01-11062. Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2002 Rates  

  • Start Preamble Start Printed Page 22646

    AGENCY:

    Health Care Financing Administration (HCFA), HHS.

    ACTION:

    Proposed rule.

    SUMMARY:

    We are proposing to revise the Medicare hospital inpatient prospective payment systems for operating and capital costs to: Implement applicable statutory requirements, including a number of provisions of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Public Law 106-554); and implement changes arising from our continuing experience with these systems. In addition, in the Addendum to this proposed rule, we are describing proposed changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. These changes would be applicable to discharges occurring on or after October 1, 2001. We also are setting forth proposed rate-of-increase limits as well as proposed policy changes for hospitals and hospital units excluded from the prospective payment systems.

    We also are proposing changes to the policies governing payments to hospitals for the direct costs of graduate medical education and critical access hospitals.

    DATES:

    Comments will be considered if received at the appropriate address, as provided below, no later than 5 p.m. on July 3, 2001.

    ADDRESSES:

    Mail written comments (an original and three copies) to the following address ONLY: Health Care Financing Administration, Department of Health and Human Services, Attention: HCFA-1158-P, P.O. Box 8010, Baltimore, MD 21244-1850.

    If you prefer, you may deliver by courier your written comments (an original and three copies) to one of the following addresses:

    Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, or

    Room C5-14-03, Central Building, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    Comments mailed to those addresses specified as appropriate for courier delivery may be delayed and could be considered late.

    Because of staffing and resource limitations, we cannot accept comments by facsimile (FAX) transmission. In commenting, please refer to file code HCFA-1158-P.

    For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

    For comments that relate to information collection requirements, mail a copy of comments to the following addresses:

    Health Care Financing Administration, Office of Information Services, Security and Standards Group, Division of HCFA Enterprise Standards, Room N2-14-26, 7500 Security Boulevard, Baltimore, Maryland 21244-1850. Attn: John Burke, HCFA-1158-P; and

    Office of Information and Regulatory Affairs, Office of Management and Budget, Room 3001, New Executive Office Building, Washington, DC 20503, Attn: Allison Herron Eydt, HCFA Desk Officer.

    Start Further Info

    FOR FURTHER INFORMATION CONTACT:

    Steve Phillips, (410) 786-4548, Operating Prospective Payment, Diagnosis-Related Groups (DRGs), Wage Index, Hospital Geographic Reclassifications, and Sole Community Hospital Issues

    Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded Hospitals, Graduate Medical Education and Critical Access Hospital Issues

    End Further Info End Preamble Start Supplemental Information

    SUPPLEMENTARY INFORMATION:

    Inspection of Public Comments

    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 C5-12-08 of the Health Care Financing Administration, 7500 Security Blvd., Baltimore, MD, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. Please call (410) 786-7197 to arrange to view these comments.

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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).

    Under section 1886(d)(1)(B) of the Act in effect without consideration of the amendments made by the Balanced Budget Act of 1997 (Public Law 105-33), the Balanced Budget Refinement Act of 1999 (Public Law 106-113, and the recent Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Public Law 106-554, enacted on December 21, 2000), certain specialty hospitals are excluded from the hospital inpatient prospective payment system: Psychiatric hospitals and units, rehabilitation hospitals and Start Printed Page 22647units, 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, until the payment provisions of Public Laws 105-33, 106-113, and 106-554 that are applicable to three classes of these hospitals are implemented, as discussed below.

    Various sections of Public Laws 105-33, 106-113, and 106-554 provide for the transition of rehabilitation hospitals and units, psychiatric hospitals and units, and long-term care hospitals from being paid on an excluded hospital basis to being paid on an individual prospective payment system basis. These provisions are as follows:

    • Rehabilitation Hospitals and Units. Section 1886(j) of the Act, as added by section 4421 of Public Law 105-33 and amended by section 125 of Public Law 106-113 and section 305 of Public Law 106-554, authorizes the implementation of a prospective payment system for inpatient hospital services furnished by rehabilitation hospitals and units. Section 4421 of Public Law 105-33 amended the Act by adding section 1886(j). Section 1886(j) of the Act provides for a fully implemented prospective payment system for inpatient rehabilitation hospitals and rehabilitation units, effective for cost reporting periods beginning on or after October 2002, with payment provisions during a transitional period of October 1, 2000 to October 1, 2002 based on target amounts specified in section 1886(b) of the Act. Section 125 of Public Law 106-113 amended section 1886(j) of the Act to require the Secretary to use a discharge as the payment unit for inpatient rehabilitation services under the prospective payment system and to establish classes of patient discharges by functional-related groups. Section 305 of Public Law 106-554 further amended section 1886(j) of the Act to allow hospitals to elect to be paid the full Federal prospective payment rather than the transitional period payments specified in the Act. A brief discussion of the November 3, 2000 proposed rule (65 FR 66304) that we issued to propose implementation of the prospective payment system for inpatient rehabilitation hospitals and rehabilitation units is included under section VI.A.4. of this preamble.
    • Psychiatric Hospitals and Units. Sections 124(a) and (c) of Public Law 106-113 provide for the development of a per diem prospective payment system for payment for inpatient hospital services of psychiatric hospitals and units under the Medicare program, effective for cost reporting periods beginning on or after October 1, 2002. This system must include an adequate patient classification system that reflects the differences in patient resource use and costs among these hospitals and must maintain budget neutrality. We are in the process of developing a proposed rule, to be followed by a final rule, to implement the prospective payment system for psychiatric hospitals and units, effective for October 1, 2002.
    • Long-Term Care Hospitals. Sections 123(a) and (c) of Public Law 106-113 provide for the development of a per discharge prospective payment system for payment for inpatient hospital services furnished by long-term care hospitals under the Medicare program, effective for cost reporting periods beginning on or after October 1, 2002. Section 307(b)(1) of Public Law 106-554 provides that payments under the long-term care prospective payment system will be made on a prospective payment basis rather than a cost basis. The long-term care hospital prospective payment system must include a patient classification system that reflects the differences in patient resource use and costs, and must maintain budget neutrality. We are planning to develop a proposed rule, to be followed by a final rule, to implement the prospective payment system for long-term care hospitals, effective for October 1, 2002. Section 307 of Public Law 106-554 provides that if the Secretary is unable to develop a prospective payment system for long-term care hospitals that can be implemented by October 1, 2002, the Secretary must implement a prospective payment system that bases payment under the system using the existing acute hospital DRGs, modified where feasible to account for resource use of long-term care hospital patients using the most recently available hospital discharge data for long-term care services.

    Under sections 1820 and 1834(g) of the Act, payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services on a reasonable cost basis. Reasonable cost is determined under the provisions of section 1861(v)(1)(A) of the Act and existing regulations under Parts 413 and 415.

    Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (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 system are located in 42 CFR Part 412. The regulations governing excluded hospitals and hospital units are located in Parts 412 and 413. The regulations governing GME payments and payments to CAHs are located in Part 413.

    On August 1, 2000, we published a final rule in the Federal Register (65 FR 47054) that implemented both statutory requirements and other changes to the Medicare hospital inpatient prospective payment systems for both operating costs and capital-related costs, as well as changes addressing payment for excluded hospitals and payments for GME costs. Generally, these changes were effective for discharges occurring on or after October 1, 2000. On March 2, 2001, we published correction notices in the Federal Register (66 FR 13020) relating to the calculation of certain wage indexes and the labeling of certain DRGs.

    Public Law 106-554 made a number of changes to the Act relating to prospective payments to hospitals for inpatient services and payments to excluded hospitals. This proposed rule would implement amendments enacted by Public Law 106-554 relating to FY 2002 payments for hospital inpatient services, new medical services and technology, GME costs, the payment adjustment for disproportionate share hospitals (DSHs), the indirect medical education (IME) adjustment for teaching hospitals, sole community hospitals (SCHs), and CAHs. It would also implement changes affecting hospitals' geographic reclassifications and wage index. These changes are addressed in sections II., III., IV., and VI. of this preamble.

    Other provisions of Public Law 106-554 that relate to Medicare payments to hospitals effective prior to October 1, 2001 (that is, for FY 2001 or for the period between April 1, 2001 and September 30, 2001), are addressed in a separate interim final rule with comment period (HCFA-1178-IFC).

    B. Major Contents of This Proposed Rule

    In this proposed rule, we are setting forth proposed changes to the Medicare hospital inpatient prospective payment systems for operating costs and for capital-related costs in FY 2002. We also are proposing changes relating to payments for GME costs and payments to excluded hospitals and units and CAHs. The proposed changes would be Start Printed Page 22648effective for discharges occurring on or after October 1, 2001.

    The following is a summary of the major changes that we are proposing to make:

    1. Proposed Changes to the DRG Reclassifications and Recalibrations of Relative Weights

    As required by section 1886(d)(4)(C) of the Act, we adjust the DRG classifications and relative weights annually. Based on analyses of Medicare claims data, we are proposing to establish a number of new DRGs and make changes to the designation of diagnosis and procedure codes under other existing DRGs. Our proposed changes for FY 2002 are set forth in section II. of this preamble.

    We also address the provisions of section 533 of Public Law 106-544 regarding development of a mechanism for adequate payment for new medical services and technologies and the required report to Congress on expeditiously introducing new medical services and technology into the DRGs.

    2. Proposed Changes to the Hospital Wage Index

    In section III. of this preamble, we discuss proposed revisions to the wage index and the annual update of the wage data. Specific issues addressed in this section include the following:

    • The FY 2002 wage index update, using FY 1998 wage data.
    • The transition to 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.
    • The costs of contracted pharmacy and laboratory services.
    • The collection of occupational mix data, as required by section 304(c) of Public Law 106-554.
    • Revisions to the wage index based on hospital redesignations and reclassifications, including changes to reflect the provisions of sections 304(a) and (b) of Public Law 106-554 relating to 3-year wage index reclassifications by the MGCRB, the use of 3 years of wage data for evaluating reclassification requests for FYs 2003 and later, and the application of a statewide wage index for reclassifications beginning in FY 2003.
    • Requests for wage data corrections and modification of the process and timetable for updating the wage index, and a proposed revision of that timetable.

    3. Other Decisions and Proposed Changes to the Prospective Payment System for Inpatient Operating and Graduate Medical Education Costs

    In section IV. of this preamble, we discuss several provisions of the regulations in 42 CFR Parts 412 and 413 and set forth certain proposed changes concerning the following:

    • Sole community hospitals.
    • Rural referral centers.
    • Changes relating to the IME adjustment as a result of section 302 of Public Law 106-554.
    • Changes relating to the DSH adjustment as a result of section 303 of Public Law 106-554.
    • The establishment of policies relating to the 3-year application of wage index reclassifications by the MGCRB, the use of 3 years of wage data in evaluating reclassification requests to the MGCRB for FYs 2003 and later, and the use of a statewide wage index for reclassifications beginning in FY 2003, as required by sections 304(a) and (b) of Public Law 106-554.
    • Proposed requirements for additional payments for new medical services and technology, as required by section 533(b) of Public Law 106-554.
    • Changes relating to payment for the direct costs of GME, including changes as a result of section 511 of Public Law 106-554.

    4. Prospective Payment System for Capital-Related Costs

    In section V. of this preamble, we specify the proposed payment requirements for capital-related costs, including the special exceptions payment, beginning October 1, 2002.

    5. Proposed Changes for Hospitals and Hospital Units Excluded from the Prospective Payment Systems

    In section VI. of this preamble, we discuss the following proposals concerning excluded hospital and hospital units and CAHs:

    • Limits on and adjustments to the proposed target amounts for FY 2002.
    • Revision of the methodology for wage neutralizing the hospital-specific target amounts using preclassified wage data.
    • Updated caps for new excluded hospitals and units as well as changes in the effective date of classifications of excluded hospitals and units.
    • The prospective payment system for inpatient rehabilitation hospitals and units.
    • Payments to CAHs, including exclusion from the payment window requirements; the availability of CRNA pass-through payments; payment for emergency room on-call physicians; treatment of ambulance services; the use of certain qualified practitioners for preanesthesia and postanesthesia evaluations; and clarification of location requirements for CAHs.

    6. Determining Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits

    In the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the FY 2002 prospective payment rates for operating costs and capital-related costs. We also establish the proposed threshold amounts for outlier cases. In addition, we address update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2002 for hospitals and hospital units excluded from the prospective payment system.

    7. Impact Analysis

    In Appendix A, we set forth an analysis of the impact that the proposed changes described in this proposed rule would have on affected entities.

    8. Capital Acquisition Model

    Appendix B contains the technical appendix on the proposed FY 2002 capital cost model.

    9. Report to Congress on the Update Factor for Hospitals Under the Prospective Payment System and Hospitals and Units Excluded From the Prospective Payment System

    Section 1886(e)(3) of the Act requires the Secretary to report to Congress on our initial estimate of a recommended update factor for FY 2002 for payments to hospitals included in the prospective payment systems, and hospitals excluded from the prospective payment systems. This report is included as Appendix C to this proposed rule.

    10. Proposed Recommendation of Update Factor for Hospital Inpatient Operating Costs

    As required by sections 1886(e)(4) and (e)(5) of the Act, Appendix D provides our recommendation of the appropriate percentage change for FY 2002 for the following:

    • Large urban area and other area average standardized amounts (and hospital-specific rates applicable to sole community and Medicare-dependent, small rural hospitals) for hospital inpatient services paid for under the prospective payment system for operating costs.
    • Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by hospitals Start Printed Page 22649and hospital units excluded from the prospective payment system.

    11. Discussion of Medicare Payment Advisory Commission Recommendations

    Under section 1805(b) of the Act, the Medicare Payment Advisory Commission (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. This annual report makes recommendations concerning hospital inpatient payment policies. In section VII. of this preamble, we discuss the MedPAC recommendations and any actions we are proposing to take with regard to them (when an action is recommended). For further information relating specifically to the MedPAC March 1 report or to obtain a copy of the report, contact MedPAC at (202) 653-7220 or visit MedPAC's website at: www.medpac.gov.

    II. Proposed Changes to DRG Classifications and Relative Weights

    A. Background

    Under the prospective payment system, we pay for inpatient hospital services on a rate per discharge basis that varies according to 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. The proposed changes to the DRG classification system, and the proposed recalibration of the DRG weights for discharges occurring on or after October 1, 2001, 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 codes from the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM). Medicare fiscal intermediaries enter the information into their claims processing systems and subject 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.

    After screening through the MCE and any further development of the claims, cases are classified into the appropriate DRG by the Medicare GROUPER software program. 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.

    In the July 30, 1999 final rule (64 FR 41500), we discussed a process for considering non-MedPAR data in the recalibration process. In order for the use of particular data to be feasible, we must have sufficient time to evaluate and test the data. The time necessary to do so depends upon the nature and quality of the data submitted. Generally, however, a significant sample of the data should be submitted by August 1, approximately 8 months prior to the publication of the proposed rule, so that we can test the data and make a preliminary assessment as to the feasibility of using the data. Subsequently, a complete database should be submitted no later than December 1 for consideration in conjunction with the next year's proposed rule.

    Currently, cases are assigned to one of 503 DRGs (including one DRG for a diagnosis that is invalid as a discharge diagnosis and one DRG for ungroupable diagnoses) 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 because 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, the 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.

    The major changes we are proposing to make to the DRG classification system for FY 2002 are summarized in Charts 1, 2, and 3 below, followed by detailed discussions in individual sections according to MDC assignment. Other issues concerning DRGs are also set forth below. Unless otherwise noted, our DRG analysis is based on data from 100 percent of the FY 2000 MedPAR file containing hospital bills received through May 31, 2000 for discharges in FY 2000. Start Printed Page 22650

    Chart 1.—Summary of Proposed Changes in DRG Assignments

    Diagnosis related groups (DRGs)Added as newRemoved
    Pre-MDC:
    DRG 512 (Simultaneous Pancreas/Kidney Transplant)X
    DRG 513 (Pancreas Transplants)X
    MDC 5 (Diseases and Disorders of the Circulatory System):
    DRG 112 (Percutaneous Cardiovascular Procedures)X
    DRG 514 (Cardiac Defibrillator Implant with Cardiac Catheterization)X
    DRG 515 (Cardiac Defibrillator Implant without Cardiac Catheterization)X
    DRG 516 (Percutaneous Cardiovascular Procedures with Acute Myocardial Infarction (AMI))X
    DRG 517 (Percutaneous Cardiovascular Procedures without AMI, with Coronary Artery Stent ImplantX
    DRG 518 (Percutaneous Cardiovascular Procedures without AMI, without Coronary Artery Stent ImplantX
    MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue):
    DRG 519 (Cervical Spinal Fusion with CC)X
    DRG 520 (Cervical Spinal Fusion without CC)X
    MDC 20 (Alcohol/Drug Use and Alcohol/Drug-Induced Organic Mental Disorders):
    DRG 434 Alcohol/Drug Abuse or Dependency, Detoxification or Other Symptomatic Treatment with CC)X
    DRG 435 (Alcohol/Drug Abuse or Dependency, Detoxification or Other Symptomatic Treatment without CC)X
    DRG 436 (Alcohol/Drug Dependence with Rehabilitation Therapy)X
    DRG 437 (Alcohol/Drug Dependence, Combined Rehabilitation and Detoxification Therapy)X
    DRG 521 (Alcohol/Drug Abuse or Dependence with CC)X
    DRG 522 (Alcohol/Drug Abuse or Dependence without CC, with Rehabilitation Therapy)X
    DRG 523 (Alcohol/Drug Abuse or Dependence without CC, without Rehabilitation Therapy)X

    Chart 2.—Summary of Proposed Assignment or Reassignment of Diagnosis or Procedure Codes in Existing DRGs

    Diagnosis/procedure codesRemoved from DRGReassigned to DRG
    MDC 5 (Diseases and Disorders of the Circulatory System):
    Principal Diagnosis Code:
    410.01 Acute myocardial infarction of anterolateral wall, initial episode of care116516
    410.11 Acute myocardial infarction of other anterior wall, initial episode of care116516
    410.21 Acute myocardial infarction of inferolateral wall, initial episode of care116516
    410.31 Acute myocardial infarction of inferoposterior wall, initial episode of care116516
    410.41 Acute myocardial infarction of other inferior wall, initial episode of care116516
    410.51 Acute myocardial infarction of other lateral wall, initial episode of care116516
    410.61 True posterior wall infarction, initial episode of care116516
    410.71 Subendocardial infarction, initial episode of care116516
    410.81 Acute myocardial infarction of other specified sites, initial episode of care116516
    410.91 Acute myocardial infarction of unspecified site, initial episode of care116516
    Procedure Codes:
    37.94 Implantation or replacement of automatic cardioverter/defibrillation, total system (AICD)104, 105514, 515
    37.95 Implantation of automatic cardioverter/defibrillator lead(s) only104, 105514, 515
    37.96 Implantation of automatic cardioverter/defibrillator pulse generator only104, 105514, 515
    37.97 Replacement of automatic cardioverter/ defibrillator lead(s) only104, 105514, 515
    37.98 Replacement of automatic cardioverter/defibrillator pulse generator only104, 105514, 515
    Operating Room Procedures:
    35.96 Percutaneous valvuloplasty116516, 517, 518
    36.01 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy without mention of thrombolytic agent116516, 517, 518
    36.02 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy with mention of thrombolytic agent116516, 517, 518
    36.05 Multiple vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy performed during the same operation, with or without mention of thrombolytic agent116516, 517, 518
    36.09 Other removal of coronary artery obstruction116516, 517, 518
    37.34 Catheter ablation of lesion or tissues of heart116516, 517, 518
    92.27 Implantation or insertion of radioactive elementsNon-OR in MDC-5517
    Nonoperating Room Procedures:
    36.06 Insertion of coronary artery stent(s)116517
    37.21 Right heart cardiac catheterization104514
    Start Printed Page 22651
    37.22 Left heart cardiac catheterization104514
    37.23 Right and left heart cardiac catheterization104514
    37.26 Cardiac electrophysiologic stimulation and recording studies104, 112514, 516, 517, 518
    37.27 Cardiac mapping112516, 517, 518
    88.52 Angiocardiography of right heart structures104514
    88.53 Angiocardiography of left heart structures104514
    88.54 Combined right and left heart angiocardiography104514
    88.55 Coronary arteriography using a single catheter104514
    88.56 Coronary arteriography using two catheters104514
    88.57 Other and unspecified coronary arteriography104514
    88.58 Negative-contrast cardiac roentgenography104514
    MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue):
    Procedure Codes:
    81.02 Other cervical fusion, anterior technique497, 498519, 520
    81.03 Other cervical fusion, posterior technique497, 498519, 520
    MDC 15 (Newborns and Other Neonates with Conditions Originating in the Perinatal Period)
    Diagnosis Codes:
    773.0 Hemolytic disease due to RH isoimmunization389390
    773.1 Hemolytic disease due to ABO isoimmunization389390
    Secondary Diagnosis Codes:
    478.1 Other diseases of nasal cavity and sinuses390391
    520.6 Disturbances in tooth eruption390391
    623.8 Other specified noninflammatory disorders of vagina390391
    709.00 Dyschroma, unspecified390391
    709.01 Vitiglio390391
    709.09 Dyschromia, Other390391
    744.1 Accessory Auricle390391
    754.61 Congenital pes planus390391
    757.33 Congenital pigmentary anomalies of skin390391
    757.39 Other specified anomaly of skin390391
    764.08 “Light for dates” without mention of fetal malnutrition, 2,000-2,499 grams390391
    764.98 Fetal growth retardation, unspecified, 2,000-2,499 grams390391
    772.6 Cutaneous hemorrhage390391
    794.15 Abnormal and auditory function studies390391
    796.4 Other abnormal clinical findings390391
    V20.2 Routine infant or child health check390391
    V72.1 Examination of ears and hearing390391

    Chart 3.—Summary of Proposed Retitled DRGs

    MDCDRG No.Current nameProposed name
    MDC 5DRG 116Other Permanent Cardiac Pacemaker Implantation, or PTCA, with Coronary Artery Stent ImplantOther Cardiac Pacemaker Implantation.
    MDC 8DRG 497Spinal Fusion with CCSpinal Fusion except Cervical with CC.
    MDC 8DRG 498Spinal Fusion without CCSpinal Fusion except Cervical without CC.

    2. MDC 5 (Diseases and Disorders of the Circulatory System)

    a. Removal of Defibrillator Cases From DRGs 104 and 105

    DRGs 104 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization) and 105 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization) include the replacement or open repair of one or more of the four heart valves. These valves may be diseased or damaged, resulting in either leakage or restriction of blood flow to the heart, compromising the ability of the heart to pump blood. This procedure requires the use of a heart-lung bypass machine, as the heart must be stilled and opened to repair or replace the valve.

    Cardiac defibrillators are implanted to correct episodes of fibrillation (very fast heart rate) caused by malfunction of the conduction mechanism of the heart. Through implanted cardiac leads, the defibrillator mechanism senses changes in heart rhythm. When very fast heart rates occur, the defibrillator produces a burst of electric current through the leads to restore the normal heart rate. An implanted defibrillator constantly monitors heart rhythm. The implantation of this device does not require the use of a heart-lung bypass machine, and would be expected to be very different in terms of resource usage, although both procedures currently group to DRGs 104 and 105.

    As part of our ongoing review of DRGs, we examined Medicare claims data on DRG 104 and DRG 105. We reviewed 100 percent of the FY 2000 MedPAR file containing hospital bills received through May 31, 2000, for Start Printed Page 22652discharges in FY 2000, and found that the average charges across all cases in DRG 104 were $84,060, while the average charges across all cases in DRG 105 were $66,348. Carving out code 37.94 (Implantation or replacement of automatic cardioverter/defibrillator, total system [AICD]) from DRGs 104 and 105 increased those average charges to $91,366 for DRG 104 and $67,323 for DRG 105. We identified 11,021 defibrillator cases in DRG 104 (out of 25,112 total cases), with average charges of $74,719, and 2,434 defibrillator cases in DRG 105 (out of 20,094 total cases), with average charges of $59,267.

    We performed additional review on cases containing code 37.95 (Implantation of automatic cardioverter/ defibrillator lead(s) only) with code 37.96 (Implantation of automatic cardioverter/defibrillator pulse generator only) and on cases containing code 37.97 (Replacement of automatic cardioverter/defibrillator lead(s) only) with code 37.98 (Replacement of automatic cardioverter/defibrillator pulse generator only). This subgrouping contained only 56 patients. The average charges for the 18 patients in DRG 104 were $58,847. The average charges for the 38 patients in DRG 105 were $54,891.

    Because we believe the defibrillator cases are significantly different from other cases in DRGs 104 and 105, we are proposing to create two new DRGs: DRG 514 (Cardiac Defibrillator Implant with Cardiac Catheterization) and DRG 515 (Cardiac Defibrillator Implant without Cardiac Catheterization).

    We are proposing to remove procedure codes 37.94, 37.95 and 37.96, and 37.97 and 37.98 from DRGs 104 and 105 to form the new DRGs 514 and 515. The proposed new DRGs 514 and 515 would include principal diagnosis codes and procedure codes as reflected in Chart 4 below:

    Chart 4.—Composition of Proposed New DRGs 514 and 515 in MDC 5

    Diagnosis and procedure codesIncluded in proposed DRG 514Included in proposed DRG 515
    Principal Diagnosis Codes:
    All of the principal diagnosis codes assigned to MDC-5XX
    Principal or Secondary Procedure Code:
    37.94 Implantation or replacement of automatic cardioverter/defibrillation, total system (AICD)XX
    Combination Operating Procedure Codes:
    37.95 Implantation of automatic cardioverter/defibrillator lead(s) only; plus
    37.96 Implantation of automatic cardioverter/defibrillator pulse generator only;XX
    Or
    37.97 Replacement of automatic cardioverter/defibrillator lead(s) only; plus
    37.98 Replacement of automatic cardioverter/defibrillator pulse generator onlyXX
    Plus: One of the Following Nonoperating Room Procedure Codes:
    37.21 Right heart cardiac catheterizationX
    37.22 Left heart cardiac catheterizationX
    37.23 Combined right and left heart cardiac catheterizationX
    37.26 Cardiac electrophysiologic stimulation and recording studiesX
    88.52 Angiocardiography of right heart structuresX
    88.53 Angiocardiography of left heart structuresX
    88.54 Combined right and left heart angiocardiographyX
    88.55 Coronary arteriography using a single catheterX
    88.56 Coronary arteriography using two cathetersX
    88.57 Other and unspecified coronary arteriographyX
    88.58 Negative-contrast cardiac roentgenographyX

    b. Percutaneous Cardiovascular Procedures

    We reviewed other DRGs within MDC 5 in order to determine if there were also logic changes that could be made to these DRGs. The data was arrayed in a variety of ways displaying myriad permutations, resulting in the following proposed changes. A percutaneous transluminal coronary angioplasty (PTCA) is an acute intervention intended to minimize cardiac damage by restarting circulation to the heart. Some patients with an acute myocardial infarction (AMI) are now treated by performing a PTCA during the hospitalization for the AMI. Currently, PTCAs with a coronary stent implant are assigned to DRG 116 (Other Permanent Cardiac Pacemaker Implantation, or PTCA with Coronary Artery Stent Implant), along with pacemaker implants. The remaining percutaneous cardiovascular procedures are assigned to DRG 112 (Percutaneous Cardiovascular Procedures).

    The volume of percutaneous cardiovascular procedures has grown dramatically, with 186,669 cases identified in the FY 2000 MedPAR file containing hospital bills submitted through May 31, 2000. Because of the high volume, we decided to review the DRG for percutaneous cardiovascular procedures. As a first step in the evaluation, we combined the percutaneous cardiovascular procedures from DRGs 112 and 116. We then subdivided the combined percutaneous cardiovascular procedure group into two groups based on the principal diagnosis (Pdx) of AMI.

    GroupCountAverage charge
    With Pdx of AMI50,442$31,722
    Without Pdx of AMI136,22723,989

    Each of these groups was further evaluated by subdividing them based on whether a coronary stent was implanted. The vast majority of patients with an AMI had a coronary stent implanted. Patients without an AMI were subdivided into two groups based on whether a coronary stent was implanted.

    GroupCountAverage charge
    Without Pdx of AMI with stent111,441$24,745
    Start Printed Page 22653
    Without Pdx of AMI without stent24,78620,589

    Based on this analysis, we are proposing to remove the PTCAs with coronary artery stent from DRG 116, thus limiting DRG 116 to permanent cardiac pacemaker implantation. This removal will leave approximately 68,000 non-PTCA cases in DRG 116.

    In conjunction with this evaluation, we considered a new technology, intravascular brachytherapy, that is being used to treat coronary in-stent stenosis. A gamma-radiation-impregnated tape is threaded through the affected vessel for a specified amount of dwell time, and then the tape is removed. Intravascular brachytherapy was approved by the Food and Drug Administration in November 2000.

    Intravascular brachytherapy is assigned to procedure code 92.27 (Implantation or insert of radioactive elements). With the use of angioplasty, these cases are currently assigned to DRG 112 (Percutaneous Cardiovascular Procedures). Therefore, cases involving this new technology will be implicated by these proposed changes.

    We are proposing to retitle DRG 116 “Other Cardiac Pacemaker Implantation,” remove DRG 112, and create three new DRGs: DRG 516 (Percutaneous Cardiovascular Procedures with Acute Myocardial Infarction (AMI)); DRG 517 (Percutaneous Cardiovascular Procedures without AMI, with Coronary Artery Stent Implant; and DRG 518 (Percutaneous Cardiovascular Procedures without AMI, without Coronary Artery Stent Implant). The principal diagnosis codes and operating room and nonoperating room procedure codes that are proposed to be included in the new DRGs 516, 517, and 518 are reflected in Chart 5.

    In order to be assigned to new DRG 516, cases must contain one of the principal diagnoses plus the operating room procedures listed in Chart 5. Because DRG 516 contains acute myocardial infarction, which is hierarchically ordered before DRGs 517 and 518, any AMI cases also containing codes 92.27 or 36.06 would automatically be assigned to DRG 516. We are proposing to assign patients with a percutaneous cardiovascular procedure and intravascular radiation treatment to new DRG 517. As more data become available, we will reassess the assignment of intravascular radiation treatment to DRG 517. Proposed new DRG 518 would contain the same operating room and nonoperating room procedures as new proposed DRG 517, with the exception of codes 92.27 and 36.06.

     Chart 5.—Composition of Proposed New DRGs 516, 517, and 518 in MDC 5

    Diagnosis and procedure codesIncluded in Proposed DRG 516Included in Proposed DRG 517Included in Proposed DRG 518
    Principal Diagnosis Codes:
    410.01 Acute myocardial infarction of anterolateral wall, initial episode of careX
    410.11 Acute myocardial infarction of other anterior wall, initial episode of careX
    410.21 Acute myocardial infarction of inferolateral wall, initial episode of careX
    410.31 Acute myocardial infarction of inferoposterior wall, initial episode of careX
    410.41 Acute myocardial infarction of other inferior wall, initial episode of careX
    410.51 Acute myocardial infarction of other lateral wall, initial episode of careX
    410.61 True posterior wall infarction, initial episode of careX
    410.71 Subendocardial infarction, initial episode of careX
    410.81 Acute myocardial infarction of other specified sites, initial episode of care.X
    410.91 Acute myocardial infarction of unspecified site, initial episode of careX
    plus: Operating Room Procedures:
    35.96 Percutaneous valvuloplastyXXX
       and
    36.01 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy without mention of thromolytic agentXXX
       or
    36.02 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy with mention of thrombolytic agentXXX
       or
    36.05 Multiple vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy performed during the same operation, with or without mention of thrombolytic agentXXX
       and
    36.09 Other removal of coronary artery obstructionXXX
       and
    37.34 Catheter ablation of lesion or tissues of heartXXX
    92.27 Implantation or insertion of radioactive elementsX
    OR: Nonoperating Room Procedures:
    36.06 Insertion of coronary artery stent(s)X
    37.26 Cardiac electrophysiologic stimulation and recording studiesXXX
    37.27 Cardiac mappingXXX

    DRG 121 (Circulatory Disorders with AMI and Major Complication, Discharged Alive), DRG 122 (Circulatory Disorders with AMI without Major Complication, Discharged Alive), and DRG 123 (Circulatory Disorders with AMI, Expired) are not affected by these changes.

    c. Removal of Heart Assist Systems

    The ICD-9-CM Coordination and Maintenance Committee considered the nonoperative removal of heart assist systems at its November 17, 2000 meeting. A device called the intra-aortic balloon pump (IABP) is one of the most common types of ventricular assist systems. A balloon catheter is placed Start Printed Page 22654into the patient's descending thoracic aorta, and inflates and deflates with each heartbeat. This device is timed with the patient's own heart rhythm, and inflates and circulates blood to the heart and other organs. This allows the heart to rest and recover. The IABP may be used preoperatively, intraoperatively, or postoperatively. It supports the patient from a few hours to several days.

    Code 37.64 (Removal of heart assist system) already exists, and it is considered by the GROUPER to be an operative procedure. However, the nonoperative removal of a heart assist system can be done at the patient's bedside, is noninvasive, and requires no anesthesia. Therefore, the Committee created code 97.44 (Nonoperative removal of heart assist system) for use with discharges beginning on or after October 1, 2001.

    In the past, we have assigned new ICD-9-CM codes to the same DRG to which the predecessor code was assigned. If this practice were to be followed, we would have proposed that code 97.44 be assigned to MDC 5, DRGs 478 (Other Vascular Procedures with CC) and 479 (Other Vascular Procedures without CC). After hospital charge data became available, we would have considered moving it to other DRGs. However, in accordance with section 533(a) of Public Law 106-554, which requires a more expeditious technique of recognizing new medical services or technology for the hospital inpatient prospective payment system, we will reconsider this longstanding practice when possible. Therefore, as code 97.44 was designed to capture heart assist system removal that is clearly nonoperative, we are not proposing to designate 97.44 as a code which the GROUPER recognizes as a procedure. This assignment can be found in Table 6B, New Procedure Codes in the addendum to this proposed rule. Therefore, these cases will be assigned by the GROUPER to a medical DRG based on the principal diagnosis, or to a surgical DRG if a surgical procedure recognized by the GROUPER is performed.

    3. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue)

    a. Refusions

    We have received questions from correspondents regarding the appropriateness of the spinal fusion DRGs: DRG 496 (Combined Anterior/Posterior Spinal Fusion); DRG 497 (Spinal Fusion with CC); and DRG 498 (Spinal Fusion without CC). Several correspondents expressed concern about the inclusion of all refusions of the spine into one procedure code, 81.09 (Refusion of spine, any level or technique). The correspondents pointed out that because all refusions using any technique or level are in this one code, all of these cases are assigned to DRG 497 and DRG 498. They also pointed out that fusion cases involving both an anterior and posterior technique are assigned to DRG 496. Although cases with the refusion code that involve anterior and posterior techniques would appear to be more appropriately assigned to DRG 496, this is not the case.

    We recognized this limitation in the refusion codes and further acknowledged that this limitation in the ICD-9-CM coding system creates DRG problems by preventing the assignment to DRG 496 even when both anterior and posterior techniques are used for refusion cases. Therefore, we referred the issue to the ICD-9-CM Coordination and Maintenance Committee and requested the Committee to consider code revisions for the refusions of the spine during its year 2000 public meetings.

    After its deliberations, the Committee approved a series of new procedure codes for refusion of the spine that could lead to improvements within DRGs 497 and 498. These new codes, listed below, go into effect on October 1, 2001.

    81.30 Refusion of spine, not otherwise specified

    81.31 Refusion of atlas-axis spine

    81.32 Refusion of other cervical spine, anterior technique

    81.33 Refusion of other cervical spine, posterior technique

    81.34 Refusion of dorsal and dorsolumbar spine, anterior technique

    81.35 Refusion of dorsal and dorsolumbar spine, posterior technique

    81.36 Refusion of lumbar and lumbosacral spine, anterior technique

    81.37 Refusion of lumbar and lumbosacral spine, lateral transverse process technique

    81.38 Refusion of lumbar and lumbosacral spine, posterior technique

    81.39 Refusion of spine, not elsewhere classified

    As previously stated, all refusions of the spine and corrections of the pseudarthrosis of the spine are assigned to code 81.09. Code 81.09, which is always assigned to DRG 497 or DRG 498, includes refusions at any level of the spine using any technique. With the creation of the new procedure codes listed above, it will be possible to determine the level of the spine at which the refusion is performed, as well as the technique used, and assign the case to a more appropriate DRG.

    These new procedure codes should greatly improve our ability to determine the level and technique used in the refusion.

    In the past, we have assigned new ICD-9-CM codes to the same DRG to which the predecessor code was assigned. If this practice were followed, these new codes would have been assigned to DRG 497 and 498 as they are currently. After data became available, we would have considered moving them to other DRGs. However, in accordance with section 533(a) of Public Law 106-554, which requires more expeditious methods of recognizing new medical services or technology under the inpatient hospital prospective payment system, we will reconsider this longstanding practice when possible. Since the new codes clearly allow us to identify cases where the technique was either anterior or posterior and these cases are clinically similar and, therefore, should be handled in the same fashion, we are proposing to immediately assign these cases on the same basis as the fusion codes (81.00 through 81.09). We would not wait for actual claims data before making this change. These proposed assignments are reflected in Chart 6 and also can be found in Table 6B, in section V. of the Addendum to this proposed rule.

    b. Fusion of Cervical Spine

    We have received an additional inquiry concerning the spinal DRGs that focused on fusions of the cervical spine. The inquirer stated that there was a significant difference between inpatients who undergo anterior cervical spinal fusion and other types of spinal fusion in regard to treatment, recovery time, costs, and risk of complications. Anterior cervical spinal fusions are assigned to procedure code 81.02, Other cervical fusion, anterior technique. The inquirer pointed out that anterior cervical fusions differ significantly from anterior techniques at other levels since the anatomic approach is far less invasive. Thoracic anterior techniques require working around the cardiac and respiratory systems in the chest cavity, while lumbar anterior working around bowel and digestive system and the abdominal muscles. The inquirer recommended that code 81.02 be removed from DRGs 497 and 498 and grouped separately.

    We analyzed claims data from 100 percent of the FY 2000 MedPAR file containing hospital bills received through May 31, 2000, and confirmed Start Printed Page 22655that charges are lower for fusions of the cervical spine than fusions of the thoracic and lumbar spine. This was true for both anterior and posterior cervical fusions of the spine. Our medical consultants agree that the data and their clinical analysis support the creation of new DRGs for cervical fusions of the spine. Therefore, we are proposing to remove procedure codes 81.02 and 81.03 from the spinal fusion DRGs (currently, DRGs 497 and 498) and assign them to new DRGs for cervical spinal fusion with and without CC. We are proposing to make four groupings for fusion DRGs. We believe that the net effect of this proposal would be an increase in the weights for DRGs 497 and 498, since the lower charges for the cervical fusions would be removed. The average standardized charge for all spinal fusions with CCs was $26,957. For all spinal fusions without CCs, the average charge was $16,492. The table below also shows average standardized charges for these types of cases before and after the proposed revisions.

    Proposed revised spinal fusion DRGsAverage charge before proposed revisionsAverage charge after revisions
    DRG 497 Spinal Fusion Except Cervical with CC$26,957$36,821
    DRG 498 Spinal Fusion Except Cervical without CC17,49226,297
    DRG 519 Cervical Spinal Fusion with CC26,957
    DRG 520 Cervical Spinal Fusion without CC16,492

    Based on the proposed groupings, we would create two new DRGs: DRG 519 (Cervical Spinal Fusion with CC); and DRG 520 (Cervical Spinal Fusion without CC). The procedure codes that would be included in the proposed DRGs 519 and 520 are reflected in Chart 6 below.

    We are also proposing to add the new ICD-9-CM procedure codes for refusion of the cervical spine (81.32 and 81.33) to the new cervical spine fusion DRGs because they are clinically similar.

    We are proposing to retitle DRG 497 “Spinal Fusion Except Cervical with CC” and DRG 498 “Spinal Fusion Except Cervical without CC.” The retitled DRGs 497 and 498 would retain fusion codes 81.00, 81.01, and 81.04 through 81.08 and include the proposed new refusion codes 81.30, 81.31, and 81.34 through 81.39, as reflected in Chart 6 below.

    c. Posterior Spinal Fusion

    We received other correspondence regarding the current DRG assignment for code 81.07, Lumbar and lumbosacral fusion, lateral transverse process technique. The correspondent stated that physicians consider code 81.07 to be a posterior procedure. The patient is placed prone on the operating table and the spine is exposed through a vertical midline incision. The correspondent pointed out that code 81.07 is not classified as a posterior procedure within DRG 496 (Combined Anterior/Posterior Spinal Fusion). Therefore, when 81.07 is reported with one of the anterior techniques fusion codes, it is not assigned to DRG 496. The correspondent recommended that code 81.07 be added to the list of posterior spinal fusion codes for use in determining assignment to DRG 496.

    We have consulted with our clinical advisors and they agree that this addition should be made. Since we are proposing to handle the new refusion codes in the same manner as the fusion codes, we also are proposing to assign DRG 496 when 81.37 is used with one of the anterior technique fusion or refusion codes. This would be similar to the manner in which code 81.07 is classified. For assignment to DRG 496, we would consider codes 81.01, 81.04, 81.06, 81.32, 81.34, and 81.36 to be anterior techniques and codes 81.03, 81.05, 81.07, 81.08, 81.33, 81.35, and 81.38 to be posterior techniques.

    Chart 6.—Proposed Revised Composition of DRGS 496, 497, and 498 and Proposed Composition of Proposed DRG 519 and 520 in MDC 8

    Diagnosis and procedure codesExisting DRG 496Proposed to be retained in or added to existing DRG 497Proposed to be retained in or added to existing DRG 498Included in proposed DRG 519Included in proposed DRG 520
    Proposed to be assigned as anterior techniquesProposed to be assigned as posterior techniques
    Principal or Secondary Procedure Codes:
    81.00 Spinal fusion, not otherwise specifiedXX
    81.01 Atlas-axis fusionXX
    81.02 Other cervical fusion, anterior techniqueXXX
    81.03 Other cervical fusion, posterior techniqueXXX
    81.04 Lumbar and lumbosacral fusion, anterior techniqueXXX
    81.05 Lumbar and lumbosacral fusion, posterior techniqueXXX
    81.06 Lumbar and lumbosacral fusion, anterior techniqueXXX
    81.07 Lumbar and lumbosacral fusion, lateral transverse process techniqueXXX
    81.08 Lumbar and lumbosacral fusion, posterior techniqueXXX
    81.30 Refusion of spine, not otherwise specifiedXX
    81.31 Refusion of atlas-axis spineXX
    81.32 Refusion of other cervical spine, anterior techniqueXXX
    Start Printed Page 22656
    81.33 Refusion of other cervical spine, posterior techniqueXXX
    81.34 Refusion of dorsal and dorsolumbar spine, anterior techniqueXXX
    81.35 Refusion of dorsal and dorsolumbar spine, posterior techniqueXXX
    81.36 Refusion of lumbar and lumbosacral spine, anterior techniqueXXX
    81.37 Refusion of lumbar and lumbosacral spine, posterior techniqueXXX
    81.38 Refusion of lumbar and lumbosacral spine, posterior techniqueXXX
    81.39 Refusion of spine, not elsewhere classifiedXX

    d. Spinal Surgery

    The California Division of Workers' Compensation notified us of a possible problem with the following spinal DRGs:

    DRG 496 (Combined Anterior/Posterior Spinal Fusion)

    DRG 497 (Spinal Fusion with CC)

    DRG 498 (Spinal Fusion without CC)

    DRG 499 (Back & Neck Procedures except Spinal Fusion with CC)

    DRG 500 (Back & Neck Procedures except Spinal Fusion without CC)

    The Division of Workers' Compensation uses the DRG categories developed by HCFA to classify types of hospital care. However, instead of using HCFA's weights for determining reimbursement for inpatient services, the Division sets a global fee for all inpatient medical services not otherwise exempted. This fee is established by multiplying the product of the DRG weight (or revised DRG weight for a small number of categories) and the health facility's composite factor by 1.20 to get the maximum amount for worker compensation admissions.

    The Division of Workers' Compensation has received reports that the formula it uses for reimbursing cases may be providing inadequate reimbursement. California hospitals and orthopedists have reported that certain spinal surgery DRGs (DRGs 496 through 500) may involve different types of care and/or technologies than those in use at the time these groups were formulated. Health care providers in California report “recent increased use of the new implantation devices, hardware, and instrumentation, coupled with requirements for intensive hospital services accompanying use of new procedures, has led to inadequate reimbursement in these DRGs.” As a short-term response to these concerns, the California Division of Workers' Compensation is exempting the costs of hardware and instrumentation from the global fee of the fee schedule for DRGS 496 through 500. The Division also requested that HCFA examine these DRGs for any potential problem under the Medicare reimbursement system.

    The ICD-9-CM coding system does not capture specific types of implantation devices, hardware, and instrumentation. Therefore, we were not able to verify the claim that these new devices have led to increased costs in specific cases. As discussed in section II.D. of this preamble, we believe that the adoption of a more detailed coding system, such as ICD-10-PCS, would supply greater amounts of detail on these items. However, in the short term, it is not possible to identify a specific problem that involves implantation devices, hardware, and instrumentation.

    4. MDC 12 (Diseases and Disorders of the Male Reproductive System)

    At its May 11, 2000 public meeting, the ICD-9-CM Coordination and Maintenance Committee considered a request from a manufacturer to create a unique code for the procedure, Penile plethysmography with nerve stimulation, in DRG 334 (Major Male Pelvic Procedures with CC). The penile plethysmography is a test that can be performed during a radical prostatectomy procedure. During the course of the procedure, the physician places a probe within an area where the prostatic nerves are thought to be located and is able to detect minor changes in penile tumescence or detumescence. This reaction tells the physician that the nerve bundles have been located, which may aid the physician in performing a nerve-sparing radical prostatectomy procedure with precision. The nerve bundles can also be restimulated at the conclusion of the procedure, providing immediate feedback as to whether erectile function will be restored after surgery.

    After a presentation on the nerve identifying procedure and review of existing ICD-9-CM codes, the ICD-9-CM Coordination and Maintenance Committee determined that the existing code 89.58 (Plethysmogram) adequately describes this test.

    Radical prostatectomies for patients with cancer of the prostate are grouped in either DRG 334 (Major Male Pelvic Procedures with CC) or DRG 335 (Major Male Pelvic Procedures without CC). We have received a request from a manufacturer of a nerve-identifying device to assign cases containing code 89.58 into DRG 334 only, not into DRG 335, resulting in higher payments to hospitals. During FY 2001, DRG 334 had a relative weight of 1.5591, and DRG 335 had a relative weight of 1.1697. The manufacturer requested that we designate code 89.58 as an operating room procedure code that would be recognized by the GROUPER software, and make that code applicable only to DRG 334. The manufacturer believed that this would serve to take any cases of nerve sparing out of the lower paying DRG 335, and would make the technology more attractive to hospitals. As paired DRGs 334 and 335 are currently structured, they differ only in whether or not a secondary diagnosis identified as a CC is recorded.

    Using 100 percent of the FY 2000 MedPAR file which contains hospital Start Printed Page 22657bills for FY 2000 through May 31, 2000, we examined those cases in DRG 334 to which the procedure code for prostatectomy was assigned. Of the total 7,241 cases in DRG 334 identified, 5,611 of these cases contained procedure code 60.5 (Radical prostatectomy). Only three of the prostatectomy cases included code 89.58. There is not a sufficient number of cases on which to base an assessment of the payment for this procedure. Therefore, we are not proposing to modify the assignment of code 89.58.

    5. MDC 15 (Newborns and Other Neonates With Conditions Originating in the Perinatal Period)

    DRG 390 (Neonate with Other Significant Problems) contains newborn or neonate cases with other significant problems, not assigned to DRGs 385 through 389, DRG 391, or DRG 469. To be assigned to DRG 389 (Full Term Neonate with Major Problems), the neonate must have one of the principal or secondary diagnosis listed under this DRG. A neonate is assigned to DRG 390 when the neonate has a principal or secondary diagnosis of newborn or neonate with other significant problems that are not assigned to DRG 385 through 389, 391, or 469.

    We have received correspondence suggesting a number of changes to be made to DRGs 398 and 391. These changes involve removing two codes from DRG 389 and adding 17 codes to DRG 391, as described below.

    a. DRG 389 (Full Term Neonate With Major Problems)

    The correspondent suggested removing the following codes from DRG 389 and assigning them to DRG 390:

    773.0 Hemolytic disease due to RH isoimmunization

    773.1 Hemolytic disease due to ABO isoimmunization

    The correspondent stated that hemolytic disease due to RH isoimmunization or due to ABO isoimmunization should not be considered a major problem. The correspondent recommended that these two conditions be classified as significant problems instead and thus assigned to DRG 390.

    Our medical consultants sought additional advice from the National Association of Children's Hospitals and Related Institutions (NACHRI). (HCFA contracts with the 3M Health Information Systems to maintain the DRG system. The medical experts at 3M evaluate proposed DRG changes from a clinical perspective. These medical consultants assist HCFA in evaluating alternative proposals.) NACHRI and our medical consultants agree that it is appropriate to remove codes 773.0 and 773.1 from DRG 389. Therefore, we are proposing to remove 773.0 and 773.1 from DRG 389 so that neonates with these conditions are assigned to DRG 390.

    b. DRG 391 (Normal Newborn)

    We also have received correspondence with recommendations for changes to DRG 391. The correspondent pointed out that the following secondary codes currently lead to the assignment of the neonate to DRG 390 (Neonate with Other Significant Problems). The correspondent believed that the conditions described by these codes should not cause the neonate to be classified under DRG 390 when reported as a secondary diagnosis. The correspondent recommended that these conditions be listed under DRG 391 (Normal Newborn).

    478.1 Other diseases of nasal cavity and sinuses

    520.6 Disturbances in tooth eruption

    623.8 Other specified noninflammatory disorders of vagina

    709.00 Dyschroma, unspecified

    709.01 Vitiglio

    709.09 Dyschromia, Other

    744.1 Accesory auricle

    754.61 Congenital pes planus

    757.33 Congenital pigmentary anomalies of skin

    757.39 Other specified anomaly of skin, Other

    764.08 “Light for dates” without mention of fetal malnutrition, 2,000-2,499 grams

    764.98 Fetal growth retardation, unspecified, 2,000-2,499 grams

    772.6 Cutaneous hemorrhage

    794.15 Abnormal and auditory function studies

    796.4 Other abnormal clinical findings

    V20.2 Routine infant or child health check

    V72.1 Examination of ears and hearing

    Our medical consultants also sought the advice of NACHRI on this recommendation. NACHRI reviewed the list of codes and agreed that none of these conditions should be considered to be a significant problem for a neonate. NACHRI concurred that neonates with these secondary diagnoses should be classified as normal newborns. Therefore, we are proposing to add the codes listed above to DRG 391 and not classify them to DRG 390 when reported as a secondary diagnosis.

    c. Medicare Code Editor Changes

    The Medicare Code Editor (MCE) is a front-end software program that detects and reports errors in the coding of claims data. The age conflict edit detects inconsistencies between a patient's age and any diagnosis on the patient's record. A subset of diagnoses is considered valid only for patients over the age of 14 years. These diagnoses are identified as “adult” diagnoses and range in age from 15 through 124 years. Therefore, any codes included on the Newborn Diagnoses edit are valid only for patients under age 14.

    It has come to our attention that cases including the ICD-9-CM code 770.7, Chronic respiratory disease arising in the perinatal period, are being rejected. However, a condition such as bronchopulmonary dysplasia always originates in the perinatal period, so regardless of the patient's age, this condition is always coded as 770.7. The age at which the diagnosis was established or the age at continuing treatment does not affect the assignment of code 770.7.

    Because correct coding is causing these claims to be rejected, we are proposing to remove code 770.7 from the Newborn Diagnoses edit in the MCE, as well as remove it from DRG 387 (Prematurity with Major Problems) and DRG 389 (Full Term Neonate with Major Problems). Clinical conditions in code 770.7, such as pulmonary fibrosis, would group to DRG 92 (Interstitial Lung Disease with CC) and DRG 93 (Interstitial Lung Disease without CC). Therefore, we are proposing the addition of code 770.7 to DRGs 92 and 93, as they are most similar clinically. We will monitor these cases in upcoming MedPAR data to ascertain that the cases consume similar resources.

    6. MDC 20 (Alcohol/Drug Use and Alcohol/Drug-Induced Organic Mental Disorders)

    DRG 434 (Alcohol/Drug Abuse or Dependency, Detoxification or Other Symptomatic Treatment with CC is assigned when the patient has a principal diagnosis of alcohol or drug abuse or dependence along with a secondary diagnosis classified as a CC. If these patients do not have a CC, they are assigned to DRG 435 (Alcohol/Drug Abuse or Dependency, detoxification or Other Symptomatic Treatment without CC). When the patients receive rehabilitation and detoxification therapy during the stay, they are assigned to DRG 437 (Alcohol/Drug Dependence, Combined Rehabilitation and Detoxification Therapy). If the patients receive only rehabilitation therapy, they are assigned to DRG 436 (Alcohol/Drug Dependence with Rehabilitation Therapy). Start Printed Page 22658

    We have received inquiries as to why the relative weight for DRG 437, which includes both rehabilitation and detoxification (for FY 2001, the relative weight is .6606, with a geometric mean length of stay of 7.5) is lower than the FY 2001 relative weight for DRG 434, which includes only detoxification (.7256, with a geometric mean length of stay of 3.9). Likewise, the FY 2001 relative weight for DRG 436, which includes only rehabilitation (.7433), is higher than the FY 2001 relative weight for DRG 437, which includes combined rehabilitation and detoxification therapy (.6606). The inquirers indicated that those patients receiving the combination therapy would be expected to have a longer length of stay, require more services, and, therefore, be more costly to treat.

    We analyzed data from 100 percent of the FY 2000 MedPAR file which contains hospital bills received through May 31, 2000, and did not find support for the inquirers' assertion that combination therapy is more costly to treat. The relative weights indicate that the presence of a CC in DRG 434 leads to a significantly higher weight than is found in DRG 435, which does not have a CC. Therefore, we analyzed the alcohol/drug DRGs and focused on eliminating the distinction between rehabilitation and rehabilitation with detoxification and assessing the impact of CCs. We combined data on DRGs 436 and 437 and then subdivided the data based on the presence or absence of a CC. The following table contains the results of the analysis.

     Average Charges for Cases—With and Without CCs

    DRGsWith CCWithout CC
    CountChargeLength of stayCountChargeLength of stay
    Detoxification Cases—DRG 434 and DRG 4353,298$8,5485.09,689$5,1114.1
    All Rehabilitation Cases—DRG 436 and DRG 4373,2988,11710.14,4737,4079.6

    We found that, for both the detoxification and rehabilitation DRGs, the with-CC group has higher charges than the without-CC group. However, the with-CC groups still contain the anomaly that the detoxification DRG 434 has a slightly higher average charge than the combined rehabilitation DRGs 436 and 437. It appears that any significant medical problems as indicated by the presence of a CC dominate the cost incurred by hospitals for treating alcohol and drug abuse patients. For the without-CC groups, the detoxification DRG 435 has substantially lower average charges than the combined rehabilitation DRGs 436 and 437. Because the average charges of the with-CC for both the detoxification DRG 434 and combined rehabilitation DRGs 436 and 437 have similar average charges, we are proposing to combine these two groups.

    Based on the results of our analysis, we are proposing to restructure MDC 20 as follows. We first identified those cases with a principal diagnosis within MDC 20 where the patient left against medical advice. These cases are found in DRG 433 (Alcohol/Drug Abuse or Dependence, Left Against Medical Advice (AMA)). We next identified all remaining cases with a principal diagnosis within MDC 20 where there was a CC. We assigned these cases to a proposed new DRG, Alcohol/Drug Abuse or Dependence with CC). The remaining cases (without CC and did not leave against medical advice) were then divided into two proposed new DRGs based on whether or not the patient received rehabilitation (Alcohol/Drug Abuse or Dependence without CC, with Rehabilitation Therapy; and Alcohol/Drug Abuse or Dependence without CC, without Rehabilitation Therapy).

    The following table illustrates the number of patients and average charges for each of the four proposed DRGs.

     Frequencies and Average Charges for New DRGs

    DRGGroup titleNumber of casesAverage charges
    433Alcohol/Drug Abuse or Dependence, Left Against Medical Advice3,509$3,855
    521Alcohol/Drug Abuse or Dependence with CC18,2358,470
    522Alcohol/Drug Abuse or Dependence without CC, with Rehabilitation Therapy4,4737,407
    523Alcohol/Drug Abuse or Dependence without CC, without Rehabilitation Therapy9,6895,111

    This table illustrates that groups based first on the presence of CC and then on whether or not the patient receives rehabilitation therapy provide a much better explanation of differences in charges. Therefore, we are proposing to retain DRG 433, make DRGs 434 through 437 invalid, and create new DRGs 521, 522, and 523 to include the diagnosis and procedure codes reflected in Chart 7 below.

     Chart 7.—Proposed Restructure of MDC 20

    [Alcohol/drug use and alcohol/drug-induced organic mental disorders]

    Diagnosis and procedure codeIncluded in existing DRG 433Included in proposed DRG 521Included in proposed DRG 522Included in proposed DRG 523
    Principal diagnosis:
    All principal diagnosis within existing MDC 20 involving cases in which patients left against medical advice (AMA)X
    Start Printed Page 22659
    All principal diagnoses within existing MDC 20 where there is a CC and where patient did not leave against medical advice (AMA)X
    All principal diagnoses within existing MDC 20 without CC and where patient did not leave against medical advice (AMA)X
    All principal diagnoses in existing MDC 20 involving cases where patients did not leave against medical advice (AMA)X
    Procedure Codes:
    94.61 Alcohol rehabilitationX
    94.63 Alcohol rehabilitation and detoxificationX
    94.64 Drug rehabilitationX
    94.66 Drug rehabilitation and detoxificationX
    94.67 Combined alcohol and drug rehabilitationX
    94.69 Combined alcohol and drug rehabilitation and detoxificationX

    7. MDC 25 (Human Immunodeficiency Virus Infections)

    Effective October 1, 2000, ICD-9-CM diagnosis codes 783.2 (Abnormal loss of weight) and 783.4 (Lack of expected normal physiological development) were made invalid (65 FR 47171). These two old diagnosis codes were expanded to five digits and the following new diagnosis codes were created:

    783.21 Loss of weight

    783.22 Underweight

    783.40 Unspecified lack of normal physiological development

    783.41 Failure to thrive

    783.42 Delayed milestones

    783.43 Short stature

    These six revised codes were created in response to an industry request. Specifically, code 783.2 did not differentiate between whether the patient had lost weight recently or whether the patient was underweight. Code 783.4 was expanded to capture concepts such as failure to thrive, delayed milestones, and short stature. None of these concepts were captured in the old codes.

    We listed these new codes in the August 1, 2000 final rule on the hospital inpatient prospective payment system in Table 6A—New Diagnosis Codes (65 FR 47169). At the time the final rule was published, all of these codes were assigned to DRGs 296 through 298. After the final rule was published, we received an inquiry as to why these new diagnosis codes were not included in MDC 25 as human immunodeficiency virus (HIV)-related conditions. The inquirer pointed out that the predecessor codes (783.2 and 783.4) were included in MDC 25 as HIV-related conditions and suggested that the new codes be added to MDC 25. These cases will be assigned to other MDCs if the patient does not have HIV.

    We agree that the expanded codes should have been placed in the MDC 25 as HIV-related conditions. The omission was an oversight. Therefore, we are proposing to add diagnosis codes 783.21, 783.22, 783.40, 783.41, 783.42, and 783.43 as HIV-related conditions within MDC 25. When these six revised codes are reported with code 042 HIV, the patient will be classified within MDC 25.

    8. 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. Therefore, it is 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 resource intensive most least, 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 11, the surgical class “kidney transplant” consists of a single DRG (DRG 302) and the class “kidney, ureter and major bladder procedures” consists of three DRGs (DRGs 303, 304, and 305). 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 Start Printed Page 22660DRGs 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 only be considered 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 are proposing to modify the surgical hierarchy as set forth below. As we stated in the September 1, 1989 final rule (54 FR 36457), we are 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 the revised GROUPER software at the time the proposed rule is prepared. Rather, we simulate most major classification changes to approximate the placement of cases under the proposed reclassification and then determine the average charge for each DRG. These average charges then serve as our best estimate of relative resource use for each surgical class. We test the proposed surgical hierarchy changes after the revised GROUPER is received and reflect the final changes in the DRG relative weights in the final rule. Further, as discussed in section II.C. of this preamble, we anticipate that the final recalibrated weights will be somewhat different from those proposed, because they will be based on more complete data. Consequently, further revision of the hierarchy, using the above principles, may be necessary in the final rule.

    At this time, we are proposing to revise the surgical hierarchy for the pre-MDC DRGs, MDC 5 (Diseases and Disorders of the Circulatory System), MDC 8 (Diseases and Disorders of the Musculoskeletal System & Connective Tissue) and MDC 20 (Alcohol/Drug Use & Alcohol/Drug Induced Organic Mental Disorders), as these are proposed to be revised under sections II.B.2., II.B.3., and II.B.6. of this preamble, as follows:

    • In the pre-MDC DRGs, we are proposing to reorder Lung Transplant (DRG 495) above Bone Marrow Transplant (DRG 481). We are also proposing to reorder Simultaneous Pancreas/Kidney Transplant (DRG 512) and Pancreas Transplant (DRG 513) above Lung Transplant (DRG 495).
    • In MDC 5, we are proposing to reorder Cardiac Defibrillator Implants (DRGs 514 and 515) above Other Cardiothoracic Procedures (DRG 108). We are also proposing to reorder Percutaneous Cardiovascular Procedures (DRGs 516, 517, and 518) above Other Vascular Procedures (DRGs 478 and 479).
    • In MDC 8, we are proposing to reorder Cervical Spinal Fusion (DRGs 519 and 520) above Back & Neck Procedures Except Spinal Fusion (DRGs 499 and 500).
    • In MDC 20, we are proposing to order as follows: Alcohol/Drug Abuse or Dependence, Left AMA (DRG 433) above Alcohol/Drug Abuse or Dependence With CC (DRG 521); Alcohol/Drug Abuse or Dependence With CC (DRG 521) above Alcohol/Drug Abuse or Dependence With Rehabilitation Therapy Without CC (DRG 522); and Alcohol/Drug Abuse or Dependence With Rehabilitation Therapy Without CC (DRG 522) above Alcohol/Drug Abuse or Dependence Without Rehabilitation Therapy Without CC (DRG 523).

    9. Refinement of Complications and Comorbidities (CC) List

    In the September 1, 1987 final notice (52 FR 33143) concerning changes to the DRG classification system, 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 for the following reasons: (1) To preclude coding of CCs for closely related conditions; (2) to preclude duplicative coding or inconsistent coding from being treated as CCs; and (3) to ensure that cases are appropriately classified between the complicated and uncomplicated DRGs in a pair. We developed this standard list of diagnoses 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 deleting CCs already on the list. At this time, we do not propose to delete any of the diagnosis codes on the CC list.

    In the May 19, 1987 proposed notice (52 FR 18877) concerning changes to the DRG classification system, 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 coexist, 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 only as 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 (53 FR 38485) for the revision made for the discharges occurring in FY 1989; the September 1, 1989 final rule (54 FR 36552) for the FY 1990 revision; the September 4, 1990 final rule (55 FR 36126) for the FY 1991 revision; the August 30, 1991 final rule (56 FR 43209) for the FY 1992 revision; the September 1, 1992 final rule (57 FR 39753) for the FY 1993 revision; the September 1, 1993 final rule (58 FR 46278) for the FY 1994 revisions; the September 1, 1994 final rule (59 FR 45334) for the FY 1995 revisions; the September 1, 1995 final rule (60 FR 45782) for the FY 1996 revisions; the August 30, 1996 final rule (61 FR 46171) for the FY 1997 revisions; the August 29, 1997 final rule (62 FR 45966) for the FY 1998 revisions; the July 31, 1998 final rule (63 FR 40954) for the FY 1999 revisions, and the August 1, 2000 final rule (65 FR 47064) for the FY 2001 revisions. In the July 30, 1999 final rule (64 FR 41490) we did not modify the CC Exclusions List for FY 2000 because we Start Printed Page 22661did not make any changes to the ICD-9-CM codes for FY 2000.

    We are proposing a limited revision of the CC Exclusions List to take into account the changes that will be made in the ICD-9-CM diagnosis coding system effective October 1, 2001. (See section II.B.11. below, for a discussion of ICD-9-CM changes.) These proposed changes are being made in accordance with the principles established when we created the CC Exclusions List in 1987.

    Tables 6F and 6G in section V. of the Addendum to this proposed rule contain the proposed revisions to the CC Exclusions List that would be effective for discharges occurring on or after October 1, 2001. Each table shows the principal diagnoses with proposed changes to the excluded CCs. Each of these principal diagnoses is shown with an asterisk, and the additions or deletions to the CC Exclusions List are provided in an indented column immediately following the affected principal diagnosis.

    CCs that are added to the list are in Table 6G—Additions to the CC Exclusions List. Beginning with discharges on or after October 1, 2001, the indented diagnoses will not be recognized by the GROUPER as valid CCs for the asterisked principal diagnosis.

    CCs that are deleted from the list are in Table 6H—Deletions from the CC Exclusions List. Beginning with discharges on or after October 1, 2001, the indented diagnoses will be recognized by the GROUPER as valid CCs for the asterisked principal diagnosis.

    Copies of the original CC Exclusions List applicable to FY 1988 can be obtained from the National Technical Information Service (NTIS) of the Department of Commerce. It is available in hard copy for $133.00 plus shipping and handling. A request for the FY 1988 CC Exclusions List (which should include the identification accession number (PB) 88-133970) should be made to the following address: National Technical Information Service, United States Department of Commerce, 5285 Port Royal Road, Springfield, VA 22161; or by calling (800) 553-6847.

    Users should be aware of the fact that all revisions to the CC Exclusions List (FYs 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998, and 1999) and those in Tables 6F and 6G of this document must be incorporated into the list purchased from NTIS in order to obtain the CC Exclusions List applicable for discharges occurring on or after October 1, 2001. (Note: There was no CC Exclusions List in FY 2000 because we did not make changes to the ICD-9-CM codes for FY 2000.)

    Alternatively, the complete documentation of the GROUPER logic, including the current CC Exclusions List, is available from 3M/Health Information Systems (HIS), which, under contract with HCFA, is responsible for updating and maintaining the GROUPER program. The current DRG Definitions Manual, Version 18.0, is available for $225.00, which includes $15.00 for shipping and handling. Version 19.0 of this manual, which includes the final FY 2002 DRG changes, will be available in October 2001 for $225.00. These manuals may be obtained by writing 3M/HIS at the following address: 100 Barnes Road, Wallingford, CT 06492; or by calling (203) 949-0303. Please specify the revision or revisions requested.

    10. 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) 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 not occurring 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 (55 FR 36135), August 30, 1991 (56 FR 43212), September 1, 1992 (57 FR 23625), September 1, 1993 (58 FR 46279), September 1, 1994 (59 FR 45336), September 1, 1995 (60 FR 45783), August 30, 1996 (61 FR 46173), and August 29, 1997 (62 FR 45981), we moved several other procedures from DRG 468 to 477, and some procedures from DRG 477 to 468. No procedures were moved in FY 1999, as noted in the July 31, 1998 final rule (63 FR 40962); in FY 2000, as noted in the July 30, 1999 final rule (64 FR 41496); or in FY 2001, as noted in the August 1, 2000 final rule (65 FR 47064).

    a. Moving Procedure Codes From DRGs 468 or 477 to MDCs

    We annually conduct a review of procedures producing assignment to DRG 468 or DRG 477 on the basis of volume, by procedure, to see if it would be appropriate to move procedure codes out of these DRGs into one of the surgical DRGs for the MDC into which the principal diagnosis falls. The data are arrayed two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by volume of procedure codes within each MDC.

    Using 100 percent of the FY 2000 MedPAR file containing bills submitted through May 31, 2000 for discharges in FY 2000, we determined that the quantity of cases in DRG 477 totaled 17,153. There were 106 instances where the major operative procedure appeared only once (6.4 percent of the time), resulting in assignment to DRG 477.

    Using the same 100 percent sample of the FY 2000 MedPAR file, we reviewed DRG 468. There were a total of 40,429 cases, with one major operative code causing the DRG assignment 311 times (or 8 percent) and 230 instances where the major operative procedure appeared only once (or 6 percent of the time).

    Our medical consultants then identified 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 Start Printed Page 22662diagnosis falls. Based on this year's review, we did not identify any necessary changes in procedures under DRG 477 and, therefore, are not proposing to move any procedures from DRG 477 to one of the surgical DRGs. However, our medical consultants have identified a number of procedure codes that should be removed from DRG 468 and put into more clinically coherent DRGs. The movement of these codes are specified in the charts below:

     Movement of Procedure Codes From DRG 468

    Procedure codeDescriptionIncluded in DRGDescription
    MDC 1—Diseases and Disorders of the Nervous System
    5495Peritoneal Incision7Peripheral and Cranial Nerve and Other Nervous System Procedures with CC
    5495Peritoneal Incision8Peripheral and Cranial Nerve and Other Incision Nervous System Procedures without CC
    MDC 3—Diseases and Disorders of the Ear
    3821Blood Vessel Biopsy63Other Ear, Nose, Mouth and Throat OR Procedure
    MDC 4—Diseases and Disorders of the Respiratory System
    3821Blood Vessel Biopsy76Other Respiratory System OR Procedures with CC
    3821Blood Vessel Biopsy77Other Respiratory System OR Procedures without CC
    3929Vascular Shunt & Bypass NEC76Other Respiratory System OR Procedures with CC
    3929Vascular Shunt & Bypass NEC77Other Respiratory System OR Procedures without CC
    3931Suture of Artery76Other Respiratory System OR Procedures with CC
    3931Suture of Artery77Other Respiratory System OR Procedures without CC
    5411Exploratory Laparotomy76Other Respiratory System OR Procedures with CC
    5411Exploratory Laparotomy77Other Respiratory System OR Procedures without CC
    7749Bone Biopsy NEC76Other Respiratory System OR Procedures with CC
    7749Bone Biopsy NEC77Other Respiratory System OR Procedures without CC
    8669Free Skin Graft NEC76Other Respiratory System OR Procedures with CC
    8669Free Skin Graft NEC77Other Respiratory System OR Procedures without CC
    MDC 5—Diseases and Disorders of the Circulatory System
    3402Exploratory Thoracotomy120Other Circulatory System OR Procedures
    3403Reopen Thoracotomy Site120Other Circulatory System OR Procedures
    3421Transpleura Thoracoscopy120Other Circulatory System OR Procedures
    3422Mediastinoscoy Circulatory120Other Circulatory System OR Procedures
    3426Open Mediastinal Biopsy120Other Circulatory System OR Procedures
    436Distal Gastrectomy120Other Circulatory System OR Procedures
    437Partial Gastrectomy with Jejunal Anastamosis120Other Circulatory System OR Procedures
    4389Partial Gastrectomy120Other Circulatory System OR Procedures
    4399Total Gastrectomy120Other Circulatory System OR Procedures
    14561Multiple Segment Small Bowel Excision120Other Circulatory System OR Procedures
    4562Partial Small Bowel Resectomy NEC120Other Circulatory System OR Procedures
    4572Cecectomy120Other Circulatory System OR Procedures
    4573Right Hemicolectomy120Other Circulatory System OR Procedures
    4574Transverse Colon Resectomy120Other Circulatory System OR Procedures
    4575Left Hemicolectomy120Other Circulatory System OR Procedures
    4579Partial Large Bowel Excision NEC120Other Circulatory System OR Procedures
    458Total Intra-Abdominal Colectomy120Other Circulatory System OR Procedures
    4593Small-to-Large Bowel NEC120Other Circulatory System OR Procedures
    4603Large Bowel Exteriorization120Other Circulatory System OR Procedures
    4613Permanent Colostomy120Other Circulatory System OR Procedures
    4709Other Appendectomy120Other Circulatory System OR Procedures
    4862Anterior Rectal Resction With Colostomy120Other Circulatory System OR Procedures
    4863Anterior Rectal Resection NEC120Other Circulatory System OR Procedures
    4869Rectal Resection120Other Circulatory System OR Procedures
    5012Open Liver Biopsy120Other Circulatory System OR Procedures
    540Abdominal Wall Incision120Other Circulatory System OR Procedures
    MDC 6—Diseases and Disorders of the Digestive System
    5122Cholecystectomy170Other Digestive System OR Procedures with CC
    5122Cholecystectomy171Other Digestive System OR Procedures without CC
    5123Laparoscopic Cholecystectomy170Other Digestive System OR Procedures with CC
    5132GB-To-Intestine Anastomy170Other Digestive System OR Procedures with CC
    5136Choledochoenterostomy170Other Digestive System OR Procedures with CC
    Start Printed Page 22663
    5136Choledochoenterostomy171Other Digestive System OR Procedures without CC
    5137Hepatic Duct-GI Anastomy170Other Digestive System OR Procedures with Anastomy CC
    5137Hepatic Duct-GI Anastomy171Other Digestive System OR Procedures without CC
    5159Bile Duct Incision NEC170Other Digestive System OR Procedures with CC
    5159Bile Duct Incision NEC171Other Digestive System OR Procedures without CC
    MDC 7—Diseases and Disorders of the Hepatobiliary System and Pancreas
    540Abdominal Wall Incision201Other Hepatobiliary and Pancreas Procedure
    MDC 8—Diseases and Disorders of the Musculoskeletal System and Connective Tissue
    3479Other Chest Wall Repair233Other Musculoskeletal System & Connective Tissue OR Procedure with CC
    3479Other Chest Wall Repair234Other Musculoskeletal System & Connective Tissue OR Procedure without CC
    MDC 11—Diseases and Disorders of the Kidney and Urinary Tract
    540Abdominal Wall Incision315Other Kidney & Urinary Tract OR Procedure
    5451Laparoscopic Periton Adhesiolysis315Other Kidney & Urinary Tract OR Procedure
    5459Other Periton Adhesiolysis315Other Kidney & Urinary Tract OR Procedure

    b. Reassignment of Procedures Among DRGs 468, 476, and 477

    We also annually review the list of ICD-9-CM procedures that, when in combination with their principal diagnosis code, result in assignment to DRGs 468, 476, and 477, to ascertain if any of those procedures should be moved from one of these DRGs to another of these DRGs based on average charges and length of stay. We look at the data for trends such as shifts in treatment practice or reporting practice that would make the resulting DRG assignment illogical. If our medical consultants were to find these shifts, we would propose moving cases to keep the DRGs clinically similar or to provide payment for the cases in a similar manner. 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 are not proposing 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.

    c. Adding Diagnosis Codes to MDCs

    Based on our review this year, we are not proposing to add any diagnosis codes to MDCs.

    11. 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, charged with maintaining and updating the ICD-9-CM system. The Committee is jointly responsible for 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 implementation in FY 2002 at public meetings held on May 11, 2000 and November 17, 2000, and finalized the coding changes after consideration of comments received at the meetings and in writing by January 8, 2001.

    Copies of the Coordination and Maintenance Committee minutes of the 2000 meetings can be obtained from the HCFA home page at: http://www.hcfa.gov/​medicare/​icd9cm.htm. 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, MD 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, Purchasing Policy Group, Division of Acute Care; C4-07-07; 7500 Security Start Printed Page 22664Boulevard; Baltimore, MD 21244-1850. Comments may be sent by E-mail to: pbrooks@hcfa.gov.

    The ICD-9-CM code changes that have been approved will become effective October 1, 2001. The new ICD-9-CM codes are listed, along with their proposed DRG classifications, in Tables 6A and 6B (New Diagnosis Codes and New Procedure Codes, respectively) in section V. of the Addendum to this proposed rule. As we stated above, the code numbers and their titles were presented for public comment at the ICD-9-CM Coordination and Maintenance Committee meetings. Both oral and written comments were considered before the codes were approved. Therefore, we are soliciting comments only on the proposed DRG classification of these new codes.

    Further, the Committee has approved the expansion of certain ICD-9-CM codes to require an additional digit for valid code assignment. Diagnosis codes that have been replaced by expanded codes or other codes or have been deleted are in Table 6C (Invalid Diagnosis Codes). These invalid diagnosis codes will not be recognized by the GROUPER beginning with discharges occurring on or after October 1, 2001. For codes that have been replaced by new or expanded codes, the corresponding new or expanded diagnosis codes are included in Table 6A (New Diagnosis Codes). There were no procedure codes that were replaced by expanded codes or other codes, or were deleted. Revisions to diagnosis code titles are in Table 6E (Revised Diagnosis Code Titles), which also include the proposed DRG assignments for these revised codes. Revisions to procedure code titles are in Table 6F (Revised Procedure Codes Titles).

    In September 2000, the Department implemented a policy of paying for inpatient hospital stays for Medicare beneficiaries participating in clinical trials (HCFA Program Memorandum AB 00-89, September 19, 2000). Hospitals were encouraged to identify the patients involved by reporting an ICD-9-CM code. This would allow the examination of data on the patients involved in clinical trials. However, there was no clear ICD-9-CM diagnosis code for patients who took part in a clinical trial. There was a code for patients receiving an examination as part of the control group for clinical trials. This control group code was V70.7 (Examination for normal comparison or control in clinical research). Hospitals were instructed to use V70.5 (Health examination of defined subpopulations), for patients participating in a clinical trial.

    This coding directive has created some confusion because of the title and description of the two codes. Hospitals also have requested that all clinical patients be captured under one code. They indicated that the use of one code would be especially useful because patients frequently do not know if they are part of the control group or are receiving new therapy.

    To help alleviate the confusion, the ICD-9-CM Coordination and Maintenance Committee revised code V70.7. Effective October 1, 2001, the new title of code V70.7 is “Examination of patient in clinical trial.” This revision will make it easier to capture data on Medicare beneficiaries who are participating in a clinical trial.

    12. Other Issues

    a. Pancreas Transplant

    Effective July 1, 1999, Medicare covers whole organ pancreas transplantation if the transplantation is performed simultaneously with or after a kidney transplant (procedure codes 55.69 (Other kidney transplantation), or diagnosis code V42.0 (Organ or tissue replaced by transplant, Kidney), along with 52.80 (Pancreatic transplant, not otherwise specified), or 52.82 (Homotransplant of pancreas)). A discussion of the history of these coverage decisions and codes can be found in the August 1, 2000 final rule on the prospective payment system for FY 2001 (65 FR 47067).

    We discussed the appropriate DRG classification for these cases in both the July 30, 1999 final rule (64 FR 41497) and the August 1, 2000 final rule (65 FR 47067). Currently, cases can be assigned to one of two major DRGs depending on principal diagnosis. 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 cases will be assigned to DRG 302 (Kidney Transplant). If a pancreas transplant is performed following a kidney transplant (during a different hospital admission) on a patient with chronic renal failure secondary to diabetes with renal manifestations, the case is assigned to DRG 468 (Extensive OR Procedure Unrelated to Principal Diagnosis). This is because pancreas transplant is not assigned to MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract), the MDC to which a principal diagnosis of chronic renal failure secondary to diabetes is assigned.

    In the August 1, 2000 final rule, we noted that we would continue to monitor these transplant cases to determine the appropriateness of establishing a new DRG. For this proposed rule, using 100 percent of the data in the FY 2000 MedPAR file (which contains hospital bills received for FY 2000 through May 31, 2000), we analyzed the cases for which procedure codes 52.80 and 52.82 were reported. (Our data showed that 15 of the cases were coded using 52.83 (Heterotransplant of pancreas), which is not a covered procedure under any circumstances.) We identified a total of 221 cases for this time period. The United Network for Organ Sharing (UNOS) reported it had identified 270 cases through September 2000.

    These 221 MedPAR cases were distributed over 6 DRGs, with the majority (158 cases or 72 percent) assigned to DRG 302, and 23 cases (10 percent) assigned to DRG 468. The remaining 40 cases were distributed between 4 other DRGs, with the majority (25 cases) being assigned to DRG 292 (Other Endocrine, Nutritional and Metabolic OR Procedures with CC). Four cases were assigned to DRG 483 (Tracheostomy with Principal Diagnosis except Face, Mouth and Neck Diagnoses) in the Pre-MDC grouping, which took precedence over any other DRG assignment.

    We arrayed the data based on the presence or absence of kidney transplant; that is, pancreas transplant codes with or without 55.69. The majority of cases (166 or 75 percent) had the combined kidney-pancreas transplant in one operative episode, with 55 (25 percent) of the cases having pancreas transplant subsequent to the kidney transplant. Differences in hospital charges were significantly higher for a pancreas transplant plus a kidney transplant ($138,809) than a pancreas transplant alone ($85,972), and both were higher than average standardized charges in DRG 302 ($64,760) or DRG 468 ($39,707), although it must be noted that these figures do reflect the resource intensive patients assigned to DRG 483. Those patients in DRG 483 had average standardized charges of $377,934.

    Because these categories of patients do not fit into existing DRGs from either a clinical or resource perspective, we are proposing to create two new DRGs that would reflect these patients' unique clinical profiles: DRG 512 (Simultaneous Pancreas/Kidney Transplant) and DRG 513 (Pancreas Transplants). Cases grouped to either proposed DRGs 512 or 513 must have a principal or secondary diagnosis code and procedure code or combination of Start Printed Page 22665procedure codes as indicated in the chart below:

     Composition of Proposed DRGs 512 and 513

    Diagnosis and procedure codesIncluded in proposed DRG 512Included in proposed DRG 513
    Principal or Secondary ICD-9-CM Diabetes Mellitus Code:
    250.00 Diabetes mellitus without mention of complication, Type II or unspecified type, not stated as uncontrolledXX
    250.01 Diabetes mellitus without mention of complication, Type I, not stated as uncontrolledXX
    250.02 Diabetes mellitus without mention of complication, Type I,XX
    250.03 Diabetes mellitus without mention of complication, Type I, uncontrolledXX
    250.10 Diabetes with ketoacidosis, Type II or Unspecified type, not stated as uncontrolledXX
    250.11 Diabetes with ketoacidosis, Type I, not stated as uncontrolledXX
    250.12 Diabetes with ketoacidosis, Type II or unspecified type, uncontrolledXX
    250.13 Diabetes with ketoacidosis, Type I, controlledXX
    250.20 Diabetes with hyperosmolarity, Type II or unspecified type, not stated as uncontrolledXX
    250.21 Diabetes with hyperosmolarity, Type I, not stated as uncontrolledXX
    250.22 Diabetes with hyperosmolarity, Type II or unspecified type, uncontrolledXX
    250.23 Diabetes with hyperosmolarity, Type I, uncontrolledXX
    250.30 Diabetes with other coma, Type II or unspecified type, not stated as uncontrolled
    250.31 Diabetes with other coma, Type I, not stated as uncontrolledXX
    250.32 Diabetes with other coma, Type II or unspecified type, uncontrolledXX
    250.33 Diabetes with other coma, Type I, uncontrolledXX
    250.40 Diabetes with renal manifestations, Type II or unspecified type, not stated as uncontrolledXX
    250.41 Diabetes with renal manifestations, Type I, not stated as uncontrolledXX
    250.42 Diabetes with renal manifestations, Type II unspecified type, uncontrolledXX
    250.43 Diabetes with renal manifestations, Type I, uncontrolledXX
    250.50 Diabetes with ophthalmic manifestations, Type II or unspecified type, not stated as uncontrolledXX
    250.51 Diabetes with ophthalmic manifestations, Type I, not stated as uncontrolledXX
    250.52 Diabetes with ophthalmic manifestations, Type II or unspecified type, uncontrolledXX
    250.53 Diabetes with ophthalmic manifestations, Type I, uncontrolledXX
    250.60 Diabetes with neurological manifestations, Type II or unspecified type, not stated as uncontrolledXX
    250.61 Diabetes with neurological manifestations, Type I, not stated as uncontrolledXX
    250.62 Diabetes with neurological manifestations, Type II or unspecified type, uncontrolledXX
    250.63 Diabetes with neurological manifestations, Type I uncontrolledXX
    250.70 Diabetes with peripheral circulatory disorders, Type II or unspecified type, not stated as uncontrolledXX
    250.71 Diabetes with peripheral circulatory disorders, Type I, not stated as uncontrolledXX
    250.72 Diabetes with peripheral circulatory disorders, Type II or unspecified type, uncontrolledXX
    250.73 Diabetes with peripheral circulatory disorders, Type I, uncontrolledXX
    250.80 Diabetes with other specified manifestations, Type II or unspecified type, not stated as uncontrolledXX
    250.81 Diabetes with other specified manifestations, Type I, not stated as uncontrolledXX
    250.82 Diabetes with other specified manifestations, Type II or unspecified type, uncontrolledXX
    250.83 Diabetes with other specified manifestations, Type I, uncontrolledXX
    250.90 Diabetes with unspecified complication, Type II or unspecified type, not stated as uncontrolledXX
    250.91 Diabetes with unspecified complication, Type I, not stated as uncontrolledXX
    250.92 Diabetes with unspecified complication, Type II or unspecified type, uncontrolledXX
    250.93 Diabetes with unspecified complication, Type I, uncontrolledXX
    Principal or Secondary Diagnosis Code:
    585 Chronic renal failureXX
    403.01 Hypertensive renal disease, malignant, with renal failureXX
    403.11 Hypertensive renal disease, benign, with renal failureXX
    403.91 Hypertensive renal disease, unspecified, with renal failureXX
    404.02 Hypertensive heart & renal disease, malignant, with renal failureXX
    404.03 Hypertensive heart & renal disease, malignant, with congestive heart failure and renal diseaseXX
    404.12 Hypertensive heart & renal disease, benign, with renal failureXX
    404.13 Hypertensive heart & renal disease, benign, with congestive heart failure and renal diseaseXX
    404.92 Hypertensive heart & renal disease, unspecified, with renal failureXX
    404.93 Hypertensive heart & renal disease, unspecified, with congestive heart failure and renal failureXX
    V42.0 Organ or tissue replaced by transplant, kidneyXX
    V43.89 Organ or tissue replaced by other means, other (Kidney)XX
    Procedure Code:
    52.80 Pancreatic transplant, not otherwise specifiedX
    52.82 Homotransplant of pancreasX
    Combination Procedure Codes:
    52.80 Pancreatic transplant, not otherwise specified, plus
    55.69 Other kidney transplantationX
    or
    52.82 Homotransplant of pancreas plus
    55.69 Other kidney transplantationX
    Start Printed Page 22666

    The logic for the proposed DRG 512 accepts the pair of diagnosis codes in any position (principal/secondary or secondary/secondary). The pair of procedure codes must be present along with the two diagnosis codes. This DRG would be placed in the Pre-MDC GROUPER logic immediately following DRG 480 (Liver Transplant).

    The logic for DRG 513 accepts the pair of diagnosis codes in any position (principal/secondary or secondary/secondary). Only one procedure code must be used along with the two diagnosis codes. This DRG would be placed in the Pre-MDC GROUPER logic immediately following proposed new DRG 512 (Simultaneous Pancreas/Kidney Transplant).

    b. Intestinal Transplantation

    Effective April 1, 2001, Medicare covers intestinal transplantation for the purpose of restoring intestinal function in patients with irreversible intestinal failure (Medicare Program Memorandum Transmittal No. AB-00-130, December 22, 2000). This procedure is covered only when performed for patients who have failed total parenteral nutrition (TPN) and only when performed in centers that meet approval criteria.

    Intestinal failure is defined as the loss of absorptive capacity of the small bowel secondary to severe primary gastrointestinal disease or surgically induced short bowel syndrome. Intestinal failure prevents oral nutrition and may be associated with both mortality and profound morbidity.

    If an intestinal transplantation alone is performed on a patient with an intestinal principal diagnosis, the case would be assigned to either DRG 148 (Major Small & Large Bowel Procedures With CC) or DRG 149 (Major Small & Large Bowel Procedures Without CC). If an intestinal transplantation and a liver transplantation are performed simultaneously, the case would be assigned to DRG 480 (Liver Transplant).

    If an intestinal transplantation and a pancreas transplantation are performed simultaneously, currently the case would be assigned to either DRG 148 or DRG 149. As we have proposed in section II.B.12.A. of this proposed rule, effective October 1, 2001, the case would be assigned to DRG 513 (Pancreas Transplant). We are proposing to make a conforming change to the regulations at § 412.2(e)(4) and § 486.302 to include intestines (and multivisceral organs) in the list of organs for which Medicare pays for the acquisition costs on a reasonable cost basis.

    Effective October 1, 2000, procedure code 46.97 (Transplant of intestine) was created. We have examined our Medicare claims data to determine whether it is appropriate to propose a new intestinal transplant DRG. We examined 100 percent of the data in the FY 2000 MedPAR file containing bills submitted through May 31, 2000. Therefore, we focused our examination on the previous code assignment for intestinal transplant, code 46.99 (Other operations on intestines), and facilities that are currently performing intestinal transplantation. We were able to identify only one case, with an average charge of approximately $10,738 as compared to the average standardized charges for DRGs 148 and 149, which are approximately $37,961, and $16,965, respectively. We will continue to monitor these cases to determine whether it may be appropriate in the future to establish a new DRG.

    C. Recalibration of DRG Weights

    We are proposing to use the same basic methodology for the FY 2002 recalibration as we did for FY 2001 (August 1, 2000 final rule (65 FR 47069)). That is, we would recalibrate the weights based on charge data for Medicare discharges. However, we propose to use the most current charge information available, the FY 2000 MedPAR file. (For the FY 2001 recalibration, we used the FY 1999 MedPAR file.) The MedPAR file is based on fully coded diagnostic and procedure data for all Medicare inpatient hospital bills.

    The proposed recalibrate DRG relative weights are constructed from FY 2000 MedPAR data (discharges occurring between October 1, 1999 and September 30, 2000), based on bills received by HCFA through December 31, 2000, from all hospitals subject to the prospective payment system and short-term acute care hospitals in waiver States. The FY 2000 MedPAR file includes data for approximately 11,008,302 Medicare discharges.

    The methodology used to calculate the proposed DRG relative weights from the FY 2000 MedPAR file is as follows:

    • To the extent possible, all the claims were regrouped using the proposed DRG classification revisions discussed in section II.B. of this preamble. As noted in section II.B.8., due to the unavailability of the revised GROUPER software, we simulated most major classification changes to approximate the placement of cases under the proposed reclassification. However, there are some changes that cannot be modeled.
    • Charges were standardized to remove the effects of differences in area wage levels, indirect medical education and disproportionate share 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 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 are eliminated.
    • 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 transfer payment under the per diem payment methodology to the full DRG payment for nontransfer cases. That is, transfer cases paid under the transfer methodology equal to half of what the case would receive as a nontransfer would be 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 heart, heart-lung, liver, and lung transplant centers that have cases in the FY 1999 MedPAR file. (Medicare coverage for heart, heart-lung, liver, and lung transplants is limited to those facilities that have received approval from HCFA as transplant centers.)
    • Acquisition costs for kidney, heart, heart-lung, liver, lung, and pancreas transplants continue to be paid on a reasonable cost basis. Unlike other excluded costs, the acquisition costs are concentrated in specific DRGs (DRG 302 (Kidney Transplant); DRG 103 (Heart Transplant); DRG 480 (Liver Transplant); DRG 495 (Lung Transplant); and proposed new DRGs 512 (Simultaneous Pancreas/Kidney Transplant) and 513 (Pancreas Transplant). Because these costs are paid separately from the prospective payment rate, it is necessary to make an adjustment to prevent the relative weights for these DRGs from including the acquisition costs. Therefore, we subtracted the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average charge for the DRG and before eliminating statistical outliers.Start Printed Page 22667

    When we recalibrated the DRG weights for previous years, we set a threshold of 10 cases as the minimum number of cases required to compute a reasonable weight. We propose to use that same case threshold in recalibrating the DRG weights for FY 2002. Using the FY 2000 MedPAR data set, there are 39 DRGs that contain fewer than 10 cases. We computed the weights for these 39 low-volume DRGs by adjusting the FY 2001 weights of these DRGs by the percentage change in the average weight of the cases in the other DRGs.

    The new weights are normalized by an adjustment factor (1.44813) so that the average case weight after recalibration is equal to the average case weight before recalibration. This adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the prospective payment system, and accounts for the gradual shift in cases toward higher-weighted DRGs over time.

    Section 1886(d)(4)(C)(iii) of the Act requires that, beginning with FY 1991, reclassification and recalibration changes be made in a manner that assures that the aggregate payments are neither greater than nor less than the aggregate payments that would have been made without the changes. Although normalization is intended to achieve this effect, equating the average case weight after recalibration to the average case weight before recalibration does not necessarily achieve budget neutrality with respect to aggregate payments to hospitals because payment to hospitals is affected by factors other than average case weight. Therefore, as we have done in past years and as discussed in section II.A.4.b. of the Addendum to this proposed rule, we are proposing to make a budget neutrality adjustment to ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act is met.

    D. Incorporating New Medical Services and Technologies in the Inpatient Hospital Prospective Payment System

    Much attention recently has focused on how well Medicare incorporates the cost of new medical services and technologies into its payment systems. Of particular concern is the adequacy of Medicare's payment systems in facilitating access to new technologies for Medicare beneficiaries. Section 533 of Public Law 106-554 directs the Secretary to develop a mechanism for ensuring adequate payment under the hospital inpatient prospective payment system for new medical services and technologies, and to report to Congress on ways to more expeditiously incorporate new services and technologies into that system. This discussion addresses the requirements of section 533 of Public Law 106-554.

    1. Overview

    Medicare payment for an inpatient hospital discharge under the inpatient prospective payment system is determined by multiplying the relative weight associated with a particular DRG by the national average standardized amount (adjusted for other hospital characteristics such as a geographic wage index, teaching status, and treating a high percentage of low-income patients). 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 codes from the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM). The DRG relative weights are recalculated each year to reflect the average resources expended across all hospitals to treat patients within a particular DRG.

    In general, the inpatient prospective payment system makes payments for new medical services and technologies as soon as these items are payable. New items or services generally fit within existing DRGs, and hospitals using these items and services will be paid at established payment rates for the applicable DRGs. Payment rates may subsequently be adjusted through the annual process of evaluating the assignment of cases within DRGs and recalculating the relative weights associated with each DRG based on average charges. These annual changes are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources.

    Since the prospective payment system was first implemented in October 1983, the pace of innovation in medical technology has been rapid. Generally speaking, the system appears to have accommodated these innovations without occasioning significant concerns regarding access to new technologies. In its March 2001 report to the Congress, the Medicare Payment Advisory Commission stated “the design of the inpatient PPS (prospective payment system) makes it easier to ensure an appropriate distribution of payments while accommodating technological advances” (page 44).

    2. Current Practice—Coding and Payment

    A number of issues arise relating to present methods of incorporation of new technologies in the inpatient hospital prospective payment system. One issue is the appropriate ICD-9-CM code to be assigned to the new technology. This issue is discussed in detail below. Assuming the new technology is or can be covered by Medicare, a determination must be made concerning to which DRG should the new technology be assigned. The DRG (and the value of the relative weight associated with that DRG) to which the new technology is assigned determines the payment rate for the new technology. Under the DRG system, the condition of the patient is the primary consideration in the decision to assign a new technology to a DRG. Therefore, a new technology generally will be assigned to the same DRG as the DRG's predecessor technologies and treatment modalities. In this way, hospitals can receive payment for new technology under the inpatient hospital prospective payment system quickly. As use of the new technology diffuses among hospitals, HCFA will gradually and largely automatically recalibrate DRG payment rates based on hospital claims data to reflect increasing or decreasing costs of cases assigned to the DRG. Generally, it takes 2 years for claims data to be reflected in recalibrated DRG weights. Considering the actual costs as reflected in the claims data, HCFA may also reassign new technologies to different DRGs. However, because a new technology is often more costly initially than the predecessor technologies, the adequacy of the initial payment rate occasionally becomes an issue.

    At present, if payment is to be made other than by routine assignment of the new technology to an existing DRG, it is necessary to establish a new ICD-9-CM code. The lag between application for a new code and its being made effective for payment is at least a year. Because we use actual charge data from hospitals, additional costs or savings from the new technology are not reflected in the DRG weight for 2 years after a new code is effective. For example, the costs or savings attributable to any new technologies that were assigned new ICD-9-CM codes effective October 1, 1999, will be reflected in the DRG relative weights effective for discharges on or after October 1, 2001.

    The lag before new technology affected payment has been viewed by some observers as a useful check on payment changes, helping to ensure that Start Printed Page 22668these changes reflect the benefit of a new technology. Hospitals would adopt and utilize the new technology, it was reasoned, with a speed and to a degree commensurate with its medical advantages. Any differences in the resource requirements between the new and existing technologies would then be reflected over time in claims data and in changes in the DRG weights. To the extent particular new technologies may have been initially given relatively low payment, the design of the system provided incentives to compensate by achieving efficiencies elsewhere. Conversely, if a particular new technology reduced costs compared to existing technologies, hospitals would reap the payment benefits until such time as the DRG weights began to reflect the lower costs.

    3. Current Practice—Data

    Recently, HCFA provided an explicit avenue to permit more rapid payment adjustment through use of additional data. The Conference Report that accompanied the Balanced Budget Act of 1997 (Public Law 105-33) stated that “in order to ensure that Medicare beneficiaries have access to innovative new drug therapies, the conferees believe that HCFA should consider, to the extent feasible, reliable, validated data other than Medicare Provider Analysis and Review (MedPAR) data in annually recalibrating and reclassifying the DRGs” (H.R. Conf. Rep. No. 105-217, 105th Cong., 1st Sess., at 734 (1997)). The MedPAR contains records for all Medicare hospital discharges and is the source data used for DRG recalibration. Although we had never precluded the use of non-MedPAR data, we established an explicit process for the submission of such data in a manner consistent with the annual recalibration of the DRG weights. We stated in the July 30, 1999 Federal Register that, in the case of external data, a significant sample of the data should be submitted by August 1, approximately 8 months prior to the publication of the proposed rule. This would allow us to verify and test the data and make a preliminary assessment as to the feasibility of the data's use (64 FR 41499). Subsequently, a complete database must be submitted no later than December 1, approximately 4 months prior to the publication of the proposed rule. On the issue of the use of sample data, we stated in the Federal Register that we were not establishing specific criteria regarding sample sizes or data collection methodologies prior to gaining experience that would enable us to realistically reflect the availability of external data based on actual experience. We also encouraged anyone interested in submitting such data in the future to contact us to discuss the specific data they wish to submit and whether the data may be adequate.

    4. New Legislation

    Section 533 of Public Law 106-554 addresses the issue of how new technologies are introduced into the DRGs, and how DRG payment rates must be adapted to accommodate them. Specifically, the provision requires that the Secretary:

    • Not later than April 1, 2001, submit a report to Congress on methods of expeditiously incorporating new medical services and technologies into the clinical coding system.
    • Not later than October 1, 2001, implement the preferred methods described in the report.
    • Effective October 1, 2001, establish a mechanism to recognize the costs of new medical services and technologies after notice and opportunity for public comment.
    • Establish criteria to identify new medical services or technologies after notice and an opportunity for public comment.

    5. DRG Assignment Issues

    As background for discussion of how the DRGs should be changed to better accommodate new technology, this section will discuss the rationale for basing the initial DRG assignment on patient condition. The underlying assumption of the prospective payment system is that because hospitals are responsible for the delivery of care they can respond to the incentives to control costs inherent in the system. The success of any payment system that is predicated on providing incentives for cost control is almost totally dependent on the effectiveness with which the incentives are communicated. The DRGs were designed to be a management tool that is used also as the basis for prospective payments. The key distinction between a management tool and payment method is the ability of the hospital to use the information to take action in response to the incentives in the system. Thus, a management tool communicates information in a form and at a level of detail that can lead to specific actions. The effectiveness of any incentive-based payment system is enhanced if the payment method is simultaneously a management tool.

    Because the DRGs were developed to group clinically similar patients, an extremely important means of communication between the clinical and financial aspects of care was created. DRGs provided administrators and physicians with a meaningful basis for evaluating both the process of providing care and the associated financial impacts. Development of care pathways by DRG and profit-and-loss reports by DRG product lines became commonplace. With the adoption of these new management methods, length of stay and the use of ancillary services dropped dramatically.

    The DRGs not only provided a communications tool for hospital management, but they also provided an effective means for hospitals and Medicare to communicate. Instead of accountants and lawyers arguing the fine points of cost accounting, the focus of payment deliberations became the determination of a fair payment rate for patients with specific clinical problems. The vast majority of modifications to the DRGs since the inception of the Medicare inpatient hospital prospective payment system have resulted from recommendations from hospitals. The recommendations have almost always been the result of clinicians identifying specific types of patients with unique needs. A recent example of such a clinical dialogue relates to the DRGs for burns. The FY 1999 update to the DRGs included a major restructuring of the burn DRGs. This restructuring was the direct result of detailed and specific clinical recommendations provided to HCFA by burn specialists.

    Central to the success of the Medicare inpatient hospital prospective payment system is that DRGs have remained a clinical description of why the patient required hospitalization. We believe it would be undesirable to transform DRGs into detailed descriptions of the technology and processes used by the hospital to treat the patient. If such a transformation were to happen, the DRGs would become largely a repackaging of fee-for-service without the management and communication benefits. A fundamental assumption underlying DRGs is that the hospital has the responsibility for deciding what technology and process to employ in treating a particular type of patient. As hospitals in the aggregate make treatment decisions, these decisions are reflected in the DRG payment weights. The separation of the clinical and payment weight methodologies allows a stable clinical methodology to be maintained while the payment weights evolve in response to changing practice patterns. The packaging of all services associated with the care of a particular type of patient into a single payment amount provides the incentive for efficiency inherent in a DRG-based prospective payment system. Substantial disaggregation of the DRGs Start Printed Page 22669into smaller units of payment, or a substantial number of cases receiving extra payments, would undermine the incentives and communication value in the DRG system.

    6. Coding Issues

    To permit us to identify use of a new technology on hospital claims and hence to make different payments than would otherwise be applicable, we would require a code that can be used to specify when that technology is used.

    a. Process for Establishing New Codes

    The ICD-9-CM Coordination and Maintenance Committee is responsible for discussing potential changes to ICD-9-CM. This is a Federal interdepartmental committee, co-chaired by the National Center for Health Statistics (NCHS) and HCFA. The NCHS has lead responsibility for the ICD-9-CM diagnosis codes, while HCFA has lead responsibility for the ICD-9-CM procedure codes. The committee holds meetings twice a year, usually in May and November. Agendas for the discussions about procedure codes are published on HCFA's Internet website a month before the meeting. A Federal Register notice is also published listing topics to be discussed. The meetings are open to the public and are held usually in Baltimore, Maryland. Shortly afterwards, an extensive summary of the meeting is published on HCFA's website and the public is given an additional opportunity to comment. Final comments are due by early January. A complete, current timeline is included in the Summary Report of the Committee at: www.hcfa.gov/​medicare/​icd9cm.htm.

    For a topic to be discussed at one of the two yearly meetings of the committee, the committee must receive a request 2 months prior to the meeting. This timeframe allows HCFA to publish the agendas in the Federal Register notices and allows individuals and organizations to review the agenda and to determine if they wish to attend the public meetings. The timeframe is also necessary to allow the committee to research the topic and prepare a draft solution in time for the meeting. During the meetings, the committee provides a brief description of the topic (such as a new technology that may not be adequately identified by the current code) and then describes the technology or procedure through a formal presentation. Frequently, medical experts who perform the procedure make a presentation to describe the procedure and how it might be different from other procedures in the current code. Proposals are made to either continue capturing the procedure in the existing code, revise existing codes, or create a new code. The public then discusses the merits of the proposals and offers any alternate suggestions.

    The ICD-9-CM is updated once a year, effective October 1. This date coincides with the annual updates to the DRGs within the inpatient hospital prospective payment system. Each spring HCFA publishes a proposed rule that includes proposed changes to the inpatient hospital prospective payment system. This notice also includes final decisions on changes to ICD-9-CM codes. By August 1, HCFA publishes the new codes in the Addendum to the final rule, which is a technical presentation of actual changes to be made in both the index and tabular sections of the ICD-9-CM coding books. The Addendum is available on HCFA's website and is also sent to organizations such as the American Hospital Association (AHA) and the American Health Information Management Association (AHIMA) to distribute to their members. By October 1 of each year, the Department of Health and Human Services also produces a CD-ROM version of the ICD-9-CM, which may be purchased at the Government Printing Office. Since the ICD-9-CM is not a copyrighted system, many publishers and organizations distribute and sell books or other publications that include the changes to ICD-9-CM.

    Although the committee's process for discussing proposed changes to the ICD-9-CM fully involves and informs the public, the deliberative nature of the process does require some time. Topics discussed at the May and November 2000 meetings of the Committee are for changes to ICD-9-CM in October 2001. Therefore, depending on whether a request is considered at the May or November meeting, resulting changes may not be effective for approximately a year to a year-and-a-half later.

    b. Options To Expedite the Implementation of Coding Changes

    Several constraints upon the system would complicate implementing extensive changes. One significant complication is the interaction between the DRG system and the ICD-9-CM diagnosis and procedure codes (in the case of new services and technologies, the discussion focuses on procedure rather than diagnosis codes). When a new procedure code is created, a decision must be made as to whether the new code affects DRG assignment (for example, resulting in a case being assigned to a surgical rather than a medical DRG). Currently, new technology is generally assigned to the same DRG as its predecessor codes. Even if new codes do not affect DRG assignment, the GROUPER software (used to assign cases to DRGs) must be reprogrammed to recognize and classify all the new codes. This is necessary to allow Medicare's claims processing systems to process the claim.

    In addition to the changes to the GROUPER software, implementing changes to ICD-9-CM codes is a detailed and far-reaching process involving modifications to code books and software coding systems, as well as changes to hospitals' claims processing systems. As described above, the current process is organized around the annual publication of coding changes in the Federal Register as part of the updates and changes to the inpatient hospital prospective payment system. The changes are made available during the summer, and communicated via multiple channels to hospitals. This process allows for the necessary processing changes to be thoroughly tested prior to implementation, both by HCFA and by the hospitals. This testing procedure is essential given the volume (generally 11 million claims annually) and dollar impact (approximately $75 billion during FY 2001) of Medicare inpatient discharges.

    Another important issue when considering expediting the process of making coding changes is that the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected (section 1886(d)(4)(C)(iii) of the Act). If ICD-9-CM changes were made at multiple times during the year, the budget neutrality requirement would mean the standardized amounts, and potentially the cost outlier thresholds, would change as well. These changes would compromise the prospective nature of the payment system, whereby hospitals are able to project their revenues for the year and plan accordingly. Because we do not believe the requirement in section 533 of Public Law 106-554 to explore ways to expedite coding changes was intended to disrupt the prospective nature of the payment system, we did not consider options that would require revising the DRG weights and the standardized amounts more than once a year.

    With these considerations in mind, we explored the potential for shortening the current process.

    First, we are proposing to move the November meeting of the Coordination and Maintenance Committee to December without significant disruption. To move it further would Start Printed Page 22670disrupt the process for production of the annual inpatient prospective payment system regulation. This step would shorten the code assignment process by a month and permit coding changes resulting in payment changes to be implemented in a year.

    Second, we are proposing to expedite the process by issuing new coding decisions resulting from the spring meeting of the Committee (currently in May) that would be effective the following October 1. It may be necessary to move the May meeting to April to accommodate this procedure. Because the timing of this process would not allow the coding changes to be incorporated into the proposed rule published in the spring, cases with the new codes would have to be assigned to the same DRG to which they would have been assigned without the new code and no other payment adjustments would be possible. These coding changes would thus not affect the DRG weights or the budget neutrality calculations. However, more rapid introduction of new codes would permit reflection of the codes in claims data more quickly, and thus would permit eventual adjustment of payment rates sooner than otherwise possible. This capability could be of particular use where otherwise available data were not sufficient to support an immediate payment change, because hospital claims data permitting identification of use of the new technology would be available more quickly.

    This change would reduce the time between discussion of a proposed code and its implementation from a minimum of 11 months to 6 months. It would allow for the collection of MedPAR data a full year earlier than under the current process, providing the possibility that DRG revisions based on new codes could be expedited by up to 1 year.

    There would be significant challenges to making this proposed process work. Because the changes would not be published in the proposed rule, the public would be given less opportunity to consider the merits of the proposals, and it would have to either attend the spring meeting of the Committee or respond to the summary report within a few weeks. The decisions from the spring meeting must be finalized by the middle of June in order for us to include the changes in the Addendum of the final rule and in order to make changes in the GROUPER software to be effective October 1; it may be necessary to schedule the spring meeting earlier to meet this deadline. The opportunity to solicit additional input from industry groups and experts would be curtailed because of the short time lines. There would be an increased risk of errors related to revisions in the procedure code index (a manual process performed by HCFA), as there would be less time available to review and revise the procedure index to ensure that all changes are accurately reflected.

    For example, we are creating a new procedure code to capture percutaneous gastrojejunostomy (code 44.32). All coding instructions (indexing, inclusion terms, and exclusion terms) must be verified so that the procedure is appropriately indexed. If one of the many index entries for gastrojejunostomy is not correctly updated, percutaneous gastrojejunostomy would be assigned to another gastroenterostomy (code 44.39), which is an operating room procedure. This can have a significant impact on national health care data. Coders at different hospitals may follow different entries and arrive at different codes. To limit the potential for confusion in the hospital and coding communities resulting from two separate schedules for implementing code changes, we would limit these changes to those that meet our definition of new technology eligible for special treatment as proposed below. It would not be necessary, however, to demonstrate that the cases involving the new technology would be inadequately paid, since there would be no payment impacts of these changes.

    The changes would be included in the Addendum of the proposed rule for the inpatient hospital prospective payment system, and placed on the website for use by the industry in updating books and software systems. They also would be published in the final rule, and included in the CD-ROM version of ICD-9-CM that is distributed by the Government Printing Office. We are requesting public comments on this proposal.

    c. Limitations of ICD-9-CM

    While the updating process currently in use may not lend itself to expeditiously incorporating new medical services and technologies into the ICD-9-CM coding system, another important factor is the dated and limited structure of the ICD-9-CM system. The ICD-9-CM system was developed in the 1970s and implemented in 1979. Dramatic advances have occurred in medicine since that time. Although the ICD-9-CM Coordination and Maintenance Committee has attempted to make coding modifications to capture new technology, it has sometimes been difficult to achieve a reasonable result.

    The ICD-9-CM procedure codes are made up of four digits: two numerical characters followed by a decimal, and then two additional numerical characters. The first two digits indicate a category, such as 36—Operations on the vessels of the heart. The third digit provides additional breakdown, such as 36.0—Removal of coronary artery obstruction and insertion of stents. When the fourth digit is added, the code is fully described. There are only 10 codes available within each category (fourth digits 0-9). Once a category is full, we must either combine types of similar procedures under one code, or find a place in another section of the codebook for a new code. The benefit of such a system is that we can collapse the codes into categories when analyzing claims data to capture a wide range of similar procedures. However, if similar codes are placed in separate sections of the code book, coders may not easily find them. Errors may occur when trying to identify particular types of cases when codes are not carefully placed within a system such as the current ICD-9-CM.

    ICD-9-CM is 22 years old and the premises on which the coding system was established are dated. A number of approaches and techniques used for procedures such as lasers and the use of scopes were not anticipated when the structure of ICD-9-CM was developed. Consequently, the basic categories were established on technology that is now outdated. Making needed coding changes each year has been quite difficult and involves making compromises that effect the precision of the coding.

    d. Short-Term Solutions Within the ICD-9-CM Structure

    To consider how we might better respond to requests for new codes in the short term, we examined ICD-9-CM to attempt to identify an open series of codes that could be used for new procedures and technologies. There are currently 16 chapters of procedure codes. However, codes 17.00 through 17.99 are not in use. These codes are found between Chapter 3, “Operations on the Eye,” and Chapter 4, “Operations on the Ear.” This series of 100 codes could be used to provide codes for new procedures and technology. To fully utilize this new series of codes, we would assign new procedures to the next available code.

    A limitation of this approach would be that this new chapter would capture a diverse group of procedures potentially affecting all body systems. Assigning procedure codes to this new chapter would undoubtedly create Start Printed Page 22671considerable confusion for coders. Currently, procedures are grouped by body system, and similar procedures are placed in categories. This arrangement assists the coder in choosing the most appropriate code because he or she can quickly review closely related codes that are together. Using Chapter 17 for new technology codes, on the other hand, would mean that closely related codes would be widely separated.

    Use of Chapter 17 would also require a major revision of coding rules since coders are taught to identify codes within a group of similar procedures. They are not accustomed to looking for a list of unrelated procedures in a separate section of the coding book.

    To supplement the Chapter 17 codes, the Coordination and Maintenance Committee may be able to assign vacant codes in other chapters. However, large numbers of sequences are already fully or nearly fully occupied, and this strategy would only provide limited availability of new codes.

    e. Alternative Short-Term Approaches

    Some observers have expressed concern that the additional codes available within the ICD-9-CM code set may not be adequate to accommodate both routine changes in coding and the new technologies under consideration here, particularly if a long-term change, such as adoption of ICD-10-PCS, is significantly delayed. We have examined several alternative short-term options in the event the additional available codes are used before a long-term solution is reached. In evaluating these alternatives, one must consider the changes each entails to hospitals' and HCFA's coding and claims processing systems, and the time necessary to implement such changes (balanced against the timeframe for adopting a long-term coding solution).

    Expanding ICD-9-CM procedure codes by making them alphanumeric or adding a fifth digit would make available a substantial number of new codes for new technology but would require substantial system changes and create standards issues. This approach was extensively discussed in meetings of the ICD-9-CM Coordination and Maintenance Committee prior to the development of ICD-10-PCS. Input from the public indicated that such a significant modification to a limited and dated system would only make the system worse. The time it would take to make this system work well would be longer than that required to build a new system and the resources needed for system changes would be significant. Such a modification of the ICD-9-CM standard code set would require the formal standards setting process prescribed by the regulations implementing the Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191). We solicit comments from the public about the desirability of pursuing expansion and modification of the ICD-9-CM standards for this purpose.

    Using the V-code section of ICD-9-CM diagnosis codes to report new technology would not require any systems changes or create any standards issues and would create a moderate number of codes for new technology. We have discussed this recommendation with NCHS. NCHS opposed this option as an inappropriate use of diagnosis codes. While “V” codes are used for the classification of factors influencing health status and contact with health services, they are not a substitute for procedure coding. By adding procedure coding concepts to the diagnosis coding system, confusion could easily lead to increased errors. Furthermore, the V-code section has only a limited number of available spots.

    We also considered using HCFA Common Procedure Coding System (HCPCS) codes to report use of new technology for inpatient cases. However, using HCPCS would require a moderate amount of systems change and may require the formal standards setting process prescribed by Public Law 104-191, since the HCPCS code set is not the standard for inpatient services. However, it would make a substantial number of codes available for new technology. Alphanumeric HCPCS codes are currently used in outpatient departments and physician offices for reporting services, and they are used on a limited basis by hospitals in reporting specific inpatient services. For instance, alphanumeric HCPCS codes are used for reporting the use of hemophilia clotting factors used during an inpatient stay.

    Use of HCPCS codes would require that a new service or technology either be assigned a code through otherwise applicable processes for HCPCS coding or that HCFA assign a specific, temporary code for use in connection with new technology payments for inpatient hospital services. Specifically assigned codes could be assigned relatively quickly. However, use of such codes would run the risk of confusion if other codes were assigned to the same service or items when used in other settings. More generally, HCPCS coding would duplicate information found in the ICD-9-CM procedure codes. Careful attention to integration of coding across the two systems would be necessary, and dissemination of information about correct coding to hospital coders would present challenges. Even with excellent integration and dissemination, the risk of confusion by hospital coders would be high.

    The use of HCPCS codes would also raise questions on how the accuracy of claims data will be assessed. HCFA contracts with Peer Review Organizations (PROs) to validate the accuracy of coded data. Consideration would need to be given to how the accuracy of these data could be verified. If two separate coding systems with overlapping information are used, considerable variations in reporting practices might arise.

    Similar to the option of using alphanumeric ICD-9-CM procedure codes, changes in systems and in hospital coding procedures that would be associated with this approach would take time and resources to implement for hospitals, HCFA, and potentially other payers such as Medicare secondary insurers.

    In recognition of these considerations, we do not propose to proceed with use of HCPCS codes for this purpose at the present. We believe this possibility should be revisited later if the ICD-9-CM codes in fact prove inadequate and if a longer term solution is not yet available. However, we are encouraging public comments on the concept of using HCPCS codes to identify specific new technologies on inpatient hospital claims.

    f. Development of ICD-10-PCS; A Possible Long-Term Solution

    While acknowledging the limitations of the ICD-9-CM system, the Secretary designated the ICD-9-CM system as the national standard in a final rule in the Federal Register on August 17, 2000 (65 FR 50311) following notice and comment rulemaking in accordance with Public Law 104-191. In that same final rule, the public was advised that there would be a need in the near future to replace this dated coding system with a system that could better capture today's health care information. At that time, work was proceeding on an updated variant of the ICD system, ICD-10, that could replace ICD-9-CM, but this system was not yet completed. The World Health Organization developed ICD-10 as an international diagnosis coding system. NCHS has been modifying ICD-10 to replace the diagnosis section of ICD-9-CM. This system is being referred to as ICD-10-CM. At the same time, HCFA has been developing the ICD-10-Procedure Coding System (ICD-10-PCS) as a possible replacement for the ICD-9-CM procedure codes. Start Printed Page 22672

    Criteria for the development of a new procedure coding system were established by the National Committee on Vital and Health Statistics (NCVHS). The criteria included the following:

    • Completeness—all substantially different procedures have a unique code.
    • Expandability—the structure of the system allows incorporation of new procedures and technologies as unique codes.
    • Standardized terminology—the coding system includes definitions of the terminology used. While the meaning of the specific words can vary in common usage, the coding scheme does not include multiple meanings for the same term. Each term is assigned a specific meaning.
    • Multiaxial—the system has a multiaxial structure with each code character having the same meaning within the specific procedure section and across procedure sections to the extent possible.
    • Diagnostic information is not included in the procedure description.

    The ICD-10-PCS was developed using these criteria by HCFA through a contract with 3M Health Information Systems. The ICD-10-PCS system provides much greater code capacity because all substantially different procedures have a unique code. While the ICD-9-CM procedure coding system is limited to a maximum of 10,000 codes, the current draft of ICD-10-PCS contains 197,769 codes and the number could be expanded further.

    g. Public Meeting on Implementing ICD-10-PCS

    The Department of Health and Human Services is starting the process of soliciting public comments on whether it should proceed to adopt ICD-10-PCS as the national standard for coding inpatient hospital services to replace ICD-9-CM procedures. A public meeting on this issue has been scheduled for May 17, 2001, in the HCFA Auditorium in Baltimore, Maryland. Information on this meeting can be found in the Summary Report of the November 2000 meeting of the ICD-9-CM Coordination and Maintenance Committee at: www.hcfa.gov/​medicare/​icd9cm.htm. The public is encouraged to attend and participate in the discussion on whether ICD-10-PCS should become a national standard. Organizations and groups will be given the opportunity to make a brief presentation on their members' behalf. Groups wishing to be scheduled to present should contact Pat Brooks, HCFA, at (410) 786-5318. This meeting will begin the process of evaluating ICD-10-PCS as a future national standard.

    h. Proposed Methods of Expeditiously Incorporating New Medical Services and Technologies Into the Coding System

    In summary, we are proposing a two-part strategy for expeditiously incorporating new medical services and technologies into the clinical coding system used with respect to payment for inpatient hospital services. First, we are proposing to shorten the timeframe for implementing new codes by processing changes that do not have payment implications without first publishing them in the proposed rule in the spring. This means new codes approved at the spring meeting of the ICD-9-CM Coordination and Maintenance Committee could be implemented by October of the same year. We also are proposing to move the November meeting to December. These proposed changes would reduce the time it currently takes to implement new codes, as well as reduce the time required to collect data through the MedPAR by up to a year in many cases.

    Second, to make more codes available to identify new technology, we will immediately begin to work with the public to use Chapter 17 of ICD-9-CM procedures. This will provide room for 100 additional procedure codes. We also will continue the current process of adding and revising codes within the current chapters as room and structure allow. Our long-range strategy is to consider the implementation of ICD-10-PCS as a replacement system for ICD-9-CM. However, because of the need to address any such change through notice and public rulemaking procedures (a proposed and final rule), in addition to the need to revise both our payment systems and those of hospitals, this could occur no earlier than October 2003.

    7. New Requirements Relative to New Services and Technologies

    Section 533 of Public Law 106-554 addresses the process by which new technologies and services are introduced into the DRGs and how DRG payment rates are to be adapted to accommodate them. Section 533(b) added new section 1886(d)(5)(K) to the Act, which specifies that the Secretary must establish criteria to use to identify a new technology after notice and an opportunity for public comment. Under new section 1886(d)(5)(K)(ii)(I) of the Act, effective for discharges occurring on or after October 1, 2001, the Secretary is required to apply a mechanism to recognize the costs of new technologies if, “based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges under this subsection is inadequate.” Further, new section 1886(d)(5)(K)(v) stipulates that the requirement for an additional payment for a new medical service or technology may be satisfied by means of “an add-on payment, a payment adjustment, or any other similar mechanism for increasing the amount otherwise payable with respect to a discharge under this subsection.” Section 533(b) also added a new section 1886(d)(5)(L) to the Act which states that the requirement for an additional payment for a new medical service or technology may also be met through establishing “new-technology groups into which a new medical service or technology will be classified.”

    In section IV.F. of this preamble, we are setting forth, for public comment, our policy proposals to implement section 1886(d)(5)(K) of the Act, as added by section 533(b) of Public Law 106-554. In summary, the proposed policies include—

    • Proposed criteria for identifying new medical services and technologies for additional payments beyond the DRG prospective payment system payment.
    • The proposed methodology for determining the adequacy of current payments for new services and technology.
    • The proposed methodology for determining the amount of the additional payment and for payment mechanism for new medical services and technologies.

    III. Proposed Changes to the Hospital Wage Index

    A. Background

    Section 1886(d)(3)(E) of the Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary must adjust the standardized amounts “for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level.” In accordance with the broad discretion conferred under the Act, we currently define hospital labor market areas based on the definitions of Metropolitan Statistical Areas (MSAs), Primary MSAs (PMSAs), and New England County Metropolitan Areas (NECMAs) issued by the Office of Management and Budget Start Printed Page 22673(OMB). The OMB also designates Consolidated MSAs (CMSAs). A CMSA is a metropolitan area with a population of one million or more, comprising two or more PMSAs (identified by their separate economic and social character). For purposes of the hospital wage index, we use the PMSAs rather than CMSAs since they allow a more precise breakdown of labor costs. If a metropolitan area is not designated as part of a PMSA, we use the applicable MSA. Rural areas are areas outside a designated MSA, PMSA, or NECMA. For purposes of the wage index, we combine all of the rural counties in a State to calculate a rural wage index for that State.

    We note that, effective April 1, 1990, the term Metropolitan Area (MA) replaced the term MSA (which had been used since June 30, 1983) to describe the set of metropolitan areas consisting of MSAs, PMSAs, and CMSAs. The terminology was changed by OMB in the March 30, 1990 Federal Register to distinguish between the individual metropolitan areas known as MSAs and the set of all metropolitan areas (MSAs, PMSAs, and CMSAs) (55 FR 12154). For purposes of the prospective payment system, we will continue to refer to these areas as MSAs.

    Beginning October 1, 1993, section 1886(d)(3)(E) of the Act requires that we update the wage index annually. Furthermore, this section provides that the Secretary base the update on a survey of wages and wage-related costs of short-term, acute care hospitals. The survey should measure, to the extent feasible, the earnings and paid hours of employment by occupational category, and must exclude the wages and wage-related costs incurred in furnishing skilled nursing services. As discussed below in section III.F. of this preamble, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating the wage index.

    B. FY 2002 Wage Index Update

    The proposed FY 2002 wage index values in section V of the Addendum to this proposed rule (effective for hospital discharges occurring on or after October 1, 2001 and before October 1, 2002) are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 1998 (the FY 2001 wage index was based on FY 1997 wage data).

    The proposed FY 2002 wage index includes the following categories of data associated with costs paid under the hospital inpatient prospective payment system (as well as outpatient costs), which were also included in the FY 2001 wage index:

    • Salaries and hours from short-term, acute care hospitals.
    • Home office costs and hours.
    • Certain contract labor costs and hours.
    • Wage-related costs.

    Consistent with the wage index methodology for FY 2001, the proposed wage index for FY 2002 also continues to exclude the direct and overhead salaries and hours for services not paid through the inpatient prospective payment system such as skilled nursing facility (SNF) services, home health services, or other subprovider components that are not subject to the prospective payment system.

    We calculate a separate Puerto Rico-specific wage index and apply it to the Puerto Rico standardized amount. (See 62 FR 45984 and 46041.) This wage index is based solely on Puerto Rico's data. Finally, section 4410 of Public Law 105-33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is not located in a rural area may not be less than the area wage index applicable to hospitals located in rural areas in that State.

    C. FY 2002 Wage Index Proposal

    Because it is used to adjust payments to hospitals under the prospective payment system, the hospital wage index should, to the extent possible, reflect the wage costs associated with the areas of the hospital included under the hospital inpatient prospective payment system. In response to concerns within the hospital community related to the removal, from the wage index calculation, of costs related to graduate medical education (GME) (teaching physicians and residents) and certified registered nurse anesthetists (CRNAs), which are paid by Medicare separately from the prospective payment system, the American Hospital Association (AHA) convened a workgroup to develop a consensus recommendation on this issue. The workgroup recommended that costs related to GME and CRNAs be phased out of the wage index calculation over a 5-year period. Based upon our analysis of hospitals' FY 1996 wage data, and consistent with the AHA workgroup's recommendation, we specified in the July 30, 1999 final rule (64 FR 41505) that we would phase-out these costs from the calculation of the wage index over a 5-year period, beginning in FY 2000. In keeping with the decision to phase-out costs related to GME and CRNAs, the proposed FY 2002 wage index is based on a blend of 40 percent of an average hourly wage including these costs, and 60 percent of an average hourly wage excluding these costs.

    Beginning with the FY 1998 cost reports, we revised the Worksheet S-3, Part II so that hospitals can separately report teaching physician Part A costs on lines 4.01, 10.01, 12.01, and 18.01. Therefore, it is no longer necessary for us to conduct the special survey we used for the FY 2000 and FY 2001 wage indexes (64 FR 41505 and 65 FR 47071).

    1. Health Insurance and Health-Related Costs

    In the August 1, 2000 final rule, we clarified our definition of “purchased health insurance costs” and “self-insurance” for hospitals that provide health insurance to employees (65 FR 47073). For purposes of the wage index, purchased or self-funded health insurance plan costs include the hospitals' insurance premium costs, external administration costs, and the share of costs for services delivered to employees.

    In response to a comment received concerning this issue, we stated that, for self-funded health insurance costs, personnel costs associated with hospital staff that deliver the services to the employees must continue to be excluded from wage-related costs if the costs are already included in the wage data as salaries on Worksheet S-3, Part II, Line 1. However, after further consideration of this policy, particularly with respect to concerns expressed by our fiscal intermediaries about the level of effort required during the wage index desk review process to ensure hospitals are appropriately identifying and excluding these costs, we are proposing a revision. Effective with the calculation of the FY 2003 wage index, for either purchased or self-funded health insurance, we would allow health insurance personnel costs, associated with hospital staff that deliver services to employees, to be included as part of the wage-related costs. We believe this proposed revised policy will ensure that health insurance costs are consistently reported by hospitals. Health insurance costs would continue to be developed using generally accepted accounting principles.

    In the August 1, 2000 final rule (65 FR 47073), we further clarified that health-related costs (including employee physical examinations, flu shots, and clinic visits, and other services that are not covered by employees' health insurance plans but are provided at no cost or at discounted rates to employees of the hospital) may be included as “other” wage-related costs if, among Start Printed Page 22674other criteria, the combined cost of all such health-related costs is greater than one percent of the hospital's total salaries (less excluded area salaries).

    For purposes of calculating the FY 2003 wage index (which will be based on data for cost reporting periods beginning in FY 1999), we are proposing to revise this policy to allow hospitals to include health-related costs as allowable core wage-related costs.

    2. Costs of Contracted Pharmacy and Laboratory Services

    Our policy concerning inclusion of contract labor costs for purposes of calculating the wage index has evolved over the years. We recognize the role of contract labor in meeting special personnel needs of many hospitals. In addition, improvements in the wage data have allowed us to more accurately identify contract labor costs and hours. As a result, effective with the FY 1994 wage index, we included the costs of direct patient care contract services in the wage index calculation. The FY 1999 wage index included the costs and hours of certain management contract services, and the FY 2000 wage index included the costs for contract physician Part A services. (The 1996 proposed rule (61 FR 27456) provided an in-depth background to the issues related to the inclusion of contract labor costs in the wage index calculation.)

    We revised the 1998 cost report to collect the data associated with contract pharmacy, Worksheet S-3, Part II, Line 9.01, and contract laboratory, Worksheet S-3, Part II, Line 9.02. The cost reporting instructions for these line numbers followed that for all contract labor lines; that is, to include the amount paid for services furnished under contract for direct patient care, and not include cost for equipment, supplies, travel expenses, and other miscellaneous or overhead items (Medicare Provider Reimbursement Manual, Part 2, Cost Reporting Forms and Instructions, Chapter 36, Transmittal 6, page 36-32). Effective with the FY 2002 wage index, which uses FY 1998 wage data, we are proposing to include the costs and hours of contract pharmacy and laboratory.

    3. Collection of Occupational Mix Data

    Section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E) of the Act to require that the Secretary must provide for the collection of data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. The initial collection of these data must be completed by September 30, 2003, for application beginning October 1, 2004.

    Currently, the wage data collected by HCFA on the cost report reflect the sum of wages, hours, and wage-related costs for all hospital employees. There is no separate collection by occupational categories of employees, such as registered nurses or physical therapists. Total salaries and hours reflect management decisions made by hospitals in terms of how many employees within a certain occupation to employ to treat different types of patients. For example, a large academic medical center may tend to hire more high-cost specialized employees to treat its more acutely ill patient population. The argument is that the higher labor costs incurred to treat this patient population are reflected in the higher case mix of these hospitals, and therefore, reflecting these costs in the wage index is essentially counting them twice.

    An occupational mix adjustment can be used to account for hospital management decisions about how many employees to hire in each occupational category. Occupational mix data measure the price the hospital must pay for employees within each category. A wage index that reflected only these market prices would remove the impact of management decisions about the mix of employees needed and, therefore, better capture geographic variations in the labor market.

    We have examined this issue previously. In the May 27, 1994 Federal Register (59 FR 27724), we discussed the outcome of consideration of this issue by a hospital workgroup. At that time, the workgroup's consensus was that the data required to implement an occupational mix adjustment were not available and the likelihood of obtaining such data would be minimal. There seemed to be little support among hospital industry representatives for developing a system that would create additional reporting burdens with an unproven or minimal impact on the distribution of payments. Also, in the August 30, 1991 Federal Register (56 FR 43219), we stated our belief that the collection of these data would be costly and difficult.

    In considering the format to collect occupational mix data, we looked to data currently being collected by the Bureau of Labor Statistics (BLS), which conducts an annual mail survey to produce estimates of employment and wages for specific occupations. This program, Occupational Employment Statistics (OES), collects data on wage and salary workers in nonfarm establishments in order to produce employment and wage estimates for over 700 occupations.

    The OES survey collects wage data in 12 hourly rate intervals. Employers report the number of employees in an occupation per each wage range. To illustrate, the wage intervals used for the 1999 survey are as follows:

    IntervalHourly wagesAnnual wages
    Range AUnder $6.75Under $14,040
    Range B6.75 to 8.4914,040 to 17,659
    Range C8.50 to 10.7417,660 to 22,359
    Range D10.75 to 13.4922,360 to 28,079
    Range E13.50 to 16.9928,080 to 35,359
    Range F17.00 to 21.4935,360 to 44,719
    Range G21.50 to 27.2444,720 to 56,679
    Range H27.25 to 34.4956,680 to 71,759
    Range I34.50 to 43.7471,760 to 90,999
    Range J43.75 to 55.4991,000 to 115,439
    Range K55.50 to 69.99115,440 to 145,599
    Range L70,000 and over145,600 and over

    It should be noted that this table is for illustrative purposes, and we may update the data ranges in our actual collection instrument.

    Although we initially considered using the OES data, section 304(c) of Public Law 106-554 requires us to Start Printed Page 22675collect data from every short-term, acute care hospital. The OES data are a sample survey and, therefore, as currently conducted, are not consistent with the statutory requirement to include data from every hospital. Another issue with using OES data is that, for purposes of the Medicare wage index, the hospitals' data must be reviewed and verified by the fiscal intermediaries. The OES survey is a voluntary survey.

    Although we decided to pursue a separate data collection effort than OES, we propose to model our format after the one used by OES. In this way, hospitals participating in the OES survey, should have no additional recordkeeping and reporting requirements beyond those of the OES survey.

    The OES survey of the hospital industry is designed to capture all occupational categories within the industry. For purposes of adjusting the wage index for occupational mix, we do not believe it is necessary to collect data from such a comprehensive scope of categories. Furthermore, because the data must be audited, a comprehensive list of categories would be excessively burdensome.

    In deciding which job categories to include, we reviewed the occupational categories collected by OES and identified those with at least 35,000 hospital employees. Our goal is to collect data from a sample of job categories that provides a valid measure of wage rates within a geographical area. Using this threshold of at least 35,000 employees within a category nationally, we are proposing to collect the number of employees by wage range as illustrated in the above table, for the occupational categories listed below. The following data are based on the 1999 OES survey:

    OES codeCategoryEmployeesPercent of total hospital employeesMean hourly wage
    15008Medicine and Health Services Managers93,6801.9$27.38
    27302Social Workers, Medial and Psychiatric53,3601.116.33
    32102Physicians and Surgeons125,6402.643.76
    32308Physical Therapists39,8400.826.14
    32502Registered Nurses1,231,98025.021.12
    32505Licensed Practical Nurses206,3604.213.39
    32517Pharmacists46,8601.028.62
    32911, 32928, 32931Clinical Technologists and Technicians122,3802.5011.69
    51002, 55105, 55108, 55305First-Line Supervisors and Clerical Workers445,7309.511.39
    55332, 55347
    65038, 67002, 67005Food Preparation Workers and Housekeeping218,4404.58.17
    66008Nursing Aides, Orderlies, and Attendants301,2406.28.67

    We believe this list of occupational categories provides a good representation of the employee mix at most hospitals. Definitions for each occupational category are available on the BLS website at http://stats.bls.gov/​oes/​1999/​oes_​alph.htm.

    We have yet to settle on the methodology on how to use the occupational mix index. One option would be to weight each hospital's wage index by its occupational mix index. This requires calculating a national occupational mix index and then breaking it down by MSA and by hospital, similar to how the wage index is broken down. In this way, the wage index would capture geographic differences in wage rates. The decision about how to apply the occupational mix index to the wage index depends on the quality of the data collected, since this effort will be the first time wage and hour data by occupation are collected in this audited manner.

    Section 304(c) directs the Secretary to provide for the collection of these data by September 30, 2003, and to apply them in the wage index by October 1, 2004. Therefore, the data are to be incorporated in the FY 2005 wage index. Under our current timetable, the FY 2005 wage index will be based on wage data collected from hospitals' cost reporting periods beginning during FY 2001. In order to facilitate the fiscal intermediaries' review of these data, we believe the occupational mix data should coincide with the data otherwise used to calculate the cost report. Therefore, we will conduct a special survey of all short-term acute-care hospitals that are required to report wage data to collect these data coinciding with hospitals' FY 2001 cost reports. More specific procedural information regarding this survey will be included in the FY 2002 final rule scheduled to be published by August 1, 2001.

    D. Verification of Wage Data From the Medicare Cost Report

    The data for the proposed FY 2002 wage index were obtained from Worksheet S-3, Parts II and III of the FY 1998 Medicare cost reports. The data file used to construct the proposed wage index includes FY 1998 data submitted to HCFA as of mid-February 2001. As in past years, we performed an intensive review of the wage data, mostly through the use of edits designed to identify aberrant data.

    We asked our fiscal intermediaries to revise or verify data elements that resulted in specific edit failures. Some unresolved data elements are included in the calculation of the proposed FY 2002 wage index pending their resolution before calculation of the final FY 2002 wage index. We have instructed the intermediaries to complete their verification of questionable data elements and to transmit any changes to the wage data no later than April 9, 2001. We expect that all unresolved data elements will be resolved by that date. The revised data will be reflected in the final rule.

    Also, as part of our editing process, we removed data for 47 hospitals that failed edits. For 23 of these hospitals, we were unable to obtain sufficient documentation to verify or revise the data because the hospitals are no longer participating in the Medicare program or are in bankruptcy status. Twenty-four hospitals had incomplete or inaccurate data resulting in zero or negative average hourly wages. Therefore, they were removed from the calculation. The data for these hospitals will be included in the final wage index if we receive corrected data that pass our edits. As a result, the proposed FY 2002 wage index is calculated based on FY 1998 wage data for 4,868 hospitals. Start Printed Page 22676

    E. Computation of the Proposed FY 2002 Wage Index

    We note a proposed technical change to the FY 2002 calculation. For the FY 2001 wage index calculation, we initially proposed to subtract Line 13 of Worksheet S-3, Part III from total hours when determining the excluded hours ratio used to estimate the amount of overhead attributed to excluded areas (65 FR 26299). However, the formula resulted in large and inappropriate increases in the average hourly wages for some hospitals (65 FR 47074), particularly hospitals that have large overhead and excluded area costs. Therefore, for the final FY 2001 wage index calculation, we reverted to the FY 2000 excluded hours ratio formula, which did not subtract Line 13.

    We, and others in the hospital community, continued to believe that subtracting Part III, Line 13 from total hours is the correct formula for determining the excluded hours ratio. We analyzed how the application of this formula resulted in overstated average hourly wages for some hospitals and how we could improve the overall accuracy of the overhead allocation methodology. We became aware that the problem was not in the excluded hours ratio formula. Rather, our wage index calculation did not also remove the overhead wage-related costs associated with excluded areas, an amount that must be estimated before it can be subtracted from the calculation. The combined effect of applying the excluded hours ratio formula, which appropriately removes salaries of lower-wage, overhead employees, and not subtracting overhead wage-related costs associated with excluded areas, resulted in overstated salary costs and average hourly wages.

    For the FY 2002 wage index calculation, we are proposing to apply the excluded hours ratio formula that subtracts Part III, Line 13 from total hours. Additionally, for the first time in the wage index calculation, we estimated and subtracted overhead wage-related costs allocated to excluded areas.

    After we applied this new calculation, there were still a few hospitals that experienced large increases in their average hourly wages. The intermediaries verified that the hospitals' wage data were accurate, so we kept the data in the wage index calculation. These hospitals primarily function as SNFs, psychiatric hospitals, or rehabilitation hospitals that have few acute care beds. The hospitals' higher average hourly wages reflect the costs of the higher salaried employees that remain in the wage index calculation after we subtract the costs of excluded area and associated overhead employees.

    The method used to compute the proposed FY 2002 wage index follows.

    Step 1—As noted above, we are proposing to base the FY 2002 wage index on wage data reported on the FY 1998 Medicare cost reports. We gathered data from each of the non-Federal, short-term, acute care hospitals for which data were reported on the Worksheet S-3, Parts II and III of the Medicare cost report for the hospital's cost reporting period beginning on or after October 1, 1997 and before October 1, 1998. In addition, we included data from any hospital that had cost reporting periods beginning before October 1997 and reported a cost reporting period covering all of FY 1998. These data were included because no other data from these hospitals would be available for the cost reporting period described above, and because particular labor market areas might be affected due to the omission of these hospitals. However, we generally describe these wage data as FY 1998 data. We note that, if a hospital had more than one cost reporting period beginning during FY 1998 (for example, a hospital had two short cost reporting periods beginning on or after October 1, 1997 and before October 1, 1998), we included wage data from only one of the cost reporting periods, the longest, in the wage index calculation. If there was more than one cost reporting period and the periods were equal in length, we included the wage data from the latest period in the wage index calculation.

    Step 2—Salaries—The method used to compute a hospital's average hourly wage is a blend of 40 percent of the hospital's average hourly wage including all GME and CRNA costs, and 60 percent of the hospital's average hourly wage after eliminating all GME and CRNA costs.

    In calculating a hospital's average salaries plus wage-related costs, including all GME and CRNA costs, we subtracted from Line 1 (total salaries) the Part B salaries reported on Lines 3 and 5, home office salaries reported on Line 7, and excluded salaries reported on Lines 8 and 8.01 (that is, direct salaries attributable to skilled nursing facility services, home health services, and other subprovider components not subject to the prospective payment system). We also subtracted from Line 1 the salaries for which no hours were reported on Lines 2, 4, and 6. To determine total salaries plus wage-related costs, we added to the net hospital salaries the costs of contract labor for direct patient care, certain top management, pharmacy, laboratory, and physician Part A services (Lines 9, 9.01, 9.02, 10, and 10.01), home office salaries and wage-related costs reported by the hospital on Lines 11, 12, and 12.01, and nonexcluded area wage-related costs (Lines 13, 14, 16, 18, 18.01, and 20).

    We note that contract labor and home office salaries for which no corresponding hours are reported were not included. In addition, wage-related costs for specific categories of employees (Lines 16, 18, 18.01, and 20) are excluded if no corresponding salaries are reported for those employees (Lines 2, 4, 4.01, and 6, respectively).

    We then calculated a hospital's salaries plus wage-related costs by subtracting from total salaries the salaries plus wage-related costs for teaching physicians, Lines (4.01, 10.01, 12.01, and 18.01), Part A CRNAs (Lines 2 and 16), and residents (Lines 6 and 20).

    Step 3—Hours—With the exception of wage-related costs, for which there are no associated hours, we computed total hours using the same methods as described for salaries in Step 2.

    Step 4—For each hospital reporting both total overhead salaries and total overhead hours greater than zero, we then allocated overhead costs to areas of the hospital excluded from the wage index calculation. First, we determined the ratio of excluded area hours (sum of Lines 8 and 8.01 of Worksheet S-3, Part II) to revised total hours (Line 1 minus the sum of Part II, Lines 3, 5, 7, and Part III, Line 13 of Worksheet S-3). We then computed the amounts of overhead salaries and hours to be allocated to excluded areas by multiplying the above ratio by the total overhead salaries and hours reported on Line 13 of Worksheet S-3, Part III. Next, we computed the amounts of overhead wage-related costs to be allocated to excluded areas using three steps: (1) We determined the ratio of overhead hours (Part III, Line 13) to revised hours (Line 1 minus the sum of Lines 3, 5, and 7); (2) we computed overhead wage-related costs by multiplying the overhead hours ratio by wage-related costs reported on Part II, Lines 13, 14, 16, 18, 18.01, and 20; and (3) we multiplied the computed overhead wage-related costs by the above excluded area hours ratio. Finally, we subtracted the computed overhead salaries, wage-related costs, and hours associated with excluded areas from the total salaries (plus wage-related costs) and hours derived in Steps 2 and 3. Using the above method for computing overhead salaries, wage-related costs, and hours to allocate to Start Printed Page 22677excluded areas, we also computed these costs excluding all costs associated with GME and CRNAs (Lines 2, 4.01, 6, 10.01, 12.01, and 18.01).

    Step 5—For each hospital, we adjusted the total salaries plus wage-related costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimated the percentage change in the employment cost index (ECI) for compensation for each 30-day increment from October 14, 1997 through April 15, 1999 for private industry hospital workers from the Bureau of Labor Statistics' Compensation and Working Conditions. We use the ECI because it reflects the price increase associated with total compensation (salaries plus fringes) rather than just the increase in salaries. In addition, the ECI includes managers as well as other hospital workers. This methodology to compute the monthly update factors uses actual quarterly ECI data and assures that the update factors match the actual quarterly and annual percent changes. The factors used to adjust the hospital's data were based on the midpoint of the cost reporting period, as indicated below.

    Midpoint of Cost Reporting Period

    AfterBeforeAdjustment factor
    12/14/9701/15/981.03292
    01/14/9802/15/981.03048
    02/14/9803/15/981.02828
    03/14/9804/15/981.02621
    04/14/9805/15/981.02411
    05/14/9806/15/981.02200
    06/14/9807/15/981.01973
    07/14/9808/15/981.01714
    08/14/9809/15/981.01424
    09/14/9810/15/981.01137
    10/14/9811/15/981.00885
    11/14/9812/15/981.00669
    12/14/9801/15/991.00462
    01/14/9902/15/991.00239
    02/14/9903/15/991.00000
    03/14/9904/15/990.99746

    For example, the midpoint of a cost reporting period beginning January 1, 1998 and ending December 31, 1998 is June 30, 1998. An adjustment factor of 1.01973 would be applied to the wages of a hospital with such a cost reporting period. In addition, for the data for any cost reporting period that began in FY 1998 and covered a period of less than 360 days or more than 370 days, we annualized the data to reflect a 1-year cost report. Annualization is accomplished by dividing the data by the number of days in the cost report and then multiplying the results by 365.

    Step 6—Each hospital was assigned to its appropriate urban or rural labor market area before any reclassifications under section 1886(d)(8)(B) or section 1886(d)(10) of the Act. Within each urban or rural labor market area, we added the total adjusted salaries plus wage-related costs obtained in Step 5 (with and without GME and CRNA costs) for all hospitals in that area to determine the total adjusted salaries plus wage-related costs for the labor market area.

    Step 7—We divided the total adjusted salaries plus wage-related costs obtained under both methods in Step 6 by the sum of the corresponding total hours (from Step 4) for all hospitals in each labor market area to determine an average hourly wage for the area.

    Because the proposed FY 2002 wage index is based on a blend of average hourly wages, we then added 40 percent of the average hourly wage calculated without removing GME and CRNA costs, and 60 percent of the average hourly wage calculated with these costs excluded.

    Step 8—We added the total adjusted salaries plus wage-related costs obtained in Step 5 for all hospitals in the nation and then divided the sum by the national sum of total hours from Step 4 to arrive at a national average hourly wage (using the same blending methodology described in Step 7). Using the data as described above, the national average hourly wage is $22.0545.

    Step 9—For each urban or rural labor market area, we calculated the hospital wage index value by dividing the area average hourly wage obtained in Step 7 by the national average hourly wage computed in Step 8.

    Step 10—Following the process set forth above, we developed a separate Puerto Rico-specific wage index for purposes of adjusting the Puerto Rico standardized amounts. (The national Puerto Rico standardized amount is adjusted by a wage index calculated for all Puerto Rico labor market areas based on the national average hourly wage as described above.) We added the total adjusted salaries plus wage-related costs (as calculated in Step 5) for all hospitals in Puerto Rico and divided the sum by the total hours for Puerto Rico (as calculated in Step 4) to arrive at an overall average hourly wage of $10.8100 for Puerto Rico. For each labor market area in Puerto Rico, we calculated the Puerto Rico-specific wage index value by dividing the area average hourly wage (as calculated in Step 7) by the overall Puerto Rico average hourly wage.

    Step 11—Section 4410 of Public Law 105-33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area may not be less than the area wage index applicable to hospitals located in rural areas in that State. Furthermore, this wage index floor is to be implemented in such a manner as to ensure that aggregate prospective payment system payments are not greater or less than those that would have been made in the year if this section did not apply. For FY 2002, this change affects 240 hospitals in 41 MSAs. The MSAs affected by this provision are identified in Table 4A by a footnote.

    F. Revisions to the Wage Index Based on Hospital Redesignation

    Under section 1886(d)(8)(B) of the Act, hospitals in certain rural counties adjacent to one or more MSAs are considered to be located in one of the adjacent MSAs if certain standards are met. Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the prospective payment system.

    1. Provisions of Public Law 106-554

    Section 304 of Public Law 106-554 made changes to several provisions of section 1886(d)(10) of the Act relating to hospital reclassifications and the wage index:

    • Section 304(a) amended section 1886(d)(10)(D) of the Act by adding a clause (v) to provide that, beginning with FY 2001, an MGCRB decision on a hospital reclassification for purposes of the wage index is effective for 3 years, unless the hospital elects to terminate the reclassification. Section 304(a) also provides that the MGCRB must use the 3 most recent years' average hourly wage data in evaluating a hospital's reclassification application for FY 2003 and any succeeding fiscal year (section 1886(d)(10)(D)(vi) of the Act).
    • Section 304(b) provides that, by October 1, 2001, the Secretary must establish a mechanism under which a statewide entity may apply to have all of the geographic areas in the State treated as a single geographic area for purposes of computing and applying a single wage index, for reclassifications beginning in FY 2003. Section 304(b) further requires that, if the Secretary applies a statewide wage index to an area, an application by an individual hospital in that area would not be considered.

    We address our policy proposals relating to implementation of these three provisions of sections 304(a) and (b) of Public Law 106-554 in section IV. of this proposed rule. The following Start Printed Page 22678discussion of the proposed revisions to the wage index based on hospital redesignations reflects these proposed policies.

    2. Effects of Reclassification

    The methodology for determining the wage index values for redesignated hospitals is applied jointly to the hospitals located in those rural counties that were deemed urban under section 1886(d)(8)(B) of the Act and those hospitals that were reclassified as a result of the MGCRB decisions under section 1886(d)(10) of the Act. Section 1886(d)(8)(C) of the Act provides that the application of the wage index to redesignated hospitals is dependent on the hypothetical impact that the wage data from these hospitals would have on the wage index value for the area to which they have been redesignated. Therefore, as provided in section 1886(d)(8)(C) of the Act, the wage index values were determined by considering the following:

    • If including the wage data for the redesignated hospitals would reduce the wage index value for the area to which the hospitals are redesignated by 1 percentage point or less, the area wage index value determined exclusive of the wage data for the redesignated hospitals applies to the redesignated hospitals.
    • If including the wage data for the redesignated hospitals reduces the wage index value for the area to which the hospitals are redesignated by more than 1 percentage point, the area wage index determined inclusive of the wage data for the redesignated hospitals (the combined wage index value) applies to the redesignated hospitals.
    • If including the wage data for the redesignated hospitals increases the wage index value for the area to which the hospitals are redesignated, both the area and the redesignated hospitals receive the combined wage index value.
    • The wage index value for a redesignated urban or rural hospital cannot be reduced below the wage index value for the rural areas of the State in which the hospital is located.
    • Rural areas whose wage index values would be reduced by excluding the wage data for hospitals that have been redesignated to another area continue to have their wage index values calculated as if no redesignation had occurred.
    • Rural areas whose wage index values increase as a result of excluding the wage data for the hospitals that have been redesignated to another area have their wage index values calculated exclusive of the wage data of the redesignated hospitals.
    • Currently, the wage index value for an urban area is calculated exclusive of the wage data for hospitals that have been reclassified to another area.

    For the FY 2002 wage index, we are proposing to include the wage data for a reclassified urban hospital in both the area to which it is reclassified and the MSA where the hospital is physically located. We believe this will improve consistency and predictability in hospital reclassification and wage indices, as well as alleviate the fluctuations in the wage indexes due to reclassifications. For example, hospitals applying to reclassify into another area will know which hospitals' data will be included in calculating the wage index, because even if some hospitals in the area are reclassified, their data will be included in the calculation of the wage index of the area where they are geographically located. Also, in some cases, excluding the data of hospitals reclassified to another MSA could have a large downward impact on the wage index of the MSA in which the hospital is physically located. The negative impact of removing the data of the reclassified hospitals from the wage index calculation could lead to large wage disparities between the reclassified hospitals and other hospitals in the MSA, as the remaining hospitals would receive reduced payments due to a lower wage index. Our proposed approach would promote consistency, and simplify our rules, with respect to how we construct the wage indexes of rural and urban areas. As noted above, in the case of rural hospitals redesignated to another area, the wage index of the rural area where the hospitals are geographically located is calculated by including the wage data of the redesignated hospitals (unless doing so would result in a lower wage index).

    Finally, we note that the Medicare Payment Advisory Commission (MedPAC), in its March 2001 “Report to the Congress: Medicare Payment Policy,” recommended this policy (p. 82). (Section VII. of this preamble includes a discussion of MedPAC's recommendations and our responses.) To illustrate the potential negative impact on hospitals in an area where reclassifications of some hospitals to another area results in a decline in the wage index after the reclassified hospitals are excluded from the wage index calculation, MedPAC points out that hospitals in several MSAs have organized to pay qualifying hospitals not to reclassify. Our proposed policy change would remove this distorted incentive.

    The proposed wage index values for FY 2002 are shown in Tables 4A, 4B, 4C, and 4F in the Addendum to this proposed rule. Hospitals that are redesignated should use the wage index values shown in Table 4C. Areas in Table 4C may have more than one wage index value because the wage index value for a redesignated urban or rural hospital cannot be reduced below the wage index value for the rural areas of the State in which the hospital is located. When the wage index value of the area to which a hospital is redesignated is lower than the wage index value for the rural areas of the State in which the hospital is located, the redesignated hospital receives the higher wage index value; that is, the wage index value for the rural areas of the State in which it is located, rather than the wage index value otherwise applicable to the redesignated hospitals.

    As mentioned earlier, section 304(a) of Public Law 106-554 amended section 1886(d)(10)(D) of the Act by adding a new clause (v) to provide that a reclassification of a hospital by the MGCRB for purposes of the wage index is effective for 3 years (instead of 1 year) unless, under procedures established by the Secretary, the hospital elects to terminate the reclassification before the end of the 3-year period. Section 304(a) of Public Law 106-554 also amended section 1886(d)(10)(D) of the Act to specify that, for applications for reclassification for the wage index for FYs 2003 and later, the MGCRB must base any comparison of the average hourly wage of the hospital with the average hourly wage for hospitals in the area in which it is located and the area to which it seeks reclassification, using data from the most recently published hospital wage survey (as of the date of the hospital's application), as well as data from each of the two immediately preceding surveys. (Our policy proposals to incorporate the provisions of section 304(a) of Public Law 106-554 in the regulations are addressed in section IV.E. of this proposed rule).

    Consistent with the section 304(a) amendment, Tables 3A and 3B list the 3-year average hourly wage for each labor market area before the redesignation of hospitals, based on FY 1996, 1997, and 1998 wage data. In addition, Table 2 in the Addendum to this proposed rule includes the adjusted average hourly wage for each hospital from the FY 1996 and FY 1997 cost reporting periods, as well as the FY 1998 period. Table 2 also shows the 3-year average (as well as hospitals' average hourly wages for each of the 3 years) that the MGCRB will use (as published in the final rule following Start Printed Page 22679this proposed rule) to evaluate a hospital's application for reclassification for FY 2003 (unless that average hourly wage is later revised in accordance with § 412.63(w)(2)). The 3-year averages are calculated by dividing the sum of the dollars (adjusted to a common reporting period using the method described previously in this section) across all 3 years, by the sum of the hours. If a hospital is missing data for any of the previous years, its average hourly wage for the 3-year period is calculated based on the data available during that period.

    Applications for FY 2003 reclassifications are due to the MGCRB by September 1, 2001. (We note that the new location and mailing address of the MGCRB and the Provider Reimbursement Review Board (PRRB) is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244-2670. The MGCRB and PRRB will be functioning at this new location as of May 21, 2001. Also, please specify whether the mail is intended for the MGCRB or the PRRB.)

    At the time this proposed wage index was constructed, the MGCRB had completed its review of FY 2002 reclassification requests. The proposed FY 2002 wage index values incorporate all 643 hospitals redesignated for purposes of the wage index (hospitals redesignated under section 1886(d)(8)(B) or section 1886(d)(10) of the Act for FY 2002. The final number of reclassifications may vary because some MGCRB decisions are still under review by the Administrator and because some hospitals may withdraw their requests for reclassification.

    Any changes to the wage index that result from withdrawals of requests for reclassification, wage index corrections, appeals, and the Administrator's review process will be incorporated into the wage index values published in the final rule following this proposed rule. The changes may affect not only the wage index value for specific geographic areas, but also the wage index value redesignated hospitals receive; that is, whether they receive the wage index value for the area to which they are redesignated, or a wage index value that includes the data for both the hospitals already in the area and the redesignated hospitals. Further, the wage index value for the area from which the hospitals are redesignated may be affected.

    Under § 412.273, hospitals that have been reclassified by the MGCRB are permitted to withdraw their applications within 45 days of the publication of this proposed rule in the Federal Register. The request for withdrawal of an application for reclassification that would be effective in FY 2002 must be received by the MGCRB by June 18, 2001. A hospital that requests to withdraw its application may not later request that the MGCRB decision be reinstated.

    In addition, because the 3-year effect of the amendment made by section 304(a) of Public Law 106-554 is applicable to reclassifications for FY 2001 (which had already taken place prior to the date of enactment of Public Law 106-554) and because the application process for reclassification for FY 2002 had already been completed by the date of enactment, we are deeming hospitals that are reclassified for purposes of the wage index to one area for FY 2001 and are reclassified for purposes of the wage index or the standardized amount to another area for FY 2002 to be reclassified to the area for which they applied for FY 2002, unless they elect to receive the wage index reclassification they were granted for FY 2001. Consistent with our application withdrawal procedures under § 412.273, we are allowing hospitals that wish to receive, for FY 2002, the reclassification they were granted for FY 2001, to withdraw their applications within 45 days of the publication of this proposed rule (that is, by June 18, 2001. (These procedures are discussed in detail under section IV.E.1. of this preamble.)

    3. Statewide Wage Index

    As stated earlier, section 304(b) of Public Law 106-554 requires the Secretary to establish, by October 1, 2001, a process (based on the voluntary process utilized by the Secretary under section 1848 of the Act) under which an appropriate statewide entity may apply to have all the geographic areas in the State treated as a single geographic area for purposes of computing and applying a single wage index, for reclassification beginning in FY 2003. Section 304(b) further requires that, if the Secretary applies a statewide wage index to an area, an application by an individual hospital in that area would not be considered. We believe the reference to the voluntary process utilized by the Secretary under section 1848 of the Act refers to the process whereby we allow a State containing multiple physician fee schedule payment areas (and thus multiple geographic adjustment factors) to voluntarily convert to a single statewide payment area with a single geographic adjustment factor (see § 414.4(b), as discussed in the June 24, 1994 Federal Register (59 FR 32759).

    Section IV.E. of this proposed rule contains our policy proposal for implementing the provisions of section 304(b) in regulations. We are proposing that hospitals that seek a statewide geographic reclassification under the amendments made by section 304(b) of Public Law 106-554 apply to the MGCRB with the same deadlines as other hospitals. An approved application by the MGCRB would mean that the data of all the hospitals in the State would be used in computing and applying the wage index for that State. We are proposing that the statewide wage index would be applicable for 3 years from the date of approval or until all of the participating hospitals terminate their approved statewide wage index reclassification (effective with the next full fiscal year after their termination request), whichever occurs first.

    4. Section 402 of Public Law 106-113

    Beginning October 1, 1988, section 1886(d)(8)(B) of the Act required us to treat a hospital located in a rural county adjacent to one or more urban areas as being located in the MSA to which the greatest number of workers in the county commute, if the rural county would otherwise be considered part of an urban area under the standards published in the Federal Register on January 3, 1980 (45 FR 956) for designating MSAs (and for designating NECMAs), and if the commuting rates used in determining outlying counties (or, for New England, similar recognized areas) were determined on the basis of the aggregate number of resident workers who commute to (and, if applicable under the standards, from) the central county or counties of all contiguous MSAs (or NECMAs). Hospitals that met the criteria using the January 3, 1980 version of these OMB standards were deemed urban for purposes of the standardized amounts and for purposes of assigning the wage data index.

    During FY 1994, we incorporated the revised MSA definitions based on 1990 census population data. As a result, some counties that previously were treated as an adjacent county under section 1886(d)(8)(B) of the Act officially became part of certain MSAs. However, as specified in the Act, we continued to utilize the January 3, 1980 standards. For FY 2000, there were 27 hospitals in 22 counties affected by this provision.

    On March 30, 1990, OMB issued revised 1990 standards (55 FR 12154). There has been an increasing amount of interest by the hospital industry in using the 1990 standards as opposed to the 1980 standards to determine which hospitals qualify under the provisions set forth in section 1886(d)(8)(B) of the Act. Section 402 of Public Law 106-113 provides that, with respect to FYs 2001 Start Printed Page 22680and 2002, a hospital may elect to have the 1990 standards applied to it for purposes of section 1886(d)(8)(B) and that, beginning with FY 2003, hospitals will be required to use the standards published in the Federal Register by the Director of OMB based on the most recent decennial census.

    We worked with staff of the Population Distribution Branch within the Population Division of the United States Census Bureau to compile a list of hospitals that meet the March 30, 1990 standards using 1990 census population data and information prepared for the Metropolitan Area Standards Review Project. The conditions that must be met for a hospital located in a rural county adjacent to one or more urban areas to be treated as being located in the urban area to which the greatest number of workers in the rural county commute are as follows:

    • The rural county would otherwise be considered part of an MSA but for the fact that the rural county does not meet the standard established by OMB relating to the commuting rate of workers between the county and the central county or counties of any adjacent MSA.
    • The county would meet the commuting standard if commuting to (and where applicable, from) the central county or central counties of all adjacent MSAs or NECMAs (rather than to just one) were considered.

    A county meeting the above commuting standards must also meet the other standards established by OMB for inclusion in an MSA as an outlying county. In order to meet these requirements, the rural county must have a degree of “metropolitan character.” “Metropolitan character” is established by meeting one of the following OMB standards, which were published in the Federal Register on March 30, 1990:

    a. At least 50 percent of the employed workers residing in the county commute to the central county/counties, and either—

    • The population density of the county is at least 25 persons per square mile; or
    • At least 10 percent of the population, or at least 5,000 persons, lives in the qualifier urbanized area(s).

    b. From 40 to 50 percent of the employed workers commute to the central county/counties, and either—

    • The population density is at least 35 persons per square mile; or
    • At least 10 percent of the population, or at least 5,000 persons, lives in the qualifier urbanized area(s).

    c. From 25 to 40 percent of the employed workers commute to the central county/counties and either the population density of the county is at least 50 persons per square mile, or any two of the following conditions exist:

    • Population density is at least 35 persons per square mile.
    • At least 35 percent of the population is urban.
    • At least 10 percent of the population, or at least 5,000 persons, lives in the qualifier urbanized area(s).

    d. From 15 to 25 percent of the employed workers commute to the central county/counties, the population density of the county is at least 50 persons per square mile, and any two of the following conditions also exist:

    • Population density is at least 60 persons per square mile.
    • At least 35 percent of the population is urban.
    • Population growth between the last two decennial censuses is at least 20 percent.
    • At least 10 percent of the population, or at least 5,000 persons, lives in the qualifier urbanized area(s).

    Also accepted as meeting this commuting requirement under item d. are:

    • The number of persons working in the county who live in the central county/counties is equal to at least 15 percent of the number of employed workers living in the county; or
    • The sum of the number of workers commuting to and from the central county/counties is equal to at least 20 percent of the number of employed workers living in the county.

    e. From 15 to 25 percent of the employed workers commute to the central county/counties, the population density of the county is less than 50 persons per square mile, and any two of the following conditions also exist:

    • At least 35 percent of the population is urban.
    • Population growth between the last two decennial censuses is at least 20 percent.
    • At least 10 percent of the population, or at least 5,000 persons, lives in the qualifier urbanized area(s).

    f. At least 2,500 of the population lives in a central city of the MSA located in the qualifier urbanized area(s).

    When we apply the 1990 standards as opposed to 1980 standards, the number of qualifying counties increases from 22 to 31. On the basis of the evaluation of these data, effective for discharges occurring on or after October 1, 2001, hospitals located in the first column of the following table are proposed to be considered, for purposes of assigning the inpatient standardized amount and the wage index, to be located in the corresponding urban area in the second column:

    Rural CountyMSA
    Chilton, ALBirmingham, AL.
    Marshall, ALHuntsville, AL.
    Talladega, ALAnniston, AL.
    Bradford, FLJacksonville, FL.
    Hendry, FLWest Palm Beach-Boca Raton, FL.
    Putnam, FLGainesville, FL.
    Jackson, GAAthens, GA.
    Christian, ILSpringfield, IL.
    Macoupin, ILSt. Louis, MO-IL.
    Piatt, ILChampaign-Urbana, IL.
    Brown, INIndianapolis, IN.
    Carroll, INLafayette, IN.
    Henry, INIndianapolis, IN.
    Jefferson, KSTopeka, KS.
    Barry, MIKalamazoo-Battle Creek, MI.
    Cass, MIBenton Harbor, MI.
    Ionia, MIGrand Rapids-Muskegon-Holland, MI.
    Shiawassee, MIFlint, MI.
    Tuscola, MISaginaw-Bay City-Midland, MI
    Caswell, NCGreensboro-Winston Salem-High Point, NC.
    Greene, NCGreenville, NC.
    Harnett, NCRaleigh-Durham-Chapel Hill, NC.
    Wilson, NCRocky Mount, NC.
    Preble, OHDayton-Springfield, OH.
    Van Wert, OHLima, OH.
    Adams, PAYork, PA.
    Lawrence, PAPittsburgh, PA.
    Monroe, PANewark, NJ.
    Schuylkill, PAReading, PA.
    Jefferson, WIMilwaukee-Waukesha, WI.
    Walworth, WIMilwaukee-Waukesha, WI.

    There are 14 counties that meet the qualifying criteria using 1990 standards that did not meet the criteria using the 1980 standards. These 14 counties are:

    Chilton, AL

    Talladega, AL

    Bradford, FL

    Hendry, FL

    Putnam, FL

    Jackson, GA

    Piatt, IL

    Brown, IN

    Carroll, IN

    Greene, NC

    Wilson, NC

    Adams, PA

    Monroe, PA

    Schuylkill, PA

    In addition, when we apply the 1980 standards for three of the counties, the MSA assigned is different from the MSA that would be assigned using the 1990 standards. These counties are as follows: Start Printed Page 22681

    Rural county1980 MSA designation1990 MSA designation
    Ionia, MILansing-East Lansing, MIGrand Rapids-Muskegon-Hollan, MI.
    Caswell, NCDanville, VAGreensboro-Winston Salem-High Point, NC.
    Harnett, NCFayetteville, NCRaleigh-Durham-Chapel Hill, NC.

    Section 402 of Public Law 106-113 states that hospitals may elect to use either the January 3, 1980 standards or the March 30, 1990 standards for payments during FY 2001 and FY 2002. We are assuming hospitals will elect to go to the MSA resulting in the highest payment amount accounting for the applicable wage indexes and standardized amounts. Based on our analysis, we believe all hospitals in the designated rural counties would benefit by being included in the respective MSAs shown above. Therefore, we are proposing to assign the FY 2002 standardized amount and wage index of each respective MSA to the affected hospitals. Hospitals electing not to use the 1990 standards would be required to notify their fiscal intermediary in writing of such election prior to September 1, 2001, in order to allow sufficient time to reflect this change in our payment systems. (For FY 2001, we are providing further information related to this election, including recalculated wage indexes, through separate instruction.)

    We note that five rural counties no longer meet the qualifying criteria when we apply the revised OMB standards. These rural counties are as follows: Indian River, FL; Mason, IL; Owen, IN; Morrow, OH; and Lincoln, WV. For FY 2002, we propose to continue to treat these hospitals as attached to an MSA on the basis of the 1980 standards. Beginning FY 2003, they must meet the 1990 standards to continue to be treated as such.

    We stated in the August 1, 2000 final rule that implemented changes to the prospective payment system for FY 2001 that we were in the process of working with OMB to identify the hospitals that would be affected by section 402 of Public Law 106-113 (65 FR 47076). We further indicated we would revise payments to hospitals in the affected counties as soon as data were available. Now that the affected counties have been identified, hospitals in the 14 counties identified above will be offered the opportunity to elect this designation, as previously described. (For FY 2001, we are providing further information related to this election, including recalculated wage indexes, through separate instructions.)

    Finally, three hospitals located in counties affected by the revised OMB standards also have been reclassified by the MGCRB. The affected hospitals are listed below. If the hospitals do not wish to be reclassified for FY 2002 based on their new designation as described above, they must follow the procedures described above for requesting that their reclassification be withdrawn.

    Provider Number1990 MSA designationFY 2002 reclassification, MSA
    34-0071Raleigh-Durham-Chapel Hill, NCFayetteville, NC.
    34-0124Raleigh-Durham-Chapel Hill, NCFayetteville, NC.
    34-0126Rocky Mount, NCRaleigh-Durham-Chapel Hill, NC (wage index only.)

    G. Requests for Wage Data Corrections

    As stated in section II.D. of this preamble, the data file used to construct the proposed wage index includes FY 1998 data submitted to HCFA as of mid-February 2001. In a memorandum dated February 5, 2001, we instructed all Medicare intermediaries to inform the prospective payment hospitals they service of the availability of the wage data file and the process and timeframe for requesting revisions. The wage data file was made available on February 13, 2001 through the Internet at HCFA's home page (http://www.hcfa.gov). We also instructed the intermediaries to advise hospitals of the availability of these data either through their representative hospital organizations or directly from HCFA. Additional details on ordering this data file are discussed in section IX.A of this preamble, “Requests for Data from the Public.”

    In addition, Table 2 in the Addendum to this proposed rule contains each hospital's adjusted average hourly wage used to construct the proposed wage index values for the past 3 years, including the FY 1998 data used to construct the proposed FY 2002 wage index. It should be noted that the hospital average hourly wages shown in Table 2 do not reflect any changes made to a hospital's data after mid-February 2001. Changes approved by a hospital's fiscal intermediary and forwarded to HCFA by April 9, 2001, will be reflected on the final public use wage data file scheduled to be made available on or about May 4, 2001.

    We believe hospitals have sufficient time to ensure the accuracy of their FY 1998 wage data. Moreover, the ultimate responsibility for accurately completing the cost report rests with the hospital, which must attest to the accuracy of the data at the time the cost report is filed. Hospitals should know what wage data were submitted on their cost reports. Additionally, they are notified of any changes to their data as a result of their intermediary's review. However, if a hospital believed that its FY 1998 wage data were incorrectly reported, the hospital was to submit corrections along with complete, detailed supporting documentation to its intermediary by March 9, 2001. Hospitals were notified of this deadline, and of all other possible deadlines and requirements, through written communications from their fiscal intermediaries in early February 2001.

    After reviewing requested changes submitted by hospitals, intermediaries transmitted any revised cost reports to HCFA and forwarded a copy of the revised Worksheet S-3, Parts II and III to the hospitals. In addition, fiscal intermediaries were to notify hospitals of the changes or the reasons that changes were not accepted. This procedure ensures that hospitals have every opportunity to verify the data that will be used to construct their wage index values. We believe that fiscal intermediaries are generally in the best position to make evaluations regarding the appropriateness of a particular cost and whether it should be included in the wage index data. However, if a hospital disagrees with the intermediary's resolution of a requested change, the hospital may contact HCFA in an effort to resolve policy disputes. We note that the April 9, 2001 deadline also applies to these requested changes. We will not consider factual determinations at this time, as these Start Printed Page 22682should have been resolved earlier in the process.

    Any wage data corrections to be reflected in the final wage index must have been reviewed and verified by the intermediary and transmitted to HCFA on or before April 9, 2001. (The deadline for hospitals to request changes from their fiscal intermediaries was March 9, 2001.) These deadlines are necessary to allow sufficient time to review and process the data so that the final wage index calculation can be completed for development of the final prospective payment rates to be published by August 1, 2001.

    We have created the process described above to resolve all substantive wage data correction disputes before we finalize the wage data for the FY 2002 payment rates. Accordingly, hospitals that do not meet the procedural deadlines set forth above will not be afforded a later opportunity to submit wage data corrections or to dispute the intermediary's decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines set forth above will not be permitted to later challenge, before the Provider Reimbursement Review Board, HCFA's failure to make a requested data revision (See W. A. Foote Memorial Hospital v. Shalala, No. 99-CV-75202-DT (E.D. Mich. 2001)).

    The final wage data public use file will be released by May 4, 2001. Hospitals should examine both Table 2 of this proposed rule and the May 4 final public use wage data file (which reflects revisions to the data used to calculate the values in Table 2) to verify the data HCFA is using to calculate the wage index. Hospitals will have until June 4, 2001, to submit requests to correct errors in the final wage data due to data entry or tabulation errors by the intermediary or HCFA. The correction requests that will be considered at that time will be limited to errors in the entry or tabulation of the final wage data that the hospital could not have known about before the release of the final wage data public use file.

    As with the file made available in February 2001, HCFA will make the final wage data file released in May 2001 available to hospital associations and the public on the Internet. However, the May 2001 file will be made available solely for the limited purpose of identifying any potential errors made by HCFA or the intermediary in the entry of the final wage data that result from the correction process described above (with the March 9 deadline). Hospitals are encouraged to review their hospital wage data promptly after the release of the final file. Data presented at this time cannot be used by hospitals to initiate new wage data correction requests.

    If, after reviewing the final file, a hospital believes that its wage data are incorrect due to a fiscal intermediary or HCFA error in the entry or tabulation of the final wage data, it should send a letter to both its fiscal intermediary and HCFA. The letters should outline why the hospital believes an error exists and provide all supporting information, including dates. These requests must be received by HCFA and the intermediaries no later than June 4, 2001. Requests mailed to HCFA should be sent to: Health Care Financing Administration; Center for Health Plans and Providers; Attention: Wage Index Team, Division of Acute Care; C4-07-07; 7500 Security Boulevard; Baltimore, MD 21244-1850. Each request must also be sent to the hospital's fiscal intermediary. The intermediary will review requests upon receipt and contact HCFA immediately to discuss its findings.

    At this point in the process, that is, between release of the May 2001 wage index file and June 4, 2001, changes to the hospital wage data will only be made in those very limited situations involving an error by the intermediary or HCFA that the hospital could not have known about before its review of the final wage data file. Specifically, neither the intermediary nor HCFA will accept the following types of requests at this stage of the process:

    • Requests for wage data corrections that were submitted too late to be included in the data transmitted to HCFA on or before April 9, 2001.
    • Requests for correction of errors that were not, but could have been, identified during the hospital's review of the February 2001 wage data file.
    • Requests to revisit factual determinations or policy interpretations made by the intermediary or HCFA during the wage data correction process.

    Verified corrections to the wage index received timely (that is, by June 4, 2001) will be incorporated into the final wage index to be published by August 1, 2001 and effective October 1, 2001.

    Again, we believe the wage data correction process described above provides hospitals with sufficient opportunity to bring errors in their wage data to the intermediary's attention. Moreover, because hospitals will have access to the final wage data by early May 2001, they will have the opportunity to detect any data entry or tabulation errors made by the intermediary or HCFA before the development and publication of the FY 2002 wage index by August 1, 2001 and the implementation of the FY 2002 wage index on October 1, 2001. If hospitals avail themselves of this opportunity, the wage index implemented on October 1 should be accurate. Nevertheless, in the event that errors are identified after that date, we retain the right to make midyear changes to the wage index under very limited circumstances.

    Specifically, in accordance with § 412.63(w)(2), we may make midyear corrections to the wage index only in those limited circumstances in which a hospital can show (1) That the intermediary or HCFA made an error in tabulating its data; and (2) that the hospital could not have known about the error, or did not have an opportunity to correct the error, before the beginning of FY 2002 (that is, by the June 4, 2001 deadline). As indicated earlier, since a hospital will have the opportunity to verify its data, and the intermediary will notify the hospital of any changes, we do not foresee any specific circumstances under which midyear corrections would be necessary. However, should a midyear correction be necessary, the wage index-change for the affected area will be effective prospectively from the date the correction is made.

    H. Modification of the Process and Timetable for Updating the Wage Index

    Although the wage data correction process described above has proven successful in the past for ensuring that the wage data used each year to calculate the wage indexes are generally reliable and accurate, we are concerned about the growing volume of wage data revisions initiated by hospitals during February and the first week of March. We first discussed this issue in the FY 1998 proposed rule (62 FR 29918). At that time, we noted that, in developing the FY 1997 wage index, the wage data were revised between the proposed and final rules for more than 13 percent of the hospitals (approximately 700 of 5,200). Last year, in developing the FY 2001 wage index, the wage data were revised between the proposed and final rules for more than 32 percent of the hospitals (1,605 of 4,950).

    Since hospitals are expected to submit complete and accurate cost report data, and intermediaries review and request hospitals to correct problematic wage data before the data are submitted to HCFA in mid-November, we believe there should be limited revisions at this stage of the process. We remind the hospital community that the primary purpose of this file is to allow hospitals to verify that we have their correct data on file. However, according to information received from the Start Printed Page 22683intermediaries, these late revisions are frequently due to hospitals' lack of responsiveness in providing sufficient information to the intermediaries during the desk reviews (that is, during the intermediary's review of the hospital's cost report).

    We are proposing two changes to the wage index development process and timetable beginning with the FY 2003 wage index. We believe these changes will encourage earlier submissions of wage data revisions by hospitals and will allow intermediaries more time to address the heavy volume of revisions requested after the intermediaries have completed their desk reviews of these data. First, we are proposing to release the preliminary wage data file by early January rather than early February. As with the current preliminary file, the January file would include desk reviewed wage data that intermediaries submitted to HCFA by November of the previous year and any timely revisions HCFA received from intermediaries prior to release of the January file. Hospitals would be allowed until early February to submit requests for wage data revisions to their intermediaries. Second, intermediaries would be allowed approximately 8 weeks from the hospitals' deadline for submitting revision requests (that is, until early March) to review and transmit revised wage data to HCFA.

    We believe this proposed revised schedule will improve the quality of the wage index by allowing intermediaries more time to sufficiently review wage data revisions before the data are submitted to HCFA. Further, we believe the proposed revised process will encourage hospitals to submit revisions earlier, so the proposed wage index, from which hospitals base geographic reclassification decisions, is more accurate.

    IV. Other Decisions and Proposed Changes to the Prospective Payment System for Inpatient Operating Costs and Graduate Medical Education Costs

    A. Sole Community Hospitals (SCHs) (§§ 412.63, 412.71, 412.72, 412.73, 412.75, 412.77, and 412.92)

    For the benefit of the reader, in this proposed rule, we are discussing and seeking to clarify many of the rules and policies governing SCHs because of the legislative changes that have occurred in recent years. It has been several years since the SCH criteria have been published in one location. Rather than continue to refer to various Federal Register documents and sections of the Code of Federal Regulations, we are publishing a detailed discussion of these policies, proposing to make further changes to incorporate the provisions of sections 213, 302, 303, 304, and 311 of Public Law 106-554, and proposing to clarify other related policies.

    Under the hospital inpatient prospective payment system, special payment protections are provided to an SCH. Section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that, by reason of factors such as isolated location, weather conditions, travel conditions, absence of other like hospitals (as determined by the Secretary), or historical designation by the Secretary as an Essential Access Community Hospital (EACH), is the sole source of inpatient hospital services reasonably available to Medicare beneficiaries. The regulations that set forth the criteria that a hospital must meet to be classified as an SCH are at § 412.92. To be classified as an SCH, a hospital must either have been designated as an SCH prior to the beginning of the prospective payment system on October 1, 1983, and must be located more than 35 miles from other like hospitals, or the hospital must be located in a rural area and meet one of the following requirements:

    • It is located more than 35 miles from other like hospitals.
    • It is located between 25 and 35 miles from other like hospitals, and it—

    —Serves at least 75 percent of all inpatients, or 75 percent of Medicare beneficiary inpatients, within a 35-mile radius or, if larger, within its service area; or

    —Has fewer than 50 beds and would qualify on the basis of serving 75 percent of its area's inpatients except that some patients seek specialized care unavailable at the hospital.

    • It is located between 15 and 25 miles from other like hospitals, and because of local topography or extreme weather conditions, the other like hospitals are inaccessible for at least 30 days in each of 2 out of 3 years.
    • The travel time between the hospital and the nearest like hospital is at least 45 minutes because of distance, posted speed limits, and predictable weather conditions.
    • Effective with hospital cost reporting periods beginning on or after April 1, 1990, section 1886(d)(5)(D)(i) of the Act, as amended by section 6003(e) of Public Law 101-239, provides that SCHs are paid based on whichever of the following rates yields the greatest aggregate payment:
    • The Federal rate applicable to the hospital.
    • The updated hospital-specific rate based on FY 1982 costs per discharge.
    • The updated hospital-specific rate based on FY 1987 costs per discharge.

    Effective with hospital cost reporting periods beginning on or after October 1, 2000, section 1886(b)(3)(I)(i) of the Act, as added by section 405 of Public Law 106-113 and amended by section 213 of Public Law 106-554, provides for other options, in addition to the three bulleted options in the above paragraph, for determining which rate would yield the greatest aggregate payment. For discharges for FY 2001 through FY 2003, these additional optional rates are—

    • A phase-in blended rate of the updated hospital-specific rate based on FY 1982 costs per discharge and an FY 1996 hospital-specific rate; or
    • A phase-in blended rate of the updated hospital-specific rate based on FY 1987 costs per discharge and an FY 1996 hospital-specific rate.

    For discharges beginning in FY 2004, the additional optional rate would be 100 percent of the FY 1996 hospital-specific rate.

    For each cost reporting period, the fiscal intermediary determines which of the payment options will yield the highest rate of payment. Payments are automatically made at the highest rate using the best data available at the time the fiscal intermediary makes the determination. However, it may not be possible for the fiscal intermediary to determine in advance precisely which of the rates will yield the highest payment by year's end. In many instances, it is not possible to forecast the update factor for the Federal rates, outlier payments, the amount of the DSH adjustment, or the IME adjustment, all of which are applicable only to payments based on the Federal rate. The fiscal intermediary makes a final adjustment at the close of the cost reporting period to determine precisely which of the payment rates would yield the highest payment to the hospital.

    If a hospital disagrees with the fiscal intermediary's determination regarding the final amount of program payment to which it is entitled, it has the right to appeal the fiscal intermediary's decision in accordance with the procedures set forth in Subpart R of Part 405, which concern provider payment determinations and appeals.

    In calculating a hospital-specific rate for an SCH based on its FY 1996 cost reporting period, we will, to the extent possible, use the same methodology that we used to calculate the hospital-specific rate based on either the FY 1982 or FY 1987 cost reporting period. That Start Printed Page 22684methodology is set forth in §§ 412.71, 412.72, 412.73, 412.75 and 412.77.

    • If a hospital has a cost reporting period ending in FY 1982, it will be paid a hospital-specific rate based on its FY 1982 costs; or a hospital-specific rate based on its FY 1987 costs; or a hospital-specific rate based on its FY 1996 costs (which, until FY 2004, would be a blend of the greater of the FY 1982 or FY 1987 costs and the FY 1996 costs); or it will be paid based on the Federal rate.
    • If a hospital has no cost reporting period ending in FY 1982, it will be paid a hospital-specific rate based on its FY 1987 costs; or a hospital-specific rate based on its FY 1996 costs (which, until FY 2004, would be a blend of its FY 1987 costs and FY 1996 costs); or it will be paid based on the Federal rate.
    • If a hospital has no cost reporting period ending in either FY 1982 or FY 1987, it will be paid based on its FY 1996 costs; or it will be paid based on the Federal rate.
    • If a hospital has no cost reporting period ending in FY 1982, FY 1987, or FY 1996, it cannot be paid based on a hospital-specific rate; it will be paid based on the Federal rate.
    • If a hospital was operating during any or all of FY 1982, FY 1987, or FY 1996, but, for some reason, the cost report records are no longer available, the hospital will be treated as if it had no cost report for the applicable period. The hospital will not be allowed to substitute any other base period for the FY 1982, FY 1987, or FY 1996 base period.

    For each SCH, the fiscal intermediary will calculate a hospital-specific rate based on the hospital's FY 1982, FY 1987, or FY 1996 cost report as follows:

    • Determine the hospital's total allowable Medicare inpatient operating cost, as stated on the cost report.
    • Divide the total Medicare operating cost by the number of Medicare discharges (without adjusting for transfers) in the cost reporting period to determine the base period cost per case.
    • In order to take into consideration the hospital's individual case-mix, the base year cost per case is divided by the hospital's case-mix index applicable to the cost reporting period. This step is necessary to adjust the hospital's base period cost for case mix. This is done to remove the effects of case mix from the base period costs per case. Payments using these base period costs are then adjusted to reflect the actual case mix during the payment year. A hospital's case mix is computed based on its Medicare patient discharges subject to DRG-based payment.

    The fiscal intermediary will inform each SCH of its hospital-specific rate based on its applicable cost reporting period within 180 days after the start of its cost reporting period.

    An SCH is also eligible for a payment adjustment if, for reasons beyond its control, it experiences a decline in volume of greater than 5 percent compared to its preceding cost reporting period. This adjustment is also available to hospitals that could qualify as SCHs but choose not to be paid as SCHs; that is, hospitals that qualify and successfully apply to be designated as SCHs but continue to receive payments based on the Federal rate. In addition, section 6003(c)(1) of Public Law 101-239 deleted the sunset date on the 5-percent volume decline adjustment, thus allowing SCHs to receive the adjustment indefinitely. The sunset provision was included under section 1886(d)(5)(C)(ii) of the Act. (Section 6003(c)(1) of Public Law 101-239 amended that provision and redesignated it as section 1886(d)(5)(D) of the Act.)

    In the September 1, 1983, issue of the Federal Register (48 FR 39781), we stated that any hospital designated as an SCH would retain that status until it experienced a change in circumstances. Section 6003(e)(3) of Public Law 101-239 specifically stated that any hospital classified as an SCH as of the date of enactment of Public Law 101-239 (December 19, 1989), will retain its SCH status even if the hospital did not meet the criteria established under section 6003(e)(1) of that law. These hospitals are the “grandfathered” SCH hospitals. Therefore, we have continued to allow hospitals designated as SCHs prior to December 19, 1989, to be “grandfathered” under current criteria.

    In the June 4, 1991, Federal Register, we stated that a hospital's special status as an SCH would not be retained in light of the hospital's geographic reclassification for purposes of the standardized amount. In the event the hospital's reclassification ceases, it must reapply for special status and must meet all of the applicable qualifying criteria in effect at the time it seeks requalification (56 FR 25482). However, in the event a “grandfathered” SCH was successfully reclassified, it would be reinstated as an SCH if its reclassification ceased.

    Section 401(a) of Public Law 106-113 established that any subsection (d) hospital (section 1886(d) of the Act) located in an urban area may be redesignated as being located in a rural area if the hospital meets one of several criteria established by the legislation. One of these criteria is that the hospital could qualify as an SCH if the hospital were located in a rural area. Under this provision, an urban hospital that may have been “grandfathered” as an SCH could now qualify and receive payment as an SCH if it met the criteria of a rural SCH. Given this extension of SCH eligibility, we no longer believe it is necessary to extend special protection to “grandfathered” SCHs that successfully apply for geographic reclassification through the MGCRB for the standardized amount after their MGCRB reclassification ends. This circumstance falls under the provisions of §§ 412.92(b)(3) and (b)(5), which state that an approved classification as an SCH remains in effect without need for reapproval unless there is a change in the circumstances under which the classification was approved. We believe that a successful reclassification by the MGCRB fits the definition of a change in circumstances.

    Because some hospitals may not have understood the effect reclassification would have on their special status, under existing § 412.273(a) we are permitting affected hospitals the option to withdraw their applications for reclassification for FY 2002, even if the MGCRB has issued a decision, by submitting a withdrawal request to the MGCRB within 45 days of publication of this proposed rule. Finally, just as a competing hospital that closes leaves an opportunity for an existing hospital to qualify as an SCH, a new hospital that opens in an area with an existing hospital designated as an SCH endangers the SCH status of the existing hospital.

    As of October 1, 1997, no designations of hospitals as EACHs can be made. The EACHs designated by HCFA before October 1, 1997, will continue to be paid as SCHs for as long as they comply with the terms, conditions, and limitations under which they were designated as EACHs.

    Under § 412.92(b)(2), we define the effective dates for several situations in which a hospital gains or gives up SCH status. First, SCH status and the associated payment adjustment is effective 30 days after HCFA's written notification to the SCH. Thus, 30 days after the issuance of HCFA's notice of approval, the hospital is considered to be an SCH and the payment adjustment is applied to discharges occurring on or after that date.

    Second, § 412.92(b)(4)(ii) defines the effective date when a hospital chooses to give up its SCH status. Our policy has always been that an SCH can elect to give up its SCH status at any time by submitting a written request to the appropriate HCFA regional office Start Printed Page 22685through its fiscal intermediary. The change to fully national rates becomes effective no later than 30 days after the hospital submits its request. We believe that the “no later than 30 days” policy for the effective date for cancelling SCH status is in keeping with the prospective nature of the prospective payment system. In addition, the 30-day timeframe to give up SCH status provides the fiscal intermediaries with enough time to alter their automated payment systems prospectively, thus avoiding expensive and time-consuming reprocessing of claims. The variable timeframe of “no later than 30 days from the date of the hospital's request” also permits the regional office, the fiscal intermediary, and the hospital to select a mutually agreeable date, for example, at the end of a month, to facilitate the change in SCH status. We expect that hospitals will anticipate when they wish to give up SCH status and to submit their requests in sufficient time to permit the 30-day period for making the change.

    In addition, § 412.92(b)(2)(ii) defines the effective date of SCH status in the situation where a final and nonappealable administrative or judicial decision reverses HCFA's denial of SCH status to a hospital. In this situation, if the hospital's application was submitted on or after October 1, 1983, the effective date will be 30 days after the date of HCFA's original written notification of denial.

    Under § 412.92(b)(2)(iii), we define retroactive approval of SCH status. If a hospital is granted retroactive approval of SCH status by a final and nonappealable court order or an administrative decision under subpart R of Part 405 of the regulations, and it wishes its SCH status terminated prior to the current date (that is, it wishes to be paid as an SCH for a time-limited period, all of which is in the past), it must submit written notice to the HCFA regional office through its fiscal intermediary within 90 days of the court order or the administrative decision. This written notice must clearly state that, although SCH status was granted retroactively by the court order or by the administrative decision, the hospital wants this status terminated as of a specific date. If written notice is not received within 90 days of the court order or the administrative decision, SCH status will continue. Written requests to terminate SCH status that are received subsequent to the 90-day period will be effective no later than 30 days after the request is submitted, as discussed above.

    Under § 412.92(c)(1), we define mileage. We believe that mileage should continue to be measured by the shortest route over improved roads maintained by any local, State, or Federal Government entity for public use. We consider improved roads to include the paved surface up to the front entrance of the hospital because this portion of the distance is utilized by the public to access the hospital. This definition provides consistency with the interpretation of the MGCRB when considering hospital reclassification applications. The MGCRB measures the distance between the hospital and the county line of the area to which it seeks reclassification beginning with the paved area outside the front entrance of the hospital. This provides a consistent, national definition that is easily recognizable for each hospital. Finally, rounding of mileage is not permissible. this is also consistent with the MGCRB definition of mileage (56 FR 25483). We are proposing to revise the definition of “miles” under § 412.92(c)(1) to state that an improved road includes the paved surface up to the front entrance of the hospital.

    Under § 412.92(c)(2), we define “like” hospital. We consider like hospitals to be those hospitals furnishing short-term acute care. That is, a hospital may not qualify for an SCH classification on the grounds that neighboring hospitals offer specialty services, thereby seeking to exclude close-by competitors as like hospitals, in order to meet the mileage criteria by measuring to a like hospital that is located further away. For example, we believe that competing hospitals within a given area may each have their own specialty services, while all the facilities continue to be considered short-term acute care hospitals. We note that under § 412.92(a)(1)(ii), a hospital with fewer than 50 beds may qualify for SCH status under a special provision if patients that it would normally serve are seeking care elsewhere due to the unavailability of specialty services. This means that, if a hospital can prove that the patients from its service area are seeking specialty services elsewhere (such as, among others, heart surgery, transplants, and burn care), rather than routine care, and, because of that fact, that it otherwise would have met the criteria of section § 412.92(a)(1)(i), it can qualify as an SCH.

    We note that § 412.92(b)(1)(iii)(A) retains an outdated reference to “hospitals located within a 50 mile radius of the hospital.” With the issuance of the September 1, 1989 Federal Register (54 FR 36481, 36482), the 50 mile radius was determined to be unreasonable and all references should have been changed to 35 miles in accordance with § 412.92(a)(1)(i). We are proposing to revise the reference to “a 50 mile radius” in § 412.92(b)(1)(iii)(A) to read “a 35 mile radius”.

    We note that the travel time and weather conditions criteria set forth in § 412.92(a)(3) were discussed in detail in the September 4, 1990 Federal Register (55 FR 36050 through 36055 and 36162 through 36163).

    Under § 412.92(a)(1)(i) and (b)(1)(ii), we define the market area analysis criteria used to determine SCH status. There are several points concerning these requests for SCH status that we would like to clarify in this proposed rule. First, a hospital seeking an SCH designation based on these criteria must make its initial request to the fiscal intermediary with all the appropriate documents as will be discussed below (§ 412.92(b)(1)(i)). The fiscal intermediary will make a recommendation on the request, based on receipt of all the appropriate documentation and its own investigation and analysis, and that recommendation will be forwarded to the HCFA regional office for another level of review and final approval or disapproval. The fiscal intermediary would forward its recommendation to the HCFA regional office located in the hospital's area as opposed to the fiscal intermediary's area, if there is a difference in these areas. As discussed above, an approval of the request for SCH status will be effective 30 days after HCFA issues the approval letter. If a determination on the request requires the use of data that are available at HCFA central office only, upon receipt of the fiscal intermediary's recommendation, the HCFA regional office will forward the request and the fiscal intermediary's recommendation to the appropriate contact at HCFA central office where the determination will be made.

    Second, a hospital must provide patient origin data (the number of patients from each zip code from which the hospital draws inpatients) for all inpatient discharges to document the boundaries of its service area (§ 412.92(b)(1)(ii)(A)). Or, the hospital can request that HCFA develop patient origin data to define its service area based on the number of patients from each zip code from which the hospital draws Medicare Part A inpatients (§ 412.92(b)(1)(iii)). Then, the lowest number of zip codes in descending percentage order of Medicare inpatients that meets the 75-percent threshold will be used to represent the hospital's service area. We note that hospitals cannot substitute zip codes elsewhere Start Printed Page 22686on the list in order to manipulate the service area. See (Howard Young Medical Center, Inc. v. Shalala, 207 F.3d 437 (7th Cir. 2000).)

    Third, the hospital must provide patient origin data from all other hospitals located within a 35-mile radius of it or, if larger, within its service area, to document that no more than 25 percent of either all of the population or the Medicare beneficiaries residing in the hospital's service area and hospitalized for inpatient care were admitted to other like hospitals for care (§ 412.92(b)(1)(ii)(B)). Again, HCFA central office can develop patient origin data for other hospitals within the requesting hospital's service area if the hospital is requesting SCH status based on an examination of Medicare Part A inpatient utilization. In either case, the requesting hospital is required to submit a comprehensive list of hospitals located within a 35-mile radius or, if larger, within its service area. This list will be checked by both the fiscal intermediary and HCFA. Again, a requesting hospital cannot argue that a competing hospital should be excluded from the service area based on the existence of specialty services at that hospital if both hospitals are short-term acute care facilities. Distances between all reported hospitals will be checked by both the fiscal intermediary and HCFA, through electronic geographic mapping services (such as Yahoo or Mapquest) or by physically driving the distance involved.

    In addition, data will be analyzed based on the year for which the hospital requests SCH status. Subsequent hospital mergers or terminations will not be taken into consideration in processing the request. For example, if a hospital requests SCH status using data for FY 1999, and that data show that there is a competing hospital in existence that subsequently closed its doors in FY 2000, the data will be analyzed with the terminated hospital in existence, unless the hospital seeking SCH status applies using later data, such as FY 2001. This principle is consistent with how we analyze wage index data. If a terminated hospital has a viable cost report for the year of wage data that is being analyzed to produce the wage index, its data are included as part of the computation.

    B. Rural Referral Centers (§ 412.96)

    Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at § 412.96 set forth the criteria a hospital must meet in order to receive special treatment under the prospective payment system as a rural referral center. For discharges occurring before October 1, 1994, rural referral centers received the benefit of payment based on the other urban amount rather than the rural standardized amount. Although the other urban and rural standardized amounts were the same for discharges beginning with that date, rural referral centers would continue to receive special treatment under both the disproportionate share hospital (DSH) payment adjustment and the criteria for geographic reclassification.

    Section 401 of Public Law 106-113 amended section 1886(d)(8) of the Act by adding subparagraph (E), which creates a mechanism, separate and apart from the MGCRB, permitting an urban hospital to apply to the Secretary to be treated as being located in the rural area of the State in which the hospital is located. The statute directs the Secretary to treat a qualifying hospital as being located in the rural area for purposes of provisions under section 1886(d) of the Act. Congress clearly intended hospitals that become rural under section 1886(d)(8)(E) of the Act to receive some benefit as a result. In addition, one of the criteria under section 1886(d)(8)(E) of the Act is that the hospital would qualify as an SCH or a rural referral center if it were located in a rural area. An SCH would be eligible to be paid on the basis of the higher of its hospital-specific rate or the Federal rate. On the other hand, the only benefit under section 1886(d) of the Act for an urban hospital to become a rural referral center would be waiver of the proximity requirements that are otherwise applicable under the MGCRB process, as set forth in § 412.230(a)(3)(i).

    When we implemented section 401 of Public Law 106-113 in the August 1, 2000 final rule (65 FR 47089), we stated that we believed Congress contemplated that hospitals might seek to be reclassified as rural under section 1886(d)(8)(E) of the Act in order to become rural referral centers so that the hospitals would be exempt from the MGCRB proximity requirement and could be reclassified by the MGCRB to another urban area. Therefore, in that final rule we sought a policy approach that would appropriately address our concern that these urban to rural redesignations not be utilized inappropriately, and that would benefit hospitals seeking to reclassify under the MGCRB process by achieving rural referral center status. (We became aware of several specific hospitals that were rural referral centers for FY 1991, but subsequently lost their status when the county in which they were located became urban, and had expressed their wish to be redesignated as a rural referral center in order to be eligible to reclassify.) Accordingly, in light of section 1886(d)(8)(E) of the Act and the language in the accompanying Conference Report, effective as of October 1, 2000, hospitals located in what is now an urban area, if they were ever a rural referral center, were reinstated to rural referral center status.

    In addition, as discussed in 62 FR 45999 and 63 FR 26317, under section 4202 of Public Law 105-33, a hospital that was classified as a rural referral center for FY 1991 is to be classified as a rural referral center for FY 1998 and later years so long as that hospital continued to be located in a rural area and did not voluntarily terminate its rural referral center status. Otherwise, a hospital seeking rural referral center status must satisfy applicable criteria. One of the criteria under which a hospital may qualify as a rural referral center is to have 275 or more beds available for use. A rural hospital that does not meet the bed size requirement can qualify as a rural referral center if the hospital meets two mandatory prerequisites (specifying a minimum case-mix index and a minimum number of discharges) and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume). With respect to the two mandatory prerequisites, a hospital may be classified as a rural referral center if its—

    • Case-mix index is at least equal to the lower of the median case-mix index for urban hospitals in its census region, excluding hospitals with approved teaching programs, or the median case-mix index for all urban hospitals nationally; and
    • Number of discharges is at least 5,000 per year, or if fewer, the median number of discharges for urban hospitals in the census region in which the hospital is located. (The number of discharges criterion for an osteopathic hospital is at least 3,000 discharges per year.)

    1. Case-Mix Index

    Section 412.96(c)(1) provides that HCFA will establish updated national and regional case-mix index values in each year's annual notice of prospective payment rates for purposes of determining rural referral center status. The methodology we use to determine the proposed national and regional case-mix index values is set forth in regulations at § 412.96(c)(1)(ii). The proposed national case-mix index value includes all urban hospitals nationwide, and the proposed regional values are the median values of urban hospitals within each census region, excluding those Start Printed Page 22687with approved teaching programs (that is, those hospitals receiving indirect medical education payments as provided in § 412.105). These values are based on discharges occurring during FY 1999 (October 1, 1998 through September 30, 1999) and include bills posted to HCFA's records through December 1999.

    We are proposing that, in addition to meeting other criteria, hospitals with fewer than 275 beds, if they are to qualify for initial rural referral center status for cost reporting periods beginning on or after October 1, 2001, must have a case-mix index value for FY 2000 that is at least—

    • 1.3286; or
    • The median case-mix index value for urban hospitals (excluding hospitals with approved teaching programs as identified in § 412.105) calculated by HCFA for the census region in which the hospital is located.

    The median case-mix values by region are set forth in the following table:

    RegionCase-mix index value
    1. New England (CT, ME, MA, NH, RI, VT)1.2377
    2. Middle Atlantic (PA, NJ, NY)1.2305
    3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)1.3055
    4. East North Central (IL, IN, MI, OH, WI)1.2613
    5. East South Central (AL, KY, MS, TN)1.2537
    6. West North Central (IA, KS, MN, MO, NE, ND, SD)1.1653
    7. West South Central (AR, LA, OK, TX)1.2484
    8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)1.3286
    9. Pacific (AK, CA, HI, OR, WA)1.2693

    The preceding numbers will be revised in the final rule to the extent required to reflect the updated FY 2000 MedPAR file, which will contain data from additional bills received through March 31, 2001.

    Hospitals seeking to qualify as rural referral centers or those wishing to know how their case-mix index value compares to the criteria should obtain hospital-specific case-mix values from their fiscal intermediaries. Data are available on the Provider Statistical and Reimbursement (PS&R) System. In keeping with our policy on discharges, these case-mix index values are computed based on all Medicare patient discharges subject to DRG-based payment.

    2. Discharges

    Section 412.96(c)(2)(i) provides that HCFA will set forth the national and regional numbers of discharges in each year's annual notice of prospective payment rates for purposes of determining rural referral center status. As specified in section 1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 discharges. We are proposing to update the regional standards based on discharges for urban hospitals' cost reporting periods that began during FY 1999 (that is, October 1, 1998 through September 30, 1999). That is the latest year for which we have complete discharge data available.

    Therefore, we are proposing that, in addition to meeting other criteria, a hospital, if it is to qualify for initial rural referral center status for cost reporting periods beginning on or after October 1, 2001, must have as the number of discharges for its cost reporting period that began during FY 1999 a figure that is at least—

    • 5,000; or
    • The median number of discharges for urban hospitals in the census region in which the hospital is located, as indicated in the following table:
    RegionNumber of discharges
    1. New England (CT, ME, MA, NH, RI, VT)7083
    2. Middle Atlantic (PA, NJ, NY)8371
    3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)8202
    4. East North Central (IL, IN, MI, OH, WI)7430
    5. East South Central (AL, KY, MS, TN)6505
    6. West North Central (IA, KS, MN, MO, NE, ND, SD)4708
    7. West South Central (AR, LA, OK, TX)4911
    8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)8287
    9. Pacific (AK, CA, HI, OR, WA)7001

    These numbers will be revised in the final rule based on the latest FY 1999 cost report data.

    We reiterate that an osteopathic hospital, if it is to qualify for rural referral center status for cost reporting periods beginning on or after October 1, 2001, must have at least 3,000 discharges for its cost reporting period that began during FY 2000.

    C. Indirect Medical Education (IME) Adjustment (§ 412.105)

    1. IME Adjustment Factor Formula Multiplier (Section 302 of Public Law 106-554 and § 412.105(d)(3))

    Section 1886(d)(5)(B) of the Act provides that prospective payment hospitals that have residents in an approved graduate medical education (GME) program receive an additional payment to reflect the higher indirect operating costs associated with GME. The regulations regarding the calculation of this additional payment, known as the indirect medical education (IME) adjustment, are located at § 412.105. The additional payment is based in part on the applicable IME adjustment factor. The IME adjustment factor is calculated using a hospital's ratio of residents to beds, which is represented as r, and a multiplier, which is represented as c, in the following equation: c × [(1 + r).405 − 1]. The formula is traditionally described in terms of a certain percentage increase in Start Printed Page 22688payment for every 10-percent increase in the resident-to-bed ratio.

    Section 302 of Public Law 106-554 amended section 1886(d)(5)(B) of the Act to modify the transition for the IME formula multiplier, or c, that was first established by Public Law 105-33 and revised by Public Law 106-113.

    Section 302(a) of Public Law 106-554 provides that, for discharges occurring during FY 2002, the formula multiplier is 1.6. For discharges occurring during FY 2003 and thereafter, the formula multiplier is 1.35. (Section 302(b) of Public Law 106-554 provides for a special payment rule which states that, for discharges occurring on or after April 1, 2001 and before October 1, 2001, IME payments are to be made if “c” equalled 1.66 rather than 1.54. We are issuing a separate interim final rule with comment period (HCFA-1178-IFC) to include this change for payments in FY 2001.) The multiplier of 1.6 for FY 2002 represents a 6.5-percent increase for every 10-percent increase in the resident-to-bed ratio. The multiplier for FY 2003 and thereafter (1.35) represents a 5.5-percent increase for every 10-percent increase in the resident-to-bed ratio.

    We are proposing to revise § 412.105(d)(3)(vi) to reflect the change in the formula multiplier for FY 2002 to 1.6 as made by section 302(a) of Public Law 106-554 for discharges occurring during FY 2002. We also are proposing to add § 412.105(d)(3)(vii) to incorporate the formula multiplier of 1.35 for discharges occurring on or after October 1, 2002.

    2. Resident-to-Bed Ratio Cap (§ 412.105(a)(1))

    It has come to our attention that there is some misunderstanding about § 412.105(a)(1) regarding the determination of the resident-to-bed ratio that is used in calculating the IME adjustment. Section 4621(b)(1) of Public Law 105-33 amended section 1886(d)(5)(B) of the Act by adding a new clause (vi) to provide that, effective for cost reporting periods beginning on or after October 1, 1997, the resident-to-bed ratio may not exceed the ratio calculated during the prior cost reporting period (after accounting for the cap on the hospital's number of full-time equivalent (FTE) residents). We implemented this policy in the August 29, 1997 final rule (62 FR 46003) and the May 12, 1998 final rule (63 FR 26323) under regulations at § 412.105(a)(1). Existing § 412.105(a)(1) specifies that “[e]xcept for the special circumstances for affiliated groups and new programs described in paragraphs (f)(1)(vi) and (f)(1)(vii) of this section, for a hospital's cost reporting periods beginning on or after October 1, 1997, this ratio may not exceed the ratio for the hospital's most recent prior cost reporting period.” We are proposing to clarify § 412.105(a)(1) to add a provision that this ratio may not exceed the ratio for the hospital's most recent prior cost reporting period after accounting for the cap on the number of FTE residents.

    In general, the resident-to-bed ratio from the prior cost reporting period, which is to be used as the cap on the resident-to-bed ratio for the current payment cost reporting period, should only include an FTE count that is subject to the FTE cap on the number of allopathic and osteopathic residents, but is not subject to the rolling average. (An explanation of rolling average appears in section IV.G.3. of this preamble.)

    The following illustrates the steps for determining the resident-to-bed ratio for the current payment year cost reporting period and the cap on the resident-to-bed ratio:

    Current payment year cost reporting period resident-to-bed ratio:

    Step 1. Determine the hospital's number of FTE residents in the current payment year cost reporting period.

    Step 2. Compare the number of FTEs from step 1 to the hospital's FTE cap (§ 412.105(f)(1)(iv)). If the number of FTEs from step 1 exceeds the FTE cap, replace it with the number of FTEs in the FTE cap.

    Step 3. Determine the 3-year rolling average of the FTE residents using the FTEs from the current payment year cost reporting period and the prior two cost reporting periods (subject to the FTE cap in each cost reporting period). (Include podiatry and dental residents, and exclude residents in new programs in accordance with § 412.105(f)(1)(iv) and proposed revised (f)(1)(v). Residents in new programs are added to the quotient of the rolling average.)

    Step 4. Determine the hospital's number of beds (see § 412.105(b)) in the current payment year cost reporting period.

    Step 5. Determine the ratio of the number of FTEs from step 3 to the number of beds from step 4. The lower of this resident-to-bed ratio or the resident-to-bed ratio cap (calculated below) from the immediately preceding cost reporting period is used to calculate the hospital's IME adjustment factor for the current payment year cost reporting period.

    Resident-to-bed ratio cap:

    Step 1. Determine the hospital's number of FTE residents in its cost reporting period that immediately precedes the current payment year cost reporting period.

    Step 2. Compare the number of FTEs from step 1 to the hospital's FTE cap. If the number of FTEs from step 1 exceeds the FTE cap, replace it with the number of FTEs in the FTE cap. (If there is an increase in the number of FTEs in the current payment year cost reporting period due to a new program or an affiliation agreement, these FTEs are added to FTEs in the preceding cost reporting period after comparison to the FTE cap.)

    Step 3. Determine the hospital's number of beds (§ 412.105(b)) in its cost reporting period that immediately precedes the current payment year cost reporting period.

    Step 4. Determine the ratio of the number of FTEs in step 2 to the number of beds in step 3. This ratio is the resident-to-bed ratio cap for the current payment year cost reporting period.

    Step 5. Compare the resident-to-bed ratio cap in step 4 to the resident-to-bed ratio in the current payment year cost reporting period. The lower of the resident-to-bed ratio from the current payment year cost reporting period or the resident-to-bed ratio cap from the immediately preceding cost reporting period is used to calculate the hospital's IME adjustment factor for the current payment year cost reporting period.

    We note that the resident-to-bed ratio cap is a cap on the resident-to-bed ratio calculated for all residents, including allopathic, osteopathic, dental, and podiatry residents (63 FR 26324, May 12, 1998). However, as described in existing § 412.105(a)(1), the resident-to-bed ratio cap may be adjusted to reflect an increase in the current cost reporting period's resident-to-bed ratio due to residents in a new GME program or an affiliation agreement. While this exception does not apply if the resident-to-bed ratio increases because of an increase in the number of podiatry or dentistry residents or because of a change in the number of beds, the ratio could increase after a one-year delay. An increase in the current cost reporting period's ratio (while subject to the cap on the overall number of allopathic and osteopathic residents) thereby establishes a higher cap for the following cost reporting period.

    The following is an example of the application of the cap on the resident-to-bed ratio:

    Example—Part 1:

    • Assume Hospital A has 50 FTEs in its cost reporting period ending September 30, 1996, thereby establishing an IME FTE resident cap of 50 FTEs. Start Printed Page 22689
    • In its cost reporting period of October 1, 1996 to September 30, 1997 (the prior year), it has 50 FTEs and 200 beds, so that its resident-to-bed ratio for this period is 50/200 = .25.
    • In the (current year) cost reporting period of October 1, 1997 to September 30, 1998 (the first cost reporting period in which the FTE resident cap, the resident-to-bed ratio cap, and the rolling average apply), Hospital A has 50 FTEs and 200 beds.
    • Hospital A s FTEs do not exceed its FTE cap, so its current number of FTEs (50) is used to calculate the 2-year rolling average: (50 + 50)/2 = 50.
    • The result of the rolling average is used as the numerator of the resident-to-bed ratio. Thus, the resident-to-bed ratio is 50/200 = .25.
    • .25 is compared to the resident-to-bed ratio from the prior period of October 1, 1996 to September 30, 1997. Because the FTE resident cap and the rolling average were not yet effective in the period of October 1, 1996 to September 30, 1997, that period's resident-to-bed ratio does not have to be recalculated to account for the FTE resident cap. Accordingly, the resident-to-bed ratio cap for October 1, 1997 to September 30, 1998 is .25.
    • Because the resident-to-bed ratio does not exceed the prior year ratio, Hospital A would use the resident-to-bed ratio of .25 to determine the IME adjustment in its cost reporting period of October 1, 1997 to September 30, 1998.

    Example—Part 2:

    • In the (current year) cost reporting period of October 1, 1998 to September 30, 1999, Hospital A adds 1 podiatric and 1 dental resident, so that it has a total of 52 FTEs and 200 beds. Since the FTE resident cap only includes allopathic and osteopathic residents, Hospital A has not exceeded its FTE resident cap with the addition of a podiatric and a dental resident.
    • Accordingly, the (now) 3-year rolling average would be (52 + 50 + 50)/3 = 50.67.
    • 50.67 is used in the numerator of the current payment year's resident-to-bed ratio, so that the resident-to-bed ratio is 50.67/200 = .253.
    • .253 is compared to the resident-to-bed ratio from the prior year's cost reporting period of October 1, 1997 to September 30, 1998 that is recalculated to account for the FTE resident cap. Because Hospital A did not exceed its FTE resident cap of 50 FTEs in this period of October 1, 1997 to September 30, 1998, the recalculated resident-to-bed ratio would be 50/200 = .25.
    • Compare the current year resident-to-bed ratio (.253) to the resident-to-bed ratio cap (.25); .253 does exceed .25.
    • Therefore, the resident-to-bed ratio in the period of October 1, 1998 to September 30, 1999 is capped at .25, which is to be used in calculating Hospital A's IME adjustment for October 1, 1998 to September 30, 1999.

    Example—Part 3:

    • In the cost reporting period of October 1, 1999 to September 30, 2000, Hospital A adds 2 internal medicine residents so that it has a total of 54 FTEs and 200 beds. While podiatric and dental residents are not included in the FTE resident cap, internal medicine residents are included. Hospital A has exceeded its IME FTE resident cap of 50 by 2 FTEs. Thus, 2 FTEs are excluded from the FTE count.
    • Accordingly, the rolling average would be (52 + 52 + 50)/3 = 51.33.
    • 51.33 is used in the numerator of the resident-to-bed ratio, so that the resident-to-bed ratio is 51.33/200 = .257.
    • .257 is compared to the resident-to-bed ratio from October 1, 1998 to September 30, 1999 that is recalculated to only account for the FTE resident cap. The recalculated resident-to-bed ratio would be 50 allopathic or osteopathic FTEs plus 1 podiatric and 1 dental resident, which is 52/200 = .26.
    • .26 is the resident-to-bed ratio cap for October 1, 1999 to September 30, 2000. .257 does not exceed .26.
    • Therefore, the resident-to-bed ratio in the period of October 1, 1998 to September 30, 1999 is .257, which is to be used in calculating this period s IME adjustment.

    If a hospital starts a new GME program, the adjustment to the resident-to-bed ratio cap applies for the period of years equal to the minimum accredited length for that type of program. (For example, for a new internal medicine program, the period of years equals 3; for a new surgery program, the period of years equals 5.) Within these program years, the number of new FTE residents in the current cost reporting period is added to the FTE resident count used in the numerator of the resident-to-bed ratio from the previous cost reporting period. The lower of the resident-to-bed ratio from the current cost reporting period or the adjusted resident-to-bed ratio from the preceding cost reporting period is used to calculate the hospital's IME adjustment for the current cost reporting period. If a hospital continues to expand its program after the period of years, the numerator of the resident-to-bed ratio from the preceding cost reporting period would not be adjusted to reflect these additional residents. However, an increase in the ratio of the current cost reporting period would establish a higher cap for the following cost reporting period. We also are proposing to add a provision that the exception for new programs described in § 412.105(f)(1)(vii) applies for the period of years equal to the minimum accredited length for that type of program.

    Similarly, if a hospital increases the number of FTE residents in the current cost reporting period because of an affiliation agreement, the number of additional FTEs is added to the FTE resident count used in the numerator of the resident-to-bed ratio from the previous cost reporting period. The lower of the resident-to-bed ratio from the current cost reporting period or the adjusted resident-to-bed ratio from the preceding cost reporting period is used to calculate the hospital's IME adjustment for the current cost reporting period.

    3. Conforming Changes (§ 412.105(f)(1)(ii)(C) and (f)(1)(v))

    In the August 29, 1997 final rule with comment period (62 FR 46003), the May 12, 1998 final rule (63 FR 26323), and the July 31, 1998 final rule (63 FR 40986), to implement the provisions of Public Law 105-33, we set forth certain policies that affected payment for both direct and indirect GME. Some of these policies related to the FTE cap on allopathic and osteopathic residents, the rolling average, and payment for residents training in nonhospital settings. When we amended the regulations under § 413.86 for direct GME, we inadvertently did not make certain conforming changes in § 412.105 for IME. We are proposing to make the following conforming changes:

    • To revise § 412.105(f)(1)(ii)(C) to specify that, effective for discharges occurring on or after October 1, 1997, the time residents spend training in a nonhospital setting in patient care activities under an approved medical residency training program may be counted towards the determination of full-time equivalency if the criteria set forth at § 413.86(f)(3) or § 413.86(f)(4), as applicable, are met.
    • To revise § 412.105(f)(1)(v) to specify that residents in new residency programs are not included in the rolling average for a period of years equal to the minimum accredited length for the type of program.

    In addition, we are proposing to revise § 412.105(f)(1)(ix) to specify, for IME purposes, a temporary adjustment to a hospital's FTE cap to reflect residents added because of another hospital's closure of its medical residency program (to conform to the Start Printed Page 22690proposed change for GME discussed in section IV.G.5. of this preamble).

    D. Payments to Disproportionate Share Hospitals (§ 412.106)

    Effective for discharges beginning on or after May 1, 1986, hospitals that serve a significantly disproportionate number of low-income patients (as defined in section 1886(d)(5)(F) of the Act) receive additional payments through the DSH adjustment.

    Section 1886(d)(5)(F)(ix) of the Act, as amended by section 112 of Public Law 106-113, specifies a percentage reduction in the payments a hospital would otherwise receive under the disproportionate share formula. Prior to enactment of section 303 of Public Law 106-554, the reduction percentages were as follows: 3 percent for FY 2001, 4 percent for FY 2002, and 0 percent for FY 2003 and each subsequent fiscal year.

    Section 303 of Public Law 106-554 revised the amount of the percent reductions to 2 percent for discharges occurring in FY 2001, and to 3 percent for discharges occurring in FY 2002. The reduction continues to be 0 percent for FY 2003 and each subsequent fiscal year. Section 303 of Public Law 106-554 contains a special rule for FY 2001: For discharges occurring on or after October 1, 2000 and before April 1, 2001, the reduction is to be 3 percent, and for discharges occurring on or after April 1, 2001 and before October 1, 2001, the reduction is to be 1 percent. Changes made by section 303 with respect to FY 2001 discharges are being implemented in a separate interim final rule with comment period (HCFA-1178-IFC).

    We are proposing to revise § 412.106(e) to reflect the change in the percentage for FY 2002 made by section 303 of Public Law 106-554. We also are proposing to make a technical change in the heading of paragraph (e).

    E. Medicare Geographic Classification Review Board (Proposed New § 412.235 and Existing §§ 412.256, 412.273, 412.274(b), and 412.276)

    With the creation of the Medicare Geographic Classification Review Board (MGCRB), beginning in FY 1991, under section 1886(d)(10) of the Act, hospitals could request reclassification from one geographic location to another for the purpose of using the other area's standardized amount for inpatient operating costs or the wage index value, or both (September 6, 1990 interim final rule with comment period (55 FR 36754), June 4, 1991 final rule with comment period (56 FR 25458), and June 4, 1992 proposed rule (57 FR 23631)). Implementing regulations in Subpart L of Part 412 (§§ 412.230 et seq.) set forth criteria and conditions for redesignations from rural to urban, rural to rural, or from an urban area to another urban area with special rules for SCHs and RRCs.

    Section 304 of Public Law 106-554 contained several provisions related to the wage index and reclassification decisions made by the MGCRB. In summary, section 304 first establishes that hospital reclassification decisions by the MGCRB for wage index purposes are effective for 3 years, beginning with reclassifications for FY 2001. Second, it provides that the MGCRB must use the 3 most recent years of average hourly wage data in evaluating a hospital's reclassification application for FY 2003 and subsequent years. Third, it provides that an appropriate statewide entity may apply to have all of the geographic areas in a State treated as a single geographic area for purposes of computing and applying the wage index, for reclassifications beginning in FY 2003. A discussion of how we are proposing to implement these three provisions follows. (Section III.F. of this preamble discusses the application of these proposed policy changes to the development of the proposed FY 2002 and later wage indexes based on hospital reclassification under the provisions of section 304 of Public Law 106-554.)

    1. Three-Year Reclassifications for Wage Index Purposes

    Section 304(a) of Public Law 106-554 amended section 1886(d)(10)(D) of the Act by adding clause (v), which provides that, if a hospital is approved for reclassification by the MGCRB for purposes of the wage index, the reclassification is effective for 3 years. The amendment made by section 304(a) is effective for reclassifications for FY 2001 and subsequent years. In addition, the legislation specifies that the Secretary must establish a mechanism under which a hospital may elect to terminate such reclassification during the 3-year period.

    Consistent with new section 1886(d)(10)(D)(v) of the Act, we are proposing to revise § 412.274(b) to provide under new paragraph (b)(2) that any hospital that is reclassified for a particular fiscal year for purposes of receiving the wage index value of another area would receive that reclassification for 3 years beginning with discharges occurring on the first day (October 1) of the second Federal fiscal year in which a hospital files a complete application. This 3-year reclassification would remain in effect unless the hospital terminates the reclassification under proposed revised procedures that we are establishing under new proposed § 412.273(b). The proposed provision would apply to hospitals that are reclassified for purposes of the wage index only, as well as those that are reclassified for both the wage index and the standardized amount. However, in the latter case, only the wage index reclassification would be extended for 2 additional years beyond the 1 year provided for in the existing regulations (3 years total). Hospitals seeking reclassification for purposes of the standardized amount must continue to reapply to the MGCRB on an annual basis.

    a. Special Rule for a Hospital That Was Reclassified for FY 2001 and FY 2002 to Different Areas

    Because the 3-year effect of the amendment made by section 304(a) of Public Law 106-554 is applicable to reclassifications for FY 2001 (which had already taken place prior to the date of enactment of section 304(a) (December 21, 2000), and because the application process for reclassifications for FY 2002 had already been completed by the date of enactment, we are establishing special procedures for hospitals that are reclassified for purposes of the wage index to one area for FY 2001, and are reclassified for purposes of the wage index or the standardized amount to another area for FY 2002. We are deeming such a hospital to be reclassified to the area for which it applied for FY 2002, unless the hospital elects to receive the wage index reclassification it was granted for FY 2001. Consistent with our procedures for withdrawing an application for reclassification (§ 412.273), we are allowing a hospital that wishes to receive the reclassification it was granted for FY 2001 to withdraw its FY 2002 application by making a written request to the MGCRB within 45 days of the publication date of this proposed rule (that is, by June 18, 2001). Again, only the wage index reclassification is extended for 2 additional years (3 years total). Hospitals seeking reclassification for purposes of the standardized amount must continue to reapply to the MGCRB on an annual basis.

    (We note that the new location and mailing address of the MGCRB and the Provider Reimbursement Review Board (PRRB) is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244-2670. The MGCRB and PRRB will be functioning at this new location as of May 21, 2001. Also, please specify whether the mail is intended for the MGCRB or the PRRB.) Start Printed Page 22691

    b. Overlapping Reclassifications Are Not Permitted

    Under the broad authority delegated to the Secretary by section 1886(d)(10) of the Act, we are proposing that a hospital that is reclassified to an area for purposes of the wage index may not extend the 3-year effect of the reclassification under section 304(a) of Public Law 106-554 by subsequently applying for reclassification to the same area for purposes of the wage index for a fiscal year that would be within the 3-year period. For example, if a hospital is reclassified for purposes of the wage index to Area A for FY 2002, is approved to receive Area A's wage index for 3 years (FYs 2002, 2003, and 2004), and reapplies to be reclassified to Area A for FYs 2003, 2004, and 2005 (3 years) for purposes of the wage index, the hospital would not be permitted to receive Area A's wage index for FY 2005 as a result of the reapplication. Instead, we are proposing that if the hospital wishes to extend the FY 2002 3-year reclassification for fiscal years beyond FY 2004, it would have to apply for reclassification for FY 2005.

    We believe new section 1886(d)(10)(D)(v) of the Act replaces the current annual reclassification cycle with a 3-year reclassification cycle. We believe this policy was intended to provide consistency and predictability in hospital reclassification and wage index data, as well as to alleviate the year-to-year fluctuations in the ability of some hospitals to qualify for reclassification. We do not believe it was intended to be used to extend reclassifications for which hospitals otherwise would not be eligible (by reapplying during the second year of a 3-year reclassification because a hospital fears it may not be eligible for reclassification after its current 3-year reclassification expires).

    c. Withdrawals of Applications and Terminations of Approved Reclassifications

    (1) General

    Under § 412.273(a), a hospital, or group of hospitals, may withdraw its application for reclassification at any time before the MGCRB issues its decision or, if after the MGCRB issues its decision, within 45 days of publication of our annual notice of proposed rulemaking concerning changes to the inpatient hospital prospective payment system and proposed payment rates for the fiscal year for which the application was filed. We are proposing that the withdrawal procedures and the applicable timeframes in the existing regulations would apply to hospitals that would receive 3-year reclassification for wage index purposes. For example, if a hospital applied for reclassification to Area A for purposes of the wage index for FY 2002, but wished or wishes to withdraw its application, it must have done so prior to the MGCRB issuing a decision on its application or, if the MGCRB issued such a decision, within 45 days of the publication date of this proposed rule. Such a withdrawal, if effective, means that the hospital would not be reclassified to Area A for purposes of the wage index for FY 2002 (and would not receive continued reclassification for FYs 2003 and 2004). In other words, a withdrawal, if accepted, prevents a reclassification from ever becoming effective.

    On the other hand, a reclassification decision that is terminated upon the request of the hospital has partial effect. Section 1886(d)(10)(D)(v) of the Act, as added by section 304(a) of Public Law 106-554, provides that a reclassification for purposes of the wage index is effective for 3 years “except that the Secretary shall establish procedures under which a * * * hospital may elect to terminate such reclassification before the end of such period.” Consistent with section 1886(d)(10)(D)(v) of the Act, we are proposing to allow a hospital to terminate its approved 3-year reclassification for 1 or 2 years of the 3-year effective period (proposed § 412.273(b)). For example, a hospital that has been reclassified for purposes of the wage index for FY 2001 is also reclassified for FYs 2002 and 2003 (3 years). Such a hospital could terminate its approved reclassification so that the reclassification is effective only for FY 2001, or only for FYs 2001 and 2002. Consistent with the prospective nature of reclassifications, we would not permit a hospital to terminate its approved 3-year reclassification for part of a fiscal year. A termination would be effective for the next fiscal year. In order to terminate an approved 3-year reclassification, we would require the hospital to notify the MGCRB in writing within 45 days of the publication date of the annual proposed rule for changes to the inpatient hospital prospective payment system. A termination request, once accepted, is effective for the balance of the 3-year period (as discussed below under reapplying within original 3-year period, following a termination).

    We are establishing a special procedural rule for handling FY 2001 reclassifications. As noted above, the amendments made by section 304(a) of Public Law 106-554 are effective for reclassifications for FYs 2001 and beyond, and reclassification applications for FY 2001 had already been submitted prior to the date of enactment of section 304(a). We are deeming those hospitals that were reclassified for FY 2001 to be reclassified for FYs 2002 and 2003. Therefore, if a deemed hospital that was reclassified for purposes of the wage index for FY 2001 does not wish to continue its reclassification for FY 2002 and FY 2003, the hospital must notify the MGCRB in writing within 45 days after the publication of this proposed rule (that is, by June 18, 2001).

    (2) Reinstatement After a Withdrawal of Application or a Termination of an Approved Reclassification

    We are proposing that if a hospital elects to withdraw its 3-year reclassification application after the MGCRB has issued its decision, it may cancel its withdrawal in a subsequent fiscal year and request the MGCRB to reinstate its reclassification for the remaining fiscal years of the 3-year reclassification period. (This proposal is consistent with our proposal that 3-year reclassification periods may not overlap, as discussed in section IV.E.1.b. of this preamble.) Alternatively, a hospital may apply for reclassification to a different area (that is, an area different from the one to which it was originally reclassified), and if successful, the reclassification effect would be for 3 years.

    Example 1:

    Hospital A files an application and the MGCRB issues a decision to reclassify it to Area A for purposes of wage index for FY 2002 through FY 2004 (3 years). Within 45 days after the publication of this proposed rule, Hospital A withdraws its application. Within the time for applying for a FY 2003 reclassification, Hospital A cancels its withdrawal for classification to Area A. Its reclassification to Area A is reinstated, but only for FYs 2003 and 2004.

    Example 2:

    Hospital B files an application for reclassification for wage index purposes for FY 2002 through FY 2004 and the MGCRB issues a decision for reclassification to Area B. Within 45 days after publication of this proposed rule, Hospital B withdraws its application. Hospital B does not cancel its withdrawal of the application. Hospital B timely applies and is reclassified to Area B for 3 years, beginning with FY 2003. In this case, the reclassification to Area B would be for FYs 2003 through 2005.

    Similarly, and for the same reasons, we are proposing that if a hospital elects to terminate its accepted 3-year reclassification, it may cancel that termination and have its original reclassification reinstated for the duration of the original 3-year period. Alternatively, a hospital could apply for reclassification to a different area and receive a new 3-year period of reclassification.

    Example 3:

    Hospital C is reclassified to Area A for purposes of the wage index for FY Start Printed Page 226922002, and terminates its 3-year reclassification effective for FYs 2003 and 2004. Within the timeframe for applying for FY 2004 reclassification, Hospital C cancels its termination. Its reclassification to Area A would be reinstated for FY 2004 only.

    Example 4:

    Hospital D has the same circumstances as Hospital C in Example 3, except that instead of canceling its termination, Hospital D applies and is reclassified to Area B for FY 2004. In this case, the reclassification would be for FYs 2004 through 2006.

    d. Special Rules for Group Reclassifications

    Section 412.232 discusses situations where all hospitals in a rural county are seeking urban redesignation, and § 412.234 discusses criteria where all hospitals in an urban county are seeking redesignation to another urban county. In these cases, hospitals submit an application as a group, and all hospitals in the county must be a party to the application. The reclassification is effective both for purposes of the wage index and the standardized amount of the area to which the hospitals are reclassified.

    Section 304(a) of Public Law 106-554 does not specifically address the group reclassification situations under §§ 412.232 and 412.234. However, we believe that, in the case of hospitals reclassified under these group reclassification procedures, it would be appropriate to extend the 3-year reclassification provision to these situations for the wage index only. In order to be reclassified for the standardized amount during the second and third years of a 3-year reclassification for the wage index, the hospitals located in these counties would have to reapply on an annual basis to the MGCRB either as a group or as individual hospitals and meet the criteria outlined in §§ 412.232(a) and 412.234(a).

    Hospitals that are part of a group reclassification would be able to withdraw or terminate their 3-year wage index reclassifications in the same manner as described above. If one hospital within the group elects to withdraw or terminate its reclassification, the reclassification of other hospitals in the group would be unaffected.

    Under section 152(b) of Public Law 106-113, hospitals in certain counties were deemed to be located in specified areas for purposes of payment under the hospital inpatient prospective payment system, for discharges occurring on or after October 1, 2000. For payment purposes, these hospitals are to be treated as though they were reclassified for purposes of both the standardized amount and the wage index. Section 152(b) also requires that these reclassifications be treated for FY 2001 as though they are reclassification decisions by the MGCRB. For purposes of applying the 3-year extension of wage index reclassifications, we are proposing to extend section 1886(d)(10)(D)(v) to hospitals reclassified under section 152(b) of Public Law 106-113. These hospitals also would have to apply for the standardized amount on an annual basis to the MGCRB.

    e. Administrator Authority To Cancel Inappropriate Reclassification Decisions

    Under the provisions of § 412.278(g), the Administrator has the authority to review an inappropriate reclassification decision made by the MGCRB, as discovered by either the hospital or HCFA, including 3-year reclassifications in the second and third year, and to determine whether or not to cancel that decision as a result of the review of the facts. Hospitals that are concerned that they have been inappropriately reclassified should follow the procedures outlined in § 412.278.

    2. Three-Year Average Hourly Wages

    Section 304(a) of Public Law 106-554 amended section 1886(d)(10)(D) of the Act by adding clause (vi) which provides that the MGCRB must use the average of the 3 most recent years of hourly wage data for the hospital when evaluating a hospital's request for reclassification. Specifically, the MGCRB must base its evaluation on an average of the average hourly wage for the most recent years for the hospital seeking reclassification and the area to which the hospital seeks to reclassify. This provision is effective for reclassifications for FY 2003 and subsequent years. (Section III.F. of this preamble discusses the development and application of the proposed 3-year average hourly wage data (Table 2 in the Addendum to this proposed rule) that the MGCRB would use to evaluate hospitals' applications for reclassifications for FY 2003; and the 3-year average hourly wage data (Tables 3A and 3B in the Addendum to this proposed rule) for hospital reclassification applications for FY 2001.)

    We are proposing to revise §§ 412.230(e)(2) and 412.232(d)(2) to incorporate the provisions of section 1886(d)(10)(D)(vi) of the Act as added by section 304(a) of Public Law 106-554. Specifically, we are providing that, for redesignations effective beginning FY 2003, for hospital-specific data, the hospital must provide a 3-year average of its average hourly wages using data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes. For data for other hospitals, we are proposing to require hospitals to provide a 3-year average of the average hourly wage in the area in which the hospital is located and a 3-year average of the average hourly wage in the area to which the hospital seeks reclassification. The wage data would be taken from the HCFA hospital wage survey used to construct the wage index for prospective payment purposes. The 3-year averages are calculated by dividing the sum of the dollars (adjusted to a common reporting period using the method described in section III. of the proposed rule) across all 3 years, by the sum of the hours.

    3. Statewide Wage Index

    As stated earlier, section 304(b) of Public Law 106-554 provides for a process under which an appropriate statewide entity may apply to have all the geographic areas in the State treated as a single geographic area for purposes of computing and applying the area wage index for reclassifications beginning in FY 2003.

    Section 304 does not indicate the duration of the application of these statewide wage indexes. However, it should be noted that the statutory language does refer to these applications as reclassifications. We are proposing that these statewide wage index applications be processed similar to MGCRB applications, with the same effective dates of the decisions and the withdrawal process. Therefore, similar to wage index reclassification decisions under section 1886(d)(10)(D)(v) of the Act as added by section 304(a) of Public Law 106-554, the statewide wage index reclassification would be effective for a total of 3 years. The same deadlines and timetable applicable to MGCRB reclassification applications would apply for statewide wage index applications.

    We are proposing to establish a new § 412.235 to include the requirements for statewide wage indexes. We are proposing to apply the following criteria to determine whether hospitals would be approved for a statewide geographic wage index reclassification (proposed § 412.235(a)):

    • There must be unanimous support for a statewide wage index among hospitals in the State in which the statewide wage index would be applied. We would require a signed affidavit on behalf of all the hospitals in the State of this support as part of the application for reclassification. Start Printed Page 22693
    • All hospitals in the State must apply through a signed single application for the statewide wage index in order for the application to be considered by the MGCRB. We believe this is necessary to ensure that every hospital in the State is included in the application, since the payment of every hospital would be affected by the statewide wage index.
    • There must be unanimous support for the termination or withdrawal of a statewide wage index among hospitals in the State in which the statewide index would be applied. We would require a signed affidavit for this agreement.
    • All hospitals in the State waive their rights to any wage index that they would otherwise receive absent the statewide wage index, including a wage index that any of the hospitals might have received through individual or group geographic reclassification under § 412.273(a).

    An individual hospital within the State may receive a wage index that could be higher or lower under the statewide wage index reclassification in comparison to its wage index otherwise (proposed § 412.235(b)). Specifically, hospitals must be aware that there may be a reduction in the wage index as a result of participation on a statewide basis.

    We are proposing to consider statewide wage index applications under the same process we use for hospital reclassification applications, including the effective dates of the MGCRB decision and the withdrawal process (proposed § 412.235(c)). We are proposing that applications for the statewide wage index would be effective for 3 years beginning with discharges occurring on the first day (October 1) of the second Federal fiscal year following the Federal fiscal year in which the hospitals file a complete application unless all of the participating hospitals terminate their approved statewide wage index classification earlier, as discussed below. Once approved by the MGCRB, an application for a statewide wage index can only be withdrawn or terminated as a result of a signed affidavit on behalf of all the hospitals in the State indicating their request that the statewide reclassification be withdrawn or terminated. A request for withdrawal or termination must be submitted within 45 days of the publication of the annual proposed rule for the inpatient hospital prospective payment system announcing the reclassification. New hospitals that open prior to the deadline for submitting an application for a statewide wage index, but after a group application has been submitted, would be required to agree to the statewide wage index in order for the group application to remain viable. New hospitals that open after the deadline for submitting an application would receive the statewide wage index. The agreement of new hospitals would also be required in order to withdraw or terminate a statewide wage index reclassification. The proposed rules discussed under section IV.E.1.c. of this preamble for withdrawals of applications and terminations of approved 3-year wage index reclassification decisions would apply to decisions regarding statewide wage index reclassifications.

    We also are proposing to allow hospitals outside a State in which hospitals have received approval of a statewide wage index classification to seek reclassification for the statewide wage index into that State. In that case, an outside hospital(s) that is reclassified into the statewide wage index area would receive a wage index calculated based on the statewide wage index reclassification. However, the support of such an outside hospital(s) would not be needed in the case of withdrawal or termination of a statewide wage index reclassification.

    F. New Medical Services and Technology: Additional Payments Under the Inpatient Hospital Prospective Payment System (Proposed New §§ 412.87 and 412.88)

    Section 533(b) of Public Law 106-554 amended section 1886(d)(5) of the Act to add new subparagraphs (K) and (L) to address a process of identifying and ensuring adequate payment for new medical services and technologies under Medicare. Under new section 1886(d)(5)(K)(i) of the Act, effective for discharges beginning on or after October 1, 2001, the Secretary is required to establish (after notice and opportunity for public comment) a mechanism to recognize the costs of new services and technologies under the inpatient hospital prospective payment system. New section 1886(d)(5)(K)(ii)(I) of the Act specifies that the mechanism must apply to a new medical service or technology if, “based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges * * * is inadequate.” New section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered “new” if it meets criteria established by the Secretary (after notice and opportunity for public comment).

    New sections 1886(d)(5)(K)(ii) through (vi) of the Act further provide—

    • For an additional payment for new medical services and technology in an amount beyond the DRG prospective payment system payment rate that adequately reflects the estimated average cost of the service or technology.
    • That the requirement for an additional payment for a new service or technology may be satisfied by means of a new-technology group (described in new section 1886(d)(5)(L) of the Act), an add-on payment, a payment adjustment, or any other similar mechanism for increasing the amount otherwise payable with respect to a discharge.
    • For the collection of data relating to the cost of new medical service, or technology for not less than 2 years and no more than 3 years after an appropriate inpatient hospital services code is issued. The statute further provides that discharges involving new services or technology that occur after the collection of these data will be classified within a new or existing DRG group with a weighting factor derived from cost data collected for discharges occurring during such period.

    A discussion of how we are proposing to implement the provisions of section 533(b) of Public Law 106-554 follows. Section II.D. of this preamble discusses the Report to Congress required by section 533(a) of Public Law 106-553 relating to methods of expeditiously incorporating new medical services and technologies into the clinical coding system used for payments for inpatient hospital services and our preferred method of achieving this purpose.

    1. Criteria for Identifying New Medical Services and Technology

    New section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered “new” if it meets criteria established by the Secretary (after notice and opportunity for public comment). (For convenience, hereafter we refer to “new medical services and technology” as “new technology.”) We are proposing that a new technology would be an appropriate candidate for an additional payment when, in the judgment of the Secretary, it represents an advance in medical technology that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries (proposed § 412.87(b)(1)). This criterion is to ensure that new technology can be demonstrated to provide a substantial clinical improvement based on verifiable evidence. Because any additional payments made under this Start Printed Page 22694provision will be financed by reducing the payments made for all other services (in order to maintain budget neutrality as discussed under section IV.F.4. of this preamble), we believe that these payments should be focused on those technologies that afford clear improvements over use of previously available technologies. As explained below, we are proposing that new technologies meeting this clinical definition also must be demonstrated to be inadequately paid otherwise under the DRG system to receive special payment treatment (proposed § 412.87(b)(3)). Hospitals adopting other new technologies that do not meet these standards would be paid for these technologies through other applicable DRG payments. These payments would be recalibrated over time to reflect actual use of the new technology.

    We expect to implement this criterion by considering the clinical benefits for beneficiaries. We are aware that some technologies may offer substantial clinical improvements for small subsets of beneficiaries, such as those who have not responded to other treatments, and we expect to recognize such substantial advantages in these instances.

    In addition to the clinical and cost criteria, we are proposing that, in order to qualify for the special payment treatment provided under new section 1886(d)(5)(K)(ii)(I) of the Act, a specific technology must be new (proposed § 412.87(b)(2)). We believe the new provision contemplates the special payment treatment for new technologies until such time as data are available to reflect the cost of the technology in the DRG weights through recalibration (generally 2 years). Specifically, new section 1886(d)(5)(K)(ii)(II) of the Act states that the Secretary must “provide for the collection of data with respect to the costs of a new medical service or technology * * * for a period of not less than two years and not more than three years beginning on the date on which an inpatient hospital code is issued with respect to the service or technology.” In addition, new section 1886(d)(5)(K)(ii)(III) states that the Secretary must “provide for additional payment to be made * * * with respect to discharges involving a new medical service or technology described in subclause (I) that occur during the period described in subclause (II) in an amount that adequately reflects the estimated average costs of such service or technology.”

    We are proposing to make determinations regarding which technologies meet this criterion using a panel of Federal clinical and other experts, supplemented as appropriate with outside expertise. The results of all such determinations would be announced in the Federal Register as part of the annual updates and changes to the inpatient hospital prospective payment system (proposed § 412.87(b)(1)). We note that this determination is separate and distinct from the coverage decision process. In the case of new technologies that have gone through the national coverage determination process, we would expect that the evidence reviewed in that process would, in general, be sufficient for making these determinations as well.

    Requests to recognize new technology for special payment treatment under new section 1886(d)(5)(K)(ii)(I) of the Act would be evaluated against this proposed criterion based on evidence submitted by the requestor. These requests should be submitted in conjunction with the initial submission of data on the costs of the new technology. In general, we encourage interested parties to initiate this process by August of the year preceding the year in which a new code identifying the new technology would become effective. This will allow maximum time to review the requestor's data and clinical material. In particular, it affords an opportunity to work with the requestor to resolve any problems or questions that may arise. At a minimum, requests should be submitted by early October of that year. It should be noted that submitting requests as late as October may not afford the opportunity for HCFA to work with the requestor to resolve problems or questions. Requests must be submitted by early October to allow adequate time to consider all aspects of a request prior to making a determination to be included in the proposed rule. Work begins on preparing the DRG changes for the following fiscal year by the middle of December, and any decisions to recognize particular new technologies should be taken into account at that time.

    We are soliciting comments on these proposals. In particular, given that this process is the result of new legislation with possibly major implications for the hospital inpatient prospective payment system, we invite public comment on: our definition of new medical services and technologies; the use of Federal clinical and other experts to make determinations regarding which criteria meet our definition of a new service or technology; the information necessary to determine whether payment would be inadequate; and our payment mechanism (see following discussions for these latter two issues).

    2. Determining Adequacy of Current Payments for New Services and Technology

    Because the inpatient hospital prospective payment system includes costs associated with all aspects of a patient's stay in the hospital, it is not enough to simply identify a technology as “new” and pay an additional amount. A single DRG may encompass many different treatment approaches for a particular illness, with an array of costs associated with those approaches. Clinicians are expected to select the appropriate approach based on the needs of the patient, with the payments averaging out over time to approximate the level of resources needed to treat the average patient in the DRG.

    Section 1886(d)(b)(K)(ii) of the Act, as added by section 533(b) of Public Law 106-554, requires that the Secretary make a determination whether the payment otherwise applicable under the existing DRG is inadequate compared to the estimated costs incurred with respect to new technology (as defined previously). We believe that, in order to evaluate whether the DRG payment inadequately reflects the costs of new technology, we must be able to assess the costs of cases involving the new technology against other cases in the DRG. In other words, the criteria for identifying new technology that will receive special payment treatment should reflect whether the new technology is so expensive that hospitals are unlikely to offset the higher costs with other less costly cases within the DRG. We are proposing that this threshold be set at one standard deviation beyond the mean standardized charge for all cases in the DRG to which the new technology is assigned (or the case-weighted average of all relevant DRGs, if the new technology occurs in many different DRGs) (proposed § 412.87(b)(3)). (Standardization adjusts the actual charges of a case by the payment factors such as the wage index, the indirect medical education adjustment factor, and the disproportionate share adjustment factor.)

    This comparison would preferably be done using Medicare cases identifiable in our MedPAR database, although data from a clinical trial (including Food and Drug Administration clinical trials) where no bills were submitted for payment may be considered. To the extent possible, HCFA intends to rely on existing information in making these determinations. In most instances, the information would include the Medicare provider number of the hospital where each case was treated, Start Printed Page 22695the beneficiary identification numbers of the Medicare patients, the dates of admission and discharge, the charges associated with each case, and all relevant ICD-9-CM codes associated with each case. We would then assess the charges of identified cases involving the new technology, accounting for the additional costs of the new technology that might not be included in the charges if the new technology is being provided by the manufacturer as part of the clinical trial. If the costs of the new technology are not included in the total charges, the requestor must submit adequate documentation upon which to formulate an estimate of the likely costs to hospitals of the new technology.

    A significant sample of the data should be submitted no later than early October, approximately 6 months prior to the publication of the proposed rule. Subsequently, a complete database must be submitted no later than mid-December. This timetable is necessary to allow adequate time to assess and verify the data, as well as to work with the submitters to deal with any unique situations with respect to data availability. It is also necessary to allow us to accurately incorporate the data into the proposed rule, which we begin preparing in January. We are soliciting public comments on this process.

    To illustrate the proposed use of the standard deviation thresholds, consider DRG 8 (Peripheral and Cranial Nerve and Other Nervous System Procedures Without CC). The average standardized charge of cases assigned to this DRG based on discharges during FY 2000 was $13,212, and the standard deviation was $8,978. Therefore, if a requestor were to seek assignment of a new technology that would otherwise be assigned to DRG 8 to a different DRG, the requestor would be expected to provide data indicating that the average standardized charge of cases receiving this new technology will exceed $22,190. These data must be of a sufficient sample size to demonstrate a significant likelihood that the true mean across all cases likely to receive the new technology will exceed the mean for the cases in DRG 8 by one standard deviation.

    Using standard deviation as the threshold takes into account the distribution of charges associated with different treatment modalities around the mean charge for a particular DRG, and the extent to which lower cost cases in the DRG should be expected to offset higher cost cases. Using this method, new technology in a DRG with very little variation in charges would be more likely to meet the criteria. This would be appropriate because there are fewer opportunities within such a DRG to recover the costs of very high cost cases from excess payments for very low cost cases.

    We note that, although we anticipate a limited number of new technologies will qualify under this proposed threshold, we will continue to evaluate the appropriateness of all DRG assignments. This applies not only to new technology but existing technologies as well.

    3. Developing a Payment Mechanism

    Section 1886(d)(5)(K)(v) of the Act, as added by section 533(b) of Public Law 106-554, provides flexibility to the Secretary in terms of deciding exactly how the requirement for an additional payment will be satisfied: a new-technology group, an add-on payment, a payment adjustment, or any other similar mechanism for increasing the amount otherwise payable. We believe the approach most consistent with the design and incentives of the inpatient hospital prospective payment system would be to assign new technology to the most appropriate DRG based on the condition of the patient as described above, and adjust payments for individual cases that involve the new technology when the costs of those cases exceed a threshold amount. That is, we would not pay an additional amount for every case involving the new technology, but only where the costs of the entire case exceed the DRG payment amount. We are concerned that the establishment of new DRGs specifically for the purpose of recognizing costly new technology could potentially severely disrupt the DRG classification structure. In particular, we are concerned that some new technologies may involve large numbers of cases across multiple DRGs. Creating new DRGs specifically for new technology would pull cases out of existing DRGs, possibly leading to severe distortions in the relative weights and inadequate payments for cases remaining in the existing DRGs.

    We are proposing that Medicare provide higher payments for cases with higher costs involving identified new technologies, while preserving some of the incentives under the average-based payments for all treatment modalities for a particular patient category. The payment mechanism we are proposing would be based on the cost to hospitals for the new technology. We are proposing under § 412.88 that Medicare would pay a marginal cost factor of 50 percent for the costs of the new technology in excess of the full DRG payment. This would be calculated before any outlier payments under section 1886(d)(5)(A) of the Act, if applicable. Similarly, cases involving new technology would be eligible for outlier payments, with the additional amounts paid for the new technology included in the base payment amount. Costs would be determined by applying the cost-to-charge ratio in a manner identical to that currently used for outlier payments. If the costs of a new technology case exceed the DRG payment by more than the estimated costs of the new technology, Medicare payment would be limited to the DRG payment plus 50 percent of the estimated costs of the new technology, except if the case qualified for outlier payments. (We are proposing a conforming change to § 412.80 by adding a new paragraph (a)(3) to provide that outlier qualifying thresholds and payments would be in addition to standard DRG payments and additional payments for new medical services and technology (effective October 1, 2001).)

    For example, consider a new technology estimated to cost $3,000, in a DRG that pays $20,000. A hospital submits three claims for cases involving this new technology. After applying the hospital's cost-to-charge ratio, it is determined the costs of these three cases are $19,000, $22,000, and $25,000. Under our proposal, Medicare would pay $20,000 (the DRG payment) for the first claim. For the second claim, Medicare would pay one half of the amount by which the costs of the case exceed the DRG payment, up to the estimated cost of the new technology, or $21,000 ($20,000 plus one half of $2,000). For the third claim, Medicare would pay $21,500 ($20,000 plus one half of the total estimated costs of the new technology).

    We believe it is appropriate to limit the additional payment to 50 percent of the additional cost to appropriately balance the incentives. This limit would provide hospitals an incentive for continued cost-effective behavior in relation to the overall costs of the case. In addition, hospitals would face an incentive to balance the desirability of using the new technology versus the old; otherwise, there would be a large and perhaps inappropriate incentive to use the new technology. For example, in the late 1980s, we considered whether to establish a special payment adjustment for tissue plasminogen activator (TPA), a thrombolytic agent used in treating blockages of coronary arteries, reflecting the high costs of the drug. We did not establish such an adjustment because we believed that the updates to the standardized amounts, combined with the potential for continuing improvements in hospital Start Printed Page 22696productivity, would be adequate to finance appropriate care of Medicare patients. In fact, the costs of the drug were offset by shorter hospital stays and an overall reduction in costs per case. As clinical experience with TPA accumulated, furthermore, it appeared that the drug was not as widely beneficial as its original proponents expected. Establishing an add-on payment for this drug might have actually led to more extensive use of this drug for patients who would not have benefited, and might have even been harmed, by its blood-thinning characteristics.

    4. Budget Neutrality

    The report language accompanying section 533 of Public Law 106-554 directs that the Secretary implement the new mechanism on a budget neutral basis (H.R. Conf. Rep. No. 106-1033, 106th Cong., 2d Sess. at 897 (2000)). Section 1886(d)(4)(C)(iii) of the Act requires that the adjustments to annual DRG classifications and relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. Therefore, we would simulate projected payments under this provision for new technology during the upcoming fiscal year at the same time we estimate the payment effect of changes to the DRG classifications and recalibration. The impact of those additional payments would then be factored into the budget neutrality factor, which is applied to the standardized amounts.

    Because any additional payments directed toward new technology under this provision would be offset to ensure budget neutrality, it is important to carefully consider the extent of this provision and ensure that only technologies representing substantial advances are recognized for additional payments. In that regard, we would discuss in the annual proposed and final regulations implementing changes to the inpatient hospital prospective payment system those technologies that were considered under this provision; our determination as to whether a particular new technology meets our criteria for a new technology; whether it is determined further that cases involving the new technology would be inadequately paid under the existing DRG payment; and any assumptions that went into the budget neutrality calculations related to additional payments for that new technology, including the expected number, distribution, and costs of these cases.

    The payments made under this provision would be redistributed from all other payments made under the inpatient prospective payment system; DRG payments would be reduced by amounts we estimate to be necessary to pay for the estimated aggregate new technology payments. Our projections of the aggregate payments for new technology would involve not only estimates of the effect of the new technology on the entire cost per case but also estimates of the volume of cases expected to involve the new technology during the upcoming year. Given the uncertainty in both of these aspects of the projections, we believe it is important to expose our estimates to public comment before implementing them.

    G. Payment for Direct Costs of Graduate Medical Education (§ 413.86)

    1. Background

    Under section 1886(h) of the Act, Medicare pays hospitals for the direct costs of graduate medical education (GME). The payments are based in part on the number of residents trained by the hospital. Section 1886(h) of the Act, as amended by section 4623 of Public Law 105-33, caps the number of residents that hospitals may count for direct GME.

    Section 1886(h)(2) of the Act, as amended by section 9202 of the Consolidated Omnibus Reconciliation Act (COBRA) of 1985 (Public Law 99-272), and implemented in regulations at § 413.86(e), establishes a methodology for determining payments to hospitals for the costs of approved GME programs. Section 1886(h)(2) of the Act, as amended by COBRA, sets forth a payment methodology for the determination of a hospital-specific, base-period per resident amount (PRA) that is calculated by dividing a hospital's allowable costs of GME for a base period by its number of residents in the base period. The base period is, for most hospitals, the hospital's cost reporting period beginning in FY 1984 (that is, the period of October 1, 1983 through September 30, 1984). The PRA is multiplied by the number of FTE residents working in all areas of the hospital complex (or nonhospital sites, when applicable), and the hospital's Medicare share of total inpatient days to determine Medicare's direct GME payments. In addition, as specified in section 1886(h)(2)(D)(ii) of the Act, for cost reporting periods beginning on or after October 1, 1993, through September 30, 1995, each hospital's PRA for the previous cost reporting period is not updated for inflation for any FTE residents who are not either a primary care or an obstetrics and gynecology resident. As a result, hospitals with both primary care and obstetrics and gynecology residents and nonprimary care residents have two separate PRAs beginning in FY 1994: one for primary care and one for nonprimary care.

    Section 1886(h)(2) of the Act was further amended by section 311 of Public Law 106-113 to establish a methodology for the use of a national average PRA in computing direct GME payments for cost reporting periods beginning on or after October 1, 2000, and on or before September 30, 2005. Generally, section 1886(h)(2) of the Act establishes a “floor” and a “ceiling” based on a locality-adjusted, updated, weighted average PRA. Each hospital's PRA is compared to the floor and ceiling to determine whether its PRA should be revised. PRAs that are below the floor, that is, 70 percent of the locality-adjusted, updated, weighted average PRA, would be revised to equal 70 percent of the locality-adjusted, updated, weighted average PRA. PRAs that exceed the ceiling, that is, 140 percent of the locality-adjusted, updated, weighted average PRA, would, depending on the fiscal year, either be frozen and not increased for inflation, or increased by a reduced inflation factor. We implemented section 311 of Public Law 106-113 in the hospital inpatient prospective payment system final rule published on August 1, 2000 (65 FR 47090). In that final rule, we set forth the methodology for calculating the weighted average PRA and outlined the steps for determining whether a hospital's PRA would be revised.

    2. Amendments Made by Section 511 of Public Law 106-554 (§ 413.86(e)(4)(ii)(C) and (e)(5)(iv))

    Section 511 of Public Law 106-554 amended section 1886(h)(2)(D)(iii) of the Act by increasing the floor to 85 percent of the locality-adjusted national average PRA. In general, section 511 provides that, effective for cost reporting periods beginning on or after October 1, 2001, and before October 1, 2002, PRAs that are below 85 percent of the respective locality-adjusted national average PRA would be increased to equal 85 percent of that locality-adjusted national average PRA. Accordingly, we are proposing to implement section 511 by revising § 413.86(e)(4)(ii)(C)(1) to incorporate this change and by outlining the methodology for determining whether a hospital's PRA(s) will be adjusted in FY 2002 relative to the increased floor of the locality-adjusted national average PRA.

    In the August 1, 2000 final rule (65 FR 47091 and 47092), as implemented at Start Printed Page 22697§ 413.86(e)(4), we determined, in accordance with section 311 of Public Law 106-113, that the weighted average PRA for cost reporting periods ending during FY 1997 is $68,464. We described the procedures for updating the weighted average PRA of $68,464 for inflation to FY 2001 and for adjusting this average for the locality of each individual hospital. We then outlined the steps for comparing each hospital's PRA(s) to the locality-adjusted national average PRA to determine if, for cost reporting periods beginning on or after October 1, 2000, and before October 1, 2001, the PRAs should be revised to equal the 70-percent floor.

    In accordance with section 511 of Public Law 106-554, in this proposed rule, we are proposing that, for cost reporting periods beginning during FY 2002, the FY 2002 PRAs of hospitals that are below 85 percent of the respective locality-adjusted national average PRA for FY 2002 be increased to equal 85 percent of that locality-adjusted national average PRA. Specifically, to determine which PRAs (primary care and nonprimary care separately) for each hospital are below the 85-percent floor, each hospital's locality-adjusted national average PRA for FY 2002 is multiplied by 85 percent. This resulting number is then compared to each hospital's PRA that is updated for inflation to FY 2002. If the hospital's PRA would be less than 85 percent of the locality-adjusted national average PRA, the individual PRA is replaced with 85 percent of the locality-adjusted national average PRA for that cost reporting period, and in future years the new PRA would be updated for inflation by the Consumer Price Index for All Urban Consumers (CPI-U) as compiled by the Bureau of Labor Statistics.

    There may be some hospitals with both primary care and nonprimary care PRAs that are below the floor, and both PRAs are, therefore, replaced with 85 percent of the locality-adjusted national average PRA. In these situations, the hospitals would receive a single PRA; a distinction between PRAs would no longer be made for differences in inflation (under § 413.86(e)(3)(ii)). On the other hand, hospitals may have primary care PRAs that are above the floor, and nonprimary care PRAs that are below the floor. In these situations, only the nonprimary care PRAs would be revised to equal 85 percent of the locality adjusted national average PRA, and the prior year primary care PRAs would be updated for inflation by the CPI-U.

    For example, if the FY 2002 locality-adjusted national average PRA for Area X is $100,000, then 85 percent of that amount is $85,000. If, in Area X, Hospital A has a primary care FY 2002 PRA of $84,000 and a nonprimary care FY 2002 PRA of $82,000, both of Hospital A's FY 2002 PRAs are replaced by the $85,000 floor. Thus, $85,000 is the amount that would be used to determine Hospital A's direct GME payments for both primary care and nonprimary care FTEs in its cost reporting period beginning in FY 2002, and the $85,000 PRA would be updated for inflation by the CPI-U in subsequent years. However, Hospital B, also located in Area X, has a primary care FY 2002 PRA of $86,000 and a nonprimary care FY 2002 PRA of $84,000. Thus, for Hospital B, only the nonprimary care PRA of $84,000 is replaced by the $85,000 floor. This new PRA of $85,000 would be updated for inflation by the CPI-U in subsequent years. Hospital B's primary care PRA of $86,000 and its nonprimary care PRA of $85,000 would be used to determine its direct GME payments in its cost reporting period beginning in FY 2002.

    We note that section 511 of Public Law 106-554 only affects hospitals with PRAs below the 85-percent floor, and does not affect hospitals with PRAs that are either between the floor and ceiling or exceed the ceiling. Thus, with the exception of the change in the floor as provided by section 511, the policy regarding the use of a national average PRA for making direct GME payments remains as implemented in the regulations at § 413.86(e)(4).

    We are proposing to amend § 413.86(e)(4)(ii)(C)(1) to add the rules implementing section 1886(h)(2)(D)(iii) of the Act as amended by section 511 of Public Law 106-554.

    We also are proposing to amend § 413.86(e)(5) regarding the determination of base year PRAs for new teaching hospitals for cost reporting periods beginning during FYs 2001 through 2005. In the August 1, 2000 final rule, we made a conforming change to § 413.86(e)(5) to account for situations in which hospitals do not have a 1984 base year PRA and establish a PRA in a cost reporting period beginning on or after October 1, 2000. Existing § 413.86(e)(5)(iv) specifies that the new base year PRAs of such hospitals are subject to the regulations regarding the floor and the ceiling of the locality-adjusted national average PRA. Although the determination of new base year PRAs is subject to the national average methodology, it is not necessary to include this provision in the regulations. Therefore, we are proposing to remove § 413.86(e)(5)(iv).

    We would like to clarify that, for purposes of calculating a base year PRA for a new teaching hospital, when calculating the weighted mean value of PRAs of hospitals located in the same geographic area or the weighted mean value of the PRAs in the hospital's census region (as defined in § 412.62(f)(1)(i)), the PRAs used in the weighted average calculation must not be less than the floors for cost reporting periods beginning during FY 2001 or FY 2002, or if they exceed the ceiling, they must either be frozen for FYs 2001 and 2002 or updated with the CPI-U minus 2 percent for FYs 2003 through 2005. In addition, existing § 413.86(e)(5) provides that the PRA for a new teaching hospital is based on the lower of the hospital's actual costs incurred in connection with the GME program or the weighted mean value of PRAs. For cost reporting periods beginning during FYs 2001 and 2005, the PRA for a new teaching hospital also would be subject to the floor and the ceiling of the national average PRA methodology. If a hospital's actual costs of the GME program during its cost reporting period beginning during FY 2001 or FY 2002 are less than the floors, the hospital's PRA would not be based on the actual costs. Instead, it would be equal to 70 percent in FY 2001, or 85 percent during FY 2002, of the locality-adjusted national average PRA. The floor applies to hospitals with existing PRAs in FYs 2001 and 2002, or to hospitals that are establishing new base year PRAs in FYs 2001 and 2002. We are proposing to clarify that if a hospital establishes a new base year PRA in a cost reporting period beginning after FY 2002, its PRA would not be increased to equal the floor if it is less than the floor. Similarly, the ceiling applies to hospitals with existing PRAS in FYs 2001 through 2005, or to hospitals that are establishing new base year PRAs in FYs 2001 through 2005.

    3. Determining the 3-Year Rolling Average for Direct GME Payments (§ 413.86(g)(4) and (g)(5))

    Section 1886(h)(4)(G)(iii) of the Act, as added by section 4623 of Public Law 106-33, provides that for the hospital's first cost reporting period beginning on or after October 1, 1997, the hospital's weighted FTE count for direct GME payment purposes equals the average of the weighted FTE count for that cost reporting period and the preceding cost reporting period. For cost reporting periods beginning on or after October 1, 1998, section 1886(h)(4)(G) of the Act requires that hospitals' direct medical education weighted FTE count for payment purposes equal the average of the actual weighted FTE count for the payment year cost reporting period and Start Printed Page 22698the preceding two cost reporting periods (rolling average). This provision phases in the associated reduction in payment over a 3-year period for hospitals that are reducing their number of residents.

    In the August 29, 1997 final rule with comment period (62 FR 46004), we revised § 413.86(g)(5) accordingly, and outlined the methodology for determining a hospital's direct GME payment. Based on what we explained in the 1997 final rule, for cost reporting periods beginning on or after October 1, 1997, we would determine a hospital's direct GME payment as follows:

    Step 1. Determine the average of the weighted FTE counts for the payment year cost reporting period and the prior two immediately preceding cost reporting periods (with exception of the hospital's first cost reporting period beginning on or after October 1, 1997, which will be based on the average of the weighted average for that cost reporting period and the immediately preceding cost reporting period).

    Step 2. Determine the hospital's direct GME amount without regard to the FTE cap (before determining Medicare's share). That is, take the sum of (a) the product of the primary care PRA and the primary care weighted FTE count in the current payment year, and (b) the product of the nonprimary care PRA and the nonprimary care weighted FTE count in the current payment year.

    Step 3. Divide the hospital's direct GME amount by the total number of FTE residents (including the effect of weighting factors) for the cost reporting period to determine the weighted average PRA (this amount reflects the FTE weighted average of the primary and nonprimary care PRAs) for the cost reporting period.

    Step 4. Multiply the weighted average PRA for the cost reporting period by the 3-year average weighted count to determine the hospital's allowable direct GME costs. This product is then multiplied by the hospital's Medicare patient load for the cost reporting period to determine Medicare's direct GME payment to the hospital.

    Steps 2 and 3 above describe the methodology for combining a hospital's primary care PRA and nonprimary care PRA to determine the hospital's single weighted average PRA for the payment year cost reporting period. (This step accounts for hospitals that were training residents in both primary care and nonprimary care residency programs in FYs 1994 and 1995, when, as described in § 413.86(e)(3)(ii), each hospital's PRA for the previous cost reporting period was not adjusted for any resident FTEs who were not either a primary care resident or an obstetrics or a gynecology resident. As a result, such hospitals have two PRAs for direct GME payment; one for primary care and obstetrics and gynecology residents, and one for all other, or nonprimary care, residents. Hospitals that train either only primary care (including obstetrics and gynecology) residents or only nonprimary care residents follow the methodology described above, with the exception of combining two PRAs). Step 4 then dictates that the resulting average PRA is multiplied by the 3-year rolling average, which, in turn, is multiplied by the hospital's Medicare patient load in the current year to determine Medicare's direct GME payment to the hospital for that cost reporting period.

    In implementing this provision in the August 29, 1997 final rule with comment period, we believed that the methodology described above was appropriate because it was consistent with the methodology described under section 1886(h)(3)(B) of the Act. This section specifies that, in order to arrive at the average PRA, or “aggregate approved amount,” HCFA must multiply a hospital's PRA by the “weighted average number of [FTE] residents * * * in the hospital's approved medical residency training programs in that period” (emphasis added).

    We also believed the methodology outlined above and in the August 29, 1997 rule was appropriate because it was consistent with the intent of the statute that, after October 1, 1997, direct GME payments should be based on a rolling average. Specifically, section 4623 of Public Law 106-33 provides that, “For cost reporting periods beginning on or after October 1, 1997 * * * the total number of full-time equivalent residents for determining a hospital's graduate medical education payment shall equal the average of the actual full-time equivalent resident counts for the cost reporting period and the preceding two cost reporting periods” (emphasis added). Thus, while the statute does not include a specific methodology for computing the direct GME payments, it clearly indicates that the payment should be based on a 3-year average of the weighted number of residents, not the weighted number of residents in the current payment year cost reporting period.

    As stated above, Congress provided that the direct GME payments should be made based on a 3-year average of the weighted number of residents in order to phase in the associated reduction in payment over a 3-year period for hospitals that are reducing the number of residents they are training. However, in steps 2 and 3 above, when combining a hospital's primary care PRA and nonprimary care PRA, we weight the respective PRAs by current year residents. This introduces the number of residents that a hospital is training in the current cost reporting period into the payment formula. A payment formula that incorporates the number of current year residents “dilutes” the effect of the rolling average as related to direct GME payments. After further consideration, we believe that, consistent with the statute, the formula should be based on rolling average counts of residents. We are proposing an alternative methodology in which the direct GME payment would be the sum of (a) the product of the primary care PRA and the primary care and obstetrics and gynecology rolling average, and (b) the product of the nonprimary care PRA and the nonprimary care rolling average. (This sum would then be multiplied by the Medicare patient load.) We note that IME payments would not be affected because, although they also are based on a 3-year rolling average, there is no distinction between primary care and nonprimary care residents.

    The new methodology would be effective for cost reporting periods beginning on or after October 1, 2001. The proposed methodology for determining a hospital's direct GME payment is as follows:

    Step 1. Determine that the hospital's total unweighted FTE counts in the payment year cost reporting period and the prior two immediately preceding cost reporting periods for all residents in allopathic and osteopathic medicine do not exceed the hospital's FTE cap for these residents in accordance with § 413.86(g)(4). If the hospital's total unweighted FTE count in a cost reporting period exceeds its cap, the hospital's weighted FTE count, for primary care and obstetrics and gynecology residents and nonprimary care residents, respectively, will be reduced in the same proportion that the number of these FTE residents for that cost reporting period exceeds the unweighted FTE count in the cap. The proportional reduction is calculated for primary care and obstetrics and gynecology residents and nonprimary care residents separately in the following manner:

    (FTE cap/unweighted total FTEs in the cost reporting period) × (weighted primary care and obstetrics and gynecology FTEs in the cost reporting period)

       plus

    (FTE cap/unweighted total FTEs in the cost reporting period) × (weighted nonprimary care FTEs in the cost reporting period).

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    Add the two products to determine the hospital's reduced cap.

    Step 2. Determine the 3-year average of the weighted FTE count for primary care and obstetrics and gynecology residents in the payment year cost reporting period and the two immediately preceding cost reporting periods. Determine the 3-year average of the weighted FTE count for nonprimary care residents in the payment year cost reporting period and the two immediately preceding cost reporting periods.

    Step 3. Determine the product of the primary care PRA and the primary care and obstetrics and gynecology 3-year average from step 2. Determine the product of the nonprimary care PRA and the nonprimary care 3-year average from step 2.

    Step 4. Sum the products of step 3.

    Step 5. Multiply the sum from step 4 by the hospital's Medicare patient load for the cost reporting period to determine Medicare's direct GME payment to the hospital.

    Existing § 413.86(g)(5) specifies that residents in new programs are excluded from the rolling average calculation for a period of years equal to the minimum accredited length for the type of program, and are added to the payment formula after applying the averaging rules. Accordingly, for hospitals that qualify for an adjustment to their FTE caps for residents training in new programs under § 413.86(g)(6), primary care and obstetrics and gynecology residents in new programs would be added to the quotient of the primary care and obstetrics and gynecology 3-year average, and nonprimary care residents in new programs would be added to the quotient of the nonprimary care 3-year average. The sums of the respective 3-year averages and new residents would then be multiplied by the respective PRAs.

    The following example illustrates the determination of direct GME payment under the proposed rolling average methodology for an existing teaching hospital with no new programs:

    Example: Assume a hospital with a cost reporting period ending September 30, 1996 (beginning October 1, 1995) had 100 unweighted FTE residents and 90 weighted FTE residents. The hospital's FTE cap is 100 unweighted residents.

    Step 1. In its cost reporting period beginning in FY 2000, it had 100 unweighted residents and 90 weighted residents (50 primary care and 40 nonprimary care).

    • The hospital had 90 unweighted residents and 85 weighted residents (50 primary care and 35 nonprimary care) for its cost reporting period beginning in FY 2001.
    • In its cost reporting period beginning in FY 2002, the hospital had 80 unweighted residents and 80 weighted residents (50 primary care and 30 nonprimary care).

    Step 2. The 3-year average of weighted primary care and obstetrics and gynecology residents is (50 + 50 + 50)/3 = 50. The 3-year average of weighted nonprimary care residents is (40 + 35 + 30)/3 = 35.

    Step 3. Primary care: $80,000 PRA × 50 weighted primary care and obstetrics and gynecology FTEs = $4,000,000. Nonprimary care: $78,000 × 35 weighted nonprimary care FTEs = $2,730,000.

    Step 4. $4,000,000 + $2,730,000 = $6,730,000.

    Step 5. If the hospital's Medicare patient load for the payment cost reporting period is .20, Medicare's direct GME payment would be $6,730,000 × .20 = $1,346,000.

    Whether the proposed methodology results in a payment difference for a hospital is dependent upon whether or not the number and mix (primary care and nonprimary care) of FTEs changes in a 3-year period. If the number and mix of FTEs does not change in a 3-year period, there would be no difference in a direct GME payment amount derived using the proposed methodology versus the existing methodology. For example, if a hospital has 90 weighted FTEs (50 primary care and 40 nonprimary care) in the current year and the 2 previous years (using the PRAs and the Medicare patient load from the example above), the payment amounts derived from the existing methodology and the proposed methodology would be equal.

    If the number and mix of FTEs varies from year to year, there will be a difference in the results of the two methodologies. In some instances the existing methodology would result in a higher payment, and in other instances the proposed methodology would result in a higher payment. In the example above, the hospital has reduced its number of weighted residents by 5 FTEs in FYs 2001 and 2002. Calculating this hospital's direct GME payment amount using the existing methodology (using the PRAs and the Medicare patient load from the example) would result in a payment of $1,347,250, which is $1,250 more than $1,346,000, the amount calculated in the example using the proposed methodology.

    In a scenario where a hospital makes larger reductions to the number of FTEs, the proposed methodology may be more beneficial. For example, using the PRAs and the Medicare patient load from the example above, assume a hospital has 90 weighted FTEs (50 primary care and 40 nonprimary care) in FY 2000, 85 weighted FTEs (50 primary care and 35 nonprimary care) in FY 2001, and 70 weighted FTEs (35 primary care and 35 nonprimary care) in FY 2002. If the proposed methodology is used, the payment amount of $1,292,050 would be calculated, which is $1,666 more than $1,290,386, the amount calculated if the existing methodology is used.

    We are proposing to revise § 413.86(g)(4) to specify that, effective for cost reporting periods beginning on or after October 1, 2001, if the hospital's total unweighted FTE count in a cost reporting period exceeds its cap, the hospital's weighted FTE count, for primary care and obstetrics and gynecology residents and nonprimary care residents, respectively, will be reduced in the same proportion that the number of these FTE residents for that cost reporting period exceeds the unweighted FTE count in the cap. We also are proposing to revise § 413.86(g)(5) to specify that, effective for cost reporting periods beginning on or after October 1, 2001, the direct GME payment will be calculated using two separate rolling averages, one for primary care and obstetrics and gynecology residents and one for nonprimary care residents.

    4. Counting Research Time as Direct and Indirect GME Costs (§§ 412.105 and 413.86)

    It has come to our attention that there appears to be some confusion in the provider community as to whether the time that residents spend performing research is countable for the purposes of direct and indirect GME reimbursement. Although we are not proposing to make any policy changes in this proposed rule, we would like to reiterate our longstanding policy regarding time that residents spend in research and propose to incorporate this policy in the IME regulations.

    Section 413.86(f) specifies that, for the purposes of determining the total number of FTE residents for the direct GME payment, residents in an approved program working in all areas of the hospital complex may be counted. Accordingly, the time the residents spend performing research as part of an approved program anywhere in the hospital complex may be counted for direct GME payment purposes. If the requirements listed at §§ 413.86(f)(3) and (f)(4) are met, a hospital may also count the time residents spend doing research in non-hospital settings for direct GME payment.

    For purposes of determining the IME payment, § 412.105(f)(ii) specifies that Start Printed Page 22700the time residents spend training in parts of the hospital that are subject to the inpatient prospective payment system, in the outpatient departments, or (effective on or after October 1, 1997, in accordance with §§ 413.86(f)(3) and (f)(4)) in nonhospital settings, may be counted. Section 2405.3.F.2. of the Provider Reimbursement Manual (PRM) further states that a resident must not be counted for the IME adjustment if the resident is engaged exclusively in research. Resident time spent “exclusively” in research means that the research is not associated with the treatment or diagnosis of a particular patient of the hospital. Therefore, although the research component may be part of an approved program, the time that residents devote specifically to performing research that is not related to delivering patient care, whether it occurs in the hospital complex or in non-hospital settings, may not be counted for IME payment purposes. “Exclusively research” time is not allowable for IME purposes irrespective of whether the resident is engaged only in research or spends only part of his or her time on research. Accordingly, time spent exclusively in research over the course of a program year should be subtracted from the total FTE for that year. For example, if a resident is required to spend 3 months in a particular program year engaged in research activities unrelated to delivering patient care, that amount of time should be subtracted from the total FTE, whether or not the research time is fulfilled in one block of time, or is distributed throughout the training year.

    We note that in order to count residents for both direct GME and IME payment purposes, the residents' training must be part of an approved program. This applies whether or not the residents are doing work that is clinical in nature. There are situations where residents have completed their residency program requirements but remain for an additional period of time to continue their training (that is, to conduct research or other activities) outside the context of a formally organized approved program. As we explained in the September 29, 1989 final rule (54 FR 40306), these residents are not countable for direct GME or IME reimbursement. Rather, patient care services provided by these residents should be paid as Part B services.

    We are proposing to amend § 412.105(f)(1)(iii) to add a paragraph (B) to incorporate language that reflects this policy.

    5. Temporary Adjustments to FTE Cap To Reflect Residents Affected by Residency Program Closure

    In the July 30, 1999 hospital inpatient prospective payment system final rule (64 FR 41522), we indicated that we would allow a temporary adjustment to a hospital's FTE resident cap under limited circumstances and if certain criteria are met when a hospital assumes the training of additional residents because of another hospital's closure. We made this change because hospitals had indicated a reluctance to accept additional residents from a closed hospital without a temporary adjustment to their caps. When we proposed this change 2 years ago, we received several comments suggesting that we include lost accreditation of a program (that is, a program's closure) in the temporary adjustment policy. We explained in our response to these comments (64 FR 41522) that we did not believe it was appropriate to expand our policy to cover any acts other than a hospital's closure. We made this decision because, unless the hospital terminates its Medicare agreement, the hospital would retain its statutory FTE cap and could affiliate with other hospitals to enable the residents to finish their training.

    It has come to our attention that, despite a hospital's ability to affiliate with other hospitals when it shuts down a residency program, some hospitals for various reasons do not affiliate before their programs close, particularly when the program closes abruptly towards the end of the program year (the deadline to submit Medicare affiliation agreements is July 1 of the upcoming program year). Therefore, we are proposing that if a hospital that closes its residency training program agrees to temporarily reduce its FTE cap, another hospital(s) may receive a temporary adjustment to its FTE cap to reflect residents added because of the closure of the former hospital's residency training program. For purposes of this proposed policy on closed programs, we are proposing to define “closure of a hospital residency training program” as when the hospital ceases to offer training for residents in a particular approved medical residency training program (proposed § 413.86(g)(8)(i)(B)). The methodology for adjusting the caps for the “receiving hospital” and the “hospital that closed its program” is described below.

    a. Receiving hospital. We are proposing that a hospital(s) may receive a temporary adjustment to its (or their) FTE cap to reflect residents added because of the closure of another hospital's residency training program if—

    • The hospital is training additional residents from the residency training program of a hospital that closed its program; and
    • No later that 60 days after the hospital begins to train the residents, the hospital submits to its fiscal intermediary a request for a temporary adjustment to its FTE cap, documents that the hospital is eligible for this temporary adjustment by identifying the residents who have come from another hospital's closed program and have caused the hospital to exceed its cap, specifies the length of time the adjustment is needed, and submits to its fiscal intermediary a copy of the FTE cap reduction statement by the hospital closing the program, as specified in paragraph (g)(8)(iii)(B)(2).

    In general, the above criteria we are proposing for the temporary adjustment are reflective of the criteria for the temporary adjustment for taking on the training of displaced residents from closed hospitals. We note that we are proposing that more than one hospital would be eligible to apply for the temporary adjustment, because residents from one closed program may go to different hospitals, or they may finish their training at more than one hospital. We also note that only to the extent a hospital would exceed its FTE cap by training displaced residents would it be eligible for the temporary adjustment.

    Finally, we note that we are proposing that hospitals that meet the above proposed criteria would be eligible to receive temporary adjustments (for cost reporting periods beginning on or after October 1, 2001, for direct GME and with discharges beginning on or after October 1, 2001 for IME) for training the displaced residents from programs that closed even before the effective date of this policy. We mention this because hospitals may have closed programs in the recent past and the residents from the closed programs may not have completed their training as of the effective date of this policy. For instance, if a 5-year residency program, such as surgery, closed on July 1, 1997, the 5th program year residents may still be training during this residency year (2001). We are proposing that if both the receiving hospital(s) and the hospital that closed the program in this example follow the criteria described in this preamble, the receiving hospital may receive a temporary adjustment to its FTE cap for 9 months (October 1, 2001 through June 30, 2002) to accommodate the 5th year surgery residents. However, we note that hospitals would not be Start Printed Page 22701eligible to receive a temporary adjustment for training the residents until the effective date of this rule.

    b. Hospital that closed its program(s). We are proposing that a hospital that agrees to train residents who have been displaced by the closure of another hospital's program may receive a temporary FTE cap adjustment only if the hospital with the closed program(s)—

    • Temporarily reduces its FTE cap by the number of FTE residents in each program year training in the program at the time of the program's closure. The yearly reduction would be determined by deducting the number of those residents who would have been training in the program year during each year had the program not closed; and
    • No later than 60 days after the residents who were in the closed program begin training at another hospital, submits to its fiscal intermediary a statement signed and dated by its representative that specifies that it agrees to the temporary reduction in its FTE cap to allow the hospital training the displaced residents to obtain a temporary adjustment to its cap; identifies the residents who were training at the time of the program's closure; identifies the hospitals to which the residents are transferring once the program closes; and specifies the reduction for the applicable program years.

    Unlike the closed hospital policy at § 413.86(g)(8), we are proposing under this closed program policy (which we are proposing to amend § 413.86(g)(8) to include), that in order for the receiving hospital(s) to qualify for a temporary adjustment to its FTE cap, the hospitals that are closing their programs would need to reduce their FTE cap for the duration of time the displaced residents would need to finish their training. We are proposing this change because, as explained below, the hospital that closes the program still has the FTE slots in its cap, even if the hospital chooses not to fill the slots with residents. We believe it is inappropriate to allow an increase to the receiving hospital's cap without an attendant decrease to the cap of the hospital with the closed program, even if the increase is only temporary. We note that even under this proposed closed program policy, the hospital that closes its program may choose instead to affiliate with another hospital by July 1 of the next residency year so that the residents can more easily finish their training.

    We are proposing that the cap reduction for the hospital with the closed program would be based on the number of FTE residents in each program year who were in the program at the program's closure, and who began training at another hospital, rather than the count of residents each year at the hospital(s) receiving the temporary adjustment(s). We believe it would be too burdensome administratively to require the hospital closing the program to keep track of the status of the residents when they are training at other hospitals. For instance, Joe Smith, a resident who is a PGY 1 when Hospital X closes its pathology residency program, may then finish his training at Hospital Y. The resident trains for one year at Hospital Y as a PGY 2, but decides to drop out of the program before finishing. It would be burdensome to require Hospital X to keep track of Joe Smith's status while he is training at Hospital Y for purposes of the reduction in Hospital X's cap. Therefore, we are proposing to “freeze” the basis for the reduction of the FTE cap of the hospital that closed the program based on the count and status of the residents when the hospital closes the program.

    Example: Hospital A, which has a direct GME FTE cap of 20 FTEs and an IME FTE cap of 18 FTEs, is experiencing financial difficulties and decides to close down its internal medicine residency training program effective June 30, 2002. As of June 30, 2002, Hospital A is training 2 PGY 1s, 4 PGY 2s, and 6 PGY 3s in its internal medicine program. Hospitals B, C, and D take on the training of the displaced residents. These hospitals are eligible to receive temporary adjustments to their FTE caps if they follow the proposed criteria stated above. In order for Hospitals B, C, and D to receive the temporary adjustments, however, Hospital A must agree to reduce its FTE cap. According to the proposed criteria stated above, Hospital A's reduction would be:

    July 1, 2002 through June 30, 2003

    Direct GME FTE cap: 14 FTEs, (20 FTEs cap—2 PGY 2s—4 PGY 3s)

    IME FTE cap: 12 FTEs (18 FTEs—2 PGY 2s—4 PGY 3s)

    We note that no downward adjustment for the 6 PGY 3s for either cap is necessary since these residents will have completed their training in that program by the July 1, 2000 through June 30, 2003 program year.

    July 1, 2003 through June 30, 2004

    Direct GME FTE cap: 18 FTEs (20 FTEs cap—2 PGY 3s)

    IME FTE cap: 16 FTEs (18 FTEs cap—2 PGY 3s)

    July 1, 2004 through June 30, 2005

    Direct GME FTE cap: 20 FTEs

    IME FTE cap: 18 FTEs

    We also are proposing to revise § 412.105(f)(1)(ix) to make the provision relating to the adjustment to FTE caps to reflect residents affected by closure of hospitals' medical residency training programs applicable to determining the IME payment.

    6. Conforming Change to Regulations Governing Payment to Federally Qualified Health Centers (§ 405.2468(f))

    We have discovered a technical error in the regulations at § 405.2468(f) regarding payment to federally qualified health centers (FQHCs) and rural health centers (RHCs) for the costs of graduate medical education. Specifically, § 405.2468(f)(6)(ii)(D) provides that “The costs associated with activities described in § 413.85(d) of this chapter” are not allowable graduate medical education costs. We recently amended § 413.85 in a final rule (66 FR 3358, January 12, 2001) regarding Medicare pass-through payment for approved nursing and allied health education programs. However, we inadvertently did not make a conforming change to § 405.2468(f)(6)(ii)(D). Section 405.2468(f)(6)(ii)(D) should read “The costs associated with activities described in § 413.85(h) of this chapter.” We are proposing to revise § 405.2468(f)(6)(ii)(D) to reflect this change.

    V. Proposed Changes to the Prospective Payment System for Capital-Related Costs

    A. End of the Transition Period

    Federal fiscal year (FY) 2001 is the last year of the 10-year transition period established to phase in the prospective payment system for hospital capital-related costs. For the readers' benefit in this proposed rule, we are providing a summary of the statutory basis for the system, the development and evolution of the system, the methodology used to determine capital-related payments to hospitals, and the policy for providing exceptions payments during the transition period.

    Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services “in accordance with a prospective payment system established by the Secretary.” Under the statute, the Secretary has broad authority in establishing and implementing the capital prospective payment system. We initially implemented the capital prospective payment system in the August 30, 1991 final rule (56 FR 43409), in which we Start Printed Page 22702established a 10-year transition period to change the payment methodology for Medicare inpatient capital-related costs from a reasonable cost-based methodology to a prospective methodology (based fully on the Federal rate).

    The 10-year transition period established to phase in the prospective payment system for capital-related costs is effective for cost reporting periods beginning on or after October 1, 1991 (FY 1992) and before October 1, 2001 (FY 2002). Beginning in FY 2001, the last year of the 10-year transition period for the prospective payment system for hospital capital-related costs, capital prospective payment system payments are based solely on the Federal rate for the vast majority of hospitals. Since FY 2001 is the final year of the capital transition period, we will no longer determine a hospital-specific rate for FY 2002 in section IV. of the Addendum of this proposed rule. For cost reporting periods beginning on or after October 1, 2001, payment for capital-related costs for all hospitals, except those defined as new hospitals under § 412.30(b), will be determined based solely on the capital standard Federal rate.

    Generally, during the transition period, inpatient capital-related costs are paid on a per discharge basis, and the amount of payment depended on the relationship between the hospital-specific rate and the Federal rate during the hospital's base year. A hospital with a base year hospital-specific rate lower than the Federal rate is paid under the fully prospective payment methodology during the transition period. This method is based on a dynamic blend percentage of the hospital's hospital-specific rate and the applicable Federal rate for each year during the transition period. A hospital with a base period hospital-specific rate greater than the Federal rate is paid under the hold-harmless payment methodology during the transition period.

    During the transition period, a hospital paid under the hold-harmless payment methodology receives the higher of (1) a blended payment of 85 percent of reasonable cost for old capital plus an amount for new capital based on a portion of the Federal rate; or (2) a payment based on 100 percent of the adjusted Federal rate. The amount recognized as old capital is generally limited to the allowable Medicare capital-related costs that were in use for patient care as of December 31, 1990. Under limited circumstances, capital-related costs for assets obligated as of December 31, 1990, but put in use for patient care after December 31, 1990, also may be recognized as old capital if certain conditions were met. These costs are known as obligated capital costs. New capital costs are generally defined as allowable Medicare capital-related costs for assets put in use for patient care after December 31, 1990.

    Hospitals that are defined as “new” for the purposes of capital payments during the transition period (see § 412.300(b)) will continue to be paid according to the applicable payment methodology outlined in § 412.324. During the transition period, new hospitals are exempt from the prospective payment system for capital-related costs for their first 2 years of operation and are paid 85 percent of their reasonable capital-related costs during that period. The hospital's first 12-month cost reporting period (or combination of cost reporting periods covering at least 12 months), beginning at least 1 year after the hospital accepts its first patient, serves as the hospital's base period. Those base year costs qualify as old capital and are used to establish its hospital-specific rate used to determine its payment methodology under the capital prospective payment system. Effective with the third year of operation, the hospital will be paid under either the fully prospective methodology or the hold-harmless methodology. If the fully prospective methodology is applicable, the hospital is paid using the appropriate transition blend of its hospital-specific rate and the Federal rate for that fiscal year until the conclusion of the transition period, at which time the hospital will be paid based on 100 percent of the Federal rate. If the hold-harmless methodology is applicable, the hospital will receive hold-harmless payment for assets in use during the base period for 8 years, which may extend beyond the transition period.

    The basic methodology for determining capital prospective payments based on the Federal rate is set forth in § 412.312. For the purpose of calculating payments for each discharge, the standard Federal rate is adjusted as follows:

    (Standard Federal Rate) × (DRG Weight) × (GAF) × (Large Urban Add-on, if applicable) × (COLA Adjustment for Hospitals Located in Alaska and Hawaii) × (1 + DSH Adjustment Factor + IME Adjustment Factor)

    Hospitals may also receive outlier payments for those cases that qualify under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments.

    In accordance with section 1886(d)(9)(A) of the Act, under the prospective payment system for inpatient operating costs, hospitals located in Puerto Rico are paid for operating costs under a special payment formula. Prior to FY 1998, hospitals in Puerto Rico were paid a blended rate that consisted of 75 percent of the applicable standardized amount specific to Puerto Rico hospitals and 25 percent of the applicable national average standardized amount. However, effective October 1, 1997, under amendments to the Act enacted by section 4406 of Public Law 105-33, operating payments to hospitals in Puerto Rico are based on a blend of 50 percent of the applicable standardized amount specific to Puerto Rico hospitals and 50 percent of the applicable national average standardized amount. In conjunction with this change to the operating blend percentage, effective with discharges on or after October 1, 1997, we compute capital payments to hospitals in Puerto Rico based on a blend of 50 percent of the Puerto Rico rate and 50 percent of the Federal rate as specified in the regulations at § 412.374. For capital-related costs, we compute a separate payment rate specific to Puerto Rico hospitals using the same methodology used to compute the national Federal rate for capital-related costs.

    In the August 30, 1991 final rule (56 FR 43409), we established a capital exceptions policy, which provided for exceptions payments during the transition period (§ 412.348). Section 412.348 provides that, during the transition period, a hospital may receive additional payment under the exceptions process when its regular payments are less than a minimum percentage, established by class of hospital, of the hospital's reasonable capital-related costs. The amount of the exceptions payment is the difference between the hospital's minimum payment level and the payments the hospital would have received under the capital prospective payment system in the absence of an exceptions payment. The comparison is made on a cumulative basis for all cost reporting periods during which the hospital has been subject to the capital prospective payment transition rules. The minimum payment percentages throughout the transition period for regular capital exceptions payments by class of hospitals are:

    • For sole community hospitals, 90 percent;
    • For urban hospitals with at least 100 beds that have a disproportionate share patient percentage of at least 20.2 Start Printed Page 22703percent or that received more than 30 percent of their net inpatient care revenues from State or local governments for indigent care, 80 percent;
    • For all other hospitals, 70 percent of the hospital's reasonable inpatient capital-related costs.

    The provision for regular exceptions payments expires at the end of the transition period, that is, on September 30, 2001. Capital prospective payment system payments are no longer adjusted to reflect regular exceptions payments at § 412.348 after that date. Accordingly, for cost reporting periods beginning on or after October 1, 2001, all hospitals other than those defined as “new” under § 412.300(b) will receive only the per discharge payment based on the Federal rate for capital costs (plus any applicable DSH or IME and outlier adjustments) unless a hospital qualifies for a special exceptions payment under § 412.348(g).

    B. Special Exceptions Process

    In the August 30, 1991 final rule (56 FR 43409), we established a capital exceptions policy at § 412.348, which provided for regular exception payments during the transition period. In the September 1, 1994 final rule (59 FR 45385), we added the special exceptions process, describing it as “* * * narrowly defined, focusing on a small group of hospitals who found themselves in a disadvantaged position. The target hospitals were those who had an immediate and imperative need to begin major renovations or replacements just after the beginning of the capital prospective payment system. These hospitals would not be eligible for protection under the old capital and obligated capital provisions, and would not have been allowed any time to accrue excess capital prospective payments to fund these projects.”

    Under the special exceptions provisions at § 412.348(g), an additional payment may be made through the 10th year beyond the end of the capital prospective payment system transition period for eligible hospitals that meet (1) a project need requirement as described at § 412.348(g)(2), which, in the case of certain urban hospitals, includes an excess capacity test; and (2) a project size requirement as described at § 412.348(g)(5). Eligible hospitals include sole community hospitals, urban hospitals with at least 100 beds that have a disproportionate share percentage of at least 20.2 percent, and hospitals with a combined Medicare and Medicaid inpatient utilization of at least 70 percent.

    When we established the special exceptions process, we selected the hospital's cost reporting period beginning before October 1, 2001, as the project completion date in order to limit cost-based exceptions payments to a period of not more than 10 years beyond the end of the transition to the fully Federal capital prospective payment system. Therefore, hospitals are eligible to receive special exceptions payments for the 10 years after the cost reporting year in which they complete their project. Generally, if a project is completed in the hospital cost reporting period ending September 29, 2002, exceptions payments would continue through September 29, 2012. In addition, we believe that, for projects completed after the deadline, hospitals would have had the opportunity to reserve their prior years' capital prospective payment system payments for financing projects. We note that the August 1, 2000 final rule (65 FR 47095) incorrectly stated that special exceptions payments could extend through September 30, 2011; the date should have been September 29, 2012.

    For each cost reporting period, the amount of the special exceptions payment is determined by comparing the cumulative payments made to the hospital under the capital payment system to the cumulative minimum payment levels applicable to the hospital for each cost reporting period subject to the prospective payment system. This comparison is offset or reduced by (1) any amount by which the hospital's cumulative payments exceed its cumulative minimum payments under the regular exceptions process for all cost reporting periods during which the hospital has been subject to the capital prospective payment system; and (2) any amount by which the hospital's current year Medicare inpatient operating and capital prospective payment system payments (excluding 75 percent of its operating DSH payments) exceed its Medicare inpatient operating and capital costs (or its Medicare inpatient margin). During the capital prospective payment system transition period, the minimum payment level under the regular exceptions process varied by class of hospital as set forth in § 412.348(c) and described in section V.A. of this preamble. After the transition period and for the duration of the special exceptions provision, the minimum payment level is 70 percent as set forth in § 412.348(g)(6).

    In the July 31, 1998 final rule (63 FR 40999), we stated that a few hospitals had expressed concern with the required completion date of October 1, 2001, and other qualifying criteria for the special exceptions payment. Therefore, we solicited certain information from hospitals on major capital construction projects that might qualify for the capital special exceptions payments so we could determine if any changes in the special exceptions criteria or process were necessary. In the May 7, 1999 proposed rule (64 FR 24736), we reported that four hospitals had responded timely to our solicitation with information on their major capital construction projects. The hospitals submitted information about their location, the cost of the project, the date that the certificate of need approval was received, the start date of the project, and the anticipated completion date. Some hospitals also suggested changing a number of the requirements of the special exception provision.

    When we issued the May 7, 1999 proposed rule, we had no specific proposal to revise the special exceptions process. However, we invited comments and suggestions from hospitals and other interested parties on the revision to the special exceptions process (64 FR 24738). We noted that, because the capital special exceptions process is budget neutral, any liberalization of the policy would require a commensurate reduction in the capital rate paid to all hospitals. That is, we will continue to make an adjustment to the capital Federal rate in a budget neutral manner to pay for exceptions as long as an exceptions policy is in force, just as we have for regular exceptions during the transition period. We also stated that, based on the comments we received, we may make changes to the special exceptions criteria in the final regulation or propose changes in the FY 2001 proposed rule.

    In the July 30, 1999 final rule (64 FR 41526), we responded to the six comments we received on potential changes to the special exceptions process. In that same final rule, we also described our attempt to obtain information on hospital projects that might qualify for special exceptions payments in order to assess the impact of the recommended changes to the existing policy. In conjunction with the most recent cost report data readily available at that time (FY 1996), we attempted to estimate which of the hospital construction projects might qualify for special exception payments under the existing policy and how that universe of hospitals might change as a result of the recommended revisions to the special exceptions criteria.

    Because exception payments to a hospital for a given cost reporting period are based on a percentage of the Start Printed Page 22704capital costs incurred during the cost reporting period, we were unable to determine a precise estimate of the amount of payments to hospitals that might be eligible for special exceptions. In addition, hospitals are not eligible for special exception payments until the assets are put into use for patient care. Once eligibility for special exceptions payment has been demonstrated, it is some time before completed and settled cost reports are available to determine these payments.

    Based on our research, we determined that it is difficult to predict whether particular hospitals will be able to meet all of the special exceptions eligibility criteria (DSH percentage, completion date, project size, and project need requirements) as well as qualify to receive special exception payments after taking into account the appropriate offsets, such as inpatient operating and capital margins. However, we believe that any changes to the special exceptions policy may affect a significant number of hospitals.

    Based on our belief that these changes may have an impact on a significant number of hospitals, our evaluation of the comments, and careful consideration of all the issues, we stated in the July 30, 1999 final rule that the more appropriate forum for addressing changes to the capital special exceptions policy is the legislative process in Congress rather than the regulation process (64 FR 41528).

    As we also indicated in the July 30, 1999 final rule (64 FR 41526), we have little information about the number of hospitals that may qualify for special exceptions payments or the projected dollar amount of special exception payments, because no hospitals are currently being paid under the special exceptions process. Until FY 2002, the special exceptions provision pays either the same as the regular exceptions process or less for high DSH and sole community hospitals. In accordance with § 412.348(g)(7), a qualifying hospital may receive additional payments for up to 10 years from the year in which it completes a project that meets the project need and project size requirements of the special exception provision in §§ 412.348(g)(2) through (g)(5). Because a qualifying project under the special exceptions provision at § 412.348(g) must be completed (put into use for patient care) by the end of the hospital's last cost reporting period beginning before the end of the transition period (September 30, 2001), a hospital may receive special exception payments for 10 years through September 30, 2012. For example, an eligible hospital that completes a qualifying project in October 1993 (FY 1994) will be eligible to receive special exception payments up through FY 2003 (September 30, 2003).

    In order to assist our fiscal intermediaries in determining the end of the 10-year period in which an eligible hospital will no longer be entitled to receive special exception payments, we are proposing to add a new § 412.348(g)(9) to require that hospitals eligible for special exception payments under § 412.348(g) submit documentation to the intermediary indicating the completion date of their project (the date the project was put in use for patient care) that meets the project need and project size requirements outlined in §§ 412.348(g)(2) through (g)(5). We are proposing that, in order for an eligible hospital to receive special exception payments, this documentation would have to be submitted in writing to the intermediary by the later of October 1, 2001, or within 3 months of the end of the hospital's last cost reporting period beginning before October 1, 2001, during which a qualifying project was completed. For example, if a hospital completed a qualifying project in March 1995, it would be required to submit documentation to the intermediary by October 1, 2001. If a hospital with a 12-month cost reporting period beginning on July 1 completed a qualifying project in November 2001, it would be required to submit documentation to the intermediary no later than September 30, 2002, which is 3 months after the end of its 12-month cost reporting period that began on July 1, 2001.

    C. Exceptions Minimum Payment Level

    Section 412.348(h) limits the estimated aggregate amount of exceptions payments under both the regular exceptions and special exceptions process to no more than 10 percent of the total estimated capital prospective payment system payments in a given fiscal year. Consistent with the requirements for regular exceptions at § 412.348(c), we are proposing that if we estimate that special exception payments would exceed 10 percent of total capital prospective payment system payments for a given fiscal year, we will adjust the minimum payment level of 70 percent by one percentage point increments until the estimated payments are within the 10-percent limit. For example, we could set the minimum payment level at 69 percent to ensure that estimated aggregate special exceptions payments do not exceed 10 percent of estimated total capital prospective payment system payments. If the estimate of aggregate special exceptions payments were still projected to exceed 10 percent of total capital prospective payment system payments, we would continue reducing the minimum payment level by one percentage point increments until the requirements in § 412.348(h) were satisfied. We are proposing to revise § 412.348(g)(6) accordingly to reflect this policy.

    D. Exceptions Adjustment Factor

    Section 412.308(c)(3) requires that the standard capital Federal rate be reduced by an adjustment factor equal to the estimated proportion of additional payments for both regular exceptions and special exceptions under § 412.348 relative to total capital prospective payment system payments. In estimating the proportion of regular exceptions payments to total capital prospective payment system payments during the transition period, we used the model originally developed for determining budget neutrality (described in Appendix B of this proposed rule) to determine the exception adjustment factor, which was applied to both the Federal and hospital-specific rates. Below we describe our proposed methodology for determining the special exceptions adjustment used in establishing the Federal capital rate.

    Under the special exceptions provision specified at § 412.348(g)(1), eligible hospitals include SCHs, urban hospitals with at least 100 beds that have a disproportionate share percentage of at least 20.2 percent or qualify for DSH payments under § 412.106(c)(2), and hospitals with a combined Medicare and Medicaid inpatient utilization of at least 70 percent. An eligible hospital may receive special exception payments if it meets (1) a project need requirement as described at § 412.348(g)(2), which, in the case of certain urban hospitals, includes an excess capacity test; (2) an age of assets test as described at § 412.348(g)(3); and (3) a project size requirement as described at § 412.348(g)(5).

    In order to determine the estimated proportion of special exceptions payments to total capital payments, we attempted to identify the universe of eligible hospitals that may potentially qualify for special exception payments. First, we identified hospitals that met the eligibility requirements at § 412.348(g)(1). Then we determined each hospital's average fixed asset age in the earliest available cost report starting in FY 1992 and later. For each of those hospitals, we calculated the average fixed asset age by dividing the Start Printed Page 22705accumulated depreciation by the current year's depreciation. In accordance with § 412.348(g)(3), a hospital must have an average age of buildings and fixed assets above the 75th percentile of all hospitals in the first year of capital prospective payment system. In the September 1, 1994 final rule (59 FR 45385), we stated that, based on the June 1994 update of the cost report files in HCRIS, the 75th percentile for buildings and fixed assets for FY 1992 was 16.4 years. However, we noted that we would make a final determination of that value on the basis of more complete cost report information at a later date. In the August 29, 1997 final rule (62 FR 46012), based on the December 1996 update of HCRIS and the removal of outliers, we finalized the 75th percentile for buildings and fixed assets for FY 1992 as 15.4 years. Thus, we eliminated any hospitals from the potential universe of hospitals that may qualify for special exception payments if its average age of fixed assets did not exceed 15.4 years.

    For the hospitals remaining in the potential universe, we estimated project-size by using the fixed capital acquisitions shown on Worksheet A7 from the following HCRIS cost reports updated through December 2000.

    PPS yearCost reports periods beginning in
    IXFY 1992
    XFY 1993
    XIFY 1994
    XIIFY 1995
    XIIIFY 1996
    XIVFY 1997
    XVFY 1998
    XVIFY 1999

    Because the project phase-in may overlap 2 cost reporting years, we added together the fixed acquisitions from sequential pairs of cost reports to determine project size. Under § 412.348(g)(5), the project-size must meet the following requirements: (1) $200 million; or (2) 100 percent of its operating cost during the first 12-month cost reporting period beginning on or after October 1, 1991. We calculated the operating costs from the earliest available cost report starting in FY 1992 and later by subtracting inpatient capital costs from inpatient costs (for all payers). We did not subtract the direct medical education costs as those costs are not available on every update of the HCRIS minimum data set. If the hospital met the project size requirement, we assumed that it also met the project need requirements at § 412.348(g)(2) and the excess capacity test for urban hospitals at § 412.348(g)(4).

    Because we estimate that so few hospitals will qualify for special exceptions, projecting costs, payments, and margins would result in high statistical variance. Consequently, we decided to model the effects of special exceptions using historical data based on hospitals' actual cost experiences. If we determined that a hospital may qualify for special exceptions, we modeled special exceptions payments from the project start date through the last available cost report (FY 1999). For purposes of modeling we used the cost and payment data on the cost reports from HCRIS assuming that special exceptions would begin at the start of the qualifying project. In other words, when modeling costs and payment data, we ignored any regular exception payments that these hospitals may otherwise have received as if there had not been regular exceptions during the transition period. In projecting an eligible hospital's special exception payments, we applied the 70-percent minimum payment level, the cumulative comparison of current year capital prospective payment system payments and costs, and the cumulative operating margin offset (excluding 75 percent of operating DSH payments).

    Because hospitals may receive regular exception payments up through the end of their last cost reporting period beginning before October 1, 2001, hospitals with cost reporting periods beginning on a day other than October 1 will continue to receive regular exception payments until the end of their FY 2002 cost reporting period. Therefore, these hospitals will only receive special exception payments for the remainder of Federal FY year 2002. Consequently, the special exceptions payments made in FY 2002 will be less than for subsequent years since they are only being paid a special exception payment for a portion of FY 2002.

    Our modeling of special exception payments produced the following results:

    Cost reportNumber of hospitals eligible for special exceptionsSpecial exceptions as a fraction of capital payments to all hospitalsSpecial exceptions as a fraction of capital payments to all hospitals weighted by portion of FY 2002 for which special exceptions are paid
    PPS IX
    PPS X
    PPS XI3
    PPS XII60.00020.0001
    PPS XIII80.00010.0000
    PPS XIV140.00020.0001
    PPS XV180.00160.0002
    PPS XVI220.00110.0008

    Currently, the PPS XVI cost reports in HCRIS are incomplete because there is a 2-year lag time between the end of a hospital's cost reporting period and the submission and processing of the cost reports for HCRIS. In particular, hospitals whose cost reporting periods begin July 1 are missing. We expect more hospitals to qualify for special exceptions once data from later HCRIS updates are available. In addition, hospitals still have two more cost reporting periods (PPS XVII and PPS XVIII) to complete their projects in order to be eligible for special exceptions. We estimate that about 30 additional hospitals could qualify for special exceptions. Thus, we project Start Printed Page 22706that special exception payments as a fraction of capital payments to all hospitals could be approximately 0.0025. However, after weighting this amount to account for the FY 2002 phase-in of special exception payments, we project that this factor would be approximately 0.0012. Because special exceptions are budget neutral, we propose to offset the Federal capital rate by 0.12 percent for special exceptions for FY 2002. Therefore, the proposed exceptions adjustment factor would equal 0.9988 (1 minus 0.0012) to account for special exception payments in FY 2002. We will revise this projection of the special exception adjustment factor in the final rule based on the latest available data.

    VI. Proposed Changes for Hospitals and Hospital Units Excluded From the Prospective Payment System

    A. Limits on and Adjustments to the Target Amounts for Excluded Hospitals and Units (§§ 413.40(b)(4) and (g))

    1. Updated Caps for Existing Hospitals and Units

    Section 1886(b)(3) of the Act (as amended by section 4414 of Public Law 105-33) established caps on the target amounts for certain existing hospitals and units excluded from the prospective payment system for cost reporting periods beginning on or after October 1, 1997 through September 30, 2002. The caps on the target amounts apply to the following three classes of excluded hospitals: psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals.

    In addition, section 4416 of Public Law 105-33 limited payments for psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals that first received payments on or after October 1, 1997. Payment for these hospitals and units is limited to the lesser of the hospital's operating costs per case or 110 percent of the national median of target amounts for the same class of hospitals for cost reporting periods ending during FY 1996, updated and adjusted for differences in area wage levels.

    A discussion of how the caps on the target amounts and the payment limitation were calculated can be found in the August 29, 1997 final rule with comment period (62 FR 46018); the May 12, 1998 final rule (63 FR 26344); the July 31, 1998 final rule (63 FR 41000), and the July 30, 1999 final rule (64 FR 41529). For purposes of calculating the caps for existing facilities, the statute required the Secretary to estimate the national 75th percentile of the target amounts for each class of hospital (psychiatric, rehabilitation, or long-term care) for cost reporting periods ending during FY 1996 without adjusting for differences in area wage levels. Under section 1886(b)(3)(H)(iii) of the Act, the resulting amounts are updated by the market basket percentage to the applicable fiscal year.

    Section 121 of Public Law 106-113 amended section 1886(b)(3)(H) of the Act to also provide for an appropriate wage adjustment to the caps on the target amounts for existing psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals, effective for cost reporting periods beginning on or after October 1, 1999, through September 30, 2002. On August 1, 2000, we published an interim final rule with comment period that implemented this provision for cost reporting periods beginning on or after October 1, 1999 and before October 1, 2000 (65 FR 47026) and a final rule that implemented this provision for cost reporting periods beginning on or after October 1, 2000 (65 FR 47054). This proposed rule addresses the wage adjustment to the caps and payment limitations for cost reporting periods beginning on or after October 1, 2001.

    For purposes of calculating the caps, section 1886(b)(3)(H)(ii) of the Act requires the Secretary to first “estimate the 75th percentile of the target amounts for such hospitals within such class for cost reporting periods ending during fiscal year 1996.” Furthermore, section 1886(b)(3)(H)(iii), as added by Public Law 106-113, requires the Secretary to also provide for existing hospitals “an appropriate adjustment to the labor-related portion of the amount determined under such subparagraph to take into account the differences between average wage-related costs in the area of the hospital and the national average of such costs within the same class of hospital.”

    Consistent with the broad authority conferred on the Secretary by section 1886(b)(3)(H)(iii) of the Act to determine the appropriate wage adjustment, we account for differences in wage-related costs by adjusting the caps to account for the following:

    First, we adjust each hospital's target amount to account for area differences in wage-related costs. For each class of hospitals (psychiatric, rehabilitation, and long-term care), we determine the labor-related portion of each hospital's FY 1996 target amount by multiplying its target amount by the actuarial estimate of the labor-related portion of costs (or 0.71553). Similarly, we determine the nonlabor-related portion of each hospital's FY 1996 target amount by multiplying its target amount by the actuarial estimate of the nonlabor-related portion of costs (or 0.28447).

    Next, we account for wage differences among hospitals within each class by dividing the labor-related portion of each hospital's target amount by the hospital's wage index under the hospital inpatient prospective payment system. Within each class, each hospital's wage-neutralized target amount was calculated by adding the wage-neutralized labor-related portion of its target amount and the nonlabor-related portion of its target amount. Then, the wage-neutralized target amounts for hospitals within each class were arrayed in order to determine the national 75th percentile caps on the target amounts for each class.

    Taking into account the national 75th percentile of the target amounts for cost reporting periods ending during FY 1996 (wage-neutralized using the FY 2000 acute care wage index), the wage adjustment provided for under Public Law 106-113, and the applicable update factor based on the market basket percentage increase for FY 2001, in the August 1, 2000 final rule (65 FR 47096), we established the FY 2001 caps on the target amounts as follows:

    Class of excluded hospital or unitFY 2001 labor-related shareFY 2001 nonlabor-related share
    Psychiatric$8,131$3,233
    Rehabilitation15,1646,029
    Long Term Care29,28411,642

    In reviewing our methodology for wage neutralizing the hospital specific target amounts, it appears that we incorrectly used the FY 2000 hospital inpatient prospective payment system wage index published in Tables 4A and 4B of the July 30, 1999 final rule (64 FR 41585 through 41593), which is based on wage data after taking into account geographic reclassification under section 1886(d)(8) of the Act. We are proposing to revise the methodology of wage neutralizing the hospital-specific target amounts using pre-reclassified wage data. We propose to recalculate the limit for new excluded hospitals and units, as well as calculate the cap for existing excluded hospitals and units, using the pre-reclassification wage index. The pre-reclassification wage index is the same wage index used under the prospective payment system for skilled nursing facilities (SNFs) and was included in Table 7 of the July 30, 1999 SNF final rule (64 FR 41690). (We note that both SNFs and ambulatory surgical centers use the prospective payment system inpatient wage index Start Printed Page 22707without regard to the prospective payment system reclassification as a proxy for variations in local costs.)

    As we stated in the August 1, 2000 final rule, long-term care hospitals, rehabilitation hospitals and units, and psychiatric hospitals and units that are exempt from the prospective payment system are not subject to the prospective payment system hospital reclassification system under section 1886(d)(10)(A) of the Act. This section establishes the MGCRB for the purpose of evaluating applications from short-term, acute care providers. There is no equivalent statutory mandate for HCFA to develop an alternative board for long-term care hospitals, psychiatric hospitals and units, and rehabilitation hospitals and units. In addition, while it would be feasible to allow units physically located in prospective payment system hospitals that have been reclassified by the MGCRB to use the wage index for the area to which that hospital has been reclassified, at the present time there is no process in place to make reclassification determinations for freestanding excluded providers. There are approximately 1,000 freestanding excluded providers. Therefore, in the interest of equity, we believe that, in determining a hospital's wage-adjusted cap on its target amount, it is appropriate for excluded hospitals and units to use the wage index associated with the area in which they are physically located (MSA or rural area) and the prospective payment system reclassification under section 1886(d)(10) of the Act is not applicable. This policy is also consistent with the policy for SNFs and ambulatory surgical centers that use the acute care, inpatient hospital prospective payment system wage index and that does not allow for reclassifications since there is no analogous determinations process to the MGCRB. The MGCRB only has authority over the prospective payment system for acute care hospitals.

    Therefore, based on the broad authority conferred on the Secretary by section 1886(b)(3)(H)(iii) of the Act to determine the appropriate wage adjustment to the caps, we have determined the labor-related and nonlabor-related portions of the proposed caps on the target amounts for FY 2002 using the methodology outlined above.

    Class of excluded hospital or unitFY 2002 proposed labor-related shareFY 2002 proposed nonlabor-related share
    Psychiatric$8,404$3,341
    Rehabilitation15,6896,237
    Long-Term Care31,39912,483

    These labor-related and nonlabor-related portions of the proposed caps on the target amounts for FY 2002 are based on the current estimate of the market basket increase for excluded hospitals and units for FY 2002 of 3.0 percent and reflect the change in applying the pre-reclassified hospital inpatient prospective payment system wage index as discussed above. Furthermore, in accordance with section 307(a) of Public Law 106-554, which amended section 1886(b)(3) of the Act, the labor-related and nonlabor-related portions of the proposed cap for long-term care hospitals for FY 2002 are increased by 2 percent. We are providing a further discussion of this provision in an interim final rule with comment period that will implement provisions of Public Law 106-554 for FY 2001 and for periods in FY 2001 from April 1, 2001 through September 30, 2001 (HCFA-1178-IFC).

    Finally, to determine payments described in § 413.40(c), the cap on the hospital's target amount per discharge is determined by adding the hospital's nonlabor-related portion of the national 75th percentile cap to its wage-adjusted, labor-related portion of the national 75th percentile cap. A hospital's wage-adjusted, labor-related portion of the target amount is calculated by multiplying the labor-related portion of the national 75th percentile cap for the hospital's class by the hospital's applicable wage index. For FY 2002, a hospital's applicable wage index is the pre-reclassified wage index under the hospital inpatient prospective payment system (see § 412.63). The proposed wage index values are computed based on the same data used to compute the proposed FY 2002 wage index values for the hospital inpatient prospective payment system without taking into account changes in geographic reclassification under section 1886(d)(8)(B) of the Act for certain rural hospitals or reclassifications based on MGCRB decisions or the Secretary's decisions under sections 1886(d)(8) through (d)(10) of the Act. For cost reporting periods beginning on or after October 1, 2001 and before October 1, 2002, the pre-reclassified wage index is in Tables 4G and 4H of this proposed rule. A hospital's applicable wage index corresponds to the area in which the hospital or unit is physically located (MSA or rural area).

    2. New Excluded Hospitals and Units

    a. Updated Caps (§ 413.40(f))

    Section 1886(b)(7) of the Act establishes a payment methodology for new psychiatric hospitals and units, new rehabilitation hospitals and units, and new long-term care hospitals. Under the statutory methodology, for a hospital that is within a class of hospitals specified in the statute and first receives payments as a hospital or unit excluded from the prospective payment system on or after October 1, 1997, the amount of payment will be determined as follows: For the first two 12-month cost reporting periods, the amount of payment is the lesser of (1) the operating costs per case; or (2) 110 percent of the national median of target amounts for the same class of hospitals for cost reporting periods ending during FY 1996, updated to the first cost reporting period in which the hospital receives payments as adjusted for differences in area wage levels.

    As discussed earlier, in reviewing our methodology for wage neutralizing the hospital-specific target amounts, it appears we incorrectly used the FY 2000 hospital inpatient prospective payment system wage index published in Tables 4A and 4B of the July 30, 1999 final rule, which is based on wage data after taking into account geographic reclassifications under section 1886(d)(8) of the Act. Therefore, we also are proposing to revise the methodology of wage neutralizing the hospital-specific target amounts using pre-reclassified wage data in our calculation of the limit for new excluded hospitals and units.

    The proposed amounts included in the following table reflect the updated and recalculated 110 percent of the wage neutralized national median target amounts for each class of excluded hospitals and units for cost reporting periods beginning during FY 2002. These figures are updated to reflect the projected market basket increase of 3.0 percent. For a new provider, the labor-related share of the target amount is multiplied by the appropriate geographic area wage index, without regard to prospective payment system reclassifications, and added to the nonlabor-related share in order to determine the per case limit on payment under the statutory payment methodology for new providers.

    Class of excluded hospital or unitFY 2002 proposed labor-related shareFY 2002 proposed nonlabor-related share
    Psychiatric$6,795$2,701
    Rehabilitation13,4255,337
    Start Printed Page 22708
    Long-Term Care16,6516,620

    b. Changes in Type of Hospital Classification (§§ 412.23 and 412.25)

    Section 1886(b)(3) of the Act (as amended by section 4414 of Public Law 105-33) establishes caps on the target amounts for existing psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals for cost reporting periods beginning on or after October 1, 1997 through September 30, 2002. Section 4416 of Public Law 105-33 amended section 1886(b)(7) of the Act to provide for a limitation on payment for new excluded psychiatric hospitals and units, new rehabilitation hospitals and units, and new long-term care hospitals. Since the establishment of the caps on target amounts and the payment limitations, there has been an increase in the number of hospitals requesting a change from one classification type to another (for example, from rehabilitation to long-term care). Regulations at § 412.22(d) state that “For purposes of exclusion from the prospective payment systems under this subpart, the status of each currently participating hospital (excluded or not excluded) is determined at the beginning of each cost reporting period and is effective for the entire cost reporting period. Any changes in the status of the hospital are made only at the start of a cost reporting period.” Even though the existing regulations directly address only a hospital that changes from a prospective payment system hospital to an excluded hospital, our longstanding policy has been that a change of any classification type can be effective only at the beginning of the provider's cost reporting period. Although the existing regulations do not directly address changes in a classification type of excluded hospital, we believe that a change from one classification type of excluded hospital to another type of excluded hospital is analogous to a change from a prospective payment system hospital to an excluded hospital. Therefore, we believe it would be consistent with our longstanding policy to amend our regulations to specify that a change from one excluded hospital classification type to another type is allowed only at the beginning of the hospital's cost reporting period.

    The rationale underlying our present policy of requiring that these types of changes should only be effective at the beginning of the cost reporting period is the need to avoid any undue (and possibly significant) administrative burden that could result from doing otherwise (for example, cost allocation, cost reporting requirements, certification issues). If we were to accept changes in an excluded hospital's classification type from one type of classification to another, other than at the beginning of the cost reporting period, the hospital would need to file a terminating cost report with respect to its original classification as well as file a separate cost report for the remainder of the cost reporting period with respect to its new classification. Filing these cost reports would involve gathering the appropriate cost data, allocating the data, and apportioning the data between the two hospital classes. Additionally, we would have to validate the cost reports. To allow these types of changes in the middle of a cost reporting period would result in a significant administrative burden. We would point out that this burden is applicable equally for either a change from a prospective payment system hospital to an excluded hospital, or a change from one excluded hospital classification type to another classification type. Therefore, we are proposing to amend the regulations to provide that the effective date of any of these classification changes is only at the beginning of a provider's cost reporting period (proposed § 412.23(i), for excluded hospitals, and proposed § 412.25(f), for excluded units).

    3. Effective Date of Exclusion of Long-Term Care Hospitals

    Existing regulations at § 412.23(e) require a newly established long-term care hospital to operate for at least 6 months with an average length of stay in excess of 25 days in order to qualify for exclusion from the inpatient hospital prospective payment system as a long-term care hospital. Other regulations at § 412.22(d) allow changes in a hospital's status from not excluded to excluded to occur only at the start of a cost reporting period. These two regulations, taken together, typically require a hospital to operate for at least 6 months under the prospective payment system before becoming eligible for payment at the more favorable rate under section 1886(b)(3) of the Act.

    These regulations were challenged in litigation by a chain organization that operates a large number of long-term care hospitals (Transitional Hospital Corporation of Louisiana, Inc. v. Shalala, 222 F.3d 1019 (D.C. Cir. 2000) (THC)). Although the court of appeals in this case found that the Secretary has ample authority to adopt current regulatory provisions, it also concluded that the Secretary has not adequately considered other policy options. Consequently, it remanded the case to the agency for the agency to consider whether it wanted to continue its existing policy or adopt a policy of either “self-certification” or “retroactive adjustment.” Generally, under a self-certification approach, hospitals that have not yet demonstrated the required average length of stay would be excluded from the prospective payment system based on a commitment to maintain such a length of stay. Under a retroactive adjustment approach, a hospital's long-term care classification would be made effective with the beginning of the 6-month period in which it demonstrated the required average length of stay. Payments for that period initially would be made under the prospective payment system and then adjusted retroactively to amounts payable for an excluded long-term care hospital once length of stay was successfully established.

    As directed by the court of appeals, we are reviewing the issues raised in this case in light of the court's decision, and are specifically considering the options of self-certification and retroactive adjustment. Our current proposals and the alternatives we considered before arriving at them are set forth below. To assist us in completing the review process, we are requesting public comment on our proposals, taking into account the following considerations.

    a. Demonstrating Required Average Length of Stay

    Although we understand that we have discretion to select other policy options, we are proposing to continue our policy of requiring hospitals seeking long-term care hospital classification to demonstrate the required average length of stay based on 6 months of data, instead of permitting these hospitals to “self-certify” the required average length of stay.

    We note that the statute provides the agency with broad authority to determine the methodology by which facilities can qualify for exclusion as long-term care hospitals (section 1886(d)(1)(B)(iv)(I) of the Act specifies that “a hospital which has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days” qualifies for exclusion as a long-term care hospital). As the court of appeals decided, the parenthetical phrase as determined by the Secretary “gives the Secretary considerable leeway to determine whether to require Start Printed Page 22709prospective, contemporaneous, or retrospective evaluation and payment.” (THC at 1026.)

    Although we have considered the self-certification option, we do not believe that it is appropriate to permit long-term care hospitals to self-certify. Long-term care hospitals “are licensed as acute care hospitals in the States in which they operate [and] their only distinguishing characteristic is their long average length of stay” (ProPAC March 1, 1997 Report and Recommendations to the Congress, Recommendation 30). For this reason, and because average length of stay can be difficult, if not impossible, to forecast when a new hospital first opens its doors for service, it would not be appropriate to allow new hospitals to self-certify that they will have an average length of stay exceeding 25 days.

    Requiring newly participating hospitals to collect at least 6 months of length of stay data before permitting them to qualify as long-term care hospitals is consistent with treatment of other types of excluded hospitals in the regulations. Like long-term care hospitals, children's hospitals, which by statute are also excluded from the prospective payment system, also have just one distinguishing characteristic from acute care hospitals; namely, having inpatients who are predominantly individuals under 18 years of age (section 1886(d)(1)(B)(iii) of the Act). As with long-term care hospitals, we do not permit children's hospitals to self-certify that they will meet this requirement as to a future cost reporting period (§ 412.23(d)).

    Although we permit rehabilitation hospitals to self-certify that they meet certain elements of the definition for such a hospital, important differences between rehabilitation hospitals and long-term care hospitals render such a scheme inappropriate for the latter. The differences in the two types of excluded hospitals begin with the statute, which excludes from the prospective payment system “a rehabilitation hospital (as defined by the Secretary)” and “a hospital which has an average inpatient length of stay (as defined by the Secretary) of greater than 25 days”; that is, a long-term care hospital (sections 1886(d)(1)(B)(ii) and 1886(d)(1)(B)(iv)(I) of the Act). Thus, Congress delegated broad authority to the Secretary to define rehabilitation hospitals, but provided the definition of long-term care hospitals in the statute itself (and then, as discussed above, gave the agency broad authority to determine how to apply that definition).

    In exercising our authority to define a rehabilitation hospital, we promulgated regulations that contain several defining features that a facility must possess to be considered such a hospital, as opposed to the one statutorily mandated feature (average length of stay) that defines long-term care hospitals (§ 412.23(b)). The requirements that a rehabilitation hospital must meet include a showing that 75 percent of its patients are of a certain type, the existence of a preadmission screening process, assurance that patients will receive close medical supervision and that the hospital will furnish certain types of therapy through the use of qualified personnel, the presence of a director of rehabilitation with certain qualifications, evidence of a plan of treatment for each inpatient that is established and monitored by a physician, and the use of a coordinated interdisciplinary team approach in the rehabilitation of each patient (§ 412.23(b)(1) through (b)(7)). With the exception of the “75 percent rule,” all of these requirements are “characteristics of the patients and types of services that the facility furnishes” that “can be assessed at a given point in time” (ProPAC March 1, 1997 Report and Recommendations to the Congress, Recommendation 30).

    Thus, rehabilitation hospitals are defined primarily by static and observable features, most of which can be accurately assessed when a new rehabilitation hospital is first certified under the Medicare program. As a result, the regulations permit a new rehabilitation hospital to provide written certification that it will meet the 75 percent rule, provided we find that it also meets the six other elements of the definition of a rehabilitation facility (§ 412.23(b)(8)). The hospital's demonstrated ability to meet the six remaining requirements provides an adequate level of assurance that the hospital will also meet the 75-percent requirement if it so certifies. No such assurance is available, however, regarding whether a hospital might, during a future period, meet the sole requirement for qualification as a long-term care hospital—the average length of stay of its patients.

    b. Effective Date of Exclusion From the Prospective Payment System

    Because we propose to continue our policy of not allowing a hospital to self-certify the required average length of stay in order to be paid as an excluded long-term care hospital, it is necessary to consider the effective date of excluded status for a hospital that has demonstrated the required average length of stay. We considered making long-term care classification effective retroactively with the beginning of the 6-month period in which the hospital demonstrated the required average length of stay. Doing so would mean, for example, that a hospital that admitted its first patient on January 1, 2001, and demonstrated that its average length of stay exceeded 25 days for the period January 1 through June 30, and that was approved for long-term care classification on July 15, would be paid for its discharges from January 1, 2001 forward as an excluded long-term care hospital rather than under the prospective payment system, as long as it continued to demonstrate the requisite average length of stay. However, we believe that such retroactive application of excluded status is inappropriate.

    For the reasons below, we are proposing to continue our policy that a hospital's payment as a long-term care hospital would be effective with the beginning of the hospital's cost reporting period that follows the determination to classify the hospital as a long-term care hospital. From the first rulemaking implementing the inpatient acute hospital prospective payment system payment methodology, the agency has generally applied decisions regarding various elements of the prospective payment system payment methodology prospectively only, and the courts have upheld that action. (THC at 1022 (“status” decisions regarding whether a hospital is subject to or excluded from the prospective payment system); County of Los Angeles v. Shalala 192 F.3d 1005 (D.C. Cir. 1999) (decisions regarding criteria for receipt of “outlier” payments); Methodist Hospital of Sacramento v. Shalala, 38 F.3d 1225 (D.C. Cir. 1994) (decisions to revise “wage index” component of the prospective payment system payment rate); Hennepin County v. Sullivan, 883 F.2d 85, 91 (D.C. Cir. 1989) (“there is nothing inherently arbitrary or capricious about an agency's decision to apply new data prospectively only”); 57 FR 39746 and 39798 (1992).)

    For the same reasons that existed in the cases cited above, we believe that prospective implementation of the statutory exclusion for long-term care hospitals is fully consistent with Congress' goals in enacting the prospective payment system. It allows both the hospital and us to know with certainty at the beginning of each cost reporting period of the hospital whether the hospital is subject to or excluded from the prospective payment system for that cost reporting period and thus Start Printed Page 22710promotes certainty and predictability of payment for both providers and the agency. County of Los Angeles at 1019; Methodist Hospital of Sacramento at 1232 (“because the Secretary's prospectivity policy permits hospitals to rely with certainty on one additional element in the PPS calculation rate * * * the Secretary could reasonably conclude that it will promote efficient and realistic cost saving targets”).

    Moreover, retroactive application of a prospective payment system excluded status decision would entail a significant administrative burden as it would require reprocessing of large numbers of a hospital's claims for hospital inpatient services. See 49 FR 234 and 271 (1984) (making retroactive changes in decisions regarding providers' status as “sole community hospitals” would require us “to reprocess every inpatient hospital claim submitted for the hospital and make adjustment payments at the new rate). It is reasonable to conclude that such a burden outweighs any “increase in accuracy that would result” from retroactive application of decisions regarding long-term care hospital exclusions (Methodist Hospital of Sacramento at 1233).

    Finally, we apply our prospective-only policy evenhandedly, regardless of whether it results in a hospital's being subject to, or excluded from, the prospective payment system. Thus, retroactive adjustments in hospitals' status are as likely to hurt providers that slip below the required average length of stay during a cost reporting period as they are to help them by furnishing reimbursement for a past period in which they met that requirement (Methodist Hospital of Sacramento at 1232, 1233). Any adverse effect of the prospective only policy that might be perceived by new long-term care facilities is also lessened by the availability of a short initial cost reporting period and outlier payments for extraordinarily lengthy cases during the initial period when the hospital is subject to the prospective payment system.

    In addition to believing that it is appropriate to make payment as a long-term care hospital effective prospectively rather than retroactively, we believe it is also appropriate to continue our policy of making payment effective with the beginning of the hospital's next cost reporting period rather than as of the date of approval of long-term care status. This policy is consistent with how we treat changes in status (that is, from excluded to nonexcluded or from nonexcluded to excluded) for all types of hospitals. As we explain in more detail in section VI.A.2.b of this proposed rule, the rationale for requiring changes in a hospital's status, or changes in a hospital's classification (that is, from one type of excluded hospital to another), only at the start of the hospital's cost reporting period is to alleviate the administrative burden and potential confusion that would result from doing otherwise.

    As noted earlier, we request public comments on the proposals described above.

    4. Development of Prospective Payment System for Inpatient Rehabilitation Hospitals and Units

    Section 1886(j) of the Act, as added by section 4421 of Public Law 105-33, provided the phase-in of a case-mix adjusted prospective payment system for inpatient rehabilitation services (freestanding hospitals and units) for cost reporting periods beginning on or after October 1, 2000 and before October 1, 2002, with a fully implemented system for cost reporting periods beginning on or after October 1, 2002. Section 1886(j) of the Act was amended by section 125 of Public Law 106-113 to require the Secretary to use the discharge as the payment unit under the prospective payment system for inpatient rehabilitation services and to establish classes of patient discharges by functional-related groups. Section 305 of Public Law 106-554 further amended section 1886(j) of the Act to allow hospitals to elect to be paid the full Federal prospective payment rather than the transitional period payments specified in the Act.

    On November 3, 2000, we issued a notice of proposed rulemaking in the Federal Register (65 FR 66303) on the proposed establishment of the prospective payment system for inpatient rehabilitation facilities, to be effective on April 1, 2001. Due to the scope and complexity of the proposed system and requests from the public for more time to comment on the proposed rule, we extended the public comment period for an additional 30 days, from January 3, 2001 to February 1, 2001. As a result of the extension of the comment period, it would have been technically impossible to publish a final rule 60 days prior to implementing the prospective payment system for rehabilitation facilities by April l. We anticipate publication of a final rule in May 2001 and intend to announce our plans for implementation at that time.

    B. Critical Access Hospitals (CAHs)

    1. Exclusion of CAHs From Payment Window Requirements

    Section 1886 of the Act specifies the requirements governing payment to full-service hospitals for the operating costs of inpatient hospital services under both the inpatient hospital prospective payment system and the limits on the target amounts for hospitals excluded from the prospective payment system. “Operating costs of inpatient hospital services” are defined in section 1886(a)(3) of the Act, which provides in part that costs of certain services provided to a beneficiary during the 3 days (or in the case of an excluded hospital or unit, during the 1 day) immediately preceding the patient's admission are to be included in the payments for costs under the inpatient hospital prospective payment system, or the target amount for excluded hospitals and units. This part of the definition is sometimes referred to as the “payment window” requirement. Regulations implementing the payment window requirement are found at § 412.2(c)(5) for hospitals subject to the prospective payment system, and § 413.40(c)(2) for hospitals excluded from the prospective payment system.

    Payment to CAHs for inpatient services is not made under section 1886 of the Act, nor are CAHs considered to be hospitals excluded from the inpatient hospital Prospective Payment System. Instead, payment is made on a reasonable cost basis, as mandated by section 1814(l) of the Act. Neither section 1814(l) nor section 1861(v) of the Act (which defines “reasonable cost”) requires application of the payment window to services furnished on an outpatient basis immediately before admission to a CAH. Therefore, we have determined that the payment window provision does not apply to CAHs. To clarify this point and avoid possible misapplication of the payment window, we are proposing to amend § 413.70(a)(l) to provide that the requirements of §§ 412.2(c)(5) and 413.40(c)(2) do not apply to CAHs.

    2. Availability of CRNA Pass-Through for CAHs

    Generally, anesthesia services furnished to a hospital patient by a certified registered nurse anesthetist (CRNA) must be billed to the Part B carrier and payment is made under the applicable fee schedule provisions of § 414.60. However, certain rural hospitals that furnish no more than 500 surgical procedures requiring anesthesia per year and meet other specified requirements are exempted from the fee Start Printed Page 22711schedule. These hospitals are paid on a reasonable cost basis for their costs of anesthesia services furnished by qualified nonphysician anesthetists. The exemption is provided in accordance with section 9320(k) of the Omnibus Budget Reconciliation Act of 1986 (Public Law 99-509) (as added by section 608(c)(2) of the Family Support Act of 1988 (Public Law 100-185), as amended by section 6132 of the Omnibus Budget Reconciliation Act of 1989 (Public Law 101-239)). HCFA has codified this exemption at § 412.113(c).

    Although § 412.113(c) does not specifically extend eligibility for the pass-through payment for CRNAs to CAHs, some CAHs have pointed out that they are similar to the rural hospitals that are eligible for this payment, in that they also furnish low volumes of surgical procedures requiring anesthesia and could face the same problem of potentially inadequate payment for CRNA services if they are not allowed to qualify for the pass-through payment. We share this concern.

    We recognize that the legislation cited above, which provides the legal basis for the pass-through payments, refers only to “hospitals,” not to CAHs. Moreover, section 1861(e) of the Act states that “the term “hospital” does not include, unless the context otherwise requires, a critical access hospital * * *.” It is clear from section 1861(e) of the Act that CAHs are not to be considered hospitals under the Medicare law for most purposes. However, the reference to “context” in the provision indicates that CAHs may be classified as hospitals where, in specific contexts, it would be consistent with the purpose of the legislation to do so.

    We believe this is the case with the statutory provisions authorizing pass-through payments for CRNA costs. The purpose of the pass-through legislation is to provide small rural hospitals with low surgical volumes with relief from the difficulties they might otherwise have in furnishing CRNA services for their patients. CAHs are by definition limited'service facilities located in rural areas and, as such, they serve a population much like those served by hospitals eligible for the pass-through payments. In some cases, an institution that now participates as a CAH may even have been eligible for the pass-through payments when it participated as a hospital. Such an institution would clearly be disadvantaged if it were to lose this status. Thus, in accordance with section 1861(e) of the Act and in light of the context of the pass-through legislation cited above, we consider CAHs to be “hospitals” for purposes of extending eligibility for the CRNA pass-through payments to them.

    Therefore, we are proposing to add a new § 413.70(a)(3) and revise §§ 413.70(a)(2), (b)(1), and (b)(6) to permit CAHs that meet the criteria for the pass-through payments in § 412.113(c) to qualify for pass-through payments for the costs of anesthesia services for both inpatient and outpatient surgeries, on the same basis as full service rural hospitals. As an unrelated technical correction, we are proposing to revise § 413.70(b)(2)(i)(C) to delete the incorrect reference to § 413.130(j)(2) and replace it with a reference to reduction in capital costs under § 413.130(j). We also are proposing to revise § 412.113(c) by changing the term “hospital” to “hospital or CAH”.

    3. Payment to CAHs for Emergency Room On-Call Physicians (Proposed § 413.70(b)(4))

    Under section 1834(g) of the Act, Medicare payment to a CAH for facility services to Medicare outpatients is the reasonable costs of the CAH in providing such services. The term “reasonable cost” is defined in section 1861(v) of the Act and in regulations at 42 CFR Part 413, including, with specific reference to CAHs, § 413.70. Consistent with the general policies stated in section 2109 of the Medicare Provider Reimbursement Manual (PRM), Part I (HCFA Publication 15-1), the reasonable cost of CAH services to outpatients may include reasonable costs of compensating physicians who are on standby status in the emergency room (that is, physicians who are present and ready to treat patients if necessary). However, under existing policy, the reasonable cost of CAH services to outpatients may not include any costs of compensating physicians who are not present in the facility but are on call.

    Section 204 of Public Law 106-554 further amended section 1834(g) of the Act (as amended by section 201 of Public Law 106-554) by adding a new paragraph (5). New section 1834(g)(5) of the Act provides that, in determining the reasonable costs of outpatient CAH services under sections 1834(g)(1) and 1834(g)(2)(A) of the Act, the Secretary shall recognize as allowable costs amounts (as defined by the Secretary) for reasonable compensation and related costs for emergency room physicians who are on call (as defined by the Secretary) but who are not present on the premises of the CAH involved, are not otherwise furnishing physicians' services, and are not on call at any other provider or facility. The provisions of section 204 of Public Law 106-554 are effective for cost reporting periods beginning on or after October 1, 2001.

    To implement the provisions of section 1834(g)(5) of the Act, we are proposing to add a new paragraph (4) to § 413.70(b). The proposed § 413.70(b)(4) would permit the reasonable costs of CAH outpatient services to include the reasonable compensation and related costs of emergency room on-call physicians under the terms and conditions specified in the statute. As directed in the statute, under § 413.70(b)(4)(ii)(A) of this proposed rule, we are defining “amounts for reasonable compensation and related costs” as those allowable costs of compensating emergency room physicians for being on call, to the extent these costs are found to be reasonable under the rules in § 413.70(b)(2).

    In addition, as specified under § 413.70(b)(4)(ii)(A) of this proposed rule, we are defining an “emergency room physician who is on call” as a doctor of medicine or osteopathy with training or experience in emergency care who is immediately available by telephone or radio contact, and who is available on site within the timeframes specified in our existing regulations under § 485.618(d). Existing § 485.618(d) specifies that the physician must be available on site (1) within 30 minutes, on a 24-hour a day basis, if the CAH is located in an area other than an area described in item (2); or (2) within 60 minutes, on a 24-hour a day basis, if all of the following requirements are met:

    • The CAH is located in an area designated as a frontier area (that is, an area with fewer than six residents per square mile based on the latest population data published by the Bureau of the Census) or in an area that meets criteria for a remote location adopted by the State in its rural health care plan, and approved by HCFA, under section 1820(b) of the Act.
    • The State has determined under criteria in its rural health care plan that allowing an emergency response time longer than 30 minutes is the only feasible method of providing emergency care to residents of the area served by the CAH.
    • The State maintains documentation showing that the response time of up to 60 minutes at a particular CAH it designates is justified because other available alternatives would increase the time needed to stabilize a patient in an emergency.

    We also believe that it is essential that physicians who are paid to be in on-call status in fact come to the facility when Start Printed Page 22712summoned. Therefore, we are proposing to specify that costs of on-call emergency room physicians are allowable only if the costs are incurred under written contracts that require them to come to the CAH when their presence is medically required.

    4. Treatment of Ambulance Services Furnished by Certain Critical Access Hospitals (Proposed § 413.70(b)(5))

    Under section 1861(s)(7) of the Act, Medicare Part B covers and pays for ambulance services, to the extent prescribed in regulations, when the use of other methods of transportation would be contraindicated. Various Congressional reports indicate that Congress intended that (1) the ambulance benefit cover transportation services only if other means of transportation are contraindicated by the beneficiary's medical condition; and (2) only ambulance services to local facilities be covered unless necessary services are not available locally, in which case, transportation to the nearest facility furnishing those services is covered. (H.R. Rept. No. 89-213, 89th Cong., 1st Sess. at 37 (1995) and S. Rept. No. 89-404, 89th Cong., 1st Sess., Pt. I, at 43 (1995).)

    The Medicare program currently pays for ambulance services on a reasonable cost basis when furnished by a provider and on a reasonable charge basis when furnished by a supplier. (The term “provider” includes all Medicare-participating institutional providers that submit claims for Medicare ambulance services (hospitals, CAHs, SNFs, and home health agencies). The term “supplier” means an entity that is independent of any provider. The reasonable charge methodology that is the basis of payment for ambulance services is determined by the lowest of the customary, prevailing, actual, or inflation indexed charge.

    Section 4531(a)(1) of Public Law 105-33 amended section 1861(v)(1) of the Act and imposed an additional per trip limitation on reasonable cost payment to hospitals and CAHs for ambulance service. As amended, the statute provides that, in determining the reasonable cost of ambulance services furnished by a provider of services, the Secretary shall not recognize the cost per trip in excess of the prior year's reasonable cost per trip updated by an inflation factor. This trip limit provision was first effective for services furnished during Federal fiscal year 1998 (October 1, 1997 through September 30, 1998).

    Section 205 of Public Law 106-554 amended section 1834(l) of the Act by adding a new paragraph (8) to that section. New section 1834(l)(8) provides that the Secretary is to pay the reasonable costs incurred in furnishing ambulance services if such services are furnished by a CAH (as defined in section 1861(mm)(1) of the Act), or by an entity owned or operated by the CAH. This provision in effect eliminates any trip limit that CAHs had been subject to as a result of section 1861(v)(1) of the Act, as amended by Public Law 105-33. However, section 205 further states that in order to receive reasonable cost reimbursement for the furnishing of ambulance services, the CAH or entity must be the only provider or supplier of ambulance services located within a 35-mile drive of the CAH. Section 205 is effective for services furnished on or after December 21, 2000, the date of enactment of Public Law 106-554.

    To implement the provisions of section 1834(l)(8) of the Act, we are proposing to add a new paragraph (5) to § 413.70(b). Proposed § 413.70(b)(5) would permit a CAH, or an entity owned or operated by a CAH, to be paid for furnishing ambulance services on a reasonable cost basis if the CAH or entity is the only provider or supplier of ambulance services within a 35-mile drive of the CAH. In determining whether there is any other provider or supplier of ambulance services within a 35-mile drive of a CAH or entity, we would first identify the site where the nearest other ambulance provider or supplier garages its vehicles, and then determine whether that site is within 35 miles, calculated as the shortest distance in miles measured over improved roads. An improved road for this purpose would be defined as any road that is maintained by a local, State, or Federal government entity, and is available for use by the general public. Consistent with the change we are proposing in § 412.92(c)(1) relating to SCH determinations (as explained in section IV. of this preamble), we would consider improved roads to include the paved surface up to the front entrance of the hospital and, for purposes of § 413.70(b)(5), the front entrance of the garage.

    5. Qualified Practitioners for Preanesthesia and Postanesthesia Evaluation in CAHs

    Section 1820 of the Act sets forth the conditions for designating certain hospitals as CAHs. Implementing regulations for section 1820 of the Act are located in 42 CFR part 485, Subpart F. Among the conditions of participation regulations for CAHs in subpart F is the condition for surgical services (§ 485.639). Existing § 485.639 specifies that preanesthesia and postanesthesia services in a CAH can only be performed by a doctor of medicine or an osteopathic practitioner; a doctor of dental surgery or dental medicine; or a doctor of podiatric medicine. This Medicare condition of participation requirement regarding preanesthesia and postanesthesia evaluations for CAHs differs from, and is more restrictive than, the current requirement for acute care hospitals in general. In an acute care hospital, the CRNA is listed among the practitioners who may perform the preanesthesia and postanesthesia evaluations.

    Our principal consideration in regulating providers is to ensure patient safety and high quality patient outcomes. As circumstances and health care environments change, we reassess regulations and propose changes accordingly.

    When the regulations for the initial Rural Primary Care Hospital (RPCH) program (which later became the CAH program) were adopted, RPCHs were limited to patient stays of no more than 72 hours and to bed counts of no more than 6 acute care beds. We initially viewed RPCHs as very limited-service facilities that would be unlikely to perform any surgery beyond what might be done in a physician's office; therefore, we did not have a condition of participation for surgery. Section 102(a)(1) of the Social Security Amendments of 1994, Public Law 103-432, specifically authorized surgical care in RPCHs. In June 1995, we proposed a surgical condition of participation that incorporated the ambulatory surgery center (ASC) standards. We expected that the types of procedures done in a RPCH would most likely be those that could be done in ASCs. At the time, we received no comments in response to the proposed standards and therefore adopted them in the final RPCH conditions of participation that were published on September 1, 1995 (60 FR 45851).

    In 1997, the RPCH (now CAH) program was expanded through a statutory change to include all States and to allow for an increase in bed size and length of stay (August 29, 1997 final rule, 62 FR 46035). Since that time, the program's original conditions of participation have been revised to remove possible barriers to access to care. One example of this effort is the final rule to eliminate the Federal requirement for physician supervision of CRNAs in CAHs as well as acute care hospitals and ASCs that was published in the Federal Register on January 18, 2001 (66 FR 96570).

    Recently, provider and medical groups have suggested that CAHs may Start Printed Page 22713be at risk of losing the ability to provide access to appropriate surgical services without the full support of available CRNAs. They indicated that the existing regulations place the responsibility of the preanesthesia and postanesthesia evaluations on the operating practitioner, thereby creating a higher standard for CAHs than for other hospitals.

    In an effort to eliminate or minimize potential access issues in rural areas and to recognize the CAH's program expansion, we are proposing to revise § 485.639(b) to allow CRNAs to perform preanesthesia and postanesthesia evaluations in a CAH. As with any licensed independent health care provider, the proposed change would not permit CRNAs to practice beyond his or her licensed scope of practice or the approved policies and procedures of the CAH.

    6. Clarification of Location Requirements for CAHs

    Under section 1820(c)(2)(B)(i) of the Act, a facility seeking designation by the State as a CAH must meet two distinct types of location requirements. First, the facility must either be actually located in a county or equivalent unit of local government in a rural area, as defined in section 1886(d)(2)(D) of the Act, or it must be located in an urban area as defined in section 1886(d)(2)(D) of the Act, but be treated as being located in a rural area under section 1886(d)(8)(E) of the Act. Second, the facility must also be located more than a 35-mile drive (or, in the case of mountainous terrain or in areas with only secondary roads available, a 15-mile drive) from a hospital or similar facility described in section 1820(c) of the Act, or it must be certified by the State as being a necessary provider of health care services to residents in the area. Implementing regulations for these provisions were published in an interim final rule with comment period in the Federal Register on August 1, 2000 (65 FR 47026) and are set forth at § 485.610(b).

    Recently, concern has been expressed that § 485.610(b) does not accurately reflect the fact that a facility may satisfy the “rural location” requirement either by actually being located in a rural area or by being located in an urban area but qualifying for treatment as rural under section 1886(d)(8)(E) of the Act. In addition, we have received questions as to whether a potential CAH must meet both the rural location requirement and the requirement for location relative to other facilities (or certification by the State as a “necessary provider”).

    To avoid any further confusion, and ensure that our regulations reflect the provisions of the law accurately, we are proposing to revise § 485.610(b) to clarify that a potential CAH must either be actually located in a rural area, or be treated as being rural under section 1886(d)(8)(E) of the Act. In addition, we are proposing to place the provisions of the existing § 485.610(b)(5) in a newly created paragraph (c) entitled, “Location relative to other facilities or necessary provider certification”. We are proposing to relocate this provision in order to clarify that these criteria are separate from the rural location criteria. These proposed changes do not reflect any change in policy; they are merely an attempt to improve the clarity of the regulations.

    VII. MedPAC Recommendations

    We have reviewed the March 1, 2001 report submitted by MedPAC to Congress and have given it careful consideration in conjunction with the proposals set forth in this document. Recommendation 5A concerning the update factor for inpatient hospital operating costs and for hospitals and hospital distinct-part units excluded from the prospective payment system are discussed in Appendix D to this proposed rule. Other MedPAC recommendations and our responses are set forth below.

    A. Accounting for New Technology in Hospital Prospective Payment Systems (Recommendations 3D and 3E)

    Recommendation 3D: For the inpatient payment system, the Secretary should develop formalized procedures for expeditiously assigning codes, updating relative weights, and investigating the need for patient classification changes to recognize the costs of new and substantially improved technologies.

    Response: Section 533 of Public Law 106-554 directs the Secretary to develop a mechanism for ensuring adequate payment under the hospital inpatient prospective payment system for new medical services and technologies, and to report to Congress on ways to more expeditiously incorporate new services and technologies into that system. The discussion relating to new medical services and technologies is found in section II.D. of this proposed rule and addresses MedPAC's concern regarding the process of assigning new codes. In addition, MedPAC acknowledges, and we agree, that the process of updating the relative weights has an established track record.

    MedPAC states that a more formal system for assigning codes and investigating the need for DRG changes would have enabled the current system to more adequately respond to new technology. Although we believe the current process for assigning new codes has the advantage of being well-understood, the proposed new process we described in section II. of this proposed rule should improve the ability of the system to respond to the introduction of new technology.

    Recommendation 3E: Additional payments in the inpatient payment system should be limited to new or substantially improved technologies that add significantly to the cost of care in a diagnosis related group and should be made on a budget-neutral basis.

    Response: Section 533 of Public Law 106-554 directed the Secretary to establish a mechanism to make these payments beginning with discharges on or after October 1, 2001, and we are proposing implementation of this provision under section IV.F. of this proposed rule.

    B. Occupational-Mix Adjusted Wage Index for FY 2005 (Recommendation 4)

    Recommendation: To implement an occupation-mix adjusted wage index in FY 2005, the Secretary should collect data on wage rates by occupation in the fiscal year 2002 Medicare cost reports. Hospital-specific wage rates for each occupation should be supplemented by data on the mix of occupations for each provider type. The Secretary also should continue to improve the accuracy of the wage index by investigating differences in wages across areas for each type of provider and in the substitution of one occupation for another.

    Response: We are proposing to collect occupational mix data from hospitals through a supplemental survey to the cost report for cost reporting periods beginning during FY 2001. A more complete discussion of our proposed methodology can be found in section III. of this proposed rule.

    C. Financial Performance and Inpatient Payment Issues (Recommendations 5B, 5C, and 5D)

    Recommendation 5B: In collecting sample patient-level data, HCFA should seek to balance the goals of minimizing payment errors and furthering understanding of the effects of coding on case-mix change.

    Response: The sample data referred to by MedPAC is the Payment Error Prevention Program (PEPP) Surveillance Sample. These data are collected to monitor the payment error rate for Medicare inpatient prospective payment system services and provide outcome data to measure PROs' performance in Start Printed Page 22714reducing payment errors in their respective States. This information can be appropriately weighted to reflect the true distribution of DRGs nationally. The sample data supplant the DRG validation sample that MedPAC used in its original 1996 through 1998 estimates. The current PEPP Surveillance Sample doubles the size of the earlier DRG validation sample. It is comprised of approximately 60,000 cases per year. We believe this is a sufficient number of cases to both monitor case-mix index changes and PRO performance on payment error reduction.

    Recommendation 5C: Although the Benefits Improvement and Protection Act of 2000 improved the equity of the hospital disproportionate share adjustment, Congress still needs to reform this adjustment by:

    • Including the costs of all poor patients in calculating low-income shares used to distribute disproportionate share payments; and
    • Using the same formula to distribute payments to all hospitals covered by prospective payment.

    Response: HCFA is participating a Medicare Technical Advisory Group workgroup concerning technical issues related to the collection of uncompensated care data relative to the Medicare disproportionate share formula. A worksheet and instructions to collect these data will be sent out for prior consultation this summer for revisions to the cost reports applicable for cost reporting periods beginning on or after October 1, 2001.

    Recommendation 5E: The Congress should protect urban hospitals from the adverse effect of nearby hospitals being reclassified to areas with higher wage indexes by computing each area's wage index as if none of the hospitals located in the area had been reassigned.

    Response: With this rule, HCFA has proposed to include the wage data for a reclassified hospital in both the area to which it is reclassified and the area where the hospital is physically located. We agree with MedPAC and believe that this will provide consistency and predictability in hospital reclassification and wage indices.

    D. Specialties With Training Beyond the Initial Residency Period (Recommendation 10)

    Recommendation: The Congress should eliminate the weighting factors that currently determine Medicare's direct graduate medical education payments and count all residencies equally through completion of residents' first specialty or combined program and subspecialty if one is pursued. Residents training longer than the minimum number of years required for board eligibility in a specialty, combined program, or subspecialty should not be included in hospitals' direct graduate medical education resident counts. These policy changes should be implemented in a budget-neutral manner through adjustments to the per resident payment amounts.

    Response: Currently, Medicare payments to hospitals for direct GME is dependent, in part, on the initial residency period of the residents. Generally, the initial residency period is defined at § 413.86(g)(1) as the minimum number of years required for board eligibility, not to exceed 5 years. For purposes of determining the direct GME payment, residents are weighted at 1.0 FTE within the initial residency period, and at .5 FTE beyond the initial residency period. The limitation on the initial residency period was designed by Congress to limit full Medicare direct GME payment to the time required to train in a single specialty.

    MedPAC states that Medicare's current direct GME payment policy of limiting full funding to the first specialty in which a resident trains provides a disincentive for hospitals to offer training in subspecialties or combined programs, and therefore, may influence hospitals' decisions on the types of residents that they train. MedPAC believes that Medicare should not influence workforce policy and recommends that the disincentive be removed to make Medicare payments policies neutral with regard to programs with prerequisites, subspecialties, and combined programs. Accordingly, MedPAC recommends that Congress eliminate the weighting factors associated with direct GME payment so that all residents would be counted for full direct GME payment through the completion of their first specialty, combined program, or subspecialty. Residents training beyond the minimum number of years required for board eligibility in a specialty, combined program, or subspecialty should not be counted for purposes of the direct GME payment.

    MedPAC also believes that eliminating the weighting factors could potentially increase Medicare's direct GME payments by approximately 5 to 8 percent. Therefore, MedPAC recommends that hospitals' per resident amounts (PRAs), which are used to calculate the direct GME payment, be reduced so that this change can be implemented, to the extent possible, in a budget-neutral manner. MedPAC explains that, although further research is needed, it appears that hospitals with substantial subspecialty training (that is, at least 15 percent of the resident mix) would likely see a small net increase in payments, despite the reduction to the PRAs, while hospitals that do not have subspecialty training would likely see a small decrease in payments.

    In response to MedPAC's recommendation, we question MedPAC's estimate that eliminating the weighting factors could increase Medicare direct GME payments by only 5 to 8 percent. We believe that subspecialty training constitutes a significant portion of all GME programs, and, consequently, the elimination of the weighting factors could potentially increase payments by far more than 8 percent. If budget neutrality is to be maintained, this could mean that the attendant reductions to the PRAs could be much greater than MedPAC might assume. For those teaching hospitals that have substantial subspecialty training, there is no guarantee that the decreases in the PRAs will be offset by the increases in the direct GME payments due to the elimination of the weighting factors.

    While the recommendation would remove the existing disincentive for training in subspecialties, we believe the reductions to the PRAs, whether they are minimal or more significant, will be far more detrimental to the smaller teaching hospitals that have little or no subspecialty training. Many of these hospitals provide care to beneficiaries in rural, underserved areas and in nonhospital settings. We believe these conditions may discourage the expansion of residency training in these areas. It may be inappropriate to limit the direct GME funding to such hospitals, considering Congress' initiatives to encourage residency training in rural, underserved areas and in nonhospital settings. We also are unclear as to how MedPAC would implement the proposed reduction to the PRAs. MedPAC did not explain in its recommendation how it would propose to do this.

    VIII. Other Required Information

    A. Requests for Data From the Public

    In order to respond promptly to public requests for data related to the prospective payment system, we have established a process under which commenters can gain access to raw data on an expedited basis. Generally, the data are available in computer tape or cartridge format; however, some files are available on diskette as well as on the Internet at http://www.hcfa.gov/​stats/​pubfiles.html. Data files, and the cost for each, are listed below. Anyone wishing to purchase data tapes, cartridges, or Start Printed Page 22715diskettes should submit a written request along with a company check or money order (payable to HCFA-PUF) to cover the cost to the following address: Health Care Financing Administration, Public Use Files, Accounting Division, P.O. Box 7520, Baltimore, Maryland 21207-0520, (410) 786-3691. Files on the Internet may be downloaded without charge.

    1. Expanded Modified MedPAR-Hospital (National)

    The Medicare Provider Analysis and Review (MedPAR) file contains records for 100 percent of Medicare beneficiaries using hospital inpatient services in the United States. (The file is a Federal fiscal year file, that is, discharges occurring October 1 through September 30 of the requested year.) The records are stripped of most data elements that would permit identification of beneficiaries. The hospital is identified by the 6-position Medicare billing number. The file is available to persons qualifying under the terms of the Notice of Proposed New Routine Uses for an Existing System of Records published in the Federal Register on December 24, 1984 (49 FR 49941), and amended by the July 2, 1985 notice (50 FR 27361). The national file consists of approximately 11 million records. Under the requirements of these notices, an agreement for use of HCFA Beneficiary Encrypted Files must be signed by the purchaser before release of these data. For all files requiring a signed agreement, please write or call to obtain a blank agreement form before placing an order. Two versions of this file are created each year. They support the following:

    • Notice of Proposed Rulemaking (NPRM) published in the Federal Register. This file, scheduled to be available by the end of April, is derived from the MedPAR file with a cutoff of 3 months after the end of the fiscal year (December file).
    • Final Rule published in the Federal Register. The FY 2000 MedPAR file used for the FY 2002 final rule will be cut off 6 months after the end of the fiscal year (March file) and is scheduled to be available by the end of April.

    Media: Tape/Cartridge

    File Cost: $3,655.00 per fiscal year

    Periods Available: FY 1988 through FY 2000

    2. Expanded Modified MedPAR-Hospital (State)

    The State MedPAR file contains records for 100 percent of Medicare beneficiaries using hospital inpatient services in a particular State. The records are stripped of most data elements that will permit identification of beneficiaries. The hospital is identified by the 6-position Medicare billing number. The file is available to persons qualifying under the terms of the Notice of Proposed New Routine Uses for an Existing System of Records published in the December 24, 1984 Federal Register notice, and amended by the July 2, 1985 notice. This file is a subset of the Expanded Modified MedPAR-Hospital (National) as described above. Under the requirements of these notices, an agreement for use of HCFA Beneficiary Encrypted Files must be signed by the purchaser before release of these data. Two versions of this file are created each year. They support the following:

    • NPRM published in the Federal Register. This file, scheduled to be available by the end of April, is derived from the MedPAR file with a cutoff of 3 months after the end of the fiscal year (December file).
    • Final Rule published in the Federal Register. The FY 2000 MedPAR file used for the FY 2002 final rule will be cut off 6 months after the end of the fiscal year (March file) and is scheduled to be available by the end of April.

    Media: Tape/Cartridge

    File Cost: $1,130.00 per State per year

    Periods Available: FY 1988 through FY 2000

    3. HCFA Wage Data

    This file contains the hospital hours and salaries for FY 1998 used to create the proposed FY 2002 prospective payment system wage index. The file will be available by the beginning of February for the NPRM and the beginning of May for the final rule.

    Processing yearWage data yearPPS fiscal year
    200119982002
    200019972001
    199919962000
    199819951999
    199719941998
    199619931997
    199519921996
    199419911995
    199319901994
    199219891993
    199119881992

    These files support the following:

    • NPRM published in the Federal Register.
    • Final Rule published in the Federal Register.

    Media: Diskette/most recent year on the Internet

    File Cost: $165.00 per year

    Periods Available: FY 2002 PPS Update

    4. HCFA Hospital Wages Indices (Formerly: Urban and Rural Wage Index Values Only)

    This file contains a history of all wage indices since October 1, 1983.

    Media: Diskette/most recent year on the Internet

    File Cost: $165.00 per year

    Periods Available: FY 2002 PPS Update

    5. PPS SSA/FIPS MSA State and County Crosswalk

    This file contains a crosswalk of State and county codes used by the Social Security Administration (SSA) and the Federal Information Processing Standards (FIPS), county name, and a historical list of Metropolitan Statistical Area (MSA).

    Media: Diskette/Internet

    File Cost: $165.00 per year

    Periods Available: FY 2002 PPS Update

    6. Reclassified Hospitals New Wage Index (Formerly: Reclassified Hospitals by Provider Only)

    This file contains a list of hospitals that were reclassified for the purpose of assigning a new wage index. Two versions of these files are created each year. They support the following:

    • NPRM published in the Federal Register.
    • Final Rule published in the Federal Register.

    Media: Diskette/Internet

    File Cost: $165.00 per year

    Periods Available: FY 2002 PPS Update

    7. PPS-IV to PPS-XII Minimum Data Set

    The Minimum Data Set contains cost, statistical, financial, and other information from Medicare hospital cost reports. The data set includes only the most current cost report (as submitted, final settled, or reopened) submitted for a Medicare participating hospital by the Medicare fiscal intermediary to HCFA. This data set is updated at the end of each calendar quarter and is available on the last day of the following month.

    Media: Tape/Cartridge

    File Cost: $770.00 per year

    Periods beginning on or afterAnd before
    PPS-IV10/01/8610/01/87
    PPS-V10/01/8710/01/88
    PPS-VI10/01/8810/01/89
    PPS-VII10/01/8910/01/90
    PPS-VIII10/01/9010/01/91
    PPS-IX10/01/9110/01/92
    PPS-X10/01/9210/01/93
    PPS-XI10/01/9310/01/94
    PPS-XII10/01/9410/01/95
    Start Printed Page 22716

    Note:

    The PPS-XIII, PPS-XIV, PPS-XV, and PPS-XVI Minimum Data Sets are part of the PPS-XIII, PPS-XIV, PPS-XV, and PPS XVI Hospital Data Set Files.

    8. PPS-IX to PPS-XII Capital Data Set

    The Capital Data Set contains selected data for capital-related costs, interest expense and related information and complete balance sheet data from the Medicare hospital cost report. The data set includes only the most current cost report (as submitted, final settled or reopened) submitted for a Medicare certified hospital by the Medicare fiscal intermediary to HCFA. This data set is updated at the end of each calendar quarter and is available on the last day of the following month.

    Media: Tape/Cartridge

    File Cost: $770.00 per year

    Periods beginning on or afterAnd before
    PPS-IX10/01/9110/01/92
    PPS-X10/01/9210/01/93
    PPS-XI10/01/9310/01/94
    PPS-XII10/01/9410/01/95

    Note:

    The PPS-XIII, PPS-XIV, PPS-XV, and PPS-XVI Capital Data Sets are part of the PPS-XIII, PPS-XIV, PPS-XV, and PPS-XVI Hospital Data Set Files.

    9. PPS-XIII to PPS-XVI Hospital Data Set

    The file contains cost, statistical, financial, and other data from the Medicare Hospital Cost Report. The data set includes only the most current cost report (as submitted, final settled, or reopened) submitted for a Medicare-certified hospital by the Medicare fiscal intermediary to HCFA. The data set are updated at the end of each calendar quarter and is available on the last day of the following month.

    Media: Diskette/Internet

    File Cost: $2,500.00

    Periods beginning on or afterAnd before
    PPS-XIII10/01/9510/01/96
    PPS-XIV10/01/9610/01/97
    PPS-XV10/01/9710/01/98
    PPS-XVI10/01/9810/01/99

    10. Provider-Specific File

    This file is a component of the PRICER program used in the fiscal intermediary's system to compute DRG payments for individual bills. The file contains records for all prospective payment system eligible hospitals, including hospitals in waiver States, and data elements used in the prospective payment system recalibration processes and related activities. Beginning with December 1988, the individual records were enlarged to include pass-through per diems and other elements.

    Media: Diskette/Internet

    File Cost: $265.00

    Periods Available: FY 2002 PPS Update

    11. HCFA Medicare Case-Mix Index File

    This file contains the Medicare case-mix index by provider number as published in each year's update of the Medicare hospital inpatient prospective payment system. The case-mix index is a measure of the costliness of cases treated by a hospital relative to the cost of the national average of all Medicare hospital cases, using DRG weights as a measure of relative costliness of cases. Two versions of this file are created each year. They support the following:

    • NPRM published in the Federal Register.
    • Final rule published in the Federal Register.

    Media: Diskette/most recent year on Internet

    Price: $165.00 per year/per file

    Periods Available: FY 1985 through FY 2000

    12. DRG Relative Weights (Formerly Table 5 DRG)

    This file contains a listing of DRGs, DRG narrative description, relative weights, and geometric and arithmetic mean lengths of stay as published in the Federal Register. The hard copy image has been copied to diskette. There are two versions of this file as published in the Federal Register:

    • NPRM.
    • Final rule.

    Media: Diskette/Internet

    File Cost: $165.00

    Periods Available: FY 2002 PPS Update

    13. PPS Payment Impact File

    This file contains data used to estimate payments under Medicare's hospital inpatient prospective payment systems for operating and capital-related costs. The data are taken from various sources, including the Provider-Specific File, Minimum Data Sets, and prior impact files. The data set is abstracted from an internal file used for the impact analysis of the changes to the prospective payment systems published in the Federal Register. This file is available for release 1 month after the proposed and final rules are published in the Federal Register.

    Media: Diskette/Internet

    File Cost: $165.00

    Periods Available: FY 2002 PPS Update

    14. AOR/BOR Tables

    This file contains data used to develop the DRG relative weights. It contains mean, maximum, minimum, standard deviation, and coefficient of variation statistics by DRG for length of stay and standardized charges. The BOR tables are “Before Outliers Removed” and the AOR is “After Outliers Removed.” (Outliers refers to statistical outliers, not payment outliers.) Two versions of this file are created each year. They support the following:

    • NPRM published in the Federal Register.
    • Final rule published in the Federal Register.

    Media: Diskette/Internet

    File Cost: $165.00

    Periods Available: FY 2002 PPS Update

    For further information concerning these data tapes, contact the HCFA Public Use Files Hotline at (410) 786-3691.

    Commenters interested in obtaining or discussing any other data used in constructing this rule should contact Stephen Phillips at (410) 786-4531.

    B. Information Collection Requirements

    Under the Paperwork Reduction Act of 1995, we are required to provide 60-day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues:

    • The need for the information collection and its usefulness in carrying out the proper functions of our agency.
    • The accuracy of our estimate of the information collection burden.
    • The quality, utility, and clarity of the information to be collected.
    • Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.

    We are soliciting public comments on each of these issues for the sections that contain information collection requirements. Start Printed Page 22717

    Proposed New § 412.230(e)(2)(ii) Criteria for an Individual Hospital Seeking Redesignation to Another Rural Area or an Urban Area; Proposed New § 412.232(d)(2)(ii) Criteria for All Hospitals in a Rural County Seeking Urban Redesignation; Proposed New § 412.235 Criteria for All Hospitals in a State Seeking a Statewide Wage Index; and Proposed Revised § 412.273 Withdrawing an Application or Terminating an Approved 3-Year Reclassification

    Proposed §§ 412.230(e)(2)(ii) and 412.232(d)(2)(ii) specify that, for hospital-specific data for wage index changes for redesignations effective beginning FY 2003, the hospital must provide a 3-year average of its average hourly wages using data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes. For other data, the hospital must provide a weighted 3-year average of the average hourly wage in the area in which the hospital is located and a weighted 3-year average of the average hourly wage in the area to which the hospital seeks reclassification. Proposed new § 412.235 specifies that in order for all prospective payment system hospitals in a State to use a statewide wage index, the hospitals as a group must submit an application to the MGCRB for a decision for reclassifications for wage index purposes. The proposed changes to § 412.273 would incorporate proposed revised procedures for hospitals that request withdraw of their wage index application or termination of their wage index reclassification. These proposed changes, discussed in detail in section IV.E. of this proposed rule, implement sections 304(a) and (b) of Public Law 106-554.

    The information collection requirements associated with a hospital's application to the MGCRB for geographic reclassifications, including reclassifications for wage index purposes and the required submittal of wage data, that are codified in Part 412 are currently approved by OMB under OMB Approval Number 0938-0573, with an expiration date of September 30, 2002.

    Proposed § 412.348(g)(9) Exception Payments

    As discussed in section V. of this proposed rule, Medicare makes special exceptions payments for capital-related costs through the 10th year beyond the end of the capital prospective payment system transition period for eligible hospitals that complete a project that meets certain requirements specified in § 412.348. In order to assist our fiscal intermediaries in determining the end of the 10-year period in which an eligible hospital will no longer be entitled to receive special exception payments, we are proposing to add a new § 412.348(g)(9) to require that hospitals eligible for special exception payments under § 412.348(g) submit documentation to the intermediary indicating the completion date of their project (the date the project was put in use for patient care) that meets the project need and project size requirements outlined in §§ 412.348(g)(2) through (g)(5). We are proposing that, in order for an eligible hospital to receive special exception payments, this documentation would have to be submitted in writing to the intermediary by the later of October 1, 2001, or within 3 months of the end of the hospital's last cost reporting period beginning before October 1, 2001, during which a qualifying project was completed.

    We estimate that the information collection requirement of preparing and submitting the documentation on a hospital's capital project would impose a burden of approximately 1 hour for approximately 30 hospitals.

    If you comment on these information collection and recordkeeping requirements, please mail copies directly to the following addresses:

    Health Care Financing Administration, Office of Information Services, Security and Standards Group, Division of HCFA Enterprise Standards Room N2-14-26, 7500 Security Boulevard, Baltimore, Maryland 21244-1850, Attn: John Burke HCFA-1158-P; and

    Office of Information and Regulatory Affairs, Office of Management and Budget, Room 3001, New Executive Office Building, Washington, DC 20503, Attn: Allison Herron Eydt, HCFA Desk Officer.

    These new information collection and recordkeeping requirements have been submitted to the Office of Management and Budget (OMB) for review under the authority of PRA. We have submitted a copy of the proposed rule to OMB for its review of the information collection requirements. These requirements will not be effective until they have been approved by OMB.

    C. Public Comments

    Because of the large number of items of correspondence we normally receive on a proposed rule, we are not able to acknowledge or respond to them individually. However, in preparing the final rule, we will consider all comments concerning the provisions of this proposed rule that we receive by the date and time specified in the DATES section of this preamble and respond to those comments in the preamble to that rule. We emphasize that section 1886(e)(5) of the Act requires the final rule for FY 2002 to be published by August 1, 2001, and we will consider only those comments that deal specifically with the matters discussed in this proposed rule.

    Start List of Subjects

    List of Subjects

    42 CFR Part 405

    • Administrative practice and procedure
    • Health facilities
    • Health professions
    • Kidney diseases
    • Medicare
    • Reporting and recordkeeping requirements
    • Rural areas
    • X-rays

    42 CFR Part 412

    • Administrative practice and procedure
    • Health facilities
    • Medicare
    • Puerto Rico
    • Reporting and recordkeeping requirements

    42 CFR Part 413

    • Health facilities
    • Kidney diseases
    • Medicare
    • Puerto Rico
    • Reporting and recordkeeping requirements

    42 CFR Part 485

    • Grant programs-health
    • Health facilities
    • Medicaid
    • Medicare
    • Reporting and recordkeeping requirements

    42 CFR Part 486

    • Health professions
    • Medicare
    • Organ procurement
    • X-rays
    End List of Subjects

    42 CFR Chapter IV is proposed to be amended as set forth below:

    Start Part

    PART 405—FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

    A. Part 405 is amended as set forth below:

    1. The authority citation for Part 405 continues to read as follows:

    Start Authority

    Authority: Secs. 1102, 1861, 1862(a), 1871, 1874, 1881, and 1886(k) of the Social Security Act (42 U.S.C. 1302, 1395x, 1395y(a), 1395hh, 1395kk, 1395rr, and 1395ww(k), and sec. 353 of the Public Health Service Act (42 U.S.C. 263a).

    End Authority

    2. In § 405.2468, paragraph (f)(6)(ii) is republished and paragraph (f)(6)(ii)(D) is revised to read as follows.

    Allowable costs.
    * * * * *

    (f) Graduate medical education. * * *

    (6) * * * Start Printed Page 22718

    (ii) The following costs are not allowable graduate medical education costs:

    * * * * *

    (D) The costs associated with activities described in § 413.85(h) of this chapter.

    * * * * *
    End Part Start Part

    PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES

    B. Part 412 is amended as follows:

    1. The authority citation for Part 412 continues to read as follows:

    Start Authority

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).

    End Authority

    2. Section 412.2 is amended as follows:

    a. The introductory text of paragraph (e) is republished.

    b. Paragraph (e)(4) is revised.

    c. The introductory text of paragraph (f) is republished.

    d. A new paragraph (f)(9) is added.

    Basis of payment.
    * * * * *

    (e) Excluded costs. The following inpatient hospital costs are excluded from the prospective payment amounts and are paid on a reasonable cost basis:

    * * * * *

    (4) The acquisition costs of hearts, kidneys, livers, lungs, pancreas, and intestines (or multivisceral organs) incurred by approved transplantation centers.

    * * * * *

    (f) Additional payments to hospitals. In addition to payments based on the prospective payment system rates for inpatient operating and inpatient capital-related costs, hospitals receive payments for the following:

    * * * * *

    (9) Special additional payment for certain new technology as specified in § 412.87 and 412.88 of Subpart F.

    3. Section 412.23 is amended by adding a new paragraph (i) to read as follows:

    Excluded hospitals: Classifications.
    * * * * *

    (i) Changes in classification of hospitals. For purposes of exclusions from the prospective payment system, the classification of a hospital is effective for the hospital's entire cost reporting period. Any changes in the classification of a hospital are made only at the start of a cost reporting period.

    4. Section 412.25 is amended by adding a new paragraph (f) to read as follows:

    Excluded hospital units: Common requirements.
    * * * * *

    (f) Changes in classification of hospital units. For purposes of exclusions from the prospective payment system under this section, the classification of a hospital unit is effective for the unit's entire cost reporting period. Any changes in the classification of a hospital unit is made only at the start of a cost reporting period.

    5. Section 412.63 is amended by revising paragraphs (t) and (u) to read as follows:

    Federal rates for inpatient operating costs for fiscal years after Federal fiscal year 1984.
    * * * * *

    (t) Applicable percentage change for fiscal years 2002 and 2003. The applicable percentage change for fiscal years 2002 and 2003 is the percentage increase in the market basket index for prospective payment hospitals (as defined in § 413.40(a) of this subchapter) minus 0.55 percentage points for hospitals in all areas.

    (u) Applicable percentage change for fiscal year 2004 and for subsequent fiscal years. The applicable percentage change for fiscal year 2004 and for subsequent years is the percentage increase in the market basket index for prospective payment hospitals (as defined in § 413.40(a) of this subchapter) for hospitals in all areas.

    * * * * *

    6. The title of Subpart F is revised to read as follows:

    Subpart F—Payment for Outlier Cases and Special Treatment Payment for New Technology

    7. A new undesignated center heading is added after the Subpart F heading and before § 412.80; the section heading of § 412.80 is revised; and a new paragraph (a)(3) is added to read as follows:

    Payment for Outlier Cases

    Outlier cases: General provisions.

    (a) Basic rule.

    * * * * *

    (3) Discharges occurring on or after October 1, 2001. For discharges occurring on or after October 1, 2001, except as provided in paragraph (b) of this section concerning transfers, HCFA provides for additional payment, beyond standard DRG payments and beyond additional payments for new medical services or technology specified in §§ 412.87 and 412.88, to a hospital for covered inpatient hospital services furnished to a Medicare beneficiary if the hospital's charges for covered services, adjusted to operating costs and capital costs by applying cost-to-charge ratios as described in § 412.84(h), exceed the DRG payment for the case (plus payments for indirect costs of graduate medical education (§ 412.105), payments for serving a disproportionate share of low-income patients (§ 412.106), and additional payments for new medical services or technologies) plus a fixed dollar amount (adjusted for geographic variation in costs) as specified by HCFA.

    * * * * *

    8. A new undesignated center heading and §§ 412.87 and 412.88 are added immediately following § 412.86, to read as follows:

    Additional Special Payment for Certain New Technology

    Additional payment for new medical services and technologies: General provisions.

    (a) Basis. Sections 412.87 and 412.88 implement sections 1886(d)(5)(K) and 1886(d)(5)(L) of the Act, which authorizes the Secretary to establish a mechanism to recognize the costs of new medical services and technologies under the hospital inpatient prospective payment system.

    (b) Eligibility criteria. For discharges occurring on or after October 1, 2001, HCFA provides for additional payments (as specified in § 412.88) beyond the standard DRG payments and outlier payments to a hospital for discharges involving covered inpatient hospital services that are new medical services and technologies, if the following conditions are met:

    (1) A new medical service or technology represents an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. HCFA will determine whether a new medical service or technology meets this criterion and announce the results of its determinations in the Federal Register as a part of its annual updates and changes to the hospital inpatient prospective payment system.

    (2) A medical service or technology may be considered new within 2 or 3 years after it becomes available on the market (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration). After HCFA has recalibrated the DRGs, based on Start Printed Page 22719available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered “new” under the criterion of this section.

    (3) The DRG prospective payment rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate, based on application of a threshold amount to estimated costs incurred with respect to such discharges. To determine whether the payment would be adequate, HCFA will determine whether the costs of the cases involving a new medical service or technology will exceed a threshold amount set at one standard deviation beyond the mean standardized charge for all cases in the DRG to which the new medical service or technology is assigned (or the case-weighted average of all relevant DRGs if the new medical service or technology occurs in many different DRGs). Standardized charges reflect the actual charges of a case adjusted by the prospective payment system payment factors applicable to an individual hospital, such as the wage index, the indirect medical education adjustment factor, and the disproportionate share adjustment factor.

    Additional payment for new medical service or technology.

    (a) For discharges involving new medical services or technologies that meet the criteria specified in § 412.87, Medicare payment will be:

    (1) The standard DRG payment; plus

    (2) If the costs of the discharge (determined by applying cost-to-charge ratios as described in § 412.84(h)) exceed the standard DRG payment, an additional amount equal to the lesser of—

    (i) 50 percent of the costs of the new medical service or technology; or

    (ii) 50 percent of the amount by which the costs of the case exceed the standard DRG payment.

    (b) Unless a discharge case qualifies for outlier payment under § 412.84, Medicare will not pay any additional amount beyond the DRG payment plus 50 percent of the estimated costs of the new medical service or technology.

    9. Section 412.92 is amended as follows:

    a. Paragraph (b)(1)(iii)(A) is amended by revising the phrase “50 mile radius” to read “35 mile radius.”

    b. Paragraph (c)(1) is revised.

    Special treatment: Sole community hospitals.
    * * * * *

    (c) Terminology. * * *

    (1) The term miles means the shortest distance in miles measured over improved roads. An improved road for this purpose is any road that is maintained by a local, State, or Federal government entity and is available for use by the general public. An improved road includes the paved surface up to the front entrance of the hospital.

    * * * * *

    10. Section 412.105 is amended as follows:

    a. The introductory text of paragraph (a) is republished.

    b. Paragraph (a)(1) is revised.

    c. Paragraph (d)(3)(vi) is revised.

    d. A new paragraph (d)(3)(vii) is added.

    e. Paragraph (f)(1)(ii)(C) is revised.

    f. Paragraph (f)(1)(iii) is revised.

    g. Paragraph (f)(1)(v) is amended by adding four sentences at the end.

    h. Paragraph (f)(1)(ix) is revised.

    Special treatment: Hospitals that incur indirect costs for graduate medical education programs.
    * * * * *

    (a) Basic data. HCFA determines the following for each hospital:

    (1) The hospital's ratio of full-time equivalent residents, except as limited under paragraph (f) of this section, to the number of beds (as determined under paragraph (b) of this section). Except for the special circumstances for affiliated groups and new programs described in paragraphs (f)(1)(vi) and (f)(1)(vii) of this section, for a hospital's cost reporting periods beginning on or after October 1, 1997, this ratio may not exceed the ratio for the hospital's most recent prior cost reporting period after accounting for the cap on the number of full-time equivalent residents as described in paragraph (f)(1)(iv) of this section. The exception for new programs described in paragraph (f)(1)(vii) of this section applies for the period of years equal to the minimum accredited length for that type of program.

    * * * * *

    (d) Determination of education adjustment factor.

    * * * * *

    (3) * * *

    (vi) For discharges occurring during fiscal year 2002, 1.6.

    (vii) For discharges occurring on or after October 1, 2002, 1.35.

    * * * * *

    (f) Determining the total number of full-time equivalent residents for cost reporting periods beginning on or after July 1, 1991.

    (1) * * *

    (ii) * * *

    (C) Effective for discharges occurring on or after October 1, 1997, the time spent by a resident in a non-hospital setting in patient care activities under an approved medical residency training program is counted towards the determination of full-time equivalency if the criteria set forth in § 413.86(f)(3) or § 413.86 (f)(4), as applicable, are met.

    (iii) (A) Full-time equivalent status is based on the total time necessary to fill a residency slot. No individual may be counted as more than one full-time equivalent. If a resident is assigned to more than one hospital, the resident counts as a partial full-time equivalent based on the proportion of time worked in any of the areas of the hospital listed in paragraph (f)(1)(ii) of this section, to the total time worked by the resident. A part-time resident or one working in an area of the hospital other than those listed under paragraph (f)(1)(ii) of this section (such as a freestanding family practice center or an excluded hospital unit) would be counted as a partial full-time equivalent based on the proportion of time assigned to an area of the hospital listed in paragraph (f)(1)(ii) of this section, compared to the total time necessary to fill a full-time residency slot.

    (B) The time spent by a resident in research that is not associated with the treatment or diagnosis of a particular patient of the hospital is not countable.

    * * * * *

    (v) * * * If a hospital qualified for an adjustment to the limit established under paragraph (f)(1)(iv) of this section for new medical residency programs created under paragraph (f)(1)(vii) of this section, the count of residents participating in new medical residency training programs above the number included in the hospital's FTE count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in this paragraph for a period of years. Residents participating in new medical residency training programs are included in the hospital's FTE count before applying the averaging rules after the period of years has expired. For purposes of this paragraph, the period of years equals the minimum accredited length for the type of program. The period of years begins when the first resident begins training.

    * * * * *

    (ix) A hospital may receive a temporary adjustment to its full-time equivalent cap to reflect residents added because of another hospital's closure if the hospital meets the criteria specified in §§ 413.86(g)(8)(i) and (g)(8)(ii) of this Start Printed Page 22720subchapter. If a hospital that closes its residency training program agrees to temporarily reduce its FTE cap according to the criteria specified in §§ 413.86(g)(8)(i) and (g)(8)(iii)(B) of this subchapter, another hospital(s) may receive a temporary adjustment to its FTE cap to reflect residents added because of the closure of the residency training program if the criteria specified in §§ 413.86(g)(8)(i) and (g)(8)(iii)(A) of this subchapter are met.

    * * * * *

    11. Section 412.106 is amended by revising the heading of paragraph (e) and paragraph (e)(5) to read as follows:

    Special treatment: Hospitals that serve a disproportionate share of low-income patients.
    * * * * *

    (e) Reduction in payments beginning FY 1998. * * *

    (5) For FY 2002, 3 percent.

    * * * * *
    [Amended]

    12. In § 412.113(c), including the heading for paragraph (c), the term “hospital”, wherever it appears, is revised to read “hospital or CAH” (16 times).

    13. Section 412.230 is amended by revising paragraph (e)(2) to read as follows:

    Criteria for an individual hospital seeking redesignation to another rural area or an urban area.
    * * * * *

    (e) Use of urban or other rural area's wage index.

    * * * * *

    (2) Appropriate wage data. For a wage index change, the hospital must submit appropriate wage data as follows:

    (i) For redesignations effective through FY 2002:

    (A) For hospital-specific data, the hospital must provide data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes during the fiscal year prior to the fiscal year for which the hospital requests reclassification.

    (B) For data for other hospitals, the hospital must provide data concerning the average hourly wage in the area in which the hospital is located and the average hourly wage in the area to which the hospital seeks reclassification. The wage data are taken from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes during the fiscal year prior to the fiscal year for which the hospital requests reclassification.

    (C) If the hospital is requesting reclassification under paragraph (e)(1)(iv)(B) of this section, the hospital must provide occupational-mix data to demonstrate the average occupational mix for each employment category in the area to which it seeks reclassification. Occupational-mix data can be obtained from surveys conducted by the American Hospital Association.

    (ii) For redesignations effective beginning FY 2003:

    (A) For hospital-specific data, the hospital must provide a weighted 3-year average of its average hourly wages using data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes.

    (B) For data for other hospitals, the hospital must provide a weighted 3-year average of the average hourly wage in the area in which the hospital is located and a weighted 3-year average of the average hourly wage in the area to which the hospital seeks reclassification. The wage data are taken from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes.

    * * * * *

    14. Section 412.232 is amended by revising paragraph (d)(2) to read as follows:

    Criteria for all hospitals in a rural county seeking urban redesignation.
    * * * * *

    (d) Appropriate data.

    * * * * *

    (2) Appropriate wage data. The hospitals must submit appropriate data as follows:

    (i) For redesignations effective through FY 2002:

    (A) For hospital-specific data, the hospitals must provide data from the HCFA wage survey used to construct the wage index in effect for prospective payment purposes during the fiscal year prior to the fiscal year for which the hospitals request reclassification.

    (B) For data for other hospitals, the hospitals must provide the following:

    (1) The average hourly wage in the adjacent area, which is taken from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes during the fiscal year prior to the fiscal year for which the hospitals request reclassification.

    (2) Occupational-mix data to demonstrate the average occupational mix for each employment category in the adjacent area. Occupational-mix data can be obtained from surveys conducted by the American Hospital Association.

    (ii) For redesignations effective beginning FY 2003:

    (A) For hospital-specific data, the hospital must provide a weighted 3-year average of its average hourly wages using data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes.

    (B) For data for other hospitals, the hospital must provide a weighted 3-year average of the average hourly wage in the area in which the hospital is located and a weighted 3-year average of the average hourly wage in the area to which the hospital seeks reclassification. The wage data are taken from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes.

    15. Section 412.235 is added to read as follows:

    Criteria for all hospitals in a State seeking a statewide wage index redesignation.

    (a) General criteria. For all prospective payment system hospitals in a State to be redesignated to a statewide wage index, the following conditions must be met:

    (1) All prospective payment system hospitals in the State must apply as a group for reclassification to a statewide wage index through a signed single application.

    (2) All prospective payment system hospitals in the State must agree to the reclassification to a statewide wage index through a signed affidavit on the application.

    (3) All prospective payment system hospitals in the State must agree, through an affidavit, to withdrawal of an application or to termination of an approved statewide wage index reclassification.

    (4) All hospitals in the State must waive their rights to any wage index classification that they would otherwise receive absent the statewide wage index classification, including a wage index that any of the hospitals might have received through individual geographic reclassification.

    (5) New hospitals that open within the State prior to the deadline for submitting an application for a statewide wage index reclassification (September 1), regardless of whether a group application has already been filed, must agree to the use of the statewide wage index as part of the group application. New hospitals that open within the State after the deadline for submitting a statewide wage index reclassification application or during the approved reclassification period will be considered a party to the statewide Start Printed Page 22721wage index application and reclassification.

    (b) Effect on payments. (1) An individual hospital within the State may receive a wage index that could be higher or lower under the statewide wage index reclassification in comparison to its otherwise redesignated wage index.

    (2) Any new prospective payment system hospital that opens in the State during the effective period of an approved statewide wage index reclassification will be designated to receive the statewide wage index for the duration of that period.

    (3) A hospital located in an area outside a State in which all participating hospitals have received an approved statewide wage index reclassification may apply to be reclassified into the statewide wage index area. In that case, such a hospital that is reclassified into a statewide wage index area will receive a wage index calculated based on the statewide wage index reclassification.

    (c) Terms of the decision. (1) A decision by the MGCRB on an application for a statewide wage index reclassification will be effective for 3 years beginning with discharges occurring on the first day (October 1) of the second Federal fiscal year following the Federal fiscal year in which the hospitals filed a complete application.

    (2) The procedures and timeframes specified in § 412.273 apply to withdrawals of applications for redesignation to a statewide wage index and terminations of approved statewide wage index reclassifications, including the requirement that, to withdraw an application or terminate an approved reclassification, the request must be made in writing by all hospitals that are party to the application, except hospitals reclassified into the State for purposes of receiving the statewide wage index.

    16. Section 412.273 is amended as follows:

    a. The title of the section is revised.

    b. Paragraphs (b) and (c) are redesignated as paragraphs (c) and (d), respectively.

    c. A new paragraph (b) is added.

    d. Redesignated paragraph (c) is revised.

    Withdrawing an application or terminating an approved 3-year reclassification.
    * * * * *

    (b) Request for termination of approved 3-year wage index reclassifications.

    (1) A hospital, or a group of hospitals, that has been issued a decision on its application for a 3-year reclassification for wage index purposes only or for redesignation to a statewide wage index and has not withdrawn that application under the procedures specified in paragraph (a) of this section may request termination of its approved 3-year wage index reclassification under the following conditions:

    (i) The request to terminate must be received by the MGCRB within 45 days of the publication of the annual notice of proposed rulemaking concerning changes to the inpatient hospital prospective payment system and proposed payment rates for the fiscal year for which the termination is to apply.

    (ii) A request to terminate a 3-year reclassification will be effective only for the full fiscal year(s) remaining in the 3-year period at the time the request is received. Requests for terminations for part of a fiscal year will not be considered.

    (2) Reapplication within the approved 3-year period.

    (i) If a hospital elects to withdraw its wage index application after the MGCRB has issued its decision, it may terminate its withdrawal in a subsequent fiscal year and request the MGCRB to reinstate its wage index reclassification for the remaining fiscal year(s) of the 3-year period.

    (ii) A hospital may apply for reclassification for purposes of the wage index to a different area (that is, an area different from the one to which it was originally reclassified for the 3-year period). If the application is approved, the reclassification will be effective for 3 years.

    (c) Written request only. A request to withdraw an application or terminate an approved reclassification must be made in writing to the MGCRB by all hospitals that are party to the application or reclassification.

    * * * * *

    17. Section 412.274 is amended by revising paragraph (b) to read as follows:

    Scope and effect of an MGCRB decision.
    * * * * *

    (b) Effective date and term of the decision. (1) A standardized amount classification change is effective for one year beginning with discharges occurring on the first day (October 1) of the second Federal fiscal year following the Federal fiscal year in which the complete application is filed and ending effective at the end of that Federal fiscal year (the end of the next September 30).

    (2) A wage index classification change is effective for 3 years beginning with discharges occurring on the first day (October 1) of the second Federal fiscal year in which the complete application is filed.

    * * * * *

    18. Section 412.348 is amended by revising paragraph (g)(6) and adding a new paragraph (g)(9) to read as follows:

    Exception payments.
    * * * * *

    (g) Special exceptions process. * * *

    (6) Minimum payment level.

    (i) The minimum payment level for qualifying hospitals will be 70 percent.

    (ii) HCFA will adjust the minimum payment level in one percentage point increments as necessary to satisfy the requirement specified in paragraph (h) of this section that total estimated payments under the exceptions process not exceed 10 percent of the total estimated capital prospective payment system payments for the same fiscal year.

    * * * * *

    (9) Notification requirement. Eligible hospitals must submit documentation to the intermediary indicating the completion date of a project that meets the project need requirement under paragraph (g)(2) of this section, the project size requirement under paragraph (g)(5) of this section, and, in the case of certain urban hospitals, an excess capacity test under paragraph (g)(4) of this section, by the later of October 1, 2001 or within 3 months of the end of the hospital's last cost reporting period beginning before October 1, 2001, during which a qualifying project was completed.

    * * * * *
    End Part Start Part

    PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES

    C. Part 413 is amended as follows:

    1. The authority citation for Part 413 is revised to read as follows:

    Start Authority

    Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and (n), 1871, 1881, 1883, and 1886 of the Social Security Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 1395hh, 1395rr, 1395tt, and 1395ww).

    End Authority

    2. Section 413.70 is amended as follows:

    a. Paragraph (a)(1) introductory text is republished.

    b. A new paragraph (a)(1)(iv) is added.

    c. Paragraph (a)(2) is revised.

    d. A new paragraph (a)(3) is added.

    e. Paragraph (b)(1) is revised.Start Printed Page 22722

    f. Paragraph (b)(2)(i)(C) is revised.

    g. New paragraphs (b)(4), (b)(5) and (b)(6) are added.

    Payment for services of a CAH.

    (a) Payment for inpatient services furnished by a CAH.

    (1) Payment for inpatient services of a CAH is the reasonable costs of the CAH in providing CAH services to its inpatients, as determined in accordance with section 1861(v)(1)(A) of the Act and the applicable principles of cost reimbursement in this part and in Part 415 of this chapter, except that the following payment principles are excluded when determining payment for CAH inpatient services:

    * * * * *

    (iv) The payment window provisions for preadmission services, specified in § 412.2(c)(5) of this subchapter and § 413.40(c)(2).

    (2) Except as specified in paragraph (a)(3) of this section, payment to a CAH for inpatient services does not include any costs of physician services or other professional services to CAH inpatients, and is subject to the Part A hospital deductible and coinsurance, as determined under subpart G of part 409 of this chapter.

    (3) If a CAH meets the criteria in § 412.113(c) of this subchapter for pass-through of costs of anesthesia services furnished by qualified nonphysician anesthetists employed by the CAH or obtained under arrangements, payment to the CAH for the costs of those services is made in accordance with § 412.113(c).

    (b) Payment for outpatient services furnished by CAH.—(1) General. (i) Unless the CAH elects to be paid for services to its outpatients under the method specified in paragraph (b)(3) of this section, the amount of payment for outpatient services of a CAH is the amount determined under paragraph (b)(2) of this section.

    (ii) Except as specified in paragraph (b)(6) of this section, payment to a CAH for outpatient services does not include any costs of physician services or other professional services to CAH outpatients.

    * * * * *

    (2) Reasonable costs for facility services.

    (i) * * *

    (C) Any type of reduction to operating or capital costs under § 413.124 or § 413.130(j).

    * * * * *

    (4) Costs of emergency room on-call physicians. (i) Effective for cost reporting periods beginning on or after October 1, 2001, the reasonable costs of outpatient CAH services under paragraph (b) of this section may include amounts for reasonable compensation and related costs for an emergency room physician who is on call but who is not present on the premises of the CAH involved, is not otherwise furnishing physicians' services, and is not on call at any other provider or facility.

    (ii) For purposes of this paragraph (b)(4)—

    (A) “Amounts for reasonable compensation and related costs” means all allowable costs of compensating emergency room physicians who are on call to the extent the costs are found to be reasonable under the rules specified in paragraph (b)(2) of this section and the applicable sections of Part 413. Costs of compensating emergency room physicians are allowable only if the costs are incurred under written contracts that require the physician to come to the CAH when the physician's presence is medically required.

    (B) An “emergency room physician who is on call' means a doctor of medicine or osteopathy with training or experience in emergency care who is immediately available by telephone or radio contact, and is available on site within the timeframes specified in § 485.618(d) of this chapter.

    (5) Costs of ambulance services. (i) Effective for services furnished on or after December 21, 2000, payment for ambulance services furnished by a CAH or an entity that is owned and operated by a CAH is the reasonable costs of the CAH or the entity in furnishing those services, but only if the CAH or the entity is the only provider or supplier of ambulance services located within a 35-mile drive of the CAH or the entity.

    (ii) For purposes of paragraph (b)(5) of this section, the distance between the CAH or the entity and the other provider or supplier of ambulance services will be determined as the shortest distance in miles measured over improved roads between the CAH or the entity and the site at which the vehicles of the closest provider or supplier of ambulance services are garaged. An improved road for this purpose is any road that is maintained by a local, State, or Federal government entity and is available for use by the general public. An improved road will be considered to include the paved surface up to the front entrance of the hospital and the front entrance of the garage.

    (6) If a CAH meets the criteria in § 412.113(c) of this subchapter for pass-through of costs of anesthesia services furnished by nonphysician anesthetists employed by the CAH or obtained under arrangement, payment to the CAH for the costs of those services is made in accordance with § 412.113(c).

    * * * * *

    3. Section 413.86 is amended as follows:

    a. Paragraph (e)(4)(ii)(C)(1) is revised.

    b. Paragraph (e)(5)(iv) is removed.

    c. Paragraph (g)(4) is revised.

    d. Paragraph (g)(5) is revised.

    e. Paragraph (g)(8) is revised.

    Direct graduate medical education payments.
    * * * * *

    (e) Determining per residents amounts for the base period. * * *

    (4) * * *

    (ii) * * *

    (C) Determining necessary revisions to the per resident amount. * * *

    (1) Floor. (i) For cost reporting periods beginning on or after October 1, 2000, and before October 1, 2001, if the hospital's per resident amount would otherwise be less than 70 percent of the locality-adjusted national average per resident amount for FY 2001 (as determined under paragraph (e)(4)(ii)(B) of this section), the per resident amount is equal to 70 percent of the locality-adjusted national average per resident amount for FY 2001.

    (ii) For cost reporting periods beginning on or after October 1, 2001, and before October 1, 2002, if the hospital's per resident amount would otherwise be less than 85 percent of the locality-adjusted national average per resident amount for FY 2002 (as determined under paragraph (e)(4)(ii)(B) of this section), the per resident amount is equal to 85 percent of the locality-adjusted national average per resident amount for FY 2002.

    (iii) For subsequent cost reporting periods beginning on or after October 1, 2002, the hospital's per resident amount is updated using the methodology specified under paragraph (e)(3)(i) of this section.

    * * * * *

    (g) Determining the weighted number of FTE residents. * * *

    (4) For purposes of determining direct graduate medical education payments—

    (i) For cost reporting periods beginning on or after October 1, 1997, a hospital's unweighted FTE count for residents in allopathic and osteopathic medicine may not exceed the hospital's unweighted FTE count (or, effective for cost reporting periods beginning on or after April 1, 2000, 130 percent of the unweighted FTE count for a hospital located in a rural area) for these residents for the most recent cost reporting period ending on or before December 31, 1996. Start Printed Page 22723

    (ii) If a hospital's number of FTE residents in a cost reporting period beginning on or after October 1, 1997, and before October 1, 2001, exceeds the limit described in this paragraph (g), the hospital's total weighted FTE count (before application of the limit) will be reduced in the same proportion that the number of FTE residents for that cost reporting period exceeds the number of FTE residents for the most recent cost reporting period ending on or before December 31, 1996.

    (iii) If the hospital's number of FTE residents in a cost reporting period beginning on or after October 1, 2001 exceeds the limit described in this paragraph (g), the hospital's weighted FTE count (before application of the limit), for primary care and obstetrics and gynecology residents and nonprimary care residents, respectively, will be reduced in the same proportion that the number of FTE residents for that cost reporting period exceeds the number of FTE residents for the most recent cost reporting period ending on or before December 31, 1996.

    (iv) Hospitals that are part of the same affiliated group may elect to apply the limit on an aggregate basis.

    (v) The fiscal intermediary may make appropriate modifications to apply the provisions of this paragraph (g)(4) based on the equivalent of a 12-month cost reporting period.

    (5) For purposes of determining direct graduate medical education payment—

    (i) For the hospital's first cost reporting period beginning on or after October 1, 1997, the hospital's weighted FTE count is equal to the average of the weighted FTE count for the payment year cost reporting period and the preceding cost reporting period.

    (ii) For cost reporting periods beginning on or after October 1, 1998, and before October 1, 2001, the hospital's weighted FTE count is equal to the average of the weighted FTE count for the payment year cost reporting period and the preceding two cost reporting periods.

    (iii) For cost reporting periods beginning on or after October 1, 2001, the hospital's weighted FTE count for primary care and obstetrics and gynecology residents is equal to the average of the weighted primary care and obstetrics and gynecology counts for the payment year cost reporting period and the preceding two cost reporting periods, and the hospital's weighted FTE count for nonprimary care residents is equal to the average of the weighted nonprimary care FTE counts for the payment year cost reporting period and the preceding two cost reporting periods.

    (iv) The fiscal intermediary may make appropriate modifications to apply the provisions of this paragraph (g)(5) based on the equivalent of 12-month cost reporting periods.

    (v) If a hospital qualifies for an adjustment to the limit established under paragraph (g)(4) of this section for new medical residency programs created under paragraph (g)(6) of this section, the count of the residents participating in new medical residency training programs above the number included in the hospital's FTE count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in this paragraph (g)(5) for a period of years. Residents participating in new medical residency training programs are included in the hospital's FTE count before applying the averaging rules after the period of years has expired. For purposes of this paragraph (g)(5), the period of years equals the minimum accredited length for the type of program. The period of years begins when the first resident begins training.

    * * * * *

    (8) Closure of hospital or hospital residency program.

    (i) Definitions. For purposes of this paragraph (g)(8)—

    (A) “Closure of a hospital” means the hospital terminates its Medicare agreement under the provisions of § 489.52 of this chapter.

    (B) “Closure of a hospital residency training program” means the hospital ceases to offer training for residents in a particular approved medical residency training program.

    (ii) Closure of a hospital. A hospital may receive a temporary adjustment to its FTE cap to reflect residents added because of another hospital's closure if the hospital meets the following criteria:

    (A) The hospital is training additional residents from a hospital that closed on or after July 1, 1996.

    (B) No later than 60 days after the hospital begins to train the residents, the hospital submits a request to its fiscal intermediary for a temporary adjustment to its FTE cap, documents that the hospital is eligible for this temporary adjustment by identifying the residents who have come from the closed hospital and have caused the hospital to exceed its cap, and specifies the length of time the adjustment is needed.

    (iii) Closure of a hospital's residency training program. If a hospital that closes its residency training program voluntarily agrees to temporarily reduce its FTE cap according to the criteria specified in paragraph (g)(8)(iii)(B) of this section, another hospital(s) may receive a temporary adjustment to its FTE cap to reflect residents added because of the closure of the residency training program if the criteria specified in paragraph (g)(8)(iii)(A) of this section are met.

    (A) Receiving hospital(s). A hospital may receive a temporary adjustment to its FTE cap to reflect residents added because of the closure of another hospital's residency training program if—

    (1) The hospital is training additional residents from the residency training program of a hospital that closed a program; and

    (2) No later than 60 days after the hospital begins to train the residents, the hospital submits to its fiscal intermediary a request for a temporary adjustment to its FTE cap, documents that it is eligible for this temporary adjustment by identifying the residents who have come from another hospital's closed program and have caused the hospital to exceed its cap, specifies the length of time the adjustment is needed, and submits to its fiscal intermediary a copy of the FTE reduction statement by the hospital that closed its program, as specified in paragraph (g)(8)(iii)(B)(2) of this section.

    (B) Hospital that closed its program(s). A hospital that agrees to train residents who have been displaced by the closure of another hospital's program may receive a temporary FTE cap adjustment only if the hospital with the closed program—

    (1) Temporarily reduces its FTE cap based on the FTE residents in each program year training in the program at the time of the program's closure. This yearly reduction in the FTE cap will be determined based on the number of those residents who would have been training in the program during that year had the program not closed; and

    (2) No later than 60 days after the residents who were in the closed program begin training at another hospital, submit to its fiscal intermediary a statement signed and dated by its representative that specifies that it agrees to the temporary reduction in its FTE cap to allow the hospital training the displaced residents to obtain a temporary adjustment to its cap; identifies the residents who were in training at the time of the program's closure; identifies the hospitals to which the residents are transferring once the program closes; and specifies the reduction for the applicable program years.

    * * * * *
    End Part Start Part Start Printed Page 22724

    PART 485—CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

    D. Part 485 is amended as follows:

    1. The authority citation for part 485 continues to read as follows:

    Start Authority

    Authority: Secs. 1102 and 1871 of the Act (42 U.S.C. 1302 and 1395hh).

    End Authority

    2. Section 485.610 is amended by revising paragraph (b) and adding a new paragraph (c) to read as follows:

    Condition of participation: Status and location.
    * * * * *

    (b) Standard: Location in a rural area or treatment as rural. The CAH meets the requirements of either paragraph (b)(1) or (b)(2) of this section.

    (1) The CAH meets the following requirements:

    (i) The CAH is located outside any area that is a Metropolitan Statistical Area, as defined by the Office of Management and Budget, or that has been recognized as urban under § 412.62(f) of this chapter;

    (ii) The CAH is not deemed to be located in an urban area under § 412.63(b) of this chapter; and

    (iii) The CAH has not been classified as an urban hospital for purposes of the standardized payment amount by HCFA or the Medicare Geographic Classification Review Board under § 412.230(e) of this chapter, and is not among a group of hospitals that have been redesignated to an adjacent urban area under § 412.232 of this chapter.

    (2) The CAH is located within a Metropolitan Statistical Area, as defined by the Office of Management and Budget, but is being treated as being located in a rural area in accordance with § 412.103 of this chapter.

    (c) Standard: Location relative to other facilities or necessary provider certification. The CAH is located more than a 35-mile drive (or, in the case of mountainous terrain or in areas with only secondary roads available, a 15-mile drive) from a hospital or another CAH, or the CAH is certified by the State as being a necessary provider of health care services to residents in the area.

    3. Section 485.639 is amended by revising paragraph (b) to read as follows:

    Condition of participation: Surgical services.
    * * * * *

    (b) Anesthetic risk and evaluation. (1) A qualified practitioner, as specified in paragraph (a) of this section, must examine the patient immediately before surgery to evaluate the risk of the procedure to be performed.

    (2) A qualified practitioner, as specified in paragraph (c) of this section, must examine each patient before surgery to evaluate the risk of anesthesia.

    (3) Before discharge from the CAH, each patient must be evaluated for proper anesthesia recovery by a qualified practitioner, as specified in paragraph (c) of this section.

    * * * * *

    4. Section 485.643 is amended by revising paragraph (f) to read as follows:

    Condition of participation: Organ, tissue, and eye procurement.
    * * * * *

    (f) For purposes of these standards, the term “organ” means a human kidney, liver, heart, lung, pancreas, or intestines (or multivisceral organs).

    End Part Start Part

    PART 486—CONDITIONS FOR COVERAGE OF SPECIALIZED SERVICES FURNISHED BY SUPPLIERS

    F. Part 486 is amended as follows:

    1. The authority citation for Part 486 continues to read as follows:

    Start Authority

    Authority: Sections 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).

    End Authority

    2. Section 486.302 is amended by revising the definition of “organ” to read as follows:

    Definitions.
    * * * * *

    “Organ” means a human kidney, liver, heart, lung, pancreas, or intestines (or multivisceral organs).

    * * * * *
    Start Signature

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

    Dated: March 15, 2001.

    Michael McMullan,

    Acting Deputy Administrator, Health Care Financing Administration.

    Dated: April 3, 2001.

    Tommy G. Thompson,

    Secretary.

    End Signature

    Editorial Note:

    The following Addendum and appendixes will not appear in the Code of Federal Regulations.

    Addendum—Proposed Schedule of Standardized Amounts Effective With Discharges Occurring On or After October 1, 2001 and Update Factors and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning On or After October 1, 2001

    I. Summary and Background

    In this Addendum, we are setting forth the proposed amounts and factors for determining prospective payment rates for Medicare inpatient operating costs and Medicare inpatient capital-related costs. We are also setting forth proposed rate-of-increase percentages for updating the target amounts for hospitals and hospital units excluded from the prospective payment system.

    For discharges occurring on or after October 1, 2001, except for SCHs, MDHs, and hospitals located in Puerto Rico, each hospital's payment per discharge under the prospective payment system will be based on 100 percent of the Federal national rate.

    SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal national rate, the updated hospital-specific rate based on FY 1982 cost per discharge, the updated hospital-specific rate based on FY 1987 cost per discharge, or, if qualified, 50 percent of the updated hospital-specific rate based on FY 1996 cost per discharge, plus the greater of 50 percent of the updated FY 1982 or FY 1987 hospital-specific rate or 50 percent of the Federal DRG payment rate. Section 213 of Public Law 106-554 amended section 1886(b)(3) of the Act to allow all SCHs to rebase their hospital-specific rate based on their FY 1996 cost per discharge.

    Under section 1886(d)(5)(G) of the Act, MDHs are paid based on the Federal national rate or, if higher, the Federal national rate plus 50 percent of the difference between the Federal national rate and the updated hospital-specific rate based on FY 1982 or FY 1987 cost per discharge, whichever is higher.

    For hospitals in Puerto Rico, the payment per discharge is based on the sum of 50 percent of a Puerto Rico rate and 50 percent of a Federal national rate. (See section II.D.3. of this Addendum for a complete description.)

    As discussed below in section II. of this Addendum, we are proposing to make changes in the determination of the prospective payment rates for Medicare inpatient operating costs for FY 2002. The changes, to be applied prospectively, would affect the calculation of the Federal rates. In section III. of this Addendum, we discuss our proposed changes for Start Printed Page 22725determining the prospective payment rates for Medicare inpatient capital-related costs for FY 2002. Section IV. of this Addendum sets forth our proposed changes for determining the rate-of-increase limits for hospitals excluded from the prospective payment system for FY 2002. The tables to which we refer in the preamble to this proposed rule are presented at the end of this Addendum in section V.

    II. Proposed Changes to Prospective Payment Rates for Inpatient Operating Costs for FY 2002

    The basic methodology for determining prospective payment rates for inpatient operating costs is set forth at § 412.63. The basic methodology for determining the prospective payment rates for inpatient operating costs for hospitals located in Puerto Rico is set forth at §§ 412.210 and 412.212. Below, we discuss the proposed factors used for determining the prospective payment rates. The Federal and Puerto Rico rate changes, once issued as final, will be effective with discharges occurring on or after October 1, 2001.

    In summary, the proposed standardized amounts set forth in Tables 1A and 1C of section V. of this Addendum reflect—

    • Updates of 2.55 percent for all areas (that is, the market basket percentage increase of 3.1 percent minus 0.55 percentage points);
    • An adjustment to ensure budget neutrality of hospital geographic reclassification, as provided for under sections 1886(d)(4)(C)(iii) and (d)(3)(E) of the Act, by applying new budget neutrality adjustment factors to the large urban and other standardized amounts;
    • An adjustment to ensure budget neutrality as provided for in section 1886(d)(8)(D) of the Act by removing the FY 2001 budget neutrality factor and applying a revised factor;
    • An adjustment to apply the revised outlier offset by removing the FY 2001 outlier offsets and applying a new offset; and
    • An adjustment in the Puerto Rico standardized amounts to reflect the application of a Puerto Rico-specific wage index.

    A. Calculation of Adjusted Standardized Amounts

    1. Standardization of Base-Year Costs or Target Amounts

    Section 1886(d)(2)(A) of the Act required the establishment of base-year cost data containing allowable operating costs per discharge of inpatient hospital services for each hospital. The preamble to the September 1, 1983 interim final rule (48 FR 39763) contains a detailed explanation of how base-year cost data were established in the initial development of standardized amounts for the prospective payment system and how they are used in computing the Federal rates.

    Section 1886(d)(9)(B)(i) of the Act required us to determine the Medicare target amounts for each hospital located in Puerto Rico for its cost reporting period beginning in FY 1987. The September 1, 1987 final rule (52 FR 33043, 33066) contains a detailed explanation of how the target amounts were determined and how they are used in computing the Puerto Rico rates.

    The standardized amounts are based on per discharge averages of adjusted hospital costs from a base period or, for Puerto Rico, adjusted target amounts from a base period, updated and otherwise adjusted in accordance with the provisions of section 1886(d) of the Act. Sections 1886(d)(2)(B) and (d)(2)(C) of the Act required us to update base-year per discharge costs for FY 1984 and then standardize the cost data in order to remove the effects of certain sources of cost variations among hospitals. These effects include case-mix, differences in area wage levels, cost-of-living adjustments for Alaska and Hawaii, indirect medical education costs, and payments to hospitals serving a disproportionate share of low-income patients.

    Under sections 1886(d)(2)(H) and (d)(3)(E) of the Act, in making payments under the prospective payment system, the Secretary estimates from time to time the proportion of costs that are wages and wage-related costs. Since October 1, 1997, when the market basket was last revised, we have considered 71.1 percent of costs to be labor-related for purposes of the prospective payment system. The average labor share in Puerto Rico is 71.3 percent. We are proposing to revise the discharge-weighted national standardized amount for Puerto Rico to reflect the proportion of discharges in large urban and other areas from the FY 2000 MedPAR file.

    2. Computing Large Urban and Other Area Averages

    Sections 1886(d)(2)(D) and (d)(3) of the Act require the Secretary to compute two average standardized amounts for discharges occurring in a fiscal year: one for hospitals located in large urban areas and one for hospitals located in other areas. In addition, under sections 1886(d)(9)(B)(iii) and (d)(9)(C)(i) of the Act, the average standardized amount per discharge must be determined for hospitals located in large urban and other areas in Puerto Rico. Hospitals in Puerto Rico are paid a blend of 50 percent of the applicable Puerto Rico standardized amount and 50 percent of a national standardized payment amount.

    Section 1886(d)(2)(D) of the Act defines “urban area” as those areas within a Metropolitan Statistical Area (MSA). A “large urban area” is defined as an urban area with a population of more than 1 million. In addition, section 4009(i) of Public Law 100-203 provides that a New England County Metropolitan Area (NECMA) with a population of more than 970,000 is classified as a large urban area. As required by section 1886(d)(2)(D) of the Act, population size is determined by the Secretary based on the latest population data published by the Bureau of the Census. Urban areas that do not meet the definition of a “large urban area” are referred to as “other urban areas.” Areas that are not included in MSAs are considered “rural areas” under section 1886(d)(2)(D) of the Act. Payment for discharges from hospitals located in large urban areas will be based on the large urban standardized amount. Payment for discharges from hospitals located in other urban and rural areas will be based on the other standardized amount.

    Based on 1999 population estimates published by the Bureau of the Census, 63 areas meet the criteria to be defined as large urban areas for FY 2002. These areas are identified in Table 4A.

    3. Updating the Average Standardized Amounts

    Under section 1886(d)(3)(A) of the Act, we update the average standardized amounts each year. In accordance with section 1886(d)(3)(A)(iv) of the Act, we are proposing to update the large urban areas' and the other areas' average standardized amounts for FY 2002 using the applicable percentage increases specified in section 1886(b)(3)(B)(i) of the Act. Section 1886(b)(3)(B)(i)(XVII) of the Act as amended by section 301 of Public Law 106-554 specifies that the update factor for the standardized amounts for FY 2002 is equal to the market basket percentage increase minus 0.55 percentage points for hospitals in all areas. Section 301 also established that the update factor for FY 2003 is equal to the market basket percentage increase minus 0.55 percentage points. We are proposing to revise § 412.63 to reflect these changes.

    The percentage change in the market basket reflects the average change in the price of goods and services purchased by hospitals to furnish inpatient care. The most recent forecast of the hospital Start Printed Page 22726market basket increase for FY 2002 is 3.1 percent. Thus, for FY 2002, the proposed update to the average standardized amounts equals 2.55 percent for hospitals in all areas.

    As in the past, we are adjusting the FY 2001 standardized amounts to remove the effects of the FY 2001 geographic reclassifications and outlier payments before applying the FY 2002 updates. That is, we are increasing the standardized amounts to restore the reductions that were made for the effects of geographic reclassification and outliers. We then apply the new offsets to the standardized amounts for outliers and geographic reclassifications for FY 2002.

    Although the update factors for FY 2002 are set by law, we are required by section 1886(e)(3) of the Act to report to the Congress our initial recommendation of update factors for FY 2002 for both prospective payment hospitals and hospitals excluded from the prospective payment system. For general information purposes, we have included the report to Congress as Appendix C to this proposed rule. Our proposed recommendation on the update factors (which is required by sections 1886(e)(4)(A) and (e)(5)(A) of the Act) is set forth as Appendix D to this proposed rule.

    4. Other Adjustments to the Average Standardized Amounts

    a. Recalibration of DRG Weights and Updated Wage Index—Budget Neutrality Adjustment. Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in FY 1991, the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. As discussed in section II. of the preamble, we normalized the recalibrated DRG weights by an adjustment factor, so that the average case weight after recalibration is equal to the average case weight prior to recalibration.

    Section 1886(d)(3)(E) of the Act requires us to update the hospital wage index on an annual basis beginning October 1, 1993. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index.

    To comply with the requirement of section 1886(d)(4)(C)(iii) of the Act that DRG reclassification and recalibration of the relative weights be budget neutral, and the requirement in section 1886(d)(3)(E) of the Act that the updated wage index be budget neutral, we used FY 2000 discharge data to simulate payments and compared aggregate payments using the FY 2001 relative weights and wage index to aggregate payments using the proposed FY 2002 relative weights and wage index. The same methodology was used for the FY 2001 budget neutrality adjustment. (See the discussion in the September 1, 1992 final rule (57 FR 39832).) Based on this comparison, we computed a budget neutrality adjustment factor equal to 0.992493. We also adjust the Puerto Rico-specific standardized amounts for the effect of DRG reclassification and recalibration. We computed a budget neutrality adjustment factor for Puerto Rico-specific standardized amounts equal to 0.994677. These budget neutrality adjustment factors are applied to the standardized amounts without removing the effects of the FY 2001 budget neutrality adjustments. We do not remove the prior budget neutrality adjustment because estimated aggregate payments after the changes in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year adjustment, we would not satisfy this condition.

    In addition, we are proposing to apply these same adjustment factors to the hospital-specific rates that are effective for cost reporting periods beginning on or after October 1, 2001. (See the discussion in the September 4, 1990 final rule (55 FR 36073).)

    b. Reclassified Hospitals—Budget Neutrality Adjustment. Section 1886(d)(8)(B) of the Act provides that, effective with discharges occurring on or after October 1, 1988, certain rural hospitals are deemed urban. In addition, section 1886(d)(10) of the Act provides for the reclassification of hospitals based on determinations by the Medicare Geographic Classification Review Board (MGCRB). Under section 1886(d)(10) of the Act, a hospital may be reclassified for purposes of the standardized amount or the wage index, or both.

    Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the prospective payment system after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. To calculate this budget neutrality factor, we used FY 2000 discharge data to simulate payments, and compared total prospective payments (including indirect medical education and disproportionate share hospital payments) prior to any reclassifications to total prospective payments after reclassifications. Based on these simulations, we are applying an adjustment factor of 0.991054 to ensure that the effects of reclassification are budget neutral.

    The adjustment factor is applied to the standardized amounts after removing the effects of the FY 2001 budget neutrality adjustment factor. We note that the proposed FY 2002 adjustment reflects wage index and standardized amount reclassifications approved by the MGCRB or the Administrator as of February 28, 2001, and the effects of section 304 of Public Law 106-554 to extend wage index reclassifications for 3 years. The effects of any additional reclassification changes resulting from appeals and reviews of the MGCRB decisions for FY 2002 or from a hospital's request for the withdrawal of a reclassification request will be reflected in the final budget neutrality adjustment published in the final rule for FY 2002.

    c. Outliers. Section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for “outlier” cases, cases involving extraordinarily high costs (cost outliers). Section 1886(d)(3)(B) of the Act requires the Secretary to adjust both the large urban and other area national standardized amounts by the same factor to account for the estimated proportion of total DRG payments made to outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act requires the Secretary to adjust the large urban and other standardized amounts applicable to hospitals in Puerto Rico to account for the estimated proportion of total DRG payments made to outlier cases. Furthermore, under section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year must be projected to be not less than 5 percent nor more than 6 percent of total payments based on DRG prospective payment rates.

    i. FY 2002 outlier thresholds. For FY 2001, the fixed loss cost outlier threshold was equal to the prospective payment rate for the DRG plus the IME and DSH payments plus $17,550 (16,036 for hospitals that have not yet entered the prospective payment system for capital-related costs). The marginal cost factor for cost outliers (the percent of costs paid after costs for the case exceed the threshold) was 80 percent. We applied an outlier adjustment to the FY 2001 standardized amounts of 0.948908 for the large urban and other areas rates and 0.9409 for the capital Federal rate.

    For FY 2002, we propose to establish a fixed loss cost outlier threshold equal to the prospective payment rate for the Start Printed Page 22727DRG plus the IME and DSH payments plus $21,000. The capital prospective payment system is fully phased in, effective FY 2002. Therefore, we no longer are establishing a separate threshold for hospitals that have not yet entered the prospective payment system for capital-related costs. We propose to maintain the marginal cost factor for cost outliers at 80 percent.

    To calculate FY 2002 outlier thresholds, we simulated payments by applying FY 2002 rates and policies to the December 2000 update of the FY 2000 MedPAR file and the December 2000 update of the provider-specific file. As we have explained in the past, to calculate outlier thresholds, we apply a cost inflation factor to update costs for the cases used to simulate payments. For FY 2000, we used a cost inflation factor of zero percent. For FY 2001, we used a cost inflation factor (or cost adjustment factor) of 1.8 percent. To set the proposed FY 2002 outlier thresholds, we are using a 2-year cost inflation factor of 5.5 percent (to inflate FY 2000 charges to FY 2002). This factor reflects our analysis of the best available cost report data as well as calculations (using the best available data) indicating that the percentage of actual outlier payments for FY 2000 is higher than we projected before the beginning of FY 2000, and that the percentage of actual outlier payments for FY 2001 will likely be higher than we projected before the beginning of FY 2001. The calculations of “actual” outlier payments are discussed further below.

    ii. Other changes concerning outliers. In accordance with section 1886(d)(5)(A)(iv) of the Act, we calculated proposed outlier thresholds so that outlier payments are projected to equal 5.1 percent of total payments based on DRG prospective payment rates. In accordance with section 1886(d)(3)(E), we reduced the proposed FY 2002 standardized amounts by the same percentage to account for the projected proportion of payments paid to outliers.

    As stated in the September 1, 1993 final rule (58 FR 46348), we establish outlier thresholds that are applicable to both inpatient operating costs and inpatient capital-related costs. When we modeled the combined operating and capital outlier payments, we found that using a common set of thresholds resulted in a higher percentage of outlier payments for capital-related costs than for operating costs. We project that the proposed thresholds for FY 2002 will result in outlier payments equal to 5.1 percent of operating DRG payments and 5.7 percent of capital payments based on the Federal rate.

    The proposed outlier adjustment factors to be applied to the standardized amounts for FY 2002 are as follows:

    Operating standardized amountsCapital federal rate
    National0.9489100.974711
    Puerto Rico0.9425930.970336

    We apply the proposed outlier adjustment factors after removing the effects of the FY 2001 outlier adjustment factors on the standardized amounts.

    Table 8A in section V. of this Addendum contains the updated Statewide average operating cost-to-charge ratios for urban hospitals and for rural hospitals to be used in calculating cost outlier payments for those hospitals for which the fiscal intermediary is unable to compute a reasonable hospital-specific cost-to-charge ratio. These Statewide average ratios would replace the ratios published in the August 1, 2000 final rule (65 FR 47054). Table 8B contains comparable statewide average capital cost-to-charge ratios. These average ratios would be used to calculate cost outlier payments for those hospitals for which the fiscal intermediary computes operating cost-to-charge ratios lower than 0.1908357 or greater than 1.3133937 and capital cost-to-charge ratios lower than 0.0120498 or greater than 0.1668928. This range represents 3.0 standard deviations (plus or minus) from the mean of the log distribution of cost-to-charge ratios for all hospitals. We note that the cost-to-charge ratios in Tables 8A and 8B would be used during FY 2002 when hospital-specific cost-to-charge ratios based on the latest settled cost report are either not available or outside the three standard deviations range.

    iii. FY 2000 and FY 2001 outlier payments. In the August 1, 2000 final rule (65 FR 47054), we stated that, based on available data, we estimated that actual FY 2000 outlier payments would be approximately 6.2 percent of actual total DRG payments. This was computed by simulating payments using the March 2000 update of the FY 1999 bill data available at the time. That is, the estimate of actual outlier payments did not reflect actual FY 2000 bills but instead reflected the application of FY 2000 rates and policies to available FY 1999 bills. Our current estimate, using available FY 2000 bills, is that actual outlier payments for FY 2000 were approximately 7.4 percent of actual total DRG payments. We note that the MedPAR file for FY 2000 discharges continues to be updated. Thus, the data indicate that, for FY 2000, the percentage of actual outlier payments relative to actual total payments is higher than we projected before FY 2000 (and thus exceeds the percentage by which we reduced the standardized amounts for FY 2000). In fact, the data indicate that the proportion of actual outlier payments for FY 2000 exceeds 6.0 percent. Nevertheless, consistent with the policy and statutory interpretation we have maintained since the inception of the prospective payment system, we do not plan to recoup money and make retroactive adjustments to outlier payments for FY 2000.

    We currently estimate that actual outlier payments for FY 2001 will be approximately 5.9 percent of actual total DRG payments, 0.8 percent higher than the 5.1 percent we projected in setting outlier policies for FY 2001. This estimate is based on simulations using the December 2000 update of the provider-specific file and the December 2000 update of the FY 2000 MedPAR file (discharge data for FY 2000 bills). We used these data to calculate an estimate of the actual outlier percentage for FY 2001 by applying FY 2001 rates and policies to available FY 2000 bills.

    5. FY 2002 Standardized Amounts

    The adjusted standardized amounts are divided into labor and nonlabor portions. Table 1A contains the two national standardized amounts that we are proposing to be applicable to all hospitals, except hospitals in Puerto Rico. Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto Rico payment rate is based on the discharge-weighted average of the national large urban standardized amount and the national other standardized amount (as set forth in Table 1A). The labor and nonlabor portions of the national average standardized amounts for Puerto Rico hospitals are set forth in Table 1C. This table also includes the Puerto Rico standardized amounts.

    B. Adjustments for Area Wage Levels and Cost of Living

    Tables 1A and 1C, as set forth in this Addendum, contain the proposed labor-related and nonlabor-related shares that would be used to calculate the prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico. This section addresses two types of adjustments to the standardized amounts that are made in determining the prospective payment rates as described in this Addendum. Start Printed Page 22728

    1. Adjustment for Area Wage Levels

    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that we make an adjustment to the labor-related portion of the prospective payment rates to account for area differences in hospital wage levels. This adjustment is made by multiplying the labor-related portion of the adjusted standardized amounts by the appropriate wage index for the area in which the hospital is located. In section III. of this preamble, we discuss the data and methodology for the proposed FY 2002 wage index. The proposed wage index is set forth in Tables 4A, 4B, 4C, and 4F of this Addendum.

    2. Adjustment for Cost-of-Living in Alaska and Hawaii

    Section 1886(d)(5)(H) of the Act authorizes an adjustment to take into account the unique circumstances of hospitals in Alaska and Hawaii. Higher labor-related costs for these two States are taken into account in the adjustment for area wages described above. For FY 2002, we propose to adjust the payments for hospitals in Alaska and Hawaii by multiplying the nonlabor portion of the standardized amounts by the appropriate adjustment factor contained in the table below. If the Office of Personnel Management releases revised cost-of-living adjustment factors before July 1, 2001, we will publish them in the final rule and use them in determining FY 2002 payments.

    Table of Cost-of-Living Adjustment Factors, Alaska and Hawaii Hospitals

    Alaska—All areas1.25
    Hawaii:
    County of Honolulu1.1650
    County of Hawaii1.2325
    County of Kauai1.2325
    County of Maui1.2375
    County of Kalawao1.2375
    (The above factors are based on data obtained from the U.S. Office of Personnel Management.)

    C. DRG Relative Weights

    As discussed in section II. of the preamble, we have developed a classification system for all hospital discharges, assigning them into DRGs, and have developed relative weights for each DRG that reflect the resource utilization of cases in each DRG relative to Medicare cases in other DRGs. Table 5 of section V. of this Addendum contains the relative weights that we are proposing to use for discharges occurring in FY 2002. These factors have been recalibrated as explained in section II. of the preamble.

    D. Calculation of Prospective Payment Rates for FY 2002

    General Formula for Calculation of Prospective Payment Rates for FY 2002

    The prospective payment rate for all hospitals located outside of Puerto Rico, except SCHs and MDHs, equals the Federal rate.

    The prospective payment rate for SCHs equals whichever of the following rates yields the greatest aggregate payment: the Federal national rate, the updated hospital-specific rate based on FY 1982 cost per discharge, the updated hospital-specific rate based on FY 1987 cost per discharge, or, if qualified, 50 percent of the updated hospital-specific rate based on FY 1996 cost per discharge, plus the greater of 50 percent of the updated FY 1982 or FY 1987 hospital-specific rate or 50 percent of the Federal DRG payment rate. Section 213 of Public Law 106-554 amended section 1886(b)(3) of the Act to allow all SCHs to rebase their hospital-specific rate based on their FY 1996 cost per discharge.

    The prospective payment rate for MDHs equals 100 percent of the Federal rate, or, if the greater of the updated FY 1982 hospital-specific rate or the updated FY 1987 hospital-specific rate is higher than the Federal rate, 100 percent of the Federal rate plus 50 percent of the difference between the applicable hospital-specific rate and the Federal rate.

    The prospective payment rate for Puerto Rico equals 50 percent of the Puerto Rico rate plus 50 percent of a discharge-weighted average of the national large urban standardized amount and the Federal national other standardized amount.

    1. Federal Rate

    For discharges occurring on or after October 1, 2001 and before October 1, 2002, except for SCHs, MDHs, and hospitals in Puerto Rico, the hospital's payment is based exclusively on the Federal national rate.

    The payment amount is determined as follows:

    Step 1—Select the appropriate national standardized amount considering the type of hospital and designation of the hospital as large urban or other (see Table 1A in section V. of this Addendum).

    Step 2—Multiply the labor-related portion of the standardized amount by the applicable wage index for the geographic area in which the hospital is located (see Tables 4A, 4B, and 4C of section V. of this Addendum).

    Step 3—For hospitals in Alaska and Hawaii, multiply the nonlabor-related portion of the standardized amount by the appropriate cost-of-living adjustment factor.

    Step 4—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount (adjusted, if appropriate, under Step 3).

    Step 5—Multiply the final amount from Step 4 by the relative weight corresponding to the appropriate DRG (see Table 5 of section V. of this Addendum).

    2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)

    Section 1886(b)(3)(C) of the Act provides that SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal national rate, the updated hospital-specific rate based on FY 1982 cost per discharge, the updated hospital-specific rate based on FY 1987 cost per discharge, or, if qualified, 50 percent of the updated hospital-specific rate based on FY 1996 cost per discharge, plus the greater of 50 percent of the updated FY 1982 or FY 1987 hospital-specific rate or 50 percent of the Federal DRG payment rate.

    Section 1886(d)(5)(G) of the Act provides that MDHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal rate or the Federal rate plus 50 percent of the difference between the Federal rate and the greater of the updated hospital-specific rate based on FY 1982 and FY 1987 cost per discharge.

    Hospital-specific rates have been determined for each of these hospitals based on either the FY 1982 cost per discharge, the FY 1987 cost per discharge or, for qualifying SCHs, the FY 1996 cost per discharge. For a more detailed discussion of the calculation of the hospital-specific rates, we refer the reader to the September 1, 1983 interim final rule (48 FR 39772); the April 20, 1990 final rule with comment (55 FR 15150); the September 4, 1990 final rule (55 FR 35994); and the August 1, 2000 final rule (65 FR 47082).

    a. Updating the FY 1982, FY 1987, and FY 1996 Hospital-Specific Rates for FY 2002. We are proposing to increase the hospital-specific rates by 2.55 percent (the hospital market basket percentage increase minus 0.55 percentage points) for SCHs and MDHs for FY 2002. Section 1886(b)(3)(C)(iv) of the Act provides that the update factor applicable to the hospital-specific rates for SCHs equal the update factor provided under section 1886(b)(3)(B)(iv) of the Act, which, for SCHs in FY 2002, Start Printed Page 22729is the market basket rate of increase minus 0.55 percentage points. Section 1886(b)(3)(D) of the Act provides that the update factor applicable to the hospital-specific rates for MDHs equals the update factor provided under section 1886(b)(3)(B)(iv) of the Act, which, for FY 2002, is the market basket rate of increase minus 0.55 percentage points.

    b. Calculation of Hospital-Specific Rate. For SCHs, the applicable FY 2002 hospital-specific rate would be based on the following: the hospital-specific rate calculated using the greater of the FY 1982 or FY 1987 costs, increased by the applicable update factor of 2.55 percent; or, if the hospital-specific rate based on cost per case in FY 1996 is greater than the hospital-specific rate using either the FY 1982 or the FY 1987 costs, the greater of 50 percent of the hospital-specific rate based on the FY 1982 or FY 1987 costs, increased by the applicable update factor, or 50 percent of the Federal rate plus 50 percent of its rebased FY 1996 hospital-specific rate updated through FY 2002. For MDHs, the applicable FY 2002 hospital-specific rate would be calculated by increasing the hospital's hospital-specific rate for the preceding fiscal year by the applicable update factor of 2.55 percent, which is the same as the update for all prospective payment hospitals. In addition, for both SCHs and MDHs, the hospital-specific rate would be adjusted by the budget neutrality adjustment factor (that is, by 0.992493) as discussed in section II.A.4.a. of this Addendum. The resulting rate is used in determining the payment under which rate an SCH or a MDH is paid for its discharges beginning on or after October 1, 2001.

    3. General Formula for Calculation of Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning On or After October 1, 2001 and Before October 1, 2002

    a. Puerto Rico Rate. The Puerto Rico prospective payment rate is determined as follows:

    Step 1—Select the appropriate adjusted average standardized amount considering the large urban or other designation of the hospital (see Table 1C of section V. of the Addendum).

    Step 2—Multiply the labor-related portion of the standardized amount by the appropriate Puerto Rico-specific wage index (see Table 4F of section V. of the Addendum).

    Step 3—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount.

    Step 4—Multiply the result in Step 3 by 50 percent.

    Step 5—Multiply the amount from Step 4 by the appropriate DRG relative weight (see Table 5 of section V. of the Addendum).

    b. National Rate. The national prospective payment rate is determined as follows:

    Step 1—Multiply the labor-related portion of the national average standardized amount (see Table 1C of section V. of the Addendum) by the appropriate national wage index (see Tables 4A and 4B of section V. of the Addendum).

    Step 2—Add the amount from Step 1 and the nonlabor-related portion of the national average standardized amount.

    Step 3—Multiply the result in Step 2 by 50 percent.

    Step 4—Multiply the amount from Step 3 by the appropriate DRG relative weight (see Table 5 of section V. of the Addendum).

    The sum of the Puerto Rico rate and the national rate computed above equals the prospective payment for a given discharge for a hospital located in Puerto Rico.

    III. Proposed Changes to Payment Rates for Inpatient Capital-Related Costs for FY 2002

    The prospective payment system for hospital inpatient capital-related costs was implemented for cost reporting periods beginning on or after October 1, 1991. Effective with that cost reporting period and during a 10-year transition period extending through FY 2001, hospital inpatient capital-related costs are paid on the basis of an increasing proportion of the capital prospective payment system Federal rate and a decreasing proportion of a hospital's historical costs for capital.

    The basic methodology for determining Federal capital prospective rates is set forth at §§ 412.308 through 412.352. Below we discuss the factors that we used to determine the proposed Federal for FY 2002. The rates, which will be effective for discharges occurring on or after October 1, 2001. As we stated in section V of the preamble of this proposed rule, we are no longer determining an update to the capital hospital-specific rate, since FY 2001 is the last year of the 10-year transition period, and beginning in FY 2002 all hospitals (except those defined as “new” under § 412.300) will be paid based on 100 percent of the capital Federal rate.

    For FY 1992, we computed the standard Federal payment rate for capital-related costs under the prospective payment system by updating the FY 1989 Medicare inpatient capital cost per case by an actuarial estimate of the increase in Medicare inpatient capital costs per case. Each year after FY 1992, we update the standard Federal rate, as provided in § 412.308(c)(1), to account for capital input price increases and other factors. Also, § 412.308(c)(2) provides that the Federal rate is adjusted annually by a factor equal to the estimated proportion of outlier payments under the Federal rate to total capital payments under the Federal rate. In addition, § 412.308(c)(3) requires that the Federal rate be reduced by an adjustment factor equal to the estimated proportion of payments for (regular and special) exceptions under § 412.348. Furthermore, § 412.308(c)(4)(ii) requires that the Federal rate be adjusted so that the annual DRG reclassification and the recalibration of DRG weights and changes in the geographic adjustment factor are budget neutral. For FYs 1992 through 1995, § 412.352 required that the Federal rate also be adjusted by a budget neutrality factor so that aggregate payments for inpatient hospital capital costs were projected to equal 90 percent of the payments that would have been made for capital-related costs on a reasonable cost basis during the fiscal year. That provision expired in FY 1996. Section 412.308(b)(2) describes the 7.4 percent reduction to the rate that was made in FY 1994, and § 412.308(b)(3) describes the 0.28 percent reduction to the rate made in FY 1996 as a result of the revised policy of paying for transfers. In the FY 1998 final rule with comment period (62 FR 45966), we implemented section 4402 of Public Law 105-33, which requires that for discharges occurring on or after October 1, 1997, and before October 1, 2002, the unadjusted standard Federal rate is reduced by 17.78 percent. A small part of that reduction will be restored effective October 1, 2002.

    To determine the appropriate budget neutrality adjustment factor and the regular exceptions payment adjustment, we developed a dynamic model of Medicare inpatient capital-related costs, that is, a model that projects changes in Medicare inpatient capital-related costs over time. With the expiration of the budget neutrality provision, the model is still used to estimate the regular exceptions payment adjustment and other factors. The model and its application are described in greater detail in Appendix B of this proposed rule.

    In accordance with section 1886(d)(9)(A) of the Act, under the prospective payment system for inpatient operating costs, hospitals located in Puerto Rico are paid for operating costs under a special payment Start Printed Page 22730formula. Prior to FY 1998, hospitals in Puerto Rico were paid a blended rate that consisted of 75 percent of the applicable standardized amount specific to Puerto Rico hospitals and 25 percent of the applicable national average standardized amount. However, effective October 1, 1997, as a result of section 4406 of Public Law 105-33, operating payments to hospitals in Puerto Rico are based on a blend of 50 percent of the applicable standardized amount specific to Puerto Rico hospitals and 50 percent of the applicable national average standardized amount. In conjunction with this change to the operating blend percentage, effective with discharges on or after October 1, 1997, we compute capital payments to hospitals in Puerto Rico based on a blend of 50 percent of the Puerto Rico rate and 50 percent of the Federal rate.

    Section 412.374 provides for the use of this blended payment system for payments to Puerto Rico hospitals under the prospective payment system for inpatient capital-related costs. Accordingly, for capital-related costs, we compute a separate payment rate specific to Puerto Rico hospitals using the same methodology used to compute the national Federal rate for capital.

    A. Determination of Federal Inpatient Capital-Related Prospective Payment Rate Update

    In the August 1, 2000 final rule (65 FR 47122), we established a Federal rate of $382.03 for FY 2001. In a separate interim final rule with comment, as a result of implementing section 301(a) of Public Law 106-554 we are establishing a Federal rate of $380.85 for discharges occurring on or after April 1, 2001 and before October 1, 2001. In accordance with section 547 of Public Law 106-554, the special increases and adjustments provided by Public Law 106-554 effective between April and October 2001 do not apply for discharges occurring after FY 2001 and should not be included in determining the payment rates in subsequent years. Thus, the adjustments and rates published in the August 1, 2000 final rule were used in determining the proposed FY 2002 rates. As a result of the changes we are proposing to the factors used to establish the Federal rate in this addendum, the proposed FY 20021 Federal rate is $389.09.

    In the discussion that follows, we explain the factors that were used to determine the proposed FY 2002 Federal rate. In particular, we explain why the proposed FY 2002 Federal rate has increased 1.85 percent compared to the FY 2001 Federal rate (published in the August 1, 2000 final rule (65 FR 47122)). We also estimate aggregate capital payments will increase by 3.80 percent during this same period. This increase is primarily due to the increase in the number of hospital admissions and the increase in case-mix. This increase in capital payments is less than last year (5.48 percent) because with the end of the transition period the remaining hold harmless hospitals receiving “cost-based” payments will begin being paid based on 100 percent of the Federal rate.

    Total payments to hospitals under the prospective payment system are relatively unaffected by changes in the capital prospective payments. Since capital payments constitute about 10 percent of hospital payments, a 1 percent change in the capital Federal rate yields only about 0.1 percent change in actual payments to hospitals. Aggregate payments under the capital prospective payment transition system are estimated to increase in FY 2002 compared to FY 2001.

    1. Standard Federal Rate Update

    a. Description of the Update Framework. Under § 412.308(c)(1), the standard Federal rate is updated on the basis of an analytical framework that takes into account changes in a capital input price index and other factors. The update framework consists of a capital input price index (CIPI) and several policy adjustment factors. Specifically, we have adjusted the projected CIPI rate of increase as appropriate each year for case-mix index-related changes, for intensity, and for errors in previous CIPI forecasts. The proposed update factor for FY 2002 under that framework is 1.1 percent. This proposal is based on a projected 0.5 percent increase in the CIPI, a 0.3 percent adjustment for intensity, a 0.0 percent adjustment for case-mix, a 0.0 percent adjustment for the FY 2000 DRG reclassification and recalibration, and a forecast error correction of 0.3 percent. We explain the basis for the FY 2002 CIPI projection in section II.D. of this Addendum. Below we describe the policy adjustments that have been applied.

    The case-mix index is the measure of the average DRG weight for cases paid under the prospective payment system. Because the DRG weight determines the prospective payment for each case, any percentage increase in the case-mix index corresponds to an equal percentage increase in hospital payments.

    The case-mix index can change for any of several reasons:

    • The average resource use of Medicare patients changes (“real” case-mix change);
    • Changes in hospital coding of patient records result in higher weight DRG assignments (“coding effects”); and
    • The annual DRG reclassification and recalibration changes may not be budget neutral (“reclassification effect”).

    We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients as opposed to changes in coding behavior that result in assignment of cases to higher weighted DRGs but do not reflect higher resource requirements. In the update framework for the prospective payment system for operating costs, we adjust the update upwards to allow for real case-mix change, but remove the effects of coding changes on the case-mix index. We also remove the effect on total payments of prior changes to the DRG classifications and relative weights, in order to retain budget neutrality for all case-mix index-related changes other than patient severity. (For example, we are adjustinged for the effects of the FY 2000 DRG reclassification and recalibration as part of our FY 2002 update recommendation.) We have adopted this case-mix index adjustment in the capital update framework as well.

    For FY 2002, we are projecting a 1.0 percent increase in the case-mix index. We estimate that real case-mix increase will equal 1.0 percent in FY 2002. Therefore, the proposed net adjustment for case-mix change in FY 2002 is 0.0 percentage points.

    We estimate that FY 2000 DRG reclassification and recalibration will result in a 0.0 percent change in the case-mix when compared with the case-mix index that would have resulted if we had not made the reclassification and recalibration changes to the DRGs. Therefore, we are making a 0.0 percent adjustment for DRG reclassification and recalibration in the update recommendation for FY 2002.

    The capital update framework contains an adjustment for forecast error. The input price index forecast is based on historical trends and relationships ascertainable at the time the update factor is established for the upcoming year. In any given year there may be unanticipated price fluctuations that may result in differences between the actual increase in prices and the forecast used in calculating the update factors. In setting a prospective payment rate under the framework, we make an adjustment for forecast error only if our estimate of the change in the capital input price index for any year is off by 0.25 percentage points or more. There is a 2-year lag between the forecast and the measurement of the forecast error. A Start Printed Page 22731forecast error of 0.3 percentage points was calculated for the FY 2000 update. That is, current historical data indicate that the FY 2000 CIPI used in calculating the forecasted FY 2000 update factor (0.6 percent) understated the actual realized price increases (0.9 percent) by 0.3 percent. This under-prediction was due to prices from municipal bond yields declining slower than expected. Therefore, we are making a 0.3 percent adjustment for forecast error in the update for FY 2002.

    Under the capital prospective payment system framework, we also make an adjustment for changes in intensity. We calculate this adjustment using the same methodology and data as in the framework for the operating prospective payment system. The intensity factor for the operating update framework reflects how hospital services are utilized to produce the final product, that is, the discharge. This component accounts for changes in the use of quality-enhancing services, changes in within-DRG severity, and expected modification of practice patterns to remove cost-ineffective services.

    We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services), and changes in real case-mix. The use of total charges in the calculation of the proposed intensity factor makes it a total intensity factor, that is, charges for capital services are already built into the calculation of the factor. Therefore, we have incorporated the intensity adjustment from the operating update framework into the capital update framework. Without reliable estimates of the proportions of the overall annual intensity increases that are due, respectively, to ineffective practice patterns and to the combination of quality-enhancing new technologies and within-DRG complexity, we assume, as in the revised operating update framework, that one-half of the annual increase is due to each of these factors. The capital update framework thus provides an add-on to the input price index rate of increase of one-half of the estimated annual increase in intensity to allow for within-DRG severity increases and the adoption of quality-enhancing technology.

    For FY 2002, we have developed a Medicare-specific intensity measure based on a 5-year average using FY 1996 through 2000 data. In determining case-mix constant intensity, we found that observed case-mix increase was 1.6 percent in FY 1996, 0.3 percent in FY 1997, −0.4 percent in FY 1998, and −0.3 in FY 1999, and −0.7 percent in FY 2000. Since we found an increase in case-mix of 1.6 for FY 1996, which was outside of the range of 1.0 to 1.4 percent, we estimate that real case-mix increase was 1.0 to 1.4 percent for that year. The estimate of 1.0 to 1.4 percent is supported by past studies of case-mix change by the RAND Corporation. The most recent study was “Has DRG Creep Crept Up? Decomposing the Case Mix Index Change Between 1987 and 1988” by G. M. Carter, J. P. Newhouse, and D. A. Relles, R-4098-HCFA/ProPAC (1991). The study suggested that real case-mix change was not dependent on total change, but was usually a fairly steady 1.0 to 1.4 percent per year. We use 1.4 percent as the upper bound because the RAND study did not take into account that hospitals may have induced doctors to document medical records more completely in order to improve payment. Following that study, we consider up to 1.4 percent of observed case-mix change as real for FY 1996 through FY 2000. Based on this analysis, we believe that all of the observed case-mix increase for FY 1997, FY 1998, and FY 1999, and FY 2000 is real. The increases for FY 1996 was in excess of our estimate of real case-mix increase.

    We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services), and changes in real case-mix. Based upon an upper limit of 1.0 percent real case-mix increase, we estimate that case-mix constant intensity increased by an average 0.3 percent during FYs 1996 through 2000, for a cumulative increase of 1.4 percent given estimates of real case-mix of 1.0 percent for FY 1996, 0.3 percent for FY 1997, −0.4 for FY 1998, and −0.3 for FY 1999, and −0.7 percent for FY 2000. Based upon an upper limit of 1.4 percent real case-mix increase, we estimate that case-mix constant intensity increase by an average 0.2 percent during FYs 1996 through 2000, for a cumulative increase of 1.2 percent, given that real case-mix increase was 1.4 percent for FY 1996, 0.3 percent for FY 1997, −0.4 for FY 1998, −0.3 for FY 1999, and −0.7 percent for FY 2000. Since we estimate that intensity has increased during that period, we are recommending a 0.3 percent intensity adjustment for FY 2002.

    b. Comparison of HCFA and MedPAC Update Recommendations. In its March 2001 Report to Congress, MedPAC presented a combined operating and capital update for hospital inpatient prospective payment system payments for FY 2002. Currently, section 1886(b)(3)(B)(i)(XVII) of the Act sets forth the FY 2002 percentage increase in the prospective payment system operating cost standardized amounts. The prospective payment system capital update is set at the discretion of the Secretary under the framework outlined in § 412.308(c)(1).

    For FY 2002, MedPAC's update framework supports a combined operating and capital update for hospital inpatient prospective payment system payments of 1.5 percent to 3.0 percent (or between the increase in the combined operating and capital market basket minus 1.3 percentage points and the increase in the combined operating and capital market basket plus 0.2 percentage points). MedPAC also notes that while the number of hospitals with negative inpatient hospital margins have increased in FY 1999 (from 33.7 percent in FY 1998 to 36.7 percent in FY 1999 (page 71)), overall high inpatient Medicare margins generally offset hospital losses on other lines of Medicare services. MedPAC continues to project substantially improved hospital total margins for FY 2000 based on performance in the first half of the fiscal year (page 72).

    MedPAC's FY 2002 combined operating and capital update framework uses a weighted average of HCFA's forecasts of the operating (PPS Input Price Index) and capital (CIPI) market baskets. This combined market basket is used to develop an estimate of the change in overall operating and capital prices. MedPAC calculated a combined market basket forecast by weighting the operating market basket forecast by 0.92 and the capital market basket forecast by 0.08, since operating costs are estimated to represent 92 percent of total hospital costs (capital costs are estimated to represent the remaining 8 percent of total hospital costs). MedPAC's combined market basket for FY 2002 is estimated to increase by 2.8 percent, based on HCFA's December 2000 forecasted operating market basket increase of 3.0 percent and HCFA's December 2000 forecasted capital market basket increase of 0.8 percent.

    Response: As we stated in the August 1, 2000 final rule (65 FR 47119), our long-term goal is to develop a single update framework for operating and capital prospective payments and that we would begin development of a unified framework. However, we have not yet developed such a single framework as the actual operating system update has been determined by Congress through FY 2003 (as amended by Public Law 106-554). In the meantime, we intend to maintain as much consistency as possible with the current operating framework in order to Start Printed Page 22732facilitate the eventual development of a unified framework.

    Our recommendation for updating the prospective payment system capital Federal rate is supported by the following analyses that measure changes in scientific and technological advances, practice pattern changes, changes in case-mix, the effect of reclassification and recalibration, and forecast error correction. MedPAC recommends a 1.5 to 3.0 percent combined operating and capital update for hospital inpatient prospective payments. Under our existing capital update framework, we are recommending a 1.1 percent update to the capital Federal rate. For purposes of comparing HCFA's capital update recommendation and MedPAC's update recommendation for FY 2002, we have isolated the capital component of MedPAC's combined market basket forecast, which was based on HCFA's December 2000 CIPI forecast of 0.8 percent. As a result, MedPAC's update recommendation for FY 2002 for capital payments is between −0.9 percent and 0.6 percent (see Table 1).

    There are some differences between HCFA's and MedPAC's update frameworks, which account for the difference in the respective update recommendations. In its combined FY 2002 update recommendation, MedPAC uses HCFA's capital input price index (the CIPI) as the starting point for estimating the change in prices since the previous year. HCFA's CIPI includes price measures for interest expense, which are an indicator of the interest rates facing hospitals during their capital purchasing decisions. Previously, MedPAC's capital market basket did not include interest expense; instead it included a financing policy adjustment when necessary to account for the prolonged changes in interest rates. HCFA's CIPI is vintage-weighted, meaning that it takes into account price changes from past purchases of capital when determining the current period update. In the past, MedPAC's capital market basket was not vintage-weighted, and only accounted for the current year price changes. Beginning last year, both HCFA's and MedPAC's FY 2002 update frameworks use HCFA's CIPI. MedPAC used HCFA's December 2000 CIPI in preparing its FY 2002 recommendation, which was forecast at 0.8 percent. Currently, the CIPI is forecast at 0.5 percent (March 2001).

    MedPAC and HCFA also differ in the adjustments they make to their price indices. (See Table 1 for a comparison of HCFA and MedPAC's update recommendations.) MedPAC makes an adjustment for scientific and technological advances, which is offset by a fixed standard for productivity growth and one-time factors. HCFA has not adopted a separate adjustment for capital science and technology or productivity and efficiency.

    In addition, MedPAC includes, when appropriate, an adjustment for one-time factors expected to affect costs in FY 2002 and the removal of the adjustment for FY 2002 one-time factors in its science and technology adjustment. MedPAC concluded that a one-time adjustment of 0.5 percent for the Health Insurance Portability and Accountability Act of 1996 (HIPAA) regulatory requirements be reflected in its FY 2002 payment update. Additionally, since MedPAC believes that the costs associated with one-time factors should not be built permanently into the rates, it recommended that the FY 2002 payment rates be reduced by 0.5 percent to offset the increase it recommended in the FY 2000 update for the costs associated with year 2000 (Y2K) computer improvements. Thus, MedPAC's combined FY 2002 adjustment for science and technological advances is 0.0 percent to 0.5 percent.

    Instead, we have identified a total intensity factor, which reflects scientific and technological advances, but we have not identified an adequate total productivity measure. MedPAC also includes a site-of-care substitution adjustment (unbundling of the payment unit) to account for the decline in the average length of Medicare acute inpatient stays. This adjustment is designed to shift funding along with associated costs when Medicare patients are discharged to postacute settings that replace acute impatient days. Other factors, such as technological advances that allow for a decreased need in follow-up care and BBA mandated policy on payment for transfer cases that limits payments within certain DRGs, are reflected in the site-of-care substitution adjustment as well. We agree with MedPAC that the site-of-care substitution effect is real and believe that it is factored into our intensity recommendation.

    For FY 2002, MedPAC recommends a −2.0 to −1.0 percent combined adjustment for site-of-care substitutions. MedPAC recommends a 0.0 to a 0.5 percent combined adjustment for scientific and technological advances, which was offset by a fixed productivity standard of 0.5 percent and a 0.0 percent adjustment for one-time factors for FY 2002. We recommend a 0.3 intensity adjustment.

    Additionally, MedPAC includes an adjustment for Medicare policy changes affecting financial status in its section of factors affecting current level of payments in its FY 2002 update recommendation. While MedPAC's update framework has not considered such costs in the past, MedPAC believes that it is appropriate to account for significant costs incurred as a result of new Medicare policy. For FY 2002, MedPAC believes that legislated updates will match cost growth and that the overall net affects of legislative changes (from Public Law 105-33, Public Law 106-113, and Public Law 106-554) will be small. Thus, it did not recommend any additional allowance for these costs for FY 2002. Accordingly, MedPAC recommended a 0.0 percent adjustment for Medicare policy changes.

    MedPAC makes a two-part adjustment for case-mix changes, which takes into account changes in case-mix in the past year. It recommends a 0.0 percent combined adjustment for DRG coding change and a 0.0 percent combined adjustment for within-DRG complexity change. This results in a combined total case-mix adjustment of 0.0 percent. We recommend a 0.0 adjustment for case-mix, since we are projecting a 1.0 percent increase in case-mix index and we estimate that real case-mix increase will equal 1.0 percent in FY 2002.

    We recommend a 0.3 percent adjustment for forecast error correction. MedPAC's combined FY 2002 update recommendation includes a 0.7 percent adjustment for forecast error correction. However, it noted that this forecast error adjustment is a result of the difference between the forecasted FY 2000 operating market basket of 2.9 percent and the actual FY 2000 operating market basket increase of 3.6 percent. The FY 2000 capital market basket was forecast at 0.6 percent, while the actual observed increase equaled 0.9 percent for capital costs. Therefore, we have included 0.3 percent adjustment for FY 2000 forecast error correction in the comparison of MedPAC's and HCFA's update recommendations for FY 2002 shown below in Table 1.

    We applied MedPAC's ratio of hospital capital costs to total hospital costs (8 percent) to the adjustment factors in its update framework for comparison with HCFA's capital update framework. The net result of these adjustments is that MedPAC has recommended a −0.9 to 0.6 percent update to the capital Federal rate for FY 2002. MedPAC believes that the annual updates to the capital and operating payments under the prospective payment system should not differ substantially, even though they are determined separately, since they correspond to costs generated by providing the same inpatient hospital Start Printed Page 22733services to the same Medicare patients. We describe the basis for our 1.1 percent total capital update for FY 2002 in the preceding section. Our recommendation of 1.1 percent is 0.5 percent higher than the upper limit of the range recommended by MedPAC due to MedPAC's −2.0 to −1.0 percent combined (operating and capital) adjustment for unbundling of the payment unit for FY 2002. If we had applied only the portion of that adjustment attributable to capital-related services, our proposed update recommendation would most likely have fallen with in the range of MedPAC's update recommendation for capital for FY 2002. While in previous years, our update recommendation has fallen within the range recommended by MedPAC, since MedPAC has developed its combined operating and capital update recommendation beginning in FY 2001, we have only been outside of that range by 0.5 percent. For FY 2001, our update recommendation of 0.9 percent was only 0.5 percentage points below MedPAC's lower limit of its FY 2002 recommendation.

    Table 1.—HCFA's FY 2002 Update Factor and MedPAC's Recommendation

    HCFA's update factorMedPAC's recommendation
    Capital Input Price Index0.50.81
    Policy Adjustment Factors:
    Intensity0.3(2)
    Science and Technology0.0 to 0.5.
    Real within DRG Change(3)
    Site-of-Care Substitution−2.0 to −1.0.
    One-Time Factors(4)0.0
    Subtotal0.3−2.0 to −0.5.
    Medicare Policy Change;0.0
    Case-Mix Adjustment Factors:
    Projected Case-Mix Change−1.0
    Real Across DRG Change1.0
    Coding Change0.0
    Real within DRG Change(4)0.0
    Subtotal0.00.0
    Effect of FY 2000 Reclassification and Recalibration0.0
    Forecast Error Correction0.30.3
    Total Update1.1−0.9 to 0.6.
    1 Used HCFA's December 2000 capital marker basket forecast in its combined update recommendation.
    2 Included in MedPAC's productivity offset in its science and technology adjustment.
    3 Included in MedPAC's case-mix adjustment.
    4 Included in HCFA's intensity factor.

    2. Outlier Payment Adjustment Factor

    Section 412.312(c) establishes a unified outlier methodology for inpatient operating and inpatient capital-related costs. A single set of thresholds is used to identify outlier cases for both inpatient operating and inpatient capital-related payments. Section 412.308(c)(2) provides that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of capital-related outlier payments to total inpatient capital-related PPS payments. The outlier thresholds are set so that operating outlier payments are projected to be 5.1 percent of total operating DRG payments.

    In the August 1, 2000 final rule, we estimated that outlier payments for capital in FY 2001 would equal 5.91 percent of inpatient capital-related payments based on the Federal rate (65 FR 47121). Accordingly, we applied an outlier adjustment factor of 0.9409 to the Federal rate. Based on the thresholds as set forth in section II.A.4.d. of this Addendum, we estimate that outlier payments for capital will equal 5.74 percent of inpatient capital-related payments based on the Federal rate in FY 2002. Therefore, we are proposing an outlier adjustment factor of 0.9426 to the Federal rate. Thus, the projected percentage of capital outlier payments to total capital standard payments for FY 2002 is lower than the percentage for FY 2001.

    The outlier reduction factors are not built permanently into the rates; that is, they are not applied cumulatively in determining the Federal rate. As explained previously, in accordance with section 547 of Public Law 106-554, the proposed FY 2002 rates are based on the FY 2001 adjustments and rates published in the August 1, 2000 final rule (65 FR 47122). Therefore, the proposed net change in the outlier adjustment to the Federal rate for FY 2002 is 1.0018 (0.9426/0.9409). The outlier adjustment increases the FY 2002 Federal rate by 0.18 percent compared with the FY 2001 outlier adjustment.

    3. Budget Neutrality Adjustment Factor for Changes in DRG Classifications and Weights and the Geographic Adjustment Factor

    Section 412.308(c)(4)(ii) requires that the Federal rate be adjusted so that aggregate payments for the fiscal year based on the Federal rate after any changes resulting from the annual DRG reclassification and recalibration and changes in the geographic adjustment factor (GAF) are projected to equal aggregate payments that would have been made on the basis of the Federal rate without such changes. We use the actuarial model, described in Appendix B of this proposed rule, to estimate the aggregate payments that would have been made on the basis of the Federal rate without changes in the DRG classifications and weights and in the GAF. We also use the model to estimate aggregate payments that would be made on the basis of the Federal rate as a result of those changes. We then use Start Printed Page 22734these figures to compute the adjustment required to maintain budget neutrality for changes in DRG weights and in the GAF.

    For FY 2001, we calculated a GAF/DRG budget neutrality factor of 0.9979. For FY 2002, we are proposing a GAF/DRG budget neutrality factor of 0.9913. The GAF/DRG budget neutrality factors are built permanently into the rates; that is, they are applied cumulatively in determining the Federal rate. This follows from the requirement that estimated aggregate payments each year be no more than they would have been in the absence of the annual DRG reclassification and recalibration and changes in the GAF. As explained previously, in accordance with section 547 of Public Law 106-554, the proposed FY 2002 adjustments and rates are based on the FY 2001 adjustment and rates published in the August 1, 2000 final rule (65 FR 47122). The proposed incremental change in the adjustment from FY 2001 to FY 2002 is 0.9913. The proposed cumulative change in the rate due to this adjustment is 0.9906 (the product of the incremental factors for FY 1993, FY 1994, FY 1995, FY 1996, FY 1997, FY 1998, FY 1999, FY 2000, FY 2001 and the proposed incremental factor for FY 2002: 0.9980 × 1.0053 × 0.9998 × 0.9994 × 0.9987 × 0.9989 × 1.0028 × 0.9985 × 0.9979 × 0.9913 = 0.9906).

    This proposed factor accounts for DRG reclassifications and recalibration and for changes in the GAF. It also incorporates the effects on the GAF of FY 2002 geographic reclassification decisions made by the MGCRB compared to FY 2001 decisions. However, it does not account for changes in payments due to changes in the DSH and IME adjustment factors or in the large urban add-on.

    4. Exceptions Payment Adjustment Factor

    Section 412.308(c)(3) requires that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of additional payments for exceptions under § 412.348 relative to total capital payments payments under the hospital-specific rate and Federal rate. We use the model originally developed for determining the budget neutrality adjustment factor to determine the regular exceptions payment adjustment factor. We describe that model in Appendix B to this proposed rule. An adjustment for regular exceptions is necessary for determining the FY 2002 rates because we will continue to pay regular exceptions for cost reporting periods beginning before October 1, 2001 but ending in FY 2002 in accordance with § 412.312(c)(3). In FY 2003 and later, no payments will be made under the regular exceptions provision, hence we will only compute a budget neutrality adjustment under § 412.348(d) for special exceptions. We describe the proposed methodology to determine to special exceptions adjustment in section V.D. of this proposed rule. For FY 2002, the exceptions adjustment is a combination of the adjustment that would be made under the regular exceptions provision and under the special exceptions provision under § 412.348(g).

    For FY 2001, we estimated that exceptions payments would equal 2.15 percent of aggregate payments based on the Federal rate and the hospital-specific rate. Therefore, we applied an exceptions reduction factor of 0.9785 (1−0.0215) in determining the Federal rate. For this proposed rule, we estimate that regular exceptions payments for FY 2002 will equal 0.63 percent of aggregate payments based on the Federal rate we estimate that special exceptions payments for FY 2002 will equal 0.12 percent of aggregate payments based on the Federal rate. Therefore, we estimate that total exceptions payments for FY 2002 will equal 0.75 percent (0.63 + 0.12 = 0.75) of aggregate payments based on the Federal rate and we are proposing an exceptions payment reduction factor of 0.9925 (1 − 0.0075) to the Federal rate for FY 2002. The proposed exceptions reduction factor for FY 2002 is 1.43 percent higher than the factor for FY 2001 published in the August 1, 2000 final rule. This increase is primarily due to the expiration of the regular exceptions provision and the narrowly defined nature of the special exceptions policy.

    The exceptions reduction factors are not built permanently into the rates; that is, the factors are not applied cumulatively in determining the Federal rate. As explained previously, in accordance with section 547 of Public Law 106-554, the proposed FY 2002 adjustments and rates are based on the FY 2001 adjustments and rates published in the August 1, 2000 final rule (65 FR 47122). Therefore, the proposed net adjustment to the FY 2002 Federal rate is 0.9925/0.9785, or 1.0143.

    5. Standard Capital Federal Rate for FY 2002

    For FY 2001, the capital Federal rate was $383.06 for discharges occurring between October 1, 2000 and April 1, 2001. As a result of implementing section 301(a) of Public Law 106-554, for discharges occurring from April to October 2001, the capital Federal rate was $380.85. However, as explained previously, in accordance with section 547 of Public Law 106-554, the proposed FY 2002 adjustments and rates are based on the FY 2001 adjustments and rates published in the August 1, 2000 final rule (65 FR 47122). As a result of changes we are proposing to the factors used to establish the Federal rate, the proposed FY 2002 Federal rate is $389.09. The proposed Federal rate for FY 2002 was calculated as follows:

    • The proposed FY 2002 update factor is 1.0110; that is, the proposed update is 1.10 percent.
    • The proposed FY 2002 budget neutrality adjustment factor that is applied to the standard Federal payment rate for changes in the DRG relative weights and in the GAF is 0.9913.
    • The proposed FY 2002 outlier adjustment factor is 0.9426.
    • The proposed FY 2002 (regular and special) exceptions payments adjustment factor is 0.9925.

    Since the Federal rate has already been adjusted for differences in case-mix, wages, cost-of-living, indirect medical education costs, and payments to hospitals serving a disproportionate share of low-income patients, we propose to make no additional adjustments in the standard Federal rate for these factors other than the budget neutrality factor for changes in the DRG relative weights and the GAF.

    We are providing a chart that shows how each of the factors and adjustments for FY 2002 affected the computation of the proposed FY 2002 Federal rate in comparison to the FY 2001 Federal rate. The proposed FY 2002 update factor has the effect of increasing the Federal rate by 1.10 percent compared to the FY 2001 rate published in the August 1, 2000 final rule, while the proposed geographic and DRG budget neutrality factor has the effect of decreasing the Federal rate by 0.87 percent. The proposed FY 2002 outlier adjustment factor has the effect of increasing the Federal rate by 0.18 percent compared to the FY 2001 rate published in the August 1, 2000 final rule. The proposed FY 2002 (regular and special) exceptions reduction factor has the effect of increasing the Federal rate by 1.43 percent compared to the exceptions reduction for FY 2001. The combined effect of all the proposed changes is to increase the proposed Federal rate by 1.85 percent compared to the Federal rate for FY 2001. Start Printed Page 22735

    Comparison of Factors and Adjustments: FY 2001 Federal Rate and Proposed FY 2002 Federal Rate

    FY 2001Proposed FY 2002ChangePercent change
    Update factor 11.00901.01101.01101.10
    GAF/DRG Adjustment Factor 10.99790.99130.9913−0.87
    Outlier Adjustment Factor 20.94090.94261.00180.18
    Exceptions Adjustment Factor 20.97850.99251.01431.43
    Federal Rate$382.03$38.091.0181.85
    1 The update factor and the GAF/DRG budget neutrality factors are built permanently into the rates. Thus, for example, the incremental change from FY 2000 to FY 2001 resulting from the application of the 0.9913 GAF/DRG budget neutrality factor for FY 2001 is 0.9913.
    2 The outlier reduction factor and the exceptions reduction factor are not built permanently into the rates; that is, these factors are not applied cumulatively in determining the rates. Thus, for example, the net change resulting from the application of the FY 2001 outlier reduction factor is 0.9426/0.9409, or 1.0018.

    6. Special Rate for Puerto Rico Hospitals

    As explained at the beginning of section IV of this Addendum, hospitals in Puerto Rico are paid based on 50 percent of the Puerto Rico rate and 50 percent of the Federal rate. The Puerto Rico rate is derived from the costs of Puerto Rico hospitals only, while the Federal rate is derived from the costs of all acute care hospitals participating in the prospective payment system (including Puerto Rico). To adjust hospitals' capital payments for geographic variations in capital costs, we apply a GAF to both portions of the blended rate. The GAF is calculated using the operating prospective payment system wage index and varies depending on the MSA or rural area in which the hospital is located. We use the Puerto Rico wage index to determine the GAF for the Puerto Rico part of the capital-blended rate and the national wage index to determine the GAF for the national part of the blended rate.

    Because we implemented a separate GAF for Puerto Rico in FY 1998, we also apply separate budget neutrality adjustments for the national GAF and for the Puerto Rico GAF. However, we apply the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. The Puerto Rico GAF budget neutrality factor is 0.99941, while the DRG adjustment is 0.9943, for a combined cumulative adjustment of 0.9937.

    In computing the payment for a particular Puerto Rico hospital, the Puerto Rico portion of the rate (50 percent) is multiplied by the Puerto Rico-specific GAF for the MSA in which the hospital is located, and the national portion of the rate (50 percent) is multiplied by the national GAF for the MSA in which the hospital is located (which is computed from national data for all hospitals in the United States and Puerto Rico). In FY 1998, we implemented a 17.78 percent reduction to the Puerto Rico rate as a result of Public Law 105-33.

    For FY 2001, before application of the GAF, the special rate for Puerto Rico hospitals was $185.06. As explained previously, in accordance with section 547 of Public Law 106-554, the proposed FY 2002 adjustments and rates are based on the FY 2001 rates published in the August 1, 2000 final rule. With the changes we are proposing to the factors used to determine the rate, the proposed FY 2002 special rate for Puerto Rico is $188.67.

    B. Calculation of Inpatient Capital-Related Prospective Payments for FY 2002

    With the end of the capital prospective payment system transition period, all hospitals (except those defined as “new” under § 412.300(b)) will be paid based on 100 percent of the Federal rate in FY 2002. The applicable Federal rate was determined by making adjustments as follows:

    • For outliers, by dividing the standard Federal rate by the outlier reduction factor for that fiscal year; and
    • For the payment adjustments applicable to the hospital, by multiplying the hospital's GAF, disproportionate share adjustment factor, and IME adjustment factor, when appropriate.

    For purposes of calculating payments for each discharge during FY 2002, the standard Federal rate is adjusted as follows:

    (Standard Federal Rate) × (DRG weight) × (GAF) × (Large Urban Add-on, if applicable) × (COLA adjustment for hospitals located in Alaska and Hawaii) × (1 + Disproportionate Share Adjustment Factor + IME Adjustment Factor, if applicable).

    The result is the adjusted Federal rate.

    Hospitals also may receive outlier payments for those cases that qualify under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments. The proposed outlier thresholds for FY 2002 are in section II.A.4.c. of this Addendum. For FY 2002, a case qualifies as a cost outlier if the cost for the case (after standardization for the indirect teaching adjustment and disproportionate share adjustment) is greater than the prospective payment rate for the DRG plus $20,900.

    During the capital prospective payment system transition period, a hospital also may receive an additional payment under the regular an exceptions process through its cost reporting period beginning before October 1, 2001 but ending in FY 2002 if its total inpatient capital-related payments are less than a minimum percentage of its allowable Medicare inpatient capital-related costs. The minimum payment level is established by class of hospital under § 412.348(c). Under § 412.348(d), the amount of a regular exceptions payment is determined by comparing the cumulative payments made to the hospital under the capital prospective payment system to the cumulative minimum payment levels applicable to the hospital for each cost reporting period subject to that system. Any amount by which the hospital's cumulative payments exceed its cumulative minimum payment is deducted from the additional payment that would otherwise be payable for a cost reporting period.

    An eligible hospital may qualify for a special exception payment under § 412.348(g) through the 10th year beyond the end of the capital transition period if meets (1) a project need requirement described at § 412.348(g)(2), which in the case of certain urban hospitals includes an excess capacity test; and (2) a project size requirement as described at § 412.348(g)(5). Eligible hospitals include sole community hospitals, urban hospitals with at lest 100 beds that have a DSH percentage of at least Start Printed Page 2273620.2 percent, and hospitals that have a combined Medicare and Medicaid inpatient utilization of at least 70 percent. Under § 412.348(g)(8), the amount of a special exceptions payment is determined by comparing the cumulative payments made to the hospital under the capital prospective payment system to the cumulative minimum payment level. This amount is offset by (1) any amount by which a hospital's cumulative capital payments exceed its cumulative minimum payment levels applicable under the regular exceptions process for cost reporting periods beginning during which the hospital has been subject to capital PPS; and (2) any amount by which a hospital's current year operating and capital payments (excluding 75 percent of operating DSH payments) exceed its operating and capital costs. The minimum payment level is 70 percent for all eligible hospitals under § 412.348(g).

    New hospitals as defined under § 412.300 are exempted from the capital prospective payment system for their first 2 years of operation and are paid 85 percent of their reasonable costs during that period. A new hospital's old capital costs are its allowable costs for capital assets that were put in use for patient care on or before the later of December 31, 1990, or the last day of the hospital's base year cost reporting period, and are subject to the rules pertaining to old capital and obligated capital as of the applicable date. Effective with the third year of operation, we will pay the hospital under either the fully prospective methodology, using the appropriate transition blend in that Federal fiscal year, or the hold-harmless methodology. If the hold-harmless methodology is applicable, the hold-harmless payment for assets in use during the base period would extend for 8 years, even if the hold-harmless payments extend beyond the normal transition period.

    C. Capital Input Price Index

    1. Background

    Like the operating input price index, the capital input price index (CIPI) is a fixed-weight price index that measures the price changes associated with costs during a given year. The CIPI differs from the operating input price index in one important aspect—the CIPI reflects the vintage nature of capital, which is the acquisition and use of capital over time. Capital expenses in any given year are determined by the stock of capital in that year (that is, capital that remains on hand from all current and prior capital acquisitions). An index measuring capital price changes needs to reflect this vintage nature of capital. Therefore, the CIPI was developed to capture the vintage nature of capital by using a weighted-average of past capital purchase prices up to and including the current year.

    Using Medicare cost reports, American Hospital Association (AHA) data, and Securities Data Company data, a vintage-weighted price index was developed to measure price increases associated with capital expenses. We periodically update the base year for the operating and capital input prices to reflect the changing composition of inputs for operating and capital expenses. Currently, the CIPI is based to FY 1992 and was last rebased in 1997. The most recent discussion of the cost category weights in the CIPI was in the final rule with comment period for FY 1998 published on August 29, 1997 (62 FR 46050).

    2. Forecast of the CIPI for Federal Fiscal Year 2001

    We are forecasting the CIPI to increase 0.9 percent for FY 2002. This reflects a projected 1.5 percent increase in vintage-weighted depreciation prices (building and fixed equipment, and movable equipment) and a 3.5 percent increase in other capital expense prices in FY 2002, partially offset by a 1.3 percent decline in vintage-weighted interest rates in FY 2002. The weighted average of these three factors produces the 0.9 percent increase for the CIPI as a whole.

    IV. Proposed Changes to Payment Rates for Excluded Hospitals and Hospital Units: Rate-of-Increase Percentages

    The inpatient operating costs of hospitals and hospital units excluded from the prospective payment system are subject to rate-of-increase limits established under the authority of section 1886(b) of the Act, which is implemented in regulations at § 413.40. Under these limits, a hospital-specific target amount (expressed in terms of the inpatient operating cost per discharge) is set for each hospital, based on the hospital's own historical cost experience trended forward by the applicable rate-of-increase percentages (update factors). In the case of a psychiatric hospital or hospital unit, a rehabilitation hospital or hospital unit, or a long-term care hospital, the target amount may not exceed the updated figure for the 75th percentile of target amounts adjusted to take into account differences between average wage-related costs in the area of the hospital and the national average of such costs within the same class of hospital for hospitals and units in the same class (psychiatric, rehabilitation, and long-term care) for cost reporting periods ending during FY 1996. The target amount is multiplied by the number of Medicare discharges in a hospital's cost reporting period, yielding the ceiling on aggregate Medicare inpatient operating costs for the cost reporting period.

    Each hospital-specific target amount is adjusted annually, at the beginning of each hospital's cost reporting period, by an applicable update factor.

    Section 1886(b)(3)(B) of the Act, which is implemented in regulations at § 413.40(c)(3)(vii), provides that for cost reporting periods beginning on or after October 1, 1998 and before October 1, 2002, the update factor for a hospital or unit depends on the hospital's or hospital unit's costs in relation to the ceiling for the most recent cost reporting period for which information is available. For hospitals with costs exceeding the ceiling by 10 percent or more, the update factor is the market basket increase. For hospitals with costs exceeding the ceiling by less than 10 percent, the update factor is the market basket minus .25 percent for each percentage point by which costs are less than 10 percent over the ceiling. For hospitals with costs equal to or less than the ceiling but greater than 66.7 percent of the ceiling, the update factor is the greater of 0 percent or the market basket minus 2.5 percent. For hospitals with costs that do not exceed 66.7 percent of the ceiling, the update factor is 0.

    The most recent forecast of the market basket increase for FY 2002 for hospitals and hospital units excluded from the prospective payment system is 3.0 percent. Therefore, the update to a hospital's target amount for its cost reporting period beginning in FY 2002 would be between 0.5 and 3.0 percent, or 0 percent, depending on the hospital's or unit's costs in relation to its rate-of-increase limit.

    In addition, § 413.40(c)(4)(iii) requires that for cost reporting periods beginning on or after October 1, 1998 and before October 1, 2002, the target amount for each psychiatric hospital or hospital unit, rehabilitation hospital or hospital unit, and long-term care hospital cannot exceed a cap on the target amounts for hospitals in the same class.

    Section 1886(b)(3)(H) of the Act, as amended by section 121 of Public Law 106-113, provides for an appropriate wage adjustment to the caps on the target amounts for psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals, effective for cost reporting periods beginning on or after October 1, 1999, through September 30, 2002. On August Start Printed Page 227371, 2000, we published an interim final rule with comment period that implemented this provision for cost reporting periods beginning on or after October 1, 1999 and before October 1, 2000 (65 FR 47026) and a final rule that implemented the provision for cost reporting periods beginning on or after October 1, 2000 and before October 1, 2001 (65 FR 47054). This proposed rule addresses the wage adjustment to the caps for cost reporting periods beginning on or after October 1, 2001.

    As discussed in section VI. of the preamble of this proposed rule, the cap on the target amount per discharge is determined by adding the hospital's nonlabor-related portion of the national 75th percentile cap to its wage-adjusted, labor-related portion of the national 75th percentile cap (the labor-related portion of costs equals 0.71553 and the nonlabor-related portion of costs equals 0.28447). A hospital's wage-adjusted, labor-related portion of the target amount is calculated by multiplying the labor-related portion of the national 75th percentile cap for the hospital's class by the wage index under the hospital inpatient prospective payment system (see § 412.63), without taking into account reclassifications under sections 1886(d)(8)(B) and (d)(10) of the Act.

    As discussed in section VI. of the preamble of this proposed rule, we are proposing to make an adjustment to the caps on target amounts for new and existing excluded hospitals and units. In calculating the wage-adjusted caps on target amounts for new and existing excluded and units for FY 2001, we inadvertently made an error. In wage neutralizing FY 1996 target amounts, we used the FY 2000 hospital inpatient prospective payment system wage index published in Tables 4A and 4B of the July 30, 1999 final rule (64 FR 41585 through 41593), which is based on wage data after taking into account geographic reclassifications under section 1886(d)(8) of the Act. We are proposing to use pre-reclassified wage data in our recalculation of the caps for FY 2002. We propose to recalculate the limits for new excluded hospitals and units, as well as calculate the cap for existing excluded hospitals and units using the same wage index used under the prospective payment system for skilled nursing facilities (SNF) as shown in Table 7 of the July 30, 1999 SNF final rule (64 FR 41690). We do not anticipate a significant impact on overall payments to these hospitals and units.

    Section 307(a) of Public Law 106-554 amended section 1886(b)(3) of the Act to provide for a 2-percent increase to the wage-adjusted 75th percentile cap on the target amount for long-term care hospitals, effective for cost reporting periods beginning during FY 2001. This provision is applicable to long-term care hospitals that were subject to the cap for existing excluded hospitals and units, as specified in § 413.40(c).

    In addition to the increase to the cap on target amounts for long-term care hospitals, section 307(a) of Public Law 106-554 amended section 1886(b)(3)(A) of the Act to make the section applicable to all long-term care hospitals, effective for cost reporting periods beginning during FY 2001. This provision requires a revision to the determination of each long-term care hospital's FY 2001 target amount as specified in § 413.40(c)(4). For cost reporting periods beginning during FY 2001, the hospital-specific target amount otherwise determined for a long-term care hospital as specified under § 413.40(c)(4)(ii) is multiplied by 1.25 (that is, increased by 25 percent). However, the revised FY 2001 target amount for a long-term care hospital cannot exceed its wage-adjusted national cap as required by section 1886(b)(3) of the Act, as amended by section 307(a) of Public Law 106-554.

    For cost reporting periods beginning in FY 2002, the proposed caps are as follows:

    Class of excluded hospital or unitLabor-related shareNonlabor-related share
    Psychiatric$8,404$3,341
    Rehabilitation15,6896,237
    Long-Term Care31,39912,483

    Regulations at § 413.40(d) specify the formulas for determining bonus and relief payments for excluded hospitals and specify established criteria for an additional bonus payment for continuous improvement. Regulations at § 413.40(f)(2)(ii) specify the payment methodology for new hospitals and hospital units (psychiatric, rehabilitation, and long-term care) effective October 1, 1997.

    V. Tables

    This section contains the tables referred to throughout the preamble to this proposed rule and in this Addendum. For purposes of this proposed rule, and to avoid confusion, we have retained the designations of Tables 1 through 5 that were first used in the September 1, 1983 initial prospective payment final rule (48 FR 39844). Tables 1A, 1C, 1D, 2, 3A, 3B, 4A, 4B, 4C, 4F, 4G, 4H, 5, 6A, 6B, 6C, 6D, 6E, 6F, 6G, 6H, 7A, 7B, 8A, and 8B are presented below. The tables presented below are as follows:

    End Part

    Table 1A—National Adjusted Operating Standardized Amounts, Labor/Nonlabor

    Table 1C—Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor

    Table 1D—Capital Standard Federal Payment Rate

    Table 2—Hospital Average Hourly Wage for Federal Fiscal Years 2000 (1996 Wage Data), 2001 (1997 Wage Data) and 2002 (1998 Wage Data) Wage Indexes and 3-Year Average of Hospital Average Hourly Wages

    Table 3A—3-Year Average Hourly Wage for Urban Areas

    Table 3B—3-Year Average Hourly Wage for Rural Areas

    Table 4A—Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas

    Table 4B—Wage Index and Capital Geographic Adjustment Factor (GAF) for Rural Areas

    Table 4C—Wage Index and Capital Geographic Adjustment Factor (GAF) for Hospitals That Are Reclassified

    Table 4F—Puerto Rico Wage Index and Capital Geographic -Adjustment Factor (GAF)

    Table 4G—Pre-Reclassified Wage Index for Urban Areas

    Table 4H—Pre-Reclassified Wage Index for Rural Areas

    Table 5—List of Diagnosis Related Groups (DRGs), Relative Weighting Factors, Geometric and Arithmetic Mean Length of Stay

    Table 6A—New Diagnosis Codes

    Table 6B—New Procedure Codes

    Table 6C—Invalid Diagnosis Codes

    Table 6D—Invalid Procedure Codes

    Table 6E—Revised Diagnosis Code Titles

    Table 6F—Revised Procedure Code Titles

    Table 6G—Additions to the CC Exclusions List

    Table 6H—Deletions to the CC Exclusions List

    Table 7A—Medicare Prospective Payment System Selected -Percentile Lengths of Stay FY 2000 MedPAR Update 12/00 -GROUPER V18.0

    Table 7B—Medicare Prospective Payment System Selected Percentile Lengths of Stay FY 2000 MedPAR Update 12/00 GROUPER V20.0

    Table 8A—Statewide Average Operating Cost-to-Charge Ratios for Urban and Rural Hospitals (Case Weighted) March 2001

    Table 8B—Statewide Average Capital Cost-to-Charge Ratios (Case Weighted) March 2001Start Printed Page 22738

    Table 1A.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor

    Large urban areasOther areas
    Labor-relatedNonlabor-relatedLabor-relatedNonlabor-related
    $2,940.89$1,195.38$2,894.33$1,176.46

    Table 1C.—Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor

    Large urban areasOther areas
    LaborNonlaborLaborNonlabor
    National$2,915.45$1,185.04$2,915.45$1,185.04
    Puerto Rico1,414.18569.251,391.79560.23

    Table 1D.—Capital Standard Federal Payment Rate

    Rate
    National$389.09
    Puerto Rico188.67
    —————————— * Wage data not available for the provider that year. ** For Federal Fiscal Year 2002 only, the average hourly wage is based upon data on file as of February 15, 2001. It does not reflect changes processed after that date. *** The 3-year average hourly wage is weighted by salaries and hours. Start Printed Page 22738

    Table 2.—Hospital Average Hourly Wage for Federal Fiscal Years 2000 (1996 Wage Data), 2001 (1997 Wage Data) and 2002 (1998 Wage Data) Wage Indexes and 3-Year Average of Hospital Average Hourly Wages

    Provider No.Average hourly wage FFY 2000Average hourly wage FFY 2001Average** hourly wage FFY 2002Average*** hourly wage (3 years)
    01000115.848416.408817.135216.4665
    01000415.019417.973219.001017.1863
    01000516.261517.598518.655417.4986
    01000617.308116.748017.353717.1306
    01000714.804815.479815.678815.3288
    01000817.654914.744317.472816.6080
    01000917.532818.773118.439018.2439
    01001015.909016.446816.466416.2848
    01001120.626120.797221.931121.1001
    01001219.299217.717115.868617.5430
    01001518.346115.451018.706217.3913
    01001616.131117.247318.677217.4112
    01001818.961717.644918.938818.5180
    01001915.491016.349317.067216.3245
    01002114.629716.291915.124115.3000
    01002220.505018.587917.643518.8422
    01002316.258116.102516.320916.2283
    01002416.026316.290016.297416.2091
    01002514.531115.135615.154814.9441
    01002714.927811.790016.859514.1053
    01002916.410317.646118.360517.4403
    01003118.019418.783518.518018.4445
    01003212.654012.599515.359013.6017
    01003319.679720.392321.181820.4188
    01003414.734215.095915.363915.0606
    01003517.478820.185316.037717.7343
    01003617.288017.814017.036617.3872
    01003818.330918.267119.609818.7632
    01003918.808020.104520.340619.7778
    01004019.103018.937619.915219.2851
    01004316.202230.748918.664019.9982
    01004417.022922.009124.026520.8906
    01004515.006515.220017.041715.7248
    01004617.182217.397018.973717.8750
    01004716.380313.352115.433215.2044
    01004914.482314.759015.524614.9487
    01005015.415918.516317.389517.0820
    Start Printed Page 22739
    0100519.939011.927511.810811.1940
    01005213.864916.548618.065316.1248
    01005313.177814.626715.564914.5406
    01005417.124618.510319.514818.4901
    01005518.193018.952618.859018.6711
    01005812.780916.170216.971515.1274
    01005918.188619.128618.802018.7124
    01006115.921514.954714.500315.1112
    01006213.569014.773212.325913.5151
    01006420.896620.413919.525620.2712
    01006515.635716.404916.875216.3279
    01006612.068115.431713.155913.4757
    01006818.736712.052512.961614.2644
    01006913.568413.863614.721114.0429
    01007214.348114.952616.233915.1957
    01007312.832813.860114.127313.6015
    01007817.711017.920218.102817.9134
    01007916.870116.442114.561115.8427
    01008013.8473**13.8473
    01008116.982318.947417.299617.7081
    01008316.214616.893318.031217.0916
    01008418.779418.496518.776918.6812
    01008518.869618.474419.688819.0044
    01008614.925516.669416.571116.0968
    01008718.388919.003317.332118.3237
    01008916.609016.804217.780017.0521
    01009018.112118.386618.944518.4882
    01009116.362013.940517.079915.6820
    01009216.498016.990017.814417.1322
    01009418.5603**18.5603
    01009511.899312.452512.259712.2090
    01009712.895513.041312.728612.8889
    01009814.278715.916514.030014.6833
    01009915.930915.987415.561915.8073
    01010015.482617.201117.723716.8503
    01010115.417315.385914.446015.0721
    01010212.725113.793313.813613.4259
    01010319.311517.935816.651417.9628
    01010418.099717.712615.996417.2534
    01010820.791417.901719.461719.3047
    01010914.087015.310714.683414.6934
    01011015.906615.631715.828315.7917
    01011215.105615.140116.827115.6716
    01011317.244016.968313.941315.9844
    01011417.261215.245417.013616.4485
    01011513.752414.626814.963214.4787
    01011816.688918.847717.083417.5145
    01011918.170718.802420.774119.7059
    01012017.033217.233618.256717.5146
    01012115.180614.644414.526214.8160
    01012318.160416.734419.214017.9949
    01012416.266616.284616.746516.4273
    01012514.415315.530416.013615.3557
    01012617.640519.571019.106518.7347
    01012719.609519.519018.278619.1726
    01012812.574714.505614.432213.6385
    01012914.426714.728616.173315.1385
    01013016.346516.680918.131416.9797
    01013117.907617.826020.188318.6602
    01013410.781718.883519.985615.8677
    01013715.934812.121720.456115.8609
    01013812.129512.867514.525413.1763
    01013919.948719.000120.681519.8355
    Start Printed Page 22740
    01014315.714416.791117.621216.7651
    01014417.121117.132017.758017.3377
    01014520.746020.843420.589520.7209
    01014618.856118.519819.141518.8309
    01014814.644312.221415.834913.9784
    01014917.083618.633318.015617.9216
    01015016.974917.895118.897717.9203
    01015217.383517.830618.217317.8172
    01015516.70289.030015.068912.5183
    010158*17.322718.395717.8637
    02000127.969028.174727.411027.8426
    02000226.914524.581525.198725.5092
    02000426.397930.566725.467927.5927
    02000529.006830.292029.237829.5337
    02000626.770631.240428.141728.8630
    02000724.955527.831932.385228.0097
    02000830.471229.414630.869130.2487
    02000923.180120.193018.466020.3801
    02001018.641723.672722.755921.4818
    02001129.469730.472728.065829.3006
    02001223.925924.854325.532024.7635
    02001326.817223.884728.155726.0576
    02001424.093227.382324.920125.4246
    02001724.971426.831927.650126.5037
    02002422.726324.087225.320524.0621
    02002527.152921.755720.258322.6334
    03000119.869520.367321.786920.6506
    03000221.626321.597721.837521.6886
    03000323.672223.483322.680423.3063
    03000417.733314.071115.547815.4308
    03000617.640918.266819.728918.5307
    03000718.560219.670821.516919.9379
    030008*22.275822.219022.2524
    03000917.934318.179418.755718.2786
    03001018.799719.090719.512319.1422
    03001120.078419.297319.431019.5785
    03001219.424518.991820.658519.6997
    03001321.018220.745819.636920.4298
    03001419.469719.931519.796619.7342
    03001620.560619.396719.478519.8559
    03001720.418522.876521.793821.6805
    03001818.911520.203220.898020.0193
    03001919.921121.700521.254020.9846
    03002215.788619.296617.348517.0947
    03002322.436523.669724.167823.4686
    03002421.669222.254122.619922.1974
    03002517.675912.725411.989413.7385
    03002717.579615.755417.655516.9563
    03003021.624920.830321.693221.3795
    03003316.839620.004420.282018.9069
    03003419.086816.824120.868918.8279
    03003519.715319.278120.022619.6580
    03003618.944920.756721.637120.4743
    03003721.437622.826623.761522.6712
    03003822.077722.677622.982222.5885
    03004017.972218.545619.763618.7537
    03004117.438915.892118.871717.2718
    03004320.772120.934120.559820.7468
    03004416.465416.864917.657517.0214
    03004719.691622.640121.441221.2271
    03004919.089619.088119.358019.1639
    03005414.486115.333815.065714.9801
    03005518.275116.361320.299118.2684
    Start Printed Page 22741
    03005921.710024.046522.627922.7570
    03006016.766119.246118.631318.2043
    03006117.347018.906319.904718.7238
    03006217.482517.673818.060317.7568
    03006418.539119.567319.943719.3687
    03006519.927720.513020.783820.4254
    03006715.620714.444617.277815.7364
    03006817.348217.361417.720817.4823
    03006919.001319.096121.093619.7255
    03008019.986520.514420.658120.3684
    03008323.643323.335523.522923.4991
    03008517.840221.095420.861119.9420
    03008618.503019.5436*19.0352
    03008720.046921.408421.946521.1838
    03008819.577219.868220.497820.0029
    03008919.901820.401920.951620.4404
    03009221.562820.698621.830821.3646
    03009319.468819.726220.431419.9052
    03009419.477321.621822.812321.4086
    03009514.249913.729313.766413.9087
    03009918.074716.154118.226317.4781
    030100**23.760923.7609
    030101**19.254719.2547
    030102**18.241318.2413
    04000115.573515.162416.917815.8741
    04000214.086513.059215.110714.0333
    04000314.002714.208915.574014.5731
    04000417.292617.847617.903417.6718
    04000512.882513.259711.131812.3937
    04000719.529921.958318.699819.9568
    04000812.697415.304014.798514.3087
    04001017.623118.602319.491318.6031
    04001112.265414.531916.099514.1756
    04001415.385317.634018.143417.0051
    04001514.604516.589115.520715.5649
    04001617.543119.029520.232118.9152
    04001714.953313.509815.468614.6576
    04001817.560217.602718.746317.9749
    04001925.708022.676923.416323.8479
    04002014.805916.482718.984416.6335
    04002116.462817.639819.683517.8176
    04002216.000617.039714.839815.8797
    04002415.728214.454117.652315.9585
    04002510.949611.507913.470511.8847
    04002618.239819.556319.792419.1863
    04002714.540616.097517.443116.0716
    04002812.840914.658413.994613.7921
    04002917.777717.878721.137018.9480
    04003014.154113.542811.240212.7784
    04003213.328013.703013.287213.4471
    04003511.212312.830010.956911.6408
    04003617.908018.975720.083518.9954
    04003713.481514.655914.094114.0704
    04003913.838614.357614.717714.3115
    04004017.428318.089519.198418.2668
    04004113.361315.989616.462415.2103
    04004214.664115.214215.205715.0333
    04004411.442212.627513.350112.5381
    04004518.772414.942916.246916.4870
    04004716.394816.865417.533616.9538
    04004815.8203**15.8203
    04005011.793413.381814.003613.0341
    04005116.280315.862716.603916.2390
    Start Printed Page 22742
    04005315.819316.361015.021915.7502
    04005415.041215.321914.257714.8844
    04005516.102917.126917.721416.9813
    04005815.670617.676616.427816.6344
    04006011.468612.814817.980513.6105
    04006217.275718.204817.890217.8204
    04006412.400710.725511.502911.4801
    04006617.642918.337717.833817.9377
    04006713.493014.601414.474114.1956
    04006916.114717.505217.002616.8681
    04007015.475716.902716.970016.4358
    04007116.302216.961017.283416.8497
    04007215.842516.089517.482216.4893
    04007417.381918.322418.754218.1968
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    52007418.692320.460120.900720.0036
    52007519.089119.845720.519919.8188
    52007616.507217.608819.536017.8404
    52007715.542717.783018.711917.3266
    52007820.555921.338020.543920.8226
    52008216.741717.7405*17.1848
    52008322.571523.884923.578723.3411
    Start Printed Page 22818
    52008418.947520.842723.332720.9981
    52008719.394220.362420.686320.1537
    52008820.152920.631221.893120.8632
    52008920.611021.545622.105521.4053
    52009018.002618.934319.831418.9411
    52009120.069320.992720.944020.6686
    52009217.557717.650018.624817.9402
    52009419.779120.361120.617920.2438
    52009518.506620.326918.642519.1370
    52009619.298019.775720.666819.9365
    52009719.647020.235420.801620.2268
    52009820.028922.334823.470721.9054
    52010018.378818.383219.478818.7419
    52010117.845319.518619.987519.1542
    52010219.835420.189821.013820.3351
    52010321.232419.480920.084220.2050
    52010720.544120.374721.790720.8828
    52010918.632219.130319.760919.1753
    52011020.031920.449421.005520.5065
    52011117.238817.783417.767317.6163
    52011218.182719.179718.570618.6454
    52011320.592521.148521.885221.2341
    52011417.379916.661617.847617.2735
    52011517.375518.298019.224818.2555
    52011618.569819.850920.692219.7165
    52011717.424218.541418.396318.1365
    52011812.44224.232614.862613.8369
    52012015.620518.7437*17.3887
    52012117.585119.730520.849219.5992
    52012216.755216.243616.933516.6326
    52012317.413517.398017.798617.5610
    52012416.390217.261917.920517.1864
    52013015.163915.684517.167916.0030
    52013118.804318.729520.259119.2549
    52013217.275915.637918.163016.9564
    52013417.609418.095318.815018.1846
    52013514.474815.824617.347615.9083
    52013619.993519.848020.440420.0986
    52013820.892221.226022.510321.5421
    52013921.279720.998821.404221.2251
    52014021.417521.520722.084921.6757
    52014116.9543**16.9543
    52014217.700320.585821.943219.9586
    52014416.623118.570119.912018.4107
    52014517.235618.265418.795818.1015
    52014615.731817.958518.237017.3448
    52014816.929317.242119.150217.8057
    52014913.303214.190112.892813.4360
    52015118.077117.326718.707018.0230
    52015221.333319.585822.598021.0747
    52015315.446715.975317.086316.1441
    52015417.922918.540319.599418.6875
    52015619.839621.337720.963820.7243
    52015717.278417.197419.600818.0185
    52015918.742318.676017.764918.3871
    52016018.844419.417320.140619.4824
    52016118.574219.490518.719718.9334
    52017022.503321.523321.063721.6831
    52017115.731617.456018.078517.1053
    52017320.141021.301620.574420.6635
    52017721.760922.722122.967322.4954
    52017817.041118.693620.901018.7748
    520188*13.9135*13.9135
    Start Printed Page 22819
    53000217.588819.327321.106619.4048
    53000315.781316.213915.952315.9820
    53000416.186215.049713.378814.7758
    53000515.148713.352915.325514.5529
    53000619.340318.589419.130519.0082
    53000718.060118.516117.789718.1450
    53000822.962518.834919.011320.0471
    53000919.447822.500921.779521.2113
    53001018.931721.609214.169917.7467
    53001117.441218.735419.460618.5542
    53001219.482918.992321.185419.8564
    53001417.315818.086918.557117.9899
    53001522.646522.456823.404022.8118
    53001617.708418.156219.320518.4153
    53001713.713116.347817.773615.9421
    53001817.869918.378319.598618.6254
    53001916.763018.543020.109718.3351
    53002217.878118.500219.613618.7082
    53002320.752720.194820.067720.3449
    53002520.320021.259822.030021.1974
    53002618.917517.011819.896918.4992
    53002729.772218.166425.506722.9705
    53002917.799316.509219.336117.7626
    53003113.377518.332220.173417.2600
    53003220.214321.036120.013220.4281
    * Wage data not available for the provider that year.
    ** For Federal Fiscal Year 2002 only, the average hourly wage is based upon data on file as of February 15, 2001. It does not reflect changes processed after that date.
    *** The 3-year average hourly wage is weighted by salaries and hours.
           

    Table 3A.—3-Year Average Hourly Wage for Urban Areas

    [Based on salaries and hours computed for Federal fiscal years 2000, 2001, and 2002]

    Urban areaAverage hourly wage
    Abilene, TX17.6806
    Aguadilla, PR9.2769
    Akron, OH21.5297
    Albany, GA22.3923
    Albany-Schenectady-Troy, NY18.7002
    Albuquerque, NM19.8373
    Alexandria, LA17.4211
    Allentown-Bethlehem-Easton, PA21.3670
    Altoona, PA20.1636
    Amarillo, TX18.6302
    Anchorage, AK27.5223
    Ann Arbor, MI24.5218
    Anniston, AL18.1347
    Appleton-Oshkosh-Neenah, WI19.6303
    Arecibo, PR10.1229
    Asheville, NC19.9864
    Athens, GA21.2433
    Atlanta, GA21.9106
    Atlantic-Cape May, NJ24.4342
    Auburn-Opelika, AL17.4403
    Augusta-Aiken, GA-SC20.3525
    Austin-San Marcos, TX20.2151
    Bakersfield, CA20.7098
    Baltimore, MD20.9279
    Bangor, ME20.7547
    Barnstable-Yarmouth, MA29.3802
    Baton Rouge, LA18.6271
    Beaumont-Port Arthur, TX18.6898
    Bellingham, WA25.1714
    Benton Harbor, MI18.7937
    Bergen-Passaic, NJ25.5796
    Billings, MT21.1153
    Biloxi-Gulfport-Pascagoula, MS17.8351
    Binghamton, NY18.8043
    Birmingham, AL18.8368
    Bismarck, ND16.8910
    Bloomington, IN18.7924
    Bloomington-Normal, IL19.1663
    Boise City, ID19.6729
    Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH24.5501
    Boulder-Longmont, CO21.3227
    Brazoria, TX18.3793
    Bremerton, WA23.7403
    Brownsville-Harlingen-San Benito, TX19.2833
    Bryan-College Station, TX18.7394
    Buffalo-Niagara Falls, NY20.6480
    Burlington, VT22.4607
    Caguas, PR10.2778
    Canton-Massillon, OH19.0700
    Casper, WY19.8564
    Cedar Rapids, IA19.1268
    Champaign-Urbana, IL19.9316
    Charleston-North Charleston, SC19.7508
    Charleston, WV20.0108
    Charlotte-Gastonia-Rock Hill, NC-SC20.3826
    Charlottesville, VA23.1481
    Chattanooga, TN-GA20.9509
    Cheyenne, WY17.9899
    Chicago, IL23.8495
    Chico-Paradise, CA21.8173
    Cincinnati, OH-KY-IN20.5080
    Clarksville-Hopkinsville, TN-KY17.8563
    Cleveland-Lorain-Elyria, OH20.7803
    Colorado Springs, CO20.7284
    Columbia, MO19.2453
    Columbia, SC20.5806
    Columbus, GA-AL18.4599
    Columbus, OH21.1200
    Corpus Christi, TX18.5130
    Corvallis, OR24.7413
    Cumberland, MD-WV18.4566
    Dallas, TX20.9635
    Danville, VA18.9744
    Davenport-Moline-Rock Island, IA-IL19.0733
    Start Printed Page 22820
    Dayton-Springfield, OH20.3789
    Daytona Beach, FL19.7030
    Decatur, AL18.8129
    Decatur, IL17.6940
    Denver, CO22.1471
    Des Moines, IA19.3257
    Detroit, MI22.6805
    Dothan, AL17.1181
    Dover, DE21.6106
    Dubuque, IA18.6795
    Duluth-Superior, MN-WI22.1000
    Dutchess County, NY22.7121
    Eau Claire, WI19.2432
    El Paso, TX19.8290
    Elkhart-Goshen, IN20.3382
    Elmira, NY18.4943
    Enid, OK18.0515
    Erie, PA19.4310
    Eugene-Springfield, OR23.8559
    Evansville, Henderson, IN-KY17.5189
    Fargo-Moorhead, ND-MN19.3632
    Fayetteville, NC19.0183
    Fayetteville-Springdale-Rogers, AR16.7888
    Flagstaff, AZ-UT22.9479
    Flint, MI23.9198
    Florence, AL16.9094
    Florence, SC18.9644
    Fort Collins-Loveland, CO22.4773
    Fort Lauderdale, FL22.1771
    Fort Myers-Cape Coral, FL19.9058
    Fort Pierce-Port St. Lucie, FL21.3915
    Fort Smith, AR-OK17.3369
    Fort Walton Beach, FL19.5052
    Fort Wayne, IN19.4642
    Fort Worth-Arlington, TX20.8053
    Fresno, CA21.9101
    Gadsden, AL18.7282
    Gainesville, FL23.1249
    Galveston-Texas City, TX21.5574
    Gary, IN20.5266
    Glens Falls, NY18.3428
    Goldsboro, NC18.4900
    Grand Forks, ND-MN19.5346
    Grand Junction, CO20.1153
    Grand Rapids-Muskegon-Holland, MI22.0624
    Great Falls, MT20.7979
    Greeley, CO21.0411
    Green Bay, WI19.9641
    Greensboro-Winston-Salem-High Point, NC20.0548
    Greenville, NC20.8376
    Greenville-Spartanburg-Anderson, SC19.7086
    Hagerstown, MD19.2372
    Hamilton-Middletown, OH19.7210
    Harrisburg-Lebanon-Carlisle, PA20.6541
    Hartford, CT24.9991
    Hattiesburg, MS16.3812
    Hickory-Morganton-Lenoir, NC19.9779
    Honolulu, HI25.2556
    Houma, LA17.3111
    Houston, TX20.7505
    Huntington-Ashland, WV-KY-OH21.1928
    Huntsville, AL19.2325
    Indianapolis, IN21.1949
    Iowa City, IA21.1012
    Jackson, MI19.7797
    Jackson, MS18.6455
    Jackson, TN19.1864
    Jacksonville, FL19.6584
    Jacksonville, NC16.8680
    Jamestown, NY17.1876
    Janesville-Beloit, WI20.9802
    Jersey City, NJ24.8343
    Johnson City-Kingsport-Bristol, TN-VA18.5293
    Johnstown, PA19.0781
    Jonesboro, AR16.9923
    Joplin, MO17.7354
    Kalamazoo-Battlecreek, MI22.4822
    Kankakee, IL20.0356
    Kansas City, KS-MO20.4279
    Kenosha, WI20.4490
    Killeen-Temple, TX19.9750
    Knoxville, TN19.0855
    Kokomo, IN19.9881
    La Crosse, WI-MN19.8516
    Lafayette, LA18.3710
    Lafayette, IN19.3581
    Lake Charles, LA16.7150
    Lakeland-Winter Haven, FL19.6666
    Lancaster, PA20.1757
    Lansing-East Lansing, MI21.3476
    Laredo, TX17.5925
    Las Cruces, NM18.7690
    Las Vegas, NV-AZ24.0639
    Lawrence, KS18.1884
    Lawton, OK19.7127
    Lewiston-Auburn, ME19.7957
    Lexington, KY18.9597
    Lima, OH20.0697
    Lincoln, NE21.3984
    Little Rock-North Little Rock, AR19.2004
    Longview-Marshall, TX18.7809
    Los Angeles-Long Beach, CA26.0786
    Louisville, KY-IN20.4511
    Lubbock, TX18.6166
    Lynchburg, VA19.4241
    Macon, GA19.2084
    Madison, WI21.9843
    Mansfield, OH18.7455
    Mayaguez, PR10.2295
    McAllen-Edinburg-Mission, TX18.1641
    Medford-Ashland, OR22.6022
    Melbourne-Titusville-Palm Bay, FL20.8444
    Memphis, TN-AR-MS19.0229
    Merced, CA21.5061
    Miami, FL21.8283
    Middlesex-Somerset-Hunterdon, NJ24.6509
    Milwaukee-Waukesha, WI21.3110
    Minneapolis-St. Paul, MN-WI23.8021
    Missoula, MT20.0852
    Mobile, AL17.4552
    Modesto, CA22.6578
    Monmouth-Ocean, NJ24.1662
    Monroe, LA18.0030
    Montgomery, AL16.5093
    Muncie, IN22.6571
    Myrtle Beach, SC18.6825
    Naples, FL20.9923
    Nashville, TN20.6183
    Nassau-Suffolk, NY30.2198
    New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT26.6547
    New London-Norwich, CT26.0295
    New Orleans, LA19.8085
    New York, NY31.0941
    Newark, NJ25.6043
    Newburgh, NY-PA23.8506
    Norfolk-Virginia Beach-Newport News, VA-NC18.4034
    Oakland, CA32.8350
    Ocala, FL20.5545
    Odessa-Midland, TX19.5695
    Oklahoma City, OK18.8746
    Olympia, WA23.8947
    Omaha, NE-IA21.4322
    Orange County, CA24.7717
    Orlando, FL20.8479
    Owensboro, KY17.7880
    Panama City, FL19.7652
    Parkersburg-Marietta, WV-OH17.9669
    Pensacola, FL18.0417
    Peoria-Pekin, IL18.6783
    Philadelphia, PA-NJ23.6329
    Phoenix-Mesa, AZ20.7971
    Pine Bluff, AR16.8497
    Pittsburgh, PA20.9887
    Pittsfield, MA22.3291
    Pocatello, ID19.9570
    Ponce, PR11.0089
    Portland, ME20.7444
    Portland-Vancouver, OR-WA23.9502
    Providence-Warwick, RI23.3619
    Provo-Orem, UT21.5657
    Pueblo, CO19.0481
    Punta Gorda, FL20.1726
    Racine, WI20.1696
    Raleigh-Durham-Chapel Hill, NC21.0052
    Rapid City, SD18.9541
    Reading, PA17.8899
    Redding, CA24.6813
    Reno, NV22.8615
    Richland-Kennewick-Pasco, WA24.4034
    Richmond-Petersburg, VA20.8459
    Riverside-San Bernardino, CA24.1711
    Roanoke, VA18.3527
    Rochester, MN24.8162
    Rochester, NY19.9290
    Rockford, IL19.3616
    Rocky Mount, NC19.3552
    Sacramento, CA26.0254
    Saginaw-Bay City-Midland, MI20.6078
    St. Cloud, MN21.3050
    St. Joseph, MO19.6144
    St. Louis, MO-IL19.5920
    Salem, OR21.8859
    Salinas, CA31.8419
    Salt Lake City-Ogden, UT21.4139
    San Angelo, TX17.4362
    San Antonio, TX18.2088
    San Diego, CA25.4124
    San Francisco, CA30.6978
    San Jose, CA29.9903
    San Juan-Bayamon, PR10.2202
    Start Printed Page 22821
    San Luis Obispo-Atascadero-Paso Robles, CA23.3041
    Santa Barbara-Santa Maria-Lompoc, CA23.3594
    Santa Cruz-Watsonville, CA30.3548
    Santa Fe, NM22.5866
    Santa Rosa, CA27.7113
    Sarasota-Bradenton, FL21.5493
    Savannah, GA20.9278
    Scranton-Wilkes Barre-Hazleton, PA17.9530
    Seattle-Bellevue-Everett, WA24.0679
    Sharon, PA17.4923
    Sheboygan, WI18.1442
    Sherman-Denison, TX19.5991
    Shreveport-Bossier City, LA19.4652
    Sioux City, IA-NE18.6963
    Sioux Falls, SD19.3356
    South Bend, IN21.7219
    Spokane, WA23.1813
    Springfield, IL18.6860
    Springfield, MO18.1563
    Springfield, MA23.1451
    State College, PA19.7984
    Steubenville-Weirton, OH-WV18.6797
    Stockton-Lodi, CA23.2294
    Sumter, SC17.6174
    Syracuse, NY20.3619
    Tacoma, WA25.1530
    Tallahassee, FL18.3753
    Tampa-St. Petersburg-Clearwater, FL19.5103
    Terre Haute, IN18.3195
    Texarkana, AR-Texarkana, TX17.9743
    Toledo, OH21.2747
    Topeka, KS19.8271
    Trenton, NJ21.9528
    Tucson, AZ19.1755
    Tulsa, OK18.4006
    Tuscaloosa, AL17.6510
    Tyler, TX20.1434
    Utica-Rome, NY18.2674
    Vallejo-Fairfield-Napa, CA28.6820
    Ventura, CA24.2443
    Victoria, TX17.9789
    Vineland-Millville-Bridgeton, NJ22.7446
    Visalia-Tulare-Porterville, CA21.3962
    Waco, TX17.7862
    Washington, DC-MD-VA-WV23.8268
    Waterloo-Cedar Falls, IA18.0820
    Wausau, WI20.4556
    West Palm Beach-Boca Raton, FL21.2892
    Wheeling, OH-WV16.9419
    Wichita, KS20.5727
    Wichita Falls, TX16.8194
    Williamsport, PA18.2904
    Wilmington-Newark, DE-MD23.9928
    Wilmington, NC20.9815
    Yakima, WA22.3174
    Yolo, CA21.5151
    York, PA18.9397
    Youngstown-Warren, OH20.9566
    Yuba City, CA23.0076
    Yuma, AZ20.4298

    Table 3B.—3-Year Average Hourly Wage for Rural Areas

    [Based on salaries and hours computed for Federal fiscal years 2000, 2001, and 2002]

    Nonurban areaAverage hourly wage
    Alabama16.1119
    Alaska26.3477
    Arizona18.5108
    Arkansas16.0724
    California21.4448
    Colorado19.2806
    Connecticut26.3210
    Delaware20.0732
    Florida19.2209
    Georgia17.8809
    Hawaii23.8315
    Idaho18.9021
    Illinois17.5886
    Indiana18.6071
    Iowa17.4515
    Kansas16.5492
    Kentucky17.3334
    Louisiana16.4052
    Maine18.8730
    Maryland18.9527
    Massachusetts24.6681
    Michigan19.4455
    Minnesota19.2586
    Mississippi16.1955
    Missouri16.7949
    Montana18.5783
    Nebraska17.6014
    Nevada20.3129
    New Hampshire21.4174
    New Jersey 1
    New Mexico18.5917
    New York18.5351
    North Carolina18.3321
    North Dakota16.8478
    Ohio18.8435
    Oklahoma16.1793
    Oregon21.7904
    Pennsylvania18.4680
    Puerto Rico9.5092
    Rhode Island 1
    South Carolina18.2462
    South Dakota16.6515
    Tennessee16.8980
    Texas16.3672
    Utah19.5943
    Vermont20.4055
    Virginia17.7547
    Washington22.5228
    West Virginia17.6572
    Wisconsin19.3313
    Wyoming19.1675
    1 All counties within the State are classified as urban.

    Table 4A.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas

    Urban area (Constituent counties)Wage indexGAF
    0040 Abilene, TX0.81180.8669
    Taylor, TX
    0060 Aguadilla, PR0.47380.5996
    Aguada, PR
    Aguadilla, PR
    Moca, PR
    0080 Akron, OH0.99240.9948
    Portage, OH
    Summit, OH
    0120 Albany, GA1.06751.0457
    Dougherty, GA
    Lee, GA
    0160 Albany-Schenectady-Troy, NY0.85970.9017
    Albany, NY
    Montgomery, NY
    Rensselaer, NY
    Saratoga, NY
    Schenectady, NY
    Schoharie, NY
    0200 Albuquerque, NM0.98550.9900
    Bernalillo, NM
    Sandoval, NM
    Valencia, NM
    0220 Alexandria, LA0.81370.8683
    Rapides, LA
    0240 Allentown-Bethlehem-Easton, PA0.94430.9615
    Carbon, PA
    Lehigh, PA
    Northampton, PA
    0280 Altoona, PA0.92250.9463
    Blair, PA
    0320 Amarillo, TX0.87060.9095
    Potter, TX
    Randall, TX
    0380 Anchorage, AK1.26051.1718
    Anchorage, AK
    0440 Ann Arbor, MI1.12201.0820
    Lenawee, MI
    Livingston, MI
    Washtenaw, MI
    0450 Anniston, AL0.83600.8846
    Calhoun, AL
    0460 Appleton-Oshkosh-Neenah, WI0.92030.9447
    Calumet, WI
    Outagamie, WI
    Winnebago, WI
    0470 Arecibo, PR0.46830.5948
    Arecibo, PR
    Camuy, PR
    Hatillo, PR
    0480 Asheville, NC0.93070.9520
    Buncombe, NC
    Madison, NC
    0500 Athens, GA0.99560.9970
    Clarke, GA
    Madison, GA
    Oconee, GA
    0520 1 Atlanta, GA1.01761.0120
    Barrow, GA
    Bartow, GA
    Carroll, GA
    Cherokee, GA
    Clayton, GA
    Cobb, GA
    Coweta, GA
    DeKalb, GA
    Douglas, GA
    Fayette, GA
    Start Printed Page 22822
    Forsyth, GA
    Fulton, GA
    Gwinnett, GA
    Henry, GA
    Newton, GA
    Paulding, GA
    Pickens, GA
    Rockdale, GA
    Spalding, GA
    Walton, GA
    0560 Atlantic-Cape May, NJ1.13491.0905
    Atlantic, NJ
    Cape May, NJ
    0580 Auburn-Opelika, AL0.83250.8820
    Lee, AL
    0600 Augusta-Aiken, GA-SC1.00901.0062
    Columbia, GA
    McDuffie, GA
    Richmond, GA
    Aiken, SC
    Edgefield, SC
    0640 1 Austin-San Marcos, TX0.93270.9534
    Bastrop, TX
    Caldwell, TX
    Hays, TX
    Travis, TX
    Williamson, TX
    0680 2 Bakersfield, CA0.98700.9911
    Kern, CA
    0720 1 Baltimore, MD0.97230.9809
    Anne Arundel, MD
    Baltimore, MD
    Baltimore City, MD
    Carroll, MD
    Harford, MD
    Howard, MD
    Queen Anne's, MD
    0733 Bangor, ME0.95590.9696
    Penobscot, ME
    0743 Barnstable-Yarmouth, MA1.35391.2306
    Barnstable, MA
    0760 Baton Rouge, LA0.82580.8772
    Ascension, LA
    East Baton Rouge, LA
    Livingston, LA
    West Baton Rouge, LA
    0840 Beaumont-Port Arthur, TX0.85080.8953
    Hardin, TX
    Jefferson, TX
    Orange, TX
    0860 Bellingham, WA1.19631.1306
    Whatcom, WA
    0870 2 Benton Harbor, MI0.91150.9385
    Berrien, MI
    0875 1 Bergen-Passaic, NJ1.16691.1115
    Bergen, NJ
    Passaic, NJ
    0880 Billings, MT0.96230.9740
    Yellowstone, MT
    0920 Biloxi-Gulfport-Pascagoula, MS0.85380.8974
    Hancock, MS
    Harrison, MS
    Jackson, MS
    0960 Binghamton, NY0.85950.9015
    Broome, NY
    Tioga, NY
    1000 Birmingham, AL0.86480.9053
    Blount, AL
    Jefferson, AL
    St. Clair, AL
    Shelby, AL
    1010 2 Bismarck, ND0.79650.8557
    Burleigh, ND
    Morton, ND
    1020 2 Bloomington, IN0.87570.9131
    Monroe, IN
    1040 Bloomington-Normal, IL0.85450.8979
    McLean, IL
    1080 Boise City, ID0.91900.9438
    Ada, ID
    Canyon, ID
    1123 1,2 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH (MA Hospitals)1.15861.1061
    Bristol, MA
    Essex, MA
    Middlesex, MA
    Norfolk, MA
    Plymouth, MA
    Suffolk, MA
    Worcester, MA
    Hillsborough, NH
    Merrimack, NH
    Rockingham, NH
    Strafford, NH
    1123 1 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH (NH Hospitals)1.14831.0993
    Bristol, MA
    Essex, MA
    Middlesex, MA
    Norfolk, MA
    Plymouth, MA
    Suffolk, MA
    Worcester, MA
    Hillsborough, NH
    Merrimack, NH
    Rockingham, NH
    Strafford, NH
    1125 Boulder-Longmont, CO0.98360.9887
    Boulder, CO
    1145 Brazoria, TX0.82990.8801
    Brazoria, TX
    1150 Bremerton, WA1.08821.0596
    Kitsap, WA
    1240 Brownsville-Harlingen-San Benito, TX0.87830.9150
    Cameron, TX
    1260 Bryan-College Station, TX0.92960.9512
    Brazos, TX
    1280 1 Buffalo-Niagara Falls, NY0.94050.9589
    Erie, NY
    Niagara, NY
    1303 Burlington, VT0.98260.9881
    Chittenden, VT
    Franklin, VT
    Grand Isle, VT
    1310 Caguas, PR0.51580.6355
    Caguas, PR
    Cayey, PR
    Cidra, PR
    Gurabo, PR
    San Lorenzo, PR
    1320 Canton-Massillon, OH0.90590.9346
    Carroll, OH
    Stark, OH
    1350 Casper, WY0.96060.9728
    Natrona, WY
    1360 Cedar Rapids, IA0.87110.9098
    Linn, IA
    1400 Champaign-Urbana, IL0.92640.9490
    Champaign, IL
    1440 Charleston-North Charleston, SC0.92930.9510
    Berkeley, SC
    Charleston, SC
    Dorchester, SC
    1480 Charleston, WV0.93690.9563
    Kanawha, WV
    Putnam, WV
    1520 1 Charlotte-Gastonia-Rock Hill, NC-SC0.94690.9633
    Cabarrus, NC
    Gaston, NC
    Lincoln, NC
    Mecklenburg, NC
    Rowan, NC
    Stanly, NC
    Union, NC
    York, SC
    1540 Charlottesville, VA1.06881.0466
    Albemarle, VA
    Charlottesville City, VA
    Fluvanna, VA
    Greene, VA
    1560 Chattanooga, TN-GA0.94460.9617
    Catoosa, GA
    Dade, GA
    Walker, GA
    Hamilton, TN
    Marion, TN
    1580 2 Cheyenne, WY0.88550.9201
    Laramie, WY
    1600 1 Chicago, IL1.10111.0682
    Cook, IL
    DeKalb, IL
    DuPage, IL
    Start Printed Page 22823
    Grundy, IL
    Kane, IL
    Kendall, IL
    Lake, IL
    McHenry, IL
    Will, IL
    1620 Chico-Paradise, CA0.99090.9938
    Butte, CA
    1640 1 Cincinnati, OH-KY-IN0.95740.9706
    Dearborn, IN
    Ohio, IN
    Boone, KY
    Campbell, KY
    Gallatin, KY
    Grant, KY
    Kenton, KY
    Pendleton, KY
    Brown, OH
    Clermont, OH
    Hamilton, OH
    Warren, OH
    1660 Clarksville-Hopkinsville, TN-KY0.84810.8933
    Christian, KY
    Montgomery, TN
    1680 1 Cleveland-Lorain-Elyria, OH0.94960.9652
    Ashtabula, OH
    Cuyahoga, OH
    Geauga, OH
    Lake, OH
    Lorain, OH
    Medina, OH
    1720 Colorado Springs, CO0.97540.9831
    El Paso, CO
    1740 Columbia, MO0.87870.9153
    Boone, MO
    1760 Columbia, SC0.95890.9717
    Lexington, SC
    Richland, SC
    1800 Columbus, GA-AL0.84710.8926
    Russell, AL
    Chattahoochee, GA
    Harris, GA
    Muscogee, GA
    1840 1 Columbus, OH0.97240.9810
    Delaware, OH
    Fairfield, OH
    Franklin, OH
    Licking, OH
    Madison, OH
    Pickaway, OH
    1880 Corpus Christi, TX0.82030.8731
    Nueces, TX
    San Patricio, TX
    1890 Corvallis, OR1.17811.1188
    Benton, OR
    1900 2 Cumberland, MD-WV (MD Hospitals)0.89620.9277
    Allegany, MD
    Mineral, WV
    1900 Cumberland, MD-WV (WV Hospital)0.84020.8876
    Allegany, MD
    Mineral, WV
    1920 1 Dallas, TX0.95060.9659
    Collin, TX
    Dallas, TX
    Denton, TX
    Ellis, TX
    Henderson, TX
    Hunt, TX
    Kaufman, TX
    Rockwall, TX
    1950 Danville, VA0.86410.9048
    Danville City, VA
    Pittsylvania, VA
    1960 Davenport-Moline-Rock Island, IA-IL0.87900.9155
    Scott, IA
    Henry, IL
    Rock Island, IL
    2000 Dayton-Springfield, OH0.93230.9531
    Clark, OH
    Greene, OH
    Miami, OH
    Montgomery, OH
    2020 Daytona Beach, FL0.90690.9353
    Flagler, FL
    Volusia, FL
    2030 Decatur, AL0.88170.9174
    Lawrence, AL
    Morgan, AL
    2040 2 Decatur, IL0.81400.8686
    Macon, IL
    2080 1 Denver, CO1.02891.0197
    Adams, CO
    Arapahoe, CO
    Denver, CO
    Douglas, CO
    Jefferson, CO
    2120 Des Moines, IA0.88810.9219
    Dallas, IA
    Polk, IA
    Warren, IA
    2160 1 Detroit, MI1.04781.0325
    Lapeer, MI
    Macomb, MI
    Monroe, MI
    Oakland, MI
    St. Clair, MI
    Wayne, MI
    2180 Dothan, AL0.80050.8587
    Dale, AL
    Houston, AL
    2190 Dover, DE1.04531.0308
    Kent, DE
    2200 Dubuque, IA0.86170.9031
    Dubuque, IA
    2240 Duluth-Superior, MN-WI1.04011.0273
    St. Louis, MN
    Douglas, WI
    2281 Dutchess County, NY1.06391.0433
    Dutchess, NY
    2290 2 Eau Claire, WI0.91210.9389
    Chippewa, WI
    Eau Claire, WI
    2320 El Paso, TX0.91620.9418
    El Paso, TX
    2330 Elkhart-Goshen, IN0.96460.9756
    Elkhart, IN
    2335 Elmira, NY0.85300.8968
    Chemung, NY
    2340 Enid, OK0.84540.8914
    Garfield, OK
    2360 Erie, PA0.89110.9241
    Erie, PA
    2400 Eugene-Springfield, OR1.14851.0995
    Lane, OR
    2440 2 Evansville-Henderson, IN-KY (IN Hospitals)0.87570.9131
    Posey, IN
    Vanderburgh, IN
    Warrick, IN
    Henderson, KY
    2440 2 Evansville-Henderson, IN-KY (KY Hospitals)0.80190.8597
    Posey, IN
    Vanderburgh, IN
    Warrick, IN
    Henderson, KY
    2520 Fargo-Moorhead, ND-MN0.93740.9567
    Clay, MN
    Cass, ND
    2560 Fayetteville, NC0.91320.9397
    Cumberland, NC
    2580 Fayetteville-Springdale-Rogers, AR0.75870.8277
    Benton, AR
    Washington, AR
    2620 Flagstaff, AZ-UT1.06781.0459
    Coconino, AZ
    Kane, UT
    2640 Flint, MI1.09201.0621
    Genesee, MI
    2650 Florence, AL0.79270.8529
    Colbert, AL
    Lauderdale, AL
    2655 Florence, SC0.88430.9192
    Florence, SC
    2670 Fort Collins-Loveland, CO1.01611.0110
    Larimer, CO
    2680 1 Ft. Lauderdale, FL1.09061.0612
    Broward, FL
    2700 Fort Myers-Cape Coral, FL0.93800.9571
    Lee, FL
    2710 Fort Pierce-Port St. Lucie, FL1.00671.0046
    Martin, FL
    St. Lucie, FL
    2720 Fort Smith, AR-OK0.80760.8639
    Start Printed Page 22824
    Crawford, AR
    Sebastian, AR
    Sequoyah, OK
    2750 2 Fort Walton Beach, FL0.87330.9114
    Okaloosa, FL
    2760 Fort Wayne, IN0.91860.9435
    Adams, IN
    Allen, IN
    De Kalb, IN
    Huntington, IN
    Wells, IN
    Whitley, IN
    2800 1 Forth Worth-Arlington, TX0.94520.9621
    Hood, TX
    Johnson, TX
    Parker, TX
    Tarrant, TX
    2840 Fresno, CA0.99720.9981
    Fresno, CA
    Madera, CA
    2880 Gadsden, AL0.88450.9194
    Etowah, AL
    2900 Gainesville, FL1.21331.1416
    Alachua, FL
    2920 Galveston-Texas City, TX1.02711.0185
    Galveston, TX
    2960 Gary, IN0.95710.9704
    Lake, IN
    Porter, IN
    2975 2 Glens Falls, NY0.85300.8968
    Warren, NY
    Washington, NY
    2980 Goldsboro, NC0.88100.9169
    Wayne, NC
    2985 Grand Forks, ND-MN0.91730.9426
    Polk, MN
    Grand Forks, ND
    2995 Grand Junction, CO0.98160.9874
    Mesa, CO
    3000 1 Grand Rapids-Muskegon-Holland, MI1.01611.0110
    Allegan, MI
    Kent, MI
    Muskegon, MI
    Ottawa, MI
    3040 Great Falls, MT0.93010.9516
    Cascade, MT
    3060 Greeley, CO0.96040.9727
    Weld, CO
    3080 Green Bay, WI0.94400.9613
    Brown, WI
    3120 1 Greensboro-Winston-Salem-High Point, NC0.96160.9735
    Alamance, NC
    Davidson, NC
    Davie, NC
    Forsyth, NC
    Guilford, NC
    Randolph, NC
    Stokes, NC
    Yadkin, NC
    3150 Greenville, NC0.99630.9975
    Pitt, NC
    3160 Greenville-Spartanburg-Anderson, SC0.91100.9382
    Anderson, SC
    Cherokee, SC
    Greenville, SC
    Pickens, SC
    Spartanburg, SC
    3180 2 Hagerstown, MD0.89620.9277
    Washington, MD
    3200 Hamilton-Middletown, OH0.92690.9493
    Butler, OH
    3240 Harrisburg-Lebanon-Carlisle, PA0.93110.9523
    Cumberland, PA
    Dauphin, PA
    Lebanon, PA
    Perry, PA
    3283 1,2 Hartford, CT1.23571.1560
    Hartford, CT
    Litchfield, CT
    Middlesex, CT
    Tolland, CT
    3285 2 Hattiesburg, MS0.76120.8296
    Forrest, MS
    Lamar, MS
    3290 Hickory-Morganton-Lenoir, NC0.95170.9667
    Alexander, NC
    Burke, NC
    Caldwell, NC
    Catawba, NC
    3320 Honolulu, HI1.16581.1108
    Honolulu, HI
    3350 Houma, LA0.80430.8615
    Lafourche, LA
    Terrebonne, LA
    3360 1 Houston, TX0.96040.9727
    Chambers, TX
    Fort Bend, TX
    Harris, TX
    Liberty, TX
    Montgomery, TX
    Waller, TX
    3400 Huntington-Ashland, WV-KY-OH0.97000.9794
    Boyd, KY
    Carter, KY
    Greenup, KY
    Lawrence, OH
    Cabell, WV
    Wayne, WV
    3440 Huntsville, AL0.88540.9200
    Limestone, AL
    Madison, AL
    3480 1 Indianapolis, IN0.97710.9843
    Boone, IN
    Hamilton, IN
    Hancock, IN
    Hendricks, IN
    Johnson, IN
    Madison, IN
    Marion, IN
    Morgan, IN
    Shelby, IN
    3500 Iowa City, IA0.99730.9982
    Johnson, IA
    3520 Jackson, MI0.93870.9576
    Jackson, MI
    3560 Jackson, MS0.85890.9011
    Hinds, MS
    Madison, MS
    Rankin, MS
    3580 Jackson, TN0.91170.9387
    Madison, TN
    Chester, TN
    3600 1 Jacksonville, FL0.90400.9332
    Clay, FL
    Duval, FL
    Nassau, FL
    St. Johns, FL
    3605 2 Jacksonville, NC0.86320.9042
    Onslow, NC
    3610 2 Jamestown, NY0.85300.8968
    Chautauqua, NY
    3620 Janesville-Beloit, WI0.98400.9890
    Rock, WI
    3640 Jersey City, NJ1.12161.0818
    Hudson, NJ
    3660 Johnson City-Kingsport-Bristol, TN-VA0.85400.8976
    Carter, TN
    Hawkins, TN
    Sullivan, TN
    Unicoi, TN
    Washington, TN
    Bristol City, VA
    Scott, VA
    Washington, VA
    3680 Johnstown, PA0.89590.9275
    Cambria, PA
    Somerset, PA
    3700 Jonesboro, AR0.85230.8963
    Craighead, AR
    3710 Joplin, MO0.87360.9116
    Jasper, MO
    Newton, MO
    3720 Kalamazoo-Battlecreek, MI1.06961.0472
    Calhoun, MI
    Kalamazoo, MI
    Van Buren, MI
    3740 Kankakee, IL0.92680.9493
    Kankakee, IL
    3760 1 Kansas City, KS-MO0.94300.9606
    Johnson, KS
    Leavenworth, KS
    Miami, KS
    Wyandotte, KS
    Cass, MO
    Clay, MO
    Clinton, MO
    Jackson, MO
    Start Printed Page 22825
    Lafayette, MO
    Platte, MO
    Ray, MO
    3800 Kenosha, WI0.96780.9778
    Kenosha, WI
    3810 2 Killeen-Temple, TX0.76730.8341
    Bell, TX
    Coryell, TX
    3840 Knoxville, TN0.89040.9236
    Anderson, TN
    Blount, TN
    Knox, TN
    Loudon, TN
    Sevier, TN
    Union, TN
    3850 Kokomo, IN0.92900.9508
    Howard, IN
    Tipton, IN
    3870 La Crosse, WI-MN0.93280.9535
    Houston, MN
    La Crosse, WI
    3880 Lafayette, LA0.86000.9019
    Acadia, LA
    Lafayette, LA
    St. Landry, LA
    St. Martin, LA
    3920 Lafayette, IN0.91650.9420
    Clinton, IN
    Tippecanoe, IN
    3960 Lake Charles, LA0.78100.8443
    Calcasieu, LA
    3980 Lakeland-Winter Haven, FL0.91670.9422
    Polk, FL
    4000 Lancaster, PA0.94130.9594
    Lancaster, PA
    4040 Lansing-East Lansing, MI0.96530.9761
    Clinton, MI
    Eaton, MI
    Ingham, MI
    4080 Laredo, TX0.78770.8492
    Webb, TX
    4100 2 Las Cruces, NM0.88350.9187
    Dona Ana, NM
    4120 1 Las Vegas, NV-AZ1.12381.0832
    Mohave, AZ
    Clark, NV
    Nye, NV
    4150 Lawrence, KS0.87560.9130
    Douglas, KS
    4200 Lawton, OK0.87830.9150
    Comanche, OK
    4243 Lewiston-Auburn, ME0.94510.9621
    Androscoggin, ME
    4280 Lexington, KY0.88500.9197
    Bourbon, KY
    Clark, KY
    Fayette, KY
    Jessamine, KY
    Madison, KY
    Scott, KY
    Woodford, KY
    4320 Lima, OH0.95580.9695
    Allen, OH
    Auglaize, OH
    4360 Lincoln, NE1.02721.0185
    Lancaster, NE
    4400 Little Rock-North Little Rock, AR0.90530.9341
    Faulkner, AR
    Lonoke, AR
    Pulaski, AR
    Saline, AR
    4420 Longview-Marshall, TX0.84390.8903
    Gregg, TX
    Harrison, TX
    Upshur, TX
    4480 1 Los Angeles-Long Beach, CA1.20711.1376
    Los Angeles, CA
    4520 1 Louisville, KY-IN0.95960.9722
    Clark, IN
    Floyd, IN
    Harrison, IN
    Scott, IN
    Bullitt, KY
    Jefferson, KY
    Oldham, KY
    4600 Lubbock, TX0.85470.8981
    Lubbock, TX
    4640 Lynchburg, VA0.92080.9451
    Amherst, VA
    Bedford, VA
    Bedford City, VA
    Campbell, VA
    Lynchburg City, VA
    4680 Macon, GA0.90770.9358
    Bibb, GA
    Houston, GA
    Jones, GA
    Peach, GA
    Twiggs, GA
    4720 Madison, WI1.04621.0314
    Dane, WI
    4800 Mansfield, OH0.88270.9181
    Crawford, OH
    Richland, OH
    4840 Mayaguez, PR0.49170.6150
    Anasco, PR
    Cabo Rojo, PR
    Hormigueros, PR
    Mayaguez, PR
    Sabana Grande, PR
    San German, PR
    4880 McAllen-Edinburg-Mission, TX0.84330.8898
    Hidalgo, TX
    4890 Medford-Ashland, OR1.04331.0295
    Jackson, OR
    4900 Melbourne-Titusville-Palm Bay, FL0.98830.9920
    Brevard, Fl
    4920 1 Memphis, TN-AR-MS0.94350.9610
    Crittenden, AR
    DeSoto, MS
    Fayette, TN
    Shelby, TN
    Tipton, TN
    4940 Merced, CA0.98700.9911
    Merced, CA
    5000 1 Miami, FL0.99340.9955
    Dade, FL
    5015 1 Middlesex-Somerset-Hunterdon, NJ1.19521.1299
    Hunterdon, NJ
    Middlesex, NJ
    Somerset, NJ
    5080 1 Milwaukee-Waukesha, WI0.98980.9930
    Milwaukee, WI
    Ozaukee, WI
    Washington, WI
    Waukesha, WI
    5120 1 Minneapolis-St. Paul, MN-WI1.10001.0674
    Anoka, MN
    Carver, MN
    Chisago, MN
    Dakota, MN
    Hennepin, MN
    Isanti, MN
    Ramsey, MN
    Scott, MN
    Sherburne, MN
    Washington, MN
    Wright, MN
    Pierce, WI
    St. Croix, WI
    5140 Missoula, MT0.94530.9622
    Missoula, MT
    5160 Mobile, AL0.77660.8410
    Baldwin, AL
    Mobile, AL
    5170 Modesto, CA1.09451.0638
    Stanislaus, CA
    5190 1 Monmouth-Ocean, NJ1.15141.1014
    Monmouth, NJ
    Ocean, NJ
    5200 Monroe, LA0.82960.8799
    Ouachita, LA
    5240 Montgomery, AL0.75020.8213
    Autauga, AL
    Elmore, AL
    Montgomery, AL
    5280 Muncie, IN0.96890.9786
    Delaware, IN
    5330 Myrtle Beach, SC0.88550.9201
    Horry, SC
    5345 Naples, FL0.95660.9701
    Collier, FL
    5360 1 Nashville, TN0.96020.9726
    Cheatham, TN
    Davidson, TN
    Dickson, TN
    Robertson, TN
    Rutherford TN
    Sumner, TN
    Start Printed Page 22826
    Williamson, TN
    Wilson, TN
    5380 1 Nassau-Suffolk, NY1.38411.2493
    Nassau, NY
    Suffolk, NY
    5483 12 New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT1.23571.1560
    Fairfield, CT
    New Haven, CT
    5523 12 New London-Norwich, CT1.23571.1560
    New London, CT
    5560 1 New Orleans, LA0.90540.9342
    Jefferson, LA
    Orleans, LA
    Plaquemines, LA
    St. Bernard, LA
    St. Charles, LA
    St. James, LA
    St. John The Baptist, LA
    St. Tammany, LA
    5600 1 New York, NY1.39231.2544
    Bronx, NY
    Kings, NY
    New York, NY
    Putnam, NY
    Queens, NY
    Richmond, NY
    Rockland, NY
    Westchester, NY
    5640 1 Newark, NJ1.20041.1332
    Essex, NJ
    Morris, NJ
    Sussex, NJ
    Union, NJ
    Warren, NJ
    5660 Newburgh, NY-PA1.12351.0830
    Orange, NY
    Pike, PA
    5720 1 Norfolk-Virginia Beach-Newport News, VA-NC0.86300.9040
    Currituck, NC
    Chesapeake City, VA
    Gloucester, VA
    Hampton City, VA
    Isle of Wight, VA
    James City, VA
    Mathews, VA
    Newport News City, VA
    Norfolk City, VA
    Poquoson City, VA
    Portsmouth City, VA
    Suffolk City, VA
    Virginia Beach City VA
    Williamsburg City, VA
    York, VA
    5775 1 Oakland, CA1.54161.3450
    Alameda, CA
    Contra Costa, CA
    5790 Ocala, FL0.95790.9710
    Marion, FL
    5800 Odessa-Midland, TX0.90170.9316
    Ector, TX
    Midland, TX
    5880 1 Oklahoma City, OK0.87280.9110
    Canadian, OK
    Cleveland, OK
    Logan, OK
    McClain, OK
    Oklahoma, OK
    Pottawatomie, OK
    5910 Olympia, WA1.14811.0992
    Thurston, WA
    5920 Omaha, NE-IA0.96960.9791
    Pottawattamie, IA
    Cass, NE
    Douglas, NE
    Sarpy, NE
    Washington, NE
    5945 1 Orange County, CA1.13541.0909
    Orange, CA
    5960 1 Orlando, FL0.94640.9630
    Lake, FL
    Orange, FL
    Osceola, FL
    Seminole, FL
    5990 Owensboro, KY0.83460.8835
    Daviess, KY
    6015 Panama City, FL0.91660.9421
    Bay, FL
    6020 Parkersburg-Marietta, WV-OH (WV Hospitals)0.81920.8723
    Washington, OH
    Wood, WV
    6020 2 Parkersburg-Marietta, WV-OH (OH Hospitals)0.87610.9134
    Washington, OH
    Wood, WV
    6080 2 Pensacola, FL0.87330.9114
    Escambia, FL
    Santa Rosa, FL
    6120 Peoria-Pekin, IL0.88830.9221
    Peoria, IL
    Tazewell, IL
    Woodford, IL
    6160 1 Philadelphia, PA-NJ1.06261.0425
    Burlington, NJ
    Camden, NJ
    Gloucester, NJ
    Salem, NJ
    Bucks, PA
    Chester, PA
    Delaware, PA
    Montgomery, PA
    Philadelphia, PA
    6200 1 Phoenix-Mesa, AZ0.96540.9762
    Maricopa, AZ
    Pinal, AZ
    6240 Pine Bluff, AR0.78370.8463
    Jefferson, AR
    6280 1 Pittsburgh, PA0.97140.9803
    Allegheny, PA
    Beaver, PA
    Butler, PA
    Fayette, PA
    Washington, PA
    Westmoreland, PA
    6323 2 Pittsfield, MA1.15861.1061
    Berkshire, MA
    6340 Pocatello, ID0.95570.9694
    Bannock, ID
    6360 Ponce, PR0.52780.6456
    Guayanilla, PR
    Juana Diaz, PR
    Penuelas, PR
    Ponce, PR
    Villalba, PR
    Yauco, PR
    6403 Portland, ME0.95010.9656
    Cumberland, ME
    Sagadahoc, ME
    York, ME
    6440 1 Portland-Vancouver, OR-WA1.12911.0867
    Clackamas, OR
    Columbia, OR
    Multnomah, OR
    Washington, OR
    Yamhill, OR
    Clark, WA
    6483 1 Providence-Warwick-Pawtucket, RI1.07811.0528
    Bristol, RI
    Kent, RI
    Newport, RI
    Providence, RI
    Washington, RI
    6520 Provo-Orem, UT0.99670.9977
    Utah, UT
    6560 2 Pueblo, CO0.89090.9239
    Pueblo, CO
    6580 Punta Gorda, FL0.88180.9175
    Charlotte, FL
    6600 Racine, WI0.94410.9614
    Racine, WI
    6640 1 Raleigh-Durham-Chapel Hill, NC0.99010.9932
    Chatham, NC
    Durham, NC
    Franklin, NC
    Johnston, NC
    Orange, NC
    Wake, NC
    6660 Rapid City, SD0.89710.9283
    Pennington, SD
    6680 2 Reading, PA0.84730.8927
    Berks, PA
    6690 Redding, CA1.12221.0822
    Shasta, CA
    6720 Reno, NV1.04561.0310
    Washoe, NV
    Start Printed Page 22827
    6740 Richland-Kennewick-Pasco, WA1.10861.0732
    Benton, WA
    Franklin, WA
    6760 Richmond-Petersburg, VA0.97120.9802
    Charles City County, VA
    Chesterfield, VA
    Colonial Heights City, VA
    Dinwiddie, VA
    Goochland, VA
    Hanover, VA
    Henrico, VA
    Hopewell City, VA
    New Kent, VA
    Petersburg City, VA
    Powhatan, VA
    Prince George, VA
    Richmond City, VA
    6780 1 Riverside-San Bernardino, CA1.10121.0682
    Riverside, CA
    San Bernardino, CA
    6800 2 Roanoke, VA0.84730.8927
    Botetourt, VA
    Roanoke, VA
    Roanoke City, VA
    Salem City, VA
    6820 Rochester, MN1.15951.1067
    Olmsted, MN
    6840 1 Rochester, NY0.92380.9472
    Genesee, NY
    Livingston, NY
    Monroe, NY
    Ontario, NY
    Orleans, NY
    Wayne, NY
    6880 Rockford, IL0.91940.9441
    Boone, IL
    Ogle, IL
    Winnebago, IL
    6895 Rocky Mount, NC0.91970.9443
    Edgecombe, NC
    Nash, NC
    6920 1 Sacramento, CA1.18091.1206
    El Dorado, CA
    Placer, CA
    Sacramento, CA
    6960 Saginaw-Bay City-Midland, MI0.96620.9767
    Bay, MI
    Midland, MI
    Saginaw, MI
    6980 St. Cloud, MN1.00401.0027
    Benton, MN
    Stearns, MN
    7000 St. Joseph, MO0.91130.9384
    Andrew, MO
    Buchanan, MO
    7040 1 St. Louis, MO-IL0.90240.9321
    Clinton, IL
    Jersey, IL
    Madison, IL
    Monroe, IL
    St. Clair, IL
    Franklin, MO
    Jefferson, MO
    Lincoln, MO
    St. Charles, MO
    St. Louis, MO
    St. Louis City, MO
    Warren, MO
    7080 2 Salem, OR1.01561.0107
    Marion, OR
    Polk, OR
    7120 Salinas, CA1.48541.3112
    Monterey, CA
    7160 1 Salt Lake City-Ogden, UT0.99760.9984
    Davis, UT
    Salt Lake, UT
    Weber, UT
    7200 San Angelo, TX0.82880.8793
    Tom Green, TX
    7240 1 San Antonio, TX0.83330.8826
    Bexar, TX
    Comal, TX
    Guadalupe, TX
    Wilson, TX
    7320 1 San Diego, CA1.14801.0991
    San Diego, CA
    7360 1 San Francisco, CA1.43191.2787
    Marin, CA
    San Francisco, CA
    San Mateo, CA
    7400 1 San Jose, CA1.42491.2744
    Santa Clara, CA
    7440 1 San Juan-Bayamon, PR0.48120.6060
    Aguas Buenas, PR
    Barceloneta, PR
    Bayamon, PR
    Canovanas, PR
    Carolina, PR
    Catano, PR
    Ceiba, PR
    Comerio, PR
    Corozal, PR
    Dorado, PR
    Fajardo, PR
    Florida, PR
    Guaynabo, PR
    Humacao, PR
    Juncos, PR
    Los Piedras, PR
    Loiza, PR
    Luguillo, PR
    Manati, PR
    Morovis, PR
    Naguabo, PR
    Naranjito, PR
    Rio Grande, PR
    San Juan, PR
    Toa Alta, PR
    Toa Baja, PR
    Trujillo Alto, PR
    Vega Alta, PR
    Vega Baja, PR
    Yabucoa, PR
    7460 San Luis Obispo-Atascadero-Paso Robles, CA1.11171.0752
    San Luis Obispo, CA
    7480 Santa Barbara-Santa Maria-Lompoc, CA1.09271.0626
    Santa Barbara, CA
    7485 Santa Cruz-Watsonville, CA1.40491.2621
    Santa Cruz, CA
    7490 Santa Fe, NM1.03121.0213
    Los Alamos, NM
    Santa Fe, NM
    7500 Santa Rosa, CA1.27271.1796
    Sonoma, CA
    7510 Sarasota-Bradenton, FL1.01181.0081
    Manatee, FL
    Sarasota, FL
    7520 Savannah, GA0.93490.9549
    Bryan, GA
    Chatham, GA
    Effingham, GA
    7560 2 Scranton—Wilkes-Barre—Hazleton, PA0.84730.8927
    Columbia, PA
    Lackawanna, PA
    Luzerne, PA
    Wyoming, PA
    7600 1 Seattle-Bellevue-Everett, WA1.10561.0712
    Island, WA
    King, WA
    Snohomish, WA
    7610 2 Sharon, PA0.84730.8927
    Mercer, PA
    7620 2 Sheboygan, WI0.91210.9389
    Sheboygan, WI
    7640 Sherman-Denison, TX0.91630.9419
    Grayson, TX
    7680 Shreveport-Bossier City, LA0.91650.9420
    Bossier, LA
    Caddo, LA
    Webster, LA
    7720 Sioux City, IA-NE0.88680.9210
    Woodbury, IA
    Dakota, NE
    7760 Sioux Falls, SD0.92450.9477
    Lincoln, SD
    Minnehaha, SD
    7800 South Bend, IN1.03031.0207
    St. Joseph, IN
    7840 Spokane, WA1.07911.0535
    Spokane, WA
    7880 Springfield, IL0.85020.8948
    Menard, IL
    Sangamon, IL
    7920 Springfield, MO0.86660.9066
    Christian, MO
    Start Printed Page 22828
    Greene, MO
    Webster, MO
    8003 2 Springfield, MA1.15861.1061
    Hampden, MA
    Hampshire, MA
    8050 State College, PA0.92390.9472
    Centre, PA
    8080 2 Steubenville-Weirton, OH-WV (OH Hospitals)0.87610.9134
    Jefferson, OH
    Brooke, WV
    Hancock, WV
    8080 Steubenville-Weirton, OH-WV (WV Hospitals)0.87370.9117
    Jefferson, OH
    Brooke, WV
    Hancock, WV
    8120 Stockton-Lodi, CA1.11141.0750
    San Joaquin, CA
    8140 2 Sumter, SC0.86060.9023
    Sumter, SC
    8160 Syracuse, NY0.92470.9478
    Cayuga, NY
    Madison, NY
    Onondaga, NY
    Oswego, NY
    8200 Tacoma, WA1.17511.1168
    Pierce, WA
    8240 2 Tallahassee, FL0.87330.9114
    Gadsden, FL
    Leon, FL
    8280 1 Tampa-St. Petersburg-Clearwater, FL0.90950.9371
    Hernando, FL
    Hillsborough, FL
    Pasco, FL
    Pinellas, FL
    8320 2 Terre Haute, IN0.87570.9131
    Clay, IN
    Vermillion, IN
    Vigo, IN
    8360 Texarkana, AR-Texarkana, TX0.84140.8885
    Miller, AR
    Bowie, TX
    8400 Toledo, OH0.98150.9873
    Fulton, OH
    Lucas, OH
    Wood, OH
    8440 Topeka, KS0.90150.9315
    Shawnee, KS
    8480 Trenton, NJ1.01721.0117
    Mercer, NJ
    8520 Tucson, AZ0.90020.9305
    Pima, AZ
    8560 Tulsa, OK0.89490.9268
    Creek, OK
    Osage, OK
    Rogers, OK
    Tulsa, OK
    Wagoner, OK
    8600 Tuscaloosa, AL0.82650.8777
    Tuscaloosa, AL
    8640 Tyler, TX0.91090.9381
    Smith, TX
    8680 2 Utica-Rome, NY0.85300.8968
    Herkimer, NY
    Oneida, NY
    8720 Vallejo-Fairfield-Napa, CA1.35351.2303
    Napa, CA
    Solano, CA
    8735 Ventura, CA1.10881.0733
    Ventura, CA
    8750 Victoria, TX0.83540.8841
    Victoria, TX
    8760 Vineland-Millville-Bridgeton, NJ1.04731.0322
    Cumberland, NJ
    8780 2 Visalia-Tulare-Porterville, CA0.98700.9911
    Tulare, CA
    8800 Waco, TX0.82680.8779
    McLennan, TX
    8840 1 Washington, DC-MD-VA-WV1.11761.0791
    District of Columbia, DC
    Calvert, MD
    Charles, MD
    Frederick, MD
    Montgomery, MD
    Prince Georges, MD
    Alexandria City, VA
    Arlington, VA
    Clarke, VA
    Culpeper, VA
    Fairfax, VA
    Fairfax City, VA
    Falls Church City, VA
    Fauquier, VA
    Fredericksburg City, VA
    King George, VA
    Loudoun, VA
    Manassas City, VA
    Manassas Park City, VA
    Prince William, VA
    Spotsylvania, VA
    Stafford, VA
    Warren, VA
    Berkeley, WV
    Jefferson, WV
    8920 Waterloo-Cedar Falls, IA0.86080.9024
    Black Hawk, IA
    8940 Wausau, WI0.95160.9666
    Marathon, WI
    8960 1 West Palm Beach-Boca Raton, FL0.97850.9852
    Palm Beach, FL
    9000 2 Wheeling, WV-OH (WV Hospitals)0.81450.8689
    Belmont, OH
    Marshall, WV
    Ohio, WV
    9000 2 Wheeling, WV-OH (OH Hospitals)0.87610.9134
    Belmont, OH
    Marshall, WV
    Ohio, WV
    9040 Wichita, KS0.95410.9683
    Butler, KS
    Harvey, KS
    Sedgwick, KS
    9080 Wichita Falls, TX0.80150.8594
    Archer, TX
    Wichita, TX
    9140 Williamsport, PA0.85030.8949
    Lycoming, PA
    9160 Wilmington-Newark, DE-MD1.07571.0512
    New Castle, DE
    Cecil, MD
    9200 Wilmington, NC0.99710.9980
    New Hanover, NC
    Brunswick, NC
    9260 Yakima, WA1.06901.0468
    Yakima, WA
    9270 2 Yolo, CA0.98700.9911
    Yolo, CA
    9280 2 York, PA0.84730.8927
    York, PA
    9320 Youngstown-Warren, OH0.94800.9641
    Columbiana, OH
    Mahoning, OH
    Trumbull, OH
    9340 Yuba City, CA1.04791.0326
    Sutter, CA
    Yuba, CA
    9360 Yuma, AZ0.89040.9236
    Yuma, AZ
    1 Large Urban Area
    2 Hospitals geographically located in the area are assigned the statewide rural wage index for FY 2002.

    Table 4B.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Rural Areas

    Nonurban areaWage indexGAF
    Alabama0.74830.8199
    Alaska1.20061.1334
    Arizona0.87470.9124
    Arkansas0.75610.8258
    California0.98700.9911
    Colorado0.89090.9239
    Connecticut1.23571.1560
    Delaware0.94870.9646
    Florida0.87330.9114
    Georgia0.83410.8832
    Hawaii1.12351.0830
    Idaho0.88200.9176
    Illinois0.81400.8686
    Indiana0.87570.9131
    Iowa0.81940.8725
    Start Printed Page 22829
    Kansas0.78500.8472
    Kentucky0.80190.8597
    Louisiana0.77550.8402
    Maine0.87140.9100
    Maryland0.89620.9277
    Massachusetts1.15861.1061
    Michigan0.91150.9385
    Minnesota0.91090.9381
    Mississippi0.76120.8296
    Missouri0.78380.8464
    Montana0.86420.9049
    Nebraska0.82330.8753
    Nevada0.97850.9852
    New Hampshire0.99140.9941
    New Jersey 1
    New Mexico0.88350.9187
    New York0.85300.8968
    North Carolina0.86320.9042
    North Dakota0.79650.8557
    Ohio0.87610.9134
    Oklahoma0.76460.8321
    Oregon1.01561.0107
    Pennsylvania0.84730.8927
    Puerto Rico0.46540.5923
    Rhode Island 1
    South Carolina0.86060.9023
    South Dakota0.79340.8534
    Tennessee0.79010.8510
    Texas0.76730.8341
    Utah0.91560.9414
    Vermont0.95760.9708
    Virginia0.84730.8927
    Washington1.03011.0205
    West Virginia0.81450.8689
    Wisconsin0.91210.9389
    Wyoming0.88550.9201 -
    1 All counties within the State are classified as urban.

    Table 4C.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Hospitals That Are Reclassified

    AreaWage indexGAF
    Abilene, TX0.81180.8669
    Akron, OH0.99240.9948
    Albany, GA1.06751.0457
    Albuquerque, NM0.97480.9827
    Alexandria, LA0.81370.8683
    Allentown-Bethlehem-Easton, PA0.94430.9615
    Altoona, PA0.92250.9463
    Amarillo, TX0.84850.8936
    Anchorage, AK1.26051.1718
    Ann Arbor, MI1.12201.0820
    Anniston, AL0.79220.8526
    Asheville, NC0.93070.9520
    Athens, GA0.98180.9875
    Atlanta, GA1.00661.0045
    Augusta-Aiken, GA-SC1.00901.0062
    Austin-San Marcos, TX0.93270.9534
    Barnstable-Yarmouth, MA1.34151.2229
    Baton Rouge, LA0.82580.8772
    Bellingham, WA1.14271.0957
    Benton Harbor, MI0.91150.9385
    Bergen-Passaic, NJ1.16691.1115
    Billings, MT0.96230.9740
    Biloxi-Gulfport-Pascagoula, MS0.81980.8728
    Binghamton, NY0.85950.9015
    Birmingham, AL0.86480.9053
    Bismarck, ND0.79650.8557
    Bloomington-Normal, IL0.85450.8979
    Boise City, ID0.91900.9438
    Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH1.14831.0993
    Burlington, VT0.96060.9728
    Caguas, PR0.49930.6215
    Casper, WY0.94540.9623
    Champaign-Urbana, IL0.92640.9490
    Charleston-North Charleston, SC0.92930.9510
    Charleston, WV0.89910.9298
    Charlotte-Gastonia-Rock Hill, NC-SC0.94690.9633
    Chattanooga, TN-GA0.92070.9450
    Chicago, IL1.08871.0599
    Cincinnati, OH-KY-IN0.95740.9706
    Clarksville-Hopkinsville, TN-KY0.84810.8933
    Cleveland-Lorain-Elyria, OH0.94960.9652
    Columbia, MO0.87870.9153
    Columbia, SC0.92640.9490
    Columbus, GA-AL0.84710.8926
    Columbus, OH0.97240.9810
    Corpus Christi, TX0.82030.8731
    Dallas, TX0.95060.9659
    Davenport-Moline-Rock Island, IA-IL0.87900.9155
    Dayton-Springfield, OH0.93230.9531
    Denver, CO1.02891.0197
    Des Moines, IA0.88810.9219
    Dothan, AL0.80050.8587
    Dover, DE0.99570.9971
    Duluth-Superior, MN-WI1.02991.0204
    Eau Claire, WI0.91210.9389
    Elkhart-Goshen, IN0.95160.9666
    Erie, PA0.87800.9148
    Eugene-Springfield, OR1.10731.0723
    Fargo-Moorhead, ND-MN0.92470.9478
    Fayetteville, NC0.89700.9283
    Flagstaff, AZ-UT1.02221.0151
    Flint, MI1.09201.0621
    Florence, AL0.79270.8529
    Florence, SC0.88430.9192
    Fort Collins-Loveland, CO1.01611.0110
    Ft. Lauderdale, FL1.09061.0612
    Fort Pierce-Port St. Lucie, FL1.00671.0046
    Fort Smith, AR-OK0.78890.8501
    Fort Walton Beach, FL0.85470.8981
    Fort Wayne, IN0.90590.9346
    Forth Worth-Arlington, TX0.94520.9621
    Gadsden, AL0.84460.8908
    Gainesville, FL1.18551.1236
    Grand Forks, ND-MN (ND Hospitals)0.90220.9319
    Grand Forks, ND-MN (MN Hospital)0.91090.9381
    Grand Junction, CO0.98160.9874
    Grand Rapids-Muskegon-Holland, MI1.00521.0036
    Great Falls, MT0.93010.9516
    Greeley, CO0.96040.9727
    Green Bay, WI0.94400.9613
    Greensboro-Winston-Salem-High Point, NC0.94740.9637
    Greenville, NC0.97510.9829
    Greenville-Spartanburg-Anderson, SC0.91100.9382
    Harrisburg-Lebanon-Carlisle, PA0.90680.9352
    Hartford, CT1.15861.1061
    Hattiesburg, MS0.76120.8296
    Hickory-Morganton-Lenoir, NC0.95170.9667
    Honolulu, HI1.16581.1108
    Houston, TX0.96040.9727
    Huntington-Ashland, WV-KY-OH0.92860.9505
    Huntsville, AL0.86570.9060
    Indianapolis, IN0.96660.9770
    Iowa City, IA0.98200.9876
    Jackson, MS0.85890.9011
    Jackson, TN0.89450.9265
    Jacksonville, FL0.90400.9332
    Johnson City-Kingsport-Bristol, TN-VA0.85400.8976
    Jonesboro, AR0.80930.8651
    Joplin, MO0.85600.8990
    Kalamazoo-Battlecreek, MI1.05371.0365
    Kansas City, KS-MO0.94300.9606
    Knoxville, TN0.89040.9236
    Kokomo, IN0.92900.9508
    Lafayette, LA0.84300.8896
    Lansing-East Lansing, MI0.96530.9761
    Las Vegas, NV-AZ1.12381.0832
    Lawton, OK0.83720.8854
    Lexington, KY0.86750.9072
    Lima, OH0.95580.9695
    Lincoln, NE0.99450.9962
    Little Rock-North Little Rock, AR0.89380.9260
    Longview-Marshall, TX0.84390.8903
    Los Angeles-Long Beach, CA1.20711.1376
    Louisville, KY-IN0.94810.9642
    Lubbock, TX0.85470.8981
    Lynchburg, VA0.88970.9231
    Macon, GA0.90770.9358
    Madison, WI1.04621.0314
    Mansfield, OH0.88270.9181
    Medford-Ashland, OR1.01561.0107
    Melbourne-Titusville-Palm Bay, FL0.98830.9920
    Memphis, TN-AR-MS0.91520.9411
    Miami, FL0.99340.9955
    Start Printed Page 22830
    Milwaukee-Waukesha, WI0.98980.9930
    Minneapolis-St. Paul, MN-WI1.10001.0674
    Missoula, MT0.92730.9496
    Mobile, AL0.77660.8410
    Modesto, CA1.09451.0638
    Monmouth-Ocean, NJ1.15141.1014
    Monroe, LA0.81910.8723
    Montgomery, AL0.75020.8213
    Myrtle Beach, SC0.86630.9064
    Nashville, TN0.94330.9608
    New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT1.23571.1560
    New London-Norwich, CT1.15781.1055
    New Orleans, LA0.90540.9342
    New York, NY1.39231.2544
    Newark, NJ1.20041.1332
    Newburgh, NY-PA1.08381.0567
    Norfolk-Virginia Beach-Newport News, VA-NC0.86320.9042
    Oakland, CA1.53131.3388
    Odessa-Midland, TX (TX Hospitals)0.87690.9140
    Odessa-Midland, TX (NM Hospitals)0.88350.9187
    Oklahoma City, OK0.87280.9110
    Omaha, NE-IA0.96960.9791
    Orange County, CA1.13541.0909
    Orlando, FL0.94640.9630
    Peoria-Pekin, IL0.88830.9221
    Philadelphia, PA-NJ1.06261.0425
    Pine Bluff, AR0.78370.8463
    Pittsburgh, PA0.95500.9690
    Pittsfield, MA1.00181.0012
    Pocatello, ID0.92640.9490
    Portland, ME0.95010.9656
    Portland-Vancouver, OR-WA1.12911.0867
    Provo-Orem, UT0.98400.9890
    Raleigh-Durham-Chapel Hill, NC0.99010.9932
    Rapid City, SD0.88490.9197
    Reading, PA0.84730.8927
    Redding, CA1.12221.0822
    Reno, NV1.04561.0310
    Richland-Kennewick-Pasco, WA1.04781.0325
    Richmond-Petersburg, VA0.97120.9802
    Roanoke, VA0.84680.8924
    Rochester, MN1.15951.1067
    Rockford, IL0.90800.9360
    Sacramento, CA1.18091.1206
    Saginaw-Bay City-Midland, MI0.96620.9767
    St. Cloud, MN1.00401.0027
    St. Joseph, MO0.89530.9271
    St. Louis, MO-IL0.89110.9241
    Salinas, CA1.47381.3042
    Salt Lake City-Ogden, UT0.99760.9984
    San Diego, CA1.14801.0991
    Santa Fe, NM1.00131.0009
    Santa Rosa, CA1.24081.1592
    Sarasota-Bradenton, FL1.01181.0081
    Savannah, GA0.93490.9549
    Seattle-Bellevue-Everett, WA1.10561.0712
    Sherman-Denison, TX0.88990.9232
    Shreveport-Bossier City, LA0.91650.9420
    Sioux City, IA-NE0.88680.9210
    Sioux Falls, SD0.90370.9330
    South Bend, IN1.01761.0120
    Spokane, WA1.06631.0449
    Springfield, IL0.85020.8948
    Springfield, MO0.84540.8914
    Stockton-Lodi, CA1.11141.0750
    Syracuse, NY0.92470.9478
    Tampa-St. Petersburg-Clearwater, FL0.90950.9371
    Texarkana, AR-Texarkana, TX0.84140.8885
    Toledo, OH0.98150.9873
    Topeka, KS0.88500.9197
    Tucson, AZ0.90020.9305
    Tulsa, OK0.88150.9173
    Tuscaloosa, AL0.82650.8777
    Tyler, TX0.89050.9237
    Victoria, TX0.82120.8738
    Waco, TX0.82680.8779
    Washington, DC-MD-VA-WV1.10241.0690
    Waterloo-Cedar Falls, IA0.86080.9024
    Wausau, WI0.95160.9666
    West Palm Beach-Boca Raton, FL0.97850.9852
    Wichita, KS0.92180.9458
    Wichita Falls, TX0.80150.8594
    Wilmington-Newark, DE-MD1.07571.0512
    Rural Alabama0.74830.8199
    Rural Florida0.87330.9114
    Rural Illinois (IA Hospital)0.81940.8725
    Rural Illinois (MO Hospital)0.81400.8686
    Rural Kentucky0.80190.8597
    Rural Louisiana0.77550.8402
    Rural Michigan0.91150.9385
    Rural Minnesota0.91090.9381
    Rural Missouri (AK Hospital)0.78380.8464
    Rural Missouri (KS Hospital)0.78500.8472
    Rural Montana0.86420.9049
    Rural Nebraska0.82330.8753
    Rural Nevada0.92190.9458
    Rural Oregon1.01561.0107
    Rural Texas0.76730.8341
    Rural Washington1.03011.0205
    Rural Wisconsin0.91210.9389
    Rural Wyoming0.88550.9201

    Table 4F.—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF)

    AreaWage indexGAFWage index— Reclass. hospitalsGAF— Reclass. hospitals
    Aguadilla, PR0.96660.9770
    Arecibo, PR0.95550.9693
    Caguas, PR1.05231.03551.01881.0128
    Mayaguez, PR1.00311.0021
    Ponce, PR1.07681.0520
    San Juan-Bayamon, PR0.98170.9874
    Rural Puerto Rico0.94950.9651
    Start Printed Page 22831

    Table 4G.—Pre-Reclassified Wage Index for Urban Areas

    Urban area (Constituent counties)Wage index
    0040 Abilene, TX0.8057
    Taylor, TX
    0060 Aguadilla, PR0.4738
    Aguada, PR
    Aguadilla, PR
    Moca, PR
    0080 Akron, OH0.9924
    Portage, OH
    Summit, OH
    0120 Albany, GA1.0675
    Dougherty, GA
    Lee, GA
    0160 Albany-Schenectady-Troy, NY0.8597
    Albany, NY
    Montgomery, NY
    Rensselaer, NY
    Saratoga, NY
    Schenectady, NY
    Schoharie, NY
    0200 Albuquerque, NM0.9855
    Bernalillo, NM
    Sandoval, NM
    Valencia, NM
    0220 Alexandria, LA0.8121
    Rapides, LA
    0240 Allentown-Bethlehem-Easton, PA0.9443
    Carbon, PA
    Lehigh, PA
    Northampton, PA
    0280 Altoona, PA0.9225
    Blair, PA
    0320 Amarillo, TX0.8706
    Potter, TX
    Randall, TX
    0380 Anchorage, AK1.2454
    Anchorage, AK
    0440 Ann Arbor, MI1.1220
    Lenawee, MI
    Livingston, MI
    Washtenaw, MI
    0450 Anniston, AL0.8360
    Calhoun, AL
    0460 Appleton-Oshkosh-Neenah, WI0.9203
    Calumet, WI
    Outagamie, WI
    Winnebago, WI
    0470 Arecibo, PR0.4683
    Arecibo, PR
    Camuy, PR
    Hatillo, PR
    0480 Asheville, NC0.9307
    Buncombe, NC
    Madison, NC
    0500 Athens, GA0.9956
    Clarke, GA
    Madison, GA
    Oconee, GA
    0520 Atlanta, GA1.0176
    Barrow, GA
    Bartow, GA
    Carroll, GA
    Cherokee, GA
    Clayton, GA
    Cobb, GA
    Coweta, GA
    DeKalb, GA
    Douglas, GA
    Fayette, GA
    Forsyth, GA
    Fulton, GA
    Gwinnett, GA
    Henry, GA
    Newton, GA
    Paulding, GA
    Pickens, GA
    Rockdale, GA
    Spalding, GA
    Walton, GA
    0560 Atlantic-Cape May, NJ1.1349
    Atlantic, NJ
    Cape May, NJ
    0580 Auburn-Opelika, AL0.8325
    Lee, AL
    0600 Augusta-Aiken, GA-SC1.0090
    Columbia, GA
    McDuffie, GA
    Richmond, GA
    Aiken, SC
    Edgefield, SC
    0640 Austin-San Marcos, TX0.9327
    Bastrop, TX
    Caldwell, TX
    Hays, TX
    Travis, TX
    Williamson, TX
    0680 Bakersfield, CA0.9387
    Kern, CA
    0720 Baltimore, MD0.9723
    Anne Arundel, MD
    Baltimore, MD
    Baltimore City, MD
    Carroll, MD
    Harford, MD
    Howard, MD
    Queen Anne's, MD
    0733 Bangor, ME0.9559
    Penobscot, ME
    0743 Barnstable-Yarmouth, MA1.3539
    Barnstable, MA
    0760 Baton Rouge, LA0.8258
    Ascension, LA
    East Baton Rouge, LA
    Livingston, LA
    West Baton Rouge, LA
    0840 Beaumont-Port Arthur, TX0.8508
    Hardin, TX
    Jefferson, TX
    Orange, TX
    0860 Bellingham, WA1.1963
    Whatcom, WA
    0870 Benton Harbor, MI0.8912
    Berrien, MI
    0875 Bergen-Passaic, NJ1.1549
    Bergen, NJ
    Passaic, NJ
    0880 Billings, MT0.9623
    Yellowstone, MT
    0920 Biloxi-Gulfport-Pascagoula, MS0.8538
    Hancock, MS
    Harrison, MS
    Jackson, MS
    0960 Binghamton, NY0.8595
    Broome, NY
    Tioga, NY
    1000 Birmingham, AL0.8648
    Blount, AL
    Jefferson, AL
    St. Clair, AL
    Shelby, AL
    1010 Bismarck, ND0.7955
    Burleigh, ND
    Morton, ND
    1020 Bloomington, IN0.8689
    Monroe, IN
    1040 Bloomington-Normal, IL0.8448
    McLean, IL
    1080 Boise City, ID0.9151
    Ada, ID
    Canyon, ID
    1123 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH (NH Hospitals)1.1483
    Bristol, MA
    Essex, MA
    Middlesex, MA
    Norfolk, MA
    Plymouth, MA
    Suffolk, MA
    Worcester, MA
    Hillsborough, NH
    Merrimack, NH
    Rockingham, NH
    Strafford, NH
    1125 Boulder-Longmont, CO0.9836
    Boulder, CO
    1145 Brazoria, TX0.8299
    Brazoria, TX
    1150 Bremerton, WA1.0882
    Kitsap, WA
    1240 Brownsville-Harlingen-San Benito, TX0.8783
    Cameron, TX
    1260 Bryan-College Station, TX0.9296
    Brazos, TX
    1280 Buffalo-Niagara Falls, NY0.9405
    Erie, NY
    Niagara, NY
    1303 Burlington, VT0.9826
    Chittenden, VT
    Franklin, VT
    Grand Isle, VT
    1310 Caguas, PR0.5158
    Caguas, PR
    Cayey, PR
    Cidra, PR
    Gurabo, PR
    San Lorenzo, PR
    1320 Canton-Massillon, OH0.9059
    Carroll, OH
    Stark, OH
    1350 Casper, WY0.9606
    Natrona, WY
    1360 Cedar Rapids, IA0.8711
    Linn, IA
    1400 Champaign-Urbana, IL0.9264
    Champaign, IL
    1440 Charleston-North Charleston, SC0.9293
    Berkeley, SC
    Charleston, SC
    Dorchester, SC
    1480 Charleston, WV0.9369
    Kanawha, WV
    Putnam, WV
    1520 Charlotte-Gastonia-Rock Hill, NC-SC0.9400
    Start Printed Page 22832
    Cabarrus, NC
    Gaston, NC
    Lincoln, NC
    Mecklenburg, NC
    Rowan, NC
    Stanly, NC
    Union, NC
    York, SC
    1540 Charlottesville, VA1.0688
    Albemarle, VA
    Charlottesville City, VA
    Fluvanna, VA
    Greene, VA
    1560 Chattanooga, TN-GA0.9446
    Catoosa, GA
    Dade, GA
    Walker, GA
    Hamilton, TN
    Marion, TN
    1580 Cheyenne, WY0.8414
    Laramie, WY
    1600 Chicago, IL1.1011
    Cook, IL
    DeKalb, IL
    DuPage, IL
    Grundy, IL
    Kane, IL
    Kendall, IL
    Lake, IL
    McHenry, IL
    Will, IL
    1620 Chico-Paradise, CA0.9909
    Butte, CA
    1640 Cincinnati, OH-KY-IN0.9574
    Dearborn, IN
    Ohio, IN
    Boone, KY
    Campbell, KY
    Gallatin, KY
    Grant, KY
    Kenton, KY
    Pendleton, KY
    Brown, OH
    Clermont, OH
    Hamilton, OH
    Warren, OH
    1660 Clarksville-Hopkinsville, TN-KY0.8433
    Christian, KY
    Montgomery, TN
    1680 Cleveland-Lorain-Elyria, OH0.9496
    Ashtabula, OH
    Cuyahoga, OH
    Geauga, OH
    Lake, OH
    Lorain, OH
    Medina, OH
    1720 Colorado Springs, CO0.9754
    El Paso, CO
    1740 Columbia, MO0.8787
    Boone, MO
    1760 Columbia, SC0.9589
    Lexington, SC
    Richland, SC
    1800 Columbus, GA-AL0.8471
    Russell, AL
    Chattahoochee, GA
    Harris, GA
    Muscogee, GA
    1840 Columbus, OH0.9724
    Delaware, OH
    Fairfield, OH
    Franklin, OH
    Licking, OH
    Madison, OH
    Pickaway, OH
    1880 Corpus Christi, TX0.8203
    Nueces, TX
    San Patricio, TX
    1890 Corvallis, OR1.1781
    Benton, OR
    1900 Cumberland, MD-WV (WV Hospital)0.8402
    Allegany, MD
    Mineral, WV
    1920 Dallas, TX0.9506
    Collin, TX
    Dallas, TX
    Denton, TX
    Ellis, TX
    Henderson, TX
    Hunt, TX
    Kaufman, TX
    Rockwall, TX
    1950 Danville, VA0.8641
    Danville City, VA
    Pittsylvania, VA
    1960 Davenport-Moline-Rock Island, IA-IL0.8790
    Scott, IA
    Henry, IL
    Rock Island, IL
    2000 Dayton-Springfield, OH0.9323
    Clark, OH
    Greene, OH
    Miami, OH
    Montgomery, OH
    2020 Daytona Beach, FL0.9069
    Flagler, FL
    Volusia, FL
    2030 Decatur, AL0.8817
    Lawrence, AL
    Morgan, AL
    2040 Decatur, IL0.8056
    Macon, IL
    2080 Denver, CO1.0289
    Adams, CO
    Arapahoe, CO
    Denver, CO
    Douglas, CO
    Jefferson, CO
    2120 Des Moines, IA0.8881
    Dallas, IA
    Polk, IA
    Warren, IA
    2160 Detroit, MI1.0478
    Lapeer, MI
    Macomb, MI
    Monroe, MI
    Oakland, MI
    St. Clair, MI
    Wayne, MI
    2180 Dothan, AL0.7959
    Dale, AL
    Houston, AL
    2190 Dover, DE1.0453
    Kent, DE
    2200 Dubuque, IA0.8617
    Dubuque, IA
    2240 Duluth-Superior, MN-WI1.0401
    St. Louis, MN
    Douglas, WI
    2281 Dutchess County, NY1.0639
    Dutchess, NY
    2290 Eau Claire, WI0.8893
    Chippewa, WI
    Eau Claire, WI
    2320 El Paso, TX0.9162
    El Paso, TX
    2330 Elkhart-Goshen, IN0.9646
    Elkhart, IN
    2335 Elmira, NY0.8530
    Chemung, NY
    2340 Enid, OK0.8454
    Garfield, OK
    2360 Erie, PA0.8911
    Erie, PA
    2400 Eugene-Springfield, OR1.1485
    Lane, OR
    2440 Evansville-Henderson, IN-KY (IN Hospitals)0.7808
    Posey, IN
    Vanderburgh, IN
    Warrick, IN
    Henderson, KY
    2520 Fargo-Moorhead, ND-MN0.9374
    Clay, MN
    Cass, ND
    2560 Fayetteville, NC0.9132
    Cumberland, NC
    2580 Fayetteville-Springdale-Rogers, AR0.7587
    Benton, AR
    Washington, AR
    2620 Flagstaff, AZ-UT1.0678
    Coconino, AZ
    Kane, UT
    2640 Flint, MI1.0920
    Genesee, MI
    2650 Florence, AL0.7875
    Colbert, AL
    Lauderdale, AL
    2655 Florence, SC0.8843
    Florence, SC
    2670 Fort Collins-Loveland, CO1.0161
    Larimer, CO
    2680 Ft. Lauderdale, FL1.0407
    Broward, FL
    2700 Fort Myers-Cape Coral, FL0.9380
    Lee, FL
    2710 Fort Pierce-Port St. Lucie, FL1.0067
    Martin, FL
    St. Lucie, FL
    2720 Fort Smith, AR-OK0.8076
    Crawford, AR
    Sebastian, AR
    Sequoyah, OK
    2750 Fort Walton Beach, FL0.8695
    Okaloosa, FL
    2760 Fort Wayne, IN0.9186
    Adams, IN
    Allen, IN
    De Kalb, IN
    Huntington, IN
    Wells, IN
    Whitley, IN
    2800 Forth Worth-Arlington, TX0.9452
    Hood, TX
    Johnson, TX
    Start Printed Page 22833
    Parker, TX
    Tarrant, TX
    2840 Fresno, CA0.9972
    Fresno, CA
    Madera, CA
    2880 Gadsden, AL0.8845
    Etowah, AL
    2900 Gainesville, FL1.2133
    Alachua, FL
    2920 Galveston-Texas City, TX1.0271
    Galveston, TX
    2960 Gary, IN0.9571
    Lake, IN
    Porter, IN
    2975 Glens Falls, NY0.8432
    Warren, NY
    Washington, NY
    2980 Goldsboro, NC0.8810
    Wayne, NC
    2985 Grand Forks, ND-MN0.9173
    Polk, MN
    Grand Forks, ND
    2995 Grand Junction, CO0.9579
    Mesa, CO
    3000 Grand Rapids-Muskegon-Holland, MI1.0161
    Allegan, MI
    Kent, MI
    Muskegon, MI
    Ottawa, MI
    3040 Great Falls, MT0.8972
    Cascade, MT
    3060 Greeley, CO0.9604
    Weld, CO
    3080 Green Bay, WI0.9269
    Brown, WI
    3120 Greensboro-Winston-Salem-High Point, NC0.9616
    Alamance, NC
    Davidson, NC
    Davie, NC
    Forsyth, NC
    Guilford, NC
    Randolph, NC
    Stokes, NC
    Yadkin, NC
    3150 Greenville, NC0.9963
    Pitt, NC
    3160 Greenville-Spartanburg-Anderson, SC0.9096
    Anderson, SC
    Cherokee, SC
    Greenville, SC
    Pickens, SC
    Spartanburg, SC
    3180 Hagerstown, MD0.8462
    Washington, MD
    3200 Hamilton-Middletown, OH0.9269
    Butler, OH
    3240 Harrisburg-Lebanon-Carlisle, PA0.9311
    Cumberland, PA
    Dauphin, PA
    Lebanon, PA
    Perry, PA
    3283 Hartford, CT1.1536
    Hartford, CT
    Litchfield, CT
    Middlesex, CT
    Tolland, CT
    3285 2 Hattiesburg, MS0.7559
    Forrest, MS
    Lamar, MS
    3290 Hickory-Morganton-Lenoir, NC0.9517
    Alexander, NC
    Burke, NC
    Caldwell, NC
    Catawba, NC
    3320 Honolulu, HI1.1653
    Honolulu, HI
    3350 Houma, LA0.8043
    Lafourche, LA
    Terrebonne, LA
    3360 Houston, TX0.9604
    Chambers, TX
    Fort Bend, TX
    Harris, TX
    Liberty, TX
    Montgomery, TX
    Waller, TX
    3400 Huntington-Ashland, WV-KY-OH0.9700
    Boyd, KY
    Carter, KY
    Greenup, KY
    Lawrence, OH
    Cabell, WV
    Wayne, WV
    3440 Huntsville, AL0.8854
    Limestone, AL
    Madison, AL
    3480 Indianapolis, IN0.9771
    Boone, IN
    Hamilton, IN
    Hancock, IN
    Hendricks, IN
    Johnson, IN
    Madison, IN
    Marion, IN
    Morgan, IN
    Shelby, IN
    3500 Iowa City, IA0.9973
    Johnson, IA
    3520 Jackson, MI0.9387
    Jackson, MI
    3560 Jackson, MS0.8589
    Hinds, MS
    Madison, MS
    Rankin, MS
    3580 Jackson, TN0.9117
    Madison, TN
    Chester, TN
    3600 Jacksonville, FL0.9040
    Clay, FL
    Duval, FL
    Nassau, FL
    St. Johns, FL
    3605 Jacksonville, NC0.7710
    Onslow, NC
    3610 Jamestown, NY0.8143
    Chautauqua, NY
    3620 Janesville-Beloit, WI0.9840
    Rock, WI
    3640 Jersey City, NJ1.1216
    Hudson, NJ
    3660 Johnson City-Kingsport-Bristol, TN-VA0.8540
    Carter, TN
    Hawkins, TN
    Sullivan, TN
    Unicoi, TN
    Washington, TN
    Bristol City, VA
    Scott, VA
    Washington, VA
    3680 Johnstown, PA0.8959
    Cambria, PA
    Somerset, PA
    3700 Jonesboro, AR0.8523
    Craighead, AR
    3710 Joplin, MO0.8736
    Jasper, MO
    Newton, MO
    3720 Kalamazoo-Battlecreek, MI1.0696
    Calhoun, MI
    Kalamazoo, MI
    Van Buren, MI
    3740 Kankakee, IL0.9268
    Kankakee, IL
    3760 Kansas City, KS-MO0.9430
    Johnson, KS
    Leavenworth, KS
    Miami, KS
    Wyandotte, KS
    Cass, MO
    Clay, MO
    Clinton, MO
    Jackson, MO
    Lafayette, MO
    Platte, MO
    Ray, MO
    3800 Kenosha, WI0.9678
    Kenosha, WI
    3810 Killeen-Temple, TX0.7376
    Bell, TX
    Coryell, TX
    3840 Knoxville, TN0.8904
    Anderson, TN
    Blount, TN
    Knox, TN
    Loudon, TN
    Sevier, TN
    Union, TN
    3850 Kokomo, IN0.9232
    Howard, IN
    Tipton, IN
    3870 La Crosse, WI-MN0.9328
    Houston, MN
    La Crosse, WI
    3880 Lafayette, LA0.8600
    Acadia, LA
    Lafayette, LA
    St. Landry, LA
    St. Martin, LA
    3920 Lafayette, IN0.9165
    Clinton, IN
    Tippecanoe, IN
    3960 Lake Charles, LA0.7810
    Calcasieu, LA
    3980 Lakeland-Winter Haven, FL0.9167
    Polk, FL
    4000 Lancaster, PA0.9413
    Lancaster, PA
    4040 Lansing-East Lansing, MI0.9653
    Clinton, MI
    Eaton, MI
    Ingham, MI
    4080 Laredo, TX0.7877
    Webb, TX
    Start Printed Page 22834
    4100 Las Cruces, NM0.8721
    Dona Ana, NM
    4120 Las Vegas, NV-AZ1.1238
    Mohave, AZ
    Clark, NV
    Nye, NV
    4150 Lawrence, KS0.8756
    Douglas, KS
    4200 Lawton, OK0.8783
    Comanche, OK
    4243 Lewiston-Auburn, ME0.9451
    Androscoggin, ME
    4280 Lexington, KY0.8850
    Bourbon, KY
    Clark, KY
    Fayette, KY
    Jessamine, KY
    Madison, KY
    Scott, KY
    Woodford, KY
    4320 Lima, OH0.9558
    Allen, OH
    Auglaize, OH
    4360 Lincoln, NE1.0272
    Lancaster, NE
    4400 Little Rock-North Little Rock, AR0.9053
    Faulkner, AR
    Lonoke, AR
    Pulaski, AR
    Saline, AR
    4420 Longview-Marshall, TX0.8322
    Gregg, TX
    Harrison, TX
    Upshur, TX
    4480 Los Angeles-Long Beach, CA1.2062
    Los Angeles, CA
    4520 1 Louisville, KY-IN0.9596
    Clark, IN
    Floyd, IN
    Harrison, IN
    Scott, IN
    Bullitt, KY
    Jefferson, KY
    Oldham, KY
    4600 Lubbock, TX0.8547
    Lubbock, TX
    4640 Lynchburg, VA0.9208
    Amherst, VA
    Bedford, VA
    Bedford City, VA
    Campbell, VA
    Lynchburg City, VA
    4680 Macon, GA0.9064
    Bibb, GA
    Houston, GA
    Jones, GA
    Peach, GA
    Twiggs, GA
    4720 Madison, WI1.0456
    Dane, WI
    4800 Mansfield, OH0.8809
    Crawford, OH
    Richland, OH
    4840 Mayaguez, PR0.4917
    Anasco, PR
    Cabo Rojo, PR
    Hormigueros, PR
    Mayaguez, PR
    Sabana Grande, PR
    San German, PR
    4880 McAllen-Edinburg-Mission, TX0.8433
    Hidalgo, TX
    4890 Medford-Ashland, OR1.0433
    Jackson, OR
    4900 Melbourne-Titusville-Palm Bay, FL0.9857
    Brevard, FL
    4920 Memphis, TN-AR-MS0.9435
    Crittenden, AR
    DeSoto, MS
    Fayette, TN
    Shelby, TN
    Tipton, TN
    4940 Merced, CA0.9870
    Merced, CA
    5000 Miami, FL0.9934
    Dade, FL
    5015 Middlesex-Somerset-Hunterdon, NJ1.1952
    Hunterdon, NJ
    Middlesex, NJ
    Somerset, NJ
    5080 Milwaukee-Waukesha, WI0.9898
    Milwaukee, WI
    Ozaukee, WI
    Washington, WI
    Waukesha, WI
    5120 Minneapolis-St. Paul, MN-WI1.1000
    Anoka, MN
    Carver, MN
    Chisago, MN
    Dakota, MN
    Hennepin, MN
    Isanti, MN
    Ramsey, MN
    Scott, MN
    Sherburne, MN
    Washington, MN
    Wright, MN
    Pierce, WI
    St. Croix, WI
    5140 Missoula, MT0.9453
    Missoula, MT
    5160 Mobile, AL0.7754
    Baldwin, AL
    Mobile, AL
    5170 Modesto, CA1.0945
    Stanislaus, CA
    5190 Monmouth-Ocean, NJ1.0930
    Monmouth, NJ
    Ocean, NJ
    5200 Monroe, LA0.8296
    Ouachita, LA
    5240 Montgomery, AL0.7502
    Autauga, AL
    Elmore, AL
    Montgomery, AL
    5280 Muncie, IN0.9689
    Delaware, IN
    5330 Myrtle Beach, SC0.8855
    Horry, SC
    5345 Naples, FL0.9566
    Collier, FL
    5360 Nashville, TN0.9602
    Cheatham, TN
    Davidson, TN
    Dickson, TN
    Robertson, TN
    Rutherford TN
    Sumner, TN
    Williamson, TN
    Wilson, TN
    5380 Nassau-Suffolk, NY1.3841
    Nassau, NY
    Suffolk, NY
    5483 New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT1.2267
    Fairfield, CT
    New Haven, CT
    5523 New London-Norwich, CT1.1578
    New London, CT
    5560 New Orleans, LA0.9054
    Jefferson, LA
    Orleans, LA
    Plaquemines, LA
    St. Bernard, LA
    St. Charles, LA
    St. James, LA
    St. John The Baptist, LA
    St. Tammany, LA
    5600 New York, NY1.3893
    Bronx, NY
    Kings, NY
    New York, NY
    Putnam, NY
    Queens, NY
    Richmond, NY
    Rockland, NY
    Westchester, NY
    5640 Newark, NJ1.2004
    Essex, NJ
    Morris, NJ
    Sussex, NJ
    Union, NJ
    Warren, NJ
    5660 Newburgh, NY-PA1.1235
    Orange, NY
    Pike, PA
    5720 Norfolk-Virginia Beach-Newport News, VA-NC0.8629
    Currituck, NC
    Chesapeake City, VA
    Gloucester, VA
    Hampton City, VA
    Isle of Wight, VA
    James City, VA
    Mathews, VA
    Newport News City, VA
    Norfolk City, VA
    Poquoson City, VA
    Portsmouth City, VA
    Suffolk City, VA
    Virginia Beach City VA
    Williamsburg City, VA
    York, VA
    5775 Oakland, CA1.5416
    Alameda, CA
    Contra Costa, CA
    5790 Ocala, FL0.9579
    Marion, FL
    5800 Odessa-Midland, TX0.9017
    Ector, TX
    Midland, TX
    5880 Oklahoma City, OK0.8728
    Canadian, OK
    Start Printed Page 22835
    Cleveland, OK
    Logan, OK
    McClain, OK
    Oklahoma, OK
    Pottawatomie, OK
    5910 Olympia, WA1.1481
    Thurston, WA
    5920 Omaha, NE-IA0.9696
    Pottawattamie, IA
    Cass, NE
    Douglas, NE
    Sarpy, NE
    Washington, NE
    5945 Orange County, CA1.1242
    Orange, CA
    5960 Orlando, FL0.9464
    Lake, FL
    Orange, FL
    Osceola, FL
    Seminole, FL
    5990 Owensboro, KY0.8346
    Daviess, KY
    6015 Panama City, FL0.9166
    Bay, FL
    6020 Parkersburg-Marietta, WV-OH0.8192
    Washington, OH
    Wood, WV
    6080 Pensacola, FL0.8367
    Escambia, FL
    Santa Rosa, FL
    6120 Peoria-Pekin, IL0.8883
    Peoria, IL
    Tazewell, IL
    Woodford, IL
    6160 Philadelphia, PA-NJ1.0626
    Burlington, NJ
    Camden, NJ
    Gloucester, NJ
    Salem, NJ
    Bucks, PA
    Chester, PA
    Delaware, PA
    Montgomery, PA
    Philadelphia, PA
    6200 Phoenix-Mesa, AZ0.9654
    Maricopa, AZ
    Pinal, AZ
    6240 Pine Bluff, AR0.7837
    Jefferson, AR
    6280 Pittsburgh, PA0.9714
    Allegheny, PA
    Beaver, PA
    Butler, PA
    Fayette, PA
    Washington, PA
    Westmoreland, PA
    6323 Pittsfield, MA1.0396
    Berkshire, MA
    6340 Pocatello, ID0.9557
    Bannock, ID
    6360 Ponce, PR0.5278
    Guayanilla, PR
    Juana Diaz, PR
    Penuelas, PR
    Ponce, PR
    Villalba, PR
    Yauco, PR
    6403 Portland, ME0.9501
    Cumberland, ME
    Sagadahoc, ME
    York, ME
    6440 Portland-Vancouver, OR-WA1.1263
    Clackamas, OR
    Columbia, OR
    Multnomah, OR
    Washington, OR
    Yamhill, OR
    Clark, WA
    6483 Providence-Warwick-Pawtucket, RI1.0781
    Bristol, RI
    Kent, RI
    Newport, RI
    Providence, RI
    Washington, RI
    6520 Provo-Orem, UT0.9967
    Utah, UT
    6560 Pueblo, CO0.8704
    Pueblo, CO
    6580 Punta Gorda, FL0.8818
    Charlotte, FL
    6600 Racine, WI0.9441
    Racine, WI
    6640 Raleigh-Durham-Chapel Hill, NC0.9901
    Chatham, NC
    Durham, NC
    Franklin, NC
    Johnston, NC
    Orange, NC
    Wake, NC
    6660 Rapid City, SD0.8971
    Pennington, SD
    6680 Reading, PA0.6780
    Berks, PA
    6690 Redding, CA1.1222
    Shasta, CA
    6720 Reno, NV1.0456
    Washoe, NV
    6740 Richland-Kennewick-Pasco, WA1.1086
    Benton, WA
    Franklin, WA
    6760 Richmond-Petersburg, VA0.9712
    Charles City County, VA
    Chesterfield, VA
    Colonial Heights City, VA
    Dinwiddie, VA
    Goochland, VA
    Hanover, VA
    Henrico, VA
    Hopewell City, VA
    New Kent, VA
    Petersburg City, VA
    Powhatan, VA
    Prince George, VA
    Richmond City, VA
    6780 Riverside-San Bernardino, CA1.1012
    Riverside, CA
    San Bernardino, CA
    6800 Roanoke, VA0.8468
    Botetourt, VA
    Roanoke, VA
    Roanoke City, VA
    Salem City, VA
    6820 Rochester, MN1.1595
    Olmsted, MN
    6840 Rochester, NY0.9238
    Genesee, NY
    Livingston, NY
    Monroe, NY
    Ontario, NY
    Orleans, NY
    Wayne, NY
    6880 Rockford, IL0.9194
    Boone, IL
    Ogle, IL
    Winnebago, IL
    6895 Rocky Mount, NC0.9197
    Edgecombe, NC
    Nash, NC
    6920 Sacramento, CA1.1809
    El Dorado, CA
    Placer, CA
    Sacramento, CA
    6960 Saginaw-Bay City-Midland, MI0.9662
    Bay, MI
    Midland, MI
    Saginaw, MI
    6980 St. Cloud, MN0.9966
    Benton, MN
    Stearns, MN
    7000 St. Joseph, MO0.9113
    Andrew, MO
    Buchanan, MO
    7040 St. Louis, MO-IL0.9024
    Clinton, IL
    Jersey, IL
    Madison, IL
    Monroe, IL
    St. Clair, IL
    Franklin, MO
    Jefferson, MO
    Lincoln, MO
    St. Charles, MO
    St. Louis, MO
    St. Louis City, MO
    Warren, MO
    7080 Salem, OR1.0127
    Marion, OR
    Polk, OR
    7120 Salinas, CA1.4854
    Monterey, CA
    7160 Salt Lake City-Ogden, UT0.9976
    Davis, UT
    Salt Lake, UT
    Weber, UT
    7200 San Angelo, TX0.8288
    Tom Green, TX
    7240 San Antonio, TX0.8333
    Bexar, TX
    Comal, TX
    Guadalupe, TX
    Wilson, TX
    7320 San Diego, CA1.1480
    San Diego, CA
    7360 San Francisco, CA1.4319
    Marin, CA
    San Francisco, CA
    San Mateo, CA
    7400 San Jose, CA1.4249
    Santa Clara, CA
    7440 San Juan-Bayamon, PR0.4812
    Aguas Buenas, PR
    Barceloneta, PR
    Bayamon, PR
    Start Printed Page 22836
    Canovanas, PR
    Carolina, PR
    Catano, PR
    Ceiba, PR
    Comerio, PR
    Corozal, PR
    Dorado, PR
    Fajardo, PR
    Florida, PR
    Guaynabo, PR
    Humacao, PR
    Juncos, PR
    Los Piedras, PR
    Loiza, PR
    Luguillo, PR
    Manati, PR
    Morovis, PR
    Naguabo, PR
    Naranjito, PR
    Rio Grande, PR
    San Juan, PR
    Toa Alta, PR
    Toa Baja, PR
    Trujillo Alto, PR
    Vega Alta, PR
    Vega Baja, PR
    Yabucoa, PR
    7460 San Luis Obispo-Atascadero-Paso Robles, CA1.1117
    San Luis Obispo, CA
    7480 Santa Barbara-Santa Maria-Lompoc, CA1.0927
    Santa Barbara, CA
    7485 Santa Cruz-Watsonville, CA1.4049
    Santa Cruz, CA
    7490 Santa Fe, NM1.0312
    Los Alamos, NM
    Santa Fe, NM
    7500 Santa Rosa, CA1.2727
    Sonoma, CA
    7510 Sarasota-Bradenton, FL1.0118
    Manatee, FL
    Sarasota, FL
    7520 Savannah, GA0.9349
    Bryan, GA
    Chatham, GA
    Effingham, GA
    7560 Scranton—Wilkes-Barre—Hazleton, PA0.8071
    Columbia, PA
    Lackawanna, PA
    Luzerne, PA
    Wyoming, PA
    7600 Seattle-Bellevue-Everett, WA1.1040
    Island, WA
    King, WA
    Snohomish, WA
    7610 Sharon, PA0.8013
    Mercer, PA
    7620 Sheboygan, WI0.8524
    Sheboygan, WI
    7640 Sherman-Denison, TX0.9163
    Grayson, TX
    7680 Shreveport-Bossier City, LA0.9165
    Bossier, LA
    Caddo, LA
    Webster, LA
    7720 Sioux City, IA-NE0.8868
    Woodbury, IA
    Dakota, NE
    7760 Sioux Falls, SD0.9245
    Lincoln, SD
    Minnehaha, SD
    7800 South Bend, IN1.0303
    St. Joseph, IN
    7840 Spokane, WA1.0791
    Spokane, WA
    7880 Springfield, IL0.8502
    Menard, IL
    Sangamon, IL
    7920 Springfield, MO0.8666
    Christian, MO
    Greene, MO
    Webster, MO
    8003 Springfield, MA1.0747
    Hampden, MA
    Hampshire, MA
    8050 State College, PA0.9239
    Centre, PA
    8080 Steubenville-Weirton, OH-WV (WV Hospitals)0.8737
    Jefferson, OH
    Brooke, WV
    Hancock, WV
    8120 Stockton-Lodi, CA1.0939
    San Joaquin, CA
    8140 Sumter, SC0.7884
    Sumter, SC
    8160 Syracuse, NY0.9243
    Cayuga, NY
    Madison, NY
    Onondaga, NY
    Oswego, NY
    8200 Tacoma, WA1.1751
    Pierce, WA
    8240 Tallahassee, FL0.8402
    Gadsden, FL
    Leon, FL
    8280 Tampa-St. Petersburg-Clearwater, FL0.8994
    Hernando, FL
    Hillsborough, FL
    Pasco, FL
    Pinellas, FL
    8320 Terre Haute, IN0.8498
    Clay, IN
    Vermillion, IN
    Vigo, IN
    8360 Texarkana, AR-Texarkana, TX0.8414
    Miller, AR
    Bowie, TX
    8400 Toledo, OH0.9815
    Fulton, OH
    Lucas, OH
    Wood, OH
    8440 Topeka, KS0.9015
    Shawnee, KS
    8480 Trenton, NJ1.0172
    Mercer, NJ
    8520 Tucson, AZ0.8990
    Pima, AZ
    8560 Tulsa, OK0.8949
    Creek, OK
    Osage, OK
    Rogers, OK
    Tulsa, OK
    Wagoner, OK
    8600 Tuscaloosa, AL0.8265
    Tuscaloosa, AL
    8640 Tyler, TX0.9109
    Smith, TX
    8680 Utica-Rome, NY0.8425
    Herkimer, NY
    Oneida, NY
    8720 Vallejo-Fairfield-Napa, CA1.3535
    Napa, CA
    Solano, CA
    8735 Ventura, CA1.1088
    Ventura, CA
    8750 Victoria, TX0.8354
    Victoria, TX
    8760 Vineland-Millville-Bridgeton, NJ1.0473
    Cumberland, NJ
    8780 Visalia-Tulare-Porterville, CA0.9706
    Tulare, CA
    8800 Waco, TX0.8249
    McLennan, TX
    8840 Washington, DC-MD-VA-WV1.1176
    District of Columbia, DC
    Calvert, MD
    Charles, MD
    Frederick, MD
    Montgomery, MD
    Prince Georges, MD
    Alexandria City, VA
    Arlington, VA
    Clarke, VA
    Culpeper, VA
    Fairfax, VA
    Fairfax City, VA
    Falls Church City, VA
    Fauquier, VA
    Fredericksburg City, VA
    King George, VA
    Loudoun, VA
    Manassas City, VA
    Manassas Park City, VA
    Prince William, VA
    Spotsylvania, VA
    Stafford, VA
    Warren, VA
    Berkeley, WV
    Jefferson, WV
    8920 Waterloo-Cedar Falls, IA0.8134
    Black Hawk, IA
    8940 Wausau, WI0.9455
    Marathon, WI
    8960 West Palm Beach-Boca Raton, FL0.9785
    Palm Beach, FL
    9000 Wheeling, WV-OH0.8077
    Belmont, OH
    Marshall, WV
    Ohio, WV
    9040 Wichita, KS0.9541
    Butler, KS
    Harvey, KS
    Sedgwick, KS
    9080 Wichita Falls, TX0.7933
    Archer, TX
    Wichita, TX
    9140 Williamsport, PA0.8503
    Lycoming, PA
    9160 Wilmington-Newark, DE-MD1.0757
    Start Printed Page 22837
    New Castle, DE
    Cecil, MD
    9200 Wilmington, NC0.9971
    New Hanover, NC
    Brunswick, NC
    9260 Yakima, WA1.0690
    Yakima, WA
    9270 Yolo, CA0.9830
    Yolo, CA
    9280 York, PA0.7840
    York, PA
    9320 Youngstown-Warren, OH0.9480
    Columbiana, OH
    Mahoning, OH
    Trumbull, OH
    9340 Yuba City, CA1.0479
    Sutter, CA
    Yuba, CA
    9360 Yuma, AZ0.8904
    Yuma, AZ

    Table 4H.—Pre-Reclassified Wage Index for Rural Areas

    Nonurban areaWage index
    Alabama0.7420
    Alaska1.2006
    Arizona0.8747
    Arkansas0.7561
    California0.9870
    Colorado0.8909
    Connecticut1.2357
    Delaware0.9487
    Florida0.8709
    Georgia0.8341
    Hawaii1.1235
    Idaho0.8820
    Illinois0.8140
    Indiana0.8757
    Iowa0.8194
    Kansas0.7850
    Kentucky0.8019
    Louisiana0.7649
    Maine0.8714
    Maryland0.8962
    Massachusetts1.1586
    Michigan0.9106
    Minnesota0.9109
    Mississippi0.7612
    Missouri0.7826
    Montana0.8642
    Nebraska0.8233
    Nevada0.9785
    New Hampshire0.9914
    New Jersey 1
    New Mexico0.8835
    New York0.8530
    North Carolina0.8634
    North Dakota0.7965
    Ohio0.8761
    Oklahoma0.7646
    Oregon1.0150
    Pennsylvania0.8473
    Puerto Rico0.4654
    Rhode Island 1
    South Carolina0.8606
    South Dakota0.7934
    Tennessee0.7901
    Texas0.7671
    Utah0.9156
    Vermont0.9576
    Virginia0.8473
    Washington1.0301
    West Virginia0.8145
    Wisconsin0.9118
    Wyoming0.8855 -
    1 All counties within the State are classified as urban.
               * MEDICARE DATA HAVE BEEN SUPPLEMENTED BY DATA FROM 19 STATES FOR LOW VOLUME DRGS. ** DRGS 469 AND 470 CONTAIN CASES WHICH COULD NOT BE ASSIGNED TO VALID DRGS. NOTE: GEOMETRIC MEAN IS USED ONLY TO DETERMINE PAYMENT FOR TRANSFER CASES. NOTE: ARITHMETIC MEAN IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY. NOTE: RELATIVE WEIGHTS ARE BASED ON MEDICARE PATIENT DATA AND MAY NOT BE APPROPRIATE FOR OTHER PATIENTS. Start Printed Page 22837

    Table 5.—List of Diagnosis Related Groups (DRGs), Relative Weighting Factors, Geometric and Arithmetic Mean Length of Stay

    DRGMDCTypeDRG titleRelative weightsGeometric mean LOSArithmetric mean LOS
    101SURGCRANIOTOMY AGE >17 EXCEPT FOR TRAUMA3.25467.610.2
    201SURGCRANIOTOMY FOR TRAUMA AGE >173.37428.811.1
    301SURG* CRANIOTOMY AGE 0-171.952712.712.7
    401SURGSPINAL PROCEDURES2.40745.58.1
    501SURGEXTRACRANIAL VASCULAR PROCEDURES1.36122.33.2
    601SURGCARPAL TUNNEL RELEASE.72382.13.0
    701SURGPERIPH & CRANIAL NERVE & OTHER NERV SYST PROC W CC2.67368.511.3
    801SURGPERIPH & CRANIAL NERVE & OTHER NERV SYST PROC W/O CC1.37272.33.4
    901MEDSPINAL DISORDERS & INJURIES1.34115.37.0
    1001MEDNERVOUS SYSTEM NEOPLASMS W CC1.26555.57.2
    1101MEDNERVOUS SYSTEM NEOPLASMS W/O CC.84553.34.3
    1201MEDDEGENERATIVE NERVOUS SYSTEM DISORDERS.89854.96.3
    1301MEDMULTIPLE SCLEROSIS & CEREBELLAR ATAXIA.81074.55.5
    1401MEDSPECIFIC CEREBROVASCULAR DISORDERS EXCEPT TIA1.16674.86.1
    1501MEDTRANSIENT ISCHEMIC ATTACK & PRECEREBRAL OCCLUSIONS.73493.03.7
    1601MEDNONSPECIFIC CEREBROVASCULAR DISORDERS W CC1.18335.16.5
    1701MEDNONSPECIFIC CEREBROVASCULAR DISORDERS W/O CC.67062.73.5
    1801MEDCRANIAL & PERIPHERAL NERVE DISORDERS W CC.97624.65.8
    1901MEDCRANIAL & PERIPHERAL NERVE DISORDERS W/O CC.67703.13.9
    2001MEDNERVOUS SYSTEM INFECTION EXCEPT VIRAL MENINGITIS2.76289.011.4
    2101MEDVIRAL MENINGITIS1.46065.67.1
    2201MEDHYPERTENSIVE ENCEPHALOPATHY1.00734.05.1
    2301MEDNONTRAUMATIC STUPOR & COMA.81013.44.4
    2401MEDSEIZURE & HEADACHE AGE >17 W CC1.01824.05.3
    2501MEDSEIZURE & HEADACHE AGE >17 W/O CC.59452.73.3
    2601MEDSEIZURE & HEADACHE AGE 0-17.58462.32.8
    2701MEDTRAUMATIC STUPOR & COMA, COMA >1 HR1.34563.75.6
    2801MEDTRAUMATIC STUPOR & COMA, COMA <1 HR AGE >17 W CC1.35265.26.8
    2901MEDTRAUMATIC STUPOR & COMA, COMA <1 HR AGE >17 W/O CC.69033.03.8
    3001MED* TRAUMATIC STUPOR & COMA, COMA <1 HR AGE 0-17.33032.02.0
    3101MEDCONCUSSION AGE >17 W CC.90983.54.8
    Start Printed Page 22838
    3201MEDCONCUSSION AGE >17 W/O CC.51912.02.6
    3301MED* CONCUSSION AGE 0-17.20751.61.6
    3401MEDOTHER DISORDERS OF NERVOUS SYSTEM W CC1.00654.25.4
    3501MEDOTHER DISORDERS OF NERVOUS SYSTEM W/O CC.58862.73.5
    3602SURGRETINAL PROCEDURES.65861.21.5
    3702SURGORBITAL PROCEDURES1.12202.94.3
    3802SURGPRIMARY IRIS PROCEDURES.47302.02.6
    3902SURGLENS PROCEDURES WITH OR WITHOUT VITRECTOMY.58821.51.9
    4002SURGEXTRAOCULAR PROCEDURES EXCEPT ORBIT AGE >17.82742.43.6
    4102SURG* EXTRAOCULAR PROCEDURES EXCEPT ORBIT AGE 0-17.33621.61.6
    4202SURGINTRAOCULAR PROCEDURES EXCEPT RETINA, IRIS & LENS.62731.62.3
    4302MEDHYPHEMA.45702.83.3
    4402MEDACUTE MAJOR EYE INFECTIONS.65564.35.2
    4502MEDNEUROLOGICAL EYE DISORDERS.67652.73.3
    4602MEDOTHER DISORDERS OF THE EYE AGE >17 W CC.79833.95.0
    4702MEDOTHER DISORDERS OF THE EYE AGE >17 W/O CC.50132.63.4
    4802MED* OTHER DISORDERS OF THE EYE AGE 0-17.29622.92.9
    4903SURGMAJOR HEAD & NECK PROCEDURES1.75903.85.2
    5003SURGSIALOADENECTOMY.81391.51.9
    5103SURGSALIVARY GLAND PROCEDURES EXCEPT SIALOADENECTOMY.79281.82.7
    5203SURGCLEFT LIP & PALATE REPAIR.76081.51.9
    5303SURGSINUS & MASTOID PROCEDURES AGE >171.17412.33.7
    5403SURG* SINUS & MASTOID PROCEDURES AGE 0-17.48013.23.2
    5503SURGMISCELLANEOUS EAR, NOSE, MOUTH & THROAT PROCEDURES.85001.82.7
    5603SURGRHINOPLASTY.87712.02.7
    5703SURGT&A PROC, EXCEPT TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE >171.15472.84.2
    5803SURG* T&A PROC, EXCEPT TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE 0-17.27261.51.5
    5903SURGTONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE >17.83241.92.8
    6003SURG* TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE 0-17.20761.51.5
    6103SURGMYRINGOTOMY W TUBE INSERTION AGE >171.35363.25.6
    6203SURG* MYRINGOTOMY W TUBE INSERTION AGE 0-17.29401.31.3
    6303SURGOTHER EAR, NOSE, MOUTH & THROAT O.R. PROCEDURES1.36583.34.7
    6403MEDEAR, NOSE, MOUTH & THROAT MALIGNANCY1.22894.86.9
    6503MEDDYSEQUILIBRIUM.53212.42.9
    6603MEDEPISTAXIS.55382.63.3
    6703MEDEPIGLOTTITIS.75563.03.7
    6803MEDOTITIS MEDIA & URI AGE >17 W CC.66873.64.3
    6903MEDOTITIS MEDIA & URI AGE >17 W/O CC.49882.83.4
    7003MEDOTITIS MEDIA & URI AGE 0-17.45562.53.0
    7103MEDLARYNGOTRACHEITIS.67143.14.0
    7203MEDNASAL TRAUMA & DEFORMITY.67222.93.7
    7303MEDOTHER EAR, NOSE, MOUTH & THROAT DIAGNOSES AGE >17.80163.64.7
    7403MED* OTHER EAR, NOSE, MOUTH & THROAT DIAGNOSES AGE 0-17.33412.12.1
    7504SURGMAJOR CHEST PROCEDURES3.20168.810.8
    7604SURGOTHER RESP SYSTEM O.R. PROCEDURES W CC2.962810.012.6
    7704SURGOTHER RESP SYSTEM O.R. PROCEDURES W/O CC1.22544.15.4
    7804MEDPULMONARY EMBOLISM1.33176.37.2
    7904MEDRESPIRATORY INFECTIONS & INFLAMMATIONS AGE >17 W CC1.71167.69.3
    8004MEDRESPIRATORY INFECTIONS & INFLAMMATIONS AGE >17 W/O CC.92855.06.0
    8104MED* RESPIRATORY INFECTIONS & INFLAMMATIONS AGE 0-171.51256.16.1
    8204MEDRESPIRATORY NEOPLASMS1.43256.07.6
    8304MEDMAJOR CHEST TRAUMA W CC.97834.85.9
    8404MEDMAJOR CHEST TRAUMA W/O CC.54552.93.5
    8504MEDPLEURAL EFFUSION W CC1.25055.56.9
    8604MEDPLEURAL EFFUSION W/O CC.67763.03.8
    8704MEDPULMONARY EDEMA & RESPIRATORY FAILURE1.42805.56.9
    8804MEDCHRONIC OBSTRUCTIVE PULMONARY DISEASE.91374.55.4
    8904MEDSIMPLE PNEUMONIA & PLEURISY AGE >17 W CC1.06365.36.3
    9004MEDSIMPLE PNEUMONIA & PLEURISY AGE >17 W/O CC.63853.74.3
    9104MEDSIMPLE PNEUMONIA & PLEURISY AGE 0-17.81413.94.8
    9204MEDINTERSTITIAL LUNG DISEASE W CC1.23135.66.8
    9304MEDINTERSTITIAL LUNG DISEASE W/O CC.73113.54.2
    9404MEDPNEUMOTHORAX W CC1.20115.46.9
    9504MEDPNEUMOTHORAX W/O CC.58333.23.9
    Start Printed Page 22839
    9604MEDBRONCHITIS & ASTHMA AGE >17 W CC.76384.14.9
    9704MEDBRONCHITIS & ASTHMA AGE >17 W/O CC.56643.23.8
    9804MEDBRONCHITIS & ASTHMA AGE 0-17.70733.14.4
    9904MEDRESPIRATORY SIGNS & SYMPTOMS W CC.69712.63.3
    10004MEDRESPIRATORY SIGNS & SYMPTOMS W/O CC.52061.82.2
    10104MEDOTHER RESPIRATORY SYSTEM DIAGNOSES W CC.86053.64.7
    10204MEDOTHER RESPIRATORY SYSTEM DIAGNOSES W/O CC.52262.12.7
    103PRESURGHEART TRANSPLANT19.819538.657.5
    10405SURGCARDIAC VALVE & OTH MAJOR CARDIOTHORACIC PROC W CARD CATH7.760513.215.3
    10505SURGCARDIAC VALVE & OTH MAJOR CARDIOTHORACIC PROC W/O CARD CATH5.64658.810.4
    10605SURGCORONARY BYPASS W PTCA7.438210.712.3
    10705SURGCORONARY BYPASS W CARDIAC CATH5.30059.710.9
    10805SURGOTHER CARDIOTHORACIC PROCEDURES5.49949.211.2
    10905SURGCORONARY BYPASS W/O PTCA OR CARDIAC CATH3.89577.08.0
    11005SURGMAJOR CARDIOVASCULAR PROCEDURES W CC4.14928.110.2
    11105SURGMAJOR CARDIOVASCULAR PROCEDURES W/O CC2.28354.35.1
    11205SURGNO LONGER VALID.0000.0.0
    11305SURGAMPUTATION FOR CIRC SYSTEM DISORDERS EXCEPT UPPER LIMB & TOE2.66259.812.8
    11405SURGUPPER LIMB & TOE AMPUTATION FOR CIRC SYSTEM DISORDERS1.66897.29.3
    11505SURGPRM CARD PACEM IMPL W AMI, HRT FAIL OR SHK, OR AICD LEAD OR GN3.37847.29.2
    11605SURGOTHER PERMANENT CARDIAC PACEMAKER IMPLANT2.20113.64.8
    11705SURGCARDIAC PACEMAKER REVISION EXCEPT DEVICE REPLACEMENT1.31972.84.4
    11805SURGCARDIAC PACEMAKER DEVICE REPLACEMENT1.43221.82.7
    11905SURGVEIN LIGATION & STRIPPING1.35573.35.3
    12005SURGOTHER CIRCULATORY SYSTEM O.R. PROCEDURES2.34526.79.9
    12105MEDCIRCULATORY DISORDERS W AMI & MAJOR COMP, DISCHARGED ALIVE1.57995.66.9
    12205MEDCIRCULATORY DISORDERS W AMI W/O MAJOR COMP, DISCHARGED ALIVE1.02683.23.9
    12305MEDCIRCULATORY DISORDERS W AMI, EXPIRED1.58823.25.0
    12405MEDCIRCULATORY DISORDERS EXCEPT AMI, W CARD CATH & COMPLEX DIAG1.40573.64.6
    12505MEDCIRCULATORY DISORDERS EXCEPT AMI, W CARD CATH W/O COMPLEX DIAG1.03952.22.8
    12605MEDACUTE & SUBACUTE ENDOCARDITIS2.670010.512.9
    12705MEDHEART FAILURE & SHOCK1.01104.55.6
    12805MEDDEEP VEIN THROMBOPHLEBITIS.73435.25.9
    12905MEDCARDIAC ARREST, UNEXPLAINED1.02731.72.8
    13005MEDPERIPHERAL VASCULAR DISORDERS W CC.94015.06.1
    13105MEDPERIPHERAL VASCULAR DISORDERS W/O CC.57753.84.5
    13205MEDATHEROSCLEROSIS W CC.64902.53.1
    13305MEDATHEROSCLEROSIS W/O CC.55671.92.3
    13405MEDHYPERTENSION.58292.73.4
    13505MEDCARDIAC CONGENITAL & VALVULAR DISORDERS AGE >17 W CC.91173.74.8
    13605MEDCARDIAC CONGENITAL & VALVULAR DISORDERS AGE >17 W/O CC.56062.22.8
    13705MED* CARDIAC CONGENITAL & VALVULAR DISORDERS AGE 0-17.81503.33.3
    13805MEDCARDIAC ARRHYTHMIA & CONDUCTION DISORDERS W CC.82313.34.2
    13905MEDCARDIAC ARRHYTHMIA & CONDUCTION DISORDERS W/O CC.49732.12.5
    14005MEDANGINA PECTORIS.53672.22.7
    14105MEDSYNCOPE & COLLAPSE W CC.72313.03.8
    14205MEDSYNCOPE & COLLAPSE W/O CC.53922.22.7
    14305MEDCHEST PAIN.51981.72.1
    14405MEDOTHER CIRCULATORY SYSTEM DIAGNOSES W CC1.19954.35.8
    14505MEDOTHER CIRCULATORY SYSTEM DIAGNOSES W/O CC.59192.22.8
    14606SURGRECTAL RESECTION W CC2.77409.610.8
    14706SURGRECTAL RESECTION W/O CC1.60366.26.7
    14806SURGMAJOR SMALL & LARGE BOWEL PROCEDURES W CC3.531511.113.1
    14906SURGMAJOR SMALL & LARGE BOWEL PROCEDURES W/O CC1.51036.26.7
    15006SURGPERITONEAL ADHESIOLYSIS W CC2.949310.512.2
    15106SURGPERITONEAL ADHESIOLYSIS W/O CC1.35025.36.3
    15206SURGMINOR SMALL & LARGE BOWEL PROCEDURES W CC1.94657.48.7
    Start Printed Page 22840
    15306SURGMINOR SMALL & LARGE BOWEL PROCEDURES W/O CC1.16145.15.6
    15406SURGSTOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE >17 W CC4.348711.914.7
    15506SURGSTOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE >17 W/O CC1.33563.54.5
    15606SURG* STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE 0-17.83926.06.0
    15706SURGANAL & STOMAL PROCEDURES W CC1.26064.45.9
    15806SURGANAL & STOMAL PROCEDURES W/O CC.62372.02.5
    15906SURGHERNIA PROCEDURES EXCEPT INGUINAL & FEMORAL AGE >17 W CC1.36204.25.4
    16006SURGHERNIA PROCEDURES EXCEPT INGUINAL & FEMORAL AGE >17 W/O CC.76782.22.7
    16106SURGINGUINAL & FEMORAL HERNIA PROCEDURES AGE >17 W CC1.13883.24.5
    16206SURGINGUINAL & FEMORAL HERNIA PROCEDURES AGE >17 W/O CC.61451.61.9
    16306SURG* HERNIA PROCEDURES AGE 0-17.68852.12.1
    16406SURGAPPENDECTOMY W COMPLICATED PRINCIPAL DIAG W CC2.39807.89.0
    16506SURGAPPENDECTOMY W COMPLICATED PRINCIPAL DIAG W/O CC1.30004.55.0
    16606SURGAPPENDECTOMY W/O COMPLICATED PRINCIPAL DIAG W CC1.49194.25.4
    16706SURGAPPENDECTOMY W/O COMPLICATED PRINCIPAL DIAG W/O CC.87782.22.6
    16803SURGMOUTH PROCEDURES W CC1.30563.65.2
    16903SURGMOUTH PROCEDURES W/O CC.69811.82.3
    17006SURGOTHER DIGESTIVE SYSTEM O.R. PROCEDURES W CC3.06519.612.7
    17106SURGOTHER DIGESTIVE SYSTEM O.R. PROCEDURES W/O CC1.17733.95.0
    17206MEDDIGESTIVE MALIGNANCY W CC1.39725.97.6
    17306MEDDIGESTIVE MALIGNANCY W/O CC.69292.93.9
    17406MEDG.I. HEMORRHAGE W CC.99154.15.1
    17506MEDG.I. HEMORRHAGE W/O CC.54352.63.0
    17606MEDCOMPLICATED PEPTIC ULCER1.09084.45.6
    17706MEDUNCOMPLICATED PEPTIC ULCER W CC.89383.94.8
    17806MEDUNCOMPLICATED PEPTIC ULCER W/O CC.64242.73.2
    17906MEDINFLAMMATORY BOWEL DISEASE1.08615.16.4
    18006MEDG.I. OBSTRUCTION W CC.95814.65.7
    18106MEDG.I. OBSTRUCTION W/O CC.52453.03.5
    18206MEDESOPHAGITIS, GASTROENT & MISC DIGEST DISORDERS AGE >17 W CC.79593.64.6
    18306MEDESOPHAGITIS, GASTROENT & MISC DIGEST DISORDERS AGE >17 W/O CC.55862.43.0
    18406MEDESOPHAGITIS, GASTROENT & MISC DIGEST DISORDERS AGE 0-17.41232.53.0
    18503MEDDENTAL & ORAL DIS EXCEPT EXTRACTIONS & RESTORATIONS, AGE >17.86753.64.8
    18603MED* DENTAL & ORAL DIS EXCEPT EXTRACTIONS & RESTORATIONS, AGE 0-17.31992.92.9
    18703MEDDENTAL EXTRACTIONS & RESTORATIONS.79603.24.2
    18806MEDOTHER DIGESTIVE SYSTEM DIAGNOSES AGE >17 W CC1.12344.66.0
    18906MEDOTHER DIGESTIVE SYSTEM DIAGNOSES AGE >17 W/O CC.57912.53.3
    19006MEDOTHER DIGESTIVE SYSTEM DIAGNOSES AGE 0-171.19054.57.5
    19107SURGPANCREAS, LIVER & SHUNT PROCEDURES W CC4.606512.115.5
    19207SURGPANCREAS, LIVER & SHUNT PROCEDURES W/O CC1.81816.07.0
    19307SURGBILIARY TRACT PROC EXCEPT ONLY CHOLECYST W OR W/O C.D.E. W CC3.504511.613.6
    19407SURGBILIARY TRACT PROC EXCEPT ONLY CHOLECYST W OR W/O C.D.E. W/O CC1.72266.37.3
    19507SURGCHOLECYSTECTOMY W C.D.E. W CC3.08509.410.9
    19607SURGCHOLECYSTECTOMY W C.D.E. W/O CC1.61835.36.1
    19707SURGCHOLECYSTECTOMY EXCEPT BY LAPAROSCOPE W/O C.D.E. W CC2.57618.19.6
    19807SURGCHOLECYSTECTOMY EXCEPT BY LAPAROSCOPE W/O C.D.E. W/O CC1.21144.24.7
    19907SURGHEPATOBILIARY DIAGNOSTIC PROCEDURE FOR MALIGNANCY2.48138.310.8
    20007SURGHEPATOBILIARY DIAGNOSTIC PROCEDURE FOR NON-MALIGNANCY3.19728.512.0
    20107SURGOTHER HEPATOBILIARY OR PANCREAS O.R. PROCEDURES3.812512.415.6
    20207MEDCIRRHOSIS & ALCOHOLIC HEPATITIS1.32805.57.0
    20307MEDMALIGNANCY OF HEPATOBILIARY SYSTEM OR PANCREAS1.35985.77.3
    20407MEDDISORDERS OF PANCREAS EXCEPT MALIGNANCY1.20764.96.2
    Start Printed Page 22841
    20507MEDDISORDERS OF LIVER EXCEPT MALIG,CIRR,ALC HEPA W CC1.22065.26.7
    20607MEDDISORDERS OF LIVER EXCEPT MALIG,CIRR,ALC HEPA W/O CC.73453.34.1
    20707MEDDISORDERS OF THE BILIARY TRACT W CC1.11384.35.5
    20807MEDDISORDERS OF THE BILIARY TRACT W/O CC.63972.43.0
    20908SURGMAJOR JOINT & LIMB REATTACHMENT PROCEDURES OF LOWER EXTREMITY1.99434.65.1
    21008SURGHIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE >17 W CC1.75286.16.9
    21108SURGHIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE >17 W/O CC1.22614.65.0
    21208SURG* HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE 0-17.842811.111.1
    21308SURGAMPUTATION FOR MUSCULOSKELETAL SYSTEM & CONN TISSUE DISORDERS1.92837.710.0
    21408SURGNO LONGER VALID.0000.0.0
    21508SURGNO LONGER VALID.0000.0.0
    21608SURGBIOPSIES OF MUSCULOSKELETAL SYSTEM & CONNECTIVE TISSUE2.31338.510.9
    21708SURGWND DEBRID & SKN GRFT EXCEPT HAND, FOR MUSCSKELET & CONN TISS DIS3.180811.015.1
    21808SURGLOWER EXTREM & HUMER PROC EXCEPT HIP, FOOT, FEMUR AGE >17 W CC1.54484.75.7
    21908SURGLOWER EXTREM & HUMER PROC EXCEPT HIP, FOOT, FEMUR AGE >17 W/O CC.99722.83.3
    22008SURG* LOWER EXTREM & HUMER PROC EXCEPT HIP, FOOT, FEMUR AGE 0-17.58145.35.3
    22108SURGNO LONGER VALID.0000.0.0
    22208SURGNO LONGER VALID.0000.0.0
    22308SURGMAJOR SHOULDER/ELBOW PROC, OR OTHER UPPER EXTREMITY PROC W CC.97342.12.9
    22408SURGSHOULDER, ELBOW OR FOREARM PROC, EXC MAJOR JOINT PROC, W/O CC.77241.61.9
    22508SURGFOOT PROCEDURES1.11773.85.3
    22608SURGSOFT TISSUE PROCEDURES W CC1.58975.27.3
    22708SURGSOFT TISSUE PROCEDURES W/O CC.79372.12.8
    22808SURGMAJOR THUMB OR JOINT PROC, OR OTH HAND OR WRIST PROC W CC1.08852.74.0
    22908SURGHAND OR WRIST PROC, EXCEPT MAJOR JOINT PROC, W/O CC.71681.92.5
    23008SURGLOCAL EXCISION & REMOVAL OF INT FIX DEVICES OF HIP & FEMUR1.35593.95.8
    23108SURGLOCAL EXCISION & REMOVAL OF INT FIX DEVICES EXCEPT HIP & FEMUR1.43173.65.4
    23208SURGARTHROSCOPY.95561.82.9
    23308SURGOTHER MUSCULOSKELET SYS & CONN TISS O.R. PROC W CC2.09096.28.4
    23408SURGOTHER MUSCULOSKELET SYS & CONN TISS O.R. PROC W/O CC1.20752.73.6
    23508MEDFRACTURES OF FEMUR.75484.15.4
    23608MEDFRACTURES OF HIP & PELVIS.68823.94.9
    23708MEDSPRAINS, STRAINS, & DISLOCATIONS OF HIP, PELVIS & THIGH.53233.03.7
    23808MEDOSTEOMYELITIS1.40357.39.3
    23908MEDPATHOLOGICAL FRACTURES & MUSCULOSKELETAL & CONN TISS MALIGNANCY1.00175.46.7
    24008MEDCONNECTIVE TISSUE DISORDERS W CC1.37015.67.2
    24108MEDCONNECTIVE TISSUE DISORDERS W/O CC.63373.34.0
    24208MEDSEPTIC ARTHRITIS1.09205.77.2
    24308MEDMEDICAL BACK PROBLEMS.72994.04.9
    24408MEDBONE DISEASES & SPECIFIC ARTHROPATHIES W CC.71504.15.1
    24508MEDBONE DISEASES & SPECIFIC ARTHROPATHIES W/O CC.46552.93.6
    24608MEDNON-SPECIFIC ARTHROPATHIES.57113.24.0
    24708MEDSIGNS & SYMPTOMS OF MUSCULOSKELETAL SYSTEM & CONN TISSUE.55942.83.5
    24808MEDTENDONITIS, MYOSITIS & BURSITIS.81484.15.1
    24908MEDAFTERCARE, MUSCULOSKELETAL SYSTEM & CONNECTIVE TISSUE.67672.73.9
    25008MEDFX, SPRN, STRN & DISL OF FOREARM, HAND, FOOT AGE >17 W CC.68093.54.3
    25108MEDFX, SPRN, STRN & DISL OF FOREARM, HAND, FOOT AGE >17 W/O CC.45552.42.9
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    25208MED* FX, SPRN, STRN & DISL OF FOREARM, HAND, FOOT AGE 0-17.25251.81.8
    25308MEDFX, SPRN, STRN & DISL OF UPARM, LOWLEG EX FOOT AGE >17 W CC.73984.05.0
    25408MEDFX, SPRN, STRN & DISL OF UPARM, LOWLEG EX FOOT AGE >17 W/O CC.42972.83.3
    25508MED* FX, SPRN, STRN & DISL OF UPARM, LOWLEG EX FOOT AGE 0-17.29412.92.9
    25608MEDOTHER MUSCULOSKELETAL SYSTEM & CONNECTIVE TISSUE DIAGNOSES.81704.25.5
    25709SURGTOTAL MASTECTOMY FOR MALIGNANCY W CC.88012.22.8
    25809SURGTOTAL MASTECTOMY FOR MALIGNANCY W/O CC.69701.71.9
    25909SURGSUBTOTAL MASTECTOMY FOR MALIGNANCY W CC.87361.82.7
    26009SURGSUBTOTAL MASTECTOMY FOR MALIGNANCY W/O CC.64311.31.4
    26109SURGBREAST PROC FOR NON-MALIGNANCY EXCEPT BIOPSY & LOCAL EXCISION.92181.72.3
    26209SURGBREAST BIOPSY & LOCAL EXCISION FOR NON-MALIGNANCY.83773.04.2
    26309SURGSKIN GRAFT &/OR DEBRID FOR SKN ULCER OR CELLULITIS W CC2.15709.412.7
    26409SURGSKIN GRAFT &/OR DEBRID FOR SKN ULCER OR CELLULITIS W/O CC1.18266.07.7
    26509SURGSKIN GRAFT &/OR DEBRID EXCEPT FOR SKIN ULCER OR CELLULITIS W CC1.69005.27.6
    26609SURGSKIN GRAFT &/OR DEBRID EXCEPT FOR SKIN ULCER OR CELLULITIS W/O CC.84352.53.4
    26709SURGPERIANAL & PILONIDAL PROCEDURES.94213.34.5
    26809SURGSKIN, SUBCUTANEOUS TISSUE & BREAST PLASTIC PROCEDURES1.22552.53.6
    26909SURGOTHER SKIN, SUBCUT TISS & BREAST PROC W CC1.80496.99.3
    27009SURGOTHER SKIN, SUBCUT TISS & BREAST PROC W/O CC.80202.63.8
    27109MEDSKIN ULCERS1.15036.58.3
    27209MEDMAJOR SKIN DISORDERS W CC1.02435.26.7
    27309MEDMAJOR SKIN DISORDERS W/O CC.56583.44.2
    27409MEDMALIGNANT BREAST DISORDERS W CC1.18925.57.2
    27509MEDMALIGNANT BREAST DISORDERS W/O CC.65943.04.6
    27609MEDNON-MALIGANT BREAST DISORDERS.69544.05.0
    27709MEDCELLULITIS AGE >17 W CC.85855.16.1
    27809MEDCELLULITIS AGE >17 W/O CC.56383.94.6
    27909MED* CELLULITIS AGE 0-17.66104.24.2
    28009MEDTRAUMA TO THE SKIN, SUBCUT TISS & BREAST AGE >17 W CC.69403.54.4
    28109MEDTRAUMA TO THE SKIN, SUBCUT TISS & BREAST AGE >17 W/O CC.45912.53.1
    28209MED* TRAUMA TO THE SKIN, SUBCUT TISS & BREAST AGE 0-17.25572.22.2
    28309MEDMINOR SKIN DISORDERS W CC.71543.84.9
    28409MEDMINOR SKIN DISORDERS W/O CC.42162.53.2
    28510SURGAMPUTAT OF LOWER LIMB FOR ENDOCRINE, NUTRIT, & METABOL DISORDERS2.13159.111.4
    28610SURGADRENAL & PITUITARY PROCEDURES2.22775.36.9
    28710SURGSKIN GRAFTS & WOUND DEBRID FOR ENDOC, NUTRIT & METAB DISORDERS1.96168.911.7
    28810SURGO.R. PROCEDURES FOR OBESITY2.16824.96.0
    28910SURGPARATHYROID PROCEDURES.95291.93.0
    29010SURGTHYROID PROCEDURES.88531.72.3
    29110SURGTHYROGLOSSAL PROCEDURES.59101.51.8
    29210SURGOTHER ENDOCRINE, NUTRIT & METAB O.R. PROC W CC2.75889.111.9
    29310SURGOTHER ENDOCRINE, NUTRIT & METAB O.R. PROC W/O CC1.26384.56.0
    29410MEDDIABETES AGE >35.76233.84.9
    29510MEDDIABETES AGE 0-35.74683.13.9
    29610MEDNUTRITIONAL & MISC METABOLIC DISORDERS AGE >17 W CC.86324.35.5
    29710MEDNUTRITIONAL & MISC METABOLIC DISORDERS AGE >17 W/O CC.50702.93.5
    29810MEDNUTRITIONAL & MISC METABOLIC DISORDERS AGE 0-17.39442.22.9
    29910MEDINBORN ERRORS OF METABOLISM.89394.35.6
    30010MEDENDOCRINE DISORDERS W CC1.12345.36.6
    30110MEDENDOCRINE DISORDERS W/O CC.60633.03.8
    30211SURGKIDNEY TRANSPLANT3.28817.99.3
    30311SURGKIDNEY, URETER & MAJOR BLADDER PROCEDURES FOR NEOPLASM2.48537.59.0
    30411SURGKIDNEY, URETER & MAJOR BLADDER PROC FOR NON-NEOPL W CC2.45587.49.7
    30511SURGKIDNEY, URETER & MAJOR BLADDER PROC FOR NON-NEOPL W/O CC1.14863.13.8
    Start Printed Page 22843
    30611SURGPROSTATECTOMY W CC1.30064.36.2
    30711SURGPROSTATECTOMY W/O CC.60541.92.3
    30811SURGMINOR BLADDER PROCEDURES W CC1.67884.86.9
    30911SURGMINOR BLADDER PROCEDURES W/O CC.89351.82.3
    31011SURGTRANSURETHRAL PROCEDURES W CC1.13423.34.7
    31111SURGTRANSURETHRAL PROCEDURES W/O CC.59521.51.8
    31211SURGURETHRAL PROCEDURES, AGE >17 W CC1.07493.34.8
    31311SURGURETHRAL PROCEDURES, AGE >17 W/O CC.65981.82.3
    31411SURG* URETHRAL PROCEDURES, AGE 0-17.49272.32.3
    31511SURGOTHER KIDNEY & URINARY TRACT O.R. PROCEDURES2.13964.88.2
    31611MEDRENAL FAILURE1.37325.67.3
    31711MEDADMIT FOR RENAL DIALYSIS.61572.02.9
    31811MEDKIDNEY & URINARY TRACT NEOPLASMS W CC1.17105.06.5
    31911MEDKIDNEY & URINARY TRACT NEOPLASMS W/O CC.59182.12.8
    32011MEDKIDNEY & URINARY TRACT INFECTIONS AGE >17 W CC.86104.65.6
    32111MEDKIDNEY & URINARY TRACT INFECTIONS AGE >17 W/O CC.55923.33.9
    32211MEDKIDNEY & URINARY TRACT INFECTIONS AGE 0-17.52343.64.3
    32311MEDURINARY STONES W CC, &/OR ESW LITHOTRIPSY.79692.53.3
    32411MEDURINARY STONES W/O CC.44471.61.9
    32511MEDKIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE >17 W CC.63323.14.0
    32611MEDKIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE >17 W/O CC.41182.12.7
    32711MEDKIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE 0-17.37412.83.2
    32811MEDURETHRAL STRICTURE AGE >17 W CC.72162.93.8
    32911MEDURETHRAL STRICTURE AGE >17 W/O CC.43881.62.0
    33011MED* URETHRAL STRICTURE AGE 0-17.31741.61.6
    33111MEDOTHER KIDNEY & URINARY TRACT DIAGNOSES AGE >17 W CC1.06254.66.0
    33211MEDOTHER KIDNEY & URINARY TRACT DIAGNOSES AGE >17 W/O CC.60572.63.4
    33311MEDOTHER KIDNEY & URINARY TRACT DIAGNOSES AGE 0-17.80564.05.4
    33412SURGMAJOR MALE PELVIC PROCEDURES W CC1.47614.04.5
    33512SURGMAJOR MALE PELVIC PROCEDURES W/O CC1.10813.03.2
    33612SURGTRANSURETHRAL PROSTATECTOMY W CC.91492.93.9
    33712SURGTRANSURETHRAL PROSTATECTOMY W/O CC.57691.92.2
    33812SURGTESTES PROCEDURES, FOR MALIGNANCY1.21503.75.6
    33912SURGTESTES PROCEDURES, NON-MALIGNANCY AGE >171.23843.55.5
    34012SURG* TESTES PROCEDURES, NON-MALIGNANCY AGE 0-17.28202.42.4
    34112SURGPENIS PROCEDURES1.27401.93.1
    34212SURGCIRCUMCISION AGE >17.78662.63.6
    34312SURG* CIRCUMCISION AGE 0-17.15331.71.7
    34412SURGOTHER MALE REPRODUCTIVE SYSTEM O.R. PROCEDURES FOR MALIGNANCY1.17461.62.4
    34512SURGOTHER MALE REPRODUCTIVE SYSTEM O.R. PROC EXCEPT FOR MALIGNANCY1.25183.95.6
    34612MEDMALIGNANCY, MALE REPRODUCTIVE SYSTEM, W CC1.03114.96.4
    34712MEDMALIGNANCY, MALE REPRODUCTIVE SYSTEM, W/O CC.57012.33.0
    34812MED* BENIGN PROSTATIC HYPERTROPHY W CC.71056.26.2
    34912MED* BENIGN PROSTATIC HYPERTROPHY W/O CC.43574.94.9
    35012MEDINFLAMMATION OF THE MALE REPRODUCTIVE SYSTEM.71733.84.6
    35112MED* STERILIZATION, MALE.23521.31.3
    35212MEDOTHER MALE REPRODUCTIVE SYSTEM DIAGNOSES.68783.04.2
    35313SURGPELVIC EVISCERATION, RADICAL HYSTERECTOMY & RADICAL VULVECTOMY1.83865.46.8
    35413SURGUTERINE,ADNEXA PROC FOR NON-OVARIAN/ADNEXAL MALIG W CC1.52755.16.1
    35513SURGUTERINE,ADNEXA PROC FOR NON-OVARIAN/ADNEXAL MALIG W/O CC.90393.13.3
    35613SURGFEMALE REPRODUCTIVE SYSTEM RECONSTRUCTIVE PROCEDURES.74692.02.3
    35713SURGUTERINE & ADNEXA PROC FOR OVARIAN OR ADNEXAL MALIGNANCY2.44247.59.2
    35813SURGUTERINE & ADNEXA PROC FOR NON-MALIGNANCY W CC1.19103.74.4
    35913SURGUTERINE & ADNEXA PROC FOR NON-MALIGNANCY W/O CC.81912.62.8
    36013SURGVAGINA, CERVIX & VULVA PROCEDURES.85302.42.9
    36113SURGLAPAROSCOPY & INCISIONAL TUBAL INTERRUPTION1.09272.23.0
    36213SURG* ENDOSCOPIC TUBAL INTERRUPTION.30061.41.4
    36313SURGD&C, CONIZATION & RADIO-IMPLANT, FOR MALIGNANCY.81492.63.6
    36413SURGD&C, CONIZATION EXCEPT FOR MALIGNANCY.81902.94.1
    Start Printed Page 22844
    36513SURGOTHER FEMALE REPRODUCTIVE SYSTEM O.R. PROCEDURES2.01155.88.1
    36613MEDMALIGNANCY, FEMALE REPRODUCTIVE SYSTEM W CC1.27395.67.4
    36713MEDMALIGNANCY, FEMALE REPRODUCTIVE SYSTEM W/O CC.55822.43.2
    36813MEDINFECTIONS, FEMALE REPRODUCTIVE SYSTEM1.13845.67.0
    36913MEDMENSTRUAL & OTHER FEMALE REPRODUCTIVE SYSTEM DISORDERS.55842.53.4
    37014SURGCESAREAN SECTION W CC1.04174.66.1
    37114SURGCESAREAN SECTION W/O CC.68483.33.7
    37214MEDVAGINAL DELIVERY W COMPLICATING DIAGNOSES.55782.63.3
    37314MEDVAGINAL DELIVERY W/O COMPLICATING DIAGNOSES.37642.02.3
    37414SURGVAGINAL DELIVERY W STERILIZATION &/OR D&C.71032.63.2
    37514SURGVAGINAL DELIVERY W O.R. PROC EXCEPT STERIL &/OR D&C.60812.12.3
    37614MEDPOSTPARTUM & POST ABORTION DIAGNOSES W/O O.R. PROCEDURE.49542.53.2
    37714SURGPOSTPARTUM & POST ABORTION DIAGNOSES W O.R. PROCEDURE1.64653.75.6
    37814MEDECTOPIC PREGNANCY.79842.02.4
    37914MEDTHREATENED ABORTION.45022.43.5
    38014MEDABORTION W/O D&C.41961.62.1
    38114SURGABORTION W D&C, ASPIRATION CURETTAGE OR HYSTEROTOMY.66541.82.5
    38214MEDFALSE LABOR.16071.21.3
    38314MEDOTHER ANTEPARTUM DIAGNOSES W MEDICAL COMPLICATIONS.48562.83.8
    38414MEDOTHER ANTEPARTUM DIAGNOSES W/O MEDICAL COMPLICATIONS.34121.62.2
    38515MED* NEONATES, DIED OR TRANSFERRED TO ANOTHER ACUTE CARE FACILITY1.36961.81.8
    38615MED* EXTREME IMMATURITY OR RESPIRATORY DISTRESS SYNDROME, NEONATE4.516517.917.9
    38715MED* PREMATURITY W MAJOR PROBLEMS3.084613.313.3
    38815MED* PREMATURITY W/O MAJOR PROBLEMS1.86128.68.6
    38915MEDFULL TERM NEONATE W MAJOR PROBLEMS2.08577.913.7
    39015MEDNEONATE W OTHER SIGNIFICANT PROBLEMS1.13373.54.3
    39115MED* NORMAL NEWBORN.15193.13.1
    39216SURGSPLENECTOMY AGE >173.38908.310.8
    39316SURG* SPLENECTOMY AGE 0-171.34169.19.1
    39416SURGOTHER O.R. PROCEDURES OF THE BLOOD AND BLOOD FORMING ORGANS1.82665.18.1
    39516MEDRED BLOOD CELL DISORDERS AGE >17.81943.54.7
    39616MEDRED BLOOD CELL DISORDERS AGE 0-171.04803.95.0
    39716MEDCOAGULATION DISORDERS1.26644.25.6
    39816MEDRETICULOENDOTHELIAL & IMMUNITY DISORDERS W CC1.30495.16.4
    39916MEDRETICULOENDOTHELIAL & IMMUNITY DISORDERS W/O CC.66903.03.7
    40017SURGLYMPHOMA & LEUKEMIA W MAJOR O.R. PROCEDURE2.92737.410.5
    40117SURGLYMPHOMA & NON-ACUTE LEUKEMIA W OTHER O.R. PROC W CC2.98149.912.8
    40217SURGLYMPHOMA & NON-ACUTE LEUKEMIA W OTHER O.R. PROC W/O CC1.16193.14.4
    40317MEDLYMPHOMA & NON-ACUTE LEUKEMIA W CC1.84866.89.0
    40417MEDLYMPHOMA & NON-ACUTE LEUKEMIA W/O CC.87113.44.6
    40517MED* ACUTE LEUKEMIA W/O MAJOR O.R. PROCEDURE AGE 0-171.90214.94.9
    40617SURGMYELOPROLIF DISORD OR POORLY DIFF NEOPL W MAJ O.R.PROC W CC2.96928.411.0
    40717SURGMYELOPROLIF DISORD OR POORLY DIFF NEOPL W MAJ O.R.PROC W/O CC1.24843.84.7
    40817SURGMYELOPROLIF DISORD OR POORLY DIFF NEOPL W OTHER O.R.PROC2.21506.09.2
    40917MEDRADIOTHERAPY1.14694.96.3
    41017MEDCHEMOTHERAPY W/O ACUTE LEUKEMIA AS SECONDARY DIAGNOSIS.99723.34.1
    41117MEDHISTORY OF MALIGNANCY W/O ENDOSCOPY.44011.82.3
    41217MEDHISTORY OF MALIGNANCY W ENDOSCOPY.60731.92.4
    41317MEDOTHER MYELOPROLIF DIS OR POORLY DIFF NEOPL DIAG W CC1.38986.17.8
    41417MEDOTHER MYELOPROLIF DIS OR POORLY DIFF NEOPL DIAG W/O CC.74223.54.5
    41518SURGO.R. PROCEDURE FOR INFECTIOUS & PARASITIC DISEASES3.881112.616.2
    41618MEDSEPTICEMIA AGE >171.62096.48.1
    41718MEDSEPTICEMIA AGE 0-17.84984.55.3
    41818MEDPOSTOPERATIVE & POST-TRAUMATIC INFECTIONS1.04525.36.6
    Start Printed Page 22845
    41918MEDFEVER OF UNKNOWN ORIGIN AGE >17 W CC.86174.05.0
    42018MEDFEVER OF UNKNOWN ORIGIN AGE >17 W/O CC.61143.03.6
    42118MEDVIRAL ILLNESS AGE >17.66463.23.9
    42218MEDVIRAL ILLNESS & FEVER OF UNKNOWN ORIGIN AGE 0-17.48002.63.2
    42318MEDOTHER INFECTIOUS & PARASITIC DISEASES DIAGNOSES1.84056.79.0
    42419SURGO.R. PROCEDURE W PRINCIPAL DIAGNOSES OF MENTAL ILLNESS2.435010.715.6
    42519MEDACUTE ADJUSTMENT REACTION & PSYCHOSOCIAL DYSFUNCTION.67993.24.2
    42619MEDDEPRESSIVE NEUROSES.52763.54.7
    42719MEDNEUROSES EXCEPT DEPRESSIVE.54383.65.0
    42819MEDDISORDERS OF PERSONALITY & IMPULSE CONTROL.72005.07.6
    42919MEDORGANIC DISTURBANCES & MENTAL RETARDATION.83575.26.8
    43019MEDPSYCHOSES.76536.78.9
    43119MEDCHILDHOOD MENTAL DISORDERS.63095.06.8
    43219MEDOTHER MENTAL DISORDER DIAGNOSES.70683.45.1
    43320MEDALCOHOL/DRUG ABUSE OR DEPENDENCE, LEFT AMA.28522.33.2
    43420MEDNO LONGER VALID.0000.0.0
    43520MEDNO LONGER VALID.0000.0.0
    43620MEDNO LONGER VALID.0000.0.0
    43720MEDNO LONGER VALID.0000.0.0
    43820NO LONGER VALID.0000.0.0
    43921SURGSKIN GRAFTS FOR INJURIES1.93506.79.5
    44021SURGWOUND DEBRIDEMENTS FOR INJURIES2.07327.110.3
    44121SURGHAND PROCEDURES FOR INJURIES.92732.33.3
    44221SURGOTHER O.R. PROCEDURES FOR INJURIES W CC2.53496.89.6
    44321SURGOTHER O.R. PROCEDURES FOR INJURIES W/O CC.98962.73.6
    44421MEDTRAUMATIC INJURY AGE >17 W CC.72443.44.4
    44521MEDTRAUMATIC INJURY AGE >17 W/O CC.47132.43.0
    44621MED* TRAUMATIC INJURY AGE 0-17.29492.42.4
    44721MEDALLERGIC REACTIONS AGE >17.48511.92.5
    44821MED* ALLERGIC REACTIONS AGE 0-17.09702.92.9
    44921MEDPOISONING & TOXIC EFFECTS OF DRUGS AGE >17 W CC.83062.83.9
    45021MEDPOISONING & TOXIC EFFECTS OF DRUGS AGE >17 W/O CC.41611.62.0
    45121MED* POISONING & TOXIC EFFECTS OF DRUGS AGE 0-17.26182.12.1
    45221MEDCOMPLICATIONS OF TREATMENT W CC1.01253.85.2
    45321MEDCOMPLICATIONS OF TREATMENT W/O CC.49972.22.8
    45421MEDOTHER INJURY, POISONING & TOXIC EFFECT DIAG W CC.87133.44.9
    45521MEDOTHER INJURY, POISONING & TOXIC EFFECT DIAG W/O CC.46171.92.6
    45622NO LONGER VALID.0000.0.0
    45722MEDNO LONGER VALID.0000.0.0
    45822SURGNO LONGER VALID.0000.0.0
    45922SURGNO LONGER VALID.0000.0.0
    46022MEDNO LONGER VALID.0000.0.0
    46123SURGO.R. PROC W DIAGNOSES OF OTHER CONTACT W HEALTH SERVICES1.19942.54.6
    46223MEDREHABILITATION1.203310.412.3
    46323MEDSIGNS & SYMPTOMS W CC.68183.44.3
    46423MEDSIGNS & SYMPTOMS W/O CC.46302.53.1
    46523MEDAFTERCARE W HISTORY OF MALIGNANCY AS SECONDARY DIAGNOSIS.60652.53.6
    46623MEDAFTERCARE W/O HISTORY OF MALIGNANCY AS SECONDARY DIAGNOSIS.66302.54.2
    46723MEDOTHER FACTORS INFLUENCING HEALTH STATUS.57622.74.1
    468EXTENSIVE O.R. PROCEDURE UNRELATED TO PRINCIPAL DIAGNOSIS3.845811.314.5
    469** PRINCIPAL DIAGNOSIS INVALID AS DISCHARGE DIAGNOSIS.0000.0.0
    470** UNGROUPABLE.0000.0.0
    47108SURGBILATERAL OR MULTIPLE MAJOR JOINT PROCS OF LOWER EXTREMITY2.99295.05.7
    47222SURGNO LONGER VALID.0000.0.0
    47317SURGACUTE LEUKEMIA W/O MAJOR O.R. PROCEDURE AGE >173.90449.715.0
    47404SURGNO LONGER VALID.0000.0.0
    47504MEDRESPIRATORY SYSTEM DIAGNOSIS WITH VENTILATOR SUPPORT3.915510.012.7
    476SURGPROSTATIC O.R. PROCEDURE UNRELATED TO PRINCIPAL DIAGNOSIS2.290210.012.3
    Start Printed Page 22846
    477SURGNON-EXTENSIVE O.R. PROCEDURE UNRELATED TO PRINCIPAL DIAGNOSIS1.95716.79.3
    47805SURGOTHER VASCULAR PROCEDURES W CC2.42765.98.2
    47905SURGOTHER VASCULAR PROCEDURES W/O CC1.40242.83.7
    480PRESURGLIVER TRANSPLANT10.613217.722.8
    481PRESURGBONE MARROW TRANSPLANT7.888923.425.6
    482PRESURGTRACHEOSTOMY FOR FACE, MOUTH & NECK DIAGNOSES3.834311.414.3
    483PRESURGTRACHEOSTOMY EXCEPT FOR FACE, MOUTH & NECK DIAGNOSES15.282734.041.0
    48424SURGCRANIOTOMY FOR MULTIPLE SIGNIFICANT TRAUMA5.126511.514.5
    48524SURGLIMB REATTACHMENT, HIP AND FEMUR PROC FOR MULTIPLE SIGNIFICANT TRA3.10948.510.3
    48624SURGOTHER O.R. PROCEDURES FOR MULTIPLE SIGNIFICANT TRAUMA5.254711.014.3
    48724MEDOTHER MULTIPLE SIGNIFICANT TRAUMA1.91996.38.2
    48825SURGHIV W EXTENSIVE O.R. PROCEDURE5.147415.019.8
    48925MEDHIV W MAJOR RELATED CONDITION1.88027.09.4
    49025MEDHIV W OR W/O OTHER RELATED CONDITION1.04754.35.8
    49108SURGMAJOR JOINT & LIMB REATTACHMENT PROCEDURES OF UPPER EXTREMITY1.63643.03.5
    49217MEDCHEMOTHERAPY W ACUTE LEUKEMIA AS SECONDARY DIAGNOSIS4.885313.619.0
    49307SURGLAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W CC1.84684.96.3
    49407SURGLAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W/O CC.98001.92.5
    495PRESURGLUNG TRANSPLANT8.887913.816.2
    49608SURGCOMBINED ANTERIOR/POSTERIOR SPINAL FUSION5.68658.510.3
    49708SURGSPINAL FUSION EXCEPT CERVICAL W CC3.19965.86.8
    49808SURGSPINAL FUSION EXCEPT CERVICAL W/O CC2.29963.94.3
    49908SURGBACK & NECK PROCEDURES EXCEPT SPINAL FUSION W CC1.44713.85.0
    50008SURGBACK & NECK PROCEDURES EXCEPT SPINAL FUSION W/O CC.93752.22.6
    50108SURGKNEE PROCEDURES W PDX OF INFECTION W CC2.74669.812.0
    50208SURGKNEE PROCEDURES W PDX OF INFECTION W/O CC1.55915.96.9
    50308SURGKNEE PROCEDURES W/O PDX OF INFECTION1.23363.34.2
    50422SURGEXTENSIVE 3RD DEGREE BURNS W SKIN GRAFT13.809728.233.6
    50522MEDEXTENSIVE 3RD DEGREE BURNS W/O SKIN GRAFT1.48932.03.4
    50622SURGFULL THICKNESS BURN W SKIN GRAFT OR INHAL INJ W CC OR SIG TRAUMA4.914915.719.9
    50722SURGFULL THICKNESS BURN W SKIN GRFT OR INHAL INJ W/O CC OR SIG TRAUMA1.83317.29.2
    50822MEDFULL THICKNESS BURN W/O SKIN GRFT OR INHAL INJ W CC OR SIG TRAUMA1.29666.08.3
    50922MEDFULL THICKNESS BURN W/O SKIN GRFT OR INH INJ W/O CC OR SIG TRAUMA.73233.74.9
    51022MEDNON-EXTENSIVE BURNS W CC OR SIGNIFICANT TRAUMA1.35095.88.0
    51122MEDNON-EXTENSIVE BURNS W/O CC OR SIGNIFICANT TRAUMA.75583.65.1
    512PRESURGSIMULTANEOUS PANCREAS/KIDNEY TRANSPLANT6.641313.416.5
    513PRESURGPANCREAS TRANSPLANT6.649710.313.4
    51405SURGCARDIAC DEFIBRILLATOR IMPLANT W CARDIAC CATH6.41696.89.0
    51505SURGCARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH5.06524.36.8
    51605SURGPERCUTANEOUS CARDIOVASC PROC W AMI2.72504.15.0
    51705SURGPERC CARDIO PROC W CORONARY ARTERY STENT W/O AMI2.14971.92.7
    51805SURGPERC CARDIO PROC W/O CORONARY ARTERY STENT OR AMI1.66732.53.6
    51908SURGCERVICAL SPINAL FUSION W CC2.26543.45.1
    52008SURGCERVICAL SPINAL FUSION W/O CC1.57092.02.8
    52120MEDALCOHOL/DRUG ABUSE OR DEPENDENCE W CC.73544.25.4
    52220MEDALC/DRUG ABUSE OR DEPEND W REHABILITATION THERAPY W/O CC.66319.010.7
    52320MEDALC/DRUG ABUSE OR DEPEND W/O REHABILITATION THERAPY W/O CC.39833.54.3
    * MEDICARE DATA HAVE BEEN SUPPLEMENTED BY DATA FROM 19 STATES FOR LOW VOLUME DRGS.
    ** DRGS 469 AND 470 CONTAIN CASES WHICH COULD NOT BE ASSIGNED TO VALID DRGS.
    NOTE: GEOMETRIC MEAN IS USED ONLY TO DETERMINE PAYMENT FOR TRANSFER CASES.
    NOTE: ARITHMETIC MEAN IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY.
    NOTE: RELATIVE WEIGHTS ARE BASED ON MEDICARE PATIENT DATA AND MAY NOT BE APPROPRIATE FOR OTHER PATIENTS.
              Start Printed Page 22847

    Table 6A.—New Diagnosis Codes

    Diagnosis codeDescriptionCCMDCDRG
    256.31Premature menopauseN13358, 359, 369
    256.39Other ovarian failureN13358, 359, 369
    277.7Dysmetabolic Syndrome XN10299
    464.00Acute laryngitis, without mention of obstructionN3 pre68, 69, 70 482
    464.01Acute laryngitis, with obstructionN3 pre68, 69, 70 482
    464.50Unspecified supraglottis, without mention of obstructionN3 pre68, 69, 70 482
    464.51Unspecified supraglottis, with obstructionN3 pre68, 69, 70 482
    521.00Unspecified dental cariesN3 pre185, 186, 187 482
    521.01Dental caries limited to enamelN3 pre185, 186, 187 482
    521.02Dental caries extending into dentineN3 pre185, 186, 187 482
    521.03Dental caries extending into pulpN3 pre185, 186, 187 482
    521.04Arrested dental cariesN3 pre185, 186, 187 482
    521.05OdontoclasiaN3 pre185, 186, 187 482
    521.09Other dental cariesN3 pre185, 186, 187 482
    525.10Unspecified acquired absence of teethN3 pre185, 186, 187 482
    525.11Loss of teeth due to traumaN3 pre185, 186, 187 482
    525.12Loss of teeth due to periodontal diseaseN3 pre182, 183, 184 482
    525.13Loss of teeth due to cariesN3 pre185, 186, 187 482
    525.19Other loss of teethN3 pre185, 186, 187 482
    530.12Acute esophagitisN6182, 183, 184
    564.00Unspecified constipationN6182, 183, 184
    564.01Slow transit constipationN6182, 183, 184
    564.02Outlet dysfunction constipationN6182, 183, 184
    564.09Other constipationN6182, 183, 184
    602.3Dysplasia of prostateN12352
    608.82HematospermiaN12352
    608.87Retrograde ejaculationN12352
    692.76Sunburn of second degreeN9283, 284
    692.77Sunburn of third degreeN9283, 284
    718.70Developmental dislocation of joint, site unspecifiedN8256
    718.71Developmental dislocation of joint, shoulder regionN8256
    718.72Developmental dislocation of joint, upper armN8256
    718.73Developmental dislocation of joint, forearmN8256
    718.74Developmental dislocation of joint, handN8256
    718.75Developmental dislocation of joint, pelvic region and thighN8256
    718.76Developmental dislocation of joint, lower legN8256
    718.77Developmental dislocation of joint, ankle and footN8256
    718.78Developmental dislocation of joint, other specified sitesN8256
    718.79Developmental dislocation of joint, multiple sitesN8256
    733.93Stress fracture of tibia or fibulaY8239
    733.94Stress fracture of the metatarsalsY8239
    733.95Stress fracture of other boneY8239
    772.10Intraventricular hemorrhage, unspecified gradeY15387, 389
    772.11Intraventricular hemorrhage, Grade IY15387, 389
    772.12Intraventricular hemorrhage, Grade IIY15387, 389
    772.13Intraventricular hemorrhage, Grade IIIY15387, 389
    772.14Intraventricular hemorrhage, Grade IVY15387, 389
    779.7Perventricular leukomalaciaY15387, 389
    793.80Unspecified abnormal mammogramN9276
    793.81Mammographic microcalcificationN9276
    793.89Other abnormal findings on radiological examination breastN9276
    840.7Superior glenoid labrum lesions (SLAP)N8 24253, 254, 255 487
    Start Printed Page 22848
    997.71Vascular complications of mesenteric arteryY6 15188, 189, 190 387,1 389 1
    997.72Vascular complications of renal arteryY11 15331, 332, 333 387,1 389 1
    997.79Vascular complications of other vesselsY5 15130, 131 387,1 389 1
    V10.53Personal history of malignant neoplasm, renal pelvisN17411, 412
    V45.84Dental restoration statusN23467
    V49.82Dental sealant statusN23467
    V83.01Asymptomatic hemophilia A carrierN23467
    V83.02Symptomatic hemophilia A carrierN23467

    Table 6B.—New Procedure Codes

    Procedure codeDescriptionORMDCDRG
    37.28Intracardiac echocardiographyN
    44.32Percutaneous [endoscopic] gastrojejunostomyY6 7 10 17154-156 201 288 400, 406, 407
    67.51Transabdominal cerclage of cervixY13 14 21 24360 372, 373 442, 443 486
    67.59Other repair of internal cervical osY13 14 21 24360 372, 373 442, 443 486
    75.38Fetal pulse oximetryN
    81.30Refusion of spine, not otherwise specifiedY1 8 21 244 497, 498 442, 443 486
    81.31Refusion of Atlas-axis spineY1 8 21 244 497, 498 442, 443 486
    81.32Refusion of other cervical spine, anterior techniqueY1 8 21 244 496, 519, 520 442, 443 486
    81.33Refusion of other cervical spine, posterior techniqueY1 8 21 244 496, 519, 520 442, 443 486
    81.34Refusion of dorsal and dorsolumbar spine, anterior techniqueY1 8 21 244 496, 497, 498 442, 443 486
    81.35Refusion of dorsal and dorsolumbar spine, posterior techniqueY1 8 21 244 496, 497, 498 442, 443 486
    81.36Refusion of lumbar and lumbosacral spine, anterior techniqueY1 8 21 244 496, 497, 498 442, 443 486
    81.37Refusion of lumbar and lumbosacral spine, lateral transverse process techniqueY1 8 21 244 496, 497, 498 442, 443 486
    81.38Refusion of lumbar and lumbosacral spine, posterior techniqueY1 8 21 244 496, 497, 498 442, 443 486
    Start Printed Page 22849
    81.39Refusion of spine, not elsewhere classifiedY1 8 21 244 497, 498 442, 443 486
    97.44Nonoperative removal of heart assist systemN

    Table 6C.—Invalid Diagnosis Codes

    Diagnosis codeDescriptionCCMDCDRG
    256.3Other ovarian failureN13358, 359, 369
    464.0Acute laryngitisN3 pre68, 69, 70 482
    521.0Dental cariesN3 pre185, 186, 187 482
    525.1Loss of teeth due to accident, extraction, or local periodontal diseaseN3 pre185, 186, 187 482
    564.0ConstipationN6182, 183, 184
    772.1Intraventricular hemorrhageY15387,389
    793.8Nonspecific abnormal findings on radiological and other examinations of body structure, breastN9276

    Table 6D.—Invalid Procedure Codes

    Procedure codeDescriptionORMDCDRG
    67.5Repair of internal cervical osY13 14 21 24360 372, 373 442, 442 486
    81.09Refusion of spine, any level or techniqueY1 8 21 244 497, 498 442, 443 486

    Table 6E.—Revised Diagnosis Code Titles

    Diagnosis codeDescriptionCCMDCDRG
    411.81Acute coronary occlusion without myocardial infarctionY5124, 140
    493.00Extrinsic asthma without mention of status asthmaticus or acute exacerbation or unspecifiedN496, 97, 98
    493.10Intrinsic asthma without mention of status asthmaticus or acute exacerbation or unspecifiedN496, 97, 98
    493.20Chronic obstructive asthma without mention of status asthmaticus or acute exacerbation or unspecifiedY488
    493.90Asthma, unspecified without mention of status asthmaticus or acute exacerbation or unspecifiedN496, 97, 98
    V70.7Examination of participant in clinical trialN23467

    Table 6F.—Revised Procedure Codes

    Procedure codeDescriptionORMDCDRG
    75.34Other fetal monitoringN
    Start Printed Page 22850

    Table 6G.—Additions to the CC Exclusions List

    CCs that are added to the list are in Table 6F-Additions to the CC Exclusions List. Each of the principal diagnoses is shown with an asterisk, and the revisions to the CC Exclusions List are provided in an indented column immediately following the affected principal diagnosis.

    *25631 80600 82010 80637 80606 82021 77212 77210
     2580 80601 82011 80638 80607 82022 77213 77211
     2581 80602 82012 80639 80608 82030 77214 77212
     2588 80603 82013 8064 80609 82031 7797 77213
     2589 80604 82019 8065 80610 82032*7729 77214
    *25639 80605 82020 80660 80611 8208 77210 7797
     2580 80606 82021 80661 80612 8209 77211*7769
     2581 80607 82022 80662 80613 82100 77212 77210
     2588 80608 82030 80669 80614 82101 77213 77211
     2589 80609 82031 80670 80615 82110 77214 77212
    *6023 80610 82032 80671 80616 82111 7797 77213
     5960 80611 8208 80672 80617*7720*7760 77214
     5996 80612 8209 80679 80618 77210 77210 7797
     6010 80613 82100 8068 80619 77211 77211*7797
     6012 80614 82101 8069 80620 77212 77212 7722
     6013 80615 82110 8080 80621 77213 77213 7797
     6021 80616 82111 8082 80622 77214 77214*7798
     78820 80617*73394 8083 80623 7797 7797 77210
     78829 80618 73310 80843 80624*77210*7761 77211
    *60887 80619 73311 80849 80625 77210 77210 77212
     5970 80620 73312 80851 80626 77211 77211 77213
     5994 80621 73313 80852 80627 77212 77212 77214
    *73310 80622 73314 80853 80628 77213 77213 7797
     73393 80623 73315 80859 80629 77214 77214*9972
     73394 80624 73316 8088 80630 7722 7797 99771
     73395 80625 73319 8089 80631 7797*7762 99772
    *73311 80626 73393 82000 80632*77211 77210 99779
     73393 80627 73394 82001 80633 77210 77211*99771
     73394 80628 73395 82002 80634 77211 77212 53640
     73395 80629 8058 82003 80635 77212 77213 53641
    *73312 80630 8059 82009 80636 77213 77214 53642
     73393 80631 80600 82010 80637 77214 7797 53649
     73394 80632 80601 82011 80638 7722*7763 56962
     73395 80633 80602 82012 80639 7797 77210 9974
    *73313 80634 80603 82013 8064*77212 77211 99771
     73393 80635 80604 82019 8065 77210 77212 99772
     73394 80636 80605 82020 80660 77211 77213 99779
     73395 80637 80606 82021 80661 77212 77214*99772
    *73314 80638 80607 82022 80662 77213 7797 9975
     73393 80639 80608 82030 80669 77214*7764 99771
     73394 8064 80609 82031 80670 7722 77210 99772
     73395 8065 80610 82032 80671 7797 77211 99779
    *73315 80660 80611 8208 80672*77213 77212*99779
     73393 80661 80612 8209 80679 77210 77213 9972
     73394 80662 80613 82100 8068 77211 77214 99771
     73395 80669 80614 82101 8069 77212 7797 99772
    *73316 80670 80615 82110 8080 77213*7765 99779
     73393 80671 80616 82111 8082 77214 77210*99791
     73394 80672 80617*73395 8083 7722 77211 99771
     73395 80679 80618 73310 80843 7797 77212 99772
    *73319 8068 80619 73311 80849*77214 77213 99779
     73393 8069 80620 73312 80851 77210 77214*99799
     73394 8080 80621 73313 80852 77211 7797 99771
     73395 8082 80622 73314 80853 77212*7766 99772
    *73393 8083 80623 73315 80859 77213 77210 99779
     73310 80843 80624 73316 8088 77214 77211*99881
     73311 80849 80625 73319 8089 7722 77212 99771
     73312 80851 80626 73393 82000 7797 77213 99772
     73313 80852 80627 73394 82001*7722 77214 99779
     73314 80853 80628 73395 82002 77210 7797*99883
     73315 80859 80629 8058 82003 77211*7767 99771
     73316 8088 80630 8059 82009 77212 77210 99772
     73319 8089 80631 80600 82010 77213 77211 99779
     73393 82000 80632 80601 82011 77214 77212*99889
     73394 82001 80633 80602 82012 7797 77213 99771
     73395 82002 80634 80603 82013*7728 77214 99772
     8058 82003 80635 80604 82019 77210 7797 99779
     8059 82009 80636 80605 82020 77211*7768*9989
     99771
     99772
     99779
    Start Printed Page 22851

    Table 6H.—Deletions to the CC Exclusions List

    CCs that are deleted from the list are in Table 6G—Deletions to the CC Exclusions List. Each of the principal diagnoses is shown with an asterisk, and the revisions to the CC Exclusions List are provided in an indented column immediately following the affected principal diagnosis.

    *2563
     2580
     2581
     2588
     2589
    *7720
     7721
    *7721
     7721
     7722
    *7722
     7721
    *7728
     7721
    *7729
     7721
    *7760
     7721
    *7761
     7721
    *7762
     7721
    *7763
     7721
    *7764
     7721
    *7765
     7721
    *7766
     7721
    *7767
     7721
    *7768
     7721
    *7769
     7721
    *7798
     7721
    Start Printed Page 22852

    Table 7A.—Medicare Prospective Payment System, Selected Percentile Lengths of Stay

    [FY2000 MEDPAR update 12/00 Grouper V18.0]

    DRGNumber dischargesArithmetic mean LOS10th percentile25th percentile50th percentile75th percentile90th percentile
    1338228.99352361219
    267729.97783581320
    3243.50003535525252
    460357.1639125915
    5933113.164911237
    63662.967211246
    7124709.97392471220
    841643.275911247
    916106.3491135813
    10175776.5503235813
    1131284.076712358
    12467585.8962234711
    1364155.201123469
    143195235.8762235711
    151453663.549812347
    16111556.0293235712
    1735193.323112346
    18259615.4162234710
    1986383.697212357
    20562910.14823581320
    2113096.5516235813
    2225354.817412469
    2394644.185512358
    24527534.9830124610
    25253703.223612346
    26312.709711236
    2734415.0584113611
    28113166.2100135813
    2944863.609712357
    3011.000011111
    3134884.490312358
    3217382.562111235
    3311.000011111
    34202495.0786124610
    3557283.395912346
    3631901.464911112
    3714524.029611259
    381022.656911235
    399121.907911124
    4015453.425211247
    4222232.285211135
    43853.188212346
    4412384.954823469
    4524443.167812346
    4630514.683412469
    4712813.256011346
    4922414.810412369
    5024881.942511123
    512032.699511126
    522201.931811123
    5324783.555711248
    5421.500011222
    5515052.744211136
    565032.725611235
    577083.949211259
    591072.785011235
    6023.500022555
    612315.0996112612
    6231.333311122
    6329344.388912358
    6430336.1800124813
    65344662.842011245
    6669783.163511246
    674953.596012347
    68167244.115812357
    6954353.273612346
    70242.916712245
    71823.804912347
    728833.566312346
    7366304.406512369
    Start Printed Page 22853
    75390109.91243571219
    763899811.26773591421
    7723524.9184124710
    78320876.7848346811
    791697838.48923471116
    8090185.6618235710
    81418.2500334858
    82618836.9447235914
    8364465.5496234710
    8415083.345512346
    85205726.3122235812
    8621183.664312357
    87601106.2840135812
    883896945.120723469
    895258385.9470235711
    90538954.154923457
    91544.5185223510
    92137746.3499235812
    9316724.035312357
    94120306.2988235812
    9515953.717912357
    96619864.629223468
    97314443.656012357
    98184.222212246
    99189963.199111246
    10076192.186911234
    101199974.393812359
    10251462.657011235
    10347546.6021913256098
    1043657811.3165711286098
    105297269.28315681598
    106340111.496357101420
    1078786810.37835791217
    108604810.21163581319
    109602657.6926456912
    110525959.20132571118
    11185454.760412568
    1134225012.18853691524
    11487128.37682471016
    115143298.16871471116
    1163308883.60612971116
    11737174.151211259
    11876672.684911136
    11913074.8829113612
    120359298.11781251016
    1211621126.3821235812
    122789693.702712357
    123406594.5833113611
    1241328014.342712358
    125801692.765711245
    126515011.68823691422
    1276789035.2745234710
    12894245.617524579
    12941402.762111136
    130860095.6760235710
    131282364.242612467
    1321476483.000211246
    13383212.336711234
    134361183.240612346
    13572664.553112369
    13612212.715811235
    1381940873.993212358
    139826042.507211235
    140697242.653311235
    141904033.669112357
    142457762.650811235
    1432039182.125311234
    144815775.3196124711
    14572242.746011235
    1461068310.28265791217
    Start Printed Page 22854
    14726296.419635689
    14812924712.190457101522
    149184626.518445689
    1501979511.277047101420
    15148145.8286235810
    15243818.1438357914
    15320835.371134578
    1542866013.149147101625
    15565964.217912368
    15647.5000115618
    15779035.3790124711
    15846302.539511235
    159163094.9926124610
    160116552.661911235
    161111194.202711359
    16271991.926711124
    16354.4000113413
    16448248.42794571015
    16520664.804923568
    16635325.0337224610
    16732692.599012235
    16813274.7641123610
    1698342.340511235
    1701097511.16902581422
    17112844.659712469
    172304126.9363235914
    17326853.664811357
    1742404004.797423469
    175323752.941412345
    176151015.2286234610
    17791904.534822468
    17835973.070312346
    179122915.9729235711
    180855995.3567234710
    181263153.418512346
    1822435064.335612358
    183839692.915511245
    184792.962012246
    18547604.521012369
    18639.33331191818
    1876463.916411358
    188755585.5580124711
    189119843.154211246
    190497.020423458
    191888913.796746101728
    19211056.5122246811
    193525812.536957101622
    1947186.7869246812
    195432710.14704691217
    19611625.7212245710
    197187548.93353571116
    19857514.541623468
    19917049.58272471320
    200106310.35181371322
    201139813.779036111725
    202259756.4045235813
    203290176.6364235913
    204573195.7964234711
    205229006.1735235812
    20619483.916812357
    207308175.0832124610
    208100612.894611246
    2093433755.078633468
    2101208916.8189346811
    211316654.932534467
    212613.50001442929
    21391448.96042471118
    21659569.69492481220
    2171633313.19713591628
    218212965.4123234710
    Start Printed Page 22855
    219195303.224012346
    22064.000011377
    223132512.849711236
    224111121.934311223
    22557344.8575123611
    22651486.5874124814
    22746952.724211235
    22823403.797011258
    22911082.483811235
    23023655.2592123611
    231113434.9395123611
    2328072.887211137
    23350597.51812361015
    23431683.441911347
    23550365.047312469
    236382654.816413469
    23716873.503312346
    23879308.52123461016
    239490886.2151235812
    240113186.6744235813
    24131683.857012357
    24224346.6348235813
    243874074.667612469
    244121624.804712469
    24551303.445812346
    24613863.811712357
    247168323.399011347
    248105294.816112469
    249113363.659111248
    25034564.106212357
    25124062.857911245
    253196774.773213469
    254104493.190612346
    25513.000033333
    25660545.0766124610
    257163332.735911235
    258159781.934211223
    25937732.680111126
    26048961.416711122
    26118442.274911135
    2626123.947711358
    2631814612.02083581424
    26436087.4088246914
    26536816.8036124814
    26626983.303911247
    2672334.206011369
    2688783.498911247
    26973908.24411361017
    27026233.578311258
    27196217.6144246914
    27254596.1597235812
    27312864.042012358
    27423346.5900135813
    2752464.313011359
    27611774.666912468
    277851835.7309235710
    278333964.420523468
    27932.333311244
    280155774.195412358
    28171283.046411346
    28231.666711222
    28356294.575612469
    28418683.112411246
    285619510.30803581320
    28620706.4396235713
    287567610.53743571221
    28826395.770423469
    28947653.000211237
    29087532.310311224
    291651.846211123
    Start Printed Page 22856
    292470210.48722481422
    2936245.5096124712
    294878574.606612469
    29532773.737612357
    2962350035.1556224610
    297435733.412412346
    298862.825611235
    29911785.2199124710
    300159996.1363235812
    30132083.623412347
    30280189.06364571119
    303194528.42314571015
    304117678.73392461118
    30529843.638412357
    30673205.6291123813
    30720822.251711234
    30874636.1733124814
    30940962.295411234
    310238734.4002113610
    31179631.833911123
    31214874.4654113610
    3135912.331611135
    315297496.9546114915
    3161046016.6228235813
    31715072.877911236
    31855845.9979135812
    3194222.772511236
    3201866785.3171234610
    321304283.795112357
    322614.147522358
    323172413.217211247
    32474791.882611123
    32581603.824112357
    32626762.664811235
    327113.090911345
    3286633.630511358
    329772.013011124
    331460455.5426134711
    33249303.291711247
    3332815.0569124610
    33486544.438623457
    335107213.179122345
    33695633.784812348
    33730412.150011233
    33812265.1117123711
    33913444.9821113712
    34011.000011111
    34127383.108811136
    3422983.409411247
    34435022.382911125
    3454105.1244123610
    34644415.8726134712
    3473652.947911246
    35062704.393312458
    3527563.957712358
    35325336.4212235712
    35475625.8375334711
    35555043.286223345
    356251282.292411234
    35755488.48743471016
    358202944.312123357
    359298902.729522334
    360159412.855712235
    3613782.923311235
    36328623.469312237
    36416443.853411358
    36517227.2410135916
    36644106.7329135814
    3675833.061711246
    36831106.4810235812
    Start Printed Page 22857
    36931333.251511247
    37010955.8429334510
    37113073.652623345
    3729273.289112235
    37337342.249912233
    3741203.158312234
    375102.300012234
    3762473.093112246
    377485.0000113612
    3781572.414011234
    3793373.430311246
    380582.120711125
    3811522.513211135
    382451.288911112
    38317073.581711247
    3841142.184211135
    38511.000011111
    3891511.73331361024
    390144.000012367
    39114.000044444
    39223239.67503471220
    39418707.1428124816
    395869114.400112369
    396154.666712467
    397175545.1878124710
    398175265.9417235711
    39917213.575812357
    40064449.11891361220
    401558111.25752591523
    40214984.112811369
    403317328.06272361017
    40446394.272012369
    40625139.86073471220
    4077204.441712458
    40821788.03171251018
    40928225.9072234612
    410334123.906912456
    411132.307711225
    412292.448311234
    41364197.0662235914
    4147674.252912359
    4153868314.277946111828
    4161835577.3848246914
    417165.000022469
    418228226.1160235711
    419152944.720422469
    42031093.500212346
    421114643.787212357
    422803.062512346
    42374528.11622361016
    424127513.42042591626
    425157103.994512358
    42644434.451012359
    42716334.641812369
    4288356.8192124814
    429259676.3055235712
    430586698.01512361016
    4313136.2045135711
    4324694.727112359
    43354183.094511246
    43913438.40801351019
    44051319.02092361120
    4416013.231311247
    442153668.48391361018
    44337303.439911347
    44451854.133812358
    44524272.925011245
    44754512.474811235
    449280483.745711358
    45068672.005111124
    Start Printed Page 22858
    45131.333311122
    452226664.8553123610
    45350682.803511236
    45439404.565212359
    4559312.599411235
    46134904.3739112511
    4621299411.22714691421
    463217904.123912358
    46465332.996311246
    4651543.448111247
    46614703.992511259
    4675343.839011248
    4685899012.915936101730
    471116395.532234469
    473759912.50381371832
    47510708911.18002591522
    476412610.89242591421
    477248238.10041361117
    4781069997.3166135915
    479249393.537611357
    48054120.484379132543
    48137723.93101018222738
    482568612.947447101525
    4834209339.03151422334970
    48431312.677326101726
    48528809.59554571118
    486185612.440215101625
    48733397.36121361015
    48877017.007837132236
    489140058.43832361017
    49053785.3405124610
    491122053.448322346
    492267215.66623582534
    493548595.7621135711
    494299002.448211235
    49515315.026179121826
    49614449.58244571218
    497237216.17483471218
    498221523.32733461218
    499302844.698612369
    500439622.614611235
    501218010.96704681321
    5025866.5648345811
    50355513.999612357
    50411429.5877914244154
    5051453.351711137
    50691517.400048142235
    5072908.26212471118
    5086577.4718235915
    5091764.545512469
    51016197.1779235915
    5116024.7591123610
    512123610
    513123610
    514123610
    515123610
    516123610
    517123610
    518123610
    519123610
    520123610
    521123610
    522123610
    523123610
    10811358
    Start Printed Page 22859

    Table 7B.—Medicare Prospective Payment System, Selected Percentile Lengths of Stay

    [FY2000 MEDPAR update 12/00 Grouper V19.0]

    DRGNumber dischargesArithmetic mean LOS10th percentile25th percentile50th percentile75th percentile90th percentile
    1338228.99352361219
    267729.97783581320
    3243.50003535525252
    460357.1639125915
    5933113.164911237
    63662.967211246
    7124709.97392471220
    841643.275911247
    916106.3491135813
    10175776.5503235813
    1131284.076712358
    12467585.8962234711
    1364155.201123469
    143195235.8762235711
    151453663.549812347
    16111556.0293235712
    1735193.323112346
    18259615.4162234710
    1986383.697212357
    20562910.14823581320
    2113096.5516235813
    2225354.817412469
    2394644.185512358
    24527534.9830124610
    25253703.223612346
    26312.709711236
    2734415.0584113611
    28113166.2100135813
    2944863.609712357
    3011.000011111
    3134884.490312358
    3217382.562111235
    3311.000011111
    34202495.0786124610
    3557283.395912346
    3631901.464911112
    3714524.029611259
    381022.656911235
    399121.907911124
    4015453.425211247
    4222232.285211135
    43853.188212346
    4412384.954823469
    4524443.167812346
    4630514.683412469
    4712813.256011346
    4922414.810412369
    5024881.942511123
    512032.699511126
    522201.931811123
    5324783.555711248
    5421.500011222
    5515052.744211136
    565032.725611235
    577083.949211259
    591072.785011235
    6023.500022555
    612315.0996112612
    6231.333311122
    6330034.440912359
    6430336.1800124813
    65344662.842011245
    6669783.163511246
    674953.596012347
    68167244.115812357
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    Table 8A.—Statewide Average Operating Cost-to-Charge Ratios for Urban and Rural Hospitals (Case Weighted) March 2001

    StateUrbanRural
    ALABAMA0.3440.410
    ALASKA0.4170.696
    ARIZONA0.3560.491
    ARKANSAS0.4660.446
    CALIFORNIA0.3390.436
    COLORADO0.4220.577
    CONNECTICUT0.4970.506
    DELAWARE0.5110.450
    DISTRICT OF COLUMBIA0.508
    FLORIDA0.3520.369
    GEORGIA0.4590.470
    HAWAII0.4130.554
    IDAHO0.5450.561
    ILLINOIS0.4060.502
    INDIANA0.5240.533
    IOWA0.4860.612
    KANSAS0.4210.635
    KENTUCKY0.4790.492
    LOUISIANA0.4100.488
    MAINE0.6150.543
    MARYLAND0.7590.819
    MASSACHUSETTS0.5120.571
    MICHIGAN0.4600.563
    MINNESOTA0.4940.589
    MISSISSIPPI0.4520.447
    MISSOURI0.4050.479
    MONTANA0.5370.594
    NEBRASKA0.4490.610
    NEVADA0.3060.498
    NEW HAMPSHIRE0.5490.581
    NEW JERSEY0.394
    NEW MEXICO0.4660.491
    NEW YORK0.5280.609
    NORTH CAROLINA0.5160.464
    NORTH DAKOTA0.6200.654
    OHIO0.5010.570
    OKLAHOMA0.4090.494
    OREGON0.6130.595
    PENNSYLVANIA0.3980.525
    PUERTO RICO0.4860.583
    RHODE ISLAND0.520
    SOUTH CAROLINA0.4400.463
    SOUTH DAKOTA0.5290.638
    TENNESSEE0.4380.453
    TEXAS0.4020.494
    UTAH0.4970.586
    VERMONT0.5720.599
    VIRGINIA0.4540.494
    WASHINGTON0.5830.638
    WEST VIRGINIA0.5680.527
    WISCONSIN0.5250.611
    WYOMING0.5220.717

    Table 8B.—Statewide Average Capital Cost-to-Charge Ratios (Case Weighted) March 2001

    StateRatio
    ALABAMA0.044
    ALASKA0.058
    ARIZONA0.037
    ARKANSAS0.049
    CALIFORNIA0.034
    COLORADO0.045
    CONNECTICUT0.036
    DELAWARE0.051
    DISTRICT OF COLUMBIA0.040
    FLORIDA0.043
    GEORGIA0.051
    HAWAII0.038
    IDAHO0.046
    ILLINOIS0.040
    INDIANA0.056
    IOWA0.050
    KANSAS0.050
    KENTUCKY0.046
    LOUISIANA0.048
    MAINE0.040
    MARYLAND0.013
    MASSACHUSETTS0.053
    MICHIGAN0.044
    MINNESOTA0.047
    MISSISSIPPI0.044
    MISSOURI0.044
    MONTANA0.058
    NEBRASKA0.054
    NEVADA0.030
    NEW HAMPSHIRE0.061
    NEW JERSEY0.036
    NEW MEXICO0.045
    NEW YORK0.051
    NORTH CAROLINA0.046
    NORTH DAKOTA0.072
    OHIO0.048
    OKLAHOMA0.046
    OREGON0.046
    PENNSYLVANIA0.039
    PUERTO RICO0.045
    RHODE ISLAND0.029
    SOUTH CAROLINA0.046
    SOUTH DAKOTA0.059
    TENNESSEE0.049
    TEXAS0.046
    UTAH0.047
    VERMONT0.052
    VIRGINIA0.055
    WASHINGTON0.063
    WEST VIRGINIA0.045
    WISCONSIN0.051
    WYOMING0.065

    Appendix A—Regulatory Impact Analysis

    I. Introduction

    We generally prepare a regulatory flexibility analysis that is consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 through 612), unless we certify that a proposed rule would not have a significant economic impact on a substantial number of small entities. For purposes of the RFA, we consider all hospitals to be small entities. We estimate the total impact of these changes for FY 2002 payments compared to FY 2001 payments to be approximately a $1.7 billion increase. Therefore, we have prepared an impact analysis for this proposed rule.

    Also, section 1102(b) of the Act requires us to prepare a regulatory impact analysis for any proposed rule that 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 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital with fewer than 100 beds that is located outside of a Metropolitan Statistical Area (MSA) or New England County Metropolitan Area (NECMA). Section 601(g) of the Social Security Amendments of 1983 (Public Law 98-21) designated hospitals in certain New England counties as belonging to the adjacent NECMA. Thus, for purposes of the hospital inpatient prospective payment systems, we classify these hospitals as urban hospitals.

    It is clear that the changes being proposed in this document would affect both a substantial number of small rural hospitals as well as other classes of hospitals, and the effects on some may be significant. Therefore, the discussion below, in combination with the rest of this proposed rule, constitutes a combined regulatory impact analysis and regulatory flexibility analysis.

    We have reviewed this proposed rule under the threshold criteria of Executive Order 13132, Federalism, and have determined that the proposed rule will not have any negative impact on the rights, roles, and responsibilities of State, local, or tribal governments.

    Section 202 of the Unfunded Mandate Reform Act of 1995 (Public Law 104-4) also requires that agencies assess anticipated costs and benefits before issuing any proposed rule (or a final rule that has been preceded by a proposed rule) that may result in an expenditure in any one year by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million. This proposed rule would not mandate any requirements for State, local, or tribal governments.

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

    II. Objectives

    The primary objective of the hospital inpatient prospective payment system is to create incentives for hospitals to operate efficiently and minimize unnecessary costs while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs. In addition, we share national goals of preserving the Medicare Trust Fund.

    We believe the proposed changes would further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries. We expect that these proposed changes would ensure that the outcomes of this payment system are reasonable and equitable while avoiding or minimizing unintended adverse consequences.

    III. Limitations of Our Analysis

    As has been the case in our previously published regulatory impact analyses, the following quantitative analysis presents the projected effects of our proposed policy changes, as well as statutory changes Start Printed Page 22867effective for FY 2002, on various hospital groups. We estimate the effects of individual policy changes by estimating payments per case while holding all other payment policies constant. We use the best data available, but we do not attempt to predict behavioral responses to our policy changes, and we do not make adjustments for future changes in such variables as admissions, lengths of stay, or case-mix. As we have done in previous proposed rules, we are soliciting comments and information about the anticipated effects of these changes on hospitals and our methodology for estimating them.

    IV. Hospitals Included In and Excluded From the Prospective Payment System

    The prospective payment systems for hospital inpatient operating and capital-related costs encompass nearly all general, short-term, acute care hospitals that participate in the Medicare program. There were 44 Indian Health Service hospitals in our database, which we excluded from the analysis due to the special characteristics of the prospective payment method for these hospitals. Among other short-term, acute care hospitals, only the 67 such hospitals in Maryland remain excluded from the prospective payment system under the waiver at section 1814(b)(3) of the Act. Thus, as of February 2001, we have included 4,583 hospitals in our analysis. This represents about 80 percent of all Medicare-participating hospitals. The majority of this impact analysis focuses on this set of hospitals.

    The remaining 20 percent are specialty hospitals that are excluded from the prospective payment system and continue to be paid on the basis of their reasonable costs (subject to a rate-of-increase ceiling on their inpatient operating costs per discharge). These hospitals include psychiatric, rehabilitation, long-term care, children's, and cancer hospitals. The impacts of our final policy changes on these hospitals are discussed below.

    V. Impact on Excluded Hospitals and Units

    As of February 2001, there were 1,058 specialty hospitals excluded from the prospective payment system and instead paid on a reasonable cost basis subject to the rate-of-increase ceiling under § 413.40. Broken down by specialty, there were 517 psychiatric, 203 rehabilitation, 253 long-term care, 75 children's, and 10 cancer hospitals. In addition, there were 1,457 psychiatric units and 925 rehabilitation units in hospitals otherwise subject to the prospective payment system. These excluded units are also paid in accordance with § 413.40. Under § 413.40(a)(2)(i)(A), the rate-of-increase ceiling is not applicable to the 67 specialty hospitals and units in Maryland that are paid in accordance with the waiver at section 1814(b)(3) of the Act.

    As required by section 1886(b)(3)(B) of the Act, the update factor applicable to the rate-of-increase limit for excluded hospitals and units for FY 2002 would be between 0.5 and 3.0 percent, or 0 percent, depending on the hospital's or unit's costs in relation to its limit for the most recent cost reporting period for which information is available.

    The impact on excluded hospitals and units of the update in the rate-of-increase limit depends on the cumulative cost increases experienced by each excluded hospital or unit since its applicable base period. For excluded hospitals and units that have maintained their cost increases at a level below the percentage increases in the rate-of-increase limits since their base period, the major effect will be on the level of incentive payments these hospitals and units receive. Conversely, for excluded hospitals and units with per-case cost increases above the cumulative update in their rate-of-increase limits, the major effect will be the amount of excess costs that would not be reimbursed.

    We note that, under § 413.40(d)(3), an excluded hospital or unit whose costs exceed 110 percent of its rate-of-increase limit receives its rate-of-increase limit plus 50 percent of the difference between its reasonable costs and 110 percent of the limit, not to exceed 110 percent of its limit. In addition, under the various provisions set forth in § 413.40, certain excluded hospitals and units can obtain payment adjustments for justifiable increases in operating costs that exceed the limit. At the same time, however, by generally limiting payment increases, we continue to provide an incentive for excluded hospitals and units to restrain the growth in their spending for patient services.

    VI. Graduate Medical Education Impact

    A. National Average Per Resident Amount (PRA)

    As discussed in detail in section IV.G.2. of this proposed rule, we are proposing to implement section 511 of Public Law 106-554, which increases the floor of the locality-adjusted national average (PRA for the purposes of computing direct GME payments for cost reporting periods beginning during FY 2002. The national average PRA payment methodology, as provided in section 311 of Public Law 106-113, establishes a “floor” and “ceiling” based on a locality-adjusted, updated national average PRA for cost reporting periods beginning on or after October 1, 2000 and before October 1, 2005. Section 511 of Public Law 106-554 increased the floor from 70 percent to equal 85 percent of a locality-adjusted national average PRA for FY 2002.

    For this purpose rule, we have calculated an estimated impact of this proposed policy on teaching hospital's PRAs for FY 2002, making assumptions about update factors and geographic adjustment factors (GAF) for each hospital. Generally, using FY 1997 data, we calculated a floor based on 70 percent of the national average PRA and a floor based on 85 percent of the national average PRA. We then determined the amount of direct GME payments that would have been paid had the floor remained at 70 percent of the national average PRA. Next, we determined the amount of direct GME payments that would be paid with the floor increased to equal 85 percent of the national average PRA. We subtracted the difference between the two and inflated the difference to FY 2002 to determine the impact of this provision.

    The figures we use in this impact, except for the FY 1997 weighted PRA of $68,464, are estimations and are for demonstrative purposes only. Hospitals must use the methodology stated in section IV.G. of this proposed rule to revise (if appropriate) their individual PRAs.

    In calculating this impact, we used Medicare cost report data for all cost reports ending in FY 1997. We excluded hospitals that file manual cost reports because we did not have access to their Medicare utilization data. We also excluded all teaching hospitals in Maryland, because these hospitals are paid on a Medicare waiver outside of the prospective payment system, and those hospitals' PRAs do not determine their level of direct GME payments. For hospitals that had two cost reporting periods ending in FY 1997, we used the later of the two periods. A total of 1,231 teaching hospitals were included in the analysis.

    Using the FY 1997 weighted average PRA of $68,464, we determined an 85 percent floor of $58,194 for FY 1997. We then determined that, for cost reporting periods ending in FY 1997, approximately 562 hospitals had PRAs that were below $58,194 (336 hospitals of these hospitals had PRAs that were below the 70-percent floor, and 226 hospitals had PRAs that were above the 70-percent floor but below the 85-percent floor). The estimated total cost to the Medicare program in FY 2002 of replacing the PRAs of the 562 hospitals with the 85-percent floor is $104.4 million.

    B. Closed Training Programs or Hospitals That Close Their Training Programs

    As discussed in IV.G.5, of this proposed rule, we are proposing to allow a hospital to receive a temporary adjustment to its FTE cap to reflect residents added because of the closure of another hospital's GME program if the hospital that closed its program agrees to temporarily reduce its FTE cap. We have calculated an estimated impact on the Medicare program for FY 2002 as a result of this proposal. We used the best available cost report data from the FY 1997 HCRIS in our analysis.

    We estimate that approximately 5 to 10 programs, each with an average of 25 residents, close each year without advance warning, displacing the residents before they complete their training. Therefore, the number of residents displaced each year could be between 125 and 250. We estimated the impact of this proposed change based on direct GME and IME payment amounts in FY 1997 to determine a total GME amount and updated the total with the CPI-U for FY 2002. At most, the estimated impact for this proposed provision for FY 2002 is moving payments of between $10 and $20 million among different hospitals. This would result from redirecting these payments from the hospital that closed its program to the hospital(s) that takes on the residents.

    VII. Quantitative Impact Analysis of the Proposed Policy Changes Under the Prospective Payment System for Operating Costs

    A. Basis and Methodology of Estimates

    In this proposed rule, we are announcing policy changes and payment rate updates for Start Printed Page 22868the prospective payment systems for operating and capital-related costs. We have prepared separate impact analyses of the proposed changes to each system. This section deals with changes to the operating prospective payment system.

    The data used in developing the quantitative analyses presented below are taken from the FY 2000 MedPAR file and the most current provider-specific file that is used for payment purposes. Although the analyses of the changes to the operating prospective payment system do not incorporate cost data, the most recently available hospital cost report data were used to categorize hospitals. Our analysis has several qualifications. First, we do not make adjustments for behavioral changes that hospitals may adopt in response to these proposed policy changes. Second, due to the interdependent nature of the prospective payment system, it is very difficult to precisely quantify the impact associated with each proposed change. Third, we draw upon various sources for the data used to categorize hospitals in the tables. In some cases, particularly the number of beds, there is a fair degree of variation in the data from different sources. We have attempted to construct these variables with the best available source overall. For individual hospitals, however, some miscategorizations are possible.

    Using cases in the FY 2000 MedPAR file, we simulated payments under the operating prospective payment system given various combinations of payment parameters. Any short-term, acute care hospitals not paid under the general prospective payment systems (Indian Health Service hospitals and hospitals in Maryland) are excluded from the simulations. Payments under the capital prospective payment system, or payments for costs other than inpatient operating costs, are not analyzed here. Estimated payment impacts of proposed FY 2001 changes to the capital prospective payment system are discussed in section IX. of this Appendix.

    The proposed changes discussed separately below are the following:

    • The effects of the annual reclassification of diagnoses and procedures and the recalibration of the diagnosis-related group (DRG) relative weights required by section 1886(d)(4)(C) of the Act.
    • The effects of changes in hospitals' wage index values reflecting wage data from hospitals' cost reporting periods beginning during FY 1998, compared to the FY 1997 wage data.
    • The effects of our proposal to increase the accuracy of the wage index calculation by changing the overhead allocation method used so that the salaries and hours of lower-range, overhead employees and the overhead wage-related costs associated with the excluded areas of the hospital are more accurately removed when calculating the overhead costs attributable to wages.
    • The effects of our proposal to include the contract labor costs of laboratories and pharmacies from Worksheet S-3 Part II Lines 9.01 and 9.02 in the wage index calculation.
    • The combined effects of our proposed changes to the wage index data and calculations and the changes in the DRG recalibration.
    • The effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB) that will be effective in FY 2002 not including the effects of our proposed policy to hold-harmless other hospitals in an urban area where certain hospitals are reclassified elsewhere by including the wage data of reclassified hospitals in their geographic area as well as the area to which they are reclassified.
    • The effects of geographic reclassifications by the MGCRB that will be effective in FY 2002 including the effects of our proposed policy to hold-harmless other hospitals in an urban area where certain hospitals are reclassified elsewhere by including the wage data of reclassified hospitals in their geographic area as well as the area to which they are reclassified.
    • The total change in payments based on FY 2002 policies relative to payments based on FY 2001 policies.

    To illustrate the impacts of the FY 2002 proposed changes, our analysis begins with a FY 2002 baseline simulation model using: the FY 2001 DRG GROUPER (version 18.0); the FY 2001 wage index; and no MGCRB reclassifications. Outlier payments are set at 5.1 percent of total DRG plus outlier payments.

    Each proposed and statutory policy change is then added incrementally to this baseline model, finally arriving at an FY 2002 model incorporating all of the changes. This allows us to isolate the effects of each change.

    Our final comparison illustrates the percent change in payments per case from FY 2001 to FY 2002. Five factors have significant impacts here. The first is the update to the standardized amounts. In accordance with section 1886(d)(3)(A)(iv) of the Act, as amended by section 301 of Public Law 106-554, we are proposing to update the large urban and the other areas average standardized amounts for FY 2002 using the most recently forecasted hospital market basket increase for FY 2002 of 3.1 percent minus 0.55 percentage points (for an update of 2.55 percent). Under section 1886(b)(3) of the Act, the updates to the hospital-specific amounts for sole community hospitals (SCHs) and for Medicare-dependent small rural hospitals (MDHs) is equal to the market basket increase of 3.1 percent minus 0.55 percentage points (for an update of 2.55 percent).

    A second significant factor that impacts changes in hospitals' payments per case from FY 2001 to FY 2002 is the change in MGCRB status from one year to the next. That is, hospitals reclassified in FY 2001 that are no longer reclassified in FY 2002 may have a negative payment impact going from FY 2001 to FY 2002; conversely, hospitals not reclassified in FY 2001 that are reclassified in FY 2002 may have a positive impact. In some cases, these impacts can be quite substantial, so if a relatively small number of hospitals in a particular category lose their reclassification status, the percentage change in payments for the category may be below the national mean. This effect may be alleviated somewhat by section 304(a) of Public Law 106-554, which provided that reclassifications for purposes of the wage index are for a 3 year period.

    A third significant factor is that we currently estimate that actual outlier payments during FY 2001 will be 5.9 percent of actual total DRG payments. When the FY 2001 final rule was published, we projected FY 2001 outlier payments would be 5.1 percent of total DRG plus outlier payments; the standardized amounts were offset correspondingly. The effects of the higher than expected outlier payments during FY 2001 (as discussed in the Addendum to this proposed rule) are reflected in the analyses below comparing our current estimates of FY 2001 payments per case to estimated FY 2002 payments per case.

    Fourth, section 213 of Public Law 106-554 provided that all SCHs may receive payment on the basis of their costs per case during their cost reporting period that began during 1996. For FY 2001, eligible SCHs that are rebased receive a hospital-specific rate comprised of the greater of 50-percent of the higher of their FY 1982 or FY 1987 hospital-specific rate or 50-percent of the federal rate, and 50-percent of their FY 1996 hospital-specific rate.

    Fifth, sections 302 and 303 of Public Law 106-554 affect payments for indirect medical education (IME) and disproportionate share hospitals (DSH), respectively. These sections increased IME and DSH payments during FY 2001 (effective with discharges on or after April 1, 2001). For FY 2002, section 302 established IME payments at the same level as FY 2001 (6.5 percent), and section 303 established DSH payments at the adjustment the hospital would otherwise receive minus 3 percent.

    Table I demonstrates the results of our analysis. The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals. The top row of the table shows the overall impact on the 4,795 hospitals included in the analysis. This number is 93 fewer hospitals than were included in the impact analysis in the FY 2001 final rule (65 FR 47191).

    The next four rows of Table I contain hospitals categorized according to their geographic location (all urban (which is further divided into large urban and other urban) and rural). There are 2,721 hospitals located in urban areas (MSAs or NECMAs) included in our analysis. Among these, there are 1,563 hospitals located in large urban areas (populations over 1 million), and 1,158 hospitals in other urban areas (populations of 1 million or fewer). In addition, there are 2,074 hospitals in rural areas. The next two groupings are by bed-size categories, shown separately for urban and rural hospitals. The final groupings by geographic location are by census divisions, also shown separately for urban and rural hospitals.

    The second part of Table I shows hospital groups based on hospitals' FY 2002 payment classifications, including any reclassifications under section 1886(d)(10) of the Act. For example, the rows labeled urban, large urban, other urban, and rural show that the number of hospitals paid based on these categorizations (after consideration of geographic reclassifications) are 2,766, 1,643, 1,123, and 2,029, respectively.

    The next three groupings examine the impacts of the proposed changes on hospitals Start Printed Page 22869grouped by whether or not they have residency programs (teaching hospitals that receive an IME adjustment) or receive DSH payments, or some combination of these two adjustments. There are 3,674 non-teaching hospitals in our analysis, 881 teaching hospitals with fewer than 100 residents, and 240 teaching hospitals with 100 or more residents.

    In the DSH categories, hospitals are grouped according to their DSH payment status, and whether they are considered urban or rural after MGCRB reclassifications. Hospitals in the rural DSH categories, therefore, represent hospitals that were not reclassified for purposes of the standardized amount or for purposes of the DSH adjustment. (They may, however, have been reclassified for purposes of the wage index.) We note that section 211 of Public Law 106-554 reduced the qualifying DSH threshold to 15 percent for all hospitals (this threshold previously applied to urban hospitals with 100 or more beds and rural hospitals with 500 or more beds). Consequently, many more hospitals qualify for DSH. In the FY 2001 final rule, there were 3,070 hospitals that did not receive a DSH adjustment (65 FR 47192). In Table I, that number declines to 1,879. The number of urban hospitals with fewer than 100 beds receiving DSH increases from 72 prior to section 211 to 325 after its implementation. Among rural hospitals with fewer than 100 beds, 103 received DSH prior to section 211; for FY 2002 that number increases to 443.

    The next category groups hospitals considered urban after geographic reclassification, in terms of whether they receive the IME adjustment, the DSH adjustment, both, or neither.

    The next five rows examine the impacts of the proposed changes on rural hospitals by special payment groups (SCHs, rural referral centers (RRCs), and MDHs), as well as rural hospitals not receiving a special payment designation. The RRCs (165), SCHs (667), MDHs (328), and SCH and RRCs that are not included in the SCH or the RRC categories (69) shown here were not reclassified for purposes of the standardized amount. There are 20 RRCs, 1 MDH, 5 SCHs and 2 SCH and RRCs that will be reclassified as urban for the standardized amount in FY 2002 and, therefore, are not included in these rows.

    The next two groupings are based on type of ownership and the hospital's Medicare utilization expressed as a percent of total patient days. These data are taken primarily from the FY 1999 Medicare cost report files, if available (otherwise FY 1998 data are used). Data needed to determine ownership status or Medicare utilization percentages were unavailable for 46 and 78 hospitals, respectively. For the most part, these are new hospitals.

    The next series of groupings concern the geographic reclassification status of hospitals. The first grouping displays all hospitals that were reclassified by the MGCRB for FY 2002. The next two groupings separate the hospitals in the first group by urban and rural status. The final row in Table I contains hospitals located in rural counties but deemed to be urban under section 1886(d)(8)(B) of the Act.

    Table I.—Impact Analysis of Changes for FY 2002 Operating Prospective Payment System

    [Percent changes in payments per case]

    Number of hosps.1 (0)DRG re-calib.2 (1)New wage data 3 (2)New overhead alloc.4 (3)Include contract labor 5 (4)DRG & WI changes 6 (5)MCGRB reclassification 7 (6)Reclassification hold-harmless policy 8 (7)All FY 2001 changes 9 (8)
    By Geographic Location:
    All hospitals4,7950.50.20.00.00.0−0.20.21.9
    Urban hospitals2,7210.60.20.00.00.0−0.70.21.7
    Large urban areas (populations over 1 million)1,5630.7−0.10.00.0−0.1−0.80.31.5
    Other urban areas (populations of 1 million of fewer)1,1580.50.60.00.00.2−0.50.12.0
    Rural hospitals2,074−0.10.50.10.1−0.22.70.13.2
    Bed Size (Urban):
    0-99 beds712−0.10.30.00.0−0.4−0.80.22.1
    100-199 beds9430.40.20.00.0−0.2−0.70.31.6
    200-299 beds5300.60.30.00.10.1−0.70.31.8
    300-499 beds3910.70.10.00.00.0−0.70.21.6
    500 or more beds1451.00.00.00.00.2−0.60.11.5
    Bed Size (Rural):
    0-49 beds1,209−0.40.50.10.1−0.50.40.03.0
    50-99 beds520−0.20.50.10.1−0.41.10.03.3
    100-149 beds204−0.10.60.10.1−0.13.20.23.0
    150-199 beds750.10.40.10.1−0.15.20.23.4
    200 or more beds660.30.40.10.10.05.20.13.6
    Urban by Region:
    New England1390.62.2−0.10.01.3−0.20.01.7
    Middle Atlantic4170.7−1.2−0.10.0−1.4−0.80.60.2
    South Atlantic3950.70.90.00.00.9−0.80.32.8
    East North Central4620.50.10.00.1−0.2−0.60.11.6
    East South Central1600.61.10.10.01.1−0.70.03.0
    West North Central1890.60.50.10.10.3−0.70.02.0
    West South Central3420.7−0.80.00.0−0.9−0.70.00.7
    Mountain1370.60.90.00.00.7−0.70.02.4
    Pacific4340.70.40.10.00.4−0.80.22.2
    Puerto Rico460.41.30.10.01.0−0.5−0.32.6
    Rural by Region:
    Start Printed Page 22870
    New England490.00.60.10.0−0.13.00.13.7
    Middle Atlantic740.0−0.20.00.0−1.02.50.02.2
    South Atlantic2670.10.60.10.10.02.90.13.6
    East North Central273−0.20.60.00.1−0.32.20.22.8
    East South Central2630.00.50.10.1−0.23.30.03.6
    West North Central479−0.30.80.20.1−0.12.10.12.5
    West South Central331−0.10.70.10.10.03.50.14.2
    Mountain194−0.10.40.20.0−0.41.90.02.9
    Pacific1390.0−0.20.10.1−0.92.30.12.7
    Puerto Rico5−0.33.90.10.02.91.9−0.88.4
    By Payment Classification:
    Urban hospitals2,7660.60.20.00.00.0−0.70.21.7
    Large urban areas (populations over 1 million)1,6430.7−0.10.00.0−0.1−0.70.31.5
    Other urban areas (populations of 1 million of fewer)1,1230.50.60.00.00.2−0.60.12.0
    Rural areas2,029−0.10.50.10.1−0.22.50.03.2
    Teaching Status:
    Non-teaching3,6740.30.40.00.0−0.10.20.22.2
    Fewer than 100 Residents8810.60.30.00.00.1−0.60.21.9
    100 or more Residents2401.0−0.20.00.00.0−0.50.11.3
    Urban DSH:
    Non-DSH1,8790.40.20.00.0−0.1−0.20.31.7
    100 or more beds1,3780.70.20.00.00.1−0.70.21.7
    Less than 100 beds3250.00.40.10.0−0.3−0.80.33.3
    Rural DSH:
    Sole Community (SCH)540−0.20.40.10.0−0.50.40.03.1
    Referral Center (RRC)1570.20.50.10.10.05.30.13.7
    Other Rural:
    100 or more beds73−0.10.70.10.1−0.11.30.13.2
    Less than 100 beds443−0.20.50.10.1−0.40.60.04.3
    Urban teaching and DSH:
    Both teaching and DSH7540.80.10.00.00.0−0.70.21.6
    Teaching and no DSH2950.70.20.00.10.0−0.60.31.6
    No teaching and DSH9490.40.40.00.00.1−0.60.32.0
    No teaching and no DSH7680.30.20.00.0−0.2−0.60.31.5
    Rural Hospital Types:
    Non special status hospitals800−0.30.70.10.1−0.20.90.03.6
    RRC1650.20.50.10.10.06.30.13.6
    SCH667−0.20.40.10.0−0.50.40.02.5
    Start Printed Page 22871
    Medicare-dependent hospitals (MDH)328−0.30.50.10.1−0.50.50.03.2
    SCH and RRC690.10.40.00.0−0.32.50.02.7
    Type of Ownership:
    Voluntary2,7850.60.20.00.0−0.1−0.30.21.8
    Proprietary7770.60.20.10.00.1−0.30.22.0
    Government1,1870.50.60.10.00.30.10.12.5
    Unknown460.31.30.00.00.7−1.71.02.6
    Medicare Utilization as a Percent of Inpatient Days:
    0-253960.90.20.00.00.4−0.50.12.2
    25-501,8860.70.10.00.00.0−0.60.21.7
    50-651,8430.40.40.00.00.00.10.22.2
    Over 655920.20.20.00.1−0.20.20.31.9
    Unknown780.5−2.1−0.10.0−2.4−0.70.1−1.1
    Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY 2002
    Reclassifications:
    All Reclassified Hospitals6360.30.60.00.10.24.50.32.9
    Standardized Amount Only740.10.70.00.00.01.91.04.0
    Wage Index Only3910.30.50.10.10.15.30.12.5
    Both580.40.70.00.10.44.10.60.0
    Nonreclassified Hospitals4,2460.60.20.00.00.0−0.80.21.9
    All Reclassified Urban Hospitals1190.70.80.00.10.62.80.42.0
    Urban Nonreclassified Hospitals180.20.50.00.0−0.2−1.21.9−0.6
    Standardized Amount Only810.80.70.00.10.63.30.12.2
    Wage Index Only200.51.40.00.11.11.92.12.5
    Both2,5640.60.20.00.00.0−0.90.21.6
    All Reclassified Rural Hospitals5170.10.50.10.1−0.15.60.23.6
    Standardized Amount Only19−0.20.50.10.0−0.53.91.52.0
    Wage Index Only4750.10.50.10.1−0.15.50.13.6
    Both230.10.80.10.10.27.71.54.2
    Rural Nonreclassified Hospitals1,554−0.30.50.10.1−0.4−0.60.02.8
    Other Reclassified Hospitals (Section 1886(D)(8)(B))41−0.1−6.10.10.10.40.30.13.9
    1 Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the national total. Discharge data are from FY 2000, and hospital cost report data are from reporting periods beginning in FY 1999 and FY 1998.
    2 This column displays the payment impact of the recalibration of the DRG weights based on FY 2000 MedPAR data and the DRG reclassification changes, in accordance with section 1886(d)(4)(C) of the Act.
    3 This column shows the payment effects of updating the data used to calculate the wage index with data from the FY 1998 cost reports.
    4 This column displays the impact of removing the salaries and hours of lower-range, overhead employees and the overhead wage-related costs associated with the excluded areas of the hospital from the wage index calculation.
    5 This column displays the impact of including contract pharmacy and contract laboratory costs and hours in the wage index calculation. Start Printed Page 22872
    6 This column displays the combined impact of the reclassification and recalibration of the DRGs, the updated and revised wage data used to calculate the wage index, the revised overhead allocation, the laboratory and pharmacy contract labor costs, and the budget neutrality adjustment factor for these two changes, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act. Thus, it represents the combined impacts shown in columns 1, 2 3, and 4, and the FY 2002 budget neutrality factor of .992394.
    7 Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB). The effects demonstrate the FY 2002 payment impact of going from no reclassifications to the reclassifications scheduled to be in effect for FY 2002. Reclassification for prior years has no bearing on the payment impacts shown here.
    8 Shown here are the effects of geographic reclassifications by the MGCRB including the effects of our proposed policy to hold-harmless other hospitals in an urban area where certain hospitals are reclassified elsewhere by including the wage data of reclassified hospitals in their geographic area as well as the area to which they are reclassified.
    9 This column shows changes in payments from FY 2001 to FY 2002. It incorporates all of the changes displayed in columns 5, 6, and 7 (the changes displayed in columns 1, 2, 3, and 4 are included in column 5). It also displays the impact of the FY 2002 update, changes in hospitals' reclassification status in FY 2002 compared to FY 2001, and the difference in outlier payments from FY 2001 to FY 2002. It also reflects section 213 of Public Law 106-554, which permitted all SCHs to rebase for a 1996 hospital-specific rate. The sum of these columns may be different from the percentage changes shown here due to rounding and interactive effects.

    B. Impact of the Proposed Changes to the DRG Reclassifications and Recalibration of Relative Weights (Column 1)

    In column 1 of Table I, we present the combined effects of the DRG reclassifications and recalibration, as discussed in section II. of the preamble to this proposed rule. Section 1886(d)(4)(C)(i) of the Act requires us to annually make appropriate classification changes and to recalibrate the DRG weights in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources.

    We compared aggregate payments using the FY 2001 DRG relative weights (GROUPER version 18) to aggregate payments using the proposed FY 2002 DRG relative weights (GROUPER version 19). Overall payments increase 0.5 percent due to the DRG reclassification and recalibration. We note that, consistent with section 1886(d)(4)(C)(iii) of the Act, we have applied a budget neutrality factor to ensure that the overall payment impact of the DRG changes is budget neutral. This budget neutrality factor of 0.992493 is applied to payments in Column 5.

    The DRG changes we are proposing in this proposed rule would result in higher payments to urban hospitals (0.6 percent) and somewhat lower payments to rural hospitals (-0.1). The changes also would result in higher payments to larger hospitals than to smaller hospitals. This impact is consistent for both urban and rural bed size groups.

    This distributional impact likely results from the changes we are proposing to major diagnostic category (MDC) 5 “Diseases and Disorders of the Circulatory System.” As described in section II., we are proposing to remove cardiac defribrillator cases from DRGs 104 and 105, and create two new DRGs for these cases. In addition, we are proposing to revise the basis of the DRG assignment for cases involving percutaneous transluminal coronary angioplasty based on whether the patient experienced an acute myocardial infarction. Because MDC 5 is a high volume category, refining the categorizations of these cases has a noticeable impact.

    C. Impact of Updating the Wage Data and the Proposed Changes to the Wage Index Calculation (Columns 2, 3 & 4)

    Section 1886(d)(3)(E) of the Act requires that, beginning October 1, 1993, we annually update the wage data used to calculate the wage index. In accordance with this requirement, the proposed wage index for FY 2002 is based on data submitted for hospital cost reporting periods beginning on or after October 1, 1997 and before October 1, 1998. As with column 1, the impact of the new data on hospital payments is isolated in column 2 by holding the other payment parameters constant in the two simulations. That is, column 2 shows the percentage changes in payments when going from a model using the FY 2001 wage index (based on FY 1997 wage data before geographic reclassifications to a model using the FY 2002 pre-reclassification wage index based on FY 1998 wage data).

    The wage data collected on the FY 1998 cost reports are similar to the data used in the calculation of the FY 2001 wage index. For a thorough discussion of the data used to calculate the wage index, see section III.B of this proposed rule.

    The results indicate that the new wage data are estimated to provide a 0.2 percent increase for hospital payments overall (prior to applying the budget neutrality factor, see column 5). Rural hospitals appear to experience the greatest benefit from the update to the 1998 wage data, with an increase of 0.5 percent. Rural hospitals in Nevada, Connecticut and Arizona experience wage index increases of more than 5 percent. Rural hospitals in Puerto Rico experience a 3.9 percent increase.

    Urban hospitals as a group are not significantly affected by the updated wage data. While large urban hospitals appear to experience a 0.1 percent decline, estimated payments to urban hospitals overall showed an increase of 0.2 percent. Payments in other urban areas increase by 0.6 percent. Among urban census divisions, the New England division experiences a 2.2 percent increase, Middle Atlantic a 1.2 percent decrease, East South Central a 1.1 percent increase, and Puerto Rico a 1.3 percent increase.

    Columns 3 and 4, respectively, show that the proposed change to the overhead calculation and the proposal to include contract labor costs in the wage index discussed in detail in Section III.C. of this proposed rule both appear to have negligible impacts on hospital payments overall. Urban hospitals as a group are not effected by these proposals as there is a 0.0 percent impact to their payments from each proposed change. Rural hospitals, however, do appear to benefit slightly from these changes, as evidenced by the estimated 0.1 percent increase in payments to this group.

    We note that the wage data used for the proposed wage index are based upon the data available as of February 22, 2001 and, therefore, do not reflect revision requests received and processed by the fiscal intermediaries after that date. To the extent these requests are granted by hospitals' fiscal intermediaries, these revisions will be reflected in the final rule. In addition, we continue to verify the accuracy of the data for hospitals with extraordinary changes in their data from the prior year.

    The following chart compares the shifts in wage index values for labor market areas for FY 2001 relative to FY 2002. This chart demonstrates the impact of the proposed changes for the FY 2002 wage index relative to the FY 2001 wage index. The majority of labor market areas (318) experience less than a 5-percent change. A total of 36 labor market areas experience an increase of more than 5 percent with 4 having an increase greater than 10 percent. A total of 13 areas experience decreases of more than 5-percent. Of those, 4 decline by 10 percent or more.

    Percentage change in area wage index valuesNumber of labor market areas
    FY 2001FY 2002
    Increase more than 10 percent14
    Increase more than 5 percent and less than 10 percent2036
    Increase or decrease less than 5 percent339318
    Decrease more than 5 percent and less than 10 percent1413
    Decrease more than 10 percent14

    Among urban hospitals, 163 would experience an increase of between 5 and 10 percent and 16 more than 10 percent. A total of 33 rural hospitals have increases greater than 5 percent, but none greater than 10 percent. On the negative side, 121 urban hospitals have decreases in their wage index values of at least 5 percent but less than 10 percent. Five urban hospitals have decreases in their wage index values greater than 10 percent. There are no rural hospitals with decreases in their wage index values greater than 5 percent or with increases of more than 10 percent. The following chart shows the projected impact for urban and rural hospitals. Start Printed Page 22873

    Percentage change in area wage index valuesNumber of hospitals
    UrbanRural
    Increase more than 10 percent160
    Increase more than 5 percent and less than 10 percent10115
    Increase or decrease less than 5 percent2,3952,135
    Decrease more than 5 percent and less than 10 percent1210
    Decrease more than 10 percent50

    D. Combined Impact of DRG and Wage Index Changes—Including Budget Neutrality Adjustment (Column 5)

    The impact of DRG reclassifications and recalibration on aggregate payments is required by section 1886(d)(4)(C)(iii) of the Act to be budget neutral. In addition, section 1886(d)(3)(E) of the Act specifies that any updates or adjustments to the wage index are to be budget neutral. As noted in the Addendum to this proposed rule, we compared simulated aggregate payments using the FY 2001 DRG relative weights and wage index to simulated aggregate payments using the proposed FY 2002 DRG relative weights and blended wage index. Based on this comparison, we computed a wage and recalibration budget neutrality factor of 0.992493. In Table I, the combined overall impacts of the effects of both the DRG reclassifications and recalibration and the updated wage index are shown in column 5. The 0.0 percent impact for all hospitals demonstrates that these changes, in combination with the budget neutrality factor, are budget neutral.

    For the most part, the changes in this column are the sum of the changes in columns 1, 2, 3 and 4, minus approximately 0.7 percent attributable to the budget neutrality factor. There may be some variation of plus or minus 0.1 percent due to rounding.

    E. Impact of MGCRB Reclassifications (Columns 6 & 7)

    Our impact analysis to this point has assumed hospitals are paid on the basis of their actual geographic location (with the exception of ongoing policies that provide that certain hospitals receive payments on bases other than where they are geographically located, such as hospitals in rural counties that are deemed urban under section 1886(d)(8)(B) of the Act). The changes in column 5 reflect the per case payment impact of moving from this baseline to a simulation incorporating the MGCRB decisions for FY 2002. The changes in column 6 add in the post-reclassified wage index values resulting from the proposed change to include the wage data for a reclassified hospital in both the area to which it is reclassified and the area where the hospital is physically located. As noted below, these decisions affect hospitals' standardized amount and wage index area assignments.

    By February 28 of each year, the MGCRB makes reclassification determinations that will be effective for the next fiscal year, which begins on October 1. The MGCRB may approve a hospital's reclassification request for the purpose of using the other area's standardized amount, wage index value, or both.

    The proposed FY 2002 wage index values incorporate all of the MGCRB's reclassification decisions for FY 2002. The wage index values also reflect any decisions made by the HCFA Administrator through the appeals and review process for MGCRB decisions as of February 28, 2001. Additional changes that result from the Administrator's review of MGCRB decisions or a request by a hospital to withdraw its application will be reflected in the final rule for FY 2002.

    The overall effect of geographic reclassification is required by section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, we applied an adjustment of 0.991054 to ensure that the effects of reclassification are budget neutral. (See section II.A.4.b. of the Addendum to this proposed rule.) This results in a larger budget neutrality offset than the FY 2001 factor of 0.993187. This larger offset is accounted for by the extension of wage index reclassifications for 3 years as a result of section 304 of Public Law 106-554, and our proposed policy to hold-harmless the calculation of urban areas' wage indexes for reclassifications out of the area (see Column 7). We have identified 162 hospitals that were reclassified for FY 2001 but not FY 2002, that will nonetheless continue to be reclassified due to section 304 of Public Law 106-554.

    As a group, rural hospitals benefit from geographic reclassification. Their payments rise 2.7 percent in Column 6. Payments to urban hospitals decline 0.7 percent. Hospitals in other urban areas see a decrease in payments of 0.5 percent, while large urban hospitals lose 0.8 percent. Among urban hospital groups (that is, bed size, census division, and special payment status), payments generally decline.

    A positive impact is evident among most of the rural hospital groups. The smallest increase among the rural census divisions is 1.9 percent for Mountain and Puerto Rico regions. The largest increases are in rural West South Central and New England. These regions receive increases of 3.5 and 3.0 percent respectively.

    Among all the hospitals that were reclassified for FY 2002, the MGCRB changes are estimated to provide a 4.5 percent increase in payments. Urban hospitals reclassified for FY 2002 are anticipated to receive an increase of 2.8 percent, while rural reclassified hospitals are expected to benefit from the MGCRB changes with a 5.6 percent increase in payments. Overall, among hospitals that were reclassified for purposes of the standardized amount only, a payment increase of 3.3 percent is expected, while those reclassified for purposes of the wage index only show a 1.9 percent increase in payments. Payments to urban and rural hospitals that did not reclassify are expected to decrease slightly due to the MGCRB changes, decreasing by 1.2 for urban hospitals and 0.6 for rural hospitals. Those hospitals located in rural counties but deemed to be urban under section 1886(d)(8)(B) of the Act are expected to receive an increase in payments of 0.3 percent.

    Column 7 shows the impacts of our proposed policy to include the wage data for a reclassified hospital in both the area to which it is reclassified and the area where the hospital is physically located. This change affects overall payments by 0.2 percent, partially accounting for the larger budget neutrality factor compared to FY 2001. The payment impacts are generally largest in urban hospital groups, with the largest impact, 0.6 percent, experienced by urban hospitals in the Middle Atlantic census division.

    The foregoing analysis was based on MGCRB and HCFA Administrator decisions made by February 28, 2001. As previously noted, there may be changes to some MGCRB decisions through the appeals, review, and applicant withdrawal process. The outcome of these cases will be reflected in the analysis presented in the final rule.

    F. All Changes (Column 8)

    Column 8 compares our estimate of payments per case, incorporating all changes reflected in this proposed rule for FY 2002 (including statutory changes), to our estimate of payments per case in FY 2001. It includes the effects of the 2.55 percent update to the standardized amounts and the hospital-specific rates for MDHs and SCHs. It also reflects the 0.8 percentage point difference between the projected outlier payments in FY 2001 (5.1 percent of total DRG payments) and the current estimate of the percentage of actual outlier payments in FY 2001 (5.9 percent), as described in the introduction to this Appendix and the Addendum to this proposed rule.

    We also note that section 211 of Public Law 106-554 changed the criteria for hospitals to qualify for DSH payment status. Since more hospitals are now eligible to receive DSH payments for the full FY 2002, as opposed to for just the second 6 months of FY 2001, DSH payments to providers in FY 2002 would increase and this change is also captured in column 8.

    Section 213 of Public Law 106-554 provided that all SCHs may elect to receive payment on the basis of their costs per case during their cost reporting period that began during 1996. For FY 2002, eligible SCHs that rebase receive a hospital-specific rate comprised of 50 percent of the higher of their FY 1982 or FY 1987 hospital-specific rate or their Federal rate, and 50 percent of their 1996 hospital-specific rate. The impact of this provision is modeled in column 8 as well.

    There might also be interactive effects among the various factors comprising the payment system that we are not able to isolate. For these reasons, the values in column 7 may not equal the sum of the changes in columns 5 and 6, plus the other impacts that we are able to identify.

    Hospitals in urban areas experience a 1.7 percent increase in payments per case compared to FY 2001. The 0.7 percent Start Printed Page 22874negative impact due to reclassification is offset by a similar negative impact for FY 2001 of 0.4 percent (65 FR 47196). Hospitals in rural areas, meanwhile, experience a 3.2 percent payment increase. This is primarily due to the change in the DSH threshold to 15 percent for all hospitals enacted by section 211 of Public Law 106-554 and effective for discharges on or after April 1, 2001, and the positive effect of the reclassification changes (2.7 percent increase, plus an additional 0.1 percent increase from the proposal to include the wage data for a reclassified hospital in both the area to which it is reclassified and the area where the hospital is physically located).

    The impact of lowering the DSH threshold is demonstrated in Column 8, although we would note that the estimated FY 2001 payments do reflect 6 months of payments to hospitals affected by this change. The impacts are seen in the rows displaying urban hospitals with fewer than 100 beds receiving DSH (3.3 percent increase), and all rural DSH categories.

    Among urban census divisions, payments increased between 0.2 and 3.0 percent between FY 2001 and FY 2002. The rural census division experiencing the smallest increase in payments was the Mid-Atlantic region (2.2 percent). The largest increases by rural hospitals is in Puerto Rico, where payments appear to increase by 8.4 percent and West South Central, where payments appear to increase by 4.2 percent. Rural New England and South Atlantic regions also benefited with 3.7 and 3.6 percent respectively.

    Among special categories of rural hospitals, those hospitals receiving payment under the hospital-specific methodology (SCHs, MDHs, and SCH/RRCs) experience payment increases of 3.1 percent, 3.7 percent, and 3.2 percent, respectively. This outcome is primarily related to the fact that, for hospitals receiving payments under the hospital-specific methodology, there are no outlier payments. Therefore, these hospitals do not experience negative payment impacts from the decline in outlier payments from FY 2001 to FY 2002 (from 5.9 percent of total DRG plus outlier payments to 5.1 percent) as do hospitals paid based on the national standardized amounts.

    Among hospitals that were reclassified for FY 2002, hospitals overall are estimated to receive a 2.9 percent increase in payments. Urban hospitals reclassified for FY 2002 are anticipated to receive an increase of 2.0 percent, while rural reclassified hospitals are expected to benefit from reclassification with a 3.6 percent increase in payments. Overall, among hospitals reclassified for purposes of the standardized amount, only a payment increase of 4.0 percent is expected, while those hospitals reclassified for purposes of the wage index only show an expected 2.5 percent increase in payments. Those hospitals located in rural counties but deemed to be urban under section 1886(d)(8)(B) of the Act are expected to receive an increase in payments of 3.9 percent.

    Table II.—Impact Analysis of Changes for FY 2001 Operating Prospective Payment System

    [Payments per case]

    Number of hosps. (1)Average FY 2001 payment per case 1 (2)Average FY 2001 payment per case 1 (3)All FY 2001 changes (4)
    By Geographic Location:
    All hospitals4,7956,9697,1001.9
    Urban hospitals2,7217,5487,6741.7
    Large urban areas (populations over 1 million)1,5638,0878,2071.5
    Other urban areas (populations of 1 million of fewer)1,1586,8546,9892.0
    Rural hospitals2,0744,7054,8563.2
    Bed Size (Urban):
    0-99 beds7125,1145,2202.1
    100-199 beds9436,2946,3971.6
    200-299 beds5307,1927,3201.8
    300-499 beds3918,1278,2611.6
    500 or more beds1459,94610,0991.5
    Bed Size (Rural):
    0-49 beds1,2093,9224,0413.0
    50-99 beds5204,4104,5543.3
    100-149 beds2044,7804,9223.0
    150-199 beds755,2915,4703.4
    200 or more beds665,9616,1733.6
    Urban by Region:
    New England1398,0778,2141.7
    Middle Atlantic4178,5618,5790.2
    South Atlantic3957,1837,3862.8
    East North Central4627,2107,3231.6
    East South Central1606,7716,9733.0
    West North Central1897,2877,4302.0
    West South Central3427,0397,0870.7
    Mountain1377,2827,4542.4
    Pacific4348,8409,0372.2
    Puerto Rico463,2353,3192.6
    Rural by Region:
    New England495,6155,8213.7
    Middle Atlantic745,0525,1652.2
    South Atlantic2674,8715,0463.6
    East North Central2734,7434,8752.8
    East South Central2634,3984,5563.6
    West North Central4794,5064,6202.5
    West South Central3314,1774,3514.2
    Mountain1945,0205,1662.9
    Pacific1395,7625,9202.7
    Puerto Rico52,5292,7428.4
    By Payment Classification:
    Urban hospitals2,7667,5267,6521.7
    Start Printed Page 22875
    Large urban areas (populations over 1 million)1,6438,0028,1211.5
    Other urban areas (populations of 1 million of fewer)1,1236,8707,0082.0
    Rural areas2,0294,6874,8383.2
    Teaching Status:
    Non-teaching3,6745,6055,7282.2
    Fewer than 100 Residents8817,3097,4451.9
    100 or more Residents24011,25811,4101.3
    Urban DSH:
    Non-DSH1,8796,3546,4611.7
    100 or more beds1,3788,1298,2671.7
    Less than 100 beds3254,9255,0893.3
    Rural DSH:
    Sole Community (SCH)5404,2954,4273.1
    Referral Center (RRC)1575,5215,7233.7
    Other Rural:
    100 or more beds734,3044,4413.2
    Less than 100 beds4433,9284,0954.3
    Urban teaching and DSH:
    Both teaching and DSH7549,0919,2381.6
    Teaching and no DSH2957,5627,6831.6
    No teaching and DSH9496,2986,4242.0
    No teaching and no DSH7685,9326,0221.5
    Rural Hospital Types:
    Non special status hospitals8004,0424,1863.6
    RRC1655,4345,6303.6
    SCH6674,5624,6762.5
    Medicare-dependent hospitals (MDH)3283,8443,9663.2
    SCH and RRC695,6495,8032.7
    Type of Ownership:
    Voluntary2,7857,1367,2611.8
    Proprietary7776,5806,7122.0
    Government1,1876,4866,6512.5
    Unknown466,2836,4492.6
    Medicare Utilization as a Percent of Inpatient Days:
    0-253969,5049,7132.2
    25-501,8868,0308,1641.7
    50-651,8436,0126,1422.2
    Over 655925,3935,4971.9
    Unknown7810,24410,132−1.1
    Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY 2002 Reclassifications:
    All Reclassified Hospitals6366,1536,3342.9
    Standardized Amount Only745,2005,4074.0
    Wage Index Only3916,0046,1522.5
    Both586,8186,8160.0
    All Nonreclassified Hospitals4,2467,1057,2361.9
    All Urban Reclassified Hospitals1198,2538,4152.0
    Urban Nonreclassified Hospitals186,1766,136−0.6
    Standardized Amount Only818,9469,1412.2
    Wage Index Only206,1936,3462.5
    Both2,5647,5317,6541.6
    All Reclassified Rural Hospitals5175,2775,4663.6
    Standardized Amount Only194,6584,7502.0
    Wage Index Only4755,2835,4723.6
    Both235,3965,6224.2
    Rural Nonreclassified Hospitals1,5544,1534,2682.8
    Other Reclassified Hospitals (Section 1886(D)(8)(B))414,8415,0323.9
    1 These payment amounts per case do not reflect any estimates of annual case-mix increase.

    Table II presents the projected impact of the proposed changes for FY 2002 for urban and rural hospitals and for the different categories of hospitals shown in Table I. It compares the estimated payments per case for FY 2001 with the average estimated per case payments for FY 2002, as calculated under our models. Thus, this table presents, in terms of the average dollar amounts paid per discharge, the combined effects of the changes presented in Table I. The percentage changes shown in the last column of Table II equal the percentage changes in average payments from column 8 of Table I. Start Printed Page 22876

    VIII. Impact for Critical Access Hospitals (CAHs)

    There are approximately 365 facilities that qualify as CAHs. These CAHs are paid based on reasonable costs for their services to inpatients and outpatients. We examined several parts of the proposed rule, as discussed in detail in section VI.B. of the preamble, for their potential impact on CAHs.

    A. Exclusion of CAHs From Payment Window Requirements

    In this proposed rule, we are proposing to clarify the policy that CAHs are not subject to the payment window provisions of section 1886(a)(3) of the Act. Existing regulations do not require that these provisions be applied to CAHs, and we are not aware of specific situations in which they are now being applied. Consequently, we do not expect any increase or decrease in Medicare spending based on this clarification.

    B. Availability of CRNA Pass-Through for CAHs

    Under existing § 412.113(c), CRNA pass-through payment is available only to hospitals that either qualified for the pass-through of costs of anesthesia services furnished in calendar year 1989, or employed or contracted with a qualified nonphysician anesthetist as of January 1, 1988, to perform anesthesia services. We are proposing that certain CAHs that meet the pass-through criteria would qualify for pass-through payments. Under the existing criterion, the only facilities that could qualify for the pass-through as CAHs are those that would have qualified for the pass-through if they had elected to continue participating in Medicare as hospitals rather than converting to CAH status. We do not expect any increase or decrease in Medicare spending based on the proposed change in the regulations.

    C. Payment for Emergency Room On-Call Physicians

    In accordance with the amendments made by section 204 of Public Law 106-544, we are proposing to recognize as allowable costs, amounts for reasonable compensation and related costs for emergency room physicians who are on call but who are not present on the premises of a CAH. We expect that at least some CAHs will elect to compensate emergency room physicians for being on call, and that as a result, Medicare spending for CAH services will increase. However, we do not have information to develop a reliable estimate of how many CAHs will make this election, or how much physician compensation costs they will incur for on call time.

    D. Treatment of Ambulance Services Furnished by Certain CAHs

    In accordance with the provisions of section 205 of Public Law 106-554, we are proposing to amend the existing CAH regulations to provide for payment to CAHs for the reasonable costs of ambulance services furnished by a CAH or an entity owned or operated by the CAH if certain statutory requirements are met. We expect that at least some CAHs or entities owned or operated by CAHs will be able to qualify for payment for their ambulance services. To the extent that CAHs or CAH owned or operated entities furnish these services under the conditions specified in the law, ambulance services will be paid for at higher rates than would otherwise apply. As a result, Medicare spending for ambulance services will increase. However, we do not have sufficient information or data to develop a reliable estimate of how many CAHs or entities will qualify or the dollar amount of ambulance service costs they will incur.

    E. Qualified Practitioners for Preanesthesia and Postanesthesia Evaluations in CAHs

    As discussed in section VI.B. of this proposed rule, in an effort to eliminate or minimize potential issues relating to beneficiary access to medical services in rural areas, we are proposing to allow CRNAs who administer the anesthesia to conduct the preanesthesia and postanesthesia evaluations in a CAH. As with any licensed independent health care provider, the proposed change would not permit CRNAs to practice beyond his or her licensed scope of practice.

    We believe that this proposal would increase flexibility of providers in furnishing medical services in rural areas. However, we do not have information or data to develop a reliable estimate of how many CRNAs would be used to conduct preanesthesia and postanesthesia evaluations in CAHs or what the associated costs would be.

    IX. Impact of Proposed Changes in the Capital Prospective Payment System

    A. General Considerations

    We now have cost report data for the 8th year of the capital prospective payment system (cost reports beginning in FY 1999) available through the December 2000 update of the HCRIS. We also have updated information on the projected aggregate amount of obligated capital approved by the fiscal intermediaries. However, our impact analysis of payment changes for capital-related costs is still limited by the lack of hospital-specific data on several items. These are the hospital's projected new capital costs for each year, its projected old capital costs for each year, and the actual amounts of obligated capital that will be put in use for patient care and recognized as Medicare old capital costs in each year. The lack of this information affects our impact analysis in the following ways:

    • Major investment in hospital capital assets (for example, in building and major fixed equipment) occurs at irregular intervals. As a result, there can be significant variation in the growth rates of Medicare capital-related costs per case among hospitals. We do not have the necessary hospital-specific budget data to project the hospital capital growth rate for individual hospitals.
    • Our policy of recognizing certain obligated capital as old capital makes it difficult to project future capital-related costs for individual hospitals. Under § 412.302(c), a hospital is required to notify its intermediary that it has obligated capital by the later of October 1, 1992, or 90 days after the beginning of the hospital's first cost reporting period under the capital prospective payment system. The intermediary must then notify the hospital of its determination whether the criteria for recognition of obligated capital have been met by the later of the end of the hospital's first cost reporting period subject to the capital prospective payment system or 9 months after the receipt of the hospital's notification. The amount that is recognized as old capital is limited to the lesser of the actual allowable costs when the asset is put in use for patient care or the estimated costs of the capital expenditure at the time it was obligated. We have substantial information regarding fiscal intermediary determinations of projected aggregate obligated capital amounts. However, we still do not know when these projects will actually be put into use for patient care, the actual amount that will be recognized as obligated capital when the project is put into use, or the Medicare share of the recognized costs. Therefore, we do not know actual obligated capital commitments for purposes of the FY 2002 capital cost projections. In Appendix B of this proposed rule, we discuss the assumptions and computations that we employ to generate the amount of obligated capital commitments for use in the FY 2002 capital cost projections.

    In Table III of this section, we present the redistributive effects that are expected to occur between “hold-harmless” hospitals and “fully prospective” hospitals in FY 2002. In addition, we have integrated sufficient hospital-specific information into our actuarial model to project the impact of the proposed FY 2002 capital payment policies by the standard prospective payment system hospital groupings. While we now have actual information on the effects of the transition payment methodology and interim payments under the capital prospective payment system and cost report data for most hospitals, we still need to randomly generate numbers for the change in old capital costs, new capital costs for each year, and obligated amounts that will be put in use for patient care services and recognized as old capital each year. We continue to be unable to predict accurately FY 2002 capital costs for individual hospitals, but with the most recent data on hospitals' experience under the capital prospective payment system, there is adequate information to estimate the aggregate impact on most hospital groupings.

    B. Projected Impact Based on the Proposed FY 2002 Actuarial Model

    1. Assumptions

    In this impact analysis, we model dynamically the impact of the capital prospective payment system from FY 2001 to FY 2002 using a capital cost model. The FY 2002 model, as described in Appendix B of this proposed rule, integrates actual data from individual hospitals with randomly generated capital cost amounts. We have capital cost data from cost reports beginning in FY 1989 through FY 1999 as reported on the December 2000 update of HCRIS, interim payment data for hospitals already receiving capital prospective payments through PRICER, and data reported by the intermediaries that include the hospital-Start Printed Page 22877specific rate determinations that have been made through January 1, 2001 in the provider-specific file. We used these data to determine the proposed FY 2002 capital rates. However, we do not have individual hospital data on old capital changes, new capital formation, and actual obligated capital costs. We have data on costs for capital in use in FY 1999, and we age that capital by a formula described in Appendix B. Therefore, we need to randomly generate only new capital acquisitions for any year after FY 1999. All Federal rate payment parameters are assigned to the applicable hospital. We will continue to pay regular exceptions during cost reporting periods beginning before October 1, 2001 but ending in FY 2002. However, in FY 2003 and later, payments will no longer be made under the regular exceptions provision, hence, we will no longer require the actuarial model described in Appendix B of this proposed rule.

    For purposes of this impact analysis, the proposed FY 2002 actuarial model includes the following assumptions:

    • Medicare inpatient capital costs per discharge will change at the following rates during these periods:

    Average Percentage Change in Capital Costs Per Discharge

    Fiscal yearPercentage change
    20001.39
    20011.37
    20022.58
    • We estimate that the Medicare case-mix index will increase by 0.0 percent in FY 2001 and will increase by 1.0 percent in FY 2002.
    • The Federal capital rate and the hospital-specific rate were updated beginning in FY 1996 by an analytical framework that considers changes in the prices associated with capital-related costs and adjustments to account for forecast error, changes in the case-mix index, allowable changes in intensity, and other factors. The proposed FY 2002 update is 1.1 percent (see section IV. of the Addendum to this proposed rule).

    2. Results

    We have used the actuarial model to estimate the change in payment for capital-related costs from FY 2001 to FY 2002. Table III shows the effect of the capital prospective payment system on low capital cost hospitals and high capital cost hospitals. We consider a hospital to be a low capital cost hospital if, based on a comparison of its initial hospital-specific rate and the applicable Federal rate, it will be paid under the fully prospective payment methodology. A high capital cost hospital is a hospital that, based on its initial hospital-specific rate and the applicable Federal rate, will be paid under the hold-harmless payment methodology. We are no longer displaying a column for the hospital-specific payments in Table III since the FY 2001 transition blend percentage for fully prospective hospitals is 100 percent of the Federal rate and zero percent of the hospital-specific rate, and all hospitals (except those defined as “new” under § 412.300) are paid based on 100 percent of the Federal rate for FY 2002. Based on our actuarial model, the breakdown of hospitals is as follows:

    Capital Transition Payment Methodology for FY 2002

    Type of hospitalPercent of hospitalsPercent of dischargesPercent of capital costsPercent of capital payments
    Low Cost Hospital66625761
    High Cost Hospital34384339

    A low capital cost hospital may request to have its hospital-specific rate redetermined based on old capital costs in the current year, through the later of the hospital's cost reporting period beginning in FY 1994 or the first cost reporting period beginning after obligated capital comes into use (within the limits established in § 412.302(c) for putting obligated capital into use for patient care). If the redetermined hospital-specific rate is greater than the adjusted Federal rate, these hospitals will be paid under the hold-harmless payment methodology. Regardless of whether the hospital became a hold-harmless payment hospital as a result of a redetermination, we continue to show these hospitals as low capital cost hospitals in Table III.

    Assuming no behavioral changes in capital expenditures, Table III displays the percentage change in payments from FY 2001 to FY 2002 using the above described actuarial model. With the proposed Federal rate, we estimate aggregate Medicare capital payments will increase by 3.80 percent in FY 2002. This increase is somewhat lower than last year's (5.48 percent) due in part to the fact that because the transition period ends after FY 2001, there is no longer an increase in the Federal blend percentage, which increased from 90 to 100 percent from FY 2000 to FY 2001, for fully prospective hospitals.

    Table III.—Impact of Proposed Changes for FY 2002 on Payments per Discharge

    Number of hospitalsDischargesAdjusted Federal paymentAverage Federal percentHold harmless paymentExceptions paymentTotal paymentPercent change over FY 2001
    FY 2001 Payments per Discharge
    Low Cost Hospitals3,1286,718,804$626.2099.70$2.38$5.69$634.27
    Fully Prospective2,9456,231,764627.54100.005.09632.63
    100% Federal Rate163451,843627.89100.007.75635.64
    Hold Harmless2035,197367.3250.30454.7185.44907.47
    High Cost Hospitals1,5774,110,246636.9697.6919.3410.64666.93
    100% Federal Rate1,3863,744,619648.86100.008.82657.68
    Hold Harmless191365,627515.1275.29217.3829.23761.73
    Total Hospitals4,70510,829,050630.2898.928.827.57646.67
    FY 2002 Payments per Discharge
    Low Cost Hospitals3,1286,826,288647.17100.003.19650.362.54
    Start Printed Page 22878
    Fully Prospective2,9456,331,437646.59100.002.96649.552.68
    100% Federal Rate183494,852654.56100.006.11660.673.94
    High Cost Hospitals1,5774,176,324671.77100.005.72677.491.58
    100% Federal Rate1,5774,176,324671.77100.005.72677.493.01
    Total Hospitals4,70511,002,612656.51100.004.15660.662.16

    We project that low capital cost hospitals paid under the fully prospective payment methodology will experience an average increase in payments per case of 2.54 percent, and high capital cost hospitals will experience an average increase of 1.58 percent. These results are due to the fact that there is no longer an increase in the Federal blend percentage with the conclusion of the capital transition period in FY 2001 for fully prospective hospitals. Beginning FY 2002, all hospitals (except those defined as “new” under § 412.300) are paid based on 100 percent of the Federal rate for FY 2002.

    For hospitals paid under the fully prospective payment methodology, the Federal rate payment percentage remains at 100 percent from FY 2001 (last year of the transition period) since they no longer receive payments based on the hospital-specific rate. The Federal rate payment percentage in FY 2001 for hospitals paid under the hold-harmless payment methodology is based on the hospital's ratio of new capital costs to total capital costs. The average Federal rate payment percentage for high cost hospitals receiving a hold-harmless payment for old capital in FY 2001 will increase from 75.29 percent to 100 percent since the transition period will have ended. All hold-harmless hospitals will be paid based on 100 percent of the Federal rate in FY 2002. We estimate that high cost hospitals (paid based on 100 percent of the Federal rate) will receive a decrease in exceptions payments from $8.82 per discharge in FY 2001 to $5.72 per discharge in FY 2002. This is primarily due to the expiration of the regular exceptions provision in FY 2002.

    We are no longer presenting the average hospital-specific rate payment per discharge in Table III because the FY 2001 transition blend percentage for fully prospective hospitals is 100 percent of the Federal rate and zero percent of the hospital-specific rate, and all hospitals (except those defined as “new” under § 412.300) will be paid based on 100 percent of the Federal rate for FY 2002.

    As stated previously, we will continue to pay regular exceptions for cost reporting periods beginning before October 1, 2001, but ending in FY 2002. However, in FY 2003 and later, regular exception payments will no longer be made under the regular exceptions provision, however, eligible hospitals could receive special exception payments under § 412.348(g).

    We estimate that regular exceptions payments will decrease from 1.17 percent of total capital payments in FY 2001 to 0.63 percent of payments in FY 2002. These results are primarily due to the expiration of the regular exceptions after FY 2001 and the limited nature of the special exceptions policy in FY 2002. The projected distribution of the exception payments is shown in the chart below:

    Estimated FY 2002 Exceptions Payments

    Type of hospitalNumber of hospitalsPercent of exceptions payments
    Low Capital Cost12248
    High Capital Cost11652
    Total238100

    In the past we presented a cross-sectional summary of hospital groupings by the capital prospective payment transition period methodology generated by our actuarial model (Appendix B). We are no longer including such a comparison since all hospitals (except those defined as “new” under § 412.300) will be paid based on 100 percent of the Federal rate in FY 2002 with the conclusion of the 10-year capital transition period.

    C. Cross-Sectional Analysis of Changes in Aggregate Payments

    We used our FY 2002 actuarial model to estimate the potential impact of our proposed changes for FY 2002 on total capital payments per case, using a universe of 4,705 hospitals. The individual hospital payment parameters are taken from the best available data, including: The January 1, 2001 update to the provider-specific file, cost report data, and audit information supplied by intermediaries. In Table IV we present the results of the cross-sectional analysis using the results of our actuarial model and the aggregate impact of the proposed FY 2002 payment policies. As we explain in Appendix B of this proposed rule, we were not able to use 90 of the 4,795 hospitals in our database due to insufficient (missing or unusable) data. Consequently, the payment methodology distribution is based on 4,705 hospitals. These data should be fully representative of the payment methodologies that will be applicable to hospitals. Columns 3 and 4 show estimates of payments per case under our model for FY 2001 and FY 2002. Column 5 shows the total percentage change in payments from FY 2001 to FY 2002. Column 6 presents the percentage change in payments that can be attributed to Federal rate changes alone.

    Federal rate changes represented in Column 6 include the 1.85 percent increase in the Federal rate, a 1.0 percent increase in case mix, changes in the adjustments to the Federal rate (for example, the effect of the new hospital wage index on the geographic adjustment factor), and reclassifications by the MGCRB. Column 5 includes the effects of the Federal rate changes represented in Column 6. Column 5 also reflects the effects of all other changes, including the change for all hold-harmless hospitals being paid based on 100 percent of the Federal rate, and changes in exception payments. The comparisons are provided by: (1) Geographic location, (2) region, and (3) payment classification.

    The simulation results show that, on average, capital payments per case can be expected to increase 2.2 percent in FY 2002. The results show that the effect of the Federal rate change alone is to increase payments by 3.0 percent. In addition to the increase attributable to the Federal rate change, a 0.8 percent decrease is attributable to the effects of all other changes.

    Our comparison by geographic location shows an overall increase in payments to hospitals in all areas. This comparison also shows that urban and rural hospitals will experience slightly different rates of increase in capital payments per case (2.3 percent and 1.2 percent, respectively). This difference is due to the lower rate of decrease for urban hospitals relative to rural hospitals (0.7 percent and 1.7 percent, respectively) from the effect of all other changes. Urban hospitals will gain approximately the same as rural hospitals (3.0 percent versus 2.9 percent, respectively) from the effects of Federal rate changes alone.

    Most regions are estimated to receive increases in total capital payments per case, partly due to the fact that payments to all hospitals (except those defined as “new” under § 412.300) will be based on 100 percent of the Federal rate in FY 2002. Changes by region vary from a minimum Start Printed Page 22879maximum decrease of 0.6 percent (Mountain urban region) to a maximum increase of 3.0 percent (New England urban rural region).

    By type of ownership, voluntary hospitals are projected to have the largest rate of increase of total payment changes (2.5 percent, a 3.0 percent increase due to the Federal rate changes, and a 0.5 percent decrease from the effects of all other changes). Similarly, payments to government hospitals will increase 2.2 percent (a 3.0 percent increase due to Federal rate changes, and a 0.8 percent decrease from the effects of all other changes), while payments to proprietary hospitals will increase 0.5 percent (a 2.9 percent increase due to Federal rate changes, and a 2.4 percent decrease from the effects of all other changes). This 2.4 percent decrease from all other changes is primarily due to the estimated decrease in exceptions payments and the change for all hold-harmless hospitals being paid based on 100 percent of the Federal rate.

    Section 1886(d)(10) of the Act established the MGCRB. Hospitals may apply for reclassification for purposes of the standardized amount, wage index, or both and for purposes of DSH for FYs 1999 through 2001. Although the Federal capital rate is not affected, a hospital's geographic classification for purposes of the operating standardized amount does affect a hospital's capital payments as a result of the large urban adjustment factor and the disproportionate share adjustment for urban hospitals with 100 or more beds. Reclassification for wage index purposes also affects the geographic adjustment factor, since that factor is constructed from the hospital wage index.

    To present the effects of the hospitals being reclassified for FY 2001 compared to the effects of reclassification for FY 2000, we show the average payment percentage increase for hospitals reclassified in each fiscal year and in total. For FY 2001 reclassifications, we indicate those hospitals reclassified for standardized amount purposes only, for wage index purposes only, and for both purposes. The reclassified groups are compared to all other nonreclassified hospitals. These categories are further identified by urban and rural designation.

    Hospitals reclassified for FY 2001 as a whole are projected to experience a 2.0 percent increase in payments (a 3.0 percent increase attributable to Federal rate changes and a 1.0 percent decrease attributable to the effects of all other changes). Payments to nonreclassified hospitals will increase slightly more (2.2 percent) than reclassified hospitals (2.0 percent) overall. Payments to nonreclassified hospitals will increase the same as reclassified hospitals from the Federal rate changes (3.0 percent), and they will lose less from the effects of all other changes (0.8 percent compared to 1.0 percent, respectively).

    Table IV.—Comparison of Total Payments Per Case

    [FY 2001 Payments Compared to FY 2002 Payments]

    Number of hospitalsAverage FY 2001 payments/caseAverage FY 2002 payments/caseAll changesPortion attributable to Federal rate change
    By Geographic Location:
    All hospitals4,7056476612.23.0
    Large urban areas (populations over 1 million)1,5197497662.33.0
    Other urban areas (populations of 1 million or fewer)1,1256356502.43.0
    Rural areas2,0614394441.22.9
    Urban hospitals2,6446997162.33.0
    0-99 beds654522507-2.82.8
    100-199 beds9275966071.82.9
    200-299 beds5286676842.63.0
    300-499 beds3907397623.13.0
    500 or more beds1459029252.62.9
    Rural hospitals2,0614394441.22.9
    0-49 beds1,2003693721.02.9
    50-99 beds5164124161.02.9
    100-149 beds2044524571.12.9
    150-199 beds754854952.22.9
    200 or more beds665485531.03.0
    By Region:
    Urban by Region2,6446997162.33.0
    New England1387457683.03.0
    Middle Atlantic4077828002.42.9
    South Atlantic3936696842.23.0
    East North Central4486726902.73.0
    East South Central1566386552.72.9
    West North Central1816887082.93.0
    West South Central3216656731.32.9
    Mountain127702698-0.62.9
    Pacific4277878082.73.0
    Puerto Rico462953043.13.1
    Rural by Region2,0614394441.22.9
    New England495225342.33.0
    Middle Atlantic734634691.52.9
    South Atlantic2674574580.12.9
    East North Central2734494551.42.9
    East South Central2604104151.22.9
    West North Central4774224281.42.9
    West South Central3253903982.12.9
    Mountain1934664670.12.8
    Pacific1395205302.03.0
    By Payment Classification:
    All hospitals4,7056476612.23.0
    Large urban areas (populations over 1 million)1,5997427592.33.0
    Other urban areas (populations of 1 million or fewer)1,0906366512.43.0
    Rural areas2,0164374421.22.9
    Start Printed Page 22880
    Teaching Status:
    Non-teaching3,5865335401.32.9
    Fewer than 100 Residents8796756952.93.0
    100 or more Residents2409991,0262.72.9
    Urban DSH:
    100 or more beds1,3747347522.43.0
    Less than 100 beds3174894910.42.8
    Rural DSH:
    Sole Community (SCH/EACH)540395390-1.32.8
    Referral Center (RRC/EACH)1575045111.42.9
    Other Rural:
    100 or more beds734094192.42.9
    Less than 100 beds4393693802.83.0
    Urban teaching and DSH:
    Both teaching and DSH7538148362.73.0
    Teaching and no DSH2947177403.33.0
    No teaching and DSH9385855951.72.9
    No teaching and no DSH7045905950.92.9
    Rural Hospital Types:
    Non special status hospitals7883843942.83.0
    RRC/EACH1655045172.63.0
    SCH/EACH667423417-1.52.8
    Medicare-dependent hospitals (MDH)3273633650.72.9
    SCH, RRC and EACH69510508-0.42.8
    Hospitals Reclassified by the Medicare Geographic Classification Review Board:
    Reclassification Status During FY01 and FY02:4825645762.13.0
    Reclassified During FY02 Only1535715801.62.9
    FY02 Reclassifications:
    All Reclassified Hospitals6355665772.03.0
    All Nonreclassified Hospitals4,1576596742.23.0
    All Urban Reclassified Hospitals1197417632.93.0
    Urban Nonreclassified Hospitals2,4876997152.33.0
    All Reclassified Rural Hospitals5164924991.42.9
    Rural Nonreclassified Hospitals1,5423883920.92.9
    Other Reclassified Hospitals (Section 1886(D)(8)(B)).41461455-1.32.9
    Type of Ownership:
    Voluntary2,7696606772.53.0
    Proprietary7556396420.52.9
    Government1,1795815942.23.0
    Medicare Utilization as a Percent of Inpatient Days:
    0-253898258462.53.0
    25-501,8727367552.53.0
    50-651,8325685802.23.0
    Over 65585522519-0.72.9

    Appendix B: Technical Appendix on the Capital Cost Model and Required Adjustments

    Under section 1886(g)(1)(A) of the Act, we set capital prospective payment rates for FY 1992 through FY 1995 so that aggregate prospective payments for capital costs were projected to be 10 percent lower than the amount that would have been payable on a reasonable cost basis for capital-related costs in that year. To implement this requirement, we developed the capital acquisition model to determine the budget neutrality adjustment factor. Even though the budget neutrality requirement expired effective with FY 1996, we must continue to determine the recalibration and geographic reclassification budget neutrality adjustment factor and the reduction in the Federal and hospital-specific rates for exceptions payments. To determine these factors, we must continue to project capital costs and payments.

    We will continue to pay regular exceptions for cost reporting periods beginning before October 1, 2001 but ending in FY 2002. In FY 2003 and later, no payments will be made under the regular exceptions policy, hence we will not compute a budget neutrality factor for regular exceptions in FY 2003 and later. As described in section V.D. of the preamble of this proposed rule, the budget neutrality adjustment for special exceptions will be based on historical costs. Consequently, there will be no need to estimate capital costs with the capital acquisition model. We will not publish this appendix after the final rule for the FY 2002 capital rates.

    We used the capital acquisition model from the start of prospective payments for capital costs through FY 1997. We now have 8 years of cost reports under the capital prospective payment system. For FY 1998, we developed a new capital cost model to replace the capital acquisition model. This revised model makes use of the data from these cost reports.

    The following cost reports are used in the capital cost model for this proposed rule: the December 31, 2000 update of the cost reports for PPS-IX (cost reporting periods beginning in FY 1992), PPS-X (cost reporting periods beginning in FY 1993), PPS-XI (cost reporting periods beginning in FY 1994), PPS-XII (cost reporting periods beginning in FY 1995), PPS-XIII (cost reporting periods beginning in FY 1996), PPS-XIV (cost reporting periods beginning in FY 1997), Start Printed Page 22881PPS-XV (cost reporting periods beginning in FY 1998), and PPS-XVI (cost reporting periods beginning in FY 1999). In addition, to model payments, we use the January 1, 2001 update of the provider-specific file, and the March 1995 update of the intermediary audit file.

    Since hospitals under alternative payment system waivers (that is, hospitals in Maryland) are currently excluded from the capital prospective payment system, we excluded these hospitals from our model.

    We developed FY 1992 through FY 2001 hospital-specific rates using the provider-specific file and the intermediary audit file. (We used the cumulative provider-specific file, which includes all updates to each hospital's records, and chose the latest record for each fiscal year.) We checked the consistency between the provider-specific file and the intermediary audit file. We ensured that increases in the hospital-specific rates were at least as large as the published updates (increases) for the hospital-specific rates each year. We were able to match hospitals to the files as shown in the following table:

    SourceNumber of hospitals
    No match4
    Audit file only90
    Provider-specific file only185
    Provider-specific and audit file4,516
    Total4,795

    One hundred eighteen of the 4,795 hospitals had unusable or missing data, or had no cost reports available. For 52 of the 118 hospitals, we were unable to determine a hospital-specific rate from the available cost reports. However, there was adequate cost information to determine that these hospitals were paid under the hold-harmless methodology. Since the hospital-specific rate is not used to determine payments for hospitals paid under the hold-harmless methodology, there was sufficient cost report information available to include these 52 hospitals in the analysis. We were able to estimate hospital-specific amounts from the cost reports as shown in the following table.

    Cost reportNumber of hospitals
    PPS-91
    PPS-121
    PPS-131
    PPS-141
    PPS-152
    PPS-168
    Total14

    Hence we were able to use 66 (52 plus 14) of the 118 hospitals. The remaining 52 of the 118 hospitals could not be used in the analysis because we were not able to estimate their hospital-specific amount. An additional 38 hospitals could not be used in the analysis because we could not determine their capital costs, either because we had no cost reports for them or because there was insufficient cost report data. Accordingly, we used 4,705 hospitals for the analysis. Ninety (52 plus 38) hospitals could not be used in the analysis because of insufficient (missing or unusable) information. These hospitals account for about 0.3 percent of admissions. Therefore, any effects from the elimination of their cost report data should be minimal.

    We analyzed changes in capital-related costs (depreciation, interest, rent, leases, insurance, and taxes) reported in the cost reports. We found a wide variance among hospitals in the growth of these costs. For hospitals with more than 100 beds, the distribution and mean of these cost increases were different for large changes in bed-size (greater than ±20 percent). We also analyzed changes in the growth in old capital and new capital for cost reports that provided this information. For old capital, we limited the analysis to decreases in old capital. We did this since the opportunity for most hospitals to treat “obligated” capital put into service as old capital has expired. Old capital costs should decrease as assets become fully depreciated and as interest costs decrease as the loan is amortized.

    The new capital cost model separates the hospitals into three mutually exclusive groups. Hold-harmless hospitals with data on old capital were placed in the first group. Of the remaining hospitals, those hospitals with fewer than 100 beds comprise the second group. The third group consists of all hospitals that did not fit into either of the first two groups. Each of these groups displayed unique patterns of growth in capital costs. We found that the gamma distribution is useful in explaining and describing the patterns of increase in capital costs. A gamma distribution is a statistical distribution that can be used to describe patterns of growth rates, with the greatest proportion of rates being at the low end. We use the gamma distribution to estimate individual hospital rates of increase as follows:

    (1) For hold-harmless hospitals, old capital cost changes were fitted to a truncated gamma distribution, that is, a gamma distribution covering only the distribution of cost decreases. New capital costs changes were fitted to the entire gamma distribution, allowing for both decreases and increases.

    (2) For hospitals with fewer than 100 beds (small), total capital cost changes were fitted to the gamma distribution, allowing for both decreases and increases.

    (3) Other (large) hospitals were further separated into three groups:

    • Bed-size decreases over 20 percent (decrease).
    • Bed-size increases over 20 percent (increase).
    • Other (no change).

    Capital cost changes for large hospitals were fitted to gamma distributions for each bed-size change group, allowing for both decreases and increases in capital costs. We analyzed the probability distribution of increases and decreases in bed size for large hospitals. We found the probability somewhat dependent on the prior year change in bed size and factored this dependence into the analysis. Probabilities of bed-size change were determined. Separate sets of probability factors were calculated to reflect the dependence on prior year change in bed size (increase, decrease, and no change).

    The gamma distributions were fitted to changes in aggregate capital costs for the entire hospital. We checked the relationship between aggregate costs and Medicare per discharge costs. For large hospitals, there was a small variance, but the variance was larger for small hospitals. Since costs are used only for the hold-harmless methodology and to determine exceptions, we decided to use the gamma distributions fitted to aggregate cost increases for estimating distributions of cost per discharge increases.

    Capital costs per discharge calculated from the cost reports were increased by random numbers drawn from the gamma distribution to project costs in future years. Old and new capital were projected separately for hold-harmless hospitals. Aggregate capital per discharge costs were projected for all other hospitals. Because the distribution of increases in capital costs varies with changes in bed size for large hospitals, we first projected changes in bed size for large hospitals before drawing random numbers from the gamma distribution. Bed-size changes were drawn from the uniform distribution with the probabilities dependent on the previous year bed-size change. The gamma distribution has a shape parameter and a scaling parameter. (We used different parameters for each hospital group, and for old and new capital.)

    We used discharge counts from the cost reports to calculate capital cost per discharge. To estimate total capital costs for FY 2000 (the MedPAR data year) and later, we use the number of discharges from the MedPAR data. Some hospitals had considerably more discharges in FY 2000 than in the years for which we calculated cost per discharge from the cost report data. Consequently, a hospital with few cost report discharges would have a high capital cost per discharge, since fixed costs would be allocated over only a few discharges. If discharges increase substantially, the cost per discharge would decrease because fixed costs would be allocated over more discharges. If the projection of capital cost per discharge is not adjusted for increases in discharges, the projection of exceptions would be overstated. We address this situation by recalculating the cost per discharge with the MedPAR discharges if the MedPAR discharges exceed the cost report discharges by more than 20 percent. We do not adjust for increases of less than 20 percent because we have not received all of the FY 2000 discharges, and we have removed some discharges from the analysis because they are statistical outliers. This adjustment reduces our estimate of exceptions payments, and consequently, the reduction to the Federal rate for exceptions is smaller. We will continue to monitor our modeling of exceptions payments and make adjustments as needed.

    The average national capital cost per discharge generated by this model is the combined average of many randomly generated increases. This average must equal the projected average national capital cost per discharge, which we projected separately Start Printed Page 22882(outside this model). We adjusted the shape parameter of the gamma distributions so that the modeled average capital cost per discharge matches our projected capital cost per discharge. The shape parameter for old capital was not adjusted since we are modeling the aging of “existing” assets. This model provides a distribution of capital costs among hospitals that is consistent with our aggregate capital projections.

    Once each hospital's capital-related costs are generated, the model projects capital payments. We use the actual payment parameters (for example, the case-mix index and the geographic adjustment factor) that are applicable to the specific hospital.

    To project capital payments, the model first assigns the applicable payment methodology (fully prospective or hold-harmless) to the hospital as determined from the provider-specific file and the cost reports. The model simulates Federal rate payments using the assigned payment parameters and hospital-specific estimated outlier payments. The case-mix index for a hospital is derived from the FY 2000 MedPAR file using the FY 2002 DRG relative weights included in section VI. of the Addendum to this proposed rule. The case-mix index is increased each year after FY 2000 based on analysis of past experiences in case-mix increases. Based on analysis of recent case-mix increases, we estimate that case-mix will increase 0.0 percent in FY 2001. We project that case-mix will increase 1.0 percent in FY 2002. (Since we are using FY 2000 cases for our analysis, the FY 2000 increase in case-mix has no effect on projected capital payments.)

    Changes in geographic classification and revisions to the hospital wage data used to establish the hospital wage index affect the geographic adjustment factor. Changes in the DRG classification system and the relative weights affect the case-mix index.

    Section 412.308(c)(4)(ii) requires that the estimated aggregate payments for the fiscal year, based on the Federal rate after any changes resulting from DRG reclassifications and recalibration and the geographic adjustment factor, equal the estimated aggregate payments based on the Federal rate that would have been made without such changes. For FY 2001, the budget neutrality adjustment factors were 0.99933 for the national rate and 1.00508 for the Puerto Rico rate. In determining these factors, we used the factors from the first half of FY 2001 (October 2000 through March 2001) published in the August 1, 2000 final rule since section 547 of Public Law 106-554 specifies that the special increases and adjustments in effect between April and October 2001 do not apply for discharges occurring after FY 2001 and should not be included in determining the payment rates in subsequent years.

    Since we implemented a separate geographic adjustment factor for Puerto Rico, we applied separate budget neutrality adjustments for the national geographic adjustment factor and the Puerto Rico geographic adjustment factor. We applied the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. Separate adjustments were unnecessary for FY 1998 and earlier since the geographic adjustment factor for Puerto Rico was implemented in FY 1998.

    To determine the factors for FY 2002, we first determined the portions of the Federal national and Puerto Rico rates that would be paid for each hospital in FY 2002 based on its applicable payment methodology. Using our model, we then compared, separately for the national rate and the Puerto Rico rate, estimated aggregate Federal rate payments based on the FY 2001 DRG relative weights and the FY 2001 geographic adjustment factor to estimated aggregate Federal rate payments based on the FY 2001 relative weights and the FY 2002 geographic adjustment factor. In making the comparison, we held the FY 2002 Federal rate portion constant and set the other budget neutrality adjustment factor and the regular and special exceptions reduction factors to 1.00. To achieve budget neutrality for the changes in the national geographic adjustment factor, we applied an incremental budget neutrality adjustment of 0.99703 for FY 2002 to the previous cumulative FY 2001 adjustment of 0.99933, yielding a cumulative adjustment of 0.99637 through FY 2002. For the Puerto Rico geographic adjustment factor, we applied an incremental budget neutrality adjustment of 0.99943 for FY 2002 to the previous cumulative FY 2001 adjustment of 1.00508, yielding a cumulative adjustment of 1.00450 through FY 2002. We then compared estimated aggregate Federal rate payments based on the FY 2001 DRG relative weights and the FY 2002 geographic adjustment factors to estimated aggregate Federal rate payments based on the FY 2002 DRG relative weights and the FY 2002 geographic adjustment factors. The incremental adjustment for DRG classifications and changes in relative weights would be 0.99428 nationally and for Puerto Rico. The cumulative adjustments for DRG classifications and changes in relative weights and for changes in the geographic adjustment factors through FY 2002 would be 0.99067 nationally and 0.99876 for Puerto Rico. The following table summarizes the adjustment factors for each fiscal year: Start Printed Page 22883

    Budget Neutrality Adjustment for DRG Reclassifications and Recalibration and the Geographic Adjustment Factors

    Fiscal yearNationalPuerto Rico
    Incremental adjustmentIncremental adjustment
    Geographic adjustment factorDRG reclassifications and recalibrationCombinedCumulativeGeographic adjustment factorDRG reclassifications and recalibrationCombinedCumulative
    19921.00000
    19930.998000.99800
    19941.005311.00330
    19950.999801.00310
    19960.999401.00250
    19970.998731.00123
    19980.998921.000151.00000
    19990.999441.003351.002791.002940.998981.003351.002331.00233
    20000.998570.999910.998481.001420.999100.999910.999011.00134
    2001 10.998461.000190.998650.999331.003651.000091.003741.00508
    2001 23 0.997713 1.000093 0.997800.999223 1.003653 1.000093 1.003741.00508
    20024 0.997034 0.994284 0.991330.990674 0.999434 0.994284 0.993710.99876
    1 Factors effective for the first half of FY 2001 (October 2000 through March 2001).
    2 Factors effective for the second half of FY 2001 (April 2001 through September 2001).
    3 Incremental factors are applied to FY 2000 cumulative factors.
    4 Incremental factors are applied to the cumulative factors for the first half of FY 2001.
    Start Printed Page 22884

    The methodology used to determine the recalibration and geographic (DRG/GAF) budget neutrality adjustment factor is similar to that used in establishing budget neutrality adjustments under the prospective payment system for operating costs. One difference is that, under the operating prospective payment system, the budget neutrality adjustments for the effect of geographic reclassifications are determined separately from the effects of other changes in the hospital wage index and the DRG relative weights. Under the capital prospective payment system, there is a single DRG/GAF budget neutrality adjustment factor (the national rate and the Puerto Rico rate are determined separately) for changes in the geographic adjustment factor (including geographic reclassification) and the DRG relative weights. In addition, there is no adjustment for the effects that geographic reclassification has on the other payment parameters, such as the payments for serving low-income patients or the large urban add-on payments.

    In addition to computing the DRG/GAF budget neutrality adjustment factor, we used the model to simulate total payments under the prospective payment system.

    Additional payments under the exceptions process are accounted for through a reduction in the Federal and hospital-specific rates. For FY 2002 additional payments for the “regular” exceptions are made only for cost reporting periods that begin before October 1, 2001. The adjustment for “special” exceptions payments (see § 412.348(g)) is described in section V.D. of the preamble of this proposed rule. Therefore, we used the model to calculate the exceptions reduction factor. This exceptions reduction factor ensures that aggregate payments under the capital prospective payment system, including exceptions payments, are projected to equal the aggregate payments that would have been made under the capital prospective payment system without an exceptions process. In modeling exceptions for FY 2002, we calculated exceptions only for qualifying cost reporting periods. Since changes in the level of the payment rates change the level of payments under the exceptions process, the exceptions reduction factor must be determined through iteration.

    In the August 30, 1991 final rule (56 FR 43517), we indicated that we would publish each year the estimated payment factors generated by the model to determine payments for the next 5 years. Since we will no longer use the model after the final notice for the FY 2002 rates, we propose to discontinue publishing this table after the final notice for the FY 2002 rates. The table below provides the actual factors for FYs 1992 through 2001, the proposed factors for FY 2002, and the estimated factors that would be applicable through FY 2006. We caution that these are estimates for FYs 2002 and later, and are subject to revisions resulting from continued methodological refinements, receipt of additional data, and changes in payment policy. We note that in making these projections, we have assumed that the cumulative national DRG/GAF budget neutrality adjustment factor will remain at 0.99067 (0.99876 for Puerto Rico) for FY 2002 and later because we do not have sufficient information to estimate the change that will occur in the factor for years after FY 2002.

    The projections are as follows:

    Fiscal yearUpdate factorExceptions reduction factorBudget neutrality factorDRG/GAF adjustment factor 1Outlier adjustment factorFederal rate adjustmentFederal rate (after outlier reduction)
    1992N/A0.98130.96020.9497415.59
    19936.07.9756.9162.9980.9496417.29
    19943.04.9485.89471.0053.94542.9260378.34
    19953.44.9734.8432.9998.9414376.83
    19961.20.9849N/A.9994.95363.9972461.96
    19970.70.9358N/A.9987.9481438.92
    19980.909659N/A.9989.93824.8222371.51
    19990.10.9783N/A1.0028.9392378.10
    20000.30.9730N/A.9985.9402377.03
    2001 50.90.9785N/A.9979.9409382.03
    20021.106.9925N/A0.9913.9426389.09
    20030.60.9975N/A7 1.00007.94264 1.0255403.44
    20040.90.9975N/A1.0000.9426407.07
    20051.10.9975N/A1.0000.9426411.55
    20061.10.9975N/A1.0000.9426416.07
    1 Note: The incremental change over the previous year.
    2 Note: OBRA 1993 adjustment.
    3 Note: Adjustment for change in the transfer policy.
    4 Note: Balanced Budget Act of 1997 adjustment.
    5 Note: Rates are for the first half of FY 2001 (October 1, 2000 through March 31, 2001).
    6 Note: Product of general exceptions factor (0.9937) and special exceptions factor (0.9988).
    7 Note: Future adjustments are, for purposes of this projection, assumed to remain at the same level.
    Start Printed Page 22885 Appendix C—Report to Congress

    Start Printed Page 22886

    Start Printed Page 22887

    Start Printed Page 22888

    Appendix D: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services

    I. Background

    Several provisions of the Act address the setting of update factors for inpatient services furnished in FY 2002 by hospitals subject to the prospective payment system and by hospitals or units excluded from the prospective payment system. Section 1886(b)(3)(B)(i)(XVII) of the Act, as amended by Section 301 of Public Law 106-554, sets the FY 2002 percentage increase in the operating cost standardized amounts equal to the rate of increase in the hospital market basket minus 0.55 percent for prospective payment hospitals in all areas. Section 1886(b)(3)(B)(iv) of the Act sets the FY 2002 percentage increase in the hospital-specific rates applicable to SCHs and MDHs equal to the rate set forth in section 1886(b)(3)(B)(i) of the Act, that is, the same update factor as all other hospitals subject to the prospective payment system, or the rate of increase in the market basket minus 0.55 percentage points.

    Under section 1886(b)(3)(B)(ii) of the Act, the FY 2002 percentage increase in the rate-of-increase limits for hospitals and units excluded from the prospective payment system ranges from the percentage increase in the excluded hospital market basket less a percentage between 0 and 2.5 percentage points, depending on the hospital's or unit's costs in relation to its limit for the most recent cost reporting period for which information is available, or 0 percentage point if costs do not exceed two-thirds of the limit.

    In accordance with section 1886(d)(3)(A) of the Act, we are proposing to update the standardized amounts, the hospital-specific rates, and the rate-of-increase limits for hospitals and units excluded from the prospective payment system as provided in section 1886(b)(3)(B) of the Act. Based on the first quarter 2001 forecast of the FY 2002 market basket increase of 3.1 percent for hospitals and units subject to the prospective payment system, the proposed update to the standardized amounts is 2.55 percent (that is, the market basket rate of increase minus 0.55 percent percentage points) for hospitals in both large urban and other areas. The proposed update to the hospital-specific rate applicable to SCHs and MDHs is also 2.55 percent. The proposed update for hospitals and units excluded from the prospective payment system would range from the percentage increase in the excluded hospital market basket (currently estimated at 3.0 percent) minus a percentage between 0 and 2.5 percentage points, or 0 percentage points, resulting in an increase in the rate-of-increase limit between 0.5 and 3.0 percent, or 0 percent.

    Section 1886(e)(4) of the Act requires that the Secretary, taking into consideration the recommendations of the Medicare Payment Advisory Commission (MedPAC), recommend update factors for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Under section 1886(e)(5) of the Act, we are required to publish the update factors recommended under section 1886(e)(4) of the Act. Accordingly, this Appendix provides the recommendations of appropriate update factors and the analysis underlying our recommendations and our response to MedPAC's recommendations concerning the update factors.

    In its March 1, 2001 report, MedPAC stated that the legislated update of market basket minus 0.55 percentage points would provide a reasonable level of payments to hospitals. MedPAC did not make a separate recommendation for the hospital-specific rate applicable to SCHs and MDHs. We discuss MedPAC's recommendations concerning the update factors and our responses to these recommendations in section III. below.

    II. Secretary's Recommendations

    Under section 1886(e)(4) of the Act, we are recommending that an appropriate update factor for the standardized amounts is 2.55 percentage points for hospitals located in large urban and other areas. We are also recommending an update of 2.55 percentage points to the hospital-specific rate for SCHs and MDHs. As MedPAC states in its March 2001 report, there are signs of substantial improvement in hospitals' financial performance in FY 2000 as a result of the enactment of Public Law 106-113 and Public Law 106-554. In conjunction with the various “give-back” provisions in Public Law 106-113 and Public Law 106-554 and the continuation of positive (MedPAC estimates 12 percent for FY 1999 (page 64)) Medicare Start Printed Page 22889hospital inpatient margins, we believe these recommended update factors for FY 2002 would ensure that Medicare acts as a prudent purchaser and provide incentives to hospitals for increased efficiency, thereby contributing to the solvency of the Medicare Part A Trust Fund.

    We recommend that hospitals excluded from the prospective payment system receive an update of between 0.5 and 3.0 percentage points, or 0 percentage points. The update for excluded hospitals and units is equal to the increase in the excluded hospital operating market basket less a percentage between 0 and 2.5 percentage points, or 0 percentage points, depending on the hospital's or unit's costs in relation to its rate-of-increase limit for the most recent cost reporting period for which information is available. The market basket rate of increase for excluded hospitals and units is currently forecast at 3.0 percent.

    As required by section 1886(e)(4) of the Act, we have taken into consideration the recommendations of MedPAC in setting these recommended update factors. Our responses to the MedPAC recommendations concerning the update factors are discussed below.

    III. MedPAC Recommendations for Updating the Prospective Payment System Operating Standardized Amounts

    In its March 2001 Report to Congress, MedPAC recommended a combined operating and capital update for hospital inpatient prospective payment system payments for FY 2002. With the end of the transition to fully prospective capital payments ending with FY 2001, both operating and capital prospective system payments will be made using standard Federal rates adjusted by hospital specific payment variables. Currently, section 1886(b)(3)(B)(i)(XVII) of the Act sets forth the FY 2002 percentage increase in the prospective payment system operating cost standardized amounts. The prospective payment system capital update is set at the discretion of the Secretary under the framework outlined in § 412.308(c)(1).

    MedPAC's FY 2001 combined operating and capital update framework uses a weighted average of HCFA's forecasts of the operating (prospective payment system input price index) and the capital input price index. This combined market basket was used to develop an estimate of the change in overall operating and capital prices. MedPAC calculated a combined market basket forecast by weighting the operating market basket forecast by 0.92 and the capital market basket forecast by 0.08, since operating costs are estimated to represent 92 percent of total hospital costs (capital costs are estimated to represent the remaining 8 percent of total hospital costs). MedPAC's combined market basket for FY 2002 is estimated to increase by 2.8 percent, based on HCFA's December 2000 forecasted operating market basket increase of 3.0 percent and HCFA's December 2000 forecasted capital market basket increase of 0.8 percent.

    For FY 2002, MedPAC's update framework would support a combined operating and capital update for hospital inpatient prospective payment system payments of 1.5 percent to 3.0 percent (or between the increase in the combined operating and capital market basket minus 1.3 percentage points and the increase in the combined operating and capital market basket plus 0.2 percentage points). In its update recommendation, MedPAC studied factors affecting the adequacy of payments in FY 2001 and factors expected to affect hospital costs in FY 2002. MedPAC concluded, “there is no compelling reason to change current law setting an operating update for fiscal year 2002 of 0.55 percent below the rate of increase in the operating market basket “(page 73). MedPAC also notes that while the number of hospitals with negative inpatient hospital margins have increased in FY 1999 (from 33.7 percent in 1998 to 36.7 percent in 1999) (page 71), overall high inpatient Medicare margins generally offset hospital losses on other lines of Medicare services (page 68). MedPAC continues to project substantially improved hospital total margins for FY 2000 based on performance in the first half of the fiscal year (page 72).

    Response: Our long-term goal is to develop a single update framework for operating and capital prospective payments. However, the operating system update has been determined by Congress through FY 2003 (as amended by section 301 of Public Law 106-554). In the meantime, we intend to maintain as much consistency as possible with the current operating framework in order to facilitate the eventual development of a unified framework.

    We agree with MedPAC's recommendation that the current law update for FY 2002 of the market basket minus 0.55 percentage points is appropriate for the operating system update. The following analyses measure changes in hospital productivity, scientific and technological advances, practice pattern changes, changes in case-mix, the effect of reclassification on recalibration, and forecast error correction.

    A. Productivity

    Service level labor productivity is defined as the ratio of total service output to full-time equivalent employees (FTEs). While we recognize that productivity is a function of many variables (for example, labor, nonlabor material, and capital inputs), we use the portion of productivity attributed to direct labor since this update framework applies to operating payment. To recognize that we are apportioning the short-run output changes to the labor input and not considering the nonlabor inputs, we weight our productivity measure by the share of direct labor services in the market basket to determine the expected effect on cost per case.

    Our recommendation for the service productivity component is based on historical trends in productivity and total output for both the hospital industry and the general economy, and projected levels of future hospital service output. MedPAC's predecessor, the Prospective Payment Assessment Commission (ProPAC), estimated cumulative service productivity growth to be 4.9 percent from 1985 through 1989, or 1.2 percent annually. At the same time, ProPAC estimated total output growth at 3.4 percent annually, implying a ratio of service productivity growth to output growth of 0.35.

    Since it is not possible at this time to develop a productivity measure specific to Medicare patients, we examined productivity (output per hour) and output (gross domestic product) for the economy. Depending on the exact time period, annual changes in productivity range from 0.3 to 0.35 percent of the change in output (that is, a 1.0 percent increase in output would be correlated with a 0.3 to 0.35 percent change in output per hour).

    Under our framework, the recommended update is based in part on expected productivity—that is, projected service output during the year, multiplied by the historical ratio of service productivity to total service output, multiplied by the share of direct labor in total operating inputs, as calculated in the hospital market basket. This method estimates an expected productivity improvement in the same proportion to expected total service growth that has occurred in the past and assumes that, at a minimum, growth in FTEs changes proportionally to the growth in total service output. Thus, the recommendation allows for unit productivity to be smaller than the historical averages in years that output growth is relatively low and larger in years that output growth is higher than the historical averages. Based on the above estimates from both the hospital industry and the economy, we have chosen to employ the range of ratios of productivity change to output change of 0.30 to 0.35.

    The expected change in total hospital service output is the product of projected growth in total admissions (adjusted for outpatient usage), projected real case-mix growth, expected quality-enhancing intensity growth, and net of expected decline in intensity due to reduction of cost-ineffective practice. Case-mix growth and intensity numbers for Medicare are used as proxies for those of the total hospital, since case-mix increases (used in the intensity measure as well) are unavailable for non-Medicare patients. Thus, expected FY 2002 hospital output growth is simply the sum of the expected change in intensity (0.3 percent), projected admissions change (1.6 percent for FY 2002), and projected real case-mix growth (1.0 percent), or 2.9 percent. The share of direct labor services in the market basket (consisting of wages, salaries, and employee benefits) is 61.4 percent.

    Multiplying the expected change in total hospital service output (2.9 percent) by the ratio of historical service productivity change to total service growth of 0.30 to 0.35 and by the direct labor share percentage 61.4, provides our productivity standard of −0.6 to −0.5 percent.

    In past years, MedPAC made an adjustment for productivity improvement to reflect the level of improvement in the production of health care services, without affecting the quality of those services. Typically, MedPAC made a downward adjustment in its framework to reflect expected improvements in hospital productivity. In its FY 2002 combined update framework, MedPAC did not make an adjustment for productivity. Instead, MedPAC believes that the costs associated with scientific and technological advances should be financed partially Start Printed Page 22890through improvements in hospital productivity. As a result, MedPAC offset its adjustment for scientific and technological advances by a fixed standard of expected productivity growth of 0.5 percent for FY 2002. Our productivity adjustment of −0.6 to −0.5 percent is consistent with the range of MedPAC's fixed standard of expected productivity growth of 0.5 percent for FY 2002.

    B. Intensity

    We base our intensity standard on the combined effect of three separate factors: changes in the use of quality enhancing services, changes in the use of services due to shifts in within-DRG severity, and changes in the use of services due to reductions of cost-ineffective practices. For FY 2002, we recommend an adjustment of 0.2 to 0.3 percent. The basis of this recommendation is discussed below.

    We have no empirical evidence that accurately gauges the level of quality-enhancing technology changes. A study published in the Winter 1992 issue of the Health Care Financing Review, “Contributions of case mix and intensity change to hospital cost increases” (pages 151-163), suggests that one-third of the intensity change is attributable to high-cost technology. The balance was unexplained but the authors speculated that it is attributable to fixed costs in service delivery.

    Typically, a specific new technology increases cost in some uses and decreases cost in other uses. Concurrently, health status is improved in some situations while in other situations it may be unaffected or even worsened using the same technology. It is difficult to separate out the relative significance of each of the cost-increasing effects for individual technologies.

    Other things being equal, per-discharge fixed costs tend to fluctuate in inverse proportion to changes in volume. Fixed costs exist whether patients are treated or not. If volume is declining, per-discharge fixed costs will rise, but the reverse is true if volume is increasing.

    Following methods developed by HCFA's Office of the Actuary for deriving hospital output estimates from total hospital charges, we have developed Medicare-specific intensity measures based on a 5-year average using FYs 1996 through 2000 MedPAR billing data. Case-mix constant intensity is calculated as the change in total Medicare charges per discharge adjusted for changes in the average charge per unit of service as measured by the Consumer Price Index (CPI) for hospital and related services and changes in real case-mix. Thus, in order to measure changes in intensity, one must measure changes in real case-mix.

    We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services), and changes in real case-mix. Without reliable estimates of the proportions of the overall annual intensity increases due, respectively, to ineffective practice patterns and to the combination of quality-enhancing new technologies and within-DRG complexity, we assume that one-half of the annual increase is due to each of these factors.

    For FY 2002, we have developed a Medicare-specific intensity measure based on a 5-year average using FY 1996 through 2000 data. In determining case-mix constant intensity, we estimate that real case-mix increase was 1.0 to 1.4 percent each year. The estimate for those years is supported by past studies of case-mix change by the RAND Corporation. The most recent study was “Has DRG Creep Crept Up? Decomposing the Case Mix Index Change Between 1987 and 1988” by G. M. Carter, J. P. Newhouse, and D. A. Relles, R-4098-HCFA/ProPAC (1991). The study suggested that real case-mix change was not dependent on total change, but was usually a fairly steady 1.0 to 1.4 percent per year. Following that study, we consider up to 1.4 percent of observed case-mix change as real for FY 1996 through FY 2000.

    We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services), and changes in real case-mix. The average percentage change in charge per discharge was 4.7 percent and the average annual change in the CPI for hospital and related services was 4.2 percent. Dividing the change in charge per discharge by the quantity of the real case-mix index change and the CPI for hospital and related services yields an average annual change in intensity of −0.9 percent. Assuming the technology/fixed cost ratio still holds (.33), technology would account for a −0.3 percent annual decline while fixed costs would account for a −0.6 percent annual decline. The decline in fixed costs per discharge makes intuitive sense as volume, measured by total discharges, has increased during the period.

    For FYs 1995 through 1999, observed case-mix index change ranged from a low of −0.7 percent to a high of 1.6 percent, with a 5-year average change of 0.2 percent. If we assume that the upper bound of real case-mix was 1.0 percent, we estimate that case-mix constant intensity increased by an average 0.3 percent during FYs 1996 through 2000, for a cumulative increase of 1.4 percent. If we assume that the upper bound of real case-mix increase was 1.4 percent, we estimate that case-mix constant intensity increased by an average 0.2 percent during FYs 1996 through 2000, for a cumulative increase of 1.2 percent. Thus, we are recommending an intensity adjustment for FY 2002 between 0.2 and 0.3 percent.

    MedPAC does not make an adjustment for intensity per se, but its combined update recommendation for FY 2002 includes two categories that we consider to be comparable with our intensity recommendation. MedPAC is recommending a 0.0 to 0.5 update for scientific and technological advances to account for anticipated uses of emerging technologies that enhance the quality of hospital services, but increase costs of hospital care. MedPAC recognized an allowance for science and technological advances of 0.5 percent to 1.0 percent. It believes that the costs associated with scientific and technological advances should be financed at least in part through improvements in hospital productivity. Hence, MedPAC offsets its allowance for science and technology by 0.5 percent for productivity. In addition, MedPAC includes, when appropriate, an adjustment for one-time factors expected to affect costs in FY 2002 and the removal of the adjustment for FY 2002 one-time factors in its science and technology adjustment. MedPAC concluded that a one-time adjustment of 0.5 percent for the Health Insurance Portability and Accountability Act of 1996 (HIPAA) regulatory requirements should be reflected in the FY 2002 payment update. Additionally, since MedPAC believes that the costs associated with one-time factors should not be built permanently into the rates, it recommended that the FY 2002 payment rates be reduced by 0.5 percent to offset the increase it recommended in the FY 2000 update for the costs associated with year 2000 (Y2K) computer improvements. Thus, MedPAC's combined FY 2002 adjustment for science and technological advances is 0.0 percent to 0.5 percent.

    MedPAC's recommendation also takes into account the trend of some acute care providers to shift care to a postacute care facility. While this can occur for many reasons and the shifting of costs may maintain or improve quality of care for Medicare beneficiaries, it leads to an inappropriate distribution of payments and reduces the resources available for acute care providers to pay for services to other Medicare beneficiaries. We agree with MedPAC that the site-of-care substitution effect is real and believe that it is factored into our intensity recommendation.

    C. Change in Case-Mix

    Our analysis takes into account projected changes in case-mix, adjusted for changes attributable to improved coding practices. For our FY 2002 update recommendation, we are projecting a 1.0 percent increase in the case-mix index. We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients as opposed to changes in coding behavior that result in assignment of cases to higher-weighted DRGs, but do not reflect greater resource requirements. Unlike in past years, where we differentiated between “real” case-mix increase and increases attributable to changes in coding behavior, we do not believe changes in coding behavior will impact the overall case-mix in FY 2002. As such, for FY 2002, we estimate that real case-mix is equal to projected change in case-mix. Thus, we are recommending a 0.0 percent adjustment for case-mix.

    MedPAC's analysis indicates that coding change has reduced case-mix index growth. In the past, MedPAC has recommended a negative adjustment when DRG coding changes has led to case-mix index growth (upcoding) and has recommended a positive adjustment when DRG coding changes have led to a decline in case-mix (downcoding). In light of evidence that coding had no significant effect on case-mix change, MedPAC recommended an adjustment of 0.0 percent for FY 2002.

    MedPAC also makes an adjustment for within-DRG severity. In past years, MedPAC has included an adjustment for increased case complexity not captured by the DRG classification system. MedPAC recognizes Start Printed Page 22891that as the DRG system matures, it should account for more of the variation in costs by DRG assignment, leaving less within-DRG variation in case complexity and costliness (page 76). Therefore, MedPAC recommended an adjustment of 0.0 percent for FY 2002.

    D. Effect of FY 2000 DRG Reclassification and Recalibration

    We estimate that DRG reclassification and recalibration for FY 2000 resulted in a 0.0 percent change in the case-mix index when compared with the case-mix index that would have resulted if we had not made the reclassification and recalibration changes to the GROUPER.

    E. Forecast Error Correction

    We make a forecast error correction if the actual market basket changes differ from the forecasted market basket by 0.25 percentage points or more. There is a 2-year lag between the forecast and the measurement of forecast error. The estimated market basket percentage increase used to update the FY 2000 payment rates was 2.9 percent. Our most recent data indicates the actual FY 2000 increase was 3.6 percent. The resulting forecast error in the FY 2000 market basket rate of increase is 0.7 percentage points. This forecast error is a result of prices for wages, benefits, and chemicals increasing more rapidly than expected. Market conditions enabled hospitals to be less restrictive with pay increases than initially projected. Prices for chemicals were underestimated due to the unanticipated surge in oil prices in FY 2000.

    MedPAC also made a recommendation in its FY 2002 combined update framework to adjust for any error in the market basket forecasts used to set FY 2000 payment rates. It recommended a combined adjustment for FY 2000 forecast error correction of 0.7 percent. MedPAC determined this forecast error adjustment by weighting the difference between the actual and forecasted operating (92 percent) and capital (8 percent) market basket increases for FY 2000. The forecasted FY 2000 operating market basket was 2.9 percent and the actual FY 2000 operating market basket increase was 3.6 percent. The FY 2000 capital market basket was forecasted to increase by 0.6 percent and the actual market basket increase was 0.9 percent. This implies that MedPAC's combined operating and capital market basket was forecasted at 2.7 percent and the combined actual operating and capital market basket was 3.4 percent. Accordingly, MedPAC recommended a 0.7 percent forecast error correction for its FY 2002 combined update recommendation.

    F. Medicare Policy Change

    In developing its update recommendation for FY 2002, MedPAC includes an adjustment for Medicare policy changes affecting financial status in its section of factors affecting current level of payments. While MedPAC's update framework has not considered such costs in the past, MedPAC believes that it is appropriate to account for significant costs incurred as a result of new Medicare policy. For FY 2002, MedPAC believes that legislated updates will match cost growth and that the overall the net affects of legislative changes (from Public Law 105-33, Public Law 106-113, and Public Law 106-554) will be small. Thus, it did not recommend any additional allowance for these costs for FY 2002. Accordingly, MedPAC recommended a 0.0 percent adjustment for Medicare policy changes in its update framework for FY 2002.

    Comparison of FY 2002 Update Recommendations

    HHSMedPAC 1
    Market basketMBMB 1
    Policy Adjustment Factors:
    Productivity−0.6 to −0.5(2)
    Site-of-Service Substitution(3)−2.0 to − 1.0.
    Intensity0.2 to 0.3
    Science & Technology0.0 to 0.5.
    Real Within DRG Change(4)
    One-Time Factors0.0
    Medicare Policy Changes0.0
    Subtotal−0.4 to −0.2−2.0 to −0.5
    Case-Mix Adjustment Factors:
    Projected Case-Mix Change1.0
    Real Across DRG Change1.00.0
    Subtotal0.00.0
    Effect of FY 2000 DRG Reclass/Recalibration0.0
    Forecast Error Correction0.70.7
    Total Recommendation UpdateMB + 0.3 to MB + 0.5MB 1 −1.3 to MB 1 + 0.2.
    1 Used HCFA's December 2000 operating and capital market basket forecast in its combined update recommendation.
    2 Included in MedPAC's Science and Technology Adjustment.
    3 Included in HHS' Intensity Factor.
    4 Included in MedPAC's Case-Mix Adjustment.

    While the above analysis would suggest an update between operating market basket plus 0.3 percentage points and the operating market basket plus 0.5 percentage points, consistent with current law, we are recommending an update of market basket increase minus 0.55 percentage points (or 2.55 percent). Just as MedPAC believes that market basket minus 0.55 percentage points will provide a reasonable level of payments for FY 2002, we believe that a 2.55 update factor for FY 2002 will appropriately reflect current trends in health care delivery, including the recent decreases in the use of hospital inpatient services and the corresponding increase in the use of hospital outpatient and postacute care services.

    Also consistent with current law, we are recommending that the hospital-specific rates applicable to SCHs and MDHs be increased by the same update, 2.55 percentage points. As MedPAC states in its March 2001 report, there are signs of substantial improvement in hospital financial performance in FY 2000. In conjunction with the various “give-back” provisions in Public Law 106-113 and Public Law 106-554 and the continuation of positive (12 percent for FY 1999) Medicare hospital inpatient margins, we believe these recommended update factors for FY 2002 would ensure that Medicare acts as a prudent purchaser and provide incentives to hospitals for increased efficiency, thereby contributing to the solvency of the Medicare Part A Trust Fund.

    End Supplemental Information

    BILLING CODE 4120-01-P

    [FR Doc. 01-11062 Filed 5-3-01; 8:45 am]

    BILLING CODE 4120-01-P

Document Information

Published:
05/04/2001
Department:
Health Care Finance Administration
Entry Type:
Proposed Rule
Action:
Proposed rule.
Document Number:
01-11062
Dates:
Comments will be considered if received at the appropriate
Pages:
22645-22891 (247 pages)
Docket Numbers:
HCFA-1158-P
RINs:
0938-AK73
Topics:
Administrative practice and procedure, Grant programs-health, Health facilities, Health professions, Kidney diseases, Medicaid, Medicare, Puerto Rico, Reporting and recordkeeping requirements, Rural areas, X-rays
PDF File:
01-11062.pdf
CFR: (24)
42 CFR 405.2468
42 CFR 412.2
42 CFR 412.23
42 CFR 412.25
42 CFR 412.63
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