E7-5298. Medicare Program; Extension of Certain Hospital Wage Index Reclassifications

AGENCY:

Centers for Medicare & Medicaid Services (CMS) HHS.

ACTION:

Notice.

SUMMARY:

This notice announces the extension of the expiration date for certain geographic reclassifications as implemented by Division B, Title I, section 106 of the Tax Relief and Health Care Act of 2006. These geographic classifications, which affected hospitals' wage indices, were previously set to expire on March 31, 2007 and are now extended to September 30, 2007.

DATES:

Effective Date: April 1, 2007.

FOR FURTHER INFORMATION CONTACT:

Brian Slater, for hospital inpatient prospective payment systems questions, [phone]. Chris Smith-Ritter, for hospital outpatient prospective payment systems questions, [phone].

SUPPLEMENTARY INFORMATION:

I. Background

Section 508 of Pub. L. 108-173 (hereinafter referred to as “section 508”) permitted a qualifying hospital to appeal the wage index classification otherwise applicable to the hospital and apply for reclassification to another area of the State in which the hospital was located (or, at the discretion of the Secretary, to an area within a contiguous State). Hospitals were required to submit their applications by February 15, 2004. In the February 13, 2004 Federal Register (69 FR 7340), we published a notice that described our implementation of section 508. The Congress limited the reclassifications under section 508 to a 3-year period beginning April 1, 2004 and ending March 31, 2007.

Generally, geographic reclassifications are in effect for at least one entire Federal fiscal year (October 1 to September 30). However, in the FY 2006 IPPS final rule, to coincide with the end of section 508 reclassifications on March 31, 2007, we established special procedural rules under which individual and group reclassifications could take effect for only the second half of the fiscal year, from April 1 through September 30, 2007 (70 FR 47382, August 12, 2005). Consistent with those procedural rules, for FY 2007, some hospitals or geographic areas were assigned different geographic reclassifications and wage indices for the 1st half of FY 2007 than were assigned for the 2nd half of FY 2007 (71 FR 59886). Further, in accordance to section 1886(d)(8)(D) of the Act, we apply an adjustment to the IPPS standardized amounts to ensure that the effects of geographic reclassification are budget neutral. For FY 2008, we calculated one budget neutrality adjustment that reflects the average of the adjustments required for 1st and 2nd half fiscal year reclassifications, respectively. We received only favorable comments on our policy of providing for half-year reclassifications in FY 2007.

II. Provisions of the Notice

Division B, Title I, section 106 of the Tax Relief and Health Care Act of 2006 (Pub. L. 109-432) extends any geographic reclassification that was set to expire on March 31, 2007 by 6 months until September 30, 2007. Consistent with the mid-year manner in which we originally implemented section 508 (Pub. L. 108-173) in FY 2005, we will not alter previously announced wage indices or geographic reclassifications for hospitals whose reclassifications are not extended by section 106. Such hospitals will continue to receive the wage indices and reclassifications previously announced in the October 11, 2006 IPPS Federal Register notice (71 FR 59885) (or any corrections to such notice). Also, consistent with the mid-year implementation of section 508, we have made no changes to the budget neutrality adjustments applied to the standardized amounts previously announced.

Also, as with the section 508 reclassifications, the 6-month extension applies to both hospital inpatient and outpatient department services. However, because the Congress limited the extensions available under section 106 to a 6-month period, for hospital outpatient department services and payment under OPPS, a hospital that has a geographic reclassification extended from March 31, 2007 to September 30, 2007 will revert to its previously scheduled April 1st reclassification or its home area wage index from October 1, 2007 to December 31, 2007. As discussed in the previous paragraph, the OPPS wage index received for October 1 through December 31, 2007 will not be affected by the section 106 extension.

We have instructed the Medicare Administrative Contractors (MAC) for the affected providers to continue any geographic reclassifications that were set to expire on March 31, 2007 through September 30, 2007.

As described in section I of this Notice, for FY 2007, we allowed some reclassifications to take effect for only half of the fiscal year, and we calculated separate wage indices for the first and second halves of the year for the areas affected by such reclassifications. Hospitals receiving a section 508 reclassification receive the wage index for reclassified hospitals, when such a wage index applies. Because there may be two separate wage indices for hospitals for the first and second halves of the year, a small number of hospitals whose reclassifications are being extended under section 106 will receive the April 1-September 30, 2007 wage index (that is, the wage index value for the second half of the year). Thus, even if these hospitals are reclassified to the same area as in the first half of the year, the hospitals may see a change in their wage indices (see Tables 4A-2, 4B-2, and 4C-2 further corrected on January 5, 2007 (72 FR 569) and March xx, 2007 (72 FR XXX) for a listing of areas where the wage index is changing between the 1st and 2nd half of the fiscal year). We believe such a change is appropriate given section 106's focus on extending the actual geographic reclassification, and not the specific wage index assignment, for the additional 6 months.

When applying section 508, we required each hospital to submit a request in writing by February 15, 2004, to the Medicare Geographic Classification Review Board (MGCRB), with a copy to CMS. CMS will neither require nor accept written requests for the extension required by section 106, since that section simply provides a 6-month continuation for any reclassification set to expire March 31, 2007. Thus, for example, hospitals that were not reclassified under section 508 should not send written requests to the MGCRB requesting section 106 extensions.

Providers affected by section 106 are listed below:

Provider No.	Wage index 4/1/2007- 9/30/2007
010150	0.8371
020008	1.2183
050494	1.4116
050549	1.4116
060075	1.0877
070001	1.2730
070005	1.2730
070010	1.3113
070016	1.2730
070017	1.2730
070019	1.2730
070022	1.2730
070028	1.3113
070031	1.2730
070036	1.2930
070039	1.2730
160040	0.8708
160064	0.9701
160067	0.8708
160110	0.8708
220046	1.1343
230003	1.0797
230004	1.0797
230013	1.0602
230019	1.0602
230020	1.0440
230024	1.0440
230029	1.0602
230036	1.0602
230038	1.0797
230053	1.0440
230059	1.0797
230066	1.0797
230071	1.0602
230072	1.0797
230089	1.0440
230097	1.0797
230104	1.0440
230106	1.0797
230119	1.0440
230130	1.0602
230135	1.0440
230146	1.0440
230151	1.0602
230165	1.0440
230174	1.0797
230176	1.0440
230207	1.0602
230223	1.0602
230236	1.0797
230254	1.0602
230269	1.0602
230270	1.0440
230273	1.0440
230277	1.0602
250002	0.8461
250122	0.8461
270023	0.8956
270032	0.8956
270057	0.8956
310021	1.3113
310028	1.3113
310051	1.3113
310060	1.3113
310115	1.3113
310120	1.3113
330049	1.3113
330106	1.4779
330126	1.3113
330135	1.3113
330205	1.3113
330209	1.2730
330264	1.2730
340002	0.9413
350002	0.8367
350003	0.8367
350006	0.8367
350010	0.8367
350014	0.8367
350015	0.8367
350017	0.8367
350030	0.8367
380090	1.1162
390001	0.9990
390003	0.9990
390045*	0.9990
390054	0.9942
390072	0.9990
390095	0.9990
390119	0.9990
390137	0.9990
390169	0.9990
390185	0.9942
390192	0.9990
390237	0.9990
390270	0.9942
430005	0.8708
430015	0.9238
430048	0.9238
430060	0.9238
430064	0.9238
430077	0.9238
430091	0.9238
450010	0.8794
450072	1.0094
450591	1.0094
470003	1.1343
490001	0.8600
530015	1.0060
* This hospital is assigned a wage index value under a special exceptions policy (69 FR 49105).

III. Regulatory Impact Statement

We have examined the impact of this notice using the requirements of Executive Order 12866 (September 1993, Regulatory Planning and Review), and Executive Order 13132.

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). This notice implements a statutory provision that would increase payments to hospitals by less than $100 million and is therefore not a major rule.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. Again, although we do not consider this notice to be a rule subject to notice and comment rulemaking, we note that this notice does not impose any costs on State or local governments. Therefore, the requirements of Executive Order 13132 would not be applicable.

Section 106 of the Tax Relief and Health Care Act of 2006 extends any geographic reclassification that was set to expire on March 31, 2007 by six months until September 30, 2007. We estimate the impact of this provision will be to increase payments to hospitals by $80 million.

In accordance with the provisions of Executive Order 12866, this notice was reviewed by the Office of Management and Budget.

Authority: Section 106 of Public Law 109-432.

(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare—Supplementary Medical Insurance Program)

Dated: March 8, 2007.

Leslie V. Norwalk,

Acting Administrator, Centers for Medicare & Medicaid Services.