Summary of CMS FY2016 IPPS PROPOSED RULE

4/20/2015 – The purpose of this memo is to summarize key points raised in Medicare’s FY16 Inpatient Prospective Payment System (IPPS) proposed rule, as released on 4/17/15 @ www.cms.gov. Please consider this a preliminary assessment pending additional review of the proposed rule when it is published in the Federal Register on April 30, 2015. CMS seeks comments until 6/16/15. Then, the final rule for hospital inpatient reimbursement will be released by 8/1/15.

Excerpts on key issues of interest to the medical device industry include:

Reduction of Hospital Payments for Excess Readmissions (Preamble begins on page 58)
The Hospital Readmissions Reduction Program requires a reduction to a hospital’s base operating DRG payment to account for excess readmissions of selected applicable conditions. For FY13 & FY14, these conditions were acute myocardial infarction, heart failure, and pneumonia…CMS also established additional readmissions measures to include chronic obstructive pulmonary disease (COPD), total hip arthroplasty and total knee arthroplasty (THA/TKA) in the FY15 Hospital Readmissions Reduction Program. FY17, CMS is adding a measure of patients readmitted following coronary artery bypass graft (CABG) surgery. In this proposed rule, CMS proposes a refinement to the pneumonia readmissions measure.

Hospital-Acquired Condition (HAC) Reduction Program  (Preamble begins on page 60)
1% payment reduction applies to a hospital whose ranking is in the top quartile (25%) of all applicable hospitals, relative to the national average, of conditions acquired during the applicable period…In this proposed rule, CMS proposes an expansion to the population covered by the central line-associated bloodstream infection (CLABSI) and catheter-associated urinary tract infection (CAUTI) measures to include patients in select non-intensive care unit sites within a hospital.

Hospitals and Hospital Units Excluded from the IPPS (Preamble begins on page 74)
These hospitals and units are rehabilitation hospitals; long-term care hospitals (LTCHs); psychiatric hospitals; children’s hospitals; certain cancer hospitals; and short-term acute care hospitals located in Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and American Samoa. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS….They are paid solely under a reasonable cost-based system subject to a rate-of-increase ceiling on inpatient operating costs, as updated annually by the percentage increase in the IPPS operating market basket.

Critical Access Hospitals (CAHs) (Preamble begins on page 76) payments made to CAHs for inpatient and outpatient services are generally based on 101% of reasonable cost.

Endovascular Embolization (Coiling) Procedures (Preamble begins on page 140)
CMS received a request again this year to change the MS-DRG assignment for endovascular embolization (coiling) procedures. CMS believes that maintaining the current MS-DRG assignment for these types of procedures is appropriate. CMS clinical advisors state that the current grouping of procedures within MS-DRGs #20, #21 and #22 reflects patients who are unique in terms of utilization and complexity based on the three severity levels, which are specifically designed to capture clinical differences in these patients, and these factors support maintaining the current structure. Therefore, CMS proposes not to move cases with a principal diagnosis of hemorrhage and procedure codes 39.72, 39.75, and 39.76 out of MS-DRGs #20, #21 and #22 and create a new base MS-DRG.

Percutaneous Intracardiac Procedures (Preamble begins on page 157)
Request to create new MS-DRGs for percutaneous intracardiac procedures to help improve clinical homogeneity by differentiating percutaneous intracardiac procedures (performed within the heart chambers) from percutaneous intracoronary procedures (performed within the coronary vessels). The commenter recommended that CMS assign to the newly created MS-DRGs (page 159) the following procedures:

• 35.52 (Repair of atrial septal defect with prosthesis, closed technique);
• 35.96 (Percutaneous balloon valvuloplasty);
• 35.97 (Percutaneous mitral valve repair with implant);
• 37.26 (Catheter based invasive electrophysiologic testing);
• 37.27 (Cardiac mapping);
• 37.34 (Excision or destruction of other lesion or tissue of heart, endovascular approach);
• 37.36 (Excision, destruction, or exclusion of left atrial appendage (LAA)
• 37.90 (Insertion of left atrial appendage device)….

As stated on page 166, CMS believes that creating these new MS-DRGs would better reflect the resource cost of specialized equipment used to perform more complex structures of electrical conduction systems during cardiac ablation procedures. Therefore, for FY16, CMS is proposing to create two new MS-DRGs to classify percutaneous intracardiac procedures. Specifically, MS-DRG #273, entitled “Percutaneous Intracardiac Procedures with MCC,” and MS-DRG #274, entitled “Percutaneous Intracardiac Procedures without MCC”.

As stated on page 172, considering the data for peripheral angioplasty cases with a drug-eluting stent found reported in MS-DRGs 252, 253, and 254 and the input from our clinical advisors, CMS proposes not to make any MS-DRG updates for peripheral angioplasty cases with a drug-eluting stent. CMS proposes to maintain the current MS-DRG assignments for these cases in MS-DRGs 252, 253, and 254.

Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Graft (page 178)
The new technology add-on payment for the Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Graft (Zenith® F. Graft) will end on September 30, 2015.

Proposed MS-DRG changes include:

• Delete MS-DRGs 237 and 238 (page 215).
• Create MS-DRG 268, entitled “Aortic and Heart Assist Procedures Except Pulsation Balloon with MCC,” and MS-DRG 269, entitled “Aortic and Heart Assist Procedures Except Pulsation Balloon without MCC.” (page 216).
• Create MS-DRG 270, entitled “Other Major Cardiovascular Procedures with MCC”; MS-DRG 271, entitled “Other Major Cardiovascular Procedures with CC”; and MS-DRG 272, entitled “Other Major Cardiovascular Procedures without CC/MCC,”

Spinal Fusion (page 281)
CMS received a request to revise the titles of MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with Spinal Curvature/Malignancy/Infection or 9+ Fusion with MCC, with CC, and without CC/MCC, respectively) for the ICD-10 MS-DRGs, so that they more closely correspond to the terminology used to describe the ICD-10-PCS procedure codes without changing the ICD-10 MS-DRG logic. CMS agreed with the requestor that revising the titles of these MS-DRGs would more appropriately identify the procedures classified under these groupings. The new titles will be:

• MS-DRG 456 (Spinal Fusion Except Cervical with Spinal Curvature/Malignancy/Infection or Extensive Fusion with MCC)
• MS-DRG 457 (Spinal Fusion Except Cervical with Spinal Curvature/Malignancy/Infection or Extensive Fusion with CC)
• MS-DRG 458 (Spinal Fusion Except Cervical with Spinal Curvature/Malignancy/Infection or Extensive Fusion without CC/MCC).

Proposed Add-On Payments for New Services and Technologies (page 383)

• CMS is proposing to discontinue new technology add-on payments for Voraxaze®, the Zenith® F.Graft, and the Zilver® PTX® Drug Eluting Peripheral Stent for FY 2016 because these technologies will have been on the U.S. market for 3 years.
• CMS is proposing to continue making new technology add-on payments for Kcentra™, the Argus® II Retinal Prosthesis System, the CardioMEMS™ HF Monitoring System, the MitraClip® System (page 418), and the RNS® System(page 421) in FY 2016 because these technologies are still considered new.
• FY16 New Tech Applicants included…

Angel Medical Systems, Inc. submitted an application for new technology add-on payments for the Angel Medical Guardian® Ischemic Monitoring Device (hereinafter referred to as the Guardian®). The Guardian® implantable ischemia detection system is designed to provide early detection and patient alerts for ischemic and other cardiac events experienced by ambulatory patients…CMS was unable to determine if the technology meets the cost criterion.

Blinatumomab (BLINCYTO™) (page 434). Amgen, Inc. submitted an application for new technology add-on payments for Blinatumomab (BLINCYTO™)…CMS is concerned that the mechanism of action of the BLINCYTO™ technology may be similar to other approved technologies currently available to treat the same patient population and, therefore, may not meet the newness criterion…the applicant was unable to provide a single estimate of the charges.

Ceftazidime Avibactam (AVYCAZ) (page 450) Cerexa, Inc., an affiliate of Actavis, Inc., submitted an application for new technology add-on payments for FY 2016 for Ceftazidime Avibactam (AVYCAZ). AVYCAZ is used for the treatment of adult patients who have been diagnosed with complicated urinary tract Infections (cUTIs), including pyelonephritis and complicated Intra-abdominal Infections (cIAIs), for which there are limited or no available treatment options. CMS believes that AVYCAZ bears a substantial similarity to Ceftazidime and other currently available treatment options.

DIAMONDBACK 360® Coronary Orbital Atherectomy System (page 467) Cardiovascular Systems, Inc. submitted an application for new technology add-on payments for the DIAMONDBACK 360® Coronary Orbital Atherectomy System (OAS) (DIAMONDBACK® Coronary OAS) for FY 2016. The DIAMONDBACK® Coronary OAS is a percutaneous orbital atherectomy system used to facilitate stent delivery in patients who have been diagnosed with coronary artery disease and severely calcified coronary artery lesions….this technology may be substantially similar to the rotational, directional, and laser atherectomy devices that are already on the U.S. market for the treatment of such patients….CMS questions the reliability of comparing data from the ORBIT II study to historical study data because different definitions of severe calcification used in each study can make absolute comparisons difficult and/or invalid.

CRESEMBA® (Isavuconazonium)(page 480) Astellas Pharma US, Inc. (Astellas) submitted an application for new technology add-on payments for CRESEMBA® (isavuconazonium) for FY 2016. CRESEMBA® is an intravenous and oral broad-spectrum antifungal used for the treatment of adults who have severe invasive and life-threatening fungal infections, including invasive aspergillosis and mucormycosis (zygomycosis)…CMS is concerned that the applicant did not remove any charges for the other antifungal drugs used during treatments… CMS is also concerned that the applicant did not conduct the clinical trials evaluating head-to-head comparisons to alternative therapies.

Idarucizumab (page 492) Boehringer Ingelheim Pharmaceuticals, Inc. submitted an application for new technology add-on payments for Idarucizumab, a product developed as an antidote to reverse the effects of PRADAXA® (Dabigatran), which is also manufactured by Boehringer Ingelheim Pharmaceuticals, Inc. Dabigatran is an oral direct thrombin inhibitor currently indicated to: (1) reduce the risk of stroke and systemic embolism in patients who have been diagnosed with nonvalvular atrial fibrillation (NVAF); (2) treat deep venous thrombosis (DVT) and pulmonary embolism (PE) in patients who have been administered a parenteral anticoagulant for 5 to 10 days; and (3) reduce the risk of recurrence of DVT and PE in patients who have been previously diagnosed with NVAF. We believe that Idarucizumab, if approved by the FDA, may represent a treatment option that is not currently available to Medicare beneficiaries and, therefore, represents a substantial clinical improvement. However, CMS is concerned that the clinical data are not sufficient. Specifically, the applicant provided data from an animal model. In addition, the primary clinical data in relation to human volunteers are based primarily on a trial to measure safety. While the applicant did provide clinical data on the effectiveness of Idarucizumab, CMS is concerned that the evidence presented does not support the substantial clinical improvement criterion.

LUTONIX® Drug-Coated Balloon (DCB) Percutaneous Transluminal Angioplasty (PTA) Catheter and IN.PACT™ Admiral™ Paclitaxel Coated Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter (page 502) Two manufacturers, CR Bard Inc. and Medtronic, submitted applications for new technology add-on payments for FY 2016 for LUTONIX® Drug-Coated Balloon (DCB) Percutaneous Transluminal Angioplasty (PTA) Catheter (LUTONIX®) and IN.PACT™ Admiral™ Paclitaxel Coated Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter (IN.PACT™ Admiral™), respectively. Both of these technologies are drug-coated balloon angioplasty treatments for patients diagnosed with peripheral artery disease (PAD)… The applicants submitted separate cost and clinical data, and CMS reviewed and discuss each set of data separately. However, CMS intends to make one determination regarding new technology add-on payments that will apply to both devices. CMS believes that this is consistent with our policy statements in the past regarding substantial similarity. Specifically, CMS noted that approval of new technology add-on payments would extend to all technologies that are substantially similar.

VERASENSE™ Knee Balancer System (VKS) (page 524) OrthoSensor submitted an application for new technology add-on payments for the VERASENSE™ Knee Balancer System (VKS) for FY 2016. CMS is concerned that the advancements made to the VKS that resulted in the additional FDA approval clearances in 2013 may not be significant enough to distinguish. CMS believes that the advanced VKS may be substantially similar to the first version of the VKS (that was first available on the U.S. market in late 2011) and, therefore, would not meet the newness criterion.

WATCHMAN® Left Atrial Appendage (LAA) Closure Technology (page 551)
Boston Scientific submitted an application for new technology add-on payments for FY 2016 for the WATCHMAN® Left Atrial Appendage (LAA) Closure Technology (WATCHMAN® System). CMS is concerned that this is not a NEW technology because the ICD-9-CM procedure became effective October 1, 2004. (37.90- Insertion of left atrial appendage device). CMS proposes to assign the procedures performed within the heart chambers using intracardiac techniques, including those identified by ICD-9-CM procedure code 37.90, to two new proposed MS-DRGs #273 (Percutaneous Intracardiac Procedures with MCC) and proposed MS-DRG #274 (Percutaneous Intracardiac Procedures without MCC). CMS believes that this could have implications for determining whether the applicant meets the cost criterion….Furthermore, in the FY 2015 IPPS/LTCH PPS proposed rule, CMS expressed concern that the evidence presented by the applicant demonstrating superiority compared to Warfarin therapy was insufficient. CMS expressed concern that the PROTECT AF trial was not designed to demonstrate superiority, and instead was designed to demonstrate noninferiority. CMS also expressed concern that the PREVAIL trial endpoint was not significantly improved in the conventional hypothesis testing statistical analysis at any time point. CMS stated that the longer term data showed improved efficacy and safety, but still remain sparse (page 561)…CMS continues to be concerned that the data results from the PROTECT AF study are insufficient to show superiority of the WATCHMAN® System over Warfarin therapy…CMS is concerned that the applicant has not demonstrated substantially improved clinical outcomes (page 563)…CMS previously expressed concern that there was a lack of strong evidence demonstrating that the WATCHMAN® System prevents stroke at all. (page 565). While the results of this analysis appear to suggest a large reduction in ischemic stroke rates in patients who did not receive any treatment, CMS continues to have some concerns regarding whether the WATCHMAN® System device prevents strokes. The indication for the treatment of the WATCHMAN® System device is for patients who are eligible for Warfarin therapy as opposed to patients who are ineligible for Warfarin therapy. CMS is concerned that the results of the imputed placebo analysis are not sufficient to determine whether the WATCHMAN® System reduces the risk of stroke in patients who are eligible for Warfarin therapy (page 567).

“Two Midnight Rule” (page 815)
As CMS announced on April 1, 2015, CMS recovery auditors are not permitted to conduct patient status reviews for claims with dates of admission of October 1, 2013 through April 30, 2015. CMS has also established a requirement that recovery auditors must complete complex reviews within 30 days, and failure to do so will result in the loss of the recovery auditor’s contingency fee. In addition, CMS will require recovery auditors to wait 30 days before sending a claim to the MAC for adjustment. This 30-day period will allow the provider to submit a discussion period request before the MAC makes any payment adjustments. Despite these planned alterations to the Recovery Audit Program, CMS notes that hospitals and physicians continue to voice their concern with parts of the 2-midnight rule. Therefore, CMS is considering this feedback carefully, as well as recent MedPAC recommendations, and expect to include a further discussion of the broader set of issues related to short inpatient hospital stays, long outpatient stays with observation services, and the related -0.2 percent IPPS payment adjustment in the CY 2016 hospital outpatient rule.

The rest of this proposed rule pertained to inpatient quality reporting, value-based purchasing programs and acute long-term care facilities. In addition to this summary, worksheets showing the proposed payments, Relative Weights and Length of Stays for procedures of interest are available upon request. Please call 203-271-3366 for personal assistance and additional information.