data for use in calculating the proposed median number of discharges by region and is consistent with our data proposal to use cost report data from cost reporting periods beginning during FY 2023 for FY 2026 rate setting. Therefore, we are proposing 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, 2025, must have, as the number of discharges for its cost reporting period that began during FY 2023, 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 proposed number of discharges as set forth in the following table. We intend to update these numbers in the FY 2026 final rule based on the latest available cost report data. ------------------------------------------------------------------------ Proposed number Region of discharges ------------------------------------------------------------------------ 1. New England (CT, ME, MA, NH, RI, VT).............. 8,903 2. Middle Atlantic (PA, NJ, NY)...................... 9,844 3. East North Central (IL, IN, MI, OH, WI)........... 7,762 4. West North Central (IA, KS, MN, MO, NE, ND, SD)... 7,614 5. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, 10,919 WV)................................................. 6. East South Central (AL, KY, MS, TN)............... 8,315 7. West South Central (AR, LA, OK, TX)............... 5,911 8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)......... 8,048 9. Pacific (AK, CA, HI, OR, WA)...................... 8,932 ------------------------------------------------------------------------ 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 proposed rule, 5,000 discharges is the minimum criterion for all hospitals, except for osteopathic hospitals for which the minimum criterion is 3,000 discharges. [[Page 18270]]

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 low-volume hospital payment adjustment is implemented in the regulations at 42 CFR 412.101. 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 and is based on the per discharge amount paid to the qualifying hospital. 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. The payment adjustment for low-volume hospitals is not budget neutral. As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69348 through 69352), Section 306 of the Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), extended the temporary changes to the low-volume hospital qualifying criteria and payment adjustment under the IPPS, that is the modified definition of low-volume hospital and the methodology for calculating the payment adjustment for low- volume hospitals under section 1886(d)(12), through December 31, 2024. Section 3201 of the American Relief Act, 2025 (Pub. L. 118-158), further extended those temporary changes through March 31, 2025. Most recently, section 2201 of the Full-Year Continuing Appropriations and Extensions Act, 2025 (Pub. L. 119-4), enacted on March 15, 2025, provides an extension of those temporary changes to the qualifying criteria and payment adjustment methodology for certain low-volume hospitals through September 30, 2025. Absent further Congressional action, beginning October 1, 2025, the low-volume hospital qualifying criteria and payment adjustment are set to revert to the statutory requirements that were in effect prior to FY 2011, and the preexisting low-volume hospital payment adjustment methodology and qualifying criteria, as implemented in FY 2005 and discussed later in this section, will resume. We discuss the payment policies for FY 2026, in section V.D.3. of the preamble of this proposed rule. Table V.D.-01--Low-Volume Hospital Qualifying Criteria and Payment Adjustment for FYs 2019 and Subsequent FYs ---------------------------------------------------------------------------------------------------------------- Road Total Fiscal years miles discharges Payment adjustment ---------------------------------------------------------------------------------------------------------------- 2019 through 2025......................... >15 <=500 0.25. >500 <3,800 0.25-[0.25/3300] x (number of total discharges-500) = (95/330)-(number of total discharges/13,200). 2026 and subsequent years................. >25 <200 0.25. ----------------------------------------------------------------------------------------------------------------

2. Extension of Temporary Changes to Low-Volume Hospital Payment

Definition and Payment Adjustment Methodology and Conforming Changes to Regulations As discussed previously, prior to the enactment of the American Relief Act, 2025, the temporary changes to the low-volume hospital qualifying criteria and payment adjustment provided by section 306 of CAA, 2024 were set to expire on January 1, 2025. Section 3201 of the American Relief Act, 2025 extended the temporary changes to the low- volume hospital qualifying criteria and payment adjustment under the IPPS for the portion of FY 2025 beginning on January 1, 2025, and ending on March 31, 2025 (that is, for discharges occurring before April 1, 2025). We note that we address the extension provided by section 3201 of the American Relief Act, 2025, in Change Request 13949 (Transmittal 13035), issued January 6, 2025. For additional information, please refer to the transmittal https://www.cms.gov/medicare/regulations-guidance/transmittals/2025-transmittals/r13035otn. Subsequently, section 2201 of the Full-Year Continuing Appropriations and Extensions Act, 2025 further extended the temporary changes to the low-volume hospital qualifying criteria and payment adjustment under the IPPS for the remainder of FY 2025 (that is, for discharges occurring before October 1, 2025). We note the extension provided by section 2201 of the Full-Year Continuing Appropriations and Extensions Act, 2025 will be addressed in forthcoming guidance. Under section 1886(d)(12)(C)(i) of the Act, as amended by the Full- Year Continuing Appropriations and Extensions Act, 2025, for FYs 2019 through FY 2025, 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. In accordance with the existing regulations at Sec. 412.101(a), we define the term ``road miles'' to mean ``miles'' as defined at Sec. 412.92(c)(1). Under section 1886(d)(12)(D) of the Act, as amended, for discharges occurring in FYs 2019 through 2025, the Secretary determines 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), we specified a continuous, linear sliding scale formula to determine the low volume payment adjustment, as reflected in the regulations at Sec. 412.101(c)(3)(ii). 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. 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. For qualifying hospitals with fewer than 3,800 total discharges but more than 500 total discharges, the low-volume hospital payment adjustment is calculated using the formula at Sec. 412.101(c)(3)(ii) (which [[Page 18271]] is shown in the Table V.D.-01). For this purpose, the term ``discharge'' refers to total discharges, regardless of payer (that is, Medicare and non-Medicare discharges). The 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 (Sec. 412.101(b)(2)(iii)). The low-volume hospital payment adjustment for FYs 2019 through 2024 and the portion of FY 2025 beginning on October 1, 2024, and ending on December 31, 2024, is set forth in the current regulations at Sec. 412.101(c)(3). In this proposed rule, we propose to make conforming changes to the regulation text in Sec. 412.101 to reflect the extensions of the changes to the qualifying criteria and the payment adjustment methodology for low-volume hospitals in accordance with provisions of the American Relief Act, 2025 and the Full-Year Continuing Appropriations and Extensions Act, 2025. Specifically, we propose to make conforming changes to paragraphs (b)(2)(iii) and (c)(3) introductory text of Sec. 412.101 to reflect that the low-volume hospital payment adjustment policy in effect through FY 2025 is the same low-volume hospital payment adjustment policy in effect for FYs 2019 through December 31, 2024 (as described in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41398 through 41399) and in the FY 2025 IPPS/LTCH final rule (89 FR 69348 through 69352)). In addition, in accordance with the provisions of the Full-Year Continuing Appropriations and Extensions Act, 2025, we propose to make conforming changes to paragraphs (b)(2)(i) and (c)(1) of Sec. 412.101 to reflect that for FY 2026 and subsequent fiscal years, the low-volume hospital payment adjustment policy will revert back to the low-volume hospital payment adjustment policy in effect for FYs 2005 through 2010, as described in section V.D.3. of the preamble of this proposed rule. We further propose that if the temporary changes to the low-volume payment adjustment are extended through legislation beyond September 30, 2025, we would make the conforming changes to the regulations at Sec. 412.101(b)(2)(i) and (iii) and (c)(1) and (3) to reflect any further extension.

3. Payment Adjustment for FY 2026 and Subsequent Fiscal Years

In accordance with section 1886(d)(12) of the Act, as amended by section 2201 of the Full-Year Continuing Appropriations and Extensions Act, 2025, beginning with discharges occurring on or after October 1, 2025, the low-volume hospital definition and payment adjustment methodology will revert to the statutory requirements that were in effect prior to the amendments made by the Affordable Care Act and subsequent legislation. Specifically, section 1886(d)(12)(B) of the Act requires, for discharges occurring in FYs 2005 through 2010 and for discharges occurring in FY 2026 and subsequent years, that the Secretary determine an applicable percentage increase for these low- volume hospitals based on the ``empirical relationship'' between the standardized cost-per-case for such hospitals and the total number of discharges of such hospitals and the amount of the additional incremental costs (if any) that are associated with such number of discharges. The statute thus mandates that the Secretary develop an empirically justifiable adjustment based on the relationship between costs and discharges for these low-volume hospitals. Therefore, absent further Congressional action, effective FY 2026 and subsequent years, under current policy at Sec. 412.101(b), to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 discharges total, including both Medicare and non-Medicare discharges) during the fiscal year. For FY 2026 and subsequent years, the statute specifies that a low-volume hospital must have less than 800 discharges during the fiscal year. However, as required by section 1886(d)(12)(B)(i) of the Act, the Secretary has developed an empirically justifiable payment adjustment based on the relationship, for IPPS hospitals with less than 800 discharges, between the additional incremental costs (if any) that are associated with a particular number of discharges. Based on an analysis we conducted for the FY 2005 IPPS final rule (69 FR 49099 through 49102), a 25-percent low-volume adjustment to all qualifying hospitals with less than 200 discharges was found to be most consistent with the statutory requirement to provide relief for low-volume hospitals where there is empirical evidence that higher incremental costs are associated with low numbers of total discharges. (Under the policy we established in that same final rule, hospitals with between 200 and 799 discharges do not receive a low-volume hospital adjustment.) As discussed previously, for FYs 2005 through 2010 and FY 2019 and subsequent years, the discharge determination is made based on the hospital's number of total discharges, that is, Medicare and non- Medicare discharges. The 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 (Sec. 412.101(b)(2)(i)). 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. We note that, for FYs 2011 through 2018, we used the most recently available MedPAR data to determine the hospital's Medicare discharges because only Medicare discharges were used to determine if a hospital met the discharge criterion for those years. In addition to the discharge criterion, a hospital must also meet the mileage criterion to qualify for the low-volume payment adjustment. As specified by section 1886(d)(12)(C)(i) of the Act, a low-volume hospital must be more than 25 road miles (or 15 road miles for FYs 2011 through 2025) from another subsection (d) hospital. Accordingly, for FY 2026 and subsequent fiscal years, in addition to the discharge criterion, the eligibility for the low-volume payment adjustment is also dependent upon the hospital meeting the mileage criterion at Sec. 412.101(b)(2)(i), which specifies that a hospital must be located more than 25 road miles from the nearest subsection (d) hospital, consistent with section 1886(d)(12)(C)(i) of the Act. We define, at Sec. 412.101(a), the term ``road miles'' to mean ``miles'' as defined at Sec. 412.92(c)(1) (75 FR 50238 through 50275 and 50414). As previously noted, we propose to make conforming changes to paragraphs (b)(2)(i) and (c)(1) of Sec. 412.101 to reflect that for FY 2026 and subsequent fiscal years, the low-volume hospital payment adjustment policy is the same as that in effect for FYs 2005 through 2010.

4. Process for Requesting and Obtaining the Low-Volume Hospital Payment

Adjustment for FY 2026 In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 and 50414) and subsequent rulemaking, most recently in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69348 through 69352), 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 Sec. 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 [[Page 18272]] 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, 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 Sec. 412.101(b)(2)(i) and (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 must refer to its most recently submitted cost report for total discharges (Medicare and non-Medicare) to decide whether or not to apply for low-volume hospital status for a particular fiscal year. In addition to the discharge criterion, eligibility for the low- volume hospital payment adjustment is also dependent upon the hospital meeting the applicable mileage criterion specified in section 1886(d)(12)(C)(i) of the Act, which is codified at Sec. 412.101(b)(2), for the fiscal year. To meet the mileage criterion to qualify for the low-volume hospital payment adjustment for FY 2026, a hospital must be located more than 25 road miles from the nearest subsection (d) hospital. (We define in Sec. 412.101(a) the term ``road miles'' to mean ``miles'' as defined in Sec. 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 hospital(s), 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. 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). 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 2026, we are proposing 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). Specifically, for FY 2026, a hospital must make a written request for low-volume hospital status that is received by its MAC no later than September 1, 2025, in order for the 25-percent, low-volume, add-on payment adjustment to be applied to payments for its discharges beginning on or after October 1, 2025. If a hospital's written request for low-volume hospital status for FY 2026 is received after September 1, 2025, and if the MAC determines the hospital meets the criteria to qualify as a low- volume hospital, the MAC would apply the low-volume hospital payment adjustment to determine the payment for the hospital's FY 2026 discharges, effective prospectively within 30 days of the date of the MAC's low-volume hospital status determination. Under this process, a hospital that qualified for the low-volume hospital payment adjustment for FY 2025, may continue to receive a low- volume hospital payment adjustment for FY 2026 without reapplying if it meet both the discharge criterion and the mileage criterion applicable for FY 2026 (that is, the preexisting low-volume hospital qualifying criteria as implemented in FY 2005 and specified in the existing regulations at Sec. 412.101(b)(2)(i), as discussed previously). In such a case, we propose that the hospital must send written verification that is received by its MAC no later than September 1, 2025, stating that it meets the mileage criterion for FY 2026, consistent with our process in previous years. If a hospital's request for low-volume hospital status for FY 2026 is received after September 1, 2025, and if the MAC determines the hospital meets the criteria to qualify as a low-volume hospital, the MAC will apply the applicable low-volume add-on payment adjustment to determine the payment for the hospital's discharges for the applicable portion of FY 2026, effective prospectively within 30 days of the date of the MAC's low-volume hospital status determination.

1. Background for the MDH Program

Section 1886(d)(5)(G) of the Act provides special non-budget neutral payment protections, under the IPPS, to a Medicare-dependent, small rural hospital (MDH). MDHs are paid for their hospital inpatient services based on the higher of the Federal rate or a blended rate based in part on the Federal rate and in part on the MDH's hospital specific rate. (For additional information on the MDH program and the payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51683 through 51684).) Section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025 (Pub. L. 119-4), enacted on March 15, 2025, extended the MDH program through September 30, 2025 (that is, for discharges occurring before October 1, 2025). Prior to enactment of the Full-Year Continuing Appropriations and Extensions Act, 2025, the MDH program was only to be in effect for FY 2025 discharges occurring before April 1, 2025. Under current law, the MDH program provisions at section 1886(d)(5)(G) of the Act will expire for [[Page 18273]] discharges on or after October 1, 2025. Beginning with discharges occurring on or after October 1, 2025, absent further Congressional action, all hospitals that previously qualified for MDH status will be paid based on the Federal rate. Since the extension of the MDH program through FY 2012 provided by section 3124 of the Affordable Care Act, the MDH program had been extended by subsequent legislation as follows: section 606 of the American Taxpayer Relief Act (Pub. L. 112-240) extended the MDH program through FY 2013 (that is, for discharges occurring before October 1, 2013). Section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) extended the MDH program through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014). Section 106 of the Protecting Access to Medicare Act (Pub. L. 113-93) extended the MDH program through the first half of FY 2015 (that is, for discharges occurring before April 1, 2015). Section 205 of the MACRA (Pub. L. 114- 10) extended the MDH program through FY 2017 (that is, for discharges occurring before October 1, 2017). Section 50205 of the Bipartisan Budget Act (Pub. L. 115-123) extended the MDH program through FY 2022 (that is for discharges occurring before October 1, 2022). Section 102 of the Continuing Appropriations and Ukraine Supplemental Appropriations Act, 2023 (Pub. L. 117-180) extended the MDH program through December 16, 2022. Section 102 of the Further Continuing Appropriations and Extensions Act, 2023 (Pub. L. 117-229) extended the MDH program through December 23, 2022. Section 4102 of the Consolidated Appropriations Act, 2023 (Pub. L. 117-328) extended the MDH program through FY 2024 (that is for discharges occurring before October 1, 2024). Section 307 of the CAA, 2024 (Pub. L. 118-42) extended the MDH program through December 31, 2024 (that is, for discharges occurring before January 1, 2025). Section 3202 of the American Relief Act, 2025 (Pub. L. 118-158) extended the MDH program through March 31, 2025 (that is, for discharges occurring before April 1, 2025). Lastly, under current law, section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025 (Pub. L. 119-4) extended the MDH program through September 30, 2025 (that is, for discharges occurring before October 1, 2025). For additional information on the extensions of the MDH program after FY 2012, we refer readers to the following Federal Register documents: The FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53413 through 53414); the FY 2013 IPPS notice (78 FR 14689); the FY 2014 IPPS/LTCH PPS final rule (78 FR 50647 through 50649); the FY 2014 interim final rule with comment period (79 FR 15025 through 15027); the FY 2014 notice (79 FR 34446 through 34449); the FY 2015 IPPS/LTCH PPS final rule (79 FR 50022 through 50024); the August 2015 interim final rule with comment period (80 FR 49596); the FY 2017 IPPS/ LTCH PPS final rule (81 FR 57054 through 57057); the FY 2018 notice (83 FR 18303 through 18305); the FY 2019 IPPS/LTCH PPS final rule (83 FR 41429); the FY 2024 IPPS/LTCH PPS final rule (88 FR 59045); and the FY 2025 IPPS/LTCH PPS final rule (89 FR 69352).

2. Implementation of Legislative Extension of MDH Program

Prior to the enactment of Public Law 119-4, under section 3202 of Public Law 118-158, the MDH program authorized by section 1886(d)(5)(G) of the Act was set to expire on April 1, 2025. Section 2202 of Public Law 119-4 amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act by striking ``April 1, 2025'' and inserting ``October 1, 2025''. Section 2202 of Public Law 119-4 also made conforming amendments to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the Act. Therefore, we are proposing to make conforming changes to the regulations governing the MDH program at Sec. 412.108(a)(1) and (c)(2)(iii) and the general payment rules at Sec. 412.90(j) to reflect the extension of the MDH program through September 30, 2025. As a result of the extension of the MDH program through September 30, 2025, as provided by section 2202 of Public Law 119-4, a provider that was classified as an MDH as of March 31, 2025, will continue to be classified as an MDH as of April 1, 2025, with no need to reapply for MDH classification. We addressed the extension provided by section 3202 of the American Relief Act, 2025, in Change Request 13949 (Transmittal 13035), issued January 6, 2025. For additional information, please refer to the transmittal https://www.cms.gov/medicare/regulations-guidance/transmittals/2025-transmittals/r13035otn. We intend to address the extension provided by section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025 in forthcoming guidance.

3. Expiration of the MDH Program

Because section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025 extended the MDH program through September 30, 2025, only, beginning October 1, 2025, the MDH program will no longer be in effect. Since the MDH program is not authorized by statute beyond September 30, 2025, absent Congressional action, beginning October 1, 2025, all hospitals that previously qualified for MDH status under section 1886(d)(5)(G) of the Act will no longer have MDH status and will be paid based on the Federal rate. When the MDH program was set to expire at the end of FY 2012, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405), we revised our sole community hospital (SCH) policies to allow MDHs to apply for SCH status in advance of the expiration of the MDH program and be paid as such under certain conditions. We codified these changes in the regulations at Sec. 412.92(b)(2)(i) and (v). For additional information, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53674). We note that a MDH that classifies as a SCH in anticipation of the MDH program expiration would have to reapply for MDH classification in accordance with the regulations at 42 CFR 412.108(b) and meet the classification criteria at 42 CFR 412.108(a) in the event that the MDH program is further extended and the provider wishes to return to its classification as a MDH. As noted, we are proposing to make conforming changes to the regulations governing the MDH program at Sec. 412.108(a)(1) and (c)(2)(iii) and the general payment rules at Sec. 412.90(j) to reflect the extension of the MDH program through September 30, 2025. We are further proposing that if the MDH program were to be extended by law beyond September 30, 2025, similar to how it was extended by prior legislation as described previously, we would, depending on timing of such legislation in relation to the final rule, modify our proposed conforming changes to the regulations governing the MDH program at Sec. 412.108(a)(1) and (c)(2)(iii) and the general payment rules at Sec. 412.90(j) to reflect any such further extension of the MDH program. These modifications to our proposed conforming changes would only be made if the MDH program were to be extended by statute beyond September 30, 2025.

F. Payment for Indirect and Direct Graduate Medical Education Costs

(Sec. Sec. 412.105 and 413.75 Through 413.83)

1. Background

Section 1886(h) of the Act, as added by section 9202 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 99-272) and [[Page 18274]] as currently implemented in the regulations at 42 CFR 413.75 through 413.83, establishes a methodology for determining payments to hospitals for the direct costs of approved graduate medical education (GME) programs. Section 1886(h)(2) of the Act sets forth a methodology for the determination of a hospital-specific base-period per resident amount (PRA) that is calculated by dividing a hospital's allowable direct costs of GME in a base period by its number of full-time equivalent (FTE) residents in the base period. The base period is, for most hospitals, the hospital's cost reporting period beginning in FY 1984 (that is, October 1, 1983, through September 30, 1984). The base year PRA is updated annually for inflation. In general, Medicare direct GME payments are calculated by multiplying the hospital's updated PRA by the weighted number of FTE residents working in all areas of the hospital complex (and at non- provider sites, when applicable), and the hospital's Medicare share of total inpatient days. Section 1886(d)(5)(B) of the Act provides for a payment adjustment known as the indirect medical education (IME) adjustment under the IPPS for hospitals that have residents in an approved GME program, in order to account for the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The regulations regarding the calculation of this additional payment are located at 42 CFR 412.105. The hospital's IME adjustment applied to the DRG payments is calculated based on the ratio of the hospital's number of FTE residents training in either the inpatient or outpatient departments of the IPPS hospital (and, for discharges occurring on or after October 1, 1997, at non-provider sites, when applicable) to the number of inpatient hospital beds. The calculation of both direct GME payments and the IME payment adjustment is affected by the number of FTE residents that a hospital is allowed to count. Generally, the greater the number of FTE residents a hospital counts, the greater the amount of Medicare direct GME and IME payments the hospital will receive. In an attempt to end the implicit incentive for hospitals to increase the number of FTE residents, Congress established a limit on the number of allopathic and osteopathic residents that a hospital could include in its FTE resident count for direct GME and IME payment purposes in the Balanced Budget Act of 1997 (Pub. L. 105-33). Under section 1886(h)(4)(F) of the Act, for cost reporting periods beginning on or after October 1, 1997, a hospital's unweighted FTE count of residents for purposes of direct GME cannot exceed the hospital's unweighted FTE count for direct GME in its most recent cost reporting period ending on or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for IME during that cost reporting period is applied, effective for discharges occurring on or after October 1, 1997. Dental and podiatric residents are not included in this statutorily mandated cap.

2. Calculating Full-Time Equivalent Counts and Caps for Cost Reporting

Periods Other Than Twelve Months CMS's full-time equivalent (FTE) counting regulations, as established in the September 29, 1989, Federal Register (54 FR 40291), specify that no individual should be counted as more than one FTE, and that FTE status is based on the total time necessary to fill a residency slot and the share of total time spent training at each training site (see 42 CFR 412.105(f)(1)(iii)(A) for IME and 42 CFR 413.78(b)(1) for DGME). The requirements for what constitutes full-time participation may vary from specialty to specialty, or among different programs in the same specialty. Additionally, full-time equivalency may be computed based on various increments, such as hours, days, weeks, or months, in order for a hospital to obtain the full-time equivalent which it is allowed to count. Full-time equivalency for each resident is computed by determining the portion of total allowable training time that may be claimed by each hospital. In general, these data are sourced from a ``master'' rotation schedule for each approved residency program. Each rotation may consist of both allowable and non-allowable training time. For example, the time that a resident spends in a hospital's distinct-part unit is allowable to the hospital for purposes of DGME, but not for purposes of IME, while time spent in research activities at an offsite nonpatient care facility is not allowable for either DGME or IME. Additionally, a hospital cannot claim the time spent by residents training at another hospital. Consistent with the regulations at 42 CFR 413.75(d), hospitals that cross-train residents in the same program need to agree on the method of computing FTEs to ensure that no resident is counted as more than one FTE. For purposes of completing the Medicare cost report (Worksheet E, Part A, for IME and Worksheet E-4 for DGME of Form CMS-2552-10), full- time equivalency is typically calculated on the basis of 365 days (or 366 days, in the case of a leap year) for DGME versus the actual number of days in the cost reporting period for IME. Thus, for a standard 12- month cost reporting period, there is no difference in the calculation of the DGME and IME FTE counts. In the case of a cost reporting period other than 12 months in length, the statute for both DGME and IME instructs the Secretary to make ``appropriate modifications'' to ensure that the FTE counts are based on the equivalent of 12 months. Specifically, for DGME, section 1886(h)(4)(G)(ii) states that if any cost reporting period beginning on or after October 1, 1997, is not equal to 12 months, the Secretary shall make appropriate modifications to ensure that the average full- time equivalent resident counts pursuant to section 1886(h)(4)(G)(i) are based on the equivalent of full 12-month cost reporting periods. Similarly, for IME, section 1886(d)(5)(B)(vii) states that if any cost reporting period beginning on or after October 1, 1997, is not equal to 12 months, the Secretary shall make appropriate modifications to ensure that the average full-time equivalent residency count pursuant to section 1886(d)(5)(B)(vi)(II) is based on the equivalent of full 12- month cost reporting periods. The procedures for determining the total DGME and IME FTE counts for a non-12-month cost reporting period reflect the underlying differences in the two payment methodologies. A hospital's DGME count represents the number of FTE residents working in the healthcare complex over the course of an entire cost reporting period, and the total DGME payment is based on the hospital's PRA, which reflects the average costs incurred per resident during a 12-month base period or equivalent (see discussion at 54 FR 40290). Accordingly, the DGME FTE count must be prorated to reflect the length of a short or long cost reporting period, as illustrated in the following section of this preamble. By contrast, the IME adjustment reflects the average intensity of teaching activity in a hospital at any given time, and the total IME payment is based on the hospital's DRG payments during a cost reporting period. Because the size of a hospital's DRG payments already reflects the amount of patient care furnished during a short or long cost reporting period, it is not necessary to prorate the IME FTE count in the same manner as the DGME FTE count. Similarly, as explained below, proration must be applied to a hospital's [[Page 18275]] DGME FTE cap (but not the IME FTE cap) to account for a non-12-month cost reporting period, as well as to the prior- and penultimate-year DGME FTE counts (but not the IME FTE counts) for the purpose of calculating the three-year rolling average FTE count. We also note that, while these methodological distinctions become apparent in the context of calculating the counts and caps for a non-12-month cost reporting period, they are equally applicable in the case of a standard 12-month cost reporting period. While CMS's FTE counting policy is long-established and widely used in existing cost reporting software and the Intern and Resident Information System (IRIS) software, we are taking the opportunity to restate and clarify our FTE counting policy in rulemaking. We are not proposing any changes to the FTE counting policy at this time. a. Calculating FTE Counts To determine the unweighted FTE count for DGME, whether or not the cost reporting period is 12 months, or more or less, the following steps should be used: For each resident and each of that resident's individual rotations, determine the ratio of total days allowable to the hospital in that rotation, to total days in that entire rotation, consistent with the regulations at 42 CFR 413.78. Multiply the ratio from Step 1 by the ratio of (total days in the entire rotation divided by 365) (or 366, in the case of a leap year).\224\ This represents the portion of total FTE time for this rotation that may be claimed by the hospital for purposes of DGME payment, prorated for the length of the cost reporting period. --------------------------------------------------------------------------- \224\ 366 days should be used when the cost reporting period includes February 29. --------------------------------------------------------------------------- Calculate the sum of the products from Step 2 for all residents and rotations in the hospital's programs to arrive at the hospital's total unweighted DGME FTE count for the cost reporting period. Stated formulaically: Unweighted DGME FTE count = Sum of [(Allowable days in a rotation/Total days in the rotation) x (Total days in the rotation/365)] Note: This portion of the FTE calculation is not weighted for years outside of the Initial Residency Period, as the application of weighting factors is a separate step in the calculation of DGME payment on the cost report. See 42 CFR 413.79(a) for more information about the Initial Residency Period. Example: A resident worked in a rotation at Hospital A for 4 weeks (28 days) but spent 1 week (7 days) offsite engaged in non-patient care research. Step 1: Consistent with the DGME regulations, the total time allowable to Hospital A for this rotation is 21 days. The ratio is (21 days/28 days) = 0.75. Step 2: The portion of total FTE time for this rotation that Hospital A may claim for purposes of DGME payment is 0.75 x (28/ 365) = 0.06 FTE. (Note: In the case of a leap year, divide by 366 days.) Step 3: Repeat Steps 1 and 2 for all residents and rotations in the hospital's programs, and sum the results from Step 2 to arrive at Hospital A's total unweighted DGME FTE count for the cost reporting period. As stated above, 365 or 366 days is used as the denominator in Step 2 of the calculation regardless of the actual number of days in the cost reporting period. Thus, in computing the DGME FTE count, the length of the cost reporting period can affect the full-time equivalency determined for a given number of residents training at the hospital. For example, there would be fewer total rotations in a 3- month cost reporting period than in a 12-month period, and thus a commensurately smaller DGME count calculated in accordance with the procedure outlined above. Note that the hospital's updated PRA is always used and is not prorated, as it represents that hospital's average cost to train an FTE resident determined in a base period, and is not dependent upon the length of cost reporting periods subsequent to the PRA base period. In this manner, the DGME FTE count continues to be based on the ``equivalent of 12 months,'' as required by section 1886(h)(4)(G)(ii) of the Act. This procedure is performed to determine the total unweighted DGME FTE count on Form CMS-2552-10, Worksheet E-4, line 6 and line 7, as well as for the weighted FTE counts on lines 8 through 11, lines 15 and 16, and lines 21 and 22. For lines that record weighted FTE counts, the appropriate weighting factors are applied consistent with the regulations at 42 CFR 413.79(a). As mentioned above, the procedure for determining the 12-month equivalent IME FTE count, in accordance with section 1886(d)(5)(B)(vii) of the Act, is different in that the number of days used in the denominator of the calculation in Step 2 depends on the length of the cost reporting period. For 12-month cost reporting periods, a denominator of 365 days is used (or 366 days in the case of a leap year), while for cost reporting periods of different lengths, the denominator is equal to the actual number of days in the cost reporting period. The resulting FTE count represents the average number of residents in the hospital at any given time, and in turn is multiplied by the DRG payments in that same cost reporting period to obtain the hospital's total IME payment. Accordingly, to determine the FTE count for IME, whether or not the cost reporting period is 12 months, or more or less, the following steps should be used: For each resident and each of that resident's individual rotations, determine the ratio of total days allowable to the hospital in that rotation, to total days in that entire rotation, consistent with the regulations at 42 CFR 412.105(f). Multiply the ratio from Step 1 by the ratio of (total days in the entire rotation divided by the actual number of days in the cost reporting period). This represents the portion of total FTE time for this rotation that may be claimed by the hospital for purposes of IME payment. Calculate the sum of the products from Step 2 for all residents and rotations in the hospital's programs to arrive at the hospital's total IME FTE count for the cost reporting period. Stated formulaically: IME FTE count = Sum of [(Allowable days in a rotation/Total days in the rotation) x (Total days in the rotation/Days in cost reporting period)] Example 1: 12-Month Cost Reporting Period (365 Days) A resident worked in a rotation at Hospital A for 4 weeks (28 days) but spent 1 week (7 days) offsite engaged in non-patient care research. Step 1: Consistent with the IME regulations, the total time allowable to Hospital A for this rotation is 21 days. The ratio is (21 days/28 days) = 0.75. Step 2: The portion of total FTE time for this rotation that Hospital A may claim for purposes of IME payment is 0.75 x (28/365) = 0.06 FTE. (Note: In the case of a leap year, divide by 366 days.) Step 3: Repeat Steps 1 and 2 for all residents and rotations in the hospital's programs, and sum the results from Step 2 to arrive at Hospital A's total IME FTE count for the cost reporting period. Example 2: 3-Month Cost Reporting Period (92 Days) During a 92-day cost reporting period, a resident worked in a rotation at Hospital A for 4 weeks (28 days) but [[Page 18276]] spent 1 week (7 days) offsite engaged in non-patient care research. Step 1: Consistent with the IME regulations, the total time allowable to Hospital A for this rotation is 21 days. The ratio is (21 days/28 days) = 0.75. Step 2: The portion of total FTE time for this rotation that Hospital A may claim for purposes of IME payment is 0.75 x (28/92) = 0.23 FTE. Step 3: Repeat Steps 1 and 2 for all residents and rotations in the hospital's programs, and sum the results from Step 2 to arrive at Hospital A's total IME FTE count for the 3-month cost reporting period. Consistent with the regulations at 42 CFR 412.105(b), the bed count used in the denominator of the intern and resident to bed (IRB) ratio is determined by counting the number of available bed days during the cost reporting period and dividing that number by the number of days in the cost reporting period. While the IME FTE count itself is not prorated, the final amount of a hospital's IME payment nonetheless will be commensurate with the cost reporting period by virtue of the total amount of its DRG payments, which will generally increase or decrease as a result of the length of the period. For example, if a cost reporting period is 12 months long, the DRG payments by which the IME adjustment factor is multiplied to derive the total IME payment will also reflect 12 months of patient care. By contrast, the DRG payments for the 3-month (or 92-day) cost reporting period in Example 2 would reflect just 3 months of patient care. This procedure is performed to determine the total IME FTE count on Form CMS-2552-10, Worksheet E, Part A, lines 10 through 12, as well as the FTE counts on lines 16 and 17 and lines 24 and 25. b. Calculating FTE Caps for Cost Reporting Periods Other Than Twelve Months Just as the DGME FTE counts are prorated on the basis of a standard 365- or 366-day cost reporting period, a hospital's DGME FTE cap must similarly be prorated for cost reporting periods other than 12 months in length. To calculate the prorated cap, the hospital's regular 12- month DGME FTE cap is divided by 365 days (or 366 days, in the case of a leap year) and then multiplied by the actual number of days in the cost reporting period. For example, if a hospital has a regular DGME FTE cap of 270 FTEs, then the prorated DGME cap for a 3-month cost reporting period with 92 days would be: (270/365) x (92) = 68.05 FTEs. (If the hospital subsequently had a 9-month cost report with 273 days, the DGME FTE cap for the 9-month cost report would be calculated as follows: (270/365) x (273) = 201.95 FTEs. Note that 68.05 + 201.95 = 270, equivalent to the total DGME cap for 12 months (totals may be slightly off due to rounding)). Proration applies similarly to all lines on Worksheet E-4 that are associated with the FTE cap, including lines 1 through 5 and line 20. For reasons similar to those explained above in the discussion of the FTE counts, it is not necessary to prorate the IME FTE caps for a non-12-month cost reporting period; the same IME FTE cap and any associated cap adjustments apply to a cost reporting period that is less than or more than 12 months. c. Calculating the Three-Year Rolling Average for Cost Reporting Periods of Unequal Lengths Sections 1886(d)(5)(B)(vi)(II) and 1886(h)(4)(G)(i) of the Act require that a hospital's FTE counts for IME and DGME payment, respectively, in the current cost reporting period be based on a three- year rolling average. That is, the FTE counts in the current cost reporting period, prior cost reporting period, and penultimate cost reporting period are summed, then divided by 3. These provisions phase in any reductions or increases in payment over a three-year period for hospitals that experience a change in the number of residents they train. The regulations are at 42 CFR 412.105(f)(1)(v) for IME and 42 CFR 413.79(d)(3) for DGME. For reasons similar to those discussed above, no adjustments need to be made to the prior and penultimate years when calculating the rolling average IME count. However, if the current, prior and/or penultimate year cost reporting periods are of different lengths, adjustments must be made to the respective DGME FTE counts so that the rolling average is based on quantities that are comparable with one another. Accordingly, if the current cost reporting period is other than 12 months in length, the prior- and penultimate-year DGME FTE counts must be prorated, yielding 3 years of comparable FTE counts from which to calculate the rolling average: For the prior year, take the FTE count that would be reported on Worksheet E-4, line 12, and divide by 365 (or 366, if the prior year cost reporting period includes February 29), and then multiply that quotient by the number of days in the current non-12-month cost reporting period. Report this prorated FTE count on Worksheet E-4, line 12, of the current year cost report. For the penultimate year, take the FTE count that would be reported on Worksheet E-4, line 13, and divide by 365 (or 366, if the penultimate year cost reporting period includes February 29), and then multiply that quotient by the number of days in the current non-12- month cost reporting period. Report this prorated FTE count on Worksheet E-4, line 13, of the current year cost report. Stated formulaically: Prorated DGME FTE count = [(Total annual DGME FTE count/365 or 366) x (Number of days in current cost reporting period)] For example, if the current year cost reporting period is 3 months (92 days), while the prior year cost reporting period was 12 months, and the hospital's total capped DGME FTE count in the prior year was 300, then the prorated FTE count for the prior year would be: [(300/ 365) x (92)] = 75.62. That is, a DGME FTE count of 300 in a 12-month cost reporting period would be the equivalent of 75.62 FTEs in the current year 3-month cost reporting period. On the current year cost report, the hospital would enter 75.62 on line 12 of Worksheet E-4 (prior year FTE count). If the total capped DGME FTE count in the penultimate cost reporting period was 302, and the penultimate year was also 12 months, then the prorated FTE count for the penultimate year would be: [(302/365) x (92)] = 76.12. On the current year cost report, the hospital would enter 76.12 on line 13 of Worksheet E-4 (penultimate year FTE count). We note that in this scenario, if either the prior or penultimate year cost reporting period was also other than 12 months in length, then it would be necessary to adjust the calculation to account for that difference. For instance, suppose that the hospital's penultimate year cost reporting period was 9 months or 273 days long, and its capped DGME FTE count during that period (prorated on a 12-month basis as described earlier in this preamble) was 225. In this case, rather than dividing by 365 days, the hospital would divide the penultimate- year DGME FTE count by 273 days, as follows: [(225/273) x (92)] = 75.82 FTEs. Thus, the hospital would enter 75.82 on line 13 of Worksheet E-4 of the current year cost report. Conversely, if the current year is a full cost reporting period, but the prior and/or penultimate cost reporting period was other than 12 months, then the prior and/or penultimate year DGME FTE counts (which have been prorated on a 12-month basis as described earlier [[Page 18277]] in this preamble) must be annualized to yield 12-month equivalents. This procedure avoids understatement (or overstatement) of the DGME FTE count in the current year and, similar to the proration of DGME counts in the preceding scenario, results in 3 years of comparable FTE counts from which to calculate the DGME rolling average: For the prior year, take the FTE count that would be reported on Worksheet E-4, line 12, and divide by the number of days in the non-12- month cost reporting period, and then multiply that quotient by 365 (or 366, if the current cost reporting period includes February 29). Report this annualized FTE count on Worksheet E-4, line 12 of, the current year cost report. For the penultimate year, take the FTE count that would be reported on Worksheet E-4, line 13, and divide by the number of days in the non- 12-month cost reporting period, and then multiply that quotient by 365 (or 366, if the current cost reporting period includes February 29). Report this annualized FTE count on Worksheet E-4, line 13 of the current year cost report. Stated formulaically: Annualized DGME FTE count = [(Prorated DGME FTE count/Number of days in the non-12-month cost reporting period) x (365 or 366)] For example, if the current year cost reporting period is 12 months (365 days), while the prior year cost reporting period was 3 months (92 days), and the prior-year capped DGME FTE count (prorated on a 12-month basis) was 75, then the annualized FTE count for the prior year would be: [(75/92) x (365)] = 297.55. On the current year cost report, the hospital would enter 297.55 on line 12 of Worksheet E-4 (prior year FTE count).

3. Notice of Closure of Teaching Hospitals and Opportunity To Apply for

Available Slots Section 5506 of the Patient Protection and Affordable Care Act (Pub. L. 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (collectively, ``Affordable Care Act''), authorizes the Secretary to redistribute residency slots after a hospital that trained residents in an approved medical residency program closes. Section 5506 of the Affordable Care Act instructs the Secretary to establish a process by regulation that redistributes slots from teaching hospitals that close to hospitals that meet the certain criteria, with priority given to certain hospitals including those located in the same Core Based Statistical Area (CBSA), in a contiguous CBSA or in the same state as the closed hospital. Specifically, section 5506 of the Affordable Care Act amended the Act by adding subsection (vi) to section 1886(h)(4)(H) of the Act and modifying language at section 1886(d)(5)(B)(v) of the Act, to instruct the Secretary to establish a process to increase the FTE resident caps for other hospitals based upon the full-time equivalent (FTE) resident caps in teaching hospitals that closed on or after a date that is 2 years before the date of enactment (that is, March 23, 2008). In the CY 2011 Outpatient Prospective Payment System (OPPS) final rule with comment period (75 FR 72264), we established regulations at 42 CFR 413.79(o) and an application process for qualifying hospitals to apply to CMS to receive direct GME and IME FTE resident cap slots from the hospital that closed. We made certain additional modifications to Sec. 413.79 in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434), and we made changes to the section 5506 application process in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50122 through 50134). The procedures we established apply both to teaching hospitals that closed on or after March 23, 2008, and on or before August 3, 2010, and to teaching hospitals that close after August 3, 2010 (75 FR 72215). a. Notice of Closure of Wahiawa General Hospital Located in Wahiawa, HI, and the Application Process--Round 24 CMS has learned of the closure of Wahiawa General Hospital, located in Wahiawa, HI (CCN 120004). Accordingly, this notice serves to notify the public of the closure of this teaching hospital and initiate another round (``Round 24'') of the application and selection process. This round will be the 24th round (``Round 24'') of the application and selection process. The table in this section of this proposed rule contains the identifying information and IME and direct GME FTE resident caps for the closed teaching hospital, which are part of the Round 24 application process under section 5506 of the Affordable Care Act. Table V.F.-01--Wahiawa General Hospital FTE Resident Caps ---------------------------------------------------------------------------------------------------------------- IME FTE resident Direct GME FTE cap (including resident cap CCN Provider name City and state CBSA Terminating date MMA (including MMA Sec. adjustments \1\) 422 adjustments) ---------------------------------------------------------------------------------------------------------------- 120004.... Wahiawa General Wahiawa, HI...... 46520 April 2, 2024.... 11.67 + 5.49 sec. 12.11 + 2.20 Hospital. 422 increase = sec. 422 17.16 \2\. increase = 14.31.\3\ ---------------------------------------------------------------------------------------------------------------- \1\ Section 422 of the MMA, Public Law 108-173, redistributed unused IME and direct GME residency slots effective July 1, 2005. \2\ Wahiawa General Hospital's 1996 IME FTE resident cap is 11.67. Under section 422 of the MMA, the hospital received an increase of 5.49 to its IME FTE resident cap: 11.67 + 5.49 = 17.16. \3\ Wahiawa General Hospital's 1996 direct GME FTE resident cap is 12.11. Under section 422 of the MMA, the hospital received an increase of 2.20 to its direct GME FTE resident cap: 12.11 + 2.20 = 14.31. b. Notice of Closure of Carney Hospital Located in Boston, MA and the Application Process--Round 25 CMS has learned of the closure of Carney Hospital, located in Boston, MA (CCN 220017). Accordingly, this notice serves to notify the public of the closure of this teaching hospital and initiate another round (``Round 25'') of the application and selection process. This round will be the 25th round (``Round 25'') of the application and selection process. The table in this section of this proposed rule contains the identifying information and IME and direct GME FTE resident caps for the closed teaching hospital, which are part of the Round 25 application process under section 5506 of the Affordable Care Act. [[Page 18278]] Table V.F.-02--Carney Hospital FTE Resident Caps ---------------------------------------------------------------------------------------------------------------- Direct GME FTE IME FTE resident resident cap cap (including (including MMA minus> MMA Sec. code Sec. 422 \1\ and 422 and ACA Sec. ACA Sec. 5503 \2\ 5503 adjustments) adjustments) ---------------------------------------------------------------------------------------------------------------- 220017.... Carney Hospital. Boston, MA....... 14454 August 31, 2024.. 73.00-9.78 sec. 73.00-10.16 sec. 422 reduction- 422 reduction- 0.07 sec. 5503 1.70 sec. 5503 reduction = reduction = 63.15 \3\. 61.14.\4\ ---------------------------------------------------------------------------------------------------------------- \1\ Section 422 of the MMA, Public Law 108-173, redistributed unused IME and direct GME residency slots effective July 1, 2005. \2\ Section 5503 of the Affordable Care Act of 2010, Public Law 111-148 and Public Law 111-152, redistributed unused IME and direct GME residency slots effective July 1, 2011. \3\ Carney Hospital's 1996 IME FTE resident cap is 73.00. Under section 422 of the MMA, the hospital received a reduction of 9.78 to its IME FTE resident cap, and under section 5503 of the Affordable Care Act, the hospital received a reduction of 0.07 to its IME FTE resident cap: 73.00-9.78-0.07 = 63.15. \4\ Carney Hospital's 1996 direct GME FTE resident cap is 73.00. Under section 422 of the MMA, the hospital received a reduction of 10.16 to its direct GME FTE resident cap, and under section 5503 of the Affordable Care Act, the hospital received a reduction of 1.70 to its direct GME FTE resident cap: 73.00-10.16-1.70 = 61.14. c. Application Process for Available Resident Slots The application period for hospitals to apply for slots under section 5506 of the Affordable Care Act is 90 days following notice to the public of a hospital closure (77 FR 53436). Therefore, hospitals that wish to apply for and receive slots from the previously noted hospitals' FTE resident caps must submit applications using the electronic application intake system, Medicare Electronic Application Request Information SystemTM (MEARISTM), with application submissions for Round 24 and 25 due no later than July 10, 2025. The section 5506 application can be accessed at: https://mearis.cms.gov/public/home. CMS will only accept Round 24 and 25 applications submitted via MEARISTM. Applications submitted through any other method will not be considered. Within MEARISTM, we have built in several resources to support applicants: Please refer to the ``Resources'' section for guidance regarding the application submission process at: https://mearis.cms.gov/public/resources. Technical support is available under ``Useful Links'' at the bottom of the MEARISTM web page. Application related questions can be submitted to CMS using the form available under ``Contact'' at: https://mearis.cms.gov/public/resources. Application submission through MEARISTM will not only help CMS track applications and streamline the review process, but it will also create efficiencies for applicants when compared to a paper submission process. We have not established a deadline by when CMS will issue the final determinations to hospitals that receive slots under section 5506 of the Affordable Care Act. However, we review all applications received by the application deadline and notify applicants of our determinations as soon as possible. We refer readers to the CMS Direct Graduate Medical Education (DGME) website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/direct-graduate-medical-education-dgme. Hospitals should access this website for a list of additional section 5506 guidelines for the policy and procedures for applying for slots, and the redistribution of the slots under sections 1886(h)(4)(H)(vi) and 1886(d)(5)(B)(v) of the Act.

1. General

Under section 1861(v) of the Act, Medicare has historically paid providers for Medicare's share of the costs that providers incur in connection with approved educational activities. The costs of these activities are excluded from the definition of ``inpatient hospital operating costs'' and are not included in the calculation of payment rates for hospitals or hospital units paid under the IPPS, IRF PPS, or IPF PPS, and are excluded from the rate-of-increase ceiling for certain facilities not paid on a PPS. These costs are separately identified and ``passed through'' (that is, paid separately on a reasonable cost basis). Under the existing regulations at 42 CFR 413.85, approved nursing and allied health (NAH) education programs must meet State licensure requirements or be accredited by a recognized national professional organization. Additionally, an approved NAH education program must be operated by a provider. The most recent substantive rulemakings on these regulations were in the January 12, 2001, final rule (66 FR 3358 through 3374), and in the August 1, 2003, final rule (68 FR 45423 and 45434). The regulations regarding Medicare Advantage (MA) add-on payments for NAH education programs are at 42 CFR 413.87.

2. Medicare Advantage Nursing and Allied Health Education Payments

Section 541 of the Balanced Budget Refinement Act (BBRA) of 1999 provides for additional payments to hospitals for costs of nursing and allied health education associated with services to Medicare+Choice (now called Medicare Advantage (MA)) \225\ enrollees. Hospitals that operate approved nursing or allied health education programs and receive Medicare reasonable cost reimbursement for these programs may receive additional payments to account for MA enrollees. Section 541 of the BBRA limits total spending under the provision for MA enrollees to no more than $60 million in any calendar year (CY). (In this document, we refer to the total amount of $60 million or less as the payment ``pool''.) Section 541 of the BBRA also provides that direct graduate medical education (GME) payments for Medicare+Choice (now MA) utilization be reduced to the extent that these additional payments are made for nursing and allied health education programs. This provision was effective for portions of cost reporting periods occurring in a calendar year, on or after January 1, 2000. --------------------------------------------------------------------------- \225\ The M+C program in Part C of Medicare was renamed the Medicare Advantage (MA) Program under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), which was enacted in December 2003. --------------------------------------------------------------------------- Section 512 of the Benefits Improvement and Protection Act (BIPA) of 2000 changed the formula for determining the additional amounts to be paid to hospitals for Medicare+Choice (now MA) nursing and allied health costs. Under section 541 of the BBRA, the additional payment amount was determined based on the proportion of each individual hospital's nursing and allied health education payment to total nursing and allied health education payments made to all hospitals. However, this formula did not account for a hospital's specific Medicare+Choice (now MA) utilization. Section 512 of the BIPA revised this [[Page 18279]] payment formula to specifically account for each hospital's Medicare+Choice (now MA) utilization. This provision was effective for portions of cost reporting periods occurring in a calendar year, beginning with CY 2001. The regulations at 42 CFR 413.87 implement both statutory provisions. We first implemented the BBRA NAH Medicare+Choice (now MA) provision in the August 1, 2000, IPPS interim final rule with comment period (IFC) (65 FR 47036 through 47039), and subsequently implemented the BIPA provision in the August 1, 2001 IPPS final rule (66 FR 39909 and 39910). In those rules, we outlined the qualifying conditions for a hospital to receive the NAH Medicare+Choice (now MA) payment, how we would calculate the NAH Medicare+Choice (now MA) payment pool, and how a qualifying hospital would calculate its ``share'' of payment from that pool. Determining a hospital's NAH MA payment essentially involves applying a ratio of the hospital-specific NAH Part A payments, total inpatient days, and MA inpatient days, to national totals of those same variables, from cost reporting periods ending in the fiscal year that is 2 years prior to the current calendar year. The formula is as follows: (((Hospital NAH pass-through payment/Hospital Part A Inpatient Days) * (Hospital MA Inpatient Days)) divided by ((National NAH pass-through payment/National Part A Inpatient Days) * (National MA Inpatient Days))) * Current Year Payment Pool. With regard to determining the total national amounts for NAH pass- through payment, Part A inpatient days, and MA inpatient days, we note that section 1886(l) of the Act, as added by section 541 of the BBRA, gives the Secretary the discretion to ``estimate'' the national components of the formula noted previously. For example, section 1886(l)(2)(A) of the Act states that the Secretary shall estimate the ratio of payments for all hospitals for portions of cost reporting periods occurring in the year under section 1886(h)(3)(D) of the Act to total direct GME payments estimated for the same portions of periods under section 1886(h)(3) of the Act. Accordingly, we stated in the August 1, 2000, IFC (65 FR 47038) that each year, we would determine and publish in a final rule the total amount of nursing and allied health education payments made across all hospitals during the fiscal year 2 years prior to the current calendar year. We would use the best available cost reporting data for the applicable hospitals from the Hospital Cost Report Information System (HCRIS) for cost reporting periods in the fiscal year that is 2 years prior to the current calendar year. To calculate the pool, in accordance with section 1886(l) of the Act, we stated that we would ``estimate'' a total amount for each calendar year, not to exceed $60 million (65 FR 47038). To calculate the proportional reduction to Medicare+Choice (now MA) direct GME payments, we stated that the percentage is estimated by calculating the ratio of the Medicare+Choice nursing and allied health payment ``pool'' for the current calendar year to the projected total Medicare+Choice direct GME payments made across all hospitals for the current calendar year. We stated that the projections of Medicare+Choice direct GME and Part A direct GME payments are based on the best available cost report data from the HCRIS (for example, for CY 2000, the projections are based on the best available cost report data from FY 1998 HCRIS), and these payment amounts are increased using the increases allowed by section 1886(h) of the Act for these services (using the percentage applicable for the current calendar year for Medicare+Choice direct GME and the Consumer Price Index (CPI-U) increases for Part A direct GME). We also stated that we would publish the applicable percentage reduction each year in the IPPS proposed and final rules (65 FR 47038). Thus, in the August 1, 2000, IFC, we described our policy regarding the timing and source of the national data components for the NAH Medicare+Choice (now MA) add-on payment and the percent reduction to the direct GME Medicare+Choice payments, and we stated that we would publish the rates for each calendar year in the IPPS proposed and final rules. While the rates for CY 2000 were published in the August 1, 2000, IFC (see 65 FR 47038 and 47039), the rates for subsequent CYs were only issued through Change Requests (CRs) (CR 2692, CR 11642, CR 12407). After recent issuance of the CY 2019 rates in CR 12407 on August 19, 2021, we reviewed our update procedures, and were reminded that the August 1, 2000, IFC states that we would publish the NAH Medicare+Choice (now MA) rates and direct GME percent reduction every year in the IPPS rules. Accordingly, for CY 2020 and CY 2021, we proposed and finalized the NAH MA add-on rates in the FY 2023 IPPS/LTCH PPS proposed and final rules. We stated that for CYs 2022 and after, we would similarly propose and finalize the respective NAH MA rates and direct GME percent reductions in subsequent IPPS/LTCH PPS rulemakings (see 87 FR 49073, August 10, 2022). In this FY 2026 IPPS/LTCH PPS proposed rule, we are proposing the rates for CY 2024. Consistent with the use of HCRIS data for past calendar years, we are proposing to use data from cost reports ending in FY 2022 HCRIS (the fiscal year that is 2 years prior to CY 2024) to compile these national amounts: NAH pass-through payment, Part A Inpatient Days, MA Inpatient Days. For this proposed rule, we accessed the FY 2022 HCRIS data from the fourth quarterly HCRIS update of 2024. However, to calculate the ``pool'' and the direct GME MA percent reduction, we ``project'' Part A direct GME payments and MA direct GME payments for the current calendar year, which in this proposed rule is CY 2024, based on the ``best available cost report data from the HCRIS'' (65 FR 47038). Next, consistent with the method we described previously in the August 1, 2000, IFC, we increase these payment amounts from midpoint to midpoint of the appropriate calendar year using the increases allowed by section 1886(h) of the Act for these services (using the percentage applicable for the current calendar year for MA direct GME, and the Consumer Price Index-Urban (CPI-U) increases for Part A direct GME). For CY 2024, the direct GME projections are based on the fourth quarterly update of CY 2022 HCRIS, adjusted for the CPI-U and for increasing MA enrollment. For CY 2024, the proposed national rates and percentages, and their data sources, are set forth in this table. We intend to update these numbers in the FY 2026 final rule based on the latest available cost report data. ------------------------------------------------------------------------ Proposed CY 2024 NAH MA rates Proposed CY 2024 Source ------------------------------------------------------------------------ NAH Pass-Through............... $281,853,426 Cost reports ending in FY 2022 HCRIS. Part A Inpatient Days.......... 75,303,913 Cost reports ending in FY 2022 HCRIS. MA Inpatient Days.............. 16,305,155 Cost reports ending in FY 2022 HCRIS. Part A Direct GME.............. $3,085,013,941 CY 2022 HCRIS + CPI-U + MA enrollment. [[Page 18280]] MA Direct GME.................. $2,565,628,319 CY 2022 HCRIS + CPI-U + MA enrollment. Pool (not to exceed $60 $60,000,000 ((MA DGME/Part A million). DGME) * (NAH Pass-through)). Percent Reduction to MA DGME 2.34% Pool/MA direct Payments. GME. ------------------------------------------------------------------------

3. Proposed Regulatory Changes Regarding the Calculation of Net Cost of

NAH Education Programs (42 CFR 413.85(d)(2)(i) and (ii)) In the January 12, 2001, final rule (66 FR 3358), we codified the payment regulations regarding NAH education program costs at 42 CFR 413.85. With regard to determining the net costs which are allowed for ``pass-through'' payment, 42 CFR 413.85(d)(2)(i) states that the net cost of approved educational activities is determined by deducting the revenues that a provider receives from tuition and student fees from the provider's total allowable educational costs that are directly related to approved educational activities. Section 413.85(d)(2)(ii) further states that a provider's total allowable educational costs are those costs incurred by the provider for trainee stipends, compensation of teachers, and other costs of the activities as determined under the Medicare cost-finding principles in Sec. 413.24. These costs do not include patient care costs, costs incurred by a related organization, or costs that constitute a redistribution of costs from an educational institution to a provider or costs that have been or are currently being provided through community support. Worksheet A of the Medicare cost report captures the direct costs associated with a hospital's various cost centers, including its NAH education programs. The direct costs associated with operating a hospital's approved NAH education programs are reported on Worksheet A, line 20 (nursing programs) and line 23 (paramedical/allied health education programs). The instructions to these lines state-- Lines 20 and 23--If you have an approved nursing or allied health education program that meets the criteria of 42 CFR 413.85(e), classroom and clinical portions of the costs may be allowable as pass-through costs as defined in 42 CFR 413.85(d)(2). . . . (CMS Pub. 15-2, section 4013) In addition to direct costs, hospitals also incur indirect or overhead costs associated with their operations. Overhead costs are assigned to the general service cost centers on lines 1 through 23 of Worksheet A, which are a hospital's non-patient care/non-revenue producing cost centers, and which include the Administrative & General (A&G) cost center on line 5. The general cost report instructions for Worksheet A state-- Lines 1 through 23--These lines are for the general service cost centers. These costs are expenses incurred in operating the facility as a whole that are not directly associated with furnishing patient care such as, but not limited to mortgage, rent, plant operations, administrative salaries, utilities, telephone charges, computer hardware and software costs, etc. General service cost centers furnish services to both general service areas and to other cost centers in the provider (emphasis added). Because the costs of operating a hospital's NAH education programs are not directly associated with furnishing patient care, these cost centers are also included among the general service cost centers on Worksheet A. As noted in the cost report instructions cited previously, general service cost centers may furnish services to other general service areas. Thus, for example, a hospital's Administrative and General cost center may furnish services to its Nursing and Allied Health Education cost centers. The regulations and cost report instructions require that, prior to allocating overhead costs to the revenue producing cost centers, a provider must make appropriate reclassifications and adjustments to its direct costs. Worksheet A-6 is used to reclassify costs between cost centers on the cost report, while Worksheet A-8 is used to adjust both a provider's revenue producing and non-revenue producing cost centers, and remove non-allowable costs. The cost report instructions for Worksheet A-8 state, in relevant part-- Types of adjustments entered on this worksheet include (1) those needed to adjust expenses to reflect actual expenses incurred; (2) those items which constitute recovery of expenses through sales, charges, fees, etc.; (3) those items needed to adjust expenses in accordance with the Medicare principles of reimbursement; and (4) those items which are provided for separately in the cost apportionment process (emphasis added). (CMS Pub. 15-2, section 4016.) Adjustments, including the recovery of expenses through various forms of revenue, occur prior to cost finding, which is the process by which indirect costs (that is, the costs of the general service cost centers) are allocated to other cost centers (both other general service cost centers and revenue producing cost centers). Worksheets B, Part I, and B-1 have been designed to accommodate the stepdown method of cost finding described at 42 CFR 413.24(d)(1). Certain other cost adjustments, referred to as post-stepdown adjustments, occur after the allocation of indirect and overhead costs and are reported separately on Worksheet B-2. On November 17, 2017, CMS issued Transmittal 12, which contained updates to the hospital cost report instructions at CMS-2552-10, Pub. 15-2, chapter 40. It added the following instructions to line 19 of Worksheet A-8: Line 19--For each NAHE program on Worksheet A, line 20, and its subscripts, and Worksheet A, line 23, and its subscripts, enter the revenue adjustments (for tuition, fees, books, etc.) to be applied against total allowable costs that are directly related to the approved NAHE activities. Subscript this line to separately report the revenue offset for each NAHE program reported on line 20 and line 23. (See CMS Pub. 15-1, chapter 4, Sec. 414, and 42 CFR 413.85(d)(2)(i).) Transmittal 12 also added to Worksheet B-2 specific instructions for post-stepdown adjustments for certain costs associated with NAHE non-provider-operated programs under 42 CFR 413.85(g)(2), with the following note: Note: Do not use this worksheet to reduce the total allowable costs that are directly related to the NAHE programs by the revenue received from tuition and student fees. Use Worksheet A-8 to offset NAHE program costs by tuition and student fees (42 CFR 413.85(d)(2)(i)). Do not use a post step-down adjustment. By issuing these cost report clarifications in Transmittal 12, CMS was clarifying the rules regarding ensuring the appropriate order of operations for allocations and post-stepdown adjustments of overhead to the NAH education pass-through cost centers. Specifically, Transmittal 12 made it clear that adjustments to the direct costs of NAH education programs as a result of revenue received from tuition, student fees and other sources should occur on Worksheet A-8, prior to the allocation of overhead costs, and not as post-stepdown adjustments on Worksheet B-2. On February 9, 2024, the U.S. District Court for the District of Columbia (D.C.) issued a decision involving five plaintiff hospitals (Mercy Health--St. Vincent [[Page 18281]] Medical Center LLC d/b/a Mercy St. Vincent Medical Center, et al., v. Xavier Becerra, Case No. 22-cv-3578 (TNM)). The providers disputed the order of operations for determining ``net costs'' under 42 CFR 413.85(d)(2)(i). The providers disagreed with the instructions in Transmittal 12, and argued that the offsets for revenue from tuition and student fees should be made after indirect costs are allocated, using Worksheet B-2, which follows the allocation of indirect costs on Worksheet B, Part I. According to the providers, the regulations require that indirect costs be included as part of a provider's total allowable educational costs before tuition and student fees are offset, and the change to the cost reporting instructions in 2017 was a change in policy that conflicts with the regulations. The U.S. District Court for D.C. sided with the providers, arguing that the plain reading of the regulations text at 42 CFR 413.85(d)(2)(i) is consistent with the providers' interpretation of the order of operations, which is to allow direct and indirect costs to be summed, and tuition and fees to be subtracted from that sum. We disagree with the Court's ruling and assert that the cost report instructions at PRM 15-2 sec. 4016 are clear that revenue that is a recovery of expenses should be offset via Worksheet A-8, prior to the allocation of indirect costs, and that these instructions are consistent with the regulations and Medicare cost reporting policy broadly. Nevertheless, in order to further clarify the regulations, we are proposing to change the regulations text at 42 CFR 413.85(d)(2)(i) to state that the net cost of approved educational activities is determined as follows: Determine allowable direct costs incurred by the provider for trainee stipends and compensation of teachers employed by the provider. Subtract from allowable direct costs the revenues the provider receives from students or on behalf of students enrolled in the program, such as, but not limited to, tuition, student fees, or textbooks purchased for resale. Add indirect costs of the activities as determined under the Medicare cost-finding principles in 42 CFR 413.24, but limited to indirect costs that the provider itself incurs as a consequence of operating the approved educational activities. We note that as a result of this proposal, we would be modifying and moving the first sentence of existing 42 CFR 413.85(d)(2)(ii), which defines a provider's total allowable educational costs as those costs incurred by the provider for trainee stipends, compensation of teachers, and other costs of the activities as determined under the Medicare cost-finding principles in Sec. 413.24, up to proposed 42 CFR 413.85(d)(2)(i). However, we are not proposing to revise the portion of existing regulations text at 42 CFR 413.85(d)(2)(ii) which states that the direct and indirect allowable costs of educational activities do not include patient care costs, costs incurred by a related organization, or costs that constitute a redistribution of costs from an educational institution to a provider or costs that have been or are currently being provided through community support. The effective date of this proposed regulatory change would be cost reporting periods beginning on or after October 1, 2025. We understand that it is not uncommon for a provider's total revenues from tuition, student fees and other sources to exceed the provider's allowable direct costs of its nursing and allied health education programs. If the default method of cost allocation is used, the adjustments occurring on Worksheet A-8 would reduce the overhead costs apportioned to the nursing program or allied health education program cost centers. This is because the default statistical basis for allocating administrative and general costs to other cost centers is accumulated cost, which in this case would be zero. However, to mitigate this reduction of indirect costs, providers that directly incur legitimate overhead costs as a result of the operation of their NAH education programs have options under current regulations to seek permission from their MAC to employ a different allocation method that is more suited to the types of costs they incur. Exercising these options is at the request of the provider, and will not occur unless the provider seeks permission from its MAC to change its allocation method. If a provider wishes to change its statistical allocation basis for a particular cost center and/or the order in which the cost centers are allocated, the provider must make a written request to its MAC in accordance with PRM 15-1, chapter 23, section 2313. Specific to the operation of NAH education programs, a provider may elect to subscript its A&G cost center (line 5 of Worksheet A) for overhead costs directly related to NAH programs and use a statistic other than accumulated costs, which specifically relates to the NAH cost being allocated. For example, after subscripting the A&G cost center, a provider can use clinical rotation hours spent in each routine or ancillary area, to compute a ratio to total clinical rotation hours for each program. Then, to apportion staff's salaries among more than one NAH cost center, a provider can use a ratio of the number of students enrolled in a program to total number of students. For instance, a clinical coordinator's salary, whose job is to schedule and manage the clinical rotations of multiple NAHE programs, can be included in a subscripted A&G cost center and allocated to multiple NAH programs based on the ratio of the number of students in each NAH program to total number of students in all of the hospital's NAH programs. Providers would thus be able to appropriately differentiate the A&G costs to be allocated to NAH programs from those that should not be allocated toward operation of those programs because the statistical basis for this subscripted cost center would be more specific to services rendered. As a result, the amount of overhead costs that ultimately flow to the NAH cost centers would be more accurate, albeit less than what would be allocated if tuition and student fees were subtracted as a post- stepdown adjustment, as argued by the providers in Mercy Health; however, as discussed above, the providers' desired method is not consistent with CMS's existing policy or existing cost report instructions. The proposed order of operations to offset revenue from direct costs on Worksheet A-8 also is consistent with CMS policy that A&G costs allocated to the NAH cost centers must be directly related to the operation of specific approved programs under 42 CFR 413.85(f) and (g). In the January 12, 2001, final rule (66 FR 3367), we clarified the meaning of the term ``tuition'' and specified a formula for determining the net costs to indicate that ``total costs'' includes only direct and indirect costs incurred by a provider that are directly attributable to the operation of an approved educational activity. We explained that these costs do not include usual patient care costs that would be incurred in the absence of the educational activity, such as the salary costs for nursing supervisors who oversee the floor nurses and student nurses. Moreover, these costs do not include costs incurred by a related organization. We understand that a significant portion of indirect costs that certain plaintiffs in the litigation allocated to their nursing and allied health cost centers included costs incurred by a related organization (such as a home office), in violation of the regulation at 42 CFR 413.85(d)(2)(ii), [[Page 18282]] as well as A&G costs not directly attributable to the operation of the NAH programs. Those A&G costs not directly incurred as a result of operating the NAH education programs are to be paid under the IPPS, not ``passed through'' the IPPS (or other applicable hospital payment system). For instance, costs which benefit the hospital as a whole, such as Infection Control, Admissions, Patient Registration, Telecommunications, etc., would generally be incurred in the absence of a provider's NAH programs; therefore, these types of costs are not to be allocated to the NAH program cost centers. Consequently, it is the provider's responsibility to request permission from its MAC to use an allocation method for overhead costs that accurately and appropriately reflects overhead costs incurred by the provider as a direct result of operating NAH education programs. In summary, we are proposing to amend the regulations at 42 CFR 413.85(d)(2)(i) and (ii) as specified previously.

H. Proposed Payment Adjustment for Certain Immunotherapy Cases

(Sec. Sec. 412.85 and 412.312) Effective for FY 2021, we created MS-DRG 018 for cases that include procedures describing CAR T-cell therapies, which were reported using ICD-10-PCS procedure codes XW033C3 or XW043C3 (85 FR 58599 through 58600). Effective for FY 2022, we revised MS-DRG 018 to include cases that report the procedure codes for CAR T-cell and non-CAR T-cell therapies and other immunotherapies (86 FR 44798 through 448106). Effective for FY 2021, we modified our relative weight methodology for MS-DRG 018 in order to develop a relative weight that is reflective of the typical costs of providing CAR T-cell therapies relative to other IPPS services. Specifically, under our finalized policy we do not include claims determined to be clinical trial claims that group to MS- DRG 018 when calculating the average cost for 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 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 MS-DRG 018 to the extent such claims can be identified in the historical data (85 FR 58600). The term ``expanded access'' (sometimes called ``compassionate use'') is a potential pathway for a patient with a serious or immediately life-threatening disease or condition to gain access to an investigational medical product (drug, biologic, or medical device) for treatment outside of clinical trials when, among other criteria, there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition (21 CFR 312.305).\226\ --------------------------------------------------------------------------- \226\ https://www.fda.gov/news-events/expanded-access/expanded-access-keywords-definitions-and-resources. --------------------------------------------------------------------------- Effective FY 2021, we also finalized an adjustment to the payment amount for applicable clinical trial and expanded access immunotherapy cases that group to MS-DRG 018 using the same methodology that we used to adjust the case count for purposes of the relative weight calculations (85 FR 58842 through 58844). (As previously noted, effective beginning FY 2022, we revised MS-DRG 018 to include cases that report the procedure codes for CAR T-cell and non-CAR T-cell therapies and other immunotherapies (86 FR 44798 through 448106).) Specifically, under our finalized policy we apply a payment adjustment to claims that group to MS-DRG 018 and include ICD-10-CM diagnosis code Z00.6, with the modification that when the CAR T-cell, non-CAR T-cell, or other immunotherapy product is purchased in the usual manner, but the case involves a clinical trial of a different product, the payment adjustment will not be applied in calculating the payment for the case. We also finalized that when there is expanded access use of immunotherapy, the payment adjustment will be applied in calculating the payment for the case. This payment adjustment is codified at 42 CFR 412.85 (for operating IPPS payments) and 412.312 (for capital IPPS payments), for claims appropriately containing Z00.6, as described previously, and reflects that the adjustment is also applied for cases involving expanded access use immunotherapy, and that the payment adjustment only applies to applicable clinical trial cases; that is, the adjustment is not applicable to cases where the CAR T-cell, non-CAR T-cell, or other immunotherapy product is purchased in the usual manner, but the case involves a clinical trial of a different product. The regulations at 42 CFR 412.85(c) also specify that the adjustment factor will reflect the average cost for cases to be assigned to MS-DRG 018 that involve expanded access use of immunotherapy or are part of an applicable clinical trial to the average cost for cases to be assigned to MS-DRG 018 that do not involve expanded access use of immunotherapy and are not part of a clinical trial (85 FR 58844). For FY 2026, we are proposing to continue to apply an adjustment to the payment amount for expanded access use of immunotherapy and applicable clinical trial cases that group to MS-DRG 018, calculated using the same methodology, as modified in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59062), that we are proposing to use to adjust the case count for purposes of the relative weight calculations, including our proposed modifications to that methodology for FY 2026, as described in section II.D. of the preamble of this proposed rule. As discussed in the FY 2024 IPPS/LTCH PPS final rule, the MedPAR claims data now includes a field that identifies whether or not the claim includes expanded access use of immunotherapy. For the FY 2023 MedPAR data and for subsequent years, this field identifies whether or not the claim includes condition code 90. The MedPAR files now also include information for claims with the payer-only condition code ``ZC'', which is used by the IPPS Pricer to identify a case where the CAR T-cell, non-CAR T-cell, or other immunotherapy product is purchased in the usual manner, but the case involves a clinical trial of a different product so that the payment adjustment is not applied in calculating the payment for the case (for example, see Change Request 11879, available at https://www.cms.gov/files/document/r10571cp.pdf). We refer the readers to section II.D. of this proposed rule for further discussion of our methodology for identifying clinical trial claims and expanded access use claims in MS-DRG 018 and our methodology used to adjust the case count for purposes of the relative weight calculations, as modified in the FY 2024 IPPS/LTCH PPS final rule, and as further proposed to be modified for FY 2026 to identify other claims for which the immunotherapy product was not purchased in the usual manner, such as obtained at no cost. In the FY 2025 IPPS/LTCH PPS final rule, we summarized a comment requesting that CMS establish a mechanism for hospitals to report when a product is not purchased in the usual manner, such as obtained at no cost, for reasons other than participation in a clinical trial or expanded access use (89 FR 69112). We indicated we may consider this request in future [[Page 18283]] rulemaking. We agree that the same adjustment that applies to expanded access use of immunotherapy and applicable clinical trial cases should apply to other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, and therefore are proposing that, beginning in FY 2026, the payment adjustment would also be applied in calculating the payment for such cases. We intend to issue billing instructions in separate guidance that would allow a provider to indicate, for that case, that the immunotherapy product was not purchased in the usual manner so that MACs would apply the same adjustment to the payment amount that is applied for expanded access use of immunotherapy and applicable clinical trial cases that group to MS-DRG 018. We are also proposing to modify our regulations at 42 CFR 412.85 (for operating IPPS payments) and 412.312 (for capital IPPS payments) to codify this proposed payment adjustment for other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost. Specifically, we are proposing to modify the section heading and paragraphs (b) and (c) at 42 CFR 412.85 to include other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, and to make additional technical revisions to paragraph (c). We are also proposing to modify paragraph (f) at 42 CFR 412.312 to include cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost. We also refer readers to section II.D. of the preamble of this proposed rule for further discussion of our proposed changes to our methodology for calculating the relative weight for MS-DRG 018 to identify other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost and to adjust the case count for purposes of the relative weight calculations. Using the same methodology that we are proposing to use to adjust the case count for purposes of the relative weight calculations, including our proposed modifications as discussed in section II.D. of the preamble of this proposed rule, we are proposing to calculate the adjustment to the payment amount for expanded access use of immunotherapy, applicable clinical trial cases, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost as follows: Calculate the average cost for cases assigned to MS-DRG 018 that (a) contain ICD-10-CM diagnosis code Z00.6 and do not contain condition code ``ZC'', (b) contain condition code ``90'', or (c) contain standardized drug charges below the median standardized drug charge of clinical trial cases in MS-DRG 018. Calculate the average cost for all other cases assigned to MS-DRG 018. Calculate an adjustor by dividing the average cost calculated in step 1 by the average cost calculated in step 2. Apply this adjustor when calculating payments for expanded access use of immunotherapy, applicable clinical trial cases, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, that group to MS-DRG 018 by multiplying the relative weight for MS-DRG 018 by the adjustor. We refer the readers to section II.D. of the preamble of this proposed rule for further discussion of our methodology. Consistent with our calculation of the proposed adjustor for the relative weight calculations, for this proposed rule we are proposing to calculate this adjustor based on the December 2024 update of the FY 2024 MedPAR file for purposes of establishing the FY 2026 payment amount. Specifically, in accordance with proposed revised 42 CFR 412.85 (for operating IPPS payments) and 412.312 (for capital IPPS payments), we propose to multiply the FY 2026 relative weight for MS-DRG 018 by a proposed adjustor of 0.23 as part of the calculation of the payment for claims determined to be applicable clinical trial claims, expanded access use immunotherapy claims, or other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, that group to MS-DRG 018, which includes CAR T-cell and non-CAR T-cell therapies and other immunotherapies. We also propose to update the value of the adjustor based on more recent data for the final rule.

1. Regulatory Background

Section 1886(q) of the Act sets forth the requirements of the Hospital Readmissions Reduction Program effective for discharges from applicable hospitals beginning on or after October 1, 2012. Under the Hospital Readmissions Reduction Program, payments to applicable hospitals must be reduced to account for certain excess readmissions. We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 49543) and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 38240) for a general overview of the Hospital Readmissions Reduction Program. We also refer readers to 42 CFR 412.152 through 412.154 for codified Hospital Readmissions Reduction Program requirements.

2. Hospital Readmissions Reduction Program Measures

a. Proposal To Integrate Medicare Advantage (MA) Beneficiaries Into the Cohorts of the Hospital Readmissions Reduction Program Measure Set Beginning With the FY 2027 Program Year (1) Background In this proposed rule, we propose to adopt substantive updates to the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Acute Myocardial Infarction (AMI) Hospitalization; Hospital 30-Day, All-Cause, RSRR Following Heart Failure (HF) Hospitalization; Hospital 30-Day, All-Cause, RSRR Following Pneumonia (PN) Hospitalization; Hospital-Level, 30-Day, All-Cause, RSRR Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization; Hospital 30-Day, All-Cause, RSRR Following Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) Hospitalization; and Hospital 30-Day, All-Cause, RSRR Following Coronary Artery Bypass Graft (CABG) Surgery measures, hereinafter referred to as the Hospital Readmissions Reduction Program measure set, beginning with the FY 2027 Program Year. The proposed updates to the Hospital Readmissions Reduction Program measure set would include integrating MA beneficiaries into each measure's cohorts and reducing the applicable period from a three-year period to a two-year period. In addition, we propose to make a non- substantive modification; we would update the risk adjustment model to use individual International Classification of Diseases (ICD)-10 codes instead of Hierarchical Condition Categories (HCCs). For the purposes of describing the substantive change of the Hospital Readmissions Reduction Program measure set, we note that ``cohort'' is defined as the hospitalizations, or ``index admissions,'' that are included when calculating each measure. This cohort is the set of hospitalizations that meet all the inclusion and exclusion criteria. For measure cohort details of the most recent versions of the Hospital Readmissions Reduction Program measure set, we refer readers to the [[Page 18284]] measure methodology report and measure risk adjustment statistical model on our website at: https://qualitynet.cms.gov/inpatient/measures/readmission/methodology. Including MA beneficiaries in hospital outcome measures would help ensure that hospital quality would be measured across all Medicare beneficiaries and not just the Fee-For-Service (FFS) population. In 2024, 50 percent of eligible Medicare beneficiaries--or 34.3 million people--were covered by MA plans.\227\ It is projected that nearly two- thirds of all Medicare enrollees will be enrolled in MA plans by 2030.\228\ Consequently, using FFS-only beneficiaries may exclude a large segment of the focus population for quality measurement. --------------------------------------------------------------------------- \227\ Centers for Medicaid & Medicare Services. Medicare Enrollment for September 2024 (Accessed on February 5, 2025). Available at: https://data.cms.gov/tools/medicare-enrollment-dashboard. \228\ Hale, J., Hong, N., Hopkins, B., et al. (2024) Health Insurance Coverage Projections for the US Population and Sources of Coverage, by Age, 2024-34. Health Affairs. 43(7); 922-932. https://doi.org/10.1377/hlthaff.2024.00460. --------------------------------------------------------------------------- Additionally, studies comparing readmission rates between MA and FFS-only have shown mixed results. While several studies report lower readmissions for MA enrollees,229 230 others have found no difference or even higher risk-adjusted readmission rates for certain conditions.231 232 Due to these differing research study conclusions, adding the MA cohort to the Hospital Readmissions Reduction Program measures would allow for a more robust and holistic view of quality of care provided to all Medicare beneficiaries.\233\ Most importantly, the FFS and MA data in our hospital outcome measures would empower patients and caregivers to make informed decisions about their healthcare by giving them additional comparative data on hospitals. --------------------------------------------------------------------------- \229\ Jacobs, P.D., Basu, J. Medicare Advantage and Post discharge Quality: Evidence From Hospital Readmissions. American Journal of Managed Care, 2020;26(12):524-529. Available at: https://www.ajmc.com/view/medicare-advantage-and-postdischarge-quality-evidence-from-hospital-readmissions. \230\ Huckfeldt, P.J., Escarce, J.J., Rabideau, B., et al. Less Intense Postacute Care, Better Outcomes for Enrollees in Medicare Advantage Than Those in Fee-For-Service. Health Affairs. 2017;26(1):91-100. https://doi.org/10.1377/hlthaff.2016.1027. \231\ Yayac, M.F., Harrer, S.L., Janiec, D.A., et al. Costs and Outcomes of Medicare Advantage and Traditional Medicare Beneficiaries After Total Hip and Knee Arthroplasty. Journal of American Academy of Orthopedic Surgeons. 2020;28(20):e910-e916. https://doi.org/10.5435/JAAOS-D-19-00609. \232\ Henke, R.M., Karaca, Z., Gibson, T.B., et al. Medicare Advantage and Traditional Medicare Hospitalization Intensity and Readmissions. Medical Care Research and Review. 2018;75(4):434-453. https://doi.org/10.1177%2F1077558717692103. \233\ Panagiotou, O.A., Kumar, A., Gutman, R., et al. Hospital Readmission Rates in Medicare Advantage and Traditional Medicare: A Retrospective Population-Based Analysis. Annals of Internal Medicine. 2019;171(2):99-106. https://doi.org/10.7326/M18-1795. --------------------------------------------------------------------------- (2) Overview of Measure Updates We refer readers to the CMS Measures Inventory Tool and Hospital Readmissions Reduction Program readmission measures specification manuals for more information on the Hospital Readmissions Reduction Program measure set, including background on each measure and a complete summary of measure specifications.234 235 --------------------------------------------------------------------------- \234\ CMS Measures Inventory Tool. Available at: https://cmit.cms.gov/cmit/#. \235\ CMS Quality Net. Available at: https://qualitynet.cms.gov/inpatient/measures/readmission/methodology. --------------------------------------------------------------------------- We propose to adopt updates to the Hospital Readmissions Reduction Program measure set in the Hospital Readmissions Reduction Program beginning with the FY 2027 program year. The newly refined versions of the Hospital Readmissions Reduction Program measure set would expand the measures' inclusion criteria to include MA beneficiaries. Currently, the measure denominator for the Hospital Readmissions Reduction Program measure set includes beneficiaries ``Enrolled in Medicare FFS Part A and Part B for the first 12 months prior to the date of admission and enrolled in Part A during the index admission.'' \236\ We propose to modify the measure cohort to ``Enrolled in Medicare FFS and/or MA for the 12 months prior to the date of admission; and enrolled in FFS or MA during the index admission.'' \237\ The addition of MA data to the measure doubles the cohort size and more accurately reflects the quality of care for both FFS and MA beneficiaries. --------------------------------------------------------------------------- \236\ CMS Measures Inventory Tool. Available at: https://cmit.cms.gov/cmit/#. \237\ 2024 Measures Under Consideration List. Available at: https://mmshub.cms.gov/2024/2024-11/2024-measures-under-consideration-list-now-available. --------------------------------------------------------------------------- We are also providing a non-substantive update which would re- specify the risk model for each measure to primarily use individual ICD-10 codes, leveraging the specificity of individual ICD-10 coding in place of the previously used HCCs. This technical update would improve the performance of the risk adjustment models for condition- and procedure-specific mortality and complication measures.\238\ We refer readers to the CMS Measures Management System for more on the list of ICD-10 codes used in the risk adjustment model, available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports/2024-MUC-List-materials. --------------------------------------------------------------------------- \238\ Krumholz, H.M., Coppi, A.C., Warner, F., et al. Comparative effectiveness of new approaches to improve mortality risk models from Medicare claims data. JAMA Network Open. 2019;2(7):e197314-e197314 Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC6647547/. --------------------------------------------------------------------------- (3) Pre-Rulemaking Process and Measure Endorsement (a) Recommendation From the PRMR Process We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69457 through 69458) for details on the Pre-Rulemaking Measure Review (PRMR) process, including the voting procedures that the PRMR process uses to reach consensus on measure recommendations. The PRMR Hospital Committee, comprised of the PRMR Hospital Advisory Group and PRMR Hospital Recommendation Group, reviewed the proposed updated versions of the Hospital Readmissions Reduction Program measure set. Consensus is reached when there is 75 percent or higher agreement among members of a committee.\239\ The PRMR Hospital Recommendation Group reviewed the proposed updated Hospital Readmissions Reduction Program measure set specifications (MUC2024-030, MUC2024-032, MUC2024-040, MUC2024-041, MUC2024-045, MUC2024-046) during a meeting on January 16, 2025, to vote on a recommendation about use of these measures for the Hospital Readmissions Reduction Program.\240\ --------------------------------------------------------------------------- \239\ Battelle--Partnership for Quality Measurement. (February 2025). Guidebook of Policies and Procedures for Pre-Rulemaking Measure Review (PRMR) and Measure Set Review (MSR). Available at: https://p4qm.org/sites/default/files/2024-12/Final-Draft-Multi-Stakeholder-Group-Guidebook-of-Policies-and-Procedures.pdf. \240\ Battelle--Partnership for Quality Measurement. (February 2025). PRMR 2024 MUC Recommendations Spreadsheet Final. Available at: https://p4qm.org/PRMR/Resources. --------------------------------------------------------------------------- The PRMR Hospital Recommendation Group reached consensus for each of the measures. For each measure, they voted to recommend the addition of MA data to each measure, with conditions.\241\ --------------------------------------------------------------------------- \241\ Battelle--Partnership for Quality Measurement. (February 2025). PRMR 2024 MUC Recommendations Spreadsheet Final. Available at: https://p4qm.org/media/3891. --------------------------------------------------------------------------- The voting results of the PRMR Hospital Recommendation Group for the proposed updates to the Hospital 30-Day, All-Cause, RSRR Following AMI Hospitalization measure were: 18 members of the group recommended adopting the updates without [[Page 18285]] conditions; 9 members recommended adoption with conditions; and 0 members voted not to recommend the updates for adoption. Taken together, 100 percent of the votes were between ``recommend'' and ``recommend with conditions.'' Thus, the committee reached consensus and recommended with conditions the updates to the Hospital 30-Day, All-Cause, RSRR Following AMI Hospitalization measure. The voting results of the PRMR Hospital Recommendation Group for the proposed updates to the Hospital 30-Day, All-Cause, RSRR Following HF Hospitalization measure were: 17 members of the group recommended adopting the updates without conditions; 10 members recommended adoption with conditions; and 0 members voted not to recommend the updates for adoption. Taken together, 100 percent of the votes were between ``recommend'' and ``recommend with conditions.'' Thus, the committee reached consensus and recommended with conditions the updates to the Hospital 30-Day, All-Cause, RSRR Following HF Hospitalization measure. The voting results of the PRMR Hospital Recommendation Group for the proposed updates to the Hospital-Level, 30-Day, All-Cause, RSRR Following COPD Hospitalization measure were: 18 members of the group recommended adopting the updates without conditions; 9 members recommended adoption with conditions; and 0 members voted not to recommend the updates for adoption. Taken together, 100 percent of the votes were between ``recommend'' and ``recommend with conditions.'' Thus, the committee reached consensus and recommended with conditions the updates to the Hospital-Level, 30-Day, All-Cause, RSRR Following COPD Hospitalization measure. The voting results of the PRMR Hospital Recommendation Group for the proposed updates to the Hospital 30-Day, All-Cause, RSRR Following THA and/or TKA Hospitalization measure were: 19 members of the group recommended adopting the updates without conditions; 7 members recommended adoption with conditions; and 1 member voted not to recommend the updates for adoption. Taken together, 96 percent of the votes were between ``recommend'' and ``recommend with conditions.'' Thus, the committee reached consensus and recommended with conditions the updates to the Hospital 30-Day, All-Cause, RSRR Following THA and/ or TKA Hospitalization measure. The voting results of the PRMR Hospital Recommendation Group for the proposed updates to the Hospital 30-Day, All-Cause, RSRR Following PN Hospitalization measure were: 17 members of the group recommended adopting the updates without conditions; 10 members recommended adoption with conditions; and 0 members voted not to recommend the updates for adoption. Taken together, 100 percent of the votes were between ``recommend'' and ``recommend with conditions.'' Thus, the committee reached consensus and recommended with conditions the updates to the Hospital 30-Day, All-Cause, RSRR Following PN Hospitalization measure. The voting results of the PRMR Hospital Recommendation Group for the proposed updates to the Hospital 30-Day, All-Cause, RSRR Following CABG Surgery measure were: 19 members of the group recommended adopting the updates without conditions; 8 members recommended adoption with conditions; and 0 members voted not to recommend the updates for adoption. Taken together, 100 percent of the votes were between ``recommend'' and ``recommend with conditions.'' Thus, the committee reached consensus and recommended with conditions the updates to the Hospital 30-Day, All-Cause, RSRR Following CABG Surgery measure. The measure set was discussed as a group during the Hospital Recommendation Group meeting, with committee members providing recommendations that spanned across measures. The conditions submitted included: revising the inclusion criteria to include care provided in ambulatory settings; stratification of measure data by MA and FFS; consideration of a shorter 7- or 14-day readmission time period; and conducting additional testing to evaluate whether the measure is topped out for all subgroups reporting. After taking these conditions into account, we propose to adopt the updated Hospital Readmissions Reduction Program measure set in the Hospital Readmissions Reduction Program. We note that the conditions were not specific to the addition of MA data into the measures but addressed the measures in totality. Therefore, we will review the applicability of stratifying the measures by MA or FFS data and provide that information through the confidential feedback reports for hospitals. We will also evaluate the readmission metrics to a shorter 7- or 14-day readmission time period and review the criteria to include care provided in ambulatory settings and its applicability to each measure. We continue to review each measure's topped out status through our internal measure evaluation reports. (b) Measure Endorsement We refer readers to FY 2025 IPPS/LTCH PPS final rule (89 FR 69457 through 69458) for details on the endorsement and maintenance (E&M) process including the procedures the CBE's E&M Committees use to evaluate measures and whether they meet endorsement criteria. The currently implemented version of these measures in the Hospital Readmissions Reduction Program were previously evaluated and endorsed by the CBE.\242\ The proposed updated measures that include MA beneficiaries in the patient cohorts will each be considered for future endorsement. --------------------------------------------------------------------------- \242\ Hospital 30-Day, All-Cause, RSRR Following PN Hospitalization (CBE #0506), Hospital 30-Day, All-Cause, RSRR Following HF Hospitalization (CBE #0330), Hospital 30-Day, All- Cause, RSRR Following THA and/or TKA Hospitalization (CBE #1551), Hospital 30-Day, All-Cause, RSRR Following CABG Surgery (CBE #2515), Hospital-Level, 30-Day, All-Cause, RSRR Following COPD Hospitalization (CBE #1891), and Hospital 30-Day, All-Cause, RSRR Following AMI Hospitalization (CBE #0505) can all be found at https://cmit.cms.gov/cmit/#/MeasureInventory. --------------------------------------------------------------------------- (4) Data Submission and Reporting The proposed updated Hospital Readmissions Reduction Program measure set would use index admission diagnoses and in-hospital comorbidity data from Medicare FFS Part A, MA claims/encounters, or both. Additional comorbidities prior to the index admission are assessed using Part A and Part B Medicare claims, MA encounters in the 12 months prior to index (initial) admission. A patient's Medicare FFS or MA enrollment status would be obtained from the Medicare enrollment data which contains beneficiary demographic, benefit/coverage, and vital status information. We propose to use claims and encounter data with admission dates beginning from July 1, 2023, through June 30, 2025, which is associated with the FY 2027 program year. By using CMS administrative data, hospitals would not be required to submit additional data for calculating the measures. If these measure updates are finalized, we would continue to publicly report readmission rates by posting the readmission measure results for the applicable conditions for a fiscal year for each applicable hospital on the Compare tool or successor website(s), currently available at https://www.medicare.gov/care-compare/, and on the Provider Data Catalog, available [[Page 18286]] at https://data.cms.gov/provider-data/, as codified at Sec. 412.154(f). We invite public comment on this proposal. b. Technical Updates to the Specifications of the Hospital Readmissions Reduction Program Measures Beginning With the FY 2027 Program Year During the COVID-19 public health emergency (PHE), in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45256 through 45258), we updated the Hospital 30-Day All-Cause RSRR Following AMI Hospitalization; Hospital 30-Day, All-Cause, RSRR Following CABG Surgery; Hospital-Level, 30-Day, All-Cause, RSRR Following COPD Hospitalization; Hospital 30-Day, All- Cause, RSRR Following HF Hospitalization; and Hospital 30-Day, All- Cause, RSRR Following THA and/or TKA Hospitalization measures to exclude patients diagnosed with COVID-19, including a primary or secondary diagnosis present on admission (POA) of COVID-19, from both index admissions and readmissions (86 FR 45257 through 45258). In the FY 2023 IPPS/LTCH PPS final rule, we provided an update regarding the technical specifications for the Hospital 30-Day, All-Cause, RSRR Following PN Hospitalization measure to exclude patients with either principal or secondary diagnosis POA of COVID-19 from both index admissions and readmissions (87 FR 49083 through 49086). Additionally, in the FY 2023 IPPS/LTCH PPS final rule, we modified the technical measure specifications of each of the six readmission measures to include a covariate adjustment for patient history of COVID-19 in the 12 months prior to the admission beginning with the FY 2023 program year (87 FR 49086 through 49088). We stated that we were making these updates pursuant to the technical updates policy we finalized in the FY 2015 IPPS/LTCH final rule. Under this policy, we finalized a subregulatory process to incorporate technical measure specification updates into the measure specifications we had previously adopted for the Hospital Readmissions Reduction Program (79 FR 50039). We reiterated this policy in the FY 2020 IPPS/LTCH final rule, stating our continued belief that the subregulatory process is the most expeditious manner possible to ensure that quality measures remain fully up to date while preserving the public's ability to comment on updates that so fundamentally change a measure that it is no longer the same measure that we originally adopted (84 FR 42385 through 42387). We are providing notice in this proposed rule that we intend to remove the COVID-19 exclusion from the readmission measures beginning with the FY 2027 program year. This technical update will modify these readmission measures to remove the exclusion of COVID-19 diagnosed patients from the index admissions and readmissions, including the removal of the exclusion of certain ICD-10 Codes that represented patients with a secondary diagnosis of COVID-19, and the history of COVID-19 risk variable. The exclusion began as a response to the COVID-19 PHE which expired May 11, 2023. We believe that hospitals have had adequate time to adjust to the presence of COVID-19 as an ongoing virus. Using data from the last four years, July 2020-June 2024, our internal analysis showed a decline over time of the number of patients excluded from the various measure cohorts. Therefore, we believe that removing the exclusion of COVID-19 patients will ensure that these readmission measures continue to account for readmissions as intended and meet the goals of the Hospital Readmissions Reduction Program. Additional resources about current measure technical specifications and the methodology for the Hospital Technical specification of the current readmission measures are provided at our website in the Measure Methodology Reports (available at: https://qualitynet.cms.gov/inpatient/measures/readmission/methodology). Hospital Readmissions Reduction Program resources are located at the Resources web page of the QualityNet website (available at: https://qualitynet.cms.gov/inpatient/hrrp/resources). An updated measure methodology report will be made available in May 2026.

3. Additional Policies for the Hospital Readmissions Reduction Program

a. Proposal To Modify the Applicable Period for the Hospital Readmissions Reduction Program Measures Set We propose to modify the definition of ``applicable period'' as specified at Sec. 412.152. Currently, the ``applicable period'' is the 3-year period from which data are being collected to calculate excess readmission ratios (ERRs) and payment adjustment factors for the fiscal year; this includes aggregate payments for excess readmissions and aggregate payments for all discharges used in the calculation of the payment adjustment. In the FY 2013 IPPS/LTCH PPS final rule, we noted that the 3-year period provided an increase the number of cases per hospital used for measure calculation, which improved the precision of each hospital's readmission estimate (77 FR 53379 through 53382). The ``applicable period for dual eligibility'' is the same as the ``applicable period'' that we otherwise adopted for purposes of the Hospital Readmissions Reduction Program. However, we now propose to reduce the applicable period from 3 to 2 years. The proposed update would allow for more recent data when assessing performance. With the proposed inclusion of MA patients in the cohort, we assessed whether the reliability of the measures could reach a satisfactory level when the applicable period is shortened. In testing, all measures showed better between-hospital variance using the 2-year FFS and MA combined cohort as compared to the current measure specifications of a 3-year applicable period and the FFS-only cohort. Beginning in FY 2027, we propose that the ``applicable period'' for the Hospital Readmissions Reduction Program would be the 2-year period beginning 1 year advanced from the previous program fiscal year's start of the ``applicable period.'' For example, for the FY 2027 program determination, claims/encounter data with admission dates beginning from July 1, 2023, through June 30, 2025, would be used. Under this proposed policy, for all subsequent years, we would advance this 2-year period by 1 year unless otherwise specified by the Secretary, which we would revise through notice and comment rulemaking. Similarly, the ``applicable period for dual eligibility'' would continue to correspond to the ``applicable period'' for the Hospital Readmissions Reduction Program, unless otherwise specified by the Secretary. We invite public comment on this proposal. b. Proposal To Identify Aggregate Payments for Each Condition/Procedure and All Discharges for FY 2027 and Subsequent Years When calculating the numerator (aggregate payments for excess readmissions), we determine the base operating DRG payment amount for an individual hospital for the applicable period for each condition/ procedure using Medicare FFS inpatient claims from the MedPAR file with discharge dates that are within the applicable period. Under our established methodology, we use the update of the MedPAR file for each Federal fiscal year, which is updated 6 months after the end of each Federal fiscal year [[Page 18287]] within the applicable period, as our data source. In identifying discharges for the applicable conditions/procedures to calculate the aggregate payments for excess readmissions, we apply the same exclusions to the claims in the MedPAR file as are applied in the measure methodology for each of the applicable conditions/ procedures. For example, for the FY 2025 applicable period, this included the discharge diagnoses for each applicable condition/ procedure based on the list of specific ICD-10-CM and ICD-10-PCS code sets, as applicable, for that condition/procedure, as specified in the 2024 version of the measure methodology reports. In this proposed rule, we propose to include payment data for Medicare FFS and MA beneficiaries that meet the criteria as previously described for each applicable condition/procedure to calculate the aggregate payments for excess readmissions. We will rely on the MedPAR and/or the latest available data source that would provide the most up- to-date comprehensive information on payment information for Medicare FFS and MA beneficiaries. This proposal results from our proposal to include MA beneficiaries in the Hospital Readmissions Reduction Program measure set cohorts. We note that Sec. 412.152 defines the terms ``aggregate payments for excess readmissions'' and ``excess readmissions ratio'' (ERR) broadly enough to allow us to include MA beneficiaries in the calculation without requiring us to revise the regulatory definition. (1) Analysis of Proposed Changes Impact on Aggregate Payments To assess the expected impact on hospital payment adjustments resulting from the changes to the readmission measures, the ``applicable period'', and calculations for aggregate payments for excess readmissions, we estimated hospitals' payment adjustment factors using the proposed measures updates to include MA data, the proposed two-year applicable period, and the proposed updates to the calculations for aggregate payments for each condition/procedure to include MA data. Later in this section we show the estimated total Medicare savings under the current payment adjustment factor calculations and the proposed payment adjustment factor calculations which would use a two-year applicable period and include MA data in the ERR calculations and calculations for aggregate payments for each condition/procedure. Based on our analysis, the estimated average change in Medicare savings per hospital from the proposed updates was $15,579, with 1,424 hospitals having a greater penalty amount and 1,547 hospitals having the same or lower penalty amount. Table VI.K-01--Estimated Total Medicare Savings of Proposed Addition of MA Cohort to Hospital Readmissions Reduction Program Measure Set -------------------------------------------------------------------------------------------------------------------------------------------------------- Difference between Percentage difference Current Proposed proposed updates and between proposed updates methodology updates current methodology and current methodology -------------------------------------------------------------------------------------------------------------------------------------------------------- Estimated total Medicare savings.................................. $316,131,336 $357,264,092 $41,132,756 13 Number of penalized hospitals..................................... 2,342 2,417 75 3 -------------------------------------------------------------------------------------------------------------------------------------------------------- Our analysis also assesses the impact of the proposed updates to the number of eligible hospitals, number and percentage of penalized hospitals, and penalties as a share of payments overall and by hospital characteristics. The first and fifth columns in the below table indicates the total number of hospitals eligible for a penalty under the Hospital Readmissions Reduction Program. In FY 2025, approximately 3,000 subsection (d) hospitals were included in the Hospital Readmissions Reduction Program. Poorly performing hospitals included in the program may receive a penalty if they are non-Maryland subsection (d) hospitals with 25 or more eligible discharges for at least one measure during the applicable period. The second and sixth columns in the table indicates the total number of non-Maryland hospitals with available data for each characteristic that have an estimated payment adjustment factor less than 1 (that is, penalized hospitals). The third and seventh columns in the table indicates the estimated percentage of penalized hospitals among those eligible to receive a penalty by hospital characteristic. The fourth and eighth columns in the table estimate the financial impact on hospitals by hospital characteristic, referred to as the penalty as a share of payments. The penalty as a share of payments is calculated as the sum of penalties for all hospitals with that characteristic over the sum of all base operating DRG payments for those hospitals. For example, under the current methodology, the penalty as a share of payments for urban hospitals is 0.42 percent, and with the proposed updates, the penalty as a share of payments for urban hospitals is 0.46 percent. This means that total penalties for all urban hospitals is 0.42 percent of total payments for urban hospitals under the current methodology and 0.46 percent with the proposed updates. Measuring the financial impact on hospitals as a percentage of total base operating DRG payments accounts for differences in the amount of base operating DRG payments for hospitals with the characteristic when comparing the financial impact of the program on different groups of hospitals. Table VI.K-02--Comparison of Proposed Updates to Current Methodology in Hospital Readmissions Reduction Program by Hospital Characteristic -------------------------------------------------------------------------------------------------------------------------------------------------------- Current methodology (FY 2025 results: FFS only and 3- Proposed updates (adding MA stays and 2-year year performance period) performance period) ------------------------------------------------------------------------------------------------------------- Hospital characteristic Number of Number of Percentage Penalty as a Number of Number of Percentage Penalty as a eligible penalized of hospitals share of eligible penalized of hospitals share of hospitals hospitals penalized payments (%) hospitals hospitals penalized payments (%) \a\ \b\ (%) \c\ \d\ \a\ \b\ (%) \c\ \d\ -------------------------------------------------------------------------------------------------------------------------------------------------------- All Hospitals............................. 2,828 2,342 82.81 0.42 2,868 2,417 84.27 0.46 By Geographic Location: Urban hospitals........................... 2,164 1,836 84.84 0.42 2,201 1,901 86.37 0.46 [[Page 18288]] 1-99 beds............................. 505 336 66.53 0.39 518 353 68.15 0.46 100-199 beds.......................... 624 549 87.98 0.48 637 574 90.11 0.53 200-299 beds.......................... 397 368 92.70 0.48 406 374 92.12 0.56 300-399 beds.......................... 268 250 93.28 0.43 269 249 92.57 0.47 400-499 beds.......................... 123 112 91.06 0.46 123 121 98.37 0.47 500 or more beds...................... 247 221 89.47 0.34 248 230 92.74 0.37 Rural hospitals........................... 664 506 76.20 0.41 667 516 77.36 0.45 1-49 beds............................. 312 203 65.06 0.31 315 213 67.62 0.36 50-99 beds............................ 186 151 81.18 0.46 186 151 81.18 0.48 100-149 beds.......................... 92 82 89.13 0.39 92 84 91.30 0.46 150-199 beds.......................... 44 41 93.18 0.43 44 40 90.91 0.59 200 or more beds...................... 30 29 96.67 0.40 30 28 93.33 0.35 By Teaching Status: \e\ Non-teaching.......................... 1,634 1,280 78.34 0.45 1,651 1,308 79.22 0.50 Fewer than 100 residents.............. 910 806 88.57 0.44 932 837 89.81 0.48 100 or more residents................. 284 256 90.14 0.36 285 272 95.44 0.39 By Ownership Type: Government............................ 403 313 77.67 0.29 408 340 83.33 0.31 Proprietary........................... 636 519 81.60 0.55 637 511 80.22 0.64 Voluntary............................. 1,789 1,510 84.40 0.41 1,822 1,565 85.89 0.45 By Safety-net Status: \f\ Safety-net hospitals.................. 2,284 1,889 82.71 0.44 2,312 1,945 84.13 0.47 Non-safety-net hospitals.............. 544 453 83.27 0.34 556 472 84.89 0.42 By Disproportionate Share Hospital (DSH) Patient Percentage: \g\ 0-24.................................. 1,058 828 78.26 0.48 1,079 880 81.56 0.53 25-49................................. 1,469 1,273 86.66 0.39 1,478 1,279 86.54 0.42 50-64................................. 177 147 83.05 0.36 181 150 82.87 0.49 65 and over........................... 124 94 75.81 0.43 130 108 83.08 0.53 By Medicare Cost Report (MCR) Percentage: \h\ 0-24.................................. 1,183 995 84.11 0.33 1,224 1,041 85.05 0.40 25-49................................. 1,572 1,296 82.44 0.48 1,569 1,325 84.45 0.50 50-64................................. 62 43 69.35 0.75 61 39 63.93 0.75 65 and over........................... 10 7 70.00 0.29 11 9 81.82 1.21 By Region: New England........................... 122 106 86.89 0.64 123 115 93.50 0.60 Middle Atlantic....................... 313 287 91.69 0.46 318 293 92.14 0.56 East North Central.................... 444 379 85.36 0.43 446 387 86.77 0.49 West North Central.................... 228 172 75.44 0.23 227 184 81.06 0.38 South Atlantic........................ 483 421 87.16 0.46 489 439 89.78 0.47 East South Central.................... 253 210 83.00 0.47 257 221 85.99 0.42 West South Central.................... 425 342 80.47 0.39 425 315 74.12 0.38 Mountain.............................. 211 151 71.56 0.31 212 150 70.75 0.30 Pacific............................... 349 274 78.51 0.34 371 313 84.37 0.42 -------------------------------------------------------------------------------------------------------------------------------------------------------- Source: Proposed Updates results based on: preliminary MA-FFS readmission measure results that were available using data from January 1, 2022, through December 31, 2023, and include non-HRRP hospitals (such as CAHs) in the estimation of ERRs; MA-FFS DRG ratios and dual proportions from July 1, 2021, through June 30, 2023. The Current Methodology results are the actual FY 2025 results using data from July 1, 2020, through June 30, 2023. Both analyses use MedPAR data from October 1, 2022, through September 30, 2023 (FY 2023), to calculate the payment adjustment as a proportion of total base operating DRG payments. Both analyses use data from the FY 2025 proposed rule impact file for hospital characteristics data. The number of hospitals with each characteristic may not sum to the total number of hospitals due to some hospitals having missing characteristic data in the impact file. This table only includes results for hospitals who are eligible for a penalty under the program on the basis of having at least 25 eligible discharges for at least one measure. The average share of penalties as a percentage of all DRG payments is calculated as the sum of all Medicare savings for the group of hospitals divided by total base operating DRG payments for all hospitals in that group. \a\ This column is the number of applicable hospitals within the characteristic that are eligible for a penalty (that is, they have 25 or more eligible discharges for at least one measure). \b\ This column is the number of applicable hospitals that are penalized (that is, they have 25 or more eligible discharges for at least one measure and an estimated payment adjustment factor less than 1) within the characteristic. \c\ This column is the percentage of applicable hospitals that are penalized among hospitals that are eligible to receive a penalty by characteristic. \d\ This column is calculated as the sum of all penalties for the group of hospitals with that characteristic divided by total base operating DRG payments for all those hospitals. Measuring the financial impact on hospitals as a percentage of total base operating DRG payments in this way allows for comparisons across hospital characteristics that accounts for differences in the amount of base operating DRG payments for different groups of hospitals. MedPAR data from October 1, 2022, through September 30, 2023 (FY 2023), are used to estimate the total base operating DRG payments. \e\ A hospital is considered a teaching hospital if it has an Indirect Medical Education adjustment factor for Operation PPS (TCHOP) greater than zero. \f\ A hospital is considered a safety-net hospital if it is in the top DSH quintile. \g\ DSH patient percentage is the sum of the percentage of Medicare inpatient days attributable to patients eligible for both Medicare Part A and Supplemental Security Income (SSI), and the percentage of total inpatient days attributable to patients eligible for Medicaid but not Medicare Part A. \h\ MCR (Medicare Cost Report) percentage is the percentage of total inpatient stays from Medicare patients. [[Page 18289]] We invite public comment on this proposal. c. Proposal To Update and Codify the Extraordinary Circumstance Exception (ECE) Policy for the Hospital Readmissions Reduction Program (1) Background Under our current Extraordinary Circumstances Exception (ECE) regulations, we have granted exceptions to exclude data from Hospital Readmissions Reduction Program payment reduction calculations (FY 2016 IPPS/LTCH PPS final rule, 80 FR 49542 through 49543). An exception may be granted for extraordinary circumstances including, but not limited to, natural disasters or systemic problems with CMS data collection systems that directly affected the ability of facilities to submit data.\243\ We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49542 through 49544); FY 2018 IPPS/LTCH PPS final rule (82 FR 38239 through 38240), and FY 2022 IPPS/LTCH PPS final rule (86 FR 45260 through 45262) for further background and details of our ECE policy. We also refer readers to the QualityNet website for the specific requirements for submission of an ECE request in the Hospital Readmissions Reduction Program.\244\ Hospitals can request a CMS Quality Program ECE for multiple programs based on the same extraordinary circumstance using one ECE request form, including the Hospital Inpatient Quality Reporting (IQR) Program, the Hospital VBP Program, and the HAC Reduction Program. --------------------------------------------------------------------------- \243\ Centers for Medicare & Medicaid Services (CMS) Quality Program Extraordinary Circumstances Exceptions (ECE) Request Form. (2025). QualityNet. Available at: https://qualitynet.cms.gov/files/677e843f50ed8df7419f60e1?filename=HQR_ECE_Req_Form_CY_2025.pdf. \244\ CMS QualityNet. Available at: https://qualitynet.cms.gov/inpatient/hrrp/participation#tab2. --------------------------------------------------------------------------- Our ECE policy provides flexibility for Hospital Readmissions Reduction Program participants to ensure continuity of quality care delivery and measure reporting in the event of an extraordinary circumstance. For instance, we recognize that, in circumstances where an exclusion of data from the calculation of a hospital's payment reduction for the applicable period is not applicable, it is beneficial for a hospital to submit data for use in payment reduction calculations later than the Hospital Readmissions Reduction Program data submission deadline. Delayed data submission for use in payment reduction calculations authorized under the ECE policy would allow temporary relief for a hospital experiencing an extraordinary circumstance while preserving data reporting such as transparency and informed decision- making for beneficiaries and providers alike. Accordingly, we propose to update our regulations to specify that an ECE could take the form of an extension of time for a hospital to comply with a data reporting requirement if CMS determines that this type of relief would be appropriate under the circumstances. (2) Proposals To Update and Codify the Extraordinary Circumstances Exception (ECE) Policy for the Hospital Readmissions Reduction Program We propose to update and codify our ECE policy at 42 CFR 412.154(d) to include extensions of time as a form of relief and to further clarify the policy. Specifically, at proposed Sec. 412.154(d)(1), we propose that CMS may grant an ECE with respect to reporting requirements in the event of an extraordinary circumstance--defined as an event beyond the control of a hospital (for example a natural or man-made disaster such as a hurricane, tornado, earthquake, terrorist attack, or bombing)--that affected the ability of the hospital to comply with one or more applicable reporting requirements with respect to a fiscal year. We propose that the process for requesting or granting an ECE will remain the same as the current ECE process, detailed by CMS at the QualityNet website or a successor website.\245\ At proposed Sec. 412.154(d)(2)(i), we propose that a hospital may request an ECE within 30 calendar days of the date that the extraordinary circumstance occurred. Under this proposed policy, we clarify that CMS retains the authority to grant an ECE as a form of relief at any time after the extraordinary circumstance has occurred. At proposed Sec. 412.154(d)(2)(ii), we propose that CMS notify the requestor with a decision, in writing, via email. In the event that CMS grants an ECE to the hospital, the written decision will specify whether the hospital is exempted from one or more reporting requirements or whether CMS has granted the hospital an extension of time to comply with one or more reporting requirements. --------------------------------------------------------------------------- \245\ CMS QualityNet. Available at: https://qualitynet.cms.gov/inpatient/hrrp/participation#tab2. --------------------------------------------------------------------------- Additionally, at Sec. 412.154(d)(3), we propose that CMS may grant an ECE to one or more hospitals that have not requested an ECE, if CMS determines that: a systemic problem with CMS data collection system directly impacted the ability of the hospital to comply with a quality data reporting requirement; or that an extraordinary circumstance has affected an entire region or locale. As is the case under our current policy, any ECE granted will specify whether the affected hospitals are exempted from one or more reporting requirements or whether CMS has granted the hospitals an extension of time to comply with one or more reporting requirements. This proposed ECE policy would provide further reporting flexibility for hospitals and clarify the ECE process for participants of the Hospital Readmissions Reduction Program. We refer readers to sections X.C.8, VI.L.5, VI.M.3.b, and X.D.4 in this proposed rule for similar proposals in the Hospital IQR Program, Hospital VBP Program, HAC Reduction Program, and PCHQR Program, respectively. We invite public comment on our proposals.

1. Background

a. Overview For background on the Hospital VBP Program, we refer readers to the CMS website at: https://www.cms.gov/medicare/quality/initiatives/hospital-quality-initiative/hospital-value-based-purchasing. We also refer readers to our codified requirements for the Hospital VBP Program at 42 CFR 412.160 through 412.168. b. FY 2026 Program Year Payment Details Under section 1886(o)(7)(C)(v) of the Act, the applicable percent for the FY 2026 program year is 2.00 percent. Using the methodology we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 53573), we estimate that the total amount available for value-based incentive payments for FY 2026 is approximately $1.7 billion, based on the December 2024 update of the FY 2024 MedPAR file. As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53573 through 53576), we will utilize a linear exchange function to translate this estimated amount available into a value-based incentive payment percentage for each hospital, based on its Total Performance Score (TPS). We are publishing proxy value-based incentive payment adjustment factors in Table 16 associated with this proposed rule (which is available via the internet on the CMS website). We note that these proxy adjustment factors will not be used to adjust hospital payments. These [[Page 18290]] proxy value-based incentive payment adjustment factors were calculated using the proposed FY 2026 Hospital VBP program methodology and historical baseline and performance periods for the FY 2025 Hospital VBP Program and the SEP-1 measure. These proxy factors were calculated using the December 2024 update to the FY 2024 MedPAR file. The slope of the linear exchange function used to calculate these proxy factors was 4.5245231964, and the estimated amount available for value-based incentive payments to hospitals for FY 2026 is approximately $1.7 billion. We intend to include an update to this table, as Table 16A, with the FY 2026 IPPS/LTCH PPS final rule, to reflect changes based on the March 2025 update to the FY 2024 MedPAR file. We will add Table 16B to display the actual value-based incentive payment adjustment factors, exchange function slope, and estimated amount available for the FY 2026 Hospital VBP Program. We expect that Table 16B will be posted on the CMS website in Fall 2025.

2. Hospital VBP Program Measures

a. Proposed Measure Updates to the Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (1) Background We are proposing to adopt substantive measure updates to the Hospital-level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (hereinafter referred to as the COMP-HIP-KNEE measure), beginning with the FY 2033 program year. We are proposing these updates contingent on our adopting the same updates to the COMP- HIP-KNEE measure for use in the Hospital IQR Program beginning with the FY 2027 payment determination, which we discuss further in section X.C. of the preamble of this proposed rule. We adopted the COMP-HIP-KNEE measure in the FY 2015 IPPS/LTCH PPS final rule beginning with the FY 2019 program year for use in the Hospital VBP Program (79 FR 50062 through 50063). We previously adopted substantive updates to the COMP-HIP-KNEE measure in the FY 2024 IPPS/ LTCH PPS final rule (88 FR 59067 through 59070) to include index admission diagnoses and in-hospital comorbidity data from Medicare Part A claims which expanded the measure outcome to include 26 additional mechanical complications as identified from 10th revision of the International Classification of Diseases (ICD-10) codes. We continue to consider the clinical outcomes of the COMP-HIP-KNEE measure a high priority, providing important data on patient safety and adverse events, which is why we are proposing to adopt additional updates to the COMP-HIP-KNEE measure in the Hospital VBP Program under the Clinical Outcomes Domain beginning with the FY 2033 program year. In Table VI.L.-01, we illustrate the program years for which we have adopted the COMP-HIP-KNEE measure and the updates that we have adopted, as well as the proposed updates. Table VI.L.-01--Summary of Current and Proposed Reporting of the COMP- HIP-KNEE Measure in the Hospital IQR and VBP Programs ------------------------------------------------------------------------ Version of measure in use Payment year or program year ----------------------------------------- impacted Hospital VBP Hospital IQR Program Program ------------------------------------------------------------------------ FY 2026....................... Modification 1 Original.\2\ (Additional outcomes added) \1\. FY 2027....................... Modification 2 (Add MA Original. patients, shorten performance period) \3\. FY 2028....................... Modification 2........ Original. FY 2029....................... Modification 2........ Original. FY 2030....................... N/A................... Modification 1. FY 2031....................... N/A................... Modification 1. FY 2032....................... N/A................... Modification 1. FY 2033 and Subsequent Years.. N/A................... Modification 2. ------------------------------------------------------------------------ \1\ Modification 1 was finalized in the FY 2024 IPPS/LTCH PPS final rule. \2\ Original version of the measure was finalized in the FY 2015 IPPS/ LTCH PPS final rule. \3\ Modification 2 is being proposed in this section of the proposed rule. (2) Overview of Measure Updates The proposed substantive updates to the COMP-HIP-KNEE measure would expand the measure's inclusion criteria to (1) include Medicare Advantage (MA) patients and (2) shorten the performance period from 3 years to 2 years. The addition of MA data to the measure would approximately double the cohort size, demonstrate measure reliability, and more accurately reflect the quality of care for both FFS and MA beneficiaries. Additionally, the proposed update to reduce the performance period from 3 to 2 years would allow for more recent data for assessing performance. Being able to report measures with only 2 years of data with satisfactory reliability would provide more relevant and up to date quality information for actionable quality improvement insights. With the inclusion of MA patients in the cohort, we assessed whether the reliability of the measure could reach a satisfactory level when the performance period is shortened. Signal-to-noise reliability testing was calculated for all hospitals in the testing sample (n=3,124) and hospitals with at least 25 cases (n=1,777), using 2 years of data for analysis (CY 2022/2023). For hospitals with at least 25 cases, the median reliability score was 0.784, ranging from 0.545 to 0.997. The 25th and 75th percentiles were 0.673 and 0.883, respectively. Therefore 75% of hospitals exceed a 0.6 reliability score, using the 2 year FFS and MA combined cohort, and we believe that this reliability score demonstrates that 2 years of data provide satisfactory reliability. The proposed updated COMP-HIP-KNEE measure would use index admission diagnoses and procedure codes from Medicare FFS claims and MA encounter data to determine cohort inclusion criteria, complications outcomes, and present on admission (POA) comorbidities. We would assess additional comorbidities prior to the index (initial) admission using Part A inpatient, outpatient, and Part B office visit Medicare claims and MA encounters in the 12 months prior to index admission. We would obtain enrollment status from the Medicare Enrollment Database which contains beneficiary demographic, benefit/ [[Page 18291]] coverage, and vital status information. We refer readers to section X.C. of the preamble of this proposed rule for more information on the proposed updates. As stated previously, these proposed updates in the Hospital VBP Program are contingent on our adopting them in the Hospital IQR Program. (3) Pre-Rulemaking Process and Measure Endorsement We listed this updated COMP-HIP-KNEE measure in the publicly available document entitled ``List of Measures Under Consideration for December 1, 2024'' (the ``MUC List'') with identification number MUC2024-042.246 247 248 We refer readers to section X.C. of the preamble of this proposed rule for a discussion of the Pre- Rulemaking Measure Review (PRMR) meeting for this measure. --------------------------------------------------------------------------- \246\ Centers for Medicare & Medicaid Services. (2024) Overview of the List of Measures Under Consideration December 1, 2024. Available at: https://mmshub.cms.gov/sites/default/files/2024-MUC-List-Overview.pdf. \247\ Centers for Medicare and Medicaid Services. (2024) 2024 MUC List. Available at: https://mmshub.cms.gov/sites/default/files/2024-MUC-List.xlsx. \248\ We note that the measure denominator of the updated COMP- HIP-KNEE measure, as described in the MUC List, excludes patients with a principal diagnosis code of COVID-19 ICD-10 code (U07.1) or with a secondary diagnosis code of COVID-19 coded as present on admission (POA) on the index admission claim. As discussed further below, we are providing notice of our intent to remove this exclusion from the measure. --------------------------------------------------------------------------- The CBE previously re-endorsed the original measure in July of 2021.\249\ We submitted the measure with the proposed modifications (CBE #1550) for re-endorsement for the Fall 2024 cycle. The CBE's Endorsement & Maintenance Cost and Efficiency Committee convened in the Fall 2024 cycle to review the COMP-HIP-KNEE measure that was submitted to the CBE for re-endorsement. The E&M Cost and Efficiency Committee voted, and did not reach consensus on this measure on February 10, 2025.\250\ Thus, the measure was not re-endorsed by the CBE. --------------------------------------------------------------------------- \249\ Centers for Medicare & Medicaid Services. (2022) MAP 2021- 2022 Considerations for Implementing Measures Final Report-- Clinicians, Hospitals, and PAC-LTC. Available at: https://www.qualityforum.org/Publications/2022/03/MAP_2021-2022_Considerations_for_Implementing_Measures_Final_Report_-_Clinicians,_Hospitals,_and_PAC-LTC.aspx. \250\ Battelle--Partnership for Quality Measurement. (2025). Fall 2024 Endorsement Summary Report. This report will be available through this link: https://p4qm.org/projects/cost-and-efficiency. --------------------------------------------------------------------------- The committee discussed concerns about the case mix of patients, noting the shift from inpatient to outpatient for these elective procedures and that healthier patients may be directed to ambulatory surgical centers, leaving acute care hospitals with higher-risk individuals, which could affect case mix and measure outcomes. Another concern discussed was the limited scope of the measure which only includes inpatient complications, and whether this limited scope provides utility and relevance for patients. Additional concerns discussed include the overall approach to adjusting low-volume provider performance to the average, and that scores for lower volume providers may be misleading to patients. Regarding concerns on patient mix, we note that this measure focuses on higher-risk patients and is intentionally narrow to capture significant complications, such as sepsis, pulmonary embolism, or a second surgery which should be treated in the inpatient setting. We wish to emphasize that those having elective THA or TKA procedures within the inpatient setting must meet certain criteria, resulting in a smaller cohort of patients, and in communities where there are no ambulatory care centers the patient would be treated in the hospital outpatient department and would not be counted in this measure. Regarding comments about adjusting for low patient volume, the goal of this measure and adjusting for low volume is to make performance scores available for as many providers as possible while trying to avoid misclassification or profiling of providers. We further note that scores are not available for facilities with fewer than 25 cases, because the number of cases may be too small for meaningful results. We wish to emphasize that this measure has been an important patient safety measure that has provided meaningful quality and patient safety information for patients on the hospital inpatient setting for a substantial period of time. Further, we are committed to continually improving quality and patient safety for as many patients as possible within the inpatient setting. Section 1886(o)(2)(A) of the Act requires the Hospital VBP Program to select measures that have been specified for the Hospital IQR Program. We note that although section 1886(b)(3)(B)(viii)(IX)(aa) of the Act generally requires measures specified by the Secretary in the Hospital IQR Program be endorsed by the entity with a contract under section 1890(a) of the Act, section 1886(b)(3)(B)(viii)(IX)(bb) of the Act states that in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. We reviewed CBE-endorsed measures and were unable to identify any other CBE-endorsed measures on this topic, and, therefore, the exception in section 1886(b)(3)(B)(viii)(IX)(bb) of the Act applies. (4) Data Source, Submission and Public Reporting To continue to assess clinical outcomes, we are proposing to adopt these measure updates to the COMP-HIP-KNEE measure in the Hospital VBP Program under the Clinical Outcomes Domain beginning with the FY 2033 program year, contingent on our adoption of these changes in the Hospital IQR Program as described in section X.C. of the preamble of this proposed rule. If finalized, we would begin posting the updated measure data on the Compare tool beginning in July 2026, which would enable us to post data on the substantive updates to the measure for at least one year before the proposed adoption beginning with the April 1, 2029-March 31, 2031, performance period which is associated with the FY 2033 payment determination, as required by section 1886(o)(2)(C)(i) of the Act.\251\ We are also proposing that the performance standards calculation methodology for the updated COMP-HIP-KNEE measure would be the same as that which we currently use for the measure. The performance standards for the updated measure for FY 2033 are not yet available. --------------------------------------------------------------------------- \251\ We note that this performance period would only be 2 years instead of 3 if the proposed updates to the COMP-HIP-KNEE measure, which includes shortening of the performance period, are adopted. --------------------------------------------------------------------------- We invite public comment on this proposal. b. Technical Updates to the Specifications of the COMP-HIP-KNEE Measure To Update the Risk Adjustment Model Beginning With the FY 2027 Program Year In addition to the updates discussed previously and further updates we discuss below, we provide notice of our intent to make a non- substantive modification, as permitted under Sec. 412.164(c)(1), to the COMP-HIP-KNEE measure to update the risk adjustment model to use individual International Classification of Diseases (ICD)-10 codes instead of Hierarchical Condition Categories (HCCs). Under this technical updates policy, we use a [[Page 18292]] subregulatory process to incorporate technical measure specification updates into the measure specifications we have adopted for the Hospital VBP Program (79 FR 50077 through 50079). We continue to believe that this policy, codified at 42 CFR 412.164(c)(1), is the most expeditious manner possible to ensure that quality measures remain fully up to date while preserving the public's ability to comment on substantive updates, which so fundamentally change a measure that it is no longer the same measure that we originally adopted. The current risk adjustment strategy for this measure involves grouping ICD-10 diagnosis codes from CMS's HCC system into clinically relevant categories. We then evaluate the HCCs for statistical association with the measure's outcome.\252\ However, research has indicated that using individual ICD codes in place of HCCs could significantly improve the model performance of the mortality measures.\253\ To better leverage the data and analytical advances since the measure was initially developed, we created a new approach to use individual ICD-10 codes for risk adjustment instead of grouping them into categories. With this new approach, the discriminative performance of the risk adjustment model as measured by c-statistic was significantly better and the calibration performance also proved to be satisfactory. --------------------------------------------------------------------------- \252\ Centers for Medicare & Medicaid Services. 2024 Condition- Specific Measure Updates and Specifications Report. Available at: https://qualitynet.cms.gov/inpatient/measures/mortality/methodology. \253\ Krumholz, H.M., Coppi, A.C., Warner, F., Triche, E.W., Li, S.X., Mahajan, S., Li, Y., Bernheim, S.M., Grady, J., Dorsey, K., Lin, Z., & Normand, S.T. (2019). Comparative Effectiveness of New Approaches to Improve Mortality Risk Models From Medicare Claims Data. JAMA network open, 2(7), e197314. https://doi.org/10.1001/jamanetworkopen.2019.7314. --------------------------------------------------------------------------- c. Technical Updates to the Specifications of the Five Condition- and Procedure-Specific Mortality Measures and the COMP-HIP-KNEE Measure Beginning With the FY 2027 Program Year During the COVID-19 public health emergency, in the FY 2022 IPPS/ LTCH PPS final rule, we stated that we were updating the Hospital 30- Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization (MORT-30-AMI), Hospital 30- Day, All-Cause, Risk-Standardized Mortality Rate Following Coronary Artery Bypass Graft (CABG) Surgery (MORT-30-CABG), Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (MORT-30 COPD), Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure (HF) Hospitalization (MORT-30-HF), and Hospital-Level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (COMP-HIP- KNEE) measures to exclude admissions with either a principal or secondary diagnosis of COVID-19 present on admission from the measure denominators (86 FR 45279 through 45281). In the FY 2023 IPPS/LTCH PPS final rule, we also updated the technical specifications for the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization (MORT-30-PN) measure to exclude patients with either principal or secondary diagnoses of COVID-19 from the measure denominator (87 FR 49109 through 49110). Additionally, we further modified the technical measure specifications for all six measures in the Clinical Outcomes domain, the MORT-30-AMI, MORT-30-CABG, MORT-30- COPD, MORT-30-HF, MORT-30-PN, and COMP-HIP-KNEE measures, in the FY 2023 IPPS/LTCH PPS final rule to include a covariate adjustment for patient history of COVID-19 in the 12 months prior to the admission beginning with the FY 2023 program year (87 FR 49106 through 49109). We stated that we were making these updates pursuant to the technical updates policy we finalized in the FY 2015 IPPS/LTCH PPS final rule. We refer readers to the previous section of the preamble of this proposed rule for more details on our subregulatory technical updates policy. Accordingly, we are providing notice in this proposed rule that we intend to remove the COVID-19 exclusions from the five condition- and procedure-specific mortality measures and one procedure-specific complication measure beginning with the FY 2027 program year. This technical update will modify the technical specifications of the MORT- 30-AMI, MORT-30-CABG, MORT-30-COPD, MORT-30-HF, and MORT-30-PN measures to include the ICD-10 codes that identify patients with a principal or secondary diagnosis of COVID-19 in the measure denominators. The technical update will also modify the technical specifications of the COMP-HIP-KNEE measure to include the ICD-10 codes that identify patients with a principal or secondary diagnosis of COVID-19 in both the measure numerator and denominator. Lastly, the technical update will remove the covariate adjustment for patient history of COVID-19 in the 12 months prior to the admission for all six measures in the Clinical Outcomes domain for the Hospital VBP Program beginning with the FY 2027 program year. We believe that including COVID-19 patients in the measure specifications for the measures in the Clinical Outcomes domain beginning with the FY 2027 program year provides a more complete picture of the care quality provided in hospitals, which we believe meets the goals of the Hospital VBP Program. Technical specifications of the Hospital VBP Program mortality and complication measures are provided on our website under the Measure Methodology Reports section (available at: https://qualitynet.cms.gov/inpatient/measures/mortality/methodology and https://qualitynet.cms.gov/inpatient/measures/complication/methodology). Additional resources about the measure technical specifications and methodology for the Hospital VBP Program are on the QualityNet website (available at: https://qualitynet.cms.gov/inpatient/hvbp). d. Summary of Previously Adopted Quality Measures for the Hospital VBP Program We refer readers to the FY 2025 IPPS/LTCH PPS final rule for summaries of the previously adopted measures for the FY 2026 through FY 2030 program years (89 FR 69402). We are not proposing any changes to the measure set. Table VI.L.-02 summarizes the previously adopted Hospital VBP Program measure set for the FY 2026 program year. [[Page 18293]] Table VI.L.-02--Summary of Previously Adopted Measures for the FY 2026 Program Year ------------------------------------------------------------------------ Measure short name Domain/measure name CBE No. ------------------------------------------------------------------------ Person and Community Engagement Domain ------------------------------------------------------------------------ HCAHPS......................... Hospital Consumer 0166 (0228) Assessment of Healthcare Providers and Systems (HCAHPS) (including Care Transition and Responsiveness of Hospital Staff dimensions). ------------------------------------------------------------------------ Safety Domain ------------------------------------------------------------------------ CAUTI.......................... National Healthcare 0138 Safety Network (NHSN) Catheter Associated Urinary Tract Infection (CAUTI) Outcome Measure. CLABSI......................... National Healthcare 0139 Safety Network (NHSN) Central Line Associated Bloodstream Infection (CLABSI) Outcome Measure. Colon and Abdominal American College of 0753 Hysterectomy SSI. Surgeons Centers for Disease Control and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure. MRSA Bacteremia................ National Healthcare 1716 Safety Network (NHSN) Facility wide Inpatient Hospital onset Methicillin- resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure. CDI............................ National Healthcare 1717 Safety Network (NHSN) Facility wide Inpatient Hospital onset Clostridium difficile Infection (CDI) Outcome Measure. SEP-1.......................... Severe Sepsis and 0500 Septic Shock: Management Bundle. ------------------------------------------------------------------------ Clinical Outcomes Domain ------------------------------------------------------------------------ MORT-30-AMI.................... Hospital 30-Day, All- 0230 Cause, Risk- Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization. MORT-30-HF..................... Hospital 30-Day, All- 0229 Cause, Risk- Standardized Mortality Rate Following Heart Failure (HF) Hospitalization. MORT-30-PN..................... Hospital 30-Day, All- 0468 Cause, Risk- Standardized Mortality Rate Following Pneumonia Hospitalization. MORT-30-COPD................... Hospital 30-Day, All- 1893 Cause, Risk- Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization. MORT-30-CABG................... Hospital 30-Day, All- 2558 Cause, Risk- Standardized Mortality Rate Following Coronary Artery Bypass Graft (CABG) Surgery. COMP-HIP-KNEE.................. Hospital Level Risk- 1550 Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty (THA) and/ or Total Knee Arthroplasty (TKA). ------------------------------------------------------------------------ Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB........................... Medicare Spending Per 2158 Beneficiary (MSPB) Hospital. ------------------------------------------------------------------------ Table VI.L.-03 summarizes the previously adopted Hospital VBP Program measures for the FY 2027 through FY 2031 program years. Table VI.L.-03--Summary of Previously Adopted Measures for the FY 2027 Through FY 2031 Program Years ------------------------------------------------------------------------ Measure short name Domain/measure name CBE No. ------------------------------------------------------------------------ Person and Community Engagement Domain ------------------------------------------------------------------------ HCAHPS *....................... Hospital Consumer 0166 (0228) Assessment of Healthcare Providers and Systems (HCAHPS) (including Care Transition and Responsiveness of Hospital Staff dimensions). ------------------------------------------------------------------------ Safety Domain ------------------------------------------------------------------------ CAUTI.......................... National Healthcare 0138 Safety Network (NHSN) Catheter Associated Urinary Tract Infection (CAUTI) Outcome Measure. CLABSI......................... National Healthcare 0139 Safety Network (NHSN) Central Line Associated Bloodstream Infection (CLABSI) Outcome Measure. Colon and Abdominal American College of 0753 Hysterectomy SSI. Surgeons Centers for Disease Control and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure. MRSA Bacteremia................ National Healthcare 1716 Safety Network (NHSN) Facility wide Inpatient Hospital onset Methicillin- resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure. CDI............................ National Healthcare 1717 Safety Network (NHSN) Facility wide Inpatient Hospital onset Clostridium difficile Infection (CDI) Outcome Measure. SEP-1.......................... Severe Sepsis and 0500 Septic Shock: Management Bundle. ------------------------------------------------------------------------ [[Page 18294]] Clinical Outcomes Domain ------------------------------------------------------------------------ MORT-30-AMI.................... Hospital 30-Day, All- 0230 Cause, Risk- Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization. MORT-30-HF..................... Hospital 30-Day, All- 0229 Cause, Risk- Standardized Mortality Rate Following Heart Failure (HF) Hospitalization. MORT-30-PN..................... Hospital 30-Day, All- 0468 Cause, Risk- Standardized Mortality Rate Following Pneumonia Hospitalization. MORT-30-COPD................... Hospital 30-Day, All- 1893 Cause, Risk- Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization. MORT-30-CABG................... Hospital 30-Day, All- 2558 Cause, Risk- Standardized Mortality Rate Following Coronary Artery Bypass Graft (CABG) Surgery. COMP-HIP-KNEE.................. Hospital Level Risk- 1550 Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty (THA) and/ or Total Knee Arthroplasty (TKA). ------------------------------------------------------------------------ Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB........................... Medicare Spending Per 2158 Beneficiary (MSPB) Hospital. ------------------------------------------------------------------------ * In the FY 2025 IPPS/LTCH PPS final rule, we adopted the updated HCAHPS Survey measure in the Hospital VBP Program beginning with the FY 2030 program (89 FR 69508 through 69511). The Care Transition and Responsiveness of Hospital Staff dimensions will be included in the HCAHPS survey but not scored for FY 2027 through FY 2029, and will not be included in the HCAHPS survey beginning with FY 2030.

3. Baseline and Performance Periods for the FY 2027 Through FY 2031

Program Years a. Background We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69403 through 69405) for previously adopted baseline and performance periods for the FY 2026 through FY 2030 program years. We also refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56998) in which we finalized a schedule for all future baseline and performance periods. b. Summary of Baseline and Performance Periods for the FY 2027 Through FY 2031 Program Years Tables VI.L.-04, VI.L.-05, VI.L.-06, VI.L.-07, and VI.L.-08 summarize the baseline and performance periods that we have previously adopted. Table VI.L.-04--Baseline and Performance Periods for the FY 2027 Program Year ------------------------------------------------------------------------ Measures Baseline period Performance period ------------------------------------------------------------------------ Person and Community Engagement Domain ------------------------------------------------------------------------ HCAHPS.......................... January 1, 2023- January 1, 2025- December 31, 2023. December 31, 2025. ------------------------------------------------------------------------ Clinical Outcomes Domain ------------------------------------------------------------------------ Mortality measures (MORT-30-AMI, July 1, 2017-June July 1, 2022-June MORT-30-HF, MORT-30-COPD, MORT- 30, 2020 *. 30, 2025. 30-CABG, MORT-30-PN). COMP-HIP-KNEE................... April 1, 2017- April 1, 2022- March 31, 2020 *. March 31, 2025. ------------------------------------------------------------------------ Safety Domain ------------------------------------------------------------------------ NHSN measures (CAUTI, CLABSI, January 1, 2023- January 1, 2025- Colon and Abdominal December 31, 2023. December 31, Hysterectomy SSI, CDI, MRSA 2025. Bacteremia). SEP-1........................... January 1, 2023- January 1, 2025- December 31, 2023. December 31, 2025. ------------------------------------------------------------------------ Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB............................ January 1, 2023- January 1, 2025- December 31, 2023. December 31, 2025. ------------------------------------------------------------------------ * These baseline periods are impacted by the extraordinary circumstance exception (ECE) granted by CMS on March 22, 2020, due to the COVID-19 public health emergency. Qualifying claims will be excluded from the measure calculations for January 1, 2020-March 31, 2020 (Q1 2020), and April 1, 2020-June 30, 2020 (Q2 2020), from the claims-based complication and mortality measures. For more detailed information, we refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45297 through 45299). Table VI.L.-05--Baseline and Performance Periods for the FY 2028 Program Year ------------------------------------------------------------------------ Measures Baseline period Performance period ------------------------------------------------------------------------ Person and Community Engagement Domain ------------------------------------------------------------------------ HCAHPS.......................... January 1, 2024- January 1, 2026- December 31, 2024. December 31, 2026. ------------------------------------------------------------------------ [[Page 18295]] Clinical Outcomes Domain ------------------------------------------------------------------------ Mortality measures (MORT-30-AMI, July 1, 2018-June July 1, 2023-June MORT-30-HF, MORT3-0-COPD, MORT- 30, 2021 *. 30, 2026. 30-CABG, MORT-30-PN). COMP-HIP-KNEE................... April 1, 2018- April 1, 2023- March 31, 2021 *. March 31, 2026. ------------------------------------------------------------------------ Safety Domain ------------------------------------------------------------------------ NHSN measures (CAUTI, CLABSI, January 1, 2024- January 1, 2026- Colon and Abdominal December 31, 2024. December 31, Hysterectomy SSI, CDI, MRSA 2026. Bacteremia). SEP-1........................... January 1, 2024- January 1, 2026- December 31, 2024. December 31, 2026. ------------------------------------------------------------------------ Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB............................ January 1, 2024- January 1, 2026- December 31, 2024. December 31, 2026. ------------------------------------------------------------------------ * These baseline periods are impacted by the ECE granted by CMS on March 22, 2020. Qualifying claims will be excluded from the measure calculations for January 1, 2020-March 31, 2020 (Q1 2020), and April 1, 2020-June 30, 2020 (Q2 2020), from the claims-based complication and mortality measures. For more detailed information, we refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45297 through 45299). Table VI.L.-06--Baseline and Performance Periods for the FY 2029 Program Year ------------------------------------------------------------------------ Measures Baseline period Performance period ------------------------------------------------------------------------ Person and Community Engagement Domain ------------------------------------------------------------------------ HCAHPS.......................... January 1, 2025- January 1, 2027- December 31, 2025. December 31, 2027. ------------------------------------------------------------------------ Clinical Outcomes Domain ------------------------------------------------------------------------ Mortality measures (MOR-T30-AMI, July 1, 2019-June July 1, 2024-June MORT-30-HF, MORT-30-COPD, MORT- 30, 2022 *. 30, 2027. 30-CABG, MORT-30-PN). COMP-HIP-KNEE................... April 1, 2019- April 1, 2024- March 31, 2022 *. March 31, 2027. ------------------------------------------------------------------------ Safety Domain ------------------------------------------------------------------------ NHSN measures (CAUTI, CLABSI, January 1, 2025- January 1, 2027- Colon and Abdominal December 31, 2025. December 31, Hysterectomy SSI, CDI, MRSA 2027. Bacteremia). SEP-1........................... January 1, 2025- January 1, 2027- December 31, 2025. December 31, 2027. ------------------------------------------------------------------------ Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB............................ January 1, 2025- January 1, 2027- December 31, 2025. December 31, 2027. ------------------------------------------------------------------------ * These baseline periods are impacted by the ECE granted by CMS on March 22, 2020. Qualifying claims will be excluded from the measure calculations for January 1, 2020-March 31, 2020 (Q1 2020), and April 1, 2020-June 30, 2020 (Q2 2020), from the claims-based complication and mortality measures. For more detailed information, we refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45297 through 45299). Table VI.L.-07--Baseline and Performance Periods for the FY 2030 Program Year ------------------------------------------------------------------------ Measures Baseline period Performance period ------------------------------------------------------------------------ Person and Community Engagement Domain ------------------------------------------------------------------------ HCAHPS.......................... January 1, 2026- January 1, 2028- December 31, 2026. December 31, 2028. ------------------------------------------------------------------------ Clinical Outcomes Domain ------------------------------------------------------------------------ Mortality measures (MORT-30-AMI, July 1, 2020-June July 1, 2025-June MORT-30-HF, MORT3-0-COPD, MORT- 30, 2023. 30, 2028. 30-CABG, MORT-30-PN). COMP-HIP-KNEE................... April 1, 2020- April 1, 2025- March 31, 2023 *. March 31, 2028. ------------------------------------------------------------------------ Safety Domain ------------------------------------------------------------------------ NHSN measures (CAUTI, CLABSI, January 1, 2026- January 1, 2028- Colon and Abdominal December 31, 2026. December 31, Hysterectomy SSI, CDI, MRSA 2028. Bacteremia). SEP-1........................... January 1, 2026- January 1, 2028- December 31, 2026. December 31, 2028. ------------------------------------------------------------------------ [[Page 18296]] Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB............................ January 1, 2026- January 1, 2028- December 31, 2026. December 31, 2028. ------------------------------------------------------------------------ * This baseline period is impacted by the ECE granted by CMS on March 22, 2020. Qualifying claims will be excluded from the measure calculation for January 1, 2020-March 31, 2020 (Q1 2020), and April 1, 2020-June 30, 2020 (Q2 2020), from the claims-based complication measure. For more detailed information, we refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45297 through 45299). Table VI.L.-08--Baseline and Performance Periods for the FY 2031 Program Year ------------------------------------------------------------------------ Measures Baseline period Performance period ------------------------------------------------------------------------ Person and Community Engagement Domain ------------------------------------------------------------------------ HCAHPS.......................... January 1, 2027- January 1, 2029- December 31, 2027. December 31, 2029. ------------------------------------------------------------------------ Clinical Outcomes Domain ------------------------------------------------------------------------ Mortality measures (MORT-30-AMI, July 1, 2021-June July 1, 2026-June MORT-30-HF, MORT3-0-COPD, MORT- 30, 2024. 30, 2029. 30-CABG, MORT-30-PN). COMP-HIP-KNEE................... April 1, 2021- April 1, 2026- March 31, 2024. March 31, 2029. ------------------------------------------------------------------------ Safety Domain ------------------------------------------------------------------------ NHSN measures (CAUTI, CLABSI, January 1, 2027- January 1, 2029- Colon and Abdominal December 31, 2027. December 31, Hysterectomy SSI, CDI, MRSA 2029. Bacteremia). SEP-1........................... January 1, 2027- January 1, 2029- December 31, 2027. December 31, 2029. ------------------------------------------------------------------------ Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB............................ January 1, 2027- January 1, 2029- December 31, 2027. December 31, 2029. ------------------------------------------------------------------------

4. Performance Standards for the Hospital VBP Program

a. Background We refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 59089) for previously established performance standards for the FY 2026 program year. We also refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69406 through 69407) for the previously established performance standards for the FY 2027 program year. b. Technical Update to the Five National Healthcare Safety Network (NHSN) Healthcare-Associated Infection (HAI) Measures In this section, we provide information regarding upcoming changes to the standard population data that are used to calculate the standardized infection ratio (SIR) for the CDC's NHSN measures. These changes are occurring as part of routine measure maintenance. CDC's NHSN measures are used to monitor hospital performance on prevention of HAIs. For each NHSN measure, CDC calculates the standardized infection ratio (SIR), which compares a hospital's observed number of HAIs to the number of infections predicted for the hospital, adjusting for several risk factors. The predicted number of infections is determined using the amount of exposure (for example, the number of central line days when predicting CLABSI events) for a given hospital according to the relevant observed risk factors and infection rates for the same combination of risk factors that occurred among a standard population during a specified period as reflected by the appropriate risk adjustment model (this is sometimes referred to as a ``baseline,'' \254\ but referred to here as ``standard population data''). This set of rates forms standard population data that promotes timely comparisons to measure change in an outcome. Since 2016, CDC has been using data collected in CY 2015 to determine the standard population and, currently, the 2015 standard population is used to calculate the HAI measures in the Hospital VBP Program.\255\ Prior to 2016, calculated SIRs had different standard population years for each infection type and facility type.\256\ --------------------------------------------------------------------------- \254\ ``Rebaseline'' is a term that CDC's NHSN staff use to describe the process of updating the national HAI baseline data and risk adjustment models developed using these data. As part of routine measure maintenance, CDC has updated the baseline to ensure the number of predicted infections used in SIR calculations reflects the current state of HAIs in the United States using CY 2022 data. The CDC released its initial announcement of this rebaseline in June 2023. Resources and training regarding the 2015 and 2022 standard population data can be found at: https://www.cdc.gov/nhsn/nhsnrebaseline/index.html. \255\ Centers for Disease Control and Prevention. CHARTING THE COURSE: 2022 HAI REBASELINE. Available at: https://www.cdc.gov/nhsn/pdfs/rebaseline/22-Rebaseline-FAQs-Final-Version.pdf. \256\ Centers for Disease Control and Prevention. Paving the Path Forward: 2015 Rebaseline. Available at: https://www.cdc.gov/nhsn/2015rebaseline/index.html. --------------------------------------------------------------------------- During this update, HAI SIR calculations of infections reported beginning in CY 2025 will reflect the use of both the new 2022 standard population data and the 2015 standard population data. Because the Hospital VBP Program calculates improvement points using comparisons between data collected from hospitals in a baseline period and data collected in a performance period, the Hospital VBP Program must treat CDC's baseline update differently than other quality programs. We have determined that we cannot equally compare CDC's new baseline data to the current baseline data to calculate improvement points. If we do not address the CDC's measure update, we will be unable to compare the baseline and performance periods for NHSN measures in the FY 2027 through FY 2028 program years. To address the [[Page 18297]] problem, we intend to use the 2015 baseline data to calculate performance standards and calculate and publicly report measure scores until the FY 2029 program year, as depicted in the table below. For the FY 2029 program year and subsequent years, the Hospital VBP Program will use the ``new standard population data'' (that is, CY 2022 data) to calculate performance standards and calculate and publicly report measure scores. Table VI.L.-09--CDC's Baseline Data in the Hospital VBP Program ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Measures FY 2026 Program year * FY 2027 Program year * FY 2028 Program year * FY 2029 Program year * ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ NHSN Measures Baseline Periods...... 2015 Baseline Data................... 2015 Baseline Data................... 2015 Baseline Data................... 2022 Baseline Data. NHSN Measures Performance Period.... 2015 Baseline Data................... 2015 Baseline Data................... 2015 Baseline Data................... 2022 Baseline Data. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ * CDC will use current baseline data (CY 2015) to calculate measure data that we will translate into scores on the measures. ** CDC will use new baseline data (CY 2022) to calculate measure data that we will translate into scores on the measures. c. Previously and Newly Established Performance Standards for the FY 2027 Program Year We have adopted certain measures for the Safety domain, Clinical Outcomes domain, and the Efficiency and Cost Reduction domain for future program years to ensure that we can adopt baseline and performance periods of sufficient length for performance scoring purposes. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45294 through 45295), we established performance standards for the FY 2027 program year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30- HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP- HIP-KNEE) and the Efficiency and Cost Reduction domain measure (MSPB). Additionally, in the FY 2025 IPPS/LTCH PPS final rule, we established the performance standards for the FY 2027 program year for the Safety domain measures (CAUTI, CLABSI, CDI, MRSA Bacteremia, Colon and Abdominal Hysterectomy SSI, and SEP-1) and the Person and Community Engagement Domain (the HCAHPS Survey Dimensions) (89 FR 69406 through 69407). While we are making technical updates to the measures in the Clinical Outcomes domain beginning with the FY 2027 program year as discussed previously, the FY 2027 performance standards that we previously adopted for measures in this domain are unchanged because the applicable baseline period does not include COVID-19 impacted data after applying the national ECE. For the reader's reference, the performance standards for the measures in the Clinical Outcomes domain for the FY 2027 program year are set out in Table VI.L.-10. Table VI.L.-10--Performance Standards For The FY 2027 Program Year ------------------------------------------------------------------------ Achievement Measure short name threshold Benchmark ------------------------------------------------------------------------ Clinical Outcomes Domain * ------------------------------------------------------------------------ MORT-30-AMI............................. 0.877824 0.893133 MORT-30-HF.............................. 0.887571 0.913388 MORT-30-PN.............................. 0.844826 0.877204 MORT-30-COPD............................ 0.917395 0.932640 MORT-30-CABG............................ 0.971149 0.980752 COMP-HIP-KNEE **........................ 0.023322 0.017018 ------------------------------------------------------------------------ * As discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45297 through 45299), we did not include data from Q1 and Q2 of CY 2020 in the calculation of these performance standards due to the ECE granted by CMS on March 22, 2020. ** Lower values represent better performance. d. Newly Established and Estimated Performance Standards for the FY 2028 Program Year We have adopted certain measures for the Safety domain, Clinical Outcomes domain, and the Efficiency and Cost Reduction domain for future program years to ensure that we can adopt baseline and performance periods of sufficient length for performance scoring purposes. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49118), we established performance standards for the FY 2028 program year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-HF, MORT-30-PN, MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the Efficiency and Cost Reduction domain measure (MSPB Hospital). However, given the technical update to the measures in the Clinical Outcomes domain beginning with the FY 2027 program year as discussed previously, we are establishing new performance standards for the measures in the Clinical Outcomes domain for the FY 2028 program year. We note that the performance standards for the MSPB Hospital measure are based on performance period data. Therefore, we are unable to provide numerical equivalents for the standards at this time. The newly established performance standards for these measures are set out in Table VI.L.-11. [[Page 18298]] Table VI.L.-11.--Newly Established and Estimated Performance Standards For The FY 2028 Program Year ------------------------------------------------------------------------ Achievement Measure short name threshold Benchmark ------------------------------------------------------------------------ Safety Domain ------------------------------------------------------------------------ CAUTI * **...................... 0.463............. 0. CLABSI * **..................... 0.549............. 0. CDI * **........................ 0.329............. 0. MRSA Bacteremia * **............ 0.618............. 0. Colon and Abdominal Hysterectomy 0.74.............. 0. SSI * **. 0.899............. SEP-1 ***....................... 0.632479.......... 0.865693. ------------------------------------------------------------------------ Clinical Outcomes Domain ------------------------------------------------------------------------ MORT-30-AMI [diams]............. 0.877260.......... 0.893229. MORT-30-HF [diams].............. 0.885427.......... 0.910649. MORT-30-PN [diams].............. 0.831776.......... 0.866166. MORT-30-COPD [diams]............ 0.913752.......... 0.929652. MORT-30-CABG [diams]............ 0.971052.......... 0.980570. COMP-HIP-KNEE * [diams]......... 0.029758.......... 0.022002. ------------------------------------------------------------------------ Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB *.......................... Median Medicare Mean of the lowest Spending per decile Medicare Beneficiary ratio Spending per across all Beneficiary hospitals during ratios across all the performance hospitals during period. the performance period. ------------------------------------------------------------------------ * Lower values represent better performance. ** We note that the numerical values for the performance standards for the HAI measures in this proposed rule represent estimates based on the most recently available data and have been rebaselined as discussed previously. We intend to update the numerical values in the FY 2026 IPPS/LTCH PPS final rule. These estimates are based on 10/01/ 2023-09/30/2024 data. *** We note that the numerical values for the performance standards for the SEP-1 measure in this proposed rule represent estimates based on the most recently available data. These estimates are based on 10/01/ 2023-09/30/2024 data. [diams] As discussed in section VI.L.2.a. and b. of the preamble of this proposed rule, we are providing notice of a technical update for all measures in the Clinical Outcomes Domain. While these performance standards are unchanged at this time, we intend to update them in the FY 2026 IPPS/LTCH PPS final rule. We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69507-69508) where we finalized the policy to modify the scoring of the HCAHPS Survey for the FY 2027 through FY 2029 program years while updates to the survey are publicly reported under the Hospital IQR Program. Scoring is modified to only score hospitals on the six unchanged Hospital VBP dimensions of the HCAHPS Survey until the updates to the HCAHPS Survey have been publicly reported for one year. The six unchanged dimensions of the HCAHPS Survey for the Hospital VBP Program are as follows: ``Communication with Nurses''. ``Communication with Doctors''. ``Communication about Medicines''. ``Discharge Information''. ``Cleanliness and Quietness''. ``Overall Rating.'' Scoring is modified such that for each of the six unchanged dimensions, Achievement Points (0-10 points) and Improvement Points (0- 9 points) will be calculated, the larger of which will be summed across these six dimensions to create a pre-normalized HCAHPS Base Score of 0- 60 points (as compared to 0-80 points with the current eight dimensions). The pre-normalized HCAHPS Base Score will then be multiplied by \8/6\ (1.3333333) and rounded according to standard rules (values of 0.5 and higher are rounded up, values below 0.5 are rounded down) to create the normalized HCAHPS Base Score. Each of the six unchanged dimensions will be of equal weight, so that, as currently scored, the normalized HCAHPS Base Score will range from 0 to 80 points. HCAHPS Consistency Points will be calculated in the same manner as the current method and will continue to range from 0 to 20 points. Like the Base Score, the Consistency Points Score will consider scores across the six unchanged dimensions of the Person and Community Engagement domain. The final element of the scoring formula, which will remain unchanged from the current formula, will be the sum of the HCAHPS Base Score and the HCAHPS Consistency Points Score for a total score that ranges from 0 to 100 points. The method for calculating the performance standards for the six dimensions will remain unchanged. We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26511 through 26512) for our methodology for calculating performance standards. The estimated performance standards for the six unchanged dimensions for the FY 2028 program year are set out in Table VI.L.-12. Table VI.L.-12--Estimated Performance Standards for the FY 2028 Program Year: Person and Community Engagement Domain ---------------------------------------------------------------------------------------------------------------- Achievement HCAHPS survey dimension * Floor threshold (50th Benchmark (mean of (minimum) percentile) top decile) ---------------------------------------------------------------------------------------------------------------- Communication with Nurses............................. 55.55 77.55 86.47 Communication with Doctors............................ 55.53 77.66 86.34 Responsiveness of Hospital Staff **................... X X X [[Page 18299]] Communication about Medicines......................... 38.47 58.25 69.90 Hospital Cleanliness & Quietness...................... 40.97 63.69 77.70 Discharge Information................................. 66.89 86.22 91.47 Care Transition **.................................... X X X Overall Rating of Hospital............................ 35.06 69.07 84.04 ---------------------------------------------------------------------------------------------------------------- * We note that the numerical values for the performance standards for the HCAHPS Survey in this proposed rule represent estimates based on the most recently available data, and we intend to update the numerical values in the FY 2026 IPPS/LTCH PPS final rule. These estimates are based on 10/01/2023-09/30/2024 data. ** In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69507 and 69508), we finalized the policy to only score on the six unchanged dimensions of the original HCAHPS Survey for the FY 2028 program year while the updates to the survey are publicly reported on in the Hospital IQR Program for the statutorily required one year. Therefore, we are not reporting performance standards for the dimensions that are unscored. e. Newly Established Performance Standards for Certain Measures for the FY 2029 Program Year We have adopted certain measures for the Safety domain, Clinical Outcomes domain, and the Efficiency and Cost Reduction domain for future program years to ensure that we can adopt baseline and performance periods of sufficient length for performance scoring purposes. In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59091 through 59092), we established performance standards for the FY 2029 program year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30- HF, MORT-30-PN, MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the Efficiency and Cost Reduction domain measure (MSPB Hospital). However, given the technical update to the measures in the Clinical Outcomes domain beginning with the FY 2027 program year as discussed previously, we are newly establishing the performance standards for the measures in the Clinical Outcomes domain for the FY 2029 program year to now include COVID-19 patients in the measure data. We note that the performance standards for the MSPB Hospital measure are based on performance period data. Therefore, we are unable to provide numerical equivalents for the standards at this time. The newly established performance standards for these measures are set out in Table VI.L-13. Table VI.L.13--Newly Established Performance Standards for the FY 2029 Program Year ------------------------------------------------------------------------ Achievement Measure short name threshold Benchmark ------------------------------------------------------------------------ Clinical Outcomes Domain* ------------------------------------------------------------------------ MORT-30-AMI..................... 0.874856.......... 0.893101. MORT-30-HF...................... 0.880089.......... 0.9072. MORT-30-PN...................... 0.814736.......... 0.853996. MORT-30-COPD.................... 0.905916.......... 0.924829. MORT-30-CABG.................... 0.971027.......... 0.979822. COMP-HIP-KNEE **................ 0.025024.......... 0.018708. ------------------------------------------------------------------------ Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB **......................... Median Medicare Mean of the lowest Spending per decile Medicare Beneficiary ratio Spending per across all Beneficiary hospitals during ratios across all the performance hospitals during period. the performance period. ------------------------------------------------------------------------ * As discussed in section VI.L.2.a. and b. of the preamble of this proposed rule, we are providing notice of a technical update for all measures in the Clinical Outcomes Domain. While these performance standards are unchanged at this time, we intend to update them in the FY 2026 IPPS/LTCH PPS final rule. ** Lower values represent better performance. f. Newly Established Performance Standards for Certain Measures for the FY 2030 Program Year We have adopted certain measures for the Safety domain, Clinical Outcomes domain, and the Efficiency and Cost Reduction domain for future program years to ensure that we can adopt baseline and performance periods of sufficient length for performance scoring purposes. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69409 through 69410), we established performance standards for the FY 2030 program year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30- HF, MORT-30-PN, MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the Efficiency and Cost Reduction domain measure (MSPB Hospital). However, given the technical update to the measures in the Clinical Outcomes domain beginning with the FY 2027 program year as discussed previously, we are newly establishing the performance standards for the measures in the Clinical Outcomes domain for the FY 2030 program year. We note that the performance standards for the MSPB Hospital measure are based on performance period data. Therefore, we are unable to provide numerical equivalents for the standards at this time. The newly established performance standards for these measures are set out in Table VI.L.-14. [[Page 18300]] Table VI.L.--14 Newly Established Performance Standards for the FY 2030 Program Year ------------------------------------------------------------------------ Achievement Measure short name threshold Benchmark ------------------------------------------------------------------------ Clinical Outcomes Domain * ------------------------------------------------------------------------ MORT-30-AMI..................... 0.873975.......... 0.89371. MORT-30-HF...................... 0.878881.......... 0.90929. MORT-30-PN...................... 0.81782........... 0.858688. MORT-30-COPD.................... 0.903404.......... 0.924332. MORT-30-CABG.................... 0.972219.......... 0.9815. COMP-HIP-KNEE **................ 0.028252.......... 0.019993. ------------------------------------------------------------------------ Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB **......................... Median Medicare Mean of the lowest Spending per decile Medicare Beneficiary ratio Spending per across all Beneficiary hospitals during ratios across all the performance hospitals during period. the performance period. ------------------------------------------------------------------------ * As discussed in section VI.L.2.a. and b. of the preamble of this proposed rule, we are providing notice of a technical update for all measures in the Clinical Outcomes Domain. While these performance standards are unchanged at this time, we intend to update them in the FY 2026 IPPS/LTCH PPS final rule. ** Lower values represent better performance. g. Newly Established Performance Standards for Certain Measures for the FY 2031 Program Year As discussed previously, we have adopted certain measures for the Clinical Outcomes domain (MORT-30-AMI, MORT-30-HF, MORT-30-PN, MORT-30- COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the Efficiency and Cost Reduction domain (MSPB Hospital) for future program years to ensure that we can adopt baseline and performance periods of sufficient length for performance scoring purposes. In accordance with our methodology for calculating performance standards discussed more fully in the Hospital Inpatient VBP Program final rule (76 FR 26511 through 26512), which is codified at 42 CFR 412.160, we are establishing the following performance standards for the FY 2031 program year for the Clinical Outcomes domain and the Efficiency and Cost Reduction domain. We note that the performance standards for the MSPB Hospital measure are based on performance period data. Therefore, we are unable to provide numerical equivalents for the standards at this time. The newly established performance standards for these measures are set out in Table VI.L.-15. Table VI.L.-15--Newly Established Performance Standards for the FY 2031 Program Year ------------------------------------------------------------------------ Achievement Measure short name threshold Benchmark ------------------------------------------------------------------------ Clinical Outcomes Domain * ------------------------------------------------------------------------ MORT-30-AMI..................... 0.878523.......... 0.896695. MORT-30-HF...................... 0.882749.......... 0.912451. MORT-30-PN...................... 0.835165.......... 0.873917 MORT-30-COPD.................... 0.909324.......... 0.929745. MORT-30-CABG.................... 0.975023.......... 0.983685. COMP-HIP-KNEE **................ 0.036439.......... 0.02533. ------------------------------------------------------------------------ Efficiency and Cost Reduction Domain ------------------------------------------------------------------------ MSPB **......................... Median Medicare Mean of the lowest Spending per decile Medicare Beneficiary ratio Spending per across all Beneficiary hospitals during ratios across all the performance hospitals during period. the performance period. ------------------------------------------------------------------------ * As discussed in section VI.L.2.a. and b. of the preamble of this proposed rule, we are providing notice of a technical update to remove the COVID-19 exclusion from the measure data for all measures in the Clinical Outcomes Domain. As a result, these performance standards have been calculated with the inclusion of COVID-19 data. ** Lower values represent better performance.

5. Proposals To Update the Extraordinary Circumstance Exception (ECE)

Policy for the Hospital VBP Program (a) Background Under our current Extraordinary Circumstances Exception (ECE) regulations, we have granted exceptions with respect to Hospital VBP Program requirements in the event of certain extraordinary circumstances beyond the control of the hospital. We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45298 through 45299) and 42 CFR 412.165(c) for additional details related to the Hospital VBP Program ECE policy. We also refer readers to the QualityNet website for the specific requirements for submission of an ECE request in the Hospital VBP Program.\257\ --------------------------------------------------------------------------- \257\ https://qualitynet.cms.gov/inpatient/hvbp/participation#tab6. --------------------------------------------------------------------------- Our ECE policies provide flexibility for Hospital VBP program participants to ensure continuity of quality care delivery and measure scoring in the event of an extraordinary circumstance. For instance, we recognize that, in circumstances where a full exception is not applicable, it is beneficial for a hospital to report data later than the reporting deadline. Delayed reporting authorized under our ECE policy allows temporary relief for a hospital [[Page 18301]] experiencing an extraordinary circumstance while preserving the benefits of data reporting such as transparency and informed decision- making for beneficiaries and providers alike. Accordingly, we propose to update our regulations to specify that an ECE could take the form of an extension of time for a hospital to comply with a data reporting requirement if CMS determines that this type of relief would be appropriate under the circumstances. (b) Proposal To Update the Extraordinary Circumstances Exception (ECE) Policy for the Hospital VBP Program We propose to update the current ECE policy codified at 42 CFR 412.165(c) to include extensions of time as a form of relief and to further clarify the policy. Specifically, at proposed Sec. 412.165(c)(1), we propose that CMS may grant an ECE with respect to reporting requirements in the event of an extraordinary circumstance-- defined as an event beyond the control of a hospital (for example, a natural or man-made disaster such as a hurricane, tornado, earthquake, terrorist attack, or bombing)--that affected the ability of the hospital to comply with one or more applicable reporting requirements with respect to a fiscal year. We propose that the process for requesting or granting an ECE would remain the same as the current ECE process, detailed by CMS at the QualityNet website or a successor website.\258\ At proposed Sec. 412.165(c)(2)(i), we propose that a hospital may request an ECE within 30 calendar days of the date that the extraordinary circumstance occurred. Our current policy allows a request within 90 days; however, this proposed change would align to CMS systems implementation requirements across all quality reporting programs. Under this proposed codified policy, we clarify that CMS retains the authority to grant an ECE as a form of relief at any time after the extraordinary circumstance has occurred. At proposed Sec. 412.165(c)(2)(ii), we propose that CMS notify the requestor with a decision in writing. In the event that CMS grants an ECE to the hospital, the written decision will specify whether the hospital is exempted from one or more reporting requirements or whether CMS has granted the hospital an extension of time to comply with one or more reporting requirements. --------------------------------------------------------------------------- \258\ https://qualitynet.cms.gov/inpatient/iqr/participation#tab3. --------------------------------------------------------------------------- Additionally, at Sec. 412.165(c)(3), we note that CMS may grant an ECE to one or more hospitals that have not requested an ECE if CMS determines either of the following: a systemic problem with a CMS data collection system directly impacted the ability of the hospital to comply with a quality data reporting requirement, or that an extraordinary circumstance has affected an entire region or locale. As is the case under our current policy, any ECE granted will specify whether the affected hospitals are exempted from one or more reporting requirements or whether CMS has granted the hospitals an extension of time to comply with one or more reporting requirements. This proposed ECE policy would provide further reporting flexibility for hospitals and clarify the ECE process. We invite public comment on our proposals.

6. Proposed Removal of the Health Equity Adjustment From the Hospital

VBP Program In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59092 through 59106), we adopted a Health Equity Adjustment (HEA) that, beginning with the FY 2026 program year, rewards top performing hospitals that serve higher proportions of patients with dual eligibility status. We codified the HEA at Sec. Sec. 412.160 and 412.165(b) of our regulations. Section 1886(o)(5)(A) of the Act authorizes the Secretary to develop the methodology for assessing hospital performance based on performance standards established with respect to the measures selected for the Hospital VBP Program. As discussed in the FY 2024 IPPS/LTCH PPS final rule, by providing the HEA to hospitals that serve higher proportions of patients with dual eligibility status and that perform well on quality measures, the HEA would appropriately recognize the resource intensity expended to achieve high performance on quality measures by hospitals that serve a high proportion of patients with dual eligibility status, while also mitigating the worse health outcomes experienced by dually eligible patients through incentivizing better care across all hospitals. In this proposed rule, we are proposing to remove the HEA because simplifying the Hospital VBP Program's scoring methodology by removing the HEA will improve hospitals' understanding of the program and provide clearer incentives to hospitals as they seek to improve the quality of care for all patients. As noted in section I.G. of Appendix A of this proposed rule, in Table I.G.6.-01 and Table I.G.6.-02 the overall impact of the HEA on the overall payment adjustments is small. With the HEA, the average net percentage payment adjustment for FY 2026 is 0.170% and without the HEA, the average net percentage payment adjustment is 0.168%. Given this relatively small impact, and in light of the Administration's priority to streamline regulations and reduce burdens on those participating in the Medicare program, we are proposing to remove the HEA at this time. We refer readers to Supplementary Information section of this proposed rule for the Unleashing Prosperity Through Deregulation of the Medicare Program-- Request for Information for more information. We considered altering the structure of the adjustment methodology to simplify it, but that process will require time to develop and test a new adjustment and, if pursued, would be addressed in future rulemaking. We do not anticipate any serious reliance interests as a result of this proposal since the HEA does not require any additional reporting burden. We propose to codify this removal of the HEA by removing the definition of ``Health equity adjustment bonus points'' in Sec. 412.160 of our regulations and revising Sec. 412.165(b) to remove the calculation and addition of health equity adjustment bonus points from the Total Performance Score calculation beginning with the FY 2026 program year. We refer readers to Table I.G.6.-01 and Table I.G.6.-02 in K-CF, Section 6: Effects of Changes Under the FY 2026 Hospital Value-Based Purchasing (VBP) Program, which reflect an estimated impact analysis of base operating DRG payment amounts resulting from the FY 2026 Hospital VBP Program with and without the HEA, respectively. We welcome public comment on these proposals.

1. Regulatory Background

We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50709) for a general overview of the Hospital-Acquired Condition (HAC) Reduction Program and a detailed discussion of the statutory basis for the Program. We also refer readers to 42 CFR 412.170 through 412.172 for codified HAC Reduction Program requirements.

2. Measures for FY 2026 and Subsequent Years in the HAC Reduction

Program a. Current Measures The previously finalized measures for the HAC Reduction Program for FY [[Page 18302]] 2026 and subsequent years are shown in table VI.M.-01. Technical specifications for the CMS Patient Safety and Adverse Events Composite (CMS PSI 90) measure can be found on the QualityNet website available at: https://qualitynet.cms.gov/inpatient/measures/psi/resources. Technical specifications for the Centers for Disease Control and Prevention's (CDC) National Healthcare Safety Network (NHSN) healthcare-associated infection (HAI) measures can be found at the CDC's NHSN website at: https://www.cdc.gov/nhsn/acute-care-hospital/index.html and on the QualityNet website available at: https://qualitynet.cms.gov/inpatient/measures/hai/resources. These web pages provide measure updates and other information necessary to guide hospitals participating in the collection of HAC Reduction Program data. Table VI.M.-01--HAC Reduction Program Measures for FY 2026 and Subsequent Years ------------------------------------------------------------------------ Consensus- Short name Measure name based entity (CBE) No. ------------------------------------------------------------------------ HAC Reduction Program Measures for FY 2026 and Subsequent Years ------------------------------------------------------------------------ CMS PSI 90..................... CMS Patient Safety and 0531 Adverse Events Composite. CAUTI.......................... CDC NHSN Catheter- 0138 associated Urinary Tract Infection (CAUTI) Outcome Measure. CDI............................ CDC NHSN Facility-wide 1717 Inpatient Hospital- onset Clostridium difficile Infection (CDI) Outcome Measure. CLABSI......................... CDC NHSN Central Line- 0139 Associated Bloodstream Infection (CLABSI) Outcome Measure. Colon and Abdominal American College of 0753 Hysterectomy SSI. Surgeons--Centers for Disease Control and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure. MRSA Bacteremia................ CDC NHSN Facility-wide 1716 Inpatient Hospital- onset Methicillin- resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure. ------------------------------------------------------------------------ We are not proposing to add or remove any measures in this proposed rule. We refer readers to section I.G.9. of Appendix A of this proposed rule for an updated estimate of the impact of the Program policies on the proportion of hospitals in the worst performing quartile of Total HAC Scores for the FY 2026 HAC Reduction Program. b. Technical Update to CDC's National Healthcare Safety Network Healthcare-Associated Infection Measures for the HAC Reduction Program In this section, we provide information regarding upcoming changes to the standard population data that are used to calculate the standardized infection ratio (SIR) for the CDC's NHSN measures. These changes are occurring as part of routine measure maintenance. CDC's NHSN measures are used to monitor hospital performance on prevention of healthcare-associated infections (HAIs). For each NHSN measure, CDC calculates the SIR, which compares a hospital's observed number of HAIs to the number of infections predicted for the hospital, adjusting for several risk factors. The predicted number of infections is determined using the amount of exposure (for example, the number of central line days when predicting CLABSI events) for a given hospital according to the relevant observed risk factors and infection rates for the same combination of risk factors that occurred among a standard population during a specified period as reflected by the appropriate risk adjustment model (this is sometimes referred to as a ``baseline,'' \259\ but referred to here as ``standard population data''). This set of rates forms standard population data that promotes timely comparisons to measure change in an outcome. Since 2016, CDC has been using data collected in CY 2015 to determine the standard population and, currently, the 2015 standard population is used to calculate the HAI measures in the HAC Reduction Program.\260\ Prior to 2016, calculated SIRs had different standard population years for each infection type and facility type.\261\ --------------------------------------------------------------------------- \259\ ``Rebaseline'' is a term that CDC's NHSN staff use to describe the process of updating the national HAI baseline data and risk adjustment models developed using these data. As part of routine measure maintenance, CDC has updated the baseline to ensure the number of predicted infections used in SIR calculations reflects the current state of HAIs in the United States using CY 2022 data. The CDC released its initial announcement of this rebaseline in June 2023. Resources and training regarding the 2015 and 2022 standard population data can be found at: https://www.cdc.gov/nhsn/nhsnrebaseline/index.html. \260\ Centers for Disease Control and Prevention. CHARTING THE COURSE: 2022 HAI REBASELINE. Available at: https://www.cdc.gov/nhsn/pdfs/rebaseline/22-Rebaseline-FAQs-Final-Version.pdf. \261\ Centers for Disease Control and Prevention. Paving the Path Forward: 2015 Rebaseline. Available at: https://www.cdc.gov/nhsn/2015rebaseline/index.html. --------------------------------------------------------------------------- During this update, HAI SIR calculations of infections reported beginning in CY 2025 will reflect the use of both the new 2022 standard population data and the 2015 standard population data. We anticipate that the new 2022 standard population data will affect the HAC Reduction Program beginning with the FY 2028 program year when both years of the 2-year applicable period (also referred to as the ``performance period'' of the measures), CY 2025 and CY 2026, will use the 2022 update to the standard population for the CDC's NHSN measures. Under the HAC Reduction Program, confidential reports are made available to hospitals with respect to HACs of the hospital during the applicable period (78 FR 50708 through 50709). In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41484 through 41489), we clarified the Scoring Calculations Review and Correction Period (83 FR 41484) for the HAC Reduction Program, which provides hospitals with detailed HAC Reduction Program data and results in confidential Hospital-Specific Reports (HSRs). We give hospitals 30 days to review their HAC Reduction Program data, submit questions about the calculation of their results, and request corrections prior to such information being made public.\262\ The HAI measures using the 2022 update to the standard population in the FY 2028 HAC Reduction Program dataset would be publicly reported on the Provider Data Catalog in early 2028. --------------------------------------------------------------------------- \262\ For more information on the Scoring Calculations Review and Correction Period, see: https://qualitynet.cms.gov/inpatient/hac/payment#tab2. --------------------------------------------------------------------------- For the HAI measure information publicly reported on the Compare tool [[Page 18303]] on Medicare.gov, it will continue to display on a quarterly basis calculated from a rolling four quarters of data. The HAI measures using the 2022 update to the standard population data will begin to be publicly reported on the Compare tool in fall 2026 using four quarters of CY 2025 data. Table VI.M.-02--CDC Baseline Data on the Compare Tool ------------------------------------------------------------------------ Standard Performance period for CDC NHSN population Public reporting HAI measures data year ------------------------------------------------------------------------ October 1, 2024, to September 2015 Summer 2026. 30, 2025. January 1, 2025, to December 2022 Fall 2026. 31, 2025. ------------------------------------------------------------------------ As we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38324), our current policy has been to report data as soon as it is feasible on CMS websites such as the Compare tool and the Provider Data Catalog, after a 30-day preview period.\263\ Table VI.M.-03 summarizes the HAI performance periods, the standard population data year, HAC Reduction Program year, and public reporting timeframe for the CDC's NHSN measures. --------------------------------------------------------------------------- \263\ For more information on the Care Compare Preview period, see: https://qualitynet.cms.gov/inpatient/public-reporting/public-reporting/hospital-compare-preview. Table VI.M.-03--CDC Baseline Data in the HAC Reduction Program ---------------------------------------------------------------------------------------------------------------- Standard HAC Reduction Program year Performance period for CDC population Public reporting NHSN HAI measures data year ---------------------------------------------------------------------------------------------------------------- FY 2025............................. January 1, 2022, to December 2015 Early 2025. 31, 2023. FY 2026............................. January 1, 2023, to December 2015 Early 2026. 31, 2024. FY 2027............................. January 1, 2024, to December 2015 Early 2027. 31, 2025. FY 2028............................. January 1, 2025, to December 2022 Early 2028. 31, 2026. ---------------------------------------------------------------------------------------------------------------- We refer readers to section VI.L.4.b of this proposed rule, where we are proposing updates to the standard population data for the CDC's NHSN HAI measures in the Hospital Value-Based Purchasing (VBP) Program. While we are not required to solicit comments on technical updates, we invite public comment on this technical update.

3. Proposal To Codify the Extraordinary Circumstances Exception Policy

for the HAC Reduction Program a. Background In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45309 through 45310), we clarified that an Extraordinary Circumstances Exception (ECE) granted under the HAC Reduction Program may allow an exception from quality data reporting requirements and may grant a request to exclude any data submitted (whether submitted for claims purposes or to the CDC's NHSN) from the calculation of a hospital's measure results or Total HAC Score for the applicable period or both, depending on the exact circumstances under which the request was made. We intend to provide relief for a hospital whose ability to accurately collect quality measure data and to report those data in a timely manner has been negatively impacted as a direct result of experiencing a significant disaster or other extraordinary circumstance beyond the control of a hospital (80 FR 49579 through 49581) or both. An exception may be granted for extraordinary circumstances including, but not limited to, natural disasters or systemic problems with data collection systems.\264\ We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49579 through 49581), FY 2018 IPPS/LTCH PPS final rule (82 FR 38276 through 38278), and FY 2022 IPPS/LTCH PPS final rule (86 FR 45308 through 45310) for further background and details of our ECE policy. We also refer readers to the QualityNet website for the specific requirements for submission of an ECE request in the HAC Reduction Program.\265\ Hospitals can request a CMS Quality Program ECE for multiple programs based on the same extraordinary circumstance using one ECE request form, including the Hospital IQR Program, the Hospital VBP Program, and the Hospital Readmissions Reduction Program. --------------------------------------------------------------------------- \264\ Centers for Medicare & Medicaid Services (CMS) Quality Program Extraordinary Circumstances Exceptions (ECE) Request Form. (2025). QualityNet. Available at: https://qualitynet.cms.gov/files/677e843f50ed8df7419f60e1?filename=HQR_ECE_Req_Form_CY_2025.pdf. \265\ CMS QualityNet. Available at: https://qualitynet.cms.gov/inpatient/hac/participation#tab2. --------------------------------------------------------------------------- Our ECE policy provides flexibility for HAC Reduction Program participants to ensure continuity of quality care delivery and measure reporting in the event of an extraordinary circumstance. For instance, we recognize that, in circumstances where an exclusion of any data submitted from the calculation of a hospital's measure results or Total HAC Score for the applicable period is not applicable, it may be beneficial for a hospital to report data later than the reporting deadline. Delayed reporting authorized under the ECE policy would allow temporary relief for a hospital experiencing an extraordinary circumstance, while preserving data reporting benefits such as transparency and informed decision-making for beneficiaries and providers alike. Accordingly, we propose to specify that an ECE could take the form of an extension of time for a hospital to comply with a data reporting requirement if CMS determines that this type of relief would be appropriate under the circumstances. b. Proposals To Codify the Extraordinary Circumstances Exception (ECE) Policy for the HAC Reduction Program We propose to codify the ECE policy at 42 CFR 412.172(c) and include extensions of time as a form of relief. Specifically, at proposed Sec. 412.172(c)(1), we propose that CMS may grant an ECE with respect to reporting requirements in the event of an extraordinary [[Page 18304]] circumstance--defined as an event beyond the control of a hospital (for example a natural or man-made disaster such as a hurricane, tornado, earthquake, terrorist attack, or bombing)--that affected the ability of the hospital to comply with one or more applicable reporting requirements with respect to a fiscal year. We propose that the process for requesting or granting an ECE would remain the same as the current ECE process, detailed by CMS at the QualityNet website or a successor website.\266\ At proposed Sec. 412.172(c)(2)(i), we propose that a hospital may request an ECE within 30 calendar days of the date that the extraordinary circumstance occurred. Under this proposed policy, we clarify that CMS retains the authority to grant an ECE as a form of relief at any time after the extraordinary circumstance has occurred. At proposed Sec. 412.172(c)(2)(ii), we propose that CMS notify the requestor with a decision in writing, via email. In the event that CMS grants an ECE to the hospital, the written decision will specify whether the hospital is exempted from one or more reporting requirements or whether CMS has granted the hospital an extension of time to comply with one or more reporting requirements. --------------------------------------------------------------------------- \266\ https://qualitynet.cms.gov/inpatient/iqr/participation#tab3. --------------------------------------------------------------------------- Additionally, at Sec. 412.172(c)(3), we note that CMS may grant an ECE to one or more hospitals that have not requested an ECE if CMS determines that: a systemic problem with a CMS data collection system directly impacted the ability of the hospital to comply with a quality data reporting requirement, or that an extraordinary circumstance has affected an entire region or locale. Any ECE granted will specify whether the affected hospitals are exempted from one or more reporting requirements or whether CMS has granted the hospitals an extension of time to comply with one or more reporting requirements. The ECE policy is intended to provide hospitals with further reporting flexibility and clarity regarding expectations when submitting ECE requests for participants of the HAC Reduction Program. We refer readers to sections X.C.8, VI.L.5, VI.K.3.c., and X.D.4. of the preamble of this proposed rule for similar proposals in the Hospital IQR Program, Hospital VBP Program, Hospital Readmissions Reduction Program, and PCHQR Program, respectively. We invite public comment on our proposals.

1. Introduction

The Rural Community Hospital Demonstration was originally authorized by section 410A of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). The demonstration has been extended three times since the original 5-year period mandated by the MMA, each time for an additional 5 years. These extensions were authorized by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-148), section 15003 of the 21st Century Cures Act (Pub. L. 114-255) (Cures Act) enacted in 2016, and most recently, by section 128 of the Consolidated Appropriations Act, 2021 (Pub. L. 116- 260), which also reauthorized the RCHD for five years. Below we summarize the status of the demonstration program and the current methodologies for implementation and calculating budget neutrality, and propose the amount to be subtracted from the national IPPS payment rates to account for the costs of the demonstration in FY 2026. The amount would include the reconciled amount of demonstration costs for FY 2020 in the FY 2026 IPPS/LTCH final rule. We expect all finalized cost reports for FY 2020 to be available when the FY 2026 IPPS/LTCH final rule is published. Last year we published a new solicitation (89 FR 105049) to select 10 additional qualifying hospitals to participate in the Rural Community Hospital Demonstration. We only accepted applications to this solicitation from hospitals in the 20 least densely populated States, according to data for 2020 from the U.S. Census Bureau. These States are: Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Vermont, and Wyoming. We did not accept applications from hospitals located in other States or in the U.S. territories. Applications were due March 1, 2025; we will be selecting hospitals on a rolling basis beginning May 1, 2025. Given the upcoming statutory termination of the model, we are aligning performance dates for the selected hospitals with the last performance day for the currently authorized extension; therefore, although previous agreements ran for 5-year periods, agreements for hospitals selected under CMS-5051-N2 will run only until June 30, 2028.

2. Background

Section 410A(a) of the MMA (Pub. L. 108-173) required the Secretary to establish a demonstration program to test the feasibility and advisability of establishing rural community hospitals to furnish covered inpatient hospital services to Medicare beneficiaries. The demonstration pays rural community hospitals under a reasonable cost- based methodology for Medicare payment purposes for covered inpatient hospital services furnished to Medicare beneficiaries. A rural community hospital, as defined in section 410A(f)(1), is a hospital that-- Is located in a rural area (as defined in section 1886(d)(2)(D) of the Act) or is treated as being located in a rural area under section 1886(d)(8)(E) of the Act; Has fewer than 51 beds (excluding beds in a distinct part psychiatric or rehabilitation unit) as reported in its most recent cost report; Provides 24-hour emergency care services; and Is not designated or eligible for designation as a CAH under section 1820 of the Act. Our policy for implementing the 5-year extension period authorized by the CAA, 2021 (Pub. L. 116-260) follows upon the previous extensions under the Affordable Care Act (Pub. L. 111-148) and the Cures Act (Pub.

L. 114-255). Section 410A of the MMA (Pub. L. 108-173) initially

required a 5-year period of performance. Subsequently, sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-148) required the Secretary to conduct the demonstration program for an additional 5-year period, to begin on the date immediately following the last day of the initial 5-year period. In addition, the Affordable Care Act (Pub. L. 111-148) limited the number of hospitals participating to no more than 30. Section 15003 of the Cures Act (Pub. L. 114-255) required a 10-year extension period in place of the 5-year extension period under the Affordable Care Act (Pub. L. 111-148), thereby extending the demonstration for another 5 years. Section 128 of CAA, 2021 (Pub. L. 116-260), in turn, revised the statute to indicate a 15-year extension period, instead of the 10-year extension period mandated by the Cures Act (Pub. L. 114-255). Please refer to the FY 2023 IPPS proposed and final rules (87 FR 28454 through 28458 and 87 FR 49138 through 49142, respectively) for an account of hospitals entering into and withdrawing from the demonstration with these re-authorizations. There are currently 20 hospitals participating in the demonstration. [[Page 18305]] 2. Budget Neutrality a. Statutory Budget Neutrality Requirement Section 410A(c)(2) of the MMA (Pub. L. 108-173) requires that, in conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount that the Secretary would have paid if the demonstration program under this section was not implemented. This requirement is commonly referred to as ``budget neutrality.'' Generally, when we implement a demonstration program on a budget neutral basis, the demonstration program is budget neutral on its own terms; in other words, the aggregate payments to the participating hospitals do not exceed the amount that would be paid to those same hospitals in the absence of the demonstration program. We note that the payment methodology for this demonstration, that is, cost-based payments to participating small rural hospitals, made it unlikely that increased Medicare outlays would produce an offsetting reduction to Medicare expenditures elsewhere. Therefore, in the IPPS final rules spanning the period from FY 2005 through FY 2016, we adjusted the national IPPS rates by an amount sufficient to account for the added costs of this demonstration program, thus applying budget neutrality across the payment system as a whole rather than merely across the participants in the demonstration program. (We applied a different methodology for FY 2017, with the demonstration expected to end prior to the Cures Act extension.) As we discussed in the FYs 2005 through 2017 IPPS/LTCH PPS final rules (69 FR 49183; 70 FR 47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 74 FR 43922, 75 FR 50343, 76 FR 51698, 77 FR 53449, 78 FR 50740, 77 FR 50145; 80 FR 49585; and 81 FR 57034, respectively), we believe that the statutory language of the budget neutrality requirements permits the agency to implement the budget neutrality provision in this manner. We resumed this methodology of offsetting demonstration costs against the national payment rates in the IPPS final rules from FY 2018 through FY 2025. Please see the FY 2025 IPPS final rule for an account of how we applied the budget neutrality requirement for these fiscal years (89 FR 69412 through 69413). b. General Budget Neutrality Methodology We have generally incorporated two components into the budget neutrality offset amounts identified in the final IPPS rules in previous years. First, we have estimated the costs of the demonstration for the upcoming fiscal year, generally determined from historical, ``as submitted'' cost reports for the hospitals participating in that year. Updated factors representing nationwide trends in cost and volume increases have been incorporated into these estimates, as specified in the methodology described in the final rule for each fiscal year. Second, as finalized cost reports became available, we determined the amount by which the actual costs of the demonstration for an earlier, given year differed from the estimated costs for the demonstration set forth in the final IPPS rule for the corresponding fiscal year, and incorporated that amount into the budget neutrality offset amount for the upcoming fiscal year. If the actual costs for the demonstration for the earlier fiscal year exceeded the estimated costs of the demonstration identified in the final rule for that year, this difference was added to the estimated costs of the demonstration for the upcoming fiscal year when determining the budget neutrality adjustment for the upcoming fiscal year. Conversely, if the estimated costs of the demonstration set forth in the final rule for a prior fiscal year exceeded the actual costs of the demonstration for that year, this difference was subtracted from the estimated cost of the demonstration for the upcoming fiscal year when determining the budget neutrality adjustment for the upcoming fiscal year. We note that we have calculated this difference for FYs 2005 through 2018 between the actual costs of the demonstration as determined from finalized cost reports once available, and estimated costs of the demonstration as identified in the applicable IPPS final rules for these years. c. Budget Neutrality Methodology for the Extension Period Authorized by CAA, 2021 For the most-recently enacted extension period, under the CAA, 2021, we have continued upon the general budget neutrality methodology used in previous years, as described previously in the citations to earlier IPPS final rules. In this proposed rule, we outline the methodology to be used for determining the offset to the national IPPS payment rates for FY 2026. (1) Methodology for Estimating Demonstration Costs for FY 2026 Consistent with the general methodology from previous years, we are estimating the costs of the demonstration for the upcoming fiscal year, and proposing to incorporate this estimate into the budget neutrality offset amount to be applied to the national IPPS rates for the upcoming fiscal year, that is, FY 2026. We are conducting this estimate for FY 2026 based on the 20 currently participating hospitals. The methodology for calculating this amount for FY 2026 proceeds according to the following steps: Step 1: For each of these 20 hospitals, we identify the reasonable cost amount calculated under the reasonable cost-based methodology for covered inpatient hospital services, including swing beds, as indicated on the ``as submitted'' cost report for the most recent cost reporting period available. The ``as submitted'' cost report, submitted by each of the 20 hospitals, with a report end date in CY2023 is used. We sum these hospital -specific amounts to arrive at a total general amount representing the costs for covered inpatient hospital services, including swing beds, across the total 20 hospitals eligible to participate during FY 2026. Then, we multiply the total general amount by the FYs 2024, 2025, and 2026 IPPS market basket percentage increases, which are calculated by the CMS Office of the Actuary. (We are using the proposed market basket percentage increase for FY 2026, which can be found at section VI.B.1. of the preamble to this proposed rule). The result for the 20 hospitals is the general estimated reasonable cost amount for covered inpatient hospital services for FY 2026. Consistent with our methods in previous years for formulating this estimate, we are applying the IPPS market basket percentage increases for FYs 2024 through 2026 to the applicable estimated reasonable cost amount (previously described) to model the estimated FY 2026 reasonable cost amount under the demonstration. We believe that the IPPS market basket percentage increases appropriately indicate the trend of increase in inpatient hospital operating costs under the reasonable cost methodology for the years involved. Step 2: For each of the participating hospitals, we identify the estimated amount that would otherwise have been paid in FY 2026 under applicable Medicare payment methodologies for covered inpatient hospital services, including swing beds (as indicated on the same set of ``as submitted'' cost reports as in Step 1), if the demonstration had not been implemented. We sum these hospital- [[Page 18306]] specific amounts, and, in turn, multiply this sum by the FYs 2024, 2025, and 2026 IPPS applicable percentage increases. (For FY 2026, we are using the proposed applicable percentage increase, per section VI.B.1. of the preamble of this proposed rule). This methodology differs from Step 1, in which we apply the market basket percentage increases to the hospitals' applicable estimated reasonable cost amount for covered inpatient hospital services. We believe that the IPPS applicable percentage increases are appropriate factors to update the estimated amounts that generally would otherwise be paid without the demonstration because IPPS payments constitute the majority of payments that would otherwise be made without the demonstration and the applicable percentage increase is the factor used under the IPPS to update the inpatient hospital payment rates. Step 3: We subtract the amount derived in Step 2 from the amount derived in Step 1. According to our methodology, the resulting amount indicates the total difference for the 20 hospitals (for covered inpatient hospital services, including swing beds), which will be the general estimated amount of the costs of the demonstration for FY 2026. For this proposed rule, the resulting amount is $47,527,557, which, if finalized, would be incorporated into the budget neutrality offset adjustment for FY 2026. This estimated amount is based on the specific assumptions regarding the data sources used, that is, recently available ``as submitted'' cost reports and historical update factors for cost and payment. If updated data become available prior to the final rule, we will use them as appropriate to estimate the costs for the demonstration program for FY 2026 in accordance with our methodology for determining the budget neutrality estimate. We will also incorporate any statutory change that might affect the methodology for determining hospital costs either with or without the demonstration. We are proposing to include estimated costs of the demonstration for FY 2026 for all participating hospitals, to include those participating as a result of the current solicitation, in the budget neutrality offset adjustment in the FY 2027 IPPS proposed and final rules. (2) Reconciling Actual and Estimated Costs of the Demonstration for Previous Years As described earlier, we have calculated the difference for FYs 2005 through 2018 between the actual costs of the demonstration, as determined from finalized cost reports once available, and estimated costs of the demonstration as identified in the applicable IPPS final rules for these years. At this time, for the FY 2026 proposed rule, not all of the finalized cost reports are available for the 20 hospitals that completed cost report periods beginning in FY 2020 under the demonstration payment methodology. We expect all of these finalized cost reports to be available by the time of the final rule, and thus we are proposing to include the difference between the actual cost of the demonstration for FY 2020 as determined from finalized cost reports within the budget neutrality offset amount in the FY 2026 final rule. (3) Total Proposed Budget Neutrality Offset Amount for FY 2026 For this FY 2026 IPPS/LTCH PPS proposed rule, the proposed budget neutrality offset amount for FY 2026 is the amount determined under section X.2.c.(2). of the preamble of this proposed rule, representing the difference applicable to FY 2026 between the sum of the estimated reasonable cost amounts that would be paid under the demonstration for covered inpatient services to the 20 hospitals eligible to participate in the fiscal year and the sum of the estimated amounts that would generally be paid if the demonstration had not been implemented. This estimated amount is $47,527,557. However, we note, that the overall amount might change if there are any revisions prior to the final rule to the data used to formulate this estimate. We also expect to revise the budget neutrality offset amount upon calculating the actual costs of the demonstration for FY 2020, after receiving all of the finalized cost reports for that fiscal year.

A. Overview

Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient acute hospital services in accordance with a prospective payment system established by the Secretary. Under the statute, the Secretary has broad authority in establishing and implementing the IPPS for acute care hospital inpatient capital-related costs. We initially implemented the IPPS for capital-related costs in the FY 1992 IPPS final rule (56 FR 43358). In that final rule, we established a 10-year transition period to change the payment methodology for Medicare hospital inpatient capital-related costs from a reasonable cost-based payment methodology to a prospective payment methodology (based fully on the Federal rate). FY 2001 was the last year of the 10-year transition period that was established to phase in the IPPS for hospital inpatient capital-related costs. For cost reporting periods beginning in FY 2002, capital IPPS payments are based solely on the Federal rate for almost all acute care hospitals (other than hospitals receiving certain exception payments and certain new hospitals). (We refer readers to the FY 2002 IPPS final rule (66 FR 39910 through 39914) for additional information on the methodology used to determine capital IPPS payments to hospitals both during and after the transition period.) The basic methodology for determining capital prospective payments using the Federal rate is set forth in the regulations at 42 CFR 412.312. For the purpose of calculating capital payments for each discharge, the standard Federal rate is adjusted as follows: (Standard Federal Rate) x (DRG Weight) x (Geographic Adjustment Factor (GAF) x (COLA for hospitals located in Alaska and Hawaii) x (1 + Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if applicable). In addition, under Sec. 412.312(c), hospitals also may receive outlier payments under the capital IPPS for extraordinarily high-cost cases that qualify under the thresholds established for each fiscal year.

1. Exception Payments

The regulations at 42 CFR 412.348 provide for certain exception payments under the capital IPPS. The regular exception payments provided under Sec. 412.348(b) through (e) were available only during the 10-year transition period. For a certain period after the transition period, eligible hospitals may have received additional payments under the special exceptions provisions at Sec. 412.348(g). However, FY 2012 was the final year hospitals could receive special exceptions payments. For additional details regarding these exceptions policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725). Under Sec. 412.348(f), a hospital may request an additional payment if the hospital incurs unanticipated capital expenditures in excess of $5 million due to extraordinary circumstances beyond [[Page 18307]] the hospital's control. Additional information on the exception payment for extraordinary circumstances in Sec. 412.348(f) can be found in the FY 2005 IPPS final rule (69 FR 49185 and 49186).

2. New Hospitals

Under the capital IPPS, the regulations at 42 CFR 412.300(b) define a new hospital as a hospital that has operated (under previous or current ownership) for less than 2 years and lists examples of hospitals that are not considered new hospitals. In accordance with Sec. 412.304(c)(2), under the capital IPPS, a new hospital is paid 85 percent of its allowable Medicare inpatient hospital capital related costs through its first 2 years of operation, unless the new hospital elects to receive full prospective payment based on 100 percent of the Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725) for additional information on payments to new hospitals under the capital IPPS.

3. Payments for Hospitals Located in Puerto Rico

In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57061), we revised the regulations at 42 CFR 412.374 relating to the calculation of capital IPPS payments to hospitals located in Puerto Rico beginning in FY 2017 to parallel the change in the statutory calculation of operating IPPS payments to hospitals located in Puerto Rico, for discharges occurring on or after January 1, 2016, made by section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Section 601 of Public Law 114-113 increased the applicable Federal percentage of the operating IPPS payment for hospitals located in Puerto Rico from 75 percent to 100 percent and decreased the applicable Puerto Rico percentage of the operating IPPS payments for hospitals located in Puerto Rico from 25 percent to zero percent, applicable to discharges occurring on or after January 1, 2016. As such, under revised Sec. 412.374, for discharges occurring on or after October 1, 2016, capital IPPS payments to hospitals located in Puerto Rico are based on 100 percent of the capital Federal rate.

C. Proposed Annual Update for FY 2026

The proposed annual update to the national capital Federal rate, as provided for in 42 CFR 412.308(c), for FY 2026 is discussed in section III. of the Addendum to this FY 2026 IPPS/LTCH PPS proposed rule. We also note that in section II.D. of the preamble of this proposed rule, we discuss our proposed revision to the adjustment to the payment amount for certain clinical trial or expanded access use immunotherapy cases to include other cases where the immunotherapy product is not purchased in the usual manner (such as provided at no cost) that will group to MS-DRG 018 for both operating IPPS payments and capital IPPS payments. We refer readers to section II.D. of this preamble for additional details on the proposed payment adjustment for these cases.

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

2026 Certain hospitals excluded from a prospective payment system, including children's hospitals, 11 cancer 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) receive payment for inpatient hospital services they furnish on the basis of reasonable costs, subject to a rate-of-increase ceiling. A per discharge limit (the target amount, as defined in Sec. 413.40(a) of the regulations) is set for each hospital based on the hospital's own cost experience in its base year, and updated annually by a rate-of-increase percentage. For each cost reporting period, the updated target amount is multiplied by total Medicare discharges during that period and applied as an aggregate upper limit (the ceiling as defined in Sec. 413.40(a)) of Medicare reimbursement for total inpatient operating costs for a hospital's cost reporting period. In accordance with Sec. 403.752(a) of the regulations, religious nonmedical health care institutions (RNHCIs) also are subject to the rate-of-increase limits established under Sec. 413.40 of the regulations discussed previously. Furthermore, in accordance with Sec. 412.526(c)(3) of the regulations, extended neoplastic disease care hospitals (formerly classified as ``Subclause II LTCs'') also are subject to the rate-of-increase limits established under Sec. 413.40 of the regulations discussed previously. As explained in the FY 2006 IPPS final rule (70 FR 47396 through 47398), beginning with FY 2006, we have used the percentage increase in the IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, and RNHCIs. Consistent with the regulations at Sec. Sec. 412.23(g) and 413.40(a)(2)(ii)(A) and (c)(3)(viii), we also have used the percentage increase in the IPPS operating market basket to update target amounts for short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45207), we rebased and revised the IPPS operating market basket to a 2018 base year, and finalized the use of the percentage increase in the 2018-based IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa for FY 2022 and subsequent fiscal years. As discussed in section IV. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we are proposing to rebase and revise the IPPS operating basket to a 2023 base year. Therefore, we are proposing to use the percentage increase in the proposed 2023-based IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa for FY 2026 and subsequent fiscal years. Accordingly, for FY 2026, the rate-of-increase percentage to be applied to the target amount for these hospitals would be the FY 2026 percentage increase in the proposed 2023-based IPPS operating market basket. For the FY 2026 IPPS/LTCH PPS proposed rule, based on IGI's 2024 fourth quarter forecast, we estimate that the proposed 2023-based IPPS operating market basket percentage increase for FY 2026 is 3.2 percent (that is, the estimate of the market basket rate-of-increase). Based on this estimate, the FY 2026 rate-of-increase percentage that will be applied to the FY 2025 target amounts in order to calculate the FY 2026 target amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa is 3.2 percent, in accordance with the applicable regulations at 42 CFR 413.40. However, we are proposing that if more recent data become available for the FY 2026 IPPS/LTCH PPS final rule, we would use such data, if appropriate, to calculate the final IPPS operating market basket update for FY 2026. In addition, payment for inpatient operating costs for hospitals classified under section 1886(d)(1)(B)(vi) of the Act (which we refer to as ``extended neoplastic disease care hospitals'') for [[Page 18308]] cost reporting periods beginning on or after January 1, 2015, is to be made as described in 42 CFR 412.526(c)(3), and payment for capital costs for these hospitals is to be made as described in 42 CFR 412.526(c)(4). (For additional information on these payment regulations, we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38321 through 38322).) Section 412.526(c)(3) provides that the hospital's Medicare allowable net inpatient operating costs for that period are paid on a reasonable cost basis, subject to that hospital's ceiling, as determined under Sec. 412.526(c)(1), for that period. Under Sec. 412.526(c)(1), for each cost reporting period, the ceiling was determined by multiplying the updated target amount, as defined in Sec. 412.526(c)(2), for that period by the number of total Medicare discharges paid during that period. Section 412.526(c)(2)(i) describes the method for determining the target amount for cost reporting periods beginning during FY 2015. Section 412.526(c)(2)(ii) specifies that, for cost reporting periods beginning during fiscal years after FY 2015, the target amount will equal the hospital's target amount for the previous cost reporting period updated by the applicable annual rate-of-increase percentage specified in Sec. 413.40(c)(3) for the subject cost reporting period (79 FR 50197). For FY 2026, in accordance with Sec. Sec. 412.22(i) and 412.526(c)(2)(ii) of the regulations, for cost reporting periods beginning during FY 2026, the proposed update to the target amount for extended neoplastic disease care hospitals (that is, hospitals described under Sec. 412.22(i)) is the applicable annual rate-of- increase percentage specified in Sec. 413.40(c)(3), which is estimated to be the proposed percentage increase in the proposed 2023-based IPPS operating market basket (that is, the estimate of the market basket rate-of-increase). Accordingly, the proposed update to an extended neoplastic disease care hospital's target amount for FY 2026 is 3.2 percent, which is based on IGI's fourth quarter 2024 forecast. Furthermore, we are proposing that if more recent data become available for the FY 2026 IPPS/LTCH PPS final rule, we would use such data, if appropriate, to calculate the IPPS operating market basket rate of increase for FY 2026.

2. Frontier Community Health Integration Project Demonstration

a. Introduction The Frontier Community Health Integration Project Demonstration was originally authorized by section 123 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275). The demonstration has been extended by section 129 of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260) for an additional 5 years. In this proposed rule, we are summarizing the status of the demonstration program, and the ongoing methodologies for implementation and budget neutrality for the demonstration extension period. b. Background and Overview As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69416 through 69419), section 123 of the Medicare Improvements for Patients and Providers Act of 2008, as amended by section 3126 of the Affordable Care Act, authorized a demonstration project to allow eligible entities to develop and test new models for the delivery of health care services in eligible counties in order to improve access to and better integrate the delivery of acute care, extended care and other health care services to Medicare beneficiaries. The demonstration was titled ``Demonstration Project on Community Health Integration Models in Certain Rural Counties,'' and commonly known as the Frontier Community Health Integration Project (FCHIP) Demonstration. The authorizing statute stated the eligibility criteria for entities to be able to participate in the demonstration. An eligible entity, as defined in section 123(d)(1)(B) of Public Law 110-275, as amended, is a Medicare Rural Hospital Flexibility Program (MRHFP) grantee under section 1820(g) of the Act (that is, a CAH); and is located in a State in which at least 65 percent of the counties in the state are counties that have 6 or less residents per square mile. The authorizing statute stipulated several other requirements for the demonstration. In addition, section 123(g)(1)(B) of Public Law 110- 275 required that the demonstration be budget neutral. Specifically, this provision stated that, in conducting the demonstration project, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary estimates would have been paid if the demonstration project under the section were not implemented. Furthermore, section 123(i) of Public Law 110-275 stated that the Secretary may waive such requirements of titles XVIII and XIX of the Act as may be necessary and appropriate for the purpose of carrying out the demonstration project, thus allowing the waiver of Medicare payment rules encompassed in the demonstration. CMS selected CAHs to participate in four interventions, under which specific waivers of Medicare payment rules would allow for enhanced payment for telehealth, skilled nursing facility/nursing facility beds, ambulance services, and home health services. These waivers were formulated with the goal of increasing access to care with no net increase in costs. Section 123 of Public Law 110-275 initially required a 3-year period of performance. The FCHIP Demonstration began on August 1, 2016, and concluded on July 31, 2019 (referred to in this section of the proposed rule as the ``initial period''). Subsequently, section 129 of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260) extended the demonstration by 5 years (referred to in this section of the proposed rule as the ``extension period''). The Secretary is required to conduct the demonstration for an additional 5-year period. CAHs participating in the demonstration project during the extension period began such participation in their cost reporting year that began on or after January 1, 2022. As described in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69416 through 69419), 10 CAHs were selected for participation in the demonstration initial period. The selected CAHs were located in three States--Montana, Nevada, and North Dakota--and participated in three of the four interventions identified in the FY 2025 IPPS/LTCH PPS final rule. Each CAH was allowed to participate in more than one of the interventions. None of the selected CAHs were participants in the home health intervention, which was the fourth intervention. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 45328), CMS concluded that the initial period of the FCHIP Demonstration (covering the performance period of August 1, 2016, to July 31, 2019) had satisfied the [[Page 18309]] budget neutrality requirement described in section 123(g)(1)(B) of Public Law 110-275. Therefore, CMS did not apply a budget neutrality payment offset policy for the initial period of the demonstration. Section 129 of Public Law 116-260, stipulates that only the 10 CAHs that participated in the initial period of the FCHIP Demonstration are eligible to participate during the extension period. Among the eligible CAHs, five have elected to participate in the extension period. The selected CAHs are located in two States--Montana and North Dakota--and are implementing three of the four interventions. The eligible CAH participants elected to change the number of interventions and payment waivers they would participate in during the extension period. CMS accepted and approved the CAHs intervention and payment waiver updates. For the extension period, five CAHs are participants in the telehealth intervention, three CAHs are participants in the skilled nursing facility/nursing facility bed intervention, and three CAHs are participants in the ambulance services intervention. As with the initial period, each CAH was allowed to participate in more than one of the interventions during the extension period. None of the selected CAHs are participants in the home health intervention, which was the fourth intervention. c. Intervention Payment and Payment Waivers As described in the FY 2025IPPS/LTCH PPS final rule (89 FR 69416 through 69419), CMS waived certain Medicare rules for CAHs participating in the demonstration initial period to allow for alternative reasonable cost-based payment methods in the three distinct intervention service areas: telehealth services, ambulance services, and skilled nursing facility/nursing facility (SNF/NF) beds expansion. The payments and payment waiver provisions only apply if the CAH is a participant in the associated intervention. CMS Intervention Payment and Payment Waivers for the demonstration extension period consist of the following: (1) Telehealth Services Intervention Payments CMS waives section 1834(m)(2)(B) of the Act, which specifies the facility fee to the originating site for Medicare telehealth services. CMS modifies the facility fee payment specified under section 1834(m)(2)(B) of the Act to make reasonable cost-based reimbursement to the participating CAH where the participating CAH serves as the originating site for a telehealth service furnished to an eligible telehealth individual, as defined in section 1834(m)(4)(B) of the Act. CMS reimburses the participating CAH serving as the originating site at 101 percent of its reasonable costs for overhead, salaries and fringe benefits associated with telehealth services at the participating CAH. CMS does not fund or provide reimbursement to the participating CAH for the purchase of new telehealth equipment. CMS waives section 1834(m)(2)(A) of the Act, which specifies that the payment for a telehealth service furnished by a distant site practitioner is the same as it would be if the service had been furnished in-person. CMS modifies the payment amount specified for telehealth services under section 1834(m)(2)(A) of the Act to make reasonable cost-based reimbursement to the participating CAH for telehealth services furnished by a physician or practitioner located at distant site that is a participating CAH that is billing for the physician or practitioner professional services. Whether the participating CAH has or has not elected Optional Payment Method II for outpatient services, CMS would pay the participating CAH 101 percent of reasonable costs for telehealth services when a physician or practitioner has reassigned their billing rights to the participating CAH and furnishes telehealth services from the participating CAH as a distant site practitioner. This means that participating CAHs that are billing under the Standard Method on behalf of employees who are physicians or practitioners (as defined in section 1834(m)(4)(D) and (E) of the Act, respectively) would be eligible to bill for distant site telehealth services furnished by these physicians and practitioners. Additionally, CAHs billing under the Optional Method would be reimbursed based on 101 percent of reasonable costs, rather than paid based on the Medicare physician fee schedule, for the distant site telehealth services furnished by physicians and practitioners who have reassigned their billing rights to the CAH. For distant site telehealth services furnished by physicians or practitioners who have not reassigned billing rights to a participating CAH, payment to the distant site physician or practitioner would continue to be made as usual under the Medicare physician fee schedule. Except as described herein, CMS does not waive any other provisions of section 1834(m) of the Act for purposes of the telehealth services intervention payments, including the scope of Medicare telehealth services as established under section 1834(m)(4)(F) of the Act. (2) Ambulance Services Intervention Payments CMS waives 42 CFR 413.70(b)(5)(i)(D) and section 1834(l)(8) of the Act, which provides that payment for ambulance services furnished by a CAH, or an entity owned and operated by a CAH, is 101 percent of the reasonable costs of the CAH or the entity in furnishing the ambulance services, but only if the CAH or the entity is the only provider or supplier of ambulance services located within a 35-mile drive of the CAH, excluding ambulance providers or suppliers that are not legally authorized to furnish ambulance services to transport individuals to or from the CAH. The participating CAH would be paid 101 percent of reasonable costs for its ambulance services regardless of whether there is any provider or supplier of ambulance services located within a 35- mile drive of the participating CAH or participating CAH-owned and operated entity. CMS would not make cost-based payment to the participating CAH for any new capital (for example, vehicles) associated with ambulance services. This waiver does not modify any other Medicare rules regarding or affecting the provision of ambulance services. (3) SNF/NF Beds Expansion Intervention Payments CMS waives 42 CFR 485.620(a) and 485.645(a)(2) and section 1820(c)(2)(B)(iii) of the Act which limit CAHs to maintaining no more than 25 inpatient beds, including beds available for acute inpatient or swing bed services. CMS waives section 1820(f) of the Act permitting designating or certifying a facility as a critical access hospital for which the facility at any time is furnishing inpatient beds which exceed more than 25 beds. Under this waiver, if the participating CAH has received swing bed approval from CMS, the participating CAH may maintain up to ten additional beds (for a total of 35 beds) available for acute inpatient or swing bed services; however, the participating CAH may only use these 10 additional beds for nursing facility or skilled nursing facility level of care. CMS would pay the participating CAH 101 percent of reasonable costs for its SNF/NF services furnished in the 10 additional beds. [[Page 18310]] d. Budget Neutrality (1) Budget Neutrality Requirement In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 45328), we finalized a policy to address the budget neutrality requirement for the demonstration initial period. As explained in the FY 2022 IPPS/LTCH PPS final rule, we based our selection of CAHs for participation in the demonstration with the goal of maintaining the budget neutrality of the demonstration on its own terms meaning that the demonstration would produce savings from reduced transfers and admissions to other health care providers, offsetting any increase in Medicare payments as a result of the demonstration. However, because of the small size of the demonstration and uncertainty associated with the projected Medicare utilization and costs, the policy we finalized for the demonstration initial period of performance in the FY 2022 IPPS/ LTCH PPS final rule provides a contingency plan to ensure that the budget neutrality requirement in section 123 of Public Law 110-275 is met. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 through 49147), we adopted the same budget neutrality policy contingency plan used during the demonstration initial period to ensure that the budget neutrality requirement in section 123 of Public Law 110-275 is met during the demonstration extension period. If analysis of claims data for Medicare beneficiaries receiving services at each of the participating CAHs, as well as from other data sources, including cost reports for the participating CAHs, shows that increases in Medicare payments under the demonstration during the 5-year extension period are not sufficiently offset by reductions elsewhere, we would recoup the additional expenditures attributable to the demonstration through a reduction in payments to all CAHs nationwide. As explained in the FY 2023 IPPS/LTCH PPS final rule, because of the small scale of the demonstration, we indicated that we did not believe it would be feasible to implement budget neutrality for the demonstration extension period by reducing payments to only the participating CAHs. Therefore, in the event that this demonstration extension period is found to result in aggregate payments in excess of the amount that would have been paid if this demonstration extension period were not implemented, CMS policy is to comply with the budget neutrality requirement finalized in the FY 2023 IPPS/LTCH PPS final rule, by reducing payments to all CAHs, not just those participating in the demonstration extension period. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 through 49147), we stated that we believe it is appropriate to make any payment reductions across all CAHs because the FCHIP Demonstration was specifically designed to test innovations that affect delivery of services by the CAH provider category. We explained our belief that the language of the statutory budget neutrality requirement at section 123(g)(1)(B) of Public Law 110-275 permits the agency to implement the budget neutrality provision in this manner. The statutory language merely refers to ensuring that aggregate payments made by the Secretary do not exceed the amount which the Secretary estimates would have been paid if the demonstration project was not implemented and does not identify the range across which aggregate payments must be held equal. In the FY 2023 IPPS/LTCH PPS final rule, we finalized a policy that in the event the demonstration extension period is found not to have been budget neutral, any excess costs would be recouped within one fiscal year. We explained our belief that this policy is a more efficient timeframe for the government to conclude the demonstration operational requirements (such as analyzing claims data, cost report data or other data sources) to adjudicate the budget neutrality payment recoupment process due to any excess cost that occurred as result of the demonstration extension period. (2) FCHIP Budget Neutrality Methodology and Analytical Approach As explained in the FY 2022 IPPS/LTCH PPS final rule, we finalized a policy to address the demonstration budget neutrality methodology and analytical approach for the initial period of the demonstration. In the FY 2023 IPPS/LTCH PPS final rule, we finalized a policy to adopt the budget neutrality methodology and analytical approach used during the demonstration initial period to ensure budget neutrality for the extension period. The analysis of budget neutrality during the initial period of the demonstration identified both the costs related to providing the intervention services under the FCHIP Demonstration and any potential downstream effects of the intervention-related services, including any savings that may have accrued. The budget neutrality analytical approach for the demonstration initial period incorporated two major data components: (1) Medicare cost reports; and (2) Medicare administrative claims. As described in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 45328), CMS computed the cost of the demonstration for each fiscal year of the demonstration initial period using Medicare cost reports for the participating CAHs, and Medicare administrative claims and enrollment data for beneficiaries who received demonstration intervention services. In addition, in order to capture the full impact of the interventions, CMS developed a statistical modeling, Difference-in- Difference (DiD) regression analysis to estimate demonstration expenditures and compute the impact of expenditures on the intervention services by comparing cost data for the demonstration and non- demonstration groups using Medicare administrative claims across the demonstration period of performance under the initial period of the demonstration. The DiD regression analysis would compare the direct cost and potential downstream effects of intervention services, including any savings that may have accrued, during the baseline and performance period for both the demonstration and comparison groups. Second, the Medicare administrative claims analysis would be reconciled using data obtained from auditing the participating CAHs' Medicare cost reports. We would estimate the costs of the demonstration using ``as submitted'' cost reports for each hospital's financial fiscal year participation within each of the demonstration extension period performance years. Each CAH has its own Medicare cost report end date applicable to the 5-year period of performance for the demonstration extension period. The cost report is structured to gather costs, revenues and statistical data on the provider's financial fiscal period. As a result, we finalized a policy in the FY 2023 IPPS/LTCH PPS final rule that we would determine the final budget neutrality results for the demonstration extension once complete data is available for each CAH for the demonstration extension period. e. Policies for Implementing the 5-Year Extension and Provisions Authorized by Section 129 of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260) As stated in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69416 through 69419), our policy for implementing the 5-year extension period for section 129 of Public Law 116-260 follows same budget neutrality methodology and analytical approach as the [[Page 18311]] demonstration initial period methodology. While we expect to use the same methodology that was used to assess the budget neutrality of the FCHIP Demonstration during initial period of the demonstration to assess the financial impact of the demonstration during this extension period, upon receiving data for the extension period, we may update and/or modify the FCHIP budget neutrality methodology and analytical approach to ensure that the full impact of the demonstration is appropriately captured. f. Total Budget Neutrality Offset Amount for FY 2026 At this time, for the FY 2026 IPPS/LTCH PPS proposed rule, while this discussion represents our anticipated approach to assessing the financial impact of the demonstration extension period based on upon receiving data for the full demonstration extension period, we may update and/or modify the FCHIP Demonstration budget neutrality methodology and analytical approach to ensure that the full impact of the demonstration is appropriately captured. Therefore, we do not propose to apply a budget neutrality payment offset to payments to CAHs in FY 2026. This policy would have no impact for any national payment system for FY 2026.

1. Legislative and Regulatory Authority

Section 123 of the Medicare, Medicaid, and SCHIP (State Children's Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), as amended by section 307(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554), provides for payment for both the operating and capital-related costs of hospital inpatient stays in long-term care hospitals (LTCHs) under Medicare Part A based on prospectively set rates. The Medicare prospective payment system (PPS) for LTCHs applies to hospitals that are described in section 1886(d)(1)(B)(iv) of the Act, effective for cost reporting periods beginning on or after October 1, 2002. Section 1886(d)(1)(B)(iv)(I) of the Act originally defined an LTCH as a hospital that has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days. Section 1886(d)(1)(B)(iv)(II) of the Act also provided an alternative definition of LTCHs (``subclause II'' LTCHs). However, section 15008 of the 21st Century Cures Act (Pub. L. 114-255) amended section 1886 of the Act to exclude former ``subclause II'' LTCHs from being paid under the LTCH PPS and created a new category of IPPS- excluded hospitals, which we refer to as ``extended neoplastic disease care hospitals,'' to be paid as hospitals that were formally classified as ``subclause (II)'' LTCHs (82 FR 38298). Section 123 of the BBRA requires the PPS for LTCHs to be a ``per discharge'' system with a diagnosis-related group (DRG) based patient classification system that reflects the differences in patient resource use and costs in LTCHs. Section 307(b)(1) of the BIPA, among other things, mandates that the Secretary shall examine, and may provide for, adjustments to payments under the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment. In the August 30, 2002, Federal Register (67 FR 55954), we issued a final rule that implemented the LTCH PPS authorized under the BBRA and BIPA. For the initial implementation of the LTCH PPS (FYs 2003 through 2007), the system used information from LTCH patient records to classify patients into distinct long-term care-diagnosis-related groups (LTCDRGs) based on clinical characteristics and expected resource needs. Beginning in FY 2008, we adopted the Medicare severity-long-term care-diagnosis related groups (MS-LTC-DRGs) as the patient classification system used under the LTCH PPS. Payments are calculated for each MS-LTC-DRG and provisions are made for appropriate payment adjustments. Payment rates under the LTCH PPS are updated annually and published in the Federal Register. The LTCH PPS replaced the reasonable cost-based payment system under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97-248) for payments for inpatient services provided by an LTCH with a cost reporting period beginning on or after October 1, 2002. (The regulations implementing the TEFRA reasonable-cost-based payment provisions are located at 42 CFR part 413.) With the implementation of the PPS for acute care hospitals authorized by the Social Security Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the Act, certain hospitals, including LTCHs, were excluded from the PPS for acute care hospitals and paid their reasonable costs for inpatient services subject to a per discharge limitation or target amount under the TEFRA system. For each cost reporting period, a hospital specific ceiling on payments was determined by multiplying the hospital's updated target amount by the number of total current year Medicare discharges. (Generally, in this section of the preamble of this proposed rule, when we refer to discharges, we describe Medicare discharges.) The August 30, 2002, final rule further details the payment policy under the TEFRA system (67 FR 55954). In the August 30, 2002, final rule, we provided for a 5-year transition period from payments under the TEFRA system to payments under the LTCH PPS. During this 5-year transition period, an LTCH's total payment under the PPS was based on an increasing percentage of the Federal rate with a corresponding decrease in the percentage of the LTCH PPS payment that is based on reasonable cost concepts, unless an LTCH made a one-time election to be paid based on 100 percent of the Federal rate. Beginning with LTCHs' cost reporting periods beginning on or after October 1, 2006, total LTCH PPS payments are based on 100 percent of the Federal rate. In addition, in the August 30, 2002, final rule, we presented an in-depth discussion of the LTCH PPS, including the patient classification system, relative weights, payment rates, additional payments, and the budget neutrality requirements mandated by section 123 of the BBRA. The same final rule that established regulations for the LTCH PPS under 42 CFR part 412, subpart O, also contained LTCH provisions related to covered inpatient services, limitation on charges to beneficiaries, medical review requirements, furnishing of inpatient hospital services directly or under arrangement, and reporting and recordkeeping requirements. We refer readers to the August 30, 2002, final rule for a comprehensive discussion of the research and data that supported the establishment of the LTCH PPS (67 FR 55954). In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 49623), we implemented the provisions of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated the application of the ``site neutral'' payment rate under the LTCH PPS for discharges that do not meet the statutory criteria for exclusion beginning in FY 2016. For cost reporting periods beginning on or after October 1, [[Page 18312]] 2015, discharges that do not meet certain statutory criteria for exclusion are paid based on the site neutral payment rate. Discharges that do meet the statutory criteria continue to receive payment based on the LTCH PPS standard Federal payment rate. For more information on the statutory requirements of the Pathway for SGR Reform Act of 2013, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 49623) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57068 through 57075). In the FY 2018 IPPS/LTCH PPS final rule, we implemented several provisions of the 21st Century Cures Act (``the Cures Act'') (Pub. L. 114-255) that affected the LTCH PPS. (For more information on these provisions, we refer readers to (82 FR 38299).) In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41529), we made conforming changes to our regulations to implement the provisions of section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), which extends the transitional blended payment rate for site neutral payment rate cases for an additional 2 years. We refer readers to section VII.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule for a discussion of our final policy. In addition, in the FY 2019 IPPS/ LTCH PPS final rule, we removed the 25-percent threshold policy under 42 CFR 412.538, which was a payment adjustment that was applied to payments for Medicare patient LTCH discharges when the number of such patients originating from any single referring hospital was in excess of the applicable threshold for given cost reporting period. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42439), we further revised our regulations to implement the provisions of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) that relate to the payment adjustment for discharges from LTCHs that do not maintain the requisite discharge payment percentage and the process by which such LTCHs may have the payment adjustment discontinued.

2. Criteria for Classification as an LTCH

a. Classification as an LTCH Under the regulations at Sec. 412.23(e)(1), to qualify to be paid under the LTCH PPS, a hospital must have a provider agreement with Medicare. Furthermore, Sec. 412.23(e)(2)(i), which implements section 1886(d)(1)(B)(iv) of the Act, requires that a hospital have an average Medicare inpatient length of stay of greater than 25 days to be paid under the LTCH PPS. In accordance with section 1206(a)(3) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), as amended by section 15007 of Public Law 114-255, we amended our regulations to specify that Medicare Advantage plans' and site neutral payment rate discharges are excluded from the calculation of the average length of stay for all LTCHs, for discharges occurring in cost reporting period beginning on or after October 1, 2015. b. Hospitals Excluded From the LTCH PPS The following hospitals are paid under special payment provisions, as described in Sec. 412.22(c) and, therefore, are not subject to the LTCH PPS rules: Veterans Administration hospitals. Hospitals that are reimbursed under State cost control systems approved under 42 CFR part 403. Hospitals that are reimbursed in accordance with demonstration projects authorized under section 402(a) of the Social Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1), section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92- 603) (42 U.S.C. 1395b1 (note)) (Statewide-all payer systems, subject to the rate-of increase test at section 1814(b) of the Act), or section 3021 of the Patient Protection and Affordable Care Act (Pub. L. 111- 148) (42 U.S.C. 1315a). Nonparticipating hospitals furnishing emergency services to Medicare beneficiaries.

3. Limitation on Charges to Beneficiaries

In the August 30, 2002, final rule, we presented an in-depth discussion of beneficiary liability under the LTCH PPS (67 FR 55974 through 55975). This discussion was further clarified in the RY 2005 LTCH PPS final rule (69 FR 25676). In keeping with those discussions, if the Medicare payment to the LTCH is the full LTC-DRG payment amount, consistent with other established hospital prospective payment systems, Sec. 412.507 currently provides that an LTCH may not bill a Medicare beneficiary for more than the deductible and coinsurance amounts as specified under Sec. Sec. 409.82, 409.83, and 409.87, and for items and services specified under Sec. 489.30(a). However, under the LTCH PPS, Medicare will only pay for services furnished during the days for which the beneficiary has coverage until the short-stay outlier (SSO) threshold is exceeded. If the Medicare payment was for a SSO case (in accordance with Sec. 412.529), and that payment was less than the full LTC-DRG payment amount because the beneficiary had insufficient coverage as a result of the remaining Medicare days, the LTCH also is currently permitted to charge the beneficiary for services delivered on those uncovered days (in accordance with Sec. 412.507). In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49623), we amended our regulations to expressly limit the charges that may be imposed upon beneficiaries whose LTCHs' discharges are paid at the site neutral payment rate under the LTCH PPS. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57102), we amended the regulations under Sec. 412.507 to clarify our existing policy that blended payments made to an LTCH during its transitional period (that is, an LTCH's payment for discharges occurring in cost reporting periods beginning in FYs 2016 through 2019) are considered to be site neutral payment rate payments.

B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-

DRG) Classifications and Relative Weights for FY 2026

1. Background

Section 123 of the BBRA required that the Secretary implement a PPS for LTCHs to replace the cost-based payment system under TEFRA. Section 307(b)(1) of the BIPA modified the requirements of section 123 of the BBRA by requiring that the Secretary examine the feasibility and the impact of basing payment under the LTCH PPS on the use of existing (or refined) hospital DRGs that have been modified to account for different resource use of LTCH patients. Under both the IPPS and the LTCH PPS, the DRG-based classification system uses information on the claims for inpatient discharges to classify patients into distinct groups (for example, DRGs) based on clinical characteristics and expected resource needs. When the LTCH PPS was implemented for cost reporting periods beginning on or after October 1, 2002, we adopted the same DRG patient classification system utilized at that time under the IPPS. We referred to this patient classification system as the ``long-term care diagnosis-related groups (LTC-DRGs).'' As part of our efforts to better recognize severity of illness among patients, in the FY 2008 IPPS final rule with comment period (72 FR 47130), we adopted the MS-DRGs and the Medicare severity long-term care diagnosis-related groups (MS-LTC-DRGs) under the IPPS and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 2008). For a full description of the development, implementation, and rationale for the use of the MS-DRGs and MS-LTC- [[Page 18313]] DRGs, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 47175 and 47277 through 47299). (We note that, in that same final rule, we revised the regulations at Sec. 412.503 to specify that for LTCH discharges occurring on or after October 1, 2007, when applying the provisions of 42 CFR part 412, subpart O, applicable to LTCHs for policy descriptions and payment calculations, all references to LTC-DRGs would be considered a reference to MS-LTC-DRGs. For the remainder of this section, we present the discussion in terms of the current MS-LTC-DRG patient classification system unless specifically referring to the previous LTC-DRG patient classification system that was in effect before October 1, 2007.) Consistent with section 123 of the BBRA, as amended by section 307(b)(1) of the BIPA, and Sec. 412.515 of the regulations, we use information derived from LTCH PPS patient records to classify LTCH discharges into distinct MS-LTC-DRGs based on clinical characteristics and estimated resource needs. As noted previously, we adopted the same DRG patient classification system utilized at that time under the IPPS. The MS-DRG classifications are updated annually, which has resulted in the number of MS-DRGs changing over time. For FY 2026, there would be 774 MS-DRG, and by extension, MS-LTC-DRG, groupings based on the proposed changes, as discussed in section II.E. of the preamble of this proposed rule. Although the patient classification system used under both the LTCH PPS and the IPPS are the same, the relative weights are different. The established relative weight methodology and data used under the LTCH PPS result in relative weights under the LTCH PPS that reflect the differences in patient resource use of LTCH patients, consistent with section 123(a)(1) of the BBRA. That is, we assign an appropriate weight to the MS-LTC-DRGs to account for the differences in resource use by patients exhibiting the case complexity and multiple medical problems characteristic of LTCH patients.

2. Patient Classifications Into MS-LTC-DRGs

a. Background The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under the LTCH PPS) are based on the CMS DRG structure. As noted previously in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs although they are structurally identical to the MS-DRGs used under the IPPS. The MS-DRGs are organized into 25 major diagnostic categories (MDCs), most of which are based on a particular organ system of the body; the remainder involve multiple organ systems (such as MDC 22, Burns). Within most MDCs, cases are then divided into surgical DRGs and medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. The GROUPER software program does not recognize all ICD-10-PCS procedure codes as procedures affecting DRG assignment. That is, procedures that are not surgical (for example, EKGs) or are minor surgical procedures (for example, a biopsy of skin and subcutaneous tissue (procedure code 0JBH3ZX)) do not affect the MS- LTC-DRG assignment based on their presence on the claim. Generally, under the LTCH PPS, a Medicare payment is made at a predetermined specific rate for each discharge that varies based on the MS-LTC-DRG to which a beneficiary's discharge is assigned. Cases are classified into MS-LTC-DRGs for payment based on the following six data elements: Principal diagnosis. Additional or secondary diagnoses. Surgical procedures. Age. Sex. Discharge status of the patient. Currently, for claims submitted using the version ASC X12 5010 standard, up to 25 diagnosis codes and 25 procedure codes are considered for an MS-DRG assignment. This includes one principal diagnosis and up to 24 secondary diagnoses for severity of illness determinations. (For additional information on the processing of up to 25 diagnosis codes and 25 procedure codes on hospital inpatient claims, we refer readers to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS final rule (75 FR 50127).) Under the HIPAA transactions and code sets regulations at 45 CFR parts 160 and 162, covered entities (45 CFR 160.103) must comply with the adopted transaction standards and operating rules specified in subparts I through S of part 162. Among other requirements, on or after January 1, 2012, covered entities are required to use the ASC X12 Standards for Electronic Data Interchange Technical Report Type 3-- Health Care Claim: Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care Claim: Institutional (837) ASC X12 Standards for Electronic Data Interchange Technical Report Type 3, October 2007, ASC X12N/005010X233A1 for the health care claims or equivalent encounter information transaction (45 CFR 162.1102(c)). HIPAA requires covered entities to use the applicable medical data code sets when conducting HIPAA transactions (45 CFR 162.1000). Currently, upon the discharge of the patient, the LTCH must assign appropriate diagnosis and procedure codes from 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, both of which were required to be implemented October 1, 2015 (45 CFR 162.1002(c)(2) and (3)). For additional information on the implementation of the ICD-10 coding system, we refer readers to section II.F.1. of the preamble of the FY 2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56790) and section II.E.1. of the preamble of this proposed rule. Additional coding instructions and examples are published in the AHA's Coding Clinic for ICD-10-CM/PCS. To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base DRGs were subdivided according to the presence of specific secondary diagnoses designated as complications or comorbidities (CCs) into one, two, or three levels of severity, depending on the impact of the CCs on resources used for those cases. Specifically, there are sets of MS-DRGs that are split into 2 or 3 subgroups based on the presence or absence of a CC or a major complication or comorbidity (MCC). We refer readers to section II.D. of the preamble of the FY 2008 IPPS final rule with comment period for a detailed discussion about the creation of MS-DRGs based on severity of illness levels (72 FR 47141 through 47175). Medicare Administrative Contractors (MACs) enter the clinical and demographic information submitted by LTCHs into their claims processing systems and subject this information to a series of automated screening processes called the Medicare Code Editor (MCE). These screens are designed to identify cases that require further review before assignment into a MS-LTC-DRG can be made. During this process, certain types of cases are selected for further explanation (74 FR 43949). After screening through the MCE, each claim is classified into the appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the basis of diagnosis and procedure codes and other demographic [[Page 18314]] information (age, sex, and discharge status). The GROUPER software used under the LTCH PPS is the same GROUPER software program used under the IPPS. Following the MS-LTC-DRG assignment, the MAC determines the prospective payment amount by using the Medicare PRICER program, which accounts for hospital-specific adjustments. Under the LTCH PPS, we provide an opportunity for LTCHs to review the MS-LTC-DRG assignments made by the MAC and to submit additional information within a specified timeframe as provided in Sec. 412.513(c). The GROUPER software is used both to classify past cases to measure relative hospital resource consumption to establish the MS-LTC-DRG relative weights and to classify current cases for purposes of determining payment. The records for all Medicare hospital inpatient discharges are maintained in the MedPAR file. The data in this file are used to evaluate possible MS-DRG and MS-LTC-DRG classification changes and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during our annual update under both the IPPS (Sec. 412.60(e)) and the LTCH PPS (Sec. 412.517), respectively. b. Proposed Changes to the MS-LTC-DRGs for FY 2026 As specified by our regulations at Sec. 412.517(a), which require that the MS-LTC-DRG classifications and relative weights be updated annually, and consistent with our historical practice of using the same patient classification system under the LTCH PPS as is used under the IPPS, in this proposed rule, we are proposing to update the MS-LTC-DRG classifications effective October 1, 2025, through September 30, 2026 (FY 2026), consistent with the proposed changes to specific MS-DRG classifications presented in section II.F. of the preamble of this proposed rule. Accordingly, the proposed MS-LTC-DRGs for FY 2026 are the same as the MS-DRGs being proposed for use under the IPPS for FY 2026. In addition, because the proposed MS-LTC-DRGs for FY 2026 are the same as the proposed MS-DRGs for FY 2026, the other proposed changes that affect MS-DRG (and by extension MS-LTC-DRG) assignments under proposed GROUPER Version 43, as discussed in section II.E. of the preamble of this proposed rule, including the proposed changes to the MCE software and the ICD-10-CM/PCS coding system, are also applicable under the LTCH PPS for FY 2026.

3. Proposed Development of the FY 2026 MS-LTC-DRG Relative Weights

a. General Overview of the MS-LTC-DRG Relative Weights One of the primary goals for the implementation of the LTCH PPS is to pay each LTCH an appropriate amount for the efficient delivery of medical care to Medicare patients. The system must be able to account adequately for each LTCH's case-mix to ensure both fair distribution of Medicare payments and access to adequate care for those Medicare patients whose care is costlier (67 FR 55984). To accomplish these goals, we have annually adjusted the LTCH PPS standard Federal prospective payment rate by the applicable relative weight in determining payment to LTCHs for each case. Under the LTCH PPS, relative weights for each MS-LTC-DRG are a primary element used to account for the variations in cost per discharge and resource utilization among the payment groups (Sec. 412.515). To ensure that Medicare patients classified to each MS-LTC-DRG have access to an appropriate level of services and to encourage efficiency, we calculate a relative weight for each MS-LTC-DRG that represents the resources needed by an average inpatient LTCH case in that MS-LTC-DRG. For example, cases in an MS-LTC-DRG with a relative weight of 2 would, on average, cost twice as much to treat as cases in an MS-LTC-DRG with a relative weight of 1. The established methodology to develop the MS-LTC-DRG relative weights is generally consistent with the methodology established when the LTCH PPS was implemented in the August 30, 2002, LTCH PPS final rule (67 FR 55989 through 55991). However, there have been some modifications of our historical procedures for assigning relative weights in cases of zero volume or nonmonotonicity or both resulting from the adoption of the MS-LTC-DRGs. We also made a modification in conjunction with the implementation of the dual rate LTCH PPS payment structure beginning in FY 2016 to use LTCH claims data from only LTCH PPS standard Federal payment rate cases (or LTCH PPS cases that would have qualified for payment under the LTCH PPS standard Federal payment rate if the dual rate LTCH PPS payment structure had been in effect at the time of the discharge). We also adopted, beginning in FY 2023, a 10-percent cap policy on the reduction in a MS-LTC-DRG's relative weight in a given year. (For details on the modifications to our historical procedures for assigning relative weights in cases of zero volume and nonmonotonicity or both, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47289 through 47295) and the FY 2009 IPPS final rule (73 FR 48542 through 48550)). For details on the change in our historical methodology to use LTCH claims data only from LTCH PPS standard Federal payment rate cases (or cases that would have qualified for such payment had the LTCH PPS dual payment rate structure been in effect at the time) to determine the MS-LTC-DRG relative weights, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49614 through 49617). For details on our adoption of the 10-percent cap policy, we refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 49152 through 49154).) For purposes of determining the MS-LTC-DRG relative weights, under our historical methodology, there are three different categories of MS- LTC-DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS- LTC-DRGs with at least 25 applicable LTCH cases in the data used to calculate the relative weight, which are each assigned a unique relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that contain between 1 and 24 applicable LTCH cases that are grouped into quintiles (as described later in this section in Step 3 of our proposed methodology) and assigned the relative weight of the quintile); and (3) no-volume MS-LTC-DRGs that are cross-walked to other MS-LTC-DRGs based on the clinical similarities and assigned the relative weight of the cross-walked MS-LTC-DRG (as described later in this section in Step 8 of our proposed methodology). For FY 2026, we are proposing to continue to use applicable LTCH cases to establish the same volume-based categories to calculate the FY 2026 MS-LTC-DRG relative weights. b. Development of the MS-LTC-DRG Relative Weights for FY 2026 In this section, we present our proposed methodology for determining the MS-LTC-DRG relative weights for FY 2026. We first list and provide a brief description of our proposed steps for determining the FY 2026 MS-LTC-DRG relative weights. Later in this section, we discuss in greater detail each step. We note that, as we did in FY 2025, we are proposing to use our historical relative weight methodology as described in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58898 through 58907), subject to a ten percent cap as described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49162). Step 1--Prepare data for MS-LTC-DRG relative weight calculation. In this [[Page 18315]] step, we select and group the applicable claims data used in the development of the proposed MS-LTC-DRG relative weights. Step 2--Remove cases with a length of stay of 7 days or less. In this step, we trim the applicable claims data to remove cases with a length of stay of 7 days or less. Step 3--Establish low-volume MS-LTC-DRG quintiles. In this step, we employ our established quintile methodology for low-volume MS- LTC-DRGs (that is, MS-LTC-DRGs with fewer than 25 cases).