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Federal Register / Vol. 86, No. 147 / Wednesday, August 4, 2021 / Rules and Regulations
other services or items that are outside the scope of the IPF PPS. Covered psychiatric services include services for which benefits are provided under the fee-for-service Part A Hospital Insurance Program of the Medicare program.
The IPF PPS established the Federal per diem base rate for each patient day in an IPF derived from the national average daily routine operating, ancillary, and capital costs in IPFs in FY
2002. The average per diem cost was updated to the midpoint of the first year under the IPF PPS, standardized to account for the overall positive effects of the IPF PPS payment adjustments, and adjusted for budget-neutrality.
The Federal per diem payment under the IPF PPS is comprised of the Federal per diem base rate described previously and certain patientand facility-level payment adjustments for characteristics that were found in the regression analysis to be associated with statistically significant per diem cost differences with statistical significance defined as p less than 0.05. A complete discussion of the regression analysis that established the IPF PPS adjustment factors can be found in the November 2004 IPF PPS final rule 69 FR 66933
through 66936.
The patient-level adjustments include age, Diagnosis-Related Group DRG
assignment, and comorbidities;
additionally, there are adjustments to reflect higher per diem costs at the beginning of a patients IPF stay and lower costs for later days of the stay.
Facility-level adjustments include adjustments for the IPFs wage index, rural location, teaching status, a cost-ofliving adjustment for IPFs located in Alaska and Hawaii, and an adjustment for the presence of a qualifying emergency department ED.
The IPF PPS provides additional payment policies for outlier cases, interrupted stays, and a per treatment payment for patients who undergo electroconvulsive therapy ECT. During the IPF PPS mandatory 3-year transition period, stop-loss payments were also provided; however, since the transition ended as of January 1, 2008, these payments are no longer available.

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C. Annual Requirements for Updating the IPF PPS
Section 124 of the BBRA did not specify an annual rate update strategy for the IPF PPS and was broadly written to give the Secretary discretion in establishing an update methodology.
Therefore, in the November 2004 IPF
PPS final rule, we implemented the IPF
PPS using the following update strategy:

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Calculate the final Federal per diem base rate to be budget-neutral for the 18month period of January 1, 2005
through June 30, 2006.
Use a July 1 through June 30 annual update cycle.
Allow the IPF PPS first update to be effective for discharges on or after July 1, 2006 through June 30, 2007.
In November 2004, we implemented the IPF PPS in a final rule that published on November 15, 2004 in the Federal Register 69 FR 66922. In developing the IPF PPS, and to ensure that the IPF PPS can account adequately for each IPFs case-mix, we performed an extensive regression analysis of the relationship between the per diem costs and certain patient and facility characteristics to determine those characteristics associated with statistically significant cost differences on a per diem basis. That regression analysis is described in detail in our November 28, 2003 IPF proposed rule 68 FR 66923; 66928 through 66933 and our November 15, 2004 IPF final rule 69 FR 66933 through 66960. For characteristics with statistically significant cost differences, we used the regression coefficients of those variables to determine the size of the corresponding payment adjustments.
In the November 15, 2004 final rule, we explained the reasons for delaying an update to the adjustment factors, derived from the regression analysis, including waiting until we have IPF PPS
data that yields as much information as possible regarding the patient-level characteristics of the population that each IPF serves. We indicated that we did not intend to update the regression analysis and the patient-level and facility-level adjustments until we complete that analysis. Until that analysis is complete, we stated our intention to publish a notice in the Federal Register each spring to update the IPF PPS 69 FR 66966.
On May 6, 2011, we published a final rule in the Federal Register titled, Inpatient Psychiatric Facilities Prospective Payment SystemUpdate for Rate Year Beginning July 1, 2011 RY
2012 76 FR 26432, which changed the payment rate update period to a RY
that coincides with a FY update.
Therefore, final rules are now published in the Federal Register in the summer to be effective on October 1. When proposing changes in IPF payment policy, a proposed rule would be issued in the spring, and the final rule in the summer to be effective on October 1. For a detailed list of updates to the IPF PPS, we refer readers to our regulations at 42
CFR 412.428.

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The most recent IPF PPS annual update was published in a final rule on August 4, 2020 in the Federal Register titled, Medicare Program; FY 2021
Inpatient Psychiatric Facilities Prospective Payment System and Special Requirements for Psychiatric Hospitals for Fiscal Year Beginning October 1, 2020 FY 2021 85 FR
47042, which updated the IPF PPS
payment rates for FY 2021. That final rule updated the IPF PPS Federal per diem base rates that were published in the FY 2020 IPF PPS Rate Update final rule 84 FR 38424 in accordance with our established policies.
III. Provisions of the FY 2022 IPF PPS
Final Rule and Responses to Comments A. Final Update to the FY 2021 Market Basket for the IPF PPS
1. Background Originally, the input price index that was used to develop the IPF PPS was the Excluded Hospital with Capital market basket. This market basket was based on 1997 Medicare cost reports for Medicare participating inpatient rehabilitation facilities IRFs, IPFs, long-term care hospitals LTCHs, cancer hospitals, and childrens hospitals. Although market basket technically describes the mix of goods and services used in providing health care at a given point in time, this term is also commonly used to denote the input price index that is, cost category weights and price proxies derived from that market basket. Accordingly, the term market basket as used in this document, refers to an input price index.
Since the IPF PPS inception, the market basket used to update IPF PPS
payments has been rebased and revised to reflect more recent data on IPF cost structures. We last rebased and revised the IPF market basket in the FY 2020
IPF PPS rule, where we adopted a 2016based IPF market basket, using Medicare cost report data for both Medicare participating freestanding psychiatric hospitals and psychiatric units. We refer readers to the FY 2020 IPF PPS final rule for a detailed discussion of the 2016-based IPF PPS market basket and its development 84 FR 38426 through 38447. References to the historical market baskets used to update IPF PPS
payments are listed in the FY 2016 IPF
PPS final rule 80 FR 46656.
2. Final FY 2022 IPF Market Basket Update For FY 2022 that is, beginning October 1, 2021 and ending September 30, 2022, we proposed to update the IPF PPS payments by a market basket
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