[Federal Register Volume 59, Number 4 (Thursday, January 6, 1994)]
[Notices]
[Pages 760-762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-61]
[[Page Unknown]]
[Federal Register: January 6, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
[BPD-796-NC]
Medicare Program; Elimination of Additional Payments for
Administrative and General Costs of Hospital-Based Home Health Agencies
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final notice with comment period.
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SUMMARY: In accordance with section 13564(b)(1) of the Omnibus Budget
Reconciliation Act of 1993, this final notice with comment period
provides that the payment add-on for the administrative and general
costs of hospital-based home health agencies (HHAs) is eliminated. This
notice also explains the effects of this provision on the methodology
used in calculating the HHA cost limits.
DATES: Effective date: The notice is effective for cost reporting
periods beginning on or after October 1, 1993.
Comment date: Written comments will be considered if we receive
them at the appropriate address, as provided below, and must be
received by 5 p.m. on March 7, 1994.
ADDRESSES: Mail comments (an original and three copies) to the
following address:
Health Care Financing Administration, Department of Health and Human
Services, Attention: BPD-796-NC, P.O. Box 7517, Baltimore, MD 21207-
0517.
If you prefer, you may deliver your comments (an original and three
copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Ave. SW.,
Washington, DC 20201, or
Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore,
MD 21207.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code BPD-796-NC. Comments received timely will be available for
public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in room 309-G of
the Department's offices at 200 Independence Avenue SW., Washington,
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(Phone: 202-690-7890).
Copies: To order copies of the Federal Register containing this
document, send your request to: New Orders, Superintendent of
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date
of the issue requested and enclose a check or money order payable to
the Superintendent of Documents, or enclose your Visa or Master Card
number and expiration date. Credit card orders can also be placed by
calling the order desk at (202) 783-3238 or by faxing to (202) 275-
6802. The cost for each copy is $4.50. As an alternative, you may view
and photocopy the Federal Register document at most libraries
designated as U.S. Government Depository Libraries and at many other
public and academic libraries throughout the country that receive the
Federal Register.
FOR FURTHER INFORMATION CONTACT: Michael Bussacca (410) 966-4602.
SUPPLEMENTARY INFORMATION:
I. Background
Section 1861(v)(1)(A) of the Social Security Act (the Act)
authorizes the Secretary to establish limits on allowable costs
incurred by a provider of services that may be paid under the Medicare
program. These limits are based on estimates of the costs necessary in
the efficient delivery of needed health services. Under this authority,
we have maintained limits on HHA per-visit costs since 1979. The limits
may be applied to direct or indirect overall costs or to the costs
incurred for specific items or services furnished by the provider. This
statutory provision is implemented in the regulations at 42 CFR 413.30.
Additional statutory provisions governing the limits are contained at
section 1861(v)(1)(L) of the Act. Section 1861(v)(1)(L)(i) specifies
that for cost reporting periods beginning after July 1, 1987, the cost
limits are not to exceed 112 percent of the mean of the labor-related
and nonlabor per-visit costs for freestanding HHAs. In addition,
section 1861(v)(1)(L)(ii) of the Act has required that an adjustment be
made to the cost limits for the administrative and general (A&G) costs
of hospital-based agencies. The A&G per-visit add-on for hospital-based
HHAs has been applied since 1980.
We published a notice with comment period that appeared in the July
8, 1993 issue of the Federal Register (58 FR 36748) that set forth a
revised schedule of limits on HHA costs for cost reporting periods
beginning on or after July 1, 1993. The limits were computed using
actual cost per-visit data from cost reporting periods ending on or
after June 30, 1989 and before May 31, 1991, and were adjusted by the
latest estimates in the ``market basket'' index to reflect changes in
the price of goods and services furnished by HHAs.
II. Provisions of This Final Notice With Comment Period
A. Elimination of the A&G Add-on
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993
(OBRA '93), Public Law 103-66, was enacted. Section 13564(b) of OBRA
'93 amended section 1861(v)(1)(L)(ii) of the Act to require that,
effective for cost reporting periods beginning on or after October 1,
1993, we no longer include a payment adjustment for the administrative
and general costs of hospital-based HHAs in computing the HHA limits.
Under this provision, hospital-based HHAs and freestanding HHAs will be
treated identically for payment purposes. Thus, in computing a
hospital-based HHA's cost limits for cost reporting periods beginning
on or after October 1, 1993, the A&G add-on amounts that were to apply,
as set forth in Table II of the July 8, 1993 notice (58 FR 36753), will
not be used. Other components of the July 8, 1993 notice, specifically
the per-visit limits in Table I, the wage indexes in Tables IIIa and
IIIb, and the cost reporting year adjustment factors in Table IV, will
continue to be used to compute the limits.
We note that section 13564(a) of OBRA '93 amended section
1861(v)(1)(L)(iii) of the Act to provide that there be no changes in
the per-visit cost limits for home health services for cost reporting
periods beginning on or after July 1, 1994, and before July 1, 1996.
Since the effective date of that provision is different from that of
the elimination of the A&G add-on, we intend to publish a separate
notice in a future Federal Register to explain the effects of the delay
in the update. Again, the only change in the methodology for computing
the HHA cost limits that is effective for cost reporting periods
beginning on or after October 1, 1993 is the elimination of the A&G
add-on for hospital-based HHAs.
B. Computing the Cost Limit for a Hospital-Based HHA
The example below illustrates how an adjusted occupational therapy
per-visit cost limit is calculated for a hospital-based HHA in Dallas,
Texas, with a 12-month cost reporting period beginning October 1, 1993.
Because the A&G add-on has been eliminated, this example is identical
to the example contained in our July 8, 1993 notice (58 FR 36752) of
the calculation of a limit for a free-standing HHA, with the exception
of the application of a different cost reporting period adjustment
factor, as set forth in Table IV of that notice. These factors are
based on the month and year in which an HHA's cost reporting period
begins, and are used to account for inflation in costs that occurs
after the effective date of the latest schedule of HHA limits. Thus, in
the example below, the adjustment factor from Table IV of the July 8,
1993 notice for an HHA with a cost reporting period beginning October
1, 1993 is applied.
To arrive at the adjusted limit, the HHA's intermediary first
determines the adjusted labor-related component by multiplying the
labor-related component of the limit by the appropriate wage index
value, and then adjusts for budget neutrality. The adjusted limit is
the sum of the adjusted labor-related component, plus the nonlabor
component, plus other adjustments (if applicable), multiplied by the
applicable cost reporting period adjustment factor.
Example: Calculation of an Adjusted Occupational Therapy Limit for
a Hospital-Based HHA in Dallas, Texas for a Cost Reporting Period
Beginning October 1, 1993 (using the appropriate tables from the July
8, 1993 schedule of limits)
Labor Component (Table I).................................. $76.27
Wage Index Value (Table III)............................... x 0.9599
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Labor Portion.............................................. $73.21
Special Labor Adjustment for Budget Neutrality............. x 1.027
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Adjusted Labor Portion..................................... $75.19
Nonlabor Component (Table I)............................... +16.68
OSHA Adjustment............................................ +0.18
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$92.05
Cost Reporting Period. Adjustment Factor (Table IV)........ x 1.0126
------------
Adjusted Occupational Therapy Limit........................ $93.21
If an HHA uses a cost reporting period that is not 12 months in
duration, a special adjustment factor is calculated. This is necessary
because inflation projections are computed to the midpoint of the cost
reporting period, and the adjustment factors in Table IV are based on
12-month cost reporting periods. For cost reporting periods other than
12 months, the calculation must be made for the midpoint of the
specific cost reporting period. In these cases, the intermediary for
the HHA obtains this adjustment factor from HCFA.
In the July 8, 1993 notice, we also set forth an example of a cost-
limit calculation with A&G add-on for a hospital-based HHA in State
College, Pennsylvania (58 FR 36754). That example, as well as any other
references in that document to the A&G add-on, are no longer applicable
for cost reporting periods beginning on or after October 1, 1993.
III. Impact Statement
Executive Order 12866 (E.O. 12866) requires us to prepare an
analysis for any rule that meets one of the E.O. 12866 criteria for a
``significant regulatory action''; that is, that may--
Have an annual effect on the economy of $100 million or
more; or adversely affect, in a material way, the economy, a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities;
Create a serious inconsistency or otherwise interfere with
an action taken or planned by another agency;
Materially alter the budgetary impact of entitlements,
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or
Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
E.O. 12866.
In addition, for final notices such as this, we generally prepare a
regulatory flexibility analysis that is consistent with the Regulatory
Flexibility Act (RFA) (5 U.S.C. 601 through 612) unless the Secretary
certifies that this notice would not have a significant economic impact
on a substantial number of small entities. For purposes of the RFA, all
HHAs are treated as small entities.
This final notice with comment period announces the provisions of
section 13564(b) of OBRA '93, which provides for the elimination of the
A&G add-on for hospital-based HHAs, effective for cost reporting
periods beginning on or after October 1, 1993. None of the provisions
of this notice interprets or extends requirements beyond those set
forth in OBRA '93.
Section 13564(b) of OBRA '93 will result in significant Federal
cost savings. The impact of this provision is discussed further below.
This notice explains how the provision affects the methodology for
calculating the HHA limits. We do not believe that merely explaining
the results of this provision in this notice produces any effect that
will meet any of the criteria of E.O. 12866 for a significant
regulatory action or will have a significant effect on a substantial
number of small entities. Therefore, we have determined and the
Secretary certifies that neither an impact statement under E.O. 12866
nor a regulatory flexibility analysis under the RFA are required.
To the extent that a legislative provision being announced by a
notice such as this may have a significant effect on beneficiaries or
providers or may be viewed as controversial, we believe that we should
address any potential concerns. In this instance, we believe it is
desirable to inform the public of our estimate of the substantial
budgetary effect of this statutory change. We estimate that the
elimination of the add-on for hospital-based HHAs will result in the
following savings to the Medicare program:
Table 1.--Impact of the Elimination of Hospital-Based Add-On*
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Fiscal year Savings
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1994........................................................ $70
1995........................................................ 120
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*All figures are rounded to the nearest $10 million.
We have attempted to examine the overall effects of this provision
on hospital-based HHAs. As illustrated in Table 2 below, we estimate
that the elimination of the A&G add-on for hospital-based HHAs will
result in substantial increases in the number of hospital-based HHAs
that meet or exceed the cost limits.
Table 2.--Hospital-Based HHAs At or Over the Cost Limits
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HHAs in October
Model July 1993 1993
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Hospital-Based...................... 1599 774 1144
Urban........................... 780 397 596
Rural........................... 819 377 548
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The model used for our analysis is based on data from 1,599
hospital-based HHAs. In our July 8, 1993 notice, which used the same
model, we estimated that 774 hospital-based HHA in the model would meet
or exceed the HHA cost limits. Thus, we believe that the proportion of
hospital-based HHAs that will meet or exceed the cost limits is likely
to increase from approximately 48 percent (774/1599) to 72 percent
(1144/1599) as a result of the elimination of the A&G add-on.
We are unable to identify the effects of this provision on
individual hospital-based home health agencies. However, we anticipate
that overall FY 1994 Medicare payments for hospital-based HHAs will be
approximately 6 percent less than they would have been if the A&G add-
on had not been eliminated. The effects of this reduction on the total
revenues of individual hospital-based HHAs will depend on the HHA's
ability to operate within the cost limits and on the proportion of the
HHA's revenues that come from the Medicare program.
Section 1102(b) of the Act requires the Secretary to prepare a
regulatory impact analysis if a final notice such as this may have a
significant impact on the operations of a substantial number of small
rural hospitals. Such an analysis must conform to the provisions of
section 604 of the RFA. For purposes of section 1102(b) of the Act, we
define a small rural hospital as a hospital with fewer than 100 beds
located outside of a Metropolitan Statistical Area.
We have not prepared a rural impact statement since we have
determined and the Secretary certifies that this final notice will not
have a significant economic impact on the operations of a substantial
number of small rural hospitals.
IV. Other Required Information
A. Waiver of Proposed Notice and 30-Day Delay in the Effective Date
In adopting notices such as this, we ordinarily publish a proposed
notice in the Federal Register with a 60-day period for public comment
as required under section 1871(b)(1) of the Act. We also normally
provide a delay of 30 days in the effective date for documents such as
this. However, we may waive these procedures if we find good cause that
prior notice and comment or a delay in the effective date are
impracticable, unnecessary, or contrary to the public interest.
Section 13564(b)(1) of OBRA '93 amended section 1861(v)(1))(L)(ii)
of the Act to eliminate, effective for cost reporting periods beginning
on or after October 1, 1993, the adjustment to the HHA cost limits to
recognize the administrative and general costs of hospital-based HHAs.
In conformance with the clear direction of section 13564(b)(1) of OBRA
'93, this notice announces the elimination of the adjustment to the HHA
cost limits to recognize the administrative and general costs of
hospital-based HHAs and explains the effect that this action will have
on methodology for calculating the cost limits of hospital-based HHAs.
We have made no changes in this methodology beyond those directly
required by section 13564(b)(1) of OBRA '93, nor are there any other
discretionary aspects to this notice. Moreover, section 13564(b)(2) of
OBRA '93 mandates that these provisions are effective beginning with
cost reporting periods beginning on or after October 1, 1993. Thus, we
have concluded that in this instance, it would be impracticable,
unnecessary, and contrary to the public interest to publish a proposed
notice or to provide for a 30-day delay in the effective date of this
notice. Therefore, we find good cause to waive publication of a
proposed notice and the 30-day delay in effective date. However, we are
providing a 60-day period for public comment, as indicated at the
beginning of this notice.
B. Paperwork Reduction Act
This final notice does not impose information collection
requirements. Consequently, it does not need to be reviewed by the
Office of Management and Budget under the authority of the Paperwork
Reduction Act of 1980 (44 U.S.C. 3507).
C. Public Comments
Because of the large number of items of correspondence we normally
receive on a notice with comment period, we are not able to acknowledge
or respond to them individually. However, we will consider all comments
concerning the provisions of this notice that we receive by the date
and time specified in the ``DATES'' section of this notice, and, if
changes are made in another notice, we will respond to these comments
in that notice.
Authority: (Section 1861(v)(1)(L) of the Social Security Act (42
U.S.C. 1395x(v)(1)(L)); section 4207(d) of Pub. L. 101-508 (42
U.S.C. 1395x (note)); section 13564(b) of Pub. L. 103-66 (42 U.S.C.
1395x (note)).
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance)
Dated: November 19, 1993.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Dated: December 5, 1993.
Donna E. Shalala,
Secretary.
[FR Doc. 94-61 Filed 1-5-94; 8:45 am]
BILLING CODE 4120-01-P
