On the evening of December 17, 2021, the Centers for Medicare & Medicaid Services (CMS) released a follow-up to its final rule, Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Final Policy Changes and Fiscal Year 2022 Rates,[1]^,[2] which addresses policies that were proposed but not finalized in the initial final rule.

This rule implements certain provisions of the Consolidated Appropriations Act (CAA)[3] to distribute 1,000 new Medicare-funded physician residency slots to qualifying hospitals, phasing in 200 per year over five years; codifies and compiles Medicare organ acquisition payment policies relative to organ procurement organizations (OPOs), transplant hospitals, and donor community hospitals; and requests comments on certain graduate medical education (GME) issues:

• Finalizes initial process for distributing additional residency positions to qualifying hospitals;
• Solicits comments on feasible alternatives to HPSA scores as a proxy for health disparities;
• Non-rural hospitals who established or establish a medical residency training program (or rural track) in a rural area, are allowed to receive an adjustment to their FTE resident limit;
• Certain hospitals with extremely low per resident amounts (PRA) may establish new PRAs;
• Certain hospitals with very small FTE resident caps may replace their caps;
• Solicits comments on the review process to determine eligibility for PRA or FTE cap resets in situations where a hospital disagrees with the information in its cost report;
• Finalizes policies regarding Medicare-certified non-transplant hospitals and transplant hospitals’ charges for hospital services provided to cadaveric donors;
• Codifies and clarifies certain organ acquisition payment policies relative to definitions, standard acquisition charges, Medicare coverage of living donor complications, Medicare as a secondary payor for organ acquisitions, and kidney paired donations;
• Does not finalize its proposal regarding organ counting policy for Medicare payment purposes;
• Does not finalize its proposal regarding research organ counting; and
• Does not finalize its proposal related to the treatment of section 1115 waiver days for purposes of the DSH adjustment, though it expects to revisit this issue in future rulemaking.

This final rule is scheduled to be published in the Federal Register on December 27, 2021, and comments on requested sections are due by 5 p.m. EDT on February 25, 2022. Provisions of the final rule with comment are effective on February 25, 2022.

CMS Finalizes Major Changes to Graduate Medical Education

In this rule, CMS finalizes its approach to implementing Sections 126, 127, and 131 of the Consolidated Appropriations Act of 2021 (Pub. L. 116-260):

• Distribution of 1000 New GME Slots (Section 126). CMS is finalizing its plans to distribute 200 slots per year over a five-year period, starting in FY 2023.[4] CMS expects that the implementation of Section 126 of the CAA will cost approximately $1.83 billion for FY 2023 – 2031. CMS will limit each requesting hospital to one new FTE per program year for which a hospital is applying, up to a maximum of five.[5] CMS finalized its proposal to prioritize distribution of these slots under either of the two alternative methodologies:
  • The first alternative prioritizes hospitals with the highest Health Professional Shortage Area (HPSA) scores. In this case, all residency positions would be distributed through HPSA scoring.
  • Under the second alternative, CMS finalized without modification[6] its proposal for additional time to work with stakeholders and evaluate the need to adjust the distribution methodology in a future rulemaking. The Agency would distribute 200 additional residency slots for FY 2023 among hospitals in four categories—rural hospitals, hospitals above their current cap, hospitals located in states with new medical schools or branch campuses, and hospitals that serve HPSAs—with higher priority given to hospitals that qualify in more categories.
• Promoting Rural Hospital GME Funding Opportunity (Section 127). CMS finalizes its proposal to remove the “separately accredited” requirement for rural training tracks (RTTs), which allows urban hospitals to partner with a rural hospital with any accredited training program. CMS also permits rural hospitals to increase their RTT cap similar to urban hospitals and permits urban hospitals to start multiple new RTTs.[7] Beginning Oct. 1, 2022, hospitals with new RTTs will have a five year cap building window.
• Addressing Adjustment of Low Per Resident Amounts (PRA) (Section 131). CMS finalizes its proposal to permit certain hospitals with less than 3.0 FTEs on their cost report to reset their PRA for direct GME payments and establish a new cap for direct and indirect medical education. CMS will consider resetting each during a 5-year window starting at enactment, Dec. 27, 2020, and ending Dec. 26, 2025.

CMS Finalizes Changes to Organ Acquisition Payment Policies

Medicare reimburses transplant hospitals (THs) for organ acquisition costs, the transplant surgery, inpatient, and post-transplant costs but reimbursement comes through different payment systems.[8]^,[9]

• Medicare Part A pays for TH costs of a transplant and certain follow-up care through a diagnosis-related group (DRG) payment.
• Medicare Part A pays for organ acquisition costs under reasonable cost principles.[10]^,[11]
• Medicare Part B generally pays for physician and other services related to the transplant procedure.

In its proposed rule, CMS described the history of organ procurement policies and the need for a coordinated approach across organ types. To assist with this effort, CMS finalizes the codification and compilation of Medicare organ acquisition policies under a new 42 CFR Part 413 subpart L that includes: new policies, existing policies,[12] and certain policies from the Medicare Modernization Act (Pub. L. 108-173)[13] and the 21st Century Cures Act (Pub. L. 114-255).[14] Certain policies that will be modified and/or moved include:

• Define “organ” for Medicare payment purposes to exclude organs procured for research, which intentionally differs from the definition in the OPO Conditions for Coverage at 42 CFR 486.302;
• Incorporate existing definitions of OPO, hospital OPO (HOPO), independent OPO (IOPO), transplant hospital/HOPO (TH/HOPO), and histocompatibility laboratory;[15]
• Specify that organ acquisition costs include costs incurred in the acquisition of organs from a living donor or a cadaveric donor by the hospital or OPO; and
• Codify the existing Medicare policy on standard acquisition costs (SAC) for IOPOs, THs, and HOPOs.[16]

CMS notes findings from Office of the Inspector General reports that Medicare has been sharing in organ acquisition costs for some organs shipped overseas or not transplanted into Medicare beneficiaries. CMS also points out that there has been recent Congressional oversight interest into OPO financial management. To address this issue, CMS clarifies that THs and HOPOS must accurately count and report Medicare usable organs and total usable organs on their Medicare hospital cost reports. The current methodology uses Medicare hospital cost report data to calculate the Medicare share of the organ acquisition costs for THs and HOPOs using the following equation:

In addition, CMS finalizes that donor community hospitals bill OPOs for the costs of services furnished to a cadaveric doner for cost reporting periods beginning on or after October 1, 2021. OPO cost reports include both OPO donor acquisition costs and donor community hospital costs for services provided to cadaveric donors. As such, these charges are subject to Medicare’s principles of reasonable cost, and donor community hospitals should bill the lesser of customary charges reduced to cost based on the most recent hospital-specific cost-to-charge ratio for the period in which the service was rendered.

In the proposed rule, CMS suggested revising the composition and categories for counting organs used to determine Medicare’s share of organ acquisition costs.[17] However, after considering public comments, CMS decided not to finalize their proposal and will address commenter concerns in potential future rulemaking.

Treatment of Certain Medicaid Section 1115 Demonstrations for Medicare Disproportionate Share Hospital (DSH) Payments

In their proposed rule, CMS recommended revisions to the treatment of Section 1115 waiver days for purposes of the DSH adjustment (86 FR 25457 through 25459). Based on feedback, CMS decided not to finalize their proposal but expects to revisit the issue in future rulemaking.

 

[1]   Federal Register: https://www.federalregister.gov/d/2021-27523

[2]   Fact Sheet: https://www.cms.gov/newsroom/fact-sheets/fiscal-year-fy-2022-medicare-hospital-inpatient-prospective-payment-system-ipps-final-rule-comment

[3]   Sections 126, 127, & 131 of the CAA, 2021 (P.L. 116-260): https://www.congress.gov/116/plaws/publ260/PLAW-116publ260.pdf

[4]   Applications for new slots are due March 31 of the preceding fiscal year (i.e., FY 2023 applications would be due Mar. 31, 2022). This is a change from the proposed rule, under which CMS initially proposed a due date of January 31 of the preceding fiscal year. The Secretary is required to notify hospitals of the number of positions distributed to them by January 31 of the fiscal year of the increase, and the increase is effective beginning July 1 of that fiscal year.

[5]   This is a change from the proposed rule, under which CMS initially proposed a maximum of 1 FTE.

[6]   CMS did not receive any comments on this proposal.

[7]   CMS acknowledged an error in the initial calculation of the rural hospital cap adjustment in the proposed rule.

[8]   Transplant program and transplant hospital are defined at 42 CFR 482.70. CMS is phasing out the term “transplant center.”

[9]   Transplant programs in a transplant hospital (TH) must meet CMS Conditions of Participation under 42 CFR Part 482, subpart E.

[10] Medicare reimburses THs for organ acquisition costs under reasonable cost principles pursuant to section 1861(v) of the Act, based on the TH’s ratio of Medicare usable organs to total usable organs.

[11] Medicare authorizes payment to Organ Procurement Organizations (OPOs) for kidney acquisition costs under reasonable cost principles pursuant to section 1861(v) of the Act, based on the OPO’s ratio of Medicare usable kidneys to total usable kidneys. OPOs coordinate the procurement, preservation, and transportation of organs from deceased donors, and maintain a system for locating prospective recipients. OPOs must meet CMS Conditions for Coverage under 42 CFR Part 486, subpart G.

[12] Provider Reimbursement Manual Part 1 – Chapter 31.

[13] Medicare Modernization Act of 2003 (Pub. L. 108-173), Section 733: Payment for Pancreatic Islet Cell Investigational Transplants for Medicare Beneficiaries in Clinical Trials. https://www.congress.gov/bill/108th-congress/house-bill/1/text

[14] The 21st Century Cures Act (Pub. L. 114-255), Section 17006: Allowing End-Stage Renal Disease Beneficiaries to Choose a Medicare Advantage Plan.  https://www.congress.gov/bill/114th-congress/house-bill/34/text/pl

[15] Medicare reimburses histocompatibility laboratories under reasonable cost principles. Histocompatibility laboratories provide services to ensure compatibility between donor organs and potential recipients and may be either independent or hospital-based.

[16] CMS clarifies that IOPOs must develop a SAC for each type of non-renal organ by estimating the expected reasonable and necessary costs to procure cadaveric donor non-renal organs during the IOPO’s cost reporting period. CMS also clarifies that THs and HOPOs must develop SACs for living and cadaveric organs by type.

[17] Source(s): Pages 309 of the final rule.