June 22, Dear Administrator Tavenner:

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1 Submitted Electronically Marilyn Tavenner Acting Administrator Centers for Medicare & Medicaid Services Department of Health and Human Services Room 445-G Hubert H. Humphrey Building 200 Independence Avenue SW, Washington, DC Re: CMS-1588-P Medicare Program; Proposed Changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2013 Rates Dear Administrator Tavenner: On behalf of VHA Inc. ( VHA ), I am writing to provide comments on the Proposed Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year ( FY ) 2013 Rates, published in the May 11, 2012 Federal Register (the Proposed Rule ). Founded in1977, VHA is dedicated to the success of nonprofit, community-based health care. Based in Irving, Texas, VHA is a national health care network that serves more than 1,400 not-for-profit hospitals and more than 23,000 non-acute health care organizations nationwide. VHA helps its members deliver safe, effective, and cost-efficient health care through both national and local support. VHA has 15 regional offices covering 47 states, as well as a public policy office in Washington, D.C. Given the significant effect the Proposed Rule would have on the inpatient prospective payment system ( IPPS ) and related regulations, we appreciate your consideration of our concerns and requests, as set forth below. MS-DRG Documentation and Coding Offset For FY 2013, CMS proposes a prospective reduction of 1.9 percent to the standardized amount to complete adjustments related to increases in the case mix arising from the transition to MS-DRGs. In addition to the proposed 1.9 percent reduction, CMS proposes a 0.8 percent reduction to recoup overpayments made in FY 2010 as a result of documentation and coding improvements. CMS also proposes to remove the 2.9 percent recoupment adjustment applied for FY The net effect of all proposed FY 2013 documentation and coding adjustments is projected to result in an aggregate rate increase of 0.2 percent. 901 New York Avenue, N.W. Suite 510 East Washington, D.C

2 Page 2 VHA recognizes CMS for the positive documentation and coding adjustment as compared to previous years, particularly when hospitals are preparing for payment cuts under ACA and simultaneously making large investments in delivery system reforms and health information technology. In terms of MS-DRG methodology, VHA continues to believe that CMS should take into consideration true changes in patient acuity reflected in the case mix when calculating the payment adjustments to MS-DRGs. VHA objects to CMS assertion that spending on inpatient hospital care has increased solely due to changes in coding without adequately recognizing the portion of case mix change that is attributable to true changes in patient severity. Furthermore, Congress did not require CMS to prevent future overpayments by a particular date, so CMS is not statutorily obligated to implement this prospective adjustment in 2012 or any specific year thereafter. Impact of Budget Control Act of 2011 on CY 2013 Hospital Payments The Budget Control Act of 2011 imposes a two percent sequestration cut to be implemented in January, The statute defines the mechanism for this reduction to Medicare providers as applied across-the-board to all claims for Medicare Parts A,B, C, and D. In the absence of legislative relief, VHA encourages CMS to provide guidance on how this sequester would be applied and the impact of such on inpatient hospital PPS payments for Hospital Readmissions Reduction Program Under the FY 2012 final rule, CMS finalized the following key policies related to the Hospital Readmissions Reduction Program: (1) established the definition of readmission as generally referring to an admission to an acute-care hospital paid under the IPPS within 30 days of a discharge from the same or another acute-care hospital; (2) defined a hospital s excess readmission ratio for heart attack (AMI), heart failure (HF) and pneumonia (PN) as a measure of a hospital s readmission performance compared to the national average for the hospital s set of patients with that applicable condition; and (3) determined the variables for calculating a hospital s excess readmission ratio for each applicable condition as three years of discharge data and a minimum of 25 cases. In the FY 2013 IPPS Proposed Rule, CMS moves forward with proposing a methodology and the payment adjustment factors to account for excess readmissions for the three previously specified conditions. The rule outlines the methodology used to calculate the readmissions adjustment factor and defines the base operating DRG payment amount to which a hospital s potential penalties would apply as the wage-adjusted DRG operating payment, plus any applicable new technology addon payments. Finally, CMS states that it intends to disseminate confidential reports to hospitals on their readmission scores by June 20, CMS intent in providing the confidential reports and accompanying discharge-level data to hospitals is twofold: (1) To provide hospitals with an opportunity to review and submit corrections for the measure rates that we will make available to the public; and (2) to facilitate hospitals quality improvement efforts with respect to the measures.

3 Page 3 Hospitals would have 30 days to review the reports and make any corrections. VHA encourages CMS to examine this time frame closely, as 30 days may be insufficient for many providers to complete a thorough review. Although the statute mandates that CMS exclude readmissions that are unrelated to the prior discharge and planned readmissions from the measures, CMS proposal does not do so. CMS notes in the rule that the National Quality Forum has endorsed each of the three measures and that they have exclusions for readmissions that are unrelated to prior discharge. Based on the small set of existing exclusions, VHA believes the agency has ignored Congress intent that the measures be modified to explicitly exclude unrelated and planned readmissions. There are numerous reasons why a patient may return to the hospital for a planned admission and many reasons for readmissions that are unrelated to prior admissions. However, individual hospitals are limited in their ability to drill down into the data because they only have access to records for those patients who return to their own facilities for a readmission. They cannot examine data for patients who seek further care elsewhere. VHA encourages the agency to instead conduct a study to thoroughly determine the common reasons for planned readmissions, as well as determine a subset of readmissions that are unrelated to the initial admission for the relevant conditions. Hip/ Knee Readmission Review The Measure Application Partnership (MAP) recommended the inclusion of this measure in the Hospital Inpatient Quality Reporting (IQR) Program. The objective of this proposed measure is to assess readmission from any cause within 30 days of the initial total hip arthroplasty and total knee arthroplasty admissions for patients discharged from the hospital following elective primary THA and TKA. CMS has proposed to exclude beneficiaries enrolled in Medicare Advantage plans and patients under age 65 (the qualifying age for Medicare coverage for those not considered disabled or with end-stage renal disease) or for whom there is otherwise incomplete information to ensure data comparability. VHA supports the exclusion of Medicare Advantage and under 65 population from the assessment of readmissions on THA and TKA, given the lack of partial administrative data reported to CMS and outliers captured in the under-65 population for this procedure. Hospital Value-Based Purchasing (VBP) Program The proposed rule would strengthen the Hospital Value-Based Purchasing (VBP) Program to further Medicare s transformation from a system that rewards volume of service to one that rewards efficient, high-quality care. The proposed rule includes proposals that address operational details relating to payment rates to hospitals in FY 2013 (the first year that the program s payment implications will go into effect), as well as additional proposed measures and policies that would affect payment rates to hospitals in FY 2015 and FY CMS proposes to define base operating DRG payment amount consistently with how it proposed to define it under the Hospital Readmissions Reduction Program. That is, it would define it as the wage-adjusted DRG operating payment, plus any applicable new technology add-on payments, but

4 Page 4 not include adjustments or add-on payments for IME, DSH, outliers or low-volume hospitals. It also proposes to exclude the difference between an SCH s applicable hospital specific payment rate and the federal payment rate from its definition. Additional Measures: CMS proposes to add four measures to the VBP program for FY 2015: Total Medicare spending per beneficiary; Acute myocardial infarction statin prescribed at discharge; AHRQ PSI composite measure; and Central Line-Associated Blood Stream Infection (CLABSI) measure. Specifically, CMS is proposing to add the Medicare spending per beneficiary measure to the Hospital VBP Program, which would affect payments beginning in FY This measure would include all Part A and Part B payments (after removing differences attributable to geographic payment adjustments and other payment factors) from three days prior to an inpatient hospital admission through 30 days post discharge with certain exclusions. The proposed measure would be risk-adjusted for the beneficiary s age and severity of illness. VHA believes that incorporating a new efficiency measure could cause risks to Medicare reimbursement. Given the lack of national data available for hospitals to verify CMS calculations and review the proposed methodology for analysis, VHA believes that additional testing and information is required before adding the measure to the Hospital VBP program. Domains and Weighting In last year s proposed rule, CMS chose to assign a 30 percent weight to the patient experience of care (HCAHPS) domain with the remaining 70 percent devoted to the clinical process of care domain. CMS has proposed to maintain this 30 percent weight for the HCAHPS domain for FYs 2014 and Although the patient s experience is an important component of value, VHA continues to believe that CMS should re-examine the HCAHPS weighting percentage under the Hospital VBP Program. Recent research has shown that HCAHPS measures are highly subjective, particularly when patient experience responses are correlated with patient severity of illness. In addition, geographic and cultural issues could disparately and negatively affect the hospital s HCAHPS score and thus lower the hospital s performance scoring under the proposed weighting scheme due to factors that are beyond the hospital s ability to control or eliminate. This in turn could further dilute the incentivizing impact that CMS intended for performance-based payments under the VBP program. For the FY 2013 rule, CMS is also soliciting comments on a proposal to regroup the Hospital VBP Program s quality measures into six domains-- Clinical Care; Person- and Caregiver-Centered Experience and Outcomes; Safety; Efficiency and Cost Reduction; Care Coordination; and Community/Population Health-- that better reflect the National Quality Strategy beginning with the FY 2016 program year. Furthermore, beginning in FY 2015, CMS proposes to include the Medicare spending per beneficiary measure in a separate efficiency domain when determining hospitals overall VBP scores. The weighting of the efficiency domain would be 20 percent. The process

5 Page 5 domain would be reduced to 20 percent and the outcomes and experience of care domains would be 30 percent each. VHA believes CMS should take the foregoing factors into account by not only lowering the weighting percentage initially assigned to HCAHPS, but also conduct additional research on how the inclusion of new domains (e.g. outcomes and efficiency measures) in future years will revise weighting. Furthermore, VHA remains concerned that the proposed weighting for the Outcomes and Efficiency Domains is too high in the initial year of introduction and hospitals will require a more gradual transition. CMS should review closely and request continued comments in this area. Proposed Appeals Process under VBP Under the proposed appeals process, if a hospital is seeking to appeal a calculation of the Total Performance Score (TPS), measure/dimension score, condition-specific score, domain specific score, or measure rate/data for which the hospital could have submitted a correction during the review and correction process, CMS would require that the hospital first submit a correction to that calculation, and receive an adverse determination before the hospital could challenge it under the appeals process. CMS believes this requirement will be more effective and reduce the need for lengthy appeals. To the extent that a hospital seeks to appeal a calculation that was the subject of a correction request, CMS proposes that the deadline for the hospital to submit an appeal would be 30 days from the date the hospital was informed through QualityNet on its correction request decision. For any other appeals requests, CMS proposes that hospitals have up to 30 days after the conclusion of the review and corrections period specified above to submit an appeal. VHA agrees with the proposed corrections request option in advance of the formal appeals process to avoid unnecessary and lengthy appeals reviews. With respect to the proposed deadline, VHA believes that the 30 day window following the correction notice for initiating appeals is too short, and hospitals should be given a minimum of 60 days to review claimsbased measure and total performance feedback reports. Hospital Inpatient Quality Reporting (IQR) Program The proposed rule would continue to strengthen and streamline the IQR Program by proposing to add new measures and also to retire certain measures from the program for which reporting rates are approaching optimal performance. The proposed rule would also modify and streamline the validation process for the IQR program. Hospitals would be required to report a total of 59 measures for FY 2015 and 60 measures for FY CMS proposes to remove 17 measures that are currently used in the IQR program beginning in FY Most of the measures are proposed for removal in order to align with the recommendations of the Measure Application Partnership (MAP). Sixteen of the measures are calculated by CMS using claims data; the SCIP measure is reported through medical record abstraction by hospitals. For FY 2015, the agency proposes to remove these measures by the following categories: Eight hospital-acquired conditions (HACs);

6 Page 6 Five Agency for Health Research and Quality (AHRQ) Patient Safety Indicators (PSI); Three AHRQ Inpatient Quality Indicators (IQI); and One chart-abstracted measure: Surgical Care Improvement Project (SCIP) venous thromboembolism prophylaxis for surgery patients. Specifically, CMS proposes to add five additional measures to the IQR program for FY 2015, as well as one new measure (safe surgery checklist) for FY They include measures for perinatal care and readmissions (elective delivery prior to 39 completed weeks of gestation), overall readmissions (30-day hospital-wide all-cause unplanned readmission rate), readmissions relating to hip and knee replacement procedures (30-day readmission rate for total hip and knee arthroplasty; complications following elective total hip arthroplasty), and for the use of surgery checklists designed to reduce errors. VHA appreciates CMS recognition of the burden that tracking 70 plus quality measures would have on hospitals under the Hospital Inpatient Quality Reporting by reducing the number required from 72 to 59 in the proposed rule. We continue to believe that the HAC measures need further refinement before they are included in the IQR and were pleased to see CMS elected to remove them at this time. Overall, VHA continues be supportive of efforts to select of quality measures that focus on high priority areas and for which evidence-based practices exist to improve patient outcomes. Outlier Threshold The proposed rule would raise the outlier fixed-loss threshold from its current level of $22,385 to $27,425.VHA is concerned about the 23 percent increase in the cost outlier threshold from last year s amount due to the downward shift this would have on the number of cases that would qualify for an outlier payment. Inclusion of Labor and Delivery Beds in DSH and IME Payments To help low-bed hospitals qualify for soon-to-expire Medicare DSH payments, CMS proposes to include labor and delivery bed days in the count of available beds used in the DSH and IME calculations. CMS estimates that this change would decrease IME payments by $170 million in FY VHA believes that hospitals are placed at an unfair disadvantage by reducing the resident-tobed ratio and diluting IME payments. Therefore, we oppose the inclusion of labor and delivery bed days and encourage CMS to maintain IME payments at current levels. New Technology Add-On In the Conference Report to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( MMA ), Congress directed CMS to consider increasing the percent of payment associated with the add-on payments up to the marginal rate used for the inpatient outlier.

7 Page 7 Furthermore, Section 503 of the MMA provided new funding for add-on payments and relaxed the approval criteria under the inpatient PPS to ensure that the payment system would better account for expensive new drugs and devices. Despite the persistent efforts of Congress in this regard, CMS continues to resist approval of new technologies and considers only a few technologies a year for add-on payments. CMS has not yet updated the thresholds that are used to evaluate applications for new technology. VHA, as in previous rule-making cycles, once again urges CMS to raise the add-on payment level for new technologies from 50 percent to 80 percent of the difference between the standard DRG payment and the cost of the procedure using the new technology, consistent with Congress suggestion. * * * * In closing, on behalf of VHA, I would like to thank CMS for providing us this opportunity to comment on the Proposed Rule. Please feel free to contact me at (202) if you have any questions or if VHA can provide any assistance as you consider these issues. Respectfully submitted, Edward N. Goodman Vice President, Public Policy

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