SUMMARY: We are revising the Medicare hospital inpatient prospective 
payment systems for operating costs and capital-related costs to 
implement changes arising from our continuing experience with the 
systems. In addition, in the addendum to this final rule, we describe 
changes in the amounts and factors necessary to determine rates for 
Medicare hospital inpatient services for operating costs and capital-
related costs. These changes are applicable to discharges occurring on 
or after October 1, 1999. We also set forth rate-of-increase limits as 
well as policy changes for hospitals and hospital units excluded from 
the prospective payment systems. Finally, we are revising certain 
policies governing payment to hospitals for the direct costs of 
graduate medical education.

DATES: The provisions of this final rule are effective October 1, 1999. 
This rule is a major rule as defined in Title 5, United States Code, 
section 804(2). Pursuant to 5 U.S.C. section 801(a)(1)(A), we are 
submitting a report to Congress on this rule on July 30, 1999.

FOR FURTHER INFORMATION CONTACT:
Steve Phillips, (410) 786-4531, Operating Prospective Payment, 
Diagnosis-Related Group (DRG), and Wage Index Issues.
Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded 
Hospitals, and Graduate Medical Education Issues.

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I. Background

A. Summary

    Section 1886(d) of the Social Security Act (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 pay for the capital-related costs of hospital inpatient 
stays under a prospective payment system. Under these prospective 
payment systems, 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).
    Certain specialty hospitals are excluded from the prospective 
payment systems. Under section 1886(d)(1)(B) of the Act, the following 
hospitals and hospital units are excluded from the prospective payment 
systems: psychiatric hospitals or units, rehabilitation hospitals or 
units, children's hospitals, long-term care hospitals, and cancer 
hospitals. For these hospitals and units, Medicare payment for 
operating costs is based on reasonable costs subject to a hospital-
specific annual limit.
    Under section 1886(a)(4) of the Act, costs incurred directly by a 
hospital in connection with approved graduate medical education (GME) 
programs are excluded from the operating costs of inpatient hospital 
services. Hospitals with approved 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 regulations governing the hospital inpatient prospective 
payment systems are located in 42 CFR part 412. The regulations 
governing excluded hospitals and hospital units are located in parts 
412 and 413, and the GME regulations are located in part 413.

B. Summary of the Provisions of the May 7, 1999 Proposed Rule

    On May 7, 1999, we published a proposed rule in the Federal 
Register (64 FR 24716) that set forth proposed changes to the Medicare 
hospital inpatient prospective payment systems for both operating costs 
and capital-related costs that would be effective for discharges 
occurring on or after October 1, 1999. We also proposed changes 
concerning GME costs and excluded hospitals and units, as well as 
critical access hospitals (CAHs). On June 15, 1999, we issued a 
correction notice (64 FR 31995) for the May 7, 1999 proposed rule. That 
notice corrected Table 3C of the Addendum (which lists each hospital's 
case-mix index and adjusted average hourly wage based on data on file 
at HCFA as of February 22, 1999) and made several other technical 
corrections.
    In the proposed rule, we noted that the efforts that we were 
undertaking to make the Medicare computer systems compliant on January 
1, 2000, would not delay our ability to make timely and updated 
payments to hospitals under the FY 2000 prospective payment systems 
final rule. This statement still applies and the changes and updated 
rates set forth in this final rule will be implemented on October 1, 
1999.
    The following is a summary of the contents of the proposed rule:
     In order to avoid compromising our ability to process and 
pay hospital claims during the period leading up to and immediately 
following January 1, 2000, we did not propose to implement any 
revisions to the International Classification of Diseases, Ninth 
Revision, Clinical Modification (ICD-9-CM) coding system. We did 
propose to make some limited changes to certain DRG classifications for 
FY 2000 and described other proposed decisions concerning DRGs. We also recalibrated the DRG relative weights based on 
the proposed DRG changes and updated Medicare claims data.
     We proposed an FY 2000 hospital wage index update, using 
FY 1996 wage data, and revisions to the wage index based on hospital 
redesignations. In addition, we proposed to begin excluding from the 
wage index Part A physician wage costs that are teaching-related, as 
well as resident and Part A certified registered nurse anesthetist 
(CRNA) costs.
     We proposed several policy changes in the regulations in 
42 CFR parts 412 and 413 and proposed to continue existing policy 
concerning classifications of sole community hospitals; the indirect 
medical education adjustment; and Medicare Geographic Classification 
Review Board (MGCRB) decisions. In addition, we updated the qualifying 
criteria for rural referral centers and proposed several changes to the 
regulations governing payments for the direct costs of GME programs.
     We discussed the special exceptions process for certain 
eligible hospitals to receive additional payments for major 
construction or renovation projects that began soon after the start of 
the capital prospective payment system and proposals that we had 
received to change the eligibility criteria for these payments.
     We discussed a number of proposals concerning Medicare 
payments to excluded hospitals and hospital units and CAHs. These 
proposed changes related to limits on and adjustments to the proposed 
target amounts for FY 2000; changes in bed size or status of excluded 
hospitals or hospital units; payment for Medicare services furnished at 
satellite hospital locations; responsibility for care of patients in 
hospitals-within-hospitals; the allowable emergency response time for 
CAHs located in frontier or other specifically defined remote areas; 
and compliance with minimum data set requirements by CAHs with swing 
bed approval.
     In the addendum to the proposed rule, we set forth 
proposed changes to the amounts and factors for determining the FY 2000 
prospective payment rates for operating costs and capital-related 
costs. We also addressed update factors for determining the rate-of-
increase limits for cost reporting periods beginning in FY 2000 for 
hospitals and hospital units excluded from the prospective payment 
system.
     In Appendix A of the proposed rule, we set forth an 
analysis of the impact that the proposed changes would have on affected 
entities.
     In Appendix B of the proposed rule, we set forth the 
technical appendix on the proposed FY 2000 capital cost model.
     In Appendix C of the proposed rule, as required by section 
1886(e)(3)(B) of the Act, we set forth our report to Congress on our 
initial estimate of a recommended update factor for FY 2000 for both 
hospitals included in and hospitals excluded from the prospective 
payment systems.
     In Appendix D of the proposed rule, as required by 
sections 1886(e)(4) and (e)(5) of the Act, we included our 
recommendation of the appropriate percentage change for FY 2000 for--

--Large urban area and other area average standardized amounts (and 
hospital-specific rates applicable to sole community hospitals and 
Medicare-dependent, small rural hospitals) for hospital inpatient 
services paid for under the prospective payment system for operating 
costs; and
--Target rate-of-increase limits to the allowable operating costs of 
hospital inpatient services furnished by hospitals and hospital units 
excluded from the prospective payment system.

     In the proposed rule, we discussed the recommendations 
concerning hospital inpatient payment policies made by the Medicare 
Payment Advisory Commission (MedPAC) and presented our responses to 
those recommendations. Under section 1805(b) of the Act, MedPAC is 
required to submit a report to Congress, not later than March 1 of each 
year, that reviews and makes recommendations on Medicare payment 
policies.

C. Public Comments Received in Response to the Proposed Rule

    We received a total of 82 timely items of correspondence containing 
multiple comments on the proposed rule. The main areas of concern 
addressed by the commenters were removal of teaching-related and CRNA 
costs from the wage index, payments for services furnished at satellite 
hospital locations, and limits on the transfer of patients in 
hospitals-within-hospitals. We also received a number of comments 
relating to the eligibility criteria for hospitals to qualify for 
capital exceptions payments.
    Summaries of the public comments received and our responses to 
those comments are set forth below under the appropriate section.

II. Changes to DRG Reclassifications and Recalibrations of Relative 
Weights

A. Background

    Under the prospective payment system, we pay for inpatient hospital 
services on the basis of a rate per discharge that varies by the DRG to 
which a beneficiary's stay is assigned. The formula used to calculate 
payment for a specific case takes an individual hospital's payment rate 
per case and multiplies it 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.
    Congress recognized that it would be necessary to recalculate the 
DRG relative weights periodically to account for changes in resource 
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires 
that the Secretary adjust the DRG classifications and relative weights 
at least annually. These adjustments are made to reflect changes in 
treatment patterns, technology, and any other factors that may change 
the relative use of hospital resources.
    As discussed in more detail in section II.B.8 of this preamble, we 
are not implementing any revisions to the ICD-9-CM codes. We have 
undertaken, and continue to undertake, major efforts to ensure that all 
of the Medicare computer systems are ready to function on January 1, 
2000. If we were to implement changes to the ICD-9-CM codes on October 
1, 1999, we would endanger the functioning of the Medicare computer 
systems, and, specifically, we might compromise our ability to process 
hospital bills. We can, however, reclassify existing codes into 
different DRGs, if appropriate.
    The changes to the DRG classification system, and the recalibration 
of the DRG weights for discharges occurring on or after October 1, 
1999, are discussed below.

B. DRG Reclassification

1. General
    Cases are classified into DRGs for payment under the prospective 
payment system based on the principal diagnosis, up to eight additional 
diagnoses, and up to six procedures performed during the stay, as well 
as age, sex, and discharge status of the patient. The diagnosis and 
procedure information is reported by the hospital using ICD-9-CM codes. 
The Medicare fiscal intermediary enters the information into its claims 
processing system and subjects it to a series of automated screens 
called the Medicare Code Editor (MCE). These screens are designed to identify 
cases that require further review before classification into a DRG can 
be accomplished.
    After screening through the MCE and any further development of the 
claims, cases are classified by the GROUPER software program into the 
appropriate DRG. The GROUPER program was developed as a means of 
classifying each case into a DRG on the basis of the diagnosis and 
procedure codes and demographic information (that is, sex, age, and 
discharge status). It is used both to classify past cases in order to 
measure relative hospital resource consumption to establish the DRG 
weights and to classify current cases for purposes of determining 
payment. The records for all Medicare hospital inpatient discharges are 
maintained in the Medicare Provider Analysis and Review (MedPAR) file. 
The data in this file are used to evaluate possible DRG classification 
changes and to recalibrate the DRG weights.
    Currently, cases are assigned to one of 499 DRGs in 25 major 
diagnostic categories (MDCs). Most MDCs are based on a particular organ 
system of the body (for example, MDC 6, Diseases and Disorders of the 
Digestive System); however, some MDCs are not constructed on this basis 
since they involve multiple organ systems (for example, MDC 22, Burns).
    In general, cases are assigned to an MDC based on the principal 
diagnosis before assignment to a DRG. However, there are five DRGs to 
which cases are directly assigned on the basis of procedure codes. 
These are the DRGs for liver, bone marrow, and lung transplants (DRGs 
480, 481, and 495, respectively) and the two DRGs for tracheostomies 
(DRGs 482 and 483). Cases are assigned to these DRGs before 
classification to an MDC.
    Within most MDCs, cases are then divided into surgical DRGs (based 
on a surgical hierarchy that orders individual procedures or groups of 
procedures by resource intensity) and medical DRGs. Medical DRGs 
generally are differentiated on the basis of diagnosis and age. Some 
surgical and medical DRGs are further differentiated based on the 
presence or absence of complications or comorbidities (CC).
    Generally, GROUPER does not consider other procedures; that is, 
nonsurgical procedures or minor surgical procedures generally not 
performed in an operating room are not listed as operating room (OR) 
procedures in the GROUPER decision tables. However, there are a few 
non-OR procedures that do affect DRG assignment for certain principal 
diagnoses, such as extracorporeal shock wave lithotripsy for patients 
with a principal diagnosis of urinary stones.
    We proposed several changes to the DRG classification system for FY 
2000 and other decisions concerning DRGs. The proposed changes, the 
comments we received concerning them, and the final DRG changes are set 
forth below. Unless otherwise noted, our DRG analysis is based on the 
full (100 percent) FY 1998 MedPAR file, which contains data from bills 
received through March 31, 1999.
2. MDC 15 (Newborns and Other Neonates with Conditions Originating in 
the Perinatal Period)
    In the May 7, 1999 proposed rule, we noted that the following codes 
in the newborn observation series are included in the allowable 
secondary diagnoses under DRG 391 (Normal Newborn):

V29.0, Observation for suspected infectious disease
V29.1, Observation for suspected neurological condition
V29.8, Observation for other specified suspected condition
V29.9, Observation for unspecified suspected condition

There are two related codes, however, that currently are not included 
as allowable secondary diagnoses under DRG 391: V29.2 (Observation for 
suspected respiratory condition) and V29.3 (Observation for suspected 
genetic or metabolic condition). (In the proposed rule, we incorrectly 
stated that V29.3 was titled ``Observation for other genetic 
problem.'') Diagnosis codes V29.2 and V29.3 (as well as the other V29.x 
codes noted above) are used to indicate that the newborn was suspected 
of having an abnormal condition resulting from exposure from the mother 
or the birth process, but is without signs or symptoms and, after 
examination and observation, no abnormal condition is found to exist. 
Currently, when either V29.2 or V29.3 is the only secondary diagnosis 
for an otherwise healthy newborn, the case is assigned to DRG 390 
(Neonate with Other Significant Problems). Based on a belief that the 
presence of diagnosis code V29.2 or V29.3 should not exclude a newborn 
from being classified as normal, we proposed to include diagnosis codes 
V29.2 and V29.3 in the list of allowable secondary diagnoses under DRG 
391 (Normal Newborn).
    We received one comment on this proposal.
    Comment: The commenter questioned whether any of the codes in the 
V29 series should be assigned to DRG 391. The commenter believes that 
the infants assigned to diagnosis code in the V29 series do not belong 
in the same clinical group as ``normal newborn.'' The commenter 
recommended that, before moving codes V29.2 and V29.3 to DRG 391, we 
should examine data such as the average length of stay for DRGs 390 and 
391 and those cases coded with V29.x. Citing one hospital's experience, 
the commenter noted that 2.7 percent of the cases in DRG 391 were 
assigned a secondary diagnosis of V29.0 (Observation for suspected 
infectious disease). In addition, cases with secondary diagnosis codes 
V29.1, V29.8, and V29.9 represented less than 1 percent each of all 
cases in DRG 391. The commenter also reported that, for DRG 390, less 
than 1 percent of cases were assigned a secondary diagnosis code of 
V29.2 or V29.3. The commenter believes that the length of stay and 
resource consumption for these cases should be compared to other cases 
assigned to DRG 390 and DRG 391 to determine whether a separate DRG 
should be created to adequately categorize these infants.
    Response: The experience of the hospital reported by the commenter 
indicates that newborn cases with a secondary diagnosis of V29.2 or 
V29.3 represent a small percentage of newborn cases. Medicare data do 
not contain enough data on newborns to verify this.
    In the FY 1998 MedPAR file, there are only nine cases assigned to 
DRG 390 and none to DRG 391. In fact, in FY 1998, there were only 18 
cases assigned to all of MDC 15. Because of the lack of data on 
newborns in the Medicare claims file, the relative weights and lengths 
of stay for the DRGs in MDC 15 are based on non-Medicare data collected 
from 19 States. (See the September 1, 1995 final rule (60 FR 45781) for 
a detailed discussion of this policy.) Therefore, we rely closely on 
experts outside of HCFA when we make any changes in MDC 15. We had 
received information before publication of the proposed rule suggesting 
that V29.2 and V29.3 should be included with the other V29.x codes in 
DRG 391. After verifying with our medical consultants that this 
information was clinically accurate, we proposed to make this DRG 
classification change. We do note that the average lengths of stay for 
DRG 390 and 391 do not differ dramatically (3.4 and 3.1 days, 
respectively). However, the relative weight for DRG 390 is 
significantly higher than that for DRG 391 (1.5908 and 0.1516, 
respectively). Thus, we believe the amount of resource use devoted to 
newborns in DRG 390 is not connected to the amount of time spent in the hospital.
    The commenter did not provide any length of stay or resource use 
data nor did the commenter provide any reason that codes V29.2 or V29.3 
should be treated differently than the other codes in category V29.x. 
We believe that DRG 390, as its title indicates, should be used to 
classify newborns with significant problems. Newborns who exhibit no 
signs or symptoms and are merely evaluated or observed for a suspected 
condition that is ruled out should not be classified with newborns who 
have significant problems that require treatment.
    We note that DRG 391 includes newborns who have minor problems or 
conditions that require treatment. For example, some newborns with 
jaundice, newborns with scalp injuries or mild birth asphyxia, and 
newborns with minor skin infections are all classified to DRG 391. 
Thus, that DRG does contain newborn cases for which some medical 
treatment must be provided. We believe that including newborns observed 
for suspected respiratory, genetic, or metabolic conditions in DRG 391 
is clinically appropriate. Therefore, as proposed, we will include 
V29.2 and V29.3 as allowable secondary diagnoses under DRG 391, as are 
the rest of the codes in that category.
3. MDC 19 (Mental Diseases and Disorders)
    We proposed to revise the title of DRG 425, ``Acute Adjustment 
Reaction and Disturbances of Psychosocial Dysfunction'' under MDC 19 to 
read ``Acute Adjustment Reaction and Psychosocial Dysfunction.'' 
Correspondents had stated that the terms ``disturbances'' and 
``dysfunction'' were redundant since the terms have similar meanings.
    We received one comment in support of this revision. Therefore, we 
are adopting this proposed revision as final.
4. MDC 22 (Burns)
    In the July 31, 1998 final rule (63 FR 40957), we implemented an 
extensive redesign of the DRGs for burns to more appropriately capture 
the variation in resource use associated with different classes of burn 
patients. After these DRGs went into effect on October 1, 1998, we were 
contacted by several hospitals about our inclusion of the fifth digit 
``0'' on codes 948.10 through 948.90 to capture cases of full-thickness 
burns. These hospitals stated that codes in category 948 with a fifth 
digit of ``0'' should not be assigned to DRGs 506 through 509 as full-
thickness burns since not all of these cases will have a full-thickness 
(third degree) burn. The fifth digit ``0'' can capture cases in which 
there actually is no third degree burn. The hospitals requested that we 
consider removing from the full-thickness burn DRGs 506 through 509 all 
codes in the 948 category with a fifth digit of ``0'' as follows:

948.00  Body burn involving less than 10 percent of body surface, third 
degree less than 10 percent or unspecified
948.10 Body burn involving 10 to 19 percent of body surface, third 
degree less than 10 percent or unspecified
948.20 Body burn involving 20 to 29 percent of body surface, third 
degree less than 10 percent or unspecified
948.30 Body burn involving 30 to 39 percent of body surface, third 
degree less than 10 percent or unspecified
948.40 Body burn involving 40 to 49 percent of body surface, third 
degree less than 10 percent or unspecified
948.50 Body burn involving 50 to 59 percent of body surface, third 
degree less than 10 percent or unspecified
948.60 Body burn involving 60 to 69 percent of body surface, third 
degree less than 10 percent or unspecified
948.70 Body burn involving 70 to 79 percent of body surface, third 
degree less than 10 percent or unspecified
948.80 Body burn involving 80 to 89 percent of body surface, third 
degree less than 10 percent or unspecified
948.90 Body burn involving 90 percent or more of body surface, third 
degree less than 10 percent or unspecified.
    We agreed with the hospitals and proposed that the codes listed 
above be removed from DRGs 506 through 509 and added to DRG 510 
(Nonextensive Burns with CC or Significant Trauma) and DRG 511 
(Nonextensive Burns without CC or Significant Trauma). Hospitals have 
been instructed in Coding Clinic for ICD-9-CM, Fourth Quarter, 1994 
(pages 22 through 28) to code the site of the burn first (codes 940 
through 947), when known. Codes from category 948 may be used as a 
principal diagnosis only when the site of the burn is not specified. 
Category 948 is used as an additional code to provide information on 
the percentage of total body that is burned or to show the percentage 
of burn that was third degree. When hospitals report codes properly, 
full-thickness burns would be assigned to a code for burn of the 
specific site (940 through 947). This site code also shows the degree 
of the burn. Furthermore, for those rare cases in which the site is not 
provided, but it is known that 10 percent or more of the body has a 
third degree burn, hospitals may report this information through the 
use of category 948 with a fifth digit of ``1'' through ``9.'' All of 
these cases would continue to be classified as full-thickness burns in 
DRGs 506 through 509. Therefore, the proposed removal of codes 948.1 
through 948.9 with a fifth digit of ``0'' would not prevent cases from 
being assigned to one of the full-thickness DRGs when there is a third 
degree burn and the case is correctly coded.
    Comment: One commenter stated that while it is true that codes in 
category 948 with a fifth digit of ``0'' may be assigned when there is 
no third degree burn, fifth digit ``0'' is also used to report cases 
that have a body surface of 1 to 9 percent involved in third degree 
burns. The commenter suggested that consideration be given to these 
cases as the presence of a third degree burn represents additional risk 
to the patient.
    Response: We agree with the commenter that the presence of third 
degree burns represents additional risk to the patient and may result 
in a higher resource use. More accurately capturing this fact was one 
of the primary purposes in revising the burn DRGs in FY 1999. However, 
as the commenter noted, in category 948, the fifth digit of ``0'' 
includes cases with no third degree burns as well as third degree burns 
involving 1 to 9 percent of the body surface. It is precisely because 
many of the cases coded in 948 with a ``0'' fifth digit have no third 
degree burns that we believe it is not appropriate to include these 
codes in DRGs 506 through 509. As stated above, hospitals have been 
instructed to code the site of the burn first (codes 940 through 947), 
when known. These codes capture information on the site of the burn as 
well as whether the burn is a third degree burn. Therefore, by using 
the more precise codes in the 940 through 947 series, hospitals will be 
appropriately assigning cases with minor third degree burns to DRGs 506 
through 509.
    We are adopting as final our proposal to remove codes in the 948 
category with a fifth digit of ``0'' from the list of full-thickness 
burns.
5. 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 DRG within the MDC to which the 
principal diagnosis is assigned. It is, therefore, necessary to have a 
decision rule by which these cases are assigned to a single DRG. The 
surgical hierarchy, an ordering of surgical classes from most to least 
resource intensive, performs that function. Its application ensures 
that cases involving multiple surgical procedures are assigned to the 
DRG associated with the most resource-intensive surgical class.
    Because the relative resource intensity of surgical classes can 
shift as a function of DRG reclassification and recalibration, we 
reviewed the surgical hierarchy of each MDC, as we have for previous 
reclassifications, to determine if the ordering of classes coincided 
with the intensity of resource utilization, as measured by the same 
billing data used to compute the DRG relative weights.
    A surgical class can be composed of one or more DRGs. For example, 
in MDC 5, the surgical class ``heart transplant'' consists of a single 
DRG (DRG 103), and the class ``major cardiovascular procedures'' 
consists of two DRGs (DRGs 110 and 111). Consequently, in many cases, 
the surgical hierarchy has an impact on more than one DRG. The 
methodology for determining the most resource-intensive surgical class 
involves weighting each DRG for frequency to determine the average 
resources for each surgical class. For example, assume surgical class A 
includes DRGs 1 and 2 and surgical class B includes DRGs 3, 4, and 5. 
Assume also that the average charge of DRG 1 is higher than that of DRG 
3, but the average charges of DRGs 4 and 5 are higher than the average 
charge of DRG 2. To determine whether surgical class A should be higher 
or lower than surgical class B in the surgical hierarchy, we would 
weight the average charge of each DRG by frequency (that is, by the 
number of cases in the 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 OR procedures'' as discussed 
below.
    This methodology may occasionally result in a case involving 
multiple procedures being assigned to the lower-weighted 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 searches for the procedure in the 
most resource-intensive surgical class, this result is unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average relative 
weight is ordered above a surgical class with a higher average relative 
weight. For example, the ``other OR procedures'' surgical class is 
uniformly ordered last in the surgical hierarchy of each MDC in which 
it occurs, regardless of the fact that the relative weight for the DRG 
or DRGs in that surgical class may be higher than that for other 
surgical classes in the MDC. The ``other OR procedures'' class is a 
group of procedures that are least likely to be related to the 
diagnoses in the MDC but are occasionally performed on patients with 
these diagnoses. Therefore, these procedures should be considered only 
if no other procedure more closely related to the diagnoses in the MDC 
has been performed.
    A second example occurs when the difference between the average 
weights for two surgical classes is very small. We have found that 
small differences generally do not warrant reordering of the hierarchy 
since, by virtue of the hierarchy change, the relative weights are 
likely to shift such that the higher-ordered surgical class has a lower 
average weight than the class ordered below it.
    Based on the preliminary recalibration of the DRGs, we proposed to 
modify the surgical hierarchy as set forth below. However, in 
developing the proposed rule, we were unable to test the effects of 
proposed revisions to the surgical hierarchy and to reflect these 
changes in the proposed relative weights due to the unavailability of 
revised GROUPER software at the time the proposed rule was prepared. 
Rather, we simulated most major classification changes to approximate 
the placement of cases under the proposed reclassification and then 
determined the average charge for each DRG. These average charges then 
serve as our best estimate of relative resource use for each surgical 
class. We tested the proposed surgical hierarchy changes after the 
revised GROUPER was received. The final changes in the DRG relative 
weights are reflected in this final rule.
    We proposed to revise the surgical hierarchy for the Pre-MDC DRGs 
and MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth and Throat) 
as follows:
     In the Pre-MDC DRGs, we proposed to reorder Lung 
Transplant (DRG 495) above Bone Marrow Transplant (DRG 481).
     In MDC 3, we proposed to reorder Tonsil and Adenoid 
Procedure Except Tonsillectomy and/or Adenoidectomy Only (DRGs 57 and 
58) above Cleft Lip and Palate Repair (DRG 52).
    We received two comments in support of the two surgical hierarchy 
proposals. In addition, based on a test of the proposed revisions using 
the most recent MedPAR file and the revised GROUPER software, we have 
found that the revisions are still supported by the data and no 
additional changes are indicated. Therefore, we are incorporating the 
proposed revisions and reorders in this final rule.
6. Refinement of Complications and Comorbidities (CC) List
    There is a standard list of diagnoses that are considered CCs. We 
developed this list using physician panels to include those diagnoses 
that, when present as a secondary condition, would be considered a 
substantial complication or comorbidity. In previous years, we have 
made changes to the standard list of CCs, either by adding new CCs or 
by deleting CCs already on the list. In the May 7, 1999 proposed rule, 
we did not propose to delete any of the diagnosis codes on the CC list.
    In the September 1, 1987 final notice concerning changes to the DRG 
classification system (52 FR 33143), we modified the GROUPER logic so 
that certain diagnoses included on the standard list of CCs would not 
be considered a valid CC in combination with a particular principal 
diagnosis. Thus, we created the CC Exclusions List. We made these 
changes to preclude coding of CCs for closely related conditions, to 
preclude duplicative coding or inconsistent coding from being treated 
as CCs, and to ensure that cases are appropriately classified between 
the complicated and uncomplicated DRGs in a pair.
    In the May 19, 1987 proposed notice concerning changes to the DRG 
classification system (52 FR 18877), 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 (as subsequently corrected 
in the September 1, 1987 final notice (52 FR 33154)).
     Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for a condition should not be considered CCs for 
one another.
     Conditions that may not co-exist, such as partial/total, 
unilateral/bilateral, obstructed/unobstructed, and benign/malignant, 
should not be considered CCs for one another.  The same condition in anatomically proximal sites should 
not be considered CCs for one another.
     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. The FY 1988 revisions were intended to be 
only a first step toward refinement of the CC list in that the criteria 
used for eliminating certain diagnoses from consideration as CCs were 
intended to identify only the most obvious diagnoses that should not be 
considered complications or comorbidities of another diagnosis. For 
that reason, and in light of comments and questions on the CC list, 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. (See the September 30, 1988 
final rule for the revision made for the discharges occurring in FY 
1989 (53 FR 38485); the September 1, 1989 final rule for the FY 1990 
revision (54 FR 36552); the September 4, 1990 final rule for the FY 
1991 revision (55 FR 36126); the August 30, 1991 final rule for the FY 
1992 revision (56 FR 43209); the September 1, 1992 final rule for the 
FY 1993 revision (57 FR 39753); the September 1, 1993 final rule for 
the FY 1994 revisions (58 FR 46278); the September 1, 1994 final rule 
for the FY 1995 revisions (59 FR 45334); the September 1, 1995 final 
rule for the FY 1996 revisions (60 FR 45782); the August 30, 1996 final 
rule for the FY 1997 revisions (61 FR 46171); the August 29, 1997 final 
rule for the FY 1998 revisions (62 FR 45966); and the July 31, 1998 
final rule for the FY 1999 revisions (63 FR 40954).) In the May 7, 1999 
proposed rule, we did not propose to add or delete any codes from the 
CC list.
    In addition, because we are not making changes to the ICD-9-CM 
codes for FY 2000, we are not modifying the current list for new or 
deleted codes. Therefore, there are no revisions to the CC Exclusions 
List for FY 2000.
7. Review of Procedure Codes in DRGs 468, 476, and 477
    Each year, we review cases assigned to DRG 468 (Extensive OR 
Procedure Unrelated to Principal Diagnosis), DRG 476 (Prostatic OR 
Procedure Unrelated to Principal Diagnosis), and DRG 477 (Nonextensive 
OR Procedure Unrelated to Principal Diagnosis) in order to determine 
whether it would be appropriate to change the procedures assigned among 
these DRGs.
    DRGs 468, 476, and 477 are reserved for those cases in which none 
of the OR procedures performed is related to the principal diagnosis. 
These DRGs are intended to capture atypical cases, that is, those cases 
that do not occur with sufficient frequency to represent a distinct, 
recognizable clinical group. DRG 476 is assigned to those discharges in 
which one or more of the following prostatic procedures are performed 
and are unrelated to the principal diagnosis:

60.0  Incision of prostate
60.12  Open biopsy of prostate
60.15  Biopsy of periprostatic tissue
60.18  Other diagnostic procedures on prostate and periprostatic tissue
60.21  Transurethral prostatectomy
60.29  Other transurethral prostatectomy
60.61  Local excision of lesion of prostate
60.69  Prostatectomy NEC
60.81  Incision of periprostatic tissue
60.82  Excision of periprostatic tissue
60.93  Repair of prostate
60.94  Control of (postoperative) hemorrhage of prostate
60.95  Transurethral balloon dilation of the prostatic urethra
60.99  Other operations on prostate

    All remaining OR procedures are assigned to DRGs 468 and 477, with 
DRG 477 assigned to those discharges in which the only procedures 
performed are nonextensive procedures that are unrelated to the 
principal diagnosis. The original list of the ICD-9-CM procedure codes 
for the procedures we consider nonextensive procedures, if performed 
with an unrelated principal diagnosis, was published in Table 6C in 
section IV of the Addendum to the September 30, 1988 final rule (53 FR 
38591). As part of the final rules published on September 4, 1990, 
August 30, 1991, September 1, 1992, September 1, 1993, September 1, 
1994, September 1, 1995, August 30, 1996, and August 29, 1997, we moved 
several other procedures from DRG 468 to 477, and some procedures from 
DRG 477 to 468. (See 55 FR 36135, 56 FR 43212, 57 FR 23625, 58 FR 
46279, 59 FR 45336, 60 FR 45783, 61 FR 46173, and 62 FR 45981, 
respectively.) No procedures were moved in FY 1999, as noted in the 
July 31, 1998 final rule (63 FR 40962).
 a. Adding Procedure Codes to MDCs
    We annually conduct a review of procedures producing DRG 468 or 477 
assignments on the basis of volume of cases in these DRGs with each 
procedure. Our medical consultants then identify those procedures 
occurring in conjunction with certain principal diagnoses with 
sufficient frequency to justify adding them to one of the surgical DRGs 
for the MDC in which the diagnosis falls. Based on this year's review, 
we identified several procedures that we proposed to move to surgical 
DRGs for additional MDCs so that they are not assigned to DRG 468. We 
did not identify any necessary changes in procedures under DRG 477 and, 
therefore, did not propose to move any procedures from DRG 477 to one 
of the surgical DRGs.
    First, we proposed to move three codes from DRG 468 to MDC 1 
(Diseases and Disorders of the Nervous System), all of which would be 
assigned to DRGs 7 and 8 (Peripheral and Cranial Nerve and Other 
Nervous System Procedure).\1\ Procedure code 38.7 (Interruption of the 
vena cava) is sometimes performed in conjunction with treatment for the 
principal diagnosis 434.11 (Cerebral embolism with infarction), which 
is assigned to MDC 1. Our medical advisors believe that procedure code 
38.7 is appropriately performed for some neurological conditions such 
as a cerebral embolism with infarction. Because the current DRG 
configuration does not allow this assignment, we proposed to add 
procedure code 38.7 to DRGs 7 and 8.
---------------------------------------------------------------------------

    \1\ A single title combined with two DRG numbers is used to 
signify pairs. Generally, the first DRG is for cases with CC and the 
second DRG is for cases without CC. If a third number is included, 
it represents cases with patients who are age 0-17. Occasionally, a 
pair of DRGs is split between age >17 and age 0-17.
---------------------------------------------------------------------------

    Second, we proposed that procedure codes 83.92 (Insertion or 
replacement of skeletal muscle stimulator) and 83.93 (Removal of 
skeletal muscle stimulator) both be categorized with other procedures 
on the nervous system. These procedures can be performed on patients 
with a principal diagnosis in MDC 1, such as 344.00 (Quadriplegia 
unspecified) or 344.31 (Monoplegia of lower limb, affecting dominant 
side). Therefore, these two codes would also be assigned to DRGs 7 and 
8.
    Third, procedure code 39.50 (Angioplasty or atherectomy of 
noncoronary vessel) is not currently assigned to MDC 4 (Diseases and 
Disorders of the Respiratory System). This procedure is performed for 
patients who develop pulmonary embolism. The principal diagnosis for 
pulmonary embolism is in MDC 4, and, to increase clinical coherence, we 
proposed to add procedure code 39.50 to that MDC in DRGs 76 and 77 
(Other Respiratory System OR Procedures).
    Fourth, insertion of totally implantable infusion pump (procedure 
code 86.06) is not assigned to MDC 5 (Diseases and Disorders of the 
Circulatory System) in the current DRG configuration. Infusion pumps 
should be assigned to all MDCs in which subcutaneous insertion of the pump is 
appropriate. Procedure code 86.06 may be performed on patients with a 
principal diagnosis in MDC 5 such as 451.83 (Phlebitis and 
thrombophlebitis of the deep veins of other extremities). Therefore, we 
proposed to add procedure code 86.06 to DRG 120 (Other Circulatory 
System OR Procedures) in MDC 5.
    We received two comments on these MDC and DRG assignments, both of 
which concurred with our proposed changes. Therefore, we are adopting 
them as final.
b. Reassignment of Procedures Among DRGs 468, 476, and 477
    We also reviewed the list of procedures that produce assignments to 
DRGs 468, 476, and 477 to ascertain if any of those procedures should 
be moved from one of these DRGs to another based on average charges and 
length of stay. Generally, we move only those procedures for which we 
have an adequate number of discharges to analyze the data. Based on our 
review this year, we did not propose to move any procedures from DRG 
468 to DRGs 476 or 477, from DRG 476 to DRGs 468 or 477, or from DRG 
477 to DRGS 468 or 476.
8. Changes to the ICD-9-CM Coding System
    As described in section II.B.1 of this preamble, the ICD-9-CM is a 
coding system that is used for the reporting of diagnoses and 
procedures performed on a patient. In September 1985, the ICD-9-CM 
Coordination and Maintenance Committee was formed. This is a Federal 
interdepartmental committee, co-chaired by the National Center for 
Health Statistics (NCHS) and HCFA, that is charged with the mission of 
maintaining and updating the ICD-9-CM system. That mission includes 
approving coding changes, and developing errata, addenda, and other 
modifications to the ICD-9-CM 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 NCHS has lead responsibility for the ICD-9-CM diagnosis codes 
included in the Tabular List and Alphabetic Index for Diseases, while 
HCFA has lead responsibility for the ICD-9-CM procedure codes included 
in the Tabular List and Alphabetic Index for Procedures.
    The Committee encourages participation in the above 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) 
(formerly American Medical Record Association (AMRA)), the American 
Hospital Association (AHA), and various physician specialty groups as 
well as physicians, medical record administrators, health information 
management professionals, and other members of the public, to 
contribute ideas on coding matters. After considering the opinions 
expressed at the public meetings and in writing, the Committee 
formulates recommendations, which then must be approved by the 
agencies.
    The Committee presented proposals for coding changes for FY 2000 at 
public meetings held on June 4 and November 2, 1998. Even though the 
Committee conducted public meetings and considered approval of coding 
changes for FY 2000 implementation, we are not implementing any changes 
to ICD-9-CM codes for FE 2000. We have undertaken, and continue to 
undertake, major efforts to ensure that all of the Medicare computer 
systems are ready to function on January 1, 2000. If we were to make 
system changes to capture additions, deletions, and modifications to 
ICD-9-CM codes for FY 2000, we would endanger the functioning of the 
Medicare computer systems, and, specifically, we might compromise our 
ability to process hospital bills. Therefore, the code proposals 
presented at the public meetings held on June 4 and November 2, 1998, 
that (if approved) ordinarily would have been included as new codes for 
October 1, 1999, are not included in this final rule. These code 
changes to ICD-9-CM will be considered for inclusion in the annual 
update for FY 2001. The initial meeting for consideration of coding 
changes for implementation in FY 2001 was held on May 13, 1999.
    Copies of the minutes of the 1998 meetings and the May 13, 1999 
meeting can be obtained from the HCFA Home Page at http://www.hcfa.gov/
medicare/icd9cm.htm or from http://www.hcfa.gov/events, click on 
``meetings and workshops'' link, and then click on ``reports of the 
ICD-9-CM coordination and maintenance committee'' link. Paper copies of 
these minutes are no longer available and the mailing list has been 
discontinued. We encourage commenters to address suggestions on coding 
issues involving diagnosis codes to: Donna Pickett, Co-Chairperson; 
ICD-9-CM Coordination and Maintenance Committee; NCHS; Room 1100; 6525 
Belcrest Road; Hyattsville, Maryland 20782. Comments may be sent by E-
mail to dfp4@cdc.gov.
    Questions and comments concerning the procedure codes should be 
addressed to: Patricia E. Brooks, Co-Chairperson; ICD-9-CM Coordination 
and Maintenance Committee; HCFA, Center for Health Plans and Providers, 
Plan and Provider Purchasing Policy Group, Division of Acute Care; C4-
07-07; 7500 Security Boulevard; Baltimore, Maryland 21244-1850. 
Comments may be sent by E-mail to pbrooks@hcfa.gov.
    We received one comment in support of our decision not to update 
ICD-9-CM codes given the magnitude of system changes needed during the 
period leading up to the year 2000.
9. Other Issues
a. Implantation of Muscle Stimulator
    In the July 31, 1998 final rule, we responded to a comment on the 
DRG assignment for implantation of a muscle stimulator (63 FR 40964). 
In that document, we stated that we would readdress this issue after 
reviewing the FY 1998 MedPAR file.
    There is concern in the manufacturing industry that the current DRG 
assignment for the implantation of a muscle stimulator and the 
associated tendon transfer for quadriplegics is inappropriate. When the 
procedures are performed during two separate admissions, the tendon 
transfer (procedure code 82.56 (Other hand tendon transfer or 
transplantation)) is assigned to DRGs 7 and 8, and the insertion of the 
muscle stimulator (procedure code 83.92 (Insertion or replacement of 
skeletal muscle stimulator)) is assigned to DRG 468. However, when both 
procedures are performed in the same admission, the case is assigned to 
DRGs 7 and 8.
    As discussed in section II.B.7.a of this preamble, in the May 7, 
1999 proposed rule, we proposed to assign code 83.92 to DRGs 7 and 8 in 
MDC 1. Therefore, if a case involves either procedure code 82.56 or 
83.92, or both procedure codes, the case would be assigned to DRGs 7 
and 8.
    A presentation on one type of muscle stimulator was made by a 
device manufacturer before the ICD-9-CM Coordination and Maintenance 
Committee on November 2, 1998. The manufacturer strongly suggested that 
a new code assignment be made for the procedure for insertion of this 
stimulator and that it be placed in category 04.9 (Other operations on 
cranial and peripheral nerves). However, based on comments received by 
the Committee, there was an overwhelming response from the coding 
community that a new code should not be created. The commenters believe 
that these codes (82.56 and 83.92) adequately described the procedures 
since the patient receives a tendon transfer in addition to the 
skeletal muscle stimulator insertion. This is done so that the 
quadriplegic patient can achieve some hand grasping ability where there 
was none before. Some quadriplegic patients receive the tendon transfer 
on one admission and the stimulator insertion on a subsequent 
admission. Others have both procedures performed on the same admission. 
Since the tendon transfer and stimulator insertion are being performed 
on quadriplegic patients, a condition found in MDC 1, we proposed to 
add procedure codes 82.56 and 83.92 to DRGs 7 and 8. We did not receive 
any comments on this proposal. Therefore, we are adopting it as final.
b. Pancreas Transplant
    Through a Medicare Coverage Issues Manual revision (Transmittal No. 
115, April 1999), HCFA announced that, effective July 1, 1999, Medicare 
covers whole organ pancreas transplantation (procedure codes 52.80 or 
52.83) if it is performed simultaneous with or after a kidney 
transplant.
    Pancreas transplantation is generally limited to those patients 
with severe secondary complications of diabetes, including kidney 
failure. However, pancreas transplantation is sometimes performed on 
patients with labile diabetes and hypoglycemic unawareness.
    Pancreas transplantation for diabetic patients who have not 
experienced end-stage renal failure secondary to diabetes continue to 
be excluded from coverage. Medicare also excludes coverage of 
transplantation of partial pancreatic tissue or islet cells. Claims 
processing instructions to intermediaries were contained in Program 
Memorandum Transmittal No. A-99-16 (April 1999).
    We received one comment regarding the coverage and claims 
processing instructions for pancreas transplants.
    Comment: The commenter requested clarification on the date of 
coverage for services related to pancreas transplantation services 
furnished on or after July 1, 1999. Specifically, the commenter asked 
whether coverage is effective for admissions, discharges, or actual 
transplant surgery on or after that date. In addition, the commenter 
believes that if the resource use for a pancreas-kidney transplant is 
significantly greater than for a kidney transplant alone, then a new 
DRG should be created for the dual transplant. Finally, the commenter 
was unsure how hospitals should report the organ acquisition costs 
attributable to pancreas. Specifically, the commenter wanted to know if 
the costs should be included, on the hospital cost report with the 
kidney costs or whether a separate organ acquisition cost center will 
be established for pancreas acquisition costs.
    Response: As stated in Transmittal No. 115, coverage is effective 
for dates of service on or after July 1, 1999. Therefore, any pancreas 
transplant performed on or after July 1, 1999 is covered by Medicare if 
all other qualifying criteria are met.
    Under the current DRG classification, if a kidney transplant and a 
pancreas transplant are performed simultaneously on a patient with 
chronic renal failure secondary to diabetes with renal manifestations 
(diagnosis codes 250.40 through 250.43), the case is assigned to DRG 
302 (Kidney Transplant) in MDC 11 (Disease and Disorders of the Kidney 
and Urinary Tract. If a pancreas transplant is performed following a 
kidney transplant (that is, in a different hospital admission) on a 
patient with chronic renal failure secondary to diabetes with renal 
manifestations, the case is assigned to DRG 468 (Major OR Procedure 
Unrelated to Principal Diagnosis) because pancreas transplant is not 
assigned to MDC 11, the MDC to which a principal diagnosis of chronic 
renal failure secondary to diabetes is assigned.
    If a kidney and pancreas transplant are performed simultaneously or 
if a pancreas transplant is performed following a kidney transplant, on 
a patient with chronic renal failure secondary to diabetes with 
ketoacidosis (diagnosis codes 250.10 through 250.13), diabetes with 
hyperosmolarity (diagnosis codes 250.20 through 250.23), diabetes with 
other coma (diagnosis codes 250.30 through 250.33), diabetes with other 
specified manifestations (diagnosis codes 250.80 through 250.83), or 
diabetes with unspecified complication (diagnosis codes 250.90 through 
250.93), the case would be assigned to DRG 292 or 293 (Other Endocrine, 
Nutritional and Metabolic OR Procedures) in MDC 10 (Endocrine, 
Nutritional, and Metabolic Diseases and Disorders). As the commenter 
notes, it is possible that the resource use for a pancreas-kidney 
transplant or a pancreas-only transplant might be significantly 
different from a kidney-only transplant. We intend to review the 
Medicare data in our FY 1999 MedPAR file in order to analyze whether we 
should either reassign these transplants to a different DRG or create a 
new DRG. We will announce any proposals on that issue in the FY 2001 
proposed rule, which will be published in the Spring of 2000.
    A separate organ acquisition cost center has been established for 
pancreas transplantation. The Medicare cost report will include a 
separate line to account for pancreas transplantation costs. In 
addition, in this final rule, we are making a conforming change to ' 
412.2(e)(4) to include pancreas in the list of organ acquisition costs 
that are paid on a reasonable cost basis.
c. Immunotherapy
    Effective October 1, 1994, procedure code 99.28 (Injection or 
infusion of biological response modifier [BRM] as an antineoplastic 
agent) was created. This procedure is also known as BRM therapy or 
immunotherapy. At that time, we designated the code as a Anon-OR@ code 
that does not affect DRG assignment.
    Comment: One commenter, a manufacturer of a biologic response 
modifier, requested that we create a new DRG for BRM therapy or assign 
cases in which BRM therapy is performed to an existing DRG with a high 
relative weight. The commenter suggested that DRG 403 (Lymphoma and 
Non-Acute Leukemia with CC) would be an appropriate DRG. The 
manufacturer=s particular drug is used in the treatment of metastatic 
renal cell carcinoma and metastatic melanoma.
    Response: Using the 100 percent FY 1998 MedPAR file that contains 
bills through December 31, 1998, we performed an analysis of the cases 
for which procedure code 99.28 was reported. Based on the commenter's 
request, for purposes of this analysis we examined cases only for 
hospitals that use the particular drug manufactured by the commenter. 
We identified 121 cases in 19 DRGs in 9 MDCs. No more than 31 cases 
were assigned to any one particular DRG. Of the 121 cases identified, 
31 cases were assigned to DRG 318 (Kidney and Urinary Tract Neoplasms 
with CC) and 30 of the cases were assigned to DRG 82 (Respiratory 
Neoplasms). There was a wide range of charges (between approximately 
$1,300 and $125,000 per case) associated with this therapy. The average 
length of stay was approximately 5 days. Due to the limited number of 
cases that were distributed throughout 19 DRGs and the variation of charges, we 
concluded that it would be inappropriate to classify these cases into a 
single DRG. Because of the numerous principal diagnoses reported with 
BRM therapy, a single DRG for procedure code 99.28 would need to be 
placed in the pre-MDC DRG category. Similarly, it would be impossible 
to classify these cases into DRG 403 because only a few cases were 
coded with a principal diagnosis assigned to MDC 17 (Myeloproliferative 
Diseases and Disorders, and Poorly Differentiated Neoplasms), the MDC 
that includes DRG 403. Finally, the variation in charges reflected in 
the 121 cases do not persuade us that there is an analytic basis for 
combining these cases into one DRG. Using the FY 1999 MedPAR, we intend 
to do a full analysis of these cases, which we will discuss in the FY 
2001 proposed rule.
    As a final note, any DRG classification change for procedure code 
99.28 must be appropriate for all cases that receive BRM therapy, not 
just those that use the commenter's drug. Even if we might consider 
such an assignment appropriate, we have no way to distinguish between 
different drug therapies assigned to the same procedure code. The FY 
1998 MedPAR file we analyzed contained 930 cases with procedure code 
99.28. These 930 cases were assigned to 18 MDCs.
d. Heart Assist Devices
    Effective May 5, 1997, we revised Medicare coverage of heart assist 
devices to allow coverage of a ventricular assist device used for 
support of blood circulation postcardiotomy if certain conditions were 
met. In the August 29, 1997 final rule (62 FR 45973), we moved 
procedure code 37.66 (Implant of an implantable pulsatile heart assist 
device) from DRGs 110 and 111 (Major Cardiovascular Procedures) to DRG 
108 (Other Cardiothoracic Procedures) to improve payment for these 
procedures. In the July 31, 1998 final rule (63 FR 40956), in a further 
effort to improve payment for these cases, we moved procedure code 
37.66 to DRGs 104 and 105 (Cardiac Valve and Other Major Cardiothoracic 
Procedures).
    We received one comment regarding the DRG classification of 
procedure code 37.66.
    Comment: The commenter recommended that we either reclassify heart 
assist device cases to DRG 103 (Heart Transplant) or create a new DRG 
specifically for this device and technology. The commenter cited a 
discrepancy between the cost of the device implantation and payment for 
DRGs 104 and 105 as the basis for these recommendations.
    Response: We refer the reader to our response to a similar comment 
in the August 29, 1997 final rule (62 FR 45967). We note that the FY 
1998 MedPAR file has 22 cases coded with procedure code 37.66. Of these 
22 cases, 8 cases were assigned to DRG 103 (Heart Transplant) and 4 
cases to DRG 483 (Tracheostomy Except for Face, Mouth, and Neck 
Diagnoses). The remaining 10 cases would have been assigned to DRGs 104 
and 105 under the current classification.

C. Recalibration of DRG Weights

    We proposed to use the same basic methodology for the FY 2000 
recalibration as we did for FY 1999. (See the July 31, 1998 final rule 
(63 FR 40965).) That is, we recalibrated the weights based on charge 
data for Medicare discharges. However, we used the most current charge 
information available, the FY 1998 MedPAR file. (For the FY 1999 
recalibration, we used the FY 1997 MedPAR file.) The MedPAR file is 
based on fully coded diagnostic and surgical procedure data for all 
Medicare inpatient hospital bills.
    The final recalibrated DRG relative weights are constructed from FY 
1998 MedPAR data, based on bills received by HCFA through March 1999, 
from all hospitals subject to the prospective payment system and short-
term acute care hospitals in waiver States. The FY 1998 MedPAR file 
includes data for approximately 11.3 million Medicare discharges.
    The methodology used to calculate the DRG relative weights from the 
FY 1998 MedPAR file is as follows:
     All the claims were regrouped using the DRG classification 
revisions discussed above in section II.B of this preamble.
     Charges were standardized to remove the effects of 
differences in area wage levels, indirect medical education (IME) and 
disproportionate share hospital (DSH) payments, and, for hospitals in 
Alaska and Hawaii, the applicable cost-of-living adjustment.
     The average standardized charge per DRG was calculated by 
summing the standardized charges for all cases in the DRG and dividing 
that amount by the number of cases classified in the DRG.
     We then eliminated statistical outliers, using the same 
criteria as were used in computing the current weights--that is, all 
cases that are outside of 3.0 standard deviations from the mean of the 
log distribution of both the charges per case and the charges per day 
for each DRG.
     The average charge for each DRG was then recomputed 
(excluding the statistical outliers) and divided by the national 
average standardized charge per case to determine the relative weight. 
A transfer case is counted as a fraction of a case based on the ratio 
of its length of stay to the geometric mean length of stay of the cases 
assigned to the DRG. That is, a 5-day length of stay transfer case 
assigned to a DRG with a geometric mean length of stay of 10 days is 
counted as 0.5 of a total case.
     We established the relative weight for heart and heart-
lung, liver, and lung transplants (DRGs 103, 480, and 495) in a manner 
consistent with the methodology for all other DRGs except that the 
transplant cases that were used to establish the weights were limited 
to those Medicare-approved hear