97-22890. Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 1998 Rates  

  • [Federal Register Volume 62, Number 168 (Friday, August 29, 1997)]
    [Rules and Regulations]
    [Pages 45966-46140]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 97-22890]
    
    
    
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    Part IV
    
    
    
    
    
    Department of Health and Human Services
    
    
    
    
    
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    Health Care Financing Administration
    
    
    
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    42 CFR Parts 400, 409, et al.
    
    
    
    Medicare Program; Changes to the Hospital Inpatient Prospective Payment 
    Systems and Fiscal Year 1998 Rates; Final Rule
    
    Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 / Rules 
    and Regulations
    
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    DEPARTMENT OF HEALTH AND HUMAN SERVICES
    
    Health Care Financing Administration
    
    42 CFR Parts 400, 409, 410, 411, 412, 413, 424, 440, 485, 488, 489, 
    and 498
    
    [BPD-878-FC]
    RIN 0938-AH55
    
    
    Medicare Program; Changes to the Hospital Inpatient Prospective 
    Payment Systems and Fiscal Year 1998 Rates
    
    AGENCY: Health Care Financing Administration (HCFA), HHS.
    
    ACTION: Final rule with comment period.
    
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    SUMMARY: We are revising the Medicare hospital inpatient prospective 
    payment systems for operating costs and capital-related costs to 
    implement necessary changes resulting from the Balanced Budget Act of 
    1997, Pub. L. 105-33, and changes arising from our continuing 
    experience with the systems. In the addendum to this final rule with 
    comment period, we describe changes in the amounts and factors 
    necessary to determine prospective payment rates for Medicare hospital 
    inpatient services for operating costs and capital-related costs. 
    Generally, these changes are applicable to discharges occurring on or 
    after October 1, 1997. We also set forth rate-of-increase limits and 
    changes for hospitals and hospital units excluded from the prospective 
    payment systems.
    
    DATES: Effective Date:  This rule is a major rule as defined in Title 
    5, United States Code, section 804(2). Section 4644 of Pub. L. 105-33 
    provides that, with respect to this final rule, the reference in Title 
    5, United States Code, section 801(a)(3)(A) to a 60-day delay in the 
    effective date for major rules is deemed to be a reference to a 30-day 
    delay. In accordance with these provisions, the provisions of this 
    final rule with comment period are effective on October 1, 1997.
        Comment Period: Comments on the provisions resulting from the 
    Balanced Budget Act of 1997 will be considered if received at the 
    appropriate address, as provided below, no later than 5 p.m. on October 
    28, 1997. We will not consider comments concerning provisions that 
    remain unchanged from the June 2, 1997 proposed rule or that were 
    revised based on public comment.
    
    ADDRESSES: Mail written comments (one original and three copies) to the 
    following address: Health Care Financing Administration, Department of 
    Health and Human Services, Attention: BPD-878-FC, P.O. Box 7517, 
    Baltimore, MD 21207-0517.
        If you prefer, you may deliver your written comments (one original 
    and three copies) to one of the following addresses: Room 309-G, Hubert 
    H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 
    20201, or Room C5-09-26, Central Building, 7500 Security Boulevard, 
    Baltimore, MD 21244-1850.
        Because of staffing and resource limitations, we cannot accept 
    comments by facsimile (FAX) transmission. In commenting, please refer 
    to file code BPD-878-FC. Comments received timely will be available for 
    public inspection as they are received, generally beginning 
    approximately three weeks after publication of a document, in Room 309-
    G of the Department's offices at 200 Independence Avenue, SW, 
    Washington, DC, on Monday through Friday of each week from 8:30 a.m. to 
    5 p.m. (phone: (202) 690-7890).
        For comments that relate to information collection requirements, 
    mail a copy of comments to:
    
    Office of Information and Regulatory Affairs, Office of Management and 
    Budget, Room 10235, New Executive Office Building, Washington, DC 
    20503, Attn: Allison Herron Eydt, HCFA Desk Officer; and
    Health Care Financing Administration, Office of Information Services, 
    Information Technology Investment Management Group, Division of HCFA 
    Enterprise Standards, Room C2-26-17, 7500 Security Boulevard, 
    Baltimore, MD 21244-1850
    
        Copies:  To order copies of the Federal Register containing this 
    document, send your request to: New Orders, Superintendent of 
    Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
    of the issue requested and enclose a check or money order payable to 
    the Superintendent of Documents, or enclose your Visa or Master Card 
    number and expiration date. Credit card orders can also be placed by 
    calling the order desk at (202) 512-1800 or by faxing to (202) 512-
    2250. The cost for each copy is $8.00. As an alternative, you can view 
    and photocopy the Federal Register document at most libraries 
    designated as Federal Depository Libraries and at many other public and 
    academic libraries throughout the country that receive the Federal 
    Register.
    
    FOR FURTHER INFORMATION CONTACT: Nancy Edwards, (410) 786-4531, 
    Operating Prospective Payment, DRG, and Wage Index Issues. Tzvi Hefter, 
    (410) 786-4487, Capital Prospective Payment, Excluded Hospitals, and 
    Graduate Medical Education Issues.
    
    SUPPLEMENTARY INFORMATION:
    
    I. Background
    
    A. Summary
    
        Under section 1886(d) of the Social Security Act (the Act), 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 was established effective with hospital cost 
    reporting periods beginning on or after October 1, 1983. Under this 
    system, Medicare payment for hospital inpatient operating costs is made 
    at a predetermined, specific rate for each hospital discharge. All 
    discharges are classified according to a list of diagnosis-related 
    groups (DRGs). The regulations governing the hospital inpatient 
    prospective payment system are located in 42 CFR part 412.
        As required by section 1886(g) of the Act, effective with cost 
    reporting periods beginning on or after October 1, 1991, we also have 
    implemented a prospective payment methodology for hospital inpatient 
    capital-related costs. Under the capital-related cost methodology, a 
    predetermined payment amount per discharge is made for Medicare 
    inpatient capital-related costs.
    
    B. Summary of the Provisions of the June 2, 1997 Proposed Rule
    
        On June 2, 1997, we published a proposed rule in the Federal 
    Register (62 FR 29902) setting forth proposed changes to the Medicare 
    hospital inpatient prospective payment systems for both operating costs 
    and capital-related costs, which would be effective for discharges 
    occurring on or after October 1, 1997. Subsequently, on August 5, 1997, 
    the Balanced Budget Act of 1997, Public Law 105-33, was enacted. This 
    Act made major changes to the Medicare hospital payment systems, rates, 
    and policies effective beginning with FY 1998. These legislative 
    changes are summarized under section I.D. of this preamble. More 
    specific details on individual provisions that we are implementing in 
    this final rule with comment period are included under the various 
    sections of this preamble.
        Following is a summary of the major changes that we had proposed to 
    make in the June 2, 1997 proposed rule:
         We proposed changes for FY 1998 DRG classifications and 
    relative weights, as required by section 1886(d)(4)(c) of the Act.
         We proposed to update the hospital wage index for FY 1998. 
    We also
    
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    proposed revisions to the wage index based on hospital redesignations 
    and a revised process for wage data verification.
         We proposed to use a revised hospital market basket in 
    developing the recommended FY 1998 update factor for the operating 
    prospective payment rates and the excluded hospital rate-of-increase 
    limits.
         We discussed several provisions of the regulations in 42 
    CFR Parts 412 and 413 and set forth certain proposed changes concerning 
    the following:
        + Elimination of day outlier payments.
        + Rural referral centers.
        + Indirect medical education.
        + Direct graduate medical education programs.
         We discussed several provisions of the regulations in 42 
    CFR parts 412, 413, and 489 and set forth certain proposed changes and 
    clarifications concerning the following:
        + Possible adjustments to capital minimum payment levels.
        + Special exceptions application process.
         We proposed changes to the application of the criteria for 
    ``hospitals within hospitals'' seeking exclusion from the prospective 
    payment system. We also proposed technical clarifications concerning 
    exclusion of rehabilitation units.
         In the addendum to the proposed rule, we set forth 
    proposed changes to the amounts and factors for determining the FY 1998 
    prospective payment rates for operating costs and capital-related 
    costs. We also proposed update factors for determining the rate-of-
    increase limits for cost reporting periods beginning in FY 1998 for 
    hospitals and hospital units excluded from the prospective payment 
    system.
         In Appendix A of the proposed rule, we set forth an 
    analysis of the impact that the proposed changes would have on affected 
    entities.
         In Appendix B of the proposed rule, we set forth our 
    technical appendix on the proposed FY 1998 capital cost model.
         In Appendix C of the proposed rule, we set forth the data 
    sources used to determine the market basket relative weights and choice 
    of price proxies.
         In Appendix D of the proposed rule, we included our report 
    to Congress on our initial estimate of an update factor for FY 1998 for 
    both hospitals included in and hospitals excluded from the prospective 
    payment systems, as required by section 1886(e)(3)(B) of the Act.
         As required by sections 1886(e)(4) and (e)(5) of the Act, 
    in Appendix E, we provided our recommendation of the appropriate 
    percentage change for FY 1998 for the following:
        + Large urban area and other area average standardized amounts (and 
    hospital-specific rates applicable to sole community 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 and hospital 
    units excluded from the prospective payment system.
         In the proposed rule, we discussed in detail the March 1, 
    1997 recommendations made by the Prospective Payment Assessment 
    Commission (ProPAC). ProPAC is directed by section 1886(e)(2)(A) of the 
    Act to make recommendations on the appropriate percentage change factor 
    to be used in updating the average standardized amounts. In addition, 
    section 1886(e)(2)(B) of the Act directs ProPAC to make recommendations 
    regarding changes in each of the Medicare payment policies under which 
    payments to an institution are prospectively determined. In particular, 
    the recommendations relating to the hospital inpatient prospective 
    payment systems are to include recommendations concerning the number of 
    DRGs used to classify patients, adjustments to the DRGs to reflect 
    severity of illness, and changes in the methods under which hospitals 
    are paid for capital-related costs. Under section 1886(e)(3)(A) of the 
    Act, the recommendations required of ProPAC under sections 1886(e)(2) 
    (A) and (B) of the Act are to be reported to Congress not later than 
    March 1 of each year.
        We printed ProPAC's March 1, 1997 report, which included its 
    recommendations, as Appendix F to the proposed rule. The 
    recommendations, and the actions we proposed to take with regard to 
    them (when an action was recommended), were discussed in detail in the 
    appropriate sections of the preamble, the addendum, or the appendices 
    to the proposed rule.
    
    C. Public Comments Received in Response to the June 2 Proposed Rule
    
        A total of 341 items of correspondence containing comments on the 
    proposed rule were received. The main areas of concern addressed by the 
    commenters were the changes in the DRG classifications related to 
    coronary stents and stereotactic radiosurgery, and the request for 
    comments on future changes for burn cases. Among other areas of concern 
    addressed by the commenters were implementation of the FY 1999 wage 
    index and the policy change related to hospitals and hospital units 
    excluded from the prospective payment system (specifically, hospital-
    within-hospital policy).
        Summaries of the public comments received and our responses to 
    those comments appear in the individual related sections of the 
    preamble.
    
    D. Relevant Provisions of the Balanced Budget Act of 1997
    
        As noted above, on August 5, 1997, after we had issued the proposed 
    rule for the FY 1998 prospective payment system changes, the Balanced 
    Budget Act of 1997 was enacted. This Act made major changes that affect 
    Medicare payments for hospital inpatient services under the prospective 
    payment systems and the cost limits applicable to excluded hospitals, 
    as well as the direct graduate medical education payments. Because most 
    of these changes are effective October 1, 1997, we have had to make 
    some revisions to the June 2 proposals as well as make additional 
    changes. The provisions of Public Law 105-33 that we are implementing 
    in this final rule with comment period are as follows:
        1. Hospital Operating Payment Update. The applicable percentage 
    change in the standardized amounts is 0 percent for FY 1998, the market 
    basket percentage increase minus 1.9 percentage points for all 
    hospitals in all areas for FY 1999, the market basket percentage 
    increase minus 1.8 percentage points for hospitals in all areas for FY 
    2000, the market basket percentage increase minus 1.1 percentage points 
    for hospitals for all areas for FYs 2001 and 2002, and the market 
    basket percentage increase for hospitals in all areas for FY 2003 and 
    subsequent fiscal years. (Section 4401(a))
        Hospitals that do not receive disproportionate share (DSH) or 
    indirect medical education (IME) payments and are (MDH) for FY 1998 or 
    1999 will receive a higher update for that year if--
         The hospital is in a State in which the aggregate 
    prospective payment system operating payments to these types of 
    hospitals is less than the aggregate prospective payment system 
    operating costs (an overall State negative operating margin) for FY 
    1995 cost reporting periods; and
         The hospital itself has a negative operating prospective 
    payment system margin in the payment year. (Section 4401(b))
        2. Hospital Capital Rate Reduction. The Federal capital rate and 
    the hospital-specific rate are reduced by applying the budget 
    neutrality factor
    
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    that was in effect in FY 1995, which results in a 15.68 percent 
    reduction in the rates. In addition, for FY 1998 through FY 2002, both 
    rates will be reduced an additional 2.1 percent. These reductions 
    together result in an overall reduction of 17.78 percent in the 
    unadjusted rates for the next 5 years. (Section 4402)
        3. Disproportionate Share Payments. The DSH payments to hospitals 
    are reduced by 1 percent in FY 1998, 2 percent in FY 1999, 3 percent in 
    FY 2000, 4 percent in FY 2001, and 5 percent in FY 2002. (Section 4403)
        4. Outlier Payments. Beginning in FY 1998, IME and DSH payments 
    will be made only on the base DRG payment rates and not on outlier 
    payments. In determining outlier payments, the fixed loss cost outlier 
    threshold will encompass payments for IME and DSH. (Section 4405)
        5. Base Payment Rate to Puerto Rico Hospitals. The national share 
    of the Puerto Rico payment rate is increased from 25 to 50 percent. 
    Thus, these hospitals will be paid based on 50 percent of a national 
    payment amount (based on a discharge-weighted average of the large 
    urban and other urban national standardized amounts) and 50 percent of 
    the Puerto Rico payment amount. (Section 4406)
        6. Special Reclassification. The Secretary is given discretionary 
    authority to deem Stanly County, North Carolina (a rural county) as a 
    part of the Charlotte-Gastonia-Rock Hill, North Carolina-South Carolina 
    MSA (a large urban area) for purposes of the prospective payment 
    system. (Section 4408)
        7. New Guidelines for Geographic Reclassification. Public Law 105-
    33 includes several provisions concerning geographic reclassification 
    under section 1886(d)(10) of the Act. For geographic reclassifications 
    for FY 1998 and subsequent years, the Secretary must establish and 
    publish alternative guidelines for a hospital that demonstrates that--
         Its average hourly wage is at least 108 percent of the 
    average hourly wage of all other hospitals in its Metropolitan 
    Statistical Area (MSA) (or New England County Metropolitan Area 
    (NECMA));
         It pays at least 40 percent of the adjusted uninflated 
    wages in the MSA; and
         It submitted an application and was approved for 
    reclassification for the wage index for FYs 1992 through 1997. (Section 
    4409)
        For reclassifications for FYs 1999, 2000, and 2001, a hospital may 
    seek reclassification to another area for purposes of DSH payment 
    whether or not the standardized amount is the same. (Section 4203(a))
        For any hospital that has ever been classified as a rural referral 
    center (RRC), the Medicare Geographic Classification Review Board 
    (MGCRB) may not reject an application for reclassification for purposes 
    of the wage index on the basis of the 108 percent rule. (Section 4202)
        For any hospital that is owned by a municipality and was 
    reclassified as an urban hospital for FY 1996, the Secretary must 
    exclude the overhead wages and hours associated with a skilled nursing 
    facility that is owned by the hospital and that is physically located 
    apart from the hospital in determining the hospital's average hourly 
    wage for purposes of qualifying for FY 1998 reclassification, if the 
    hospital had previously applied for and been denied reclassification 
    for FY 1998. (Section 4410(c))
        8. Floor on Area Wage Index. Beginning with FY 1998, the wage index 
    for an urban hospital may not be lower than the Statewide area rural 
    wage index. (Section 4410 (a) and (b))
        9. Indirect Medical Education. The IME formula is revised to reduce 
    the IME adjustment factor from 7.7 percent to 7.0 percent in FY 1998, 
    6.5 percent in FY 1999, 6.0 percent in FY 2000, and 5.5 percent in FY 
    2001 and subsequent fiscal years. (Section 4621(a))
        For cost reporting periods beginning on or after October 1, 1997, 
    the total number of full-time equivalent residents in a hospital's 
    approved medical residency training program in the fields of allopathic 
    medicine and osteopathic medicine is limited to the hospital's full-
    time equivalent count for the most recent cost reporting period ending 
    on or before December 31, 1996. For cost reporting periods beginning on 
    or after October 1, 1997, a hospital's indirect medical education full-
    time equivalent count is based on the average full-time equivalent 
    count for the cost reporting period and the preceding two cost 
    reporting periods. For the first cost reporting period beginning on or 
    after October 1, 1997, the average is based on residents in that period 
    and the preceding period. The statute provides for adjustments for 
    short periods and a transition rule for FY 1998. Furthermore, the ratio 
    of residents-to- beds may not exceed the ratio calculated during the 
    prior cost reporting period (after accounting for the cap on the number 
    of resident FTEs).
        For portions of cost reporting periods occurring on or after 
    January 1, 1998, the Secretary must make payments to teaching hospitals 
    for the indirect costs of graduate medical education associated with 
    Medicare managed care discharges. Payment is equal to the per discharge 
    amount that would have been made for that discharge if the beneficiary 
    were not enrolled in managed care, multiplied by an applicable 
    percentage. The applicable percentage is 20 percent in 1998, 40 percent 
    in 1999, 60 percent in 2000, 80 percent in 2001, and 100 percent in 
    2002 and subsequent years.
        10. Rural Referral Centers. Any hospital classified as an RRC for 
    FY 1991 will be classified as an RRC for FY 1998 and subsequent fiscal 
    years. (Section 4202(b))
        11. Medicare-Dependent, Small Rural Hospitals. The special 
    treatment of MDHs is reinstated for FYs 1998, 1999, and 2000. The 
    payment methodology is identical to the methodology applicable in FY 
    1993; that is, if the hospital's hospital-specific rate based on 1982 
    or 1987 costs is higher than the Federal rate, the hospital receives 50 
    percent of the difference between the Federal rate and the hospital-
    specific rate. (Section 4204)
        12. Reinstatement of the Add-On for Blood Clotting Factor. The add-
    on payment for blood clotting factor provided to inpatients with 
    hemophilia is permanently reinstated beginning in FY 1998. (Section 
    4452)
        13. Counting Residents for Direct Graduate Medical Education. For 
    cost reporting periods beginning on or after October 1, 1997, the total 
    number of unweighted full-time equivalent residents in a hospital's 
    approved medical residency training program in the fields of allopathic 
    medicine and osteopathic medicine is limited to the hospital's 
    unweighted full-time equivalent count for the most recent cost 
    reporting period ending on or before December 31, 1996. For cost 
    reporting periods beginning on or after October 1, 1997, a hospital's 
    direct medical education full-time equivalent count is based on the 
    average full-time equivalent count for the cost reporting period and 
    the preceding two cost reporting periods. For the first cost reporting 
    period beginning on or after October 1, 1997 the average is based on 
    residents in that period and the preceding period. The statute provides 
    for adjustments for short periods and a transition rule for FY 1998.
        The Secretary is permitted to prescribe rules that allow 
    institutions that are members of the same affiliated group (as defined 
    by the Secretary) to elect to apply the FTE cap on an aggregate basis.
        The Secretary must prescribe rules for providing exceptions to the 
    cap for
    
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    medical residency training programs beginning on or after January 1, 
    1995.
        The statute gives the Secretary authority to collect whatever data 
    are necessary to implement these provisions. (Section 4623)
        14. Payments to Managed Care Plans for Graduate Medical Education. 
    For portions of cost reporting periods occurring on or after January 1, 
    1998, the Secretary must make payments to teaching hospitals for the 
    direct costs of graduate medical education associated with Medicare 
    managed care discharges. Payment is equal to the product of the per 
    resident amount, the total number of FTE residents working all areas of 
    the hospital, the fraction of the total number of inpatient bed days 
    that are attributable to Medicare managed care enrollees, and an 
    applicable percentage. The applicable percentage is 20 percent in 1998, 
    40 percent in 1999, 60 percent in 2000, 80 percent in 2001 and 100 
    percent in 2002 and subsequent years. (Section 4624)
        15. Payment to Nonhospital Providers. For cost reporting periods 
    beginning on or after October 1, 1997, the Secretary may establish 
    rules for payment to qualified nonhospital providers for the direct 
    costs of medical education incurred in the operation of an approved 
    medical residency training program. Qualified nonhospital providers 
    include federally qualified health centers, rural health clinics, 
    Medicare Choice organizations, and any other nonhospital providers that 
    the Secretary determines to be appropriate. The rules established by 
    the Secretary must specify the amounts, form, and manner in which 
    payments will be made and the portion of the payments that will be made 
    from each of the Medicare Trust Funds. The Secretary must reduce the 
    aggregate amount paid to hospitals to the extent payment is made to 
    nonhospital providers for residents included in the hospital's full-
    time equivalent count. (Section 4625)
        16. Payment for Combined Medical Residency Training Programs. The 
    initial residency period for combined programs consisting only of 
    primary care training is the longest of the composite programs plus one 
    additional year. A resident enrolled in a combined medical residency 
    training program that includes an obstetrics and gynecology program 
    qualifies for this special rule if the other programs combined with the 
    obstetrics and gynecology program are for training a resident in 
    primary care. This provision is effective for residency training 
    programs beginning July 1, 1997. (Section 4627)
        17. Payment Update for Excluded Hospitals and Hospital Units. For 
    FY 1998, the rate-of-increase limits for excluded hospitals and units 
    will be updated by 0 percent. For FYs 1999 through 2002, the update 
    factor is tied to the relationship between the hospital's target amount 
    and its operating costs. For hospitals with costs exceeding the target 
    amount by 10 percent or more, the update is the market basket 
    percentage increase; if costs exceed the target but by less than 10 
    percent, the update factor equals the market basket percentage increase 
    minus 0.25 percentage points for each percentage point by which costs 
    are less than 10 percent over the target (but in no case less than 0); 
    if costs are less than or equal to the target but not below \2/3\ of 
    the target amount, the update is the greater of 0 percent or the market 
    basket percentage increase minus 2.5 percentage points; and if costs do 
    not exceed \2/3\ of the target amount, the update factor is 0 percent. 
    (Section 4411)
        18. Reductions to Capital Payments. Capital payment amounts for 
    certain excluded hospitals and hospital units are reduced by 15 percent 
    for FYs 1998 through 2002. (Section 4412)
        19. Rebasing. A hospital that was excluded from the prospective 
    payment system before 1991 may apply to rebase its target amount for 
    its cost reporting period beginning in FY 1998. The rebased target 
    amount is determined by using the five latest settled cost reporting 
    periods as of August 5, 1997, updating for inflation, excluding the 
    highest and the lowest cost per discharge, and calculating an average 
    for the remaining three. Long-term care hospitals with costs exceeding 
    115 percent of their target amount and a 70- percent disproportionate 
    patient percentage may elect to use the cost reporting period beginning 
    during FY 1996 as their base year, updated for inflation. (Section 
    4413)
        20. Cap on Target Amounts for Excluded Hospitals and Units. For FYs 
    1998 through 2002, the target amount will be capped at the 75th 
    percentile of the target amounts for similar facilities for cost 
    reporting periods ending during FY 1996, updated by inflation. This cap 
    applies to psychiatric hospitals and units, rehabilitation hospitals 
    and units, and long-term care hospitals.
        21. Bonus and Relief Payments to Excluded Hospitals and Units. 
    Bonus payments to excluded hospitals and units are the lesser of--
         15 percent of the amount by which the ceiling (target 
    amount times Medicare discharges) exceeds the amount of operating 
    costs; or
         2 percent of the ceiling.
        A continuous improvement bonus payment system is established 
    beginning FY 1998 for hospitals with at least 3 full cost reporting 
    periods whose operating costs for the payment period are less than the 
    least of its target amount, its trended costs (as defined by the 
    statute), or its expected costs (as defined by the statute). The bonus 
    under this system equals the lesser of--
         50 percent of the amount by which operating costs are less 
    than expected costs; or
         1 percent of the ceiling.
        Hospitals with costs over 110 percent of their ceiling receive 
    relief payments equal to an additional 50 percent of the amount by 
    which costs exceed 110 percent of the ceiling, not to exceed 10 percent 
    of the ceiling. (Section 4415)
        22. Change in Payment and Target Amount for New Providers. 
    Effective October 1, 1997, the new provider exemptions for excluded 
    hospitals are eliminated except for children's hospitals. The amount of 
    payment for a new provider will be the lesser of operating costs for 
    the period, or 110 percent of the national median of the target amount 
    for hospitals in the same class for cost reporting periods ending in FY 
    1996, wage adjusted and updated by the market basket percentage 
    increase to the fiscal year in which the hospital first received 
    payments. (Section 4416 and 4419)
        23. Treatment of Certain Long-Term Care Hospitals. Long-term care 
    hospitals located in the same building or on the same campus as another 
    hospital and that were in existence on September 30, 1995, are 
    grandfathered in as hospitals excluded from the prospective payment 
    system. This amendment applies to discharges occurring on or after 
    October 1, 1995. (Section 4417(a))
        A hospital that first received payment in 1986, has an average 
    inpatient length of stay greater than 20 days, and in its 12-month cost 
    reporting period ending in FY 1997, has 80 percent or more of its 
    annual Medicare discharges that reflect a finding of neoplastic 
    disease, is excluded from the prospective payment system as a long-term 
    care hospital.
        This provision applies to cost reporting periods beginning on or 
    after August 5, 1997. (Section 4417(b))
        24. Treatment of Certain Cancer Hospitals. A hospital recognized as 
    a comprehensive cancer research center by the National Cancer Institute 
    of the National Institutes of Health as of April 20, 1983; located in a 
    State which, as of December 19, 1989, was not operating a demonstration 
    project under section 1814(b); that applied for and was denied 
    classification on or before December 31, 1990; is licensed for less 
    than 50 acute
    
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    care beds; and demonstrates that at least 50 percent of its total 
    discharge reflects a finding of neoplastic disease for the 4-year 
    period ending December 31, 1996, is excluded from the hospital 
    prospective payment system retroactively to 1991. The legislation 
    includes an option to rebase payments. Retroactive payments must be 
    made by August 5, 1998. (Section 4418)
        25. Limited-Service Rural Hospital Program
        A ``Medicare Rural Hospital Flexibility Program'' is established. 
    This program is a national limited-service hospital program that 
    replaces the existing Essential Access Community Hospital/Rural Primary 
    Care Hospital (EACH/RPCH) program which operates in seven States. The 
    program allows States to designate rural facilities as ``critical 
    access hospitals'' if they are located a sufficient distance from other 
    hospitals, make available 24-hour emergency care, maintain no more than 
    15 inpatient beds, and keep inpatients no longer than 96 hours (except 
    where weather or emergency conditions dictate, or a Peer Review 
    Organization waives the limit). In addition, critical access hospitals 
    do not have to meet all of the staffing requirements that apply to 
    hospitals under Medicare. Payment for inpatient and outpatient services 
    under this program is on the basis of reasonable cost.
        States may receive grants for program activities, and are 
    authorized to provide for the creation of networks, which include at 
    least one critical access hospital and at least one acute care 
    hospital. Critical access hospitals with swing-bed agreements are 
    allowed to have up to 25 inpatient beds and to furnish both acute 
    (hospital-level) and SNF-level care, provided that no more than 15 of 
    those beds are used at any one time for acute care. Existing RPCHs, 
    otherwise eligible as CAHs, and existing medical assistance facilities 
    (MAFs) participating under the MAF demonstration project in Montana, 
    will be deemed as CAHs. Existing EACHs in rural areas will continue to 
    be paid as sole community hospitals but no new EACHs will be 
    designated. (Section 4201)
        26. Change in Publication Dates. Beginning with the FY 1999 update, 
    the DRG prospective payment rate methodology and the recommended 
    hospital prospective payment updates must be published as a proposed 
    rule by April 1 and as a final rule by August 1 of each year. (Section 
    4644 (a)(1) and (b)(1))
        As a conforming change, the deadline for applications for 
    geographic reclassification for years beginning with FY 2000 is moved 
    from October 1 to September 1. Because the FY 1999 applications are due 
    on October 1, 1997, the Secretary is directed to shorten the deadlines 
    for MGCRB decision making, so that a final decision for all 
    applications is made by June 15, 1998. (Section 4644(c))
        Each of these provisions and the changes to the regulations 
    necessary to implement these provisions are described in greater detail 
    in sections III, IV, V, and VI of this preamble.
    
    II. Changes to DRG Classifications and Relative Weights
    
    A. Background
    
        Under the prospective payment system, we pay for inpatient hospital 
    services on the basis of a rate per discharge that varies by the DRG to 
    which a beneficiary's stay is assigned. The formula used to calculate 
    payment for a specific case takes an individual hospital's payment rate 
    per case and multiplies it by the weight of the DRG to which the case 
    is assigned. Each DRG weight represents the average resources required 
    to care for cases in that particular DRG relative to the average 
    resources used to treat cases in all DRGs.
        Congress recognized that it would be necessary to recalculate the 
    DRG relative weights periodically to account for changes in resource 
    consumption. Accordingly, section 1886(d)(4)(C) of the Act requires 
    that the Secretary adjust the DRG classifications and relative weights 
    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 changes to the DRG 
    classification system and the recalibration of the DRG weights for 
    discharges occurring on or after October 1, 1997 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 Edition, Clinical 
    Modification (ICD-9-CM). The Medicare fiscal intermediary enters the 
    information into its claims system and subjects it to a series of 
    automated screens called the Medicare Code Editor (MCE). These screens 
    are designed to identify cases that require further review before 
    classification into a DRG can be accomplished.
        After screening through the MCE and any further development of the 
    claims, cases are classified by the GROUPER software program into the 
    appropriate DRG. The GROUPER program was developed as a means of 
    classifying each case into a DRG on the basis of the diagnosis and 
    procedure codes and demographic information (that is, sex, age, and 
    discharge status). It is used both to classify past cases in order to 
    measure relative hospital resource consumption to establish the DRG 
    weights and to classify current cases for purposes of determining 
    payment. The records for all Medicare hospital inpatient discharges are 
    maintained in the Medicare Provider Analysis and Review (MedPAR) file. 
    The data in this file are used to evaluate possible DRG classification 
    changes and to recalibrate the DRG weights.
        Currently, cases are assigned to one of 492 DRGs in 25 major 
    diagnostic categories (MDCs). Most MDCs are based on a particular organ 
    system of the body (for example, MDC 6, Diseases and Disorders of the 
    Digestive System); however, some MDCs are not constructed on this basis 
    since they involve multiple organ systems (for example, MDC 22, Burns).
        In general, principal diagnosis determines MDC assignment. However, 
    there are five DRGs to which cases are assigned on the basis of 
    procedure codes rather than first assigning them to an MDC based on the 
    principal diagnosis. These are the DRGs for liver, bone marrow, and 
    lung transplant (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 (hereafter CC).
        Generally, GROUPER does not consider other procedures; that is, 
    nonsurgical procedures or minor surgical procedures generally not 
    performed in an operating room are not listed as operating room (OR) 
    procedures in the GROUPER decision tables. However, there are a few 
    non-OR procedures that do affect DRG
    
    [[Page 45971]]
    
    assignment for certain principal diagnoses, such as extracorporeal 
    shock wave lithotripsy for patients with a principal diagnosis of 
    urinary stones.
        We proposed several changes to the DRG classification system for FY 
    1998. The proposed changes, the comments we received concerning them, 
    our responses to those comments, and the final DRG changes are set 
    forth below.
    2. MDC 1 (Diseases and Disorders of the Nervous System)
    
    a. Stereotactic Radiosurgery
    
        Effective October 1, 1995, procedure code 92.3 (stereotactic 
    radiosurgery) was created and classified as a non-OR procedure. 
    However, because this procedure had previously been coded to procedure 
    codes that are classified as operating room procedures, we assigned 
    procedure code 92.3 to the same surgical DRGs as the predecessor codes. 
    Therefore, in the following DRGs, stereotactic radiosurgery is 
    considered a non-OR procedure that affects DRG assignment: in MDC 1, 
    DRG 1 (Craniotomy Age >17 Except for Trauma), DRG 2 (Craniotomy for 
    Trauma Age >17), and DRG 3 (Craniotomy Age 0-17) and, in MDC 10 
    (Endocrine, Nutritional and Metabolic Diseases and Disorders), DRG 286 
    (Adrenal and Pituitary Procedures). In addition, in MDC 17 
    (Myeloproliferative Diseases and Disorders and Poorly Differentiated 
    Neoplasms), procedure code 92.3 is considered a major OR procedure for 
    purposes of assignment to DRG 400 (Lymphoma and Leukemia with Major OR 
    Procedure) and DRGs 406 and 407 (Myeloproliferative Disorders or Poorly 
    Differentiated Neoplasms with Major OR Procedure).1 We 
    stated in the June 2, 1995 proposed rule (60 FR 29207) that we would 
    analyze the stereotactic radiosurgery cases as soon as the FY 1996 
    cases were available to ensure that these DRG assignments were 
    appropriate.
    ---------------------------------------------------------------------------
    
        \1\ A single title combined with two DRG numbers is used to 
    signify pairs. Generally, the first DRG is for cases with CC and the 
    second DRG is for cases without CC. If a third number is included, 
    it represents cases of patients who are age 0-17. Occasionally, a 
    pair of DRGs is split on age >17 and age 0-17.
    ---------------------------------------------------------------------------
    
        In analyzing the FY 1996 MedPAR file, we found that there were 
    stereotactic radiosurgery cases assigned to DRGs 1, 286, 400, and 407. 
    In DRG 1, the average standardized charges for these cases are 
    approximately $16,400 compared to approximately $27,800 for DRG 1 
    overall and the lengths of stay are about 3 days and 10 days, 
    respectively. In DRG 286, the average charges for procedure code 92.3 
    are also much lower than all cases in that DRG, about $11,900 versus 
    $19,400. Again the length of stay is also much lower for stereotactic 
    radiosurgery, just over 1 day compared to almost 7 days for all DRG 286 
    cases.
        Because the cases associated with procedure code 92.3 clearly are 
    much less resource-intensive than the other cases in the DRGs to which 
    it is assigned, we proposed to reassign procedure code 92.3 to DRGs 7 
    and 8 (Peripheral and Cranial Nerve and Other Nervous System 
    Procedures) in MDC 1 and DRGs 292 and 293 (Other Endocrine, Nutrition 
    and Metabolic OR Procedures) in MDC 10. We also proposed to remove 
    procedure code 92.3 from the list of major OR procedures in MDC 17. 
    Therefore, these cases would be assigned to DRGs 401 and 402 (Lymphoma 
    and Non-Acute Leukemia with Other OR Procedure) and DRG 408 
    (Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
    Other OR Procedure).
        We received over 130 comments regarding our proposal to move 
    procedure code 92.3, including many from people who underwent 
    radiosurgery. Three commenters supported the proposal. One commenter 
    concurred that a revision of the DRG assignment and payment level for 
    radiosurgery is appropriate, but suggested that any change be delayed 
    until further analysis of industry data has been conducted. The 
    remaining commenters opposed our proposal and strongly recommended that 
    stereotactic radiosurgery cases continue to be assigned to DRG 1, or if 
    a change must be made, these cases should be assigned to their own DRG 
    with an appropriate relative weight. The specific comments we received 
    are discussed below.
        Comment: Many commenters stated that stereotactic radiosurgery is 
    cost effective and is less expensive (by approximately \1/3\) than open 
    cranial surgery. The commenters were concerned that this proposal would 
    result in a 40 percent reduction in payment for these cases.
        Response: Currently, stereotactic radiosurgery is being paid at the 
    same level as open cranial surgery, as the commenter noted. We believe 
    these comments support our decision to move the radiosurgery cases into 
    a DRG with cases of comparable utilization of resources, rather than 
    group them with open surgery procedures, which involve much greater 
    resource use. Our intent is not to discourage the utilization of this 
    advanced technology nor to reduce payment arbitrarily, but to make 
    appropriate payment for the procedure by assigning it to a DRG with 
    similar resource use.
        Comment: There are several different approaches being used in 
    stereotactic radiosurgery. The two most prevalent are the gamma knife 
    and the linear accelerator. Some commenters believe that we should be 
    analyzing these cases separately and possibly making different DRG 
    assignments for them. Other commenters urged us not to distinguish 
    between approaches in radiosurgery, and one of these commenters 
    submitted data to demonstrate that there is no difference in patient 
    outcomes and that the different types of approach are clinically 
    similar.
        Response: Effective October 1, 1995, a new ICD-9-CM procedure code 
    was created to capture stereotactic radiosurgery. The new code 92.3 
    (Stereotactic radiosurgery) encompasses both gamma knife and linear 
    accelerator procedures. This topic was addressed at a public meeting of 
    the ICD-9-CM Coordination and Maintenance Committee in 1994 at which 
    representatives from the radiosurgery industry were in attendance. 
    Comments were accepted at the meeting and attendees were also invited 
    to submit written comments. At that time, we did not receive any 
    negative comments regarding the inclusion of all approaches to 
    radiosurgery in one code. Therefore, with only one code, we are unable 
    to distinguish the radiosurgery cases based on different approaches.
        We note that one difference between the approaches is the initial 
    capital costs of the equipment. However, now that capital payments are 
    made to hospitals under a prospective payment system, there is no way 
    for us to specifically recognize these different costs.
        Comment: Several commenters stated that because most radiosurgery 
    patients do not have complicating conditions, which are necessary to be 
    assigned to DRG 7, most cases will be assigned to DRG 8 and receive the 
    lower relative weight associated with less complicated cases. In any 
    event, the commenters believe that the payment for DRGs 7 and 8 is less 
    than the costs of providing the treatment. One commenter stated that 
    the average payment for radiosurgery cases assigned to DRG 1 in FY 1996 
    was $11,876.28, while payment for DRGs 7 and 8 in the same year 
    averaged $9,973.13 and $4,547.64, respectively. Therefore, this 
    proposal could reduce hospital payment for the average Medicare 
    radiosurgery cases in DRG 1 by as much as 62 percent.
        Response: We have performed an analysis of the full FY 1996 MedPAR 
    file, updated through June 1997. Of the 1,275 cases coded with 
    procedure 93.2, 966 cases would have been assigned to
    
    [[Page 45972]]
    
    DRGs 7 and 8 under our proposal. Of those 966 cases, 406 classify to 
    DRG 7 and 560 cases classify to DRG 8. The average charges of these 
    reassigned cases are approximately $16,300 for DRG 7 and $13,700 for 
    DRG 8. The average standardized charges for DRG 7 and 8 overall are 
    approximately $20,250 and $9,950, respectively. Thus, the average 
    charges for radiosurgery cases assigned to DRG 7 (just over 40 percent 
    of the total) are approximately $4,000 less than the overall cases 
    assigned to that DRG and the average charges for the cases assigned to 
    DRG 8 are approximately $4,000 more than the overall cases.
        Therefore, given a similar distribution at any hospital, the 
    payments for the DRG 7 and 8 cases should come close to balancing out; 
    that is, DRG 7 will result in payments in excess of costs and DRG 8 
    will result in approximately equal numbers of cases with costs in 
    excess of payments. This is consistent with the design of the 
    prospective payment system, which is intended to make an average, 
    predetermined payment for each case that encourages hospitals to 
    provide care efficiently and economically and treat a mix of patients 
    so that cases incurring payments in excess of costs are balanced by 
    cases incurring costs in excess of payments.
        The difference between assignment to DRG 7 and DRG 8 is the 
    documentation of complications resulting from treatment or 
    comorbidities that are present upon admission and may affect treatment. 
    Examples of these secondary diagnoses that, in fact, many of the 
    patients who commented reported having are postoperative nausea (which 
    may prolong the patient's stay), diabetes, congestive heart failure, 
    and emphysema. In fact, commenters stated that one of the advantages of 
    radiosurgery over open surgery is that it can be performed on patients 
    with comorbidities who could not otherwise tolerate surgery for their 
    conditions.
        We also note that DRGs 1 and 2 are not split on the basis of CCs; 
    rather, they are assigned based on whether the case is or is not a 
    trauma case. Therefore, hospitals might not have coded secondary 
    diagnoses for radiosurgery cases. Nonetheless, over 40 percent of the 
    reassigned cases in our analysis have CCs included on the bill. We 
    believe this will remain true in FY 1998 and the percentage may even 
    increase now that properly coding CCs will affect the amount of 
    payment.
        In response to the commenter concerned about the low payment for 
    DRGs 7 and 8, we note that, based on the MedPAR file, the average 
    payment for radiosurgery cases assigned to DRG 1 in FY 1996 was 
    approximately $16,000. If those cases had been assigned to DRGs 7 and 8 
    in that year, we estimate that the average payment would have been 
    approximately $14,000 and $8,000, respectively. Thus, on average, 
    payment for radiosurgery cases will be reduced by approximately 30 
    percent. This is consistent with commenter's assertion that this 
    procedure costs approximately one-third less than an open cranial 
    procedure.
        Comment: Commenters suggested that instead of continuing to assign 
    radiosurgery cases to DRG 1, it would be acceptable to assign these 
    cases to their own DRG and assign a weight of approximately 3.0.
        Response: As we have stated in several previous documents, 
    including the June 2 proposed rule (in connection with the discussion 
    of automatic implantable cardioverter defibrillators (62 FR 29906)), we 
    are reluctant to create device-specific DRGs where the cost of the 
    device dominates the charges. Creating a separate DRG for radiosurgery, 
    where the costs of the device used to perform the procedure dominates 
    the charges, would be a similar issue. With such a procedure-specific 
    DRG, it would be relatively easy for hospitals and manufacturers of the 
    equipment to raise the charges for the cases until they create a 
    relative weight that consistently pays them more than their costs. We 
    believe that the resource consumption associated with cases in DRGs 7 
    and 8 is similar to that required by radiosurgery cases. However, we 
    will continue to monitor this technology to ensure that these DRGs 
    remain appropriate assignments.
        Comment: Several commenters believe that the relatively low charges 
    of the radiosurgery cases result, in part, from incorrect use of 
    procedure code 92.3. These commenters requested that we either wait 
    until these issues are resolved to make a DRG change or that we adjust 
    the cases in the MedPAR file based on industry data.
        Response: It is often the case with a new code, whether diagnosis 
    or procedure, that there is a period of time necessary to gain 
    experience and correctly use the code. We did notice some coding 
    discrepancies when we reviewed the radiosurgery cases. However, these 
    discrepancies are not in the cases that are assigned to DRGs 7 and 8, 
    but rather the cases that remain assigned to DRG 1. We note that coders 
    appear to be including improperly the approach to the radiosurgery 
    procedure, such as coding thalamotomy and pallidotomy separately in 
    addition to the stereotactic radiosurgery code. In addition, the coding 
    of some cases has included codes that represent the result of the 
    radiosurgery, that is, the destruction of the lesion of the brain. 
    Again this is an improper coding practice. Both of these coding 
    practices result in radiosurgery cases being assigned to DRG 1.
        We will continue to monitor these cases to ensure that our decision 
    to reassign radiosurgery to DRGs 7 and 8 remains appropriate. We will 
    also work with the industry concerning the possibility of assigning 
    separate ICD-9-CM codes to the different types of radiosurgery.
    
    b. Sleep Apnea
    
        In our August 30, 1996 final rule (61 FR 46168), we discussed our 
    review of the DRG assignment of cases in which surgery is performed to 
    correct obstructive sleep apnea (diagnosis code 780.57). When coded as 
    the principal diagnosis, sleep apnea is assigned to DRGs 34 and 35 
    (Other Disorders of the Nervous System) in MDC 1.
        The result of our review was to assign several surgical procedures 
    used to correct sleep apnea to DRGs 7 and 8 (Peripheral and Cranial 
    Nerve and Other Nervous System Procedures). These procedures involved 
    repair of the palate or pharynx (procedure codes 27.69, 29.4, and 
    29.59). Previously, since none of these surgical procedures had been 
    assigned to MDC 1, cases of sleep apnea treated with one of these 
    procedures had been assigned to DRG 468 (Extensive OR Procedure 
    Unrelated to Principal Diagnosis) or DRG 477 (Nonextensive OR Procedure 
    Unrelated to Principal Diagnosis).
        An associated procedure that is also used to treat sleep apnea is 
    correction of cleft palate (procedure code 27.62). Currently, 
    correction of cleft palate is assigned only to DRG 52 (Cleft Lip and 
    Palate Repair) in MDC 3 (Diseases and Disorders of the Ear, Nose, 
    Mouth, and Throat). Thus, when this procedure is performed for sleep 
    apnea cases, the cases would be assigned to DRG 468. We proposed to add 
    this surgical procedure to MDC 1. Like the palate and pharynx repair 
    procedures that were addressed last year, these cases are not 
    clinically similar to the other surgical DRGs in MDC 1; thus, we 
    proposed to include them in DRGs 7 and 8.
        Comment: We received three comments on this proposal. One commenter 
    supported the change; another registered no objection but pointed out 
    that the proposed rule stated procedure code 27.62 is currently 
    assigned to DRG 477 (Nonextensive OR Procedure Unrelated to Principal 
    Diagnosis) when the principal diagnosis
    
    [[Page 45973]]
    
    is sleep apnea. The commenter noted that under the current DRG 
    groupings, such a case would actually be assigned to DRG 468. The final 
    commenter stated that if a patient is admitted for cleft palate repair, 
    the principal diagnosis likely would be cleft palate (diagnosis code 
    749.xx) even if sleep apnea is also present, presumably resulting in 
    assignment to DRG 52. This commenter suggested that if cleft palate 
    repair is performed infrequently in conjunction with a principal 
    diagnosis of obstructive sleep apnea, it would be unnecessary to 
    reassign these cases to DRGs 7 and 8.
        Response: In the proposed rule, we inadvertently stated that sleep 
    apnea cases involving the correction of cleft palate currently would be 
    assigned to DRG 477. The commenter is correct that such cases are 
    currently assigned to DRG 468.
        Although a patient admitted for cleft palate repair would more 
    likely have a principal diagnosis of cleft palate than of sleep apnea, 
    cases do occur in which obstructive sleep apnea is the documented 
    reason for the surgery. Our rationale for the proposed change is based 
    not on the frequency of the cases but on whether or not these cases are 
    appropriately assigned to DRG 468, which by definition should encompass 
    only cases involving unrelated operating room procedures. Because we 
    believe that cleft palate repair is related to obstructive sleep apnea, 
    it would be inappropriate to continue to assign these cases to DRG 468; 
    the better policy is to assign the procedure to DRGs 7 and 8 in MDC 1. 
    Therefore, we are adopting this change in this final rule.
    
    c. Geniculate Herpes Zoster
    
        Geniculate herpes zoster (diagnosis code 053.11) is an acute viral 
    disease characterized by inflammation of spinal ganglia and by a 
    vesicular eruption along the area of distribution of a sensory nerve. 
    In the August 30, 1996 final rule (61 FR 27447), we moved diagnosis 
    codes 053.10 and 053.19 (herpes zoster with unspecified nervous system 
    complication and other herpes zoster, respectively) from DRG 20 
    (Nervous System Infection Except Viral Meningitis) to DRGs 18 and 19 
    (Cranial and Peripheral Nerve Disorders). We considered moving 
    diagnosis code 053.11 at that time, however, the higher average charges 
    associated with geniculate herpes zoster and slightly higher length of 
    stay led us to decide instead to leave 053.11 in DRG 20 and to reassess 
    this decision in upcoming years.
        For the proposed rule, we conducted an analysis of the cases 
    assigned to DRG 20 using the FY 1996 MedPAR file. The average 
    standardized charges for these cases were approximately $8,430, 
    significantly lower than the average charges for the DRG of 
    approximately $21,180. The average length of stay for the geniculate 
    herpes zoster cases, approximately 6 days, was also less than the 
    average length of stay for DRG 20 of approximately 10 days. Based on 
    these data, we proposed to reassign diagnosis code 053.11 to DRGs 18 
    and 19, which have average charges of approximately $8,460 and $5,460, 
    respectively. The average length of stay for DRGs 18 and 19 was 
    approximately 6 days and 4 days, respectively.
        We received two comments supporting this change and we are 
    including it in the final DRG changes.
    3. MDC 5 (Diseases and Disorders of the Circulatory System)
    
    a. Heart Assist Devices
    
        In November 1995, we amended our general noncoverage decision 
    concerning artificial hearts and related devices. Section 65-15 of the 
    Medicare Coverage Issues manual was revised to allow coverage of the 
    HeartMate Implantable Pneumatic Left Ventricular Assist System 
    (HeartMate IP LVAS) in accordance with its Food and Drug Administration 
    (FDA)- approved use as a temporary mechanical circulation support in 
    nonreversible left ventricular failure as a bridge to cardiac 
    transplant. In order to receive Medicare coverage, all of the following 
    conditions must be met:
         The patient is listed as an approved heart transplant 
    candidate by a Medicare-approved heart transplant center.
         The implantation of the system is done in a Medicare-
    approved heart transplant center. Written permission from the listing 
    center is needed if the patient has the implantation done at another 
    Medicare-approved center.
         The patient is on inotropes.
         The patient is on an intra-aortic balloon pump (if 
    possible).
         The patient has left atrial pressure or pulmonary 
    capillary wedge pressure  20mm Hg with either--
        --Systolic blood pressure  80 mm Hg; or
        --Cardiac index of  2.0 1/min/m\2\.
        A procedure code for implant of an implantable, pulsatile heart 
    assist system (37.66), which includes the HeartMate IP LVAS, was 
    created effective October 1, 1995. At that time, the procedure code was 
    assigned to DRGs 110 and 111 (Major Cardiovascular Procedures). In the 
    proposed rule, we presented our analysis of a full year of cases coded 
    with this procedure (FY 1996 MedPAR file, December update) to determine 
    if this DRG assignment remained appropriate.
        In the full (100 percent) FY 1996 MedPAR file, there were 51 cases 
    of implant of an internal heart assist system (procedure code 37.66) in 
    MDC 5. Of these 51 cases, 18 were assigned to DRG 110 and none to DRG 
    111. The other 33 cases were assigned to DRG 103 (Heart Transplant), 
    DRG 104 (Cardiac Valve Procedures with Cardiac Cath), DRGs 106 and 107 
    (Coronary Bypass), and DRG 108 (Other Cardiothoracic Procedures). Of 
    the 18 cases assigned to DRG 110, the average charge was about $96,000 
    and the average length of stay was 22.5 days. The average charges for 
    all cases assigned to DRG 110 was about $36,500 and the average length 
    of stay was 10.1 days.
        Thus, the cases coded with procedure code 37.66 are much more 
    resource-intensive than the other cases assigned to DRG 110. In 
    reviewing the other surgical DRGs in MDC 5 for possible reassignment of 
    this procedure, we identified two DRGs that contained cases clinically 
    similar to implant of heart assist device cases: DRG 103 and DRG 108. 
    For FY 1996, the average charge of cases in DRG 103 was approximately 
    $164,000 and the length of stay was 46 days. For DRG 108, these 
    statistics were about $54,000 and 12.1 days. Thus, the average charge 
    for DRG 103 was approximately $68,000 higher than the average charge of 
    the heart assist device cases and the average charge for DRG 108 was 
    approximately $42,000 lower.
        Because our general policy is to assign a procedure code to a DRG 
    with clinically similar cases that is the best match in terms of 
    resource use, we proposed to assign procedure code 37.66 to DRG 108.
        Comment: We received two comments supporting this proposal. 
    However, several other commenters believe that the only solution that 
    would be appropriate is to assign procedure code 37.66 either to DRG 
    103 or to its own DRG. In support of this comment, they cite the very 
    high resource utilization associated with the procedure. In addition, 
    one commenter believed that failure to revise our proposal could limit 
    Medicare beneficiaries' access to this procedure.
        Response: As noted in the proposed rule, although reassignment of 
    these cases to DRG 108 does not place them in a DRG with identical 
    resource use, it is the best alternative we have at this time. As we 
    discuss above in section II.B.2.a. of this preamble concerning 
    radiosurgery, it has not been our
    
    [[Page 45974]]
    
    practice to create device-specific DRGs. Assignment of these cases to 
    DRG 103 would be no more appropriate in terms of resource use than 
    reassignment to DRG 108. In addition, we believe that only transplant 
    cases should be assigned to that DRG. We will continue to monitor these 
    cases in future years. We are also contemplating the feasibility of 
    conducting a comprehensive review of the current surgical DRGs in MDC 
    5. We last did this effective for FY 1991. Because there have been so 
    many changes in approach to heart surgery in the past few years as well 
    as the development of new devices and techniques, we believe such a 
    review could help realign these cases in terms of both clinical and 
    resource use homogeneity.
        With regard to the statement that failure to revise our proposal 
    could result in denial of heart assist devices to Medicare 
    beneficiaries, we note, as we have in many previous documents, that it 
    is a violation of a hospitals Medicare provider agreement to place 
    restrictions on the number of Medicare beneficiaries it accepts for 
    treatment unless it places the same restrictions on all other patients.
        We also note that, effective May 5, 1997, the coverage instructions 
    concerning heart assist devices were revised to delete the specific 
    product names and the hemodynamic criteria (Transmittal No. 94; April 
    1997). As revised, section 65-15 of the Medicare Coverage Issues Manual 
    allows coverage of a ventricular assist device used for support of 
    blood circulation postcardiotomy if the device has received approval 
    from the FDA for that purpose and the device is used according to FDA-
    approved labeling instructions or as a bridge to heart transplant if 
    all of the following conditions are met:
         The device is used as a temporary mechanical circulatory 
    support as a bridge to cardiac transplant.
         The patient is listed as an approved heart transplant 
    candidate by a Medicare-approved heart transplant center.
         The implantation of the system is done in a Medicare-
    approved heart transplant center. If the patient is listed with another 
    center, written permission is needed from that center.
    
    b. Automatic Implantable Cardioverter Defibrillators (AICD)
    
        For several years, we have received correspondence concerning the 
    appropriate DRG assignment of procedures involving automatic 
    implantable cardioverter defibrillators (AICDs). These cases are 
    currently assigned to DRG 116 (Other Permanent Cardiac Pacemaker 
    Implant or AICD Generator or Lead Procedure), and are represented by 
    the following procedure codes:
    37.95  Implantation of automatic cardioverter/defibrillator lead(s) 
    only
    37.96  Implantation of automatic cardioverter/defibrillator pulse 
    generator only
    37.97  Replacement of automatic cardioverter/defibrillator lead(s) only
    37.98 Replacement of automatic cardioverter/defibrillator pulse 
    generator only
        As explained in detail in the September 1, 1992 final rule (57 FR 
    39749), the clinical composition and relative weights of the surgical 
    DRGs in MDC 5 do not offer a perfect match with the AICD cases. 
    However, review of those DRGs in terms of clinical coherence and 
    similar resource consumption led to the determination that DRG 116 was 
    the best possible fit. In that document, we stated that we would 
    continue to monitor these cases.
        We last discussed this issue in the September 1, 1995 final rule 
    (60 FR 45780). At that time, we concluded that, although the average 
    charge for AICD cases was much higher than the average charge for DRG 
    116 overall, the AICD cases were clinically similar to the DRG 116 
    cases and should not be moved. In addition, a slight decrease in the 
    average charge for the cases between the FY 1993 and FY 1994 MedPAR 
    files led us to believe further reductions might be forthcoming since 
    there were new AICD devices entering the market that might lead to 
    increased price competition.
        For the proposed rule, we reviewed the most current AICD cases as 
    contained in the FY 1996 MedPAR file and found that the average 
    standardized charge for AICD cases assigned to DRG 116 was $28,777 
    compared to an average charge of $21,330 for all cases in DRG 116. 
    Because the average charge for AICD cases continued to be much higher 
    than the average charge for all other DRG 116 cases, we proposed to 
    move them to DRG 115 (Permanent Cardiac Pacemaker Implantation with 
    AMI, Heart Failure or Shock). We also proposed to revise the title of 
    DRG 115 to ``Permanent Cardiac Pacemaker Implant with AMI, Heart 
    Failure or Shock or AICD Lead or Generator Procedure.''
        We received several comments commending us on this decision and we 
    are adopting it as final.
    
    c. Coronary Artery Stent
    
        Effective October 1, 1995, procedure code 36.06 (Insertion of 
    coronary artery stent(s)) was introduced. As dictated by our 
    longstanding practice, we assigned this code to the same DRG category 
    as its predecessor codes. Therefore, procedure code 36.06 was assigned 
    to DRG 112 (Percutaneous Cardiovascular Procedures), as insertion of a 
    stent is usually performed in conjunction with percutaneous 
    transluminal coronary angioplasty (PTCA).
        We discussed this assignment and public comments we received in 
    both the September 1, 1995 final rule (60 FR 45785) and the August 30, 
    1996 final rule (61 FR 46171). We stated that we would review the stent 
    cases as soon as the FY 1996 MedPAR file was available, as these would 
    be the first Medicare data available for these cases.
        As discussed in the proposed rule, our analysis of the FY 1996 
    MedPAR data on coronary stent implantation in Medicare beneficiaries 
    revealed the following:
         The difference between the average length of stay for the 
    stent cases and the nonstent cases was 0.19 days (4.39 days versus 4.20 
    days).
         Charges for patients receiving a stent were approximately 
    $23,650, while charges for patients without stent implant were 
    approximately $17,480, for a difference of $6,170.
         Of those beneficiaries who had a PTCA procedure in FY 
    1996, approximately 34 percent received a stent.
        Based on the significant variation in hospital charges between 
    stent and nonstent cases in DRG 112, we proposed to move these cases 
    out of that DRG. Although the coronary artery stent cases are not 
    clinically similar to the pacemaker cases in DRG 116, the resource 
    consumption of those cases is very similar. Therefore, absent any other 
    appropriate DRG, we proposed to add to DRG 116 those cases including 
    procedure codes for PTCA in combination with insertion of coronary 
    stent. Specifically, we proposed to move into DRG 116 the following 
    procedure codes when performed in conjunction with procedure code 
    36.06:
    35.96  Percutaneous valvuloplasty
    36.01 Single vessel percutaneous transluminal coronary angioplasty 
    [PTCA] or coronary atherectomy without mention of thrombolytic agent
    36.02  Single vessel percutaneous transluminal coronary angioplasty 
    [PTCA] or coronary atherectomy with mention of thrombolytic agent
    36.05  Multiple vessel percutaneous transluminal coronary angioplasty 
    [PTCA] or coronary atherectomy performed during the same operation, 
    with or without mention of thrombolytic agent
    
    [[Page 45975]]
    
    36.09  Other removal of coronary artery obstruction
    37.34  Catheter ablation of lesion or tissues of the heart
    
        We also proposed to change the title of DRG 116 to ``Other 
    Permanent Cardiac Pacemaker Implant or PTCA with Coronary Artery Stent 
    Implant.''
        Comment: We received many comments in support of this move. 
    Commenters cited increased payment for use of coronary stenting in 
    appropriate patients as a rational response to an economic dilemma. One 
    commenter requested that consideration be given to increased payment 
    for the cost of the stents themselves within DRG 116 for those cases in 
    which multiple stents are implanted in the same operative episode.
        Response: We appreciate the positive responses generated by this 
    proposal. With regard to the request for modification of DRG 116 to 
    take into account the use of more than one stent per patient, we would 
    remind the commenter that one of the parameters of the prospective 
    payment system is predetermined, identical payments for each discharge 
    in a DRG. To arbitrarily begin to increase payment based on the number 
    of stents used in a procedure would undermine the system. We will 
    continue to monitor the stent cases and the assignment to DRG 116. If 
    PTCA cases with stent become a higher percentage of the PTCA cases or 
    the average charge for stent cases falls, we may reconsider this 
    assignment.
        Comment: There were several commenters who, while supporting the 
    proposal to increase increasing stent payment, also chided us for our 
    lack of foresight in neglecting to consider new drug therapies in 
    conjunction with PTCA. The pharmaceutical referenced in these comments 
    is a category of drugs called glycoprotein (GP) IIb/IIIa inhibitors, 
    which act to reduce platelet aggregation, thereby reducing death rate, 
    recurrent heart attack, and further surgery.
        Commenters suggested that HCFA take immediate steps to establish a 
    procedure code describing infusion of GPIIb/IIIa therapy. They further 
    suggested that if the agency's required lead time for revising an 
    existing ICD-9-CM code, or creating a new code for platelet inhibitor 
    therapy, precluded a new code from being effective this October 1, then 
    HCFA should create a temporary code that hospitals could use until a 
    new ICD-9-CM code could become effective. It was suggested that such a 
    temporary code would allow the reclassification of angioplasty with 
    GPIIb/IIIa usage into DRG 116 to be effective October 1, 1997.
        Response: We appreciate the suggestion that the category of GPIIb/
    IIIa platelet inhibitor drugs be uniquely identified in the ICD-9-CM 
    coding system, but would also note that a write-in campaign during a 
    proposed rule comment period does not permit us to respond to this 
    request in a responsible manner. To quickly produce a temporary code 
    would be the equivalent of producing a permanent code, but would not 
    include due process in order to make it a meaningful addition to the 
    ICD-9-CM coding system.
        We would point out that, effective October 1, 1986, code 36.04 
    (intracoronary artery thrombolytic infusion) was added to the procedure 
    coding system based on a proposal made by a major pharmaceutical 
    company. As we rely heavily on information from the public to make the 
    ICD-9-CM coding system responsive to the coding needs of the hospital 
    industry, we anticipated that the guidance, language, and suggestions 
    received from this pharmaceutical company were current and timely. In 
    the interim, there has been no public protest or demand for an ICD-9-CM 
    platelet inhibitor therapy code that would better meet the needs of the 
    industry.
        In retrospect, we regret that we integrated this code as it does 
    not appear to have been an appropriate addition to the coding system. 
    We will work with the drug and hospital industry representatives to 
    provide us with more insight and better language as we bring the topic 
    of platelet inhibitors before the ICD-9-CM Coordination and Maintenance 
    Committee on December 4, 1997. We would anticipate, therefore, having 
    an appropriate code describing GPIIb/IIIa drug therapy early next year. 
    This code would be effective for discharges on or after October 1, 
    1998.
    
    d. Circulatory Disorders (DRGs 121 and 122)
    
        In response to a comment on the May 31, 1996 proposed rule, we 
    stated in the August 30, 1996 final rule (61 FR 46172) that we would 
    conduct a comprehensive review of cases currently assigned to DRG 121 
    (Circulatory Disorders with Acute Myocardial Infarction (AMI) and 
    Cardiovascular Complications, Discharged Alive) and DRG 122 
    (Circulatory Disorders with AMI without Cardiovascular Complications, 
    Discharged Alive) to determine whether changes were needed to the list 
    of complicating conditions that can result in assignment to DRG 121. 
    Accordingly, for the FY 1998 proposed rule, we analyzed the cases in 
    the FY 1996 MedPAR file that were assigned to either DRG 121 or 122. 
    Through a variety of statistical analyses of length of stay and 
    standardized charge data, we assessed the impact on resource use of all 
    coded secondary diagnoses.
        Our analysis of these secondary diagnosis codes revealed many cases 
    now assigned to DRG 122 in which certain secondary diagnoses are 
    associated with resource use comparable to cases assigned to DRG 121. 
    Although many of these cases involve secondary diagnoses that are not 
    strictly cardiovascular in nature, such as diagnosis code category 482 
    (other bacterial pneumonia), we now believe that it is appropriate to 
    expand DRG 121 to include such major complications when they are 
    represented in significant volume among the cases in the DRG. 
    Continuing to limit DRG 121 only to cases involving the existing list 
    of cardiovascular complications would contribute to large variations in 
    the charges and lengths of stay for cases in DRG 122.
        Therefore, we proposed to change the title of DRG 121 to 
    ``Circulatory Disorders with AMI and Major Complications, Discharged 
    Alive,'' and to add the following diagnosis codes to the list of 
    complications that would produce assignment to DRG 121 when present in 
    conjunction with the existing list of AMI diagnoses:
    
    398.91  Rheumatic heart failure
    416.0  Primary pulmonary hypertension
    430  Subarachnoid hemorrhage
    431  Intracerebral hemorrhage
    432.0  Nontraumatic extradural hemorrhage
    432.1  Subdural hemorrhage
    432.9  Unspecified intracranial hemorrhage
    433.01  Occluded basilar artery with cerebral infarction
    433.11  Occluded carotid artery with cerebral infarction
    433.21  Occluded vertebral artery with cerebral infarction
    433.31  Occluded multiple and bilateral artery with cerebral infarction
    433.81  Occluded specified precerebral artery with cerebral infarction
    433.91  Occluded precerebral artery NOS with cerebral infarction
    434.00  Cerebral thrombosis
    434.01  Cerebral thrombosis with cerebral infarction
    434.10  Cerebral embolism
    434.11  Cerebral embolism with cerebral infarction
    434.90  Cerebral artery occlusion
    434.91  Cerebral artery occlusion with cerebral infarction
    436  Acute, but ill-defined, cerebrovascular disease
    
    [[Page 45976]]
    
    481  Pneumococcal pneumonia
    482.xx  Other bacterial pneumonia (all 4th and 5th digits)
    483.x  Pneumonia due to other specified organism (all 4th digits)
    484.x  Pneumonia in infectious diseases classified elsewhere (all 4th 
    digits)
    485  Bronchopneumonia, organism unspecified
    486  Pneumonia, organism unspecified
    487.0  Influenza with pneumonia
    507.x  Pneumonitis due to solids and liquids (all 4th digits)
    518.0  Pulmonary collapse
    518.5  Pulmonary insufficiency following trauma and surgery
    518.81  Respiratory failure
    707.0  Decubitus ulcer
    996.62  Infection and inflammatory reaction due to other vascular 
    device, implant, and graft
    996.72  Other complications due to other cardiac device, implant, and 
    graft
    
        We note that, in conjunction with the proposed changes, we also 
    proposed to revise the title of DRG 122 to read ``Circulatory Disorders 
    with AMI without Major Complications, Discharged Alive.''
        We received four comments fully supporting these proposed changes 
    and are including them in the final DRG changes.
    4. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
    Connective Tissue)
    
    a. Introduction
    
        As discussed in detail below, we proposed to create several new 
    DRGs in MDC 8 effective for discharges on or after October 1, 1997. 
    Specifically, we proposed to replace current DRGs 214 and 215 (Back and 
    Neck Procedures) with the following new DRGs:
    
    DRG 496  Combined Anterior/Posterior Spinal Fusion
    DRG 497  Spinal Fusion with CC
    DRG 498  Spinal Fusion without CC
    DRG 499  Back and Neck Procedures Except Spinal Fusion with CC
    DRG 500  Back and Neck Procedures Except Spinal Fusion without CC
    
        In addition, we proposed to replace existing DRGs 221 and 222 (Knee 
    Procedures) with new DRGs 501 and 502 (Knee Procedures with Principal 
    Diagnosis of Infection) and DRG 503 (Knee Procedures without Principal 
    Diagnosis of Infection).
    
    b. Back and Neck Procedures
    
        Currently, hospital inpatient cases involving back and neck 
    procedures generally are assigned to DRGs 214 and 215 (assuming a 
    principal diagnosis that groups the case to MDC 8). We have received 
    correspondence indicating that within these DRGs, cases involving 
    spinal fusion procedures represent a distinctly more complex and 
    resource-intensive subset, and that payment under DRGs 214 and 215 is 
    inadequate to cover the costs of treating patients that require spinal 
    fusion. Therefore, for the proposed rule we conducted an analysis of 
    the cases assigned to DRGs 214 and 215 using the FY 1996 MedPAR file.
        Within our sample, cases involving fusion procedures (procedure 
    codes 81.00-81.09) constituted approximately 35 percent of cases in DRG 
    214 (Back and Neck Procedures with CC) and 23 percent of those in DRG 
    215 (Back and Neck Procedures without CC). In DRG 214, the average 
    standardized charges for the fusion cases were nearly double the 
    charges of the nonfusion cases (approximately $25,300 versus $12,900). 
    There were also significant differences in charges in DRG 215--$14,400 
    for fusion cases and $8,500 for nonfusion cases. Lengths of stay for 
    fusion cases were also longer, although not dramatically so--7.1 days 
    for fusion cases versus 5.4 days for other cases in DRG 214, and 3.8 
    days versus 3.1 days in DRG 215. In view of the volume of cases 
    involved and the clear differences in resource use, we concluded that 
    it would be appropriate to create additional DRGs to separate spinal 
    fusion cases from the other back and neck procedures.
        Next, we expanded our analysis to determine whether it would be 
    appropriate to subdivide the spinal fusion cases according to whether 
    both anterior and posterior spinal fusion were performed. This 
    combination of procedures, which involves fusing both the front and 
    rear of the vertebrae, typically is performed on patients who have had 
    previous fusions that have not bonded effectively or who have several 
    vertebrae that need extensive fusion on both sides of the spine. As the 
    table below illustrates, the average charges and lengths of stay for 
    the cases involving both anterior and posterior spinal fusion were 
    markedly greater than for the other spinal fusion cases in either DRG 
    214 or 215.
    
    ------------------------------------------------------------------------
                                                                     Average
                                                                     length 
                        Type of case                        Avg.     of stay
                                                           charges     (in  
                                                                      days) 
    ------------------------------------------------------------------------
    Anterior and posterior spinal fusion................   $51,200      12.3
    DRG 214--Other spinal fusion........................    24,300       6.9
    DRG 215--Other spinal fusion........................    14,300       3.8
    ------------------------------------------------------------------------
    
        Even though the cases in which both anterior and posterior spinal 
    fusions were performed represented only about 3 percent of all spinal 
    fusion cases in our sample, we concluded that the magnitude of the 
    differences in both average charges and lengths of stay warranted a 
    further subdivision of the spinal fusion cases.
        Based on this analysis, we proposed to replace the two existing 
    DRGs for back and neck procedures with five new DRGs. For ease of 
    reference and classification, current DRGs 214 and 215 would be made 
    invalid and we would establish new DRGs 496 through 500 to contain all 
    the cases that are currently grouped in DRGs 214 and 215. We believe 
    that the division of these cases into the new DRGs would improve 
    clinical coherence and provide for more appropriate payment for both 
    spinal fusion cases and cases involving other back and neck procedures.
        Discharges would be assigned to each of the five proposed DRGs as 
    follows:
    
    DRG 496  Combined Anterior/Posterior Spinal Fusion
    
        DRG 496 would include any combination of procedure codes as 
    follows:
        One or more of the following procedure codes--
    
    81.02  Other cervical fusion anterior
    81.04  Dorsal/dorsulum fusion anterior
    81.06  Lumbar/lumbosac fusion anterior
        and
        One or more of the following procedure codes--
    
    81.03  Other cervical fusion posterior
    81.05  Dorsal/dorsulum fusion posterior
    81.08  Lumbar/lumbosac fusion posterior
    DRGs 497 and 498  Spinal Fusion with and without CC
    
        DRGs 497 and 498 would include any of the following procedure 
    codes, as long as any combination of procedure codes would not 
    otherwise result in assignment to proposed DRG 496--
    
    81.00  Spinal  fusion NOS
    81.01  Atlas-axis fusion
    81.02  Other cervical fusion anterior
    81.03  Other cervical fusion posterior
    81.04  Dorsal/dorsulum fusion anterior
    81.05  Dorsal/dorsulum fusion posterior
    81.06  Lumbar/lumbosac fusion anterior
    
    [[Page 45977]]
    
    81.07  Lumbar/lumbosac fusion lateral
    81.08  Lumbar/lumbosac fusion posterior
    81.09  Refusion of spine
    DRGs 499 and 500  Back and Neck Procedures Except Spinal Fusion with 
    and without CC.
    
        All procedure codes in current DRGs 214 and 215 other than 
    procedure codes 81.00 through 81.09 would be assigned to DRGs 499 and 
    500.
        We received five comments in support of this proposal. We are 
    adopting the proposed changes as final.
    
    c. Knee Procedures
    
        On several occasions, most recently in our September 1, 1993 final 
    rule (58 FR 46286), we have examined cases in DRG 209 (Major Joint and 
    Limb Reattachment of the Lower Extremity) to see whether hip 
    replacement cases that involve infections or other complications should 
    be classified separately from the less complicated cases in DRG 209. We 
    have found that the average charges and lengths of stay for cases with 
    principal diagnoses of infection or complications were only slightly 
    higher than for all cases in DRG 209. When we limited our analysis to 
    cases with a principal diagnosis of infection, we found that the cases 
    had significantly higher charges than for DRG 209 overall, but in view 
    of the small volume of cases (less than 0.5 percent of the total DRG 
    209 cases), we decided that changes in the classification of cases in 
    DRG 209 were not warranted.
        In the proposed rule, at the request of several correspondents, we 
    revisited the issue of whether DRG refinements are needed to address 
    differences in resource use associated with orthopedic procedures where 
    deep infections are present. To evaluate this issue, we analyzed 
    various classifications of cases in MDC 8. We began by identifying all 
    cases with a principal diagnosis indicating deep orthopedic infection 
    of the lower extremities or spine. The diagnosis codes used were as 
    follows:
    
    711.05  Pyogenic arthritis pelvic region and thigh
    711.06  Pyogenic arthritis lower leg
    711.07  Pyogenic arthritis ankle and foot
    711.08  Pyogenic arthritis other specified sites
    730.05  Acute osteomyelitis pelvic region and thigh
    730.06  Acute osteomyelitis lower leg
    730.07  Acute osteomyelitis ankle and foot
    730.08  Acute osteomyelitis other specified sites
    730.15  Chronic osteomyelitis pelvic region and thigh
    730.16  Chronic osteomyelitis lower leg
    730.17  Chronic osteomyelitis ankle and foot
    730.18  Chronic osteomyelitis other specified sites
    730.25  Unspecified osteomyelitis pelvic region and thigh
    730.26  Unspecified osteomyelitis lower leg
    730.27  Unspecified osteomyelitis ankle and foot
    730.28  Unspecified osteomyelitis other specified sites
    996.66  Infection and inflammatory reaction due to internal joint 
    prosthesis
    996.67  Infection and inflammatory reaction due to other internal 
    orthopedic device
    
        For each of the DRGs into which these cases are grouped, we then 
    compared the average standardized charges and average length of stay 
    for cases with any of the infection diagnoses listed above with other 
    cases in the DRGs. Unlike in the past, we did not limit our analysis to 
    DRG 209 but examined all DRGs within MDC 8 that focus on surgical 
    procedures of the lower extremities or spine, including DRGs 209; 210, 
    211, and 212 (Hip and Femur Procedures Except Major Joint); 214 and 215 
    (Back and Neck Procedures); and 221 and 222 (Knee Procedures).
        For the most part, we again found that these cases represented only 
    a very small proportion of the total cases in the DRGs in question. In 
    DRG 209, for example, cases with one of the above diagnosis codes as 
    the principal diagnosis continued to constitute less than 1 percent of 
    all cases in the DRG. Moreover, although the average standardized 
    charges for the deep infection cases ($24,834) were approximately 21 
    percent higher than the charges for the remaining cases in the DRG 
    ($19,297), the differences are well within one standard deviation of 
    the average charge. Given the small volume of cases, we again conclude 
    that changes in DRG 209 are not justified.
        The only DRGs that we examined in which cases with a principal 
    diagnosis of deep infection represented more than 1 percent of total 
    cases in our sample were DRGs 221 and 222. As illustrated in the chart 
    below, there are significant differences in both average charges and 
    average length of stay between infection cases in these DRGs and other 
    cases in the DRGs.
    
    ------------------------------------------------------------------------
                                                                     Average
                                                 Number    Average   length 
                   Type of case                 of cases   charges   of stay
                                                   \1\       (in       (in  
                                                          dollars)    days) 
    ------------------------------------------------------------------------
    DRG 221 (all cases).......................       451    16,529       7.2
    DRG 221 with infection....................       152    23,174      11.4
    DRG 221 w/out infection...................       299    13,151       5.1
    DRG 222 (all cases).......................       340     9,149       3.9
    DRG 222 with infection....................        37    14,452       7.0
    DRG 222 w/out infection...................       303     8,502      3.5 
    ------------------------------------------------------------------------
    \1\ Based on the 10-percent random sample of the FY 1996 MedPAR file.   
    
        Thus, more than one-third of cases in DRG 221 had a principal 
    diagnosis of deep infection, the average length of stay for these cases 
    was more than twice as long as for the remaining cases, and average 
    charges were approximately 76 percent higher. Similarly, for the 12 
    percent of total DRG 222 cases with infection as the principal 
    diagnosis, the average length of stay was double that for other cases, 
    with average charges approximately 70 percent higher. Given the 
    proportional volume of cases involved, and the significant differences 
    in both average charges and length of stay for infection cases in these 
    DRGs, we concluded that DRG refinements are appropriate.
        Based on this analysis, we proposed to replace the two existing 
    DRGs for knee procedures with three new DRGs. Again, for ease of 
    reference and classification, current DRGs 221 and 222 would be made 
    invalid and we would establish new DRGs 501 through 503 to contain all 
    the cases that are currently grouped in DRGs 221 and 222. Discharges 
    would be assigned to each of the three proposed DRGs as follows:
    
    DRG 501  Knee Procedures with Principal Diagnosis of Infection with CC
    
    [[Page 45978]]
    
    DRG 502  Knee Procedures with Principal Diagnosis of Infection without 
    CC
        DRG 501 and 502 would include any of the operating room procedures 
    now assigned to DRGs 221 and 222, when the principal diagnosis is any 
    of the following:
    
    711.06  Pyogenic arthritis lower leg
    730.06  Acute osteomyelitis lower leg
    730.16  Chronic osteomyelitis lower leg
    730.26  Unspecified osteomyelitis lower leg
    996.66  Infection and inflammatory reaction due to internal joint 
    prosthesis
    996.67  Infection and inflammatory reaction due to other internal 
    orthopedic device
    DRG 503  Knee Procedures without Principal Diagnosis of Infection
    
        DRG 503 would include any of the operating room procedures now 
    assigned to DRGs 221 and 222 when the principal diagnosis is not listed 
    above under DRGs 501 and 502.
        Comment: We received four comments in support of this proposed 
    change. One of the commenters suggested that we also consider splitting 
    proposed DRG 503 into two DRGs to distinguish between cases with and 
    without CCs.
        Response: As shown in the table above, based on the FY 1996 MedPAR 
    10 percent sample, the average charges associated with cases in new DRG 
    503 are $13,151 for cases with CC and $8,502 for cases without CC. The 
    average lengths of stay for DRG 503 cases with and without CC are 5.1 
    and 3.5 days, respectively. We note that the mean standardized charges 
    for this DRG are approximately $10,100. Given the similar lengths of 
    stay for these two sets of cases and the relatively small magnitude of 
    difference in average charges (much less than one standard deviation), 
    we do not believe that further division of the new DRG is warranted. 
    Thus, we are adopting the new proposed DRGs for Knee Procedures as 
    final.
    5. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract)
        Among the ICD-9-CM coding changes that took effect October 1, 1995 
    was the addition of new procedure code 59.72 (injection of implant into 
    urethra or bladder neck). Although this procedure is not routinely 
    performed in an operating room, the code was previously included within 
    codes classified as operating room procedures. Thus, as is our 
    practice, we assigned this procedure code to the surgical DRGs to which 
    the procedure had formerly been assigned as a non-OR procedure that 
    affects DRG assignment. Therefore, procedure code 59.72 was assigned to 
    DRGs 308 and 309 (Minor Bladder Procedures) and DRG 356 (Female 
    Reproductive System Reconstructive Procedures).
        In the June 2, 1995 proposed rule (60 FR 29209), we stated that we 
    would reevaluate the DRG classification of this code when data on its 
    use became available for analysis in 2 years, that is, in preparation 
    for the FY 1998 rulemaking process. We indicated that possible changes 
    would include moving the procedure code to a different surgical DRG or 
    classifying the code as a non-OR procedure that did not affect DRG 
    assignment.
        In the FY 1996 MedPAR file, there were several cases with procedure 
    code 59.72 assigned to DRGs 308 and 309. The chart below compares 
    average charges and length of stay for cases in these DRGs with and 
    without the injection procedure.
    
    ------------------------------------------------------------------------
                                                                     Average
                                                           Average   length 
                   Type of case                  Number    charge    of stay
                                                of cases     (in       (in  
                                                          dollars)    days) 
    ------------------------------------------------------------------------
    DRG 308 with procedure 59.72..............         5     6,978       4.2
    DRG 308 w/out procedure 59.72.............       910    13,254       6.5
    DRG 309 with procedure 59.72..............         7     5,879       1.4
    DRG 309 w/out procedure 59.72.............       311     7,888       2.7
    ------------------------------------------------------------------------
    
        As the table illustrates, cases in which injection of implant into 
    the urethra or bladder neck is the only relevant procedure for DRG 
    assignment purposes constitute a very small minority of the cases in 
    DRGs 308 and 309. However, these cases have lower average charges and 
    length of stay than other cases in the DRGs. Thus, we proposed to 
    reclassify the procedure code as a non-OR procedure that does not 
    affect DRG assignment.
        Under this proposal, cases currently assigned to DRGs 308 and 309 
    because of the performance of an implant injection would be reassigned 
    to medical DRGs in MDC 11, primarily either DRGs 320, 321, and 322 
    (Kidney and Urinary Tract Infections) or DRGs 331 and 332 (Other Kidney 
    and Urinary Tract Diagnoses). Both of these sets of DRGs have average 
    charges closely in line with the charges for cases in which procedure 
    59.72 now determines DRG assignment.
        This change would also affect DRG 356 in MDC 13 (Diseases and 
    Disorders of the Female Reproductive System). Within the 10 percent 
    sample used for this analysis, only 2 of the 2,689 cases in DRG 356 
    were assigned based on the presence of procedure code 59.72, and as in 
    DRGS 308 and 309, both the average charges and length of stay were 
    lower than for other cases.
        We received two comments in support of this proposal and are 
    including it in the final DRG changes.
    6. Surgical Hierarchies
        Some inpatient stays entail multiple surgical procedures, each one 
    of which, occurring by itself, could result in assignment of the case 
    to a different DRG within the MDC to which the principal diagnosis is 
    assigned. It is, therefore, necessary to have a decision rule by which 
    these cases are assigned to a single DRG. The surgical hierarchy, an 
    ordering of surgical classes from most to least resource intensive, 
    performs that function. Its application ensures that cases involving 
    multiple surgical procedures are assigned to the DRG associated with 
    the most resource-intensive surgical class.
        Because the relative resource intensity of surgical classes can 
    shift as a function of DRG reclassification and recalibration, we 
    reviewed the surgical hierarchy of each MDC, as we have for previous 
    reclassifications, to determine if the ordering of classes coincided 
    with the intensity of resource utilization, as measured by the same 
    billing data used to compute the DRG relative weights.
        A surgical class can be composed of one or more DRGs. For example, 
    in MDC 5, the surgical class ``heart transplant'' consists of a single 
    DRG (DRG 103) and the class ``coronary bypass'' consists of two DRGs 
    (DRGs 106 and 107). 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, therefore, 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, and 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
    
    [[Page 45979]]
    
    from the class with the highest average resource utilization to that 
    with the lowest, with the exception of ``other OR procedures'' as 
    discussed below.
        This methodology may occasionally result in a case involving 
    multiple procedures being assigned to the lower- weighted DRG (in the 
    highest, most resource-intensive surgical class) of the available 
    alternatives. However, given that the logic underlying the surgical 
    hierarchy provides that the GROUPER searches for the procedure in the 
    most resource-intensive surgical class, this result is unavoidable.
        We note that, notwithstanding the foregoing discussion, there are a 
    few instances when a surgical class with a lower average relative 
    weight is ordered above a surgical class with a higher average relative 
    weight. For example, the ``other OR procedures'' surgical class is 
    uniformly ordered last in the surgical hierarchy of each MDC in which 
    it occurs, regardless of the fact that the relative weight for the DRG 
    or DRGs in that surgical class may be higher than that for other 
    surgical classes in the MDC. The ``other OR procedures'' class is a 
    group of procedures that are least likely to be related to the 
    diagnoses in the MDC but are occasionally performed on patients with 
    these diagnoses. Therefore, these procedures should 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 proposed 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 the proposed revisions to the surgical hierarchy and to 
    reflect these changes in the proposed relative weights due to the 
    unavailability of revised GROUPER software at the time this 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.
        We proposed to revise the surgical hierarchy for the Pre-MDC DRGs, 
    MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue and 
    Breast), MDC 10 (Endocrine, Nutritional and Metabolic Diseases and 
    Disorders), and MDC 12 (Diseases and Disorders of the Male Reproductive 
    System) as follows:
         In the Pre-MDC DRGs, we would reorder Bone Marrow 
    Transplant (DRG 481) above Liver Transplant (DRG 480).
         In MDC 9, we would reorder Perianal and Pilonidal 
    Procedures (DRG 267) above Breast Procedures (DRGs 257-262).
         In MDC 10, we would reorder OR Procedures for Obesity (DRG 
    288) above Skin Graft and Wound Debridement (DRG 287).
         In MDC 12, we would reorder Circumcision (DRGs 342 and 
    343) above Transurethral Prostatectomy (DRGs 336 and 337).
        Based on a test of the proposed changes using the most recent 
    MedPAR file and the revised GROUPER software, we found that the 
    proposed change to the Pre-MDC DRGs, Bone Marrow Transplant (DRG 481) 
    above Liver Transplant (DRG 480) is not supported and this change will 
    not be incorporated in this final rule. The Pre-MDC DRGs hierarchy will 
    remain the same as in FY 1997.
        We received one comment in support of our surgical hierarchy 
    proposals. We also received one comment that disagreed, as discussed 
    below.
        Comment: One commenter was opposed to reordering Circumcision (DRGs 
    342 and 343) above Transurethral Prostatectomy (DRGs 336 and 337). The 
    commenter stated that circumcision (procedure code 64.0) is the only 
    procedure in DRGs 342 and 343, and the commenter believes that this 
    procedure is not as resource intensive or complex as the procedures 
    assigned to DRGs 336 and 337. The commenter suggested the more 
    appropriate assignment for a case involving both a transurethral 
    prostatectomy and a circumcision would be DRGs 336 and 337.
        Response: Based on the Medicare cases, the average standardized 
    charges for cases assigned to DRGs 342 and 343 is almost $7,000, which 
    is higher than the average standardized charges of cases assigned to 
    DRGs 336 and 337, approximately $6,500. Thus, if a case involves both a 
    circumcision and a prostatectomy, we believe it should be assigned to 
    the higher-weighted DRG category. Although circumcision can be a 
    relatively simple surgery for infants, when it is performed for 
    Medicare beneficiaries, it appears to be a more complicated procedure 
    and might involve the use of significant resources.
        The other proposed changes to the surgical hierarchy are still 
    supported by the data and no additional changes are indicated. 
    Therefore, we are incorporating these changes in this final rule.
    7. Refinement of Complications and Comorbidities List
        There is a standard list of diagnoses that are considered 
    complications or comorbidities (CCs). We developed this list using 
    physician panels to include those diagnoses that, when present as a 
    secondary condition, would be considered a substantial complication or 
    comorbidity. In previous years, we have made changes to the standard 
    list of CCs, either by adding new CCs or deleting CCs already on the 
    list.
        In the September 1, 1987 final notice concerning changes to the DRG 
    classification system (52 FR 33143), we modified the GROUPER logic so 
    that certain diagnoses included on the standard list of CCs would not 
    be considered a valid CC in combination with a particular principal 
    diagnosis. Thus, we created the CC Exclusions List. We made these 
    changes to preclude coding of CCs for closely related conditions, to 
    preclude duplicative coding or inconsistent coding from being treated 
    as CCs, and to ensure that cases are appropriately classified between 
    the complicated and uncomplicated DRGs in a pair.
        In the May 19, 1987 proposed notice concerning changes to the DRG 
    classification system (52 FR 18877), we explained that the excluded 
    secondary diagnoses were established using the following five 
    principles:
         Chronic and acute manifestations of the same condition 
    should not be considered CCs for one another (as subsequently corrected 
    in the September 1, 1987 final notice (52 FR 33154)).
         Specific and nonspecific (that is, not otherwise specified 
    (NOS)) diagnosis codes for a condition should not be considered CCs for 
    one another.
         Conditions that may not co-exist, such as partial/total, 
    unilateral/bilateral, obstructed/unobstructed, and benign/malignant, 
    should not be considered CCs for one another.
         The same condition in anatomically proximal sites should 
    not be considered CCs for one another.
         Closely related conditions should not be considered CCs 
    for one another.
        The creation of the CC Exclusions List was a major project 
    involving hundreds
    
    [[Page 45980]]
    
    of codes. The FY 1988 revisions were intended to be only a first step 
    toward refinement of the CC list in that the criteria used for 
    eliminating certain diagnoses from consideration as CCs were intended 
    to identify only the most obvious diagnoses that should not be 
    considered complications or comorbidities of another diagnosis. For 
    that reason, and in light of comments and questions on the CC list, we 
    have continued to review the remaining CCs to identify additional 
    exclusions and to remove diagnoses from the master list that have been 
    shown not to meet the definition of a CC. (See the September 30, 1988 
    final rule for the revision made for the discharges occurring in FY 
    1989 (53 FR 38485); the September 1, 1989 final rule for the FY 1990 
    revision (54 FR 36552); the September 4, 1990 final rule for the FY 
    1991 revision (55 FR 36126); the August 30, 1991 final rule for the FY 
    1992 revision (56 FR 43209); the September 1, 1992 final rule for the 
    FY 1993 revision (57 FR 39753); the September 1, 1993 final rule for 
    the FY 1994 revisions (58 FR 46278); the September 1, 1994 final rule 
    for the FY 1995 revisions (59 FR 45334); the September 1, 1995 final 
    rule for the FY 1996 revisions (60 FR 45782); and the August 30, 1996 
    final rule for the FY 1997 revisions (61 FR 46171)).
        We proposed 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, 1997, as well as the proposed CC 
    changes described above. (See section II.B.9, below, for a discussion 
    of ICD-9-CM changes.) These changes were proposed in accordance with 
    the principles established when we created the CC Exclusions List in 
    1987. We received one comment, which supported our changes to the CC 
    lists.
        The changes discussed above have been added to Table 6E, Additions 
    to the CC Exclusions List, in section V of the Addendum to this final 
    rule.
        Tables 6E and 6F in section V of the Addendum to this final rule 
    contain the revisions to the CC Exclusions List that will be effective 
    for discharges occurring on or after October 1, 1997. Each table shows 
    the principal diagnoses with final 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 6E--Additions to the CC 
    Exclusions List. Beginning with discharges on or after October 1, 1997, 
    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 6F--Deletions from 
    the CC Exclusions List. Beginning with discharges on or after October 
    1, 1997 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 $92.00 
    plus $6.00 shipping and handling and on microfiche for $20.50, plus 
    $4.00 for 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, Virginia 22161; or by 
    calling (703) 487-4650.
        Users should be aware of the fact that all revisions to the CC 
    Exclusions List (FYs 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 
    and 1997) and those in Tables 6E and 6F 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, 1997.
        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 14.0, is available for $195.00, 
    which includes $15.00 for shipping and handling. Version 15.0 of this 
    manual, which will include the final FY 1998 DRG changes, will be 
    available in October 1997 for $195.00. These manuals may be obtained by 
    writing 3M/HIS at the following address: 100 Barnes Road; Wallingford, 
    Connecticut 06492; or by calling (203) 949-0303. Please specify the 
    revision or revisions requested.
    8. Review of Procedure Codes in DRGs 468, 476, and 477
        Each year, we review cases assigned to DRG 468 (Extensive OR 
    Procedure Unrelated to Principal Diagnosis), DRG 476 (Prostatic OR 
    Procedure Unrelated to Principal Diagnosis), and DRG 477 (Nonextensive 
    OR Procedure Unrelated to Principal Diagnosis) in order to determine 
    whether it would be appropriate to change the procedures assigned among 
    these DRGs.
        DRGs 468, 476, and 477 are reserved for those cases in which none 
    of the OR procedures performed is related to the principal diagnosis. 
    These DRGs are intended to capture atypical cases, that is, those cases 
    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, 
    August 30, 1991, September 1, 1992, September 1, 1993, September 1, 
    1994, September 1, 1995, and August 30, 1996, we moved several other 
    procedures from DRG 468 to 477. (See 55 FR 36135, 56 FR 43212, 57 FR 
    23625, 58 FR 46279, 59 FR 45336, 60 FR 45783, and 61 FR 46173, 
    respectively.)
    
    a. Adding Procedure Codes to MDCs
    
        We annually conduct a review of procedures producing DRG 468 or 477 
    assignments on the basis of volume of cases in these DRGs with each 
    procedure. Our medical consultants then identify those procedures 
    occurring in conjunction with certain
    
    [[Page 45981]]
    
    principal diagnoses with sufficient frequency to justify adding them to 
    one of the surgical DRGs for the MDC in which the diagnosis falls. 
    Based on this year's review, we proposed to move procedure code 54.92 
    (Removal of foreign body from peritoneal cavity) to MDC 11 and assign 
    it to DRG 315 (Other Kidney and Urinary Tract OR Procedures). We note 
    that, under the current DRGs, when procedure code 54.92 is coded in 
    addition to a principal diagnosis code of 868.14 (injury with open 
    wound into retroperitoneum), the case is assigned to DRG 468.
        Comment: We received two comments on this proposed change. One 
    commenter fully supported the proposal. The other commenter noted that 
    moving procedure code 54.92 from DRG 468 to DRG 315 in MDC 11 would 
    result in a 43 percent reduction in the DRG relative weight associated 
    with the case. Although the change makes sense clinically, the 
    commenter questioned the financial impact involved.
        Response: The purpose of DRG 468 is to accommodate cases in which 
    an OR procedure that is unrelated to the principal diagnosis is 
    performed. As the commenter acknowledges, the clinical relationship 
    between procedure code 54.92 (Removal of foreign body from peritoneal 
    cavity) and a principal diagnosis code of 868.14 (injury with open 
    wound into retroperitoneum) is clear. We note that this change would 
    have resulted in the reassignment of only one case in FY 1996; 
    therefore, the financial impact involved is minimal. We are adopting 
    this change as proposed.
    
    b. Reassignment of Procedures Among DRGs 468, 476, and 477
    
        We also reviewed the list of procedures that produce assignments to 
    DRGs 468, 476, and 477 to ascertain if any of those procedures should 
    be moved from one of these DRGs to another based on average charges and 
    length of stay. Generally, we move only those procedures for which we 
    have an adequate number of discharges to analyze the data.
        In reviewing the list of OR procedures that produce DRG 468 
    assignments, we analyzed the average charge and length of stay data for 
    cases assigned to that DRG to identify those procedures that are more 
    similar to the discharges that currently group to either DRG 476 or 
    477. We identified two procedures--other surgical occlusion of 
    abdominal arteries (procedure code 38.86) and other arthrotomy of knee 
    (procedure code 80.16)--that are significantly less resource intensive 
    than the other procedures assigned to DRG 468. Therefore, we proposed 
    to move procedure codes 38.86 and 80.16 to the list of procedures that 
    result in assignment to DRG 477.
        In reviewing the list of procedures assigned to DRG 477, we did not 
    identify any procedures that should be assigned to either DRG 468 or 
    476.
        Comment: We received two comments on this proposal. Both commenters 
    supported moving procedure code 80.16, but one of the commenters 
    believes that procedure code 38.86 represents cases that are very 
    complicated and require a high level of resources.
        Response: Our review of the average resource use associated with 
    DRG 468 cases with procedure code 38.86 support this change. The 
    average charge associated with this case is approximately $13,150. The 
    average charges for cases in DRG 468 and 477 are approximately $30,000 
    and $14,300, respectively. Thus, moving procedure code 38.86 to DRG 477 
    appears appropriate in terms of resource use. We will review the cases 
    in the FY 1997 MedPAR file when it becomes available to ensure that 
    this remains true for those cases.
    9. Changes to the ICD-9-CM Coding System
        As discussed above 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 charged with the mission of maintaining and 
    updating the ICD-9-CM. That mission includes approving coding changes, 
    and developing errata, addenda, and other modifications to the ICD-9-CM 
    to reflect newly developed procedures and technologies and newly 
    identified diseases. The Committee is also responsible for promoting 
    the use of Federal and non-Federal educational programs and other 
    communication techniques with a view toward standardizing coding 
    applications and upgrading the quality of the classification system.
        The Committee is co-chaired by the National Center for Health 
    Statistics (NCHS) and HCFA. The NCHS has lead responsibility for the 
    ICD-9-CM diagnosis codes included in Volume 1--Diseases: Tabular List 
    and Volume 2--Diseases: Alphabetic Index, while HCFA has lead 
    responsibility for the ICD-9-CM procedure codes included in Volume 3--
    Procedures: Tabular List and Alphabetic Index.
        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 fields, 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 at public 
    meetings held on June 6 and December 5 and 6, 1996, and finalized the 
    coding changes after consideration of comments received at the meetings 
    and in writing within 60 days following the December 1996 meeting. The 
    initial meeting for consideration of coding issues for implementation 
    in FY 1999 was held on June 6, 1997. The minutes of the meeting can be 
    obtained from the HCFA Home Page @ http://www.hcfa.gov.pubaffr.htm. 
    Paper copies of these minutes will no longer be available and the 
    mailing list will be discontinued. We encourage commenters to address 
    suggestions on coding issues involving diagnosis codes to: Donna 
    Pickett, Co-Chairperson; ICD-9-CM Coordination and Maintenance 
    Committee; NCHS; Room 1100; 6525 Belcrest Road; Hyattsville, Maryland 
    20782. Comments may be sent by E-mail to: dfp4@nch11a.em.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, Office of Hospital Policy; Division of 
    Prospective Payment System; C5-06-27; 7500 Security Boulevard; 
    Baltimore, Maryland 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, 1997. The new ICD-9-CM codes are listed, along 
    with their DRG classifications, in Tables 6A and 6B (New Diagnosis 
    Codes and New Procedure Codes, respectively) in section V of the 
    Addendum to this final rule. As we stated above, the code
    
    [[Page 45982]]
    
    numbers and their titles were presented for public comment in the ICD-
    9-CM Coordination and Maintenance Committee meetings. Both oral and 
    written comments were considered before the codes were approved.
        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, 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, 1997. The 
    corresponding new or expanded diagnosis codes are included in Table 6A. 
    Revisions to diagnosis code titles are in Table 6D (Revised Diagnosis 
    Code Titles), which also includes the DRG assignments for these revised 
    codes. For FY 1998, there are no procedure codes that have been 
    replaced or deleted nor are there any revisions to procedure code 
    titles. We received three comments concerning our assignment of new 
    ICD-9-CM codes.
        Comment: One commenter wrote in support of the creation of a new 
    diagnosis code for pyoderma gangrenosum (code 686.01) in order to 
    distinguish this condition from infectious pyoderma. The commenter 
    stated that pyoderma gangrenosum is not infectious, but instead is a 
    manifestation of other disease such as ulcerative colitis or Crohn's 
    disease. Pyoderma gangrenosum is characterized by ulcers with extensive 
    necrosis around the edges and are generally found on the lower 
    extremities. Therefore, the commenter believes that this code should be 
    assigned to DRG 271 (Skin Ulcers) rather than DRGs 277, 278, and 279 
    (Cellulitis).
        Response: When a new code is introduced, our longstanding practice 
    is to assign it to the same DRG category as its predecessor code or 
    codes. Therefore, we proposed to assign diagnosis code 686.01 to DRGs 
    277, 278, and 279, the DRGs to which its predecessor code, 686.0 
    (pyoderma), had been assigned. The resource use and other data 
    associated with this diagnosis code will be available in the FY 1998 
    MedPAR file, which will be used for analysis as part of the FY 2000 DRG 
    changes. We will evaluate the DRG assignment of code 686.01 at that 
    time.
        Comment: In the proposed rule, we announced a new diagnosis code 
    (031.2) for disease due to disseminated mycobacterium avium-
    intracellulare complex (DMAC). We proposed that this code be classified 
    to DRG 423 (Other Infectious and Parasitic Disease Diagnoses) in MDC 18 
    (Infectious and Parasitic Diseases, Systemic or Unspecified Sites) as 
    well as be designated as an HIV major related condition in DRG 489 (HIV 
    with Major Related Condition). A commenter disagreed with our decision 
    to classify this code as a non-CC; that is, diagnosis code 031.2 would 
    not be included on the CC list. The commenter believes that when DMAC 
    is present as a secondary diagnosis, it would be considered a 
    substantial complication or comorbidity.
        Response: DMAC is the most common disseminated bacterial infection 
    in patients with advanced acquired immunodeficiency syndrome (AIDS). As 
    such, cases coded with 031.2 will also be coded with a principal or 
    secondary diagnosis of 042, Human immunodeficiency virus (HIV) disease 
    and will be assigned to DRG 489. DRG 489 is not divided based on the 
    presence or absence of CCs. We believe that the vast majority of 
    patients with DMAC, if not all, will be assigned to this DRG, thus 
    negating the need to add this disease to the CC list. As noted above, 
    it is our practice to assign new codes to the same category as their 
    predecessor code was assigned. We note that cases coded 031.2 would 
    have been coded to 031.8 (other specified mycobacterial diseases), 
    which is not a CC. We will review the assignment of cases in which DMAC 
    is coded as a secondary condition when the FY 1998 MedPAR file becomes 
    available and re-evaluate our decision.
        Comment: Commenters noted what they believed to be a typographical 
    error concerning new code V42.83 (organ or tissue replaced by 
    transplant, pancreas). In Table 6A, New Diagnosis Codes, this code was 
    recorded as being assigned to MDC 7, DRG 467 (Other Factors Influencing 
    Health Status). Since DRG 467 is assigned to MDC 23, the commenters 
    assumed this was a typographical error.
        Response: The commenters are correct; diagnosis code V42.83 is 
    assigned to DRG 204 (Disorders of Pancreas Except Malignancy) in MDC 7.
    10. Other Issues
    
    a. MDC 22 (Burns)
    
        Under the current DRG system, burn cases generally are assigned to 
    one of six DRGs in MDC 22 (Burns). These DRGs-- DRGs 456 through 460 
    and 472--have been in place without change since 1986. Recently, we 
    have received several letters from representatives of facilities that 
    specialize in treating burn cases asserting that the existing DRGs do 
    not adequately capture the variation in resource use associated with 
    different types of burn cases. In the proposed rule (62 FR 29912), we 
    discussed the concerns of these correspondents and solicited public 
    comments on whether changes in these DRGs can increase their ability to 
    explain the variation in resource use among burn cases.
        We received approximately 15 public comments on this issue, all of 
    which supported our efforts to identify DRG groupings that would 
    reflect more homogeneous resource use. These comments included a 
    proposal for restructuring the DRG classifications in MDC 22 that has 
    been endorsed by the American Burn Association. Several commenters also 
    suggested the need for a special facility category to make possible 
    payment differences for designated burn care facilities. As noted in 
    the proposed rule, however, any suggestions involving payment 
    adjustments for hospitals designated as burn centers would require 
    legislative action. We intend to conduct a full review of the comments 
    and proposals we have received as part of the FY 1999 DRG analysis 
    agenda. We will discuss our findings and, if appropriate, propose 
    modifications to MDC 22 in the FY 1999 proposed rule.
    
    b. Marfan Syndrome (DRG 390)
    
        We are making a minor DRG classification change for FY 1998 that we 
    inadvertently did not include in the June 2 proposed rule. Based on 
    correspondence we have received, we reviewed the assignment of 
    diagnosis code 759.82 (Marfan syndrome) to DRG 390 (Neonate with Other 
    Significant Problems) in MDC 15 (Newborns and Other Neonates with 
    Conditions Originating in the Perinatal Period). While Marfan syndrome 
    is a congenital disorder, cardiovascular abnormalities associated with 
    the disorder are most likely to manifest in adults. Because the current 
    classification system often results in adult patients being classified 
    to the MDC for newborns, we agree that, from a clinical coherence 
    standpoint, it is appropriate that these cases be reclassified. 
    Therefore, we are reassigning code 759.82 from DRG 390 into MDC 5, DRGs 
    135, 136, and 137 (Cardiac Congenital & Valvular Disorders). There were 
    no cases with a principal diagnosis code of 759.82 in the FY 1996 
    MedPAR file.
    
    C. Recalibration of DRG Weights
    
        We proposed to use the same basic methodology for the FY 1998 
    recalibration as we did for FY 1997. (See the August 30, 1996 final 
    rule (61 FR 46176).) That is, we would recalibrate the weights based on 
    charge data for
    
    [[Page 45983]]
    
    Medicare discharges. However, we would use the most current charge 
    information available, the FY 1996 MedPAR file, rather than the FY 1995 
    MedPAR file. The MedPAR file is based on fully-coded diagnostic and 
    surgical procedure data for all Medicare inpatient hospital bills.
        The final recalibrated DRG relative weights are constructed from FY 
    1996 MedPAR data, based on bills received by HCFA through June 1997, 
    from all hospitals subject to the prospective payment system and short-
    term acute care hospitals in waiver States. The FY 1996 MedPAR file 
    includes data for approximately 11.2 million Medicare discharges.
        The methodology used to calculate the DRG relative weights from the 
    FY 1996 MedPAR file is as follows:
         All the claims were regrouped using the DRG classification 
    revisions discussed above in section II.B of this preamble.
         Charges were standardized to remove the effects of 
    differences in area wage levels, indirect medical education costs, 
    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 as was used in computing the current weights. That is, all 
    cases that are outside of 3.0 standard deviations from the mean of the 
    log distribution of both the charges per case and the charges per day 
    for each DRG.
         The average charge for each DRG was then recomputed 
    (excluding the statistical outliers) and divided by the national 
    average standardized charge per case to determine the relative weight. 
    A transfer case is counted as a fraction of a case based on the ratio 
    of its length of stay to the geometric mean length of stay of the cases 
    assigned to the DRG. That is, a 5-day length of stay transfer case 
    assigned to a DRG with a geometric mean length of stay of 10 days is 
    counted as 0.5 of a total case.
         We established the relative weight for heart and heart-
    lung, liver, and lung transplants (DRGs 103, 480, and 495) in a manner 
    consistent with the methodology for all other DRGs except that the 
    transplant cases that were used to establish the weights were limited 
    to those Medicare-approved heart, heart-lung, liver, and lung 
    transplant centers that have cases in the FY 1995 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, 
    and lung 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 
    for heart and heart-lung transplants); DRG 480 (Liver Transplant); and 
    DRG 495 (Lung 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 effect of 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.
        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 proposed to use that same case 
    threshold in recalibrating the DRG weights for FY 1998. For this final 
    rule, using the FY 1996 MedPAR data set, there are 34 DRGs that contain 
    fewer than 10 cases. We computed the weights for the 34 low-volume DRGs 
    by adjusting the FY 1997 weights of these DRGs by the percentage change 
    in the average weight of the cases in the other DRGs.
        The weights developed according to the methodology described above, 
    using the proposed DRG classification changes, result in an average 
    case weight that is different from the average case weight before 
    recalibration. Therefore, the new weights are normalized by an 
    adjustment factor, 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.
        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.a of the Addendum to this final rule, we are making a 
    budget neutrality adjustment to assure that the requirement of section 
    1886(d)(4)(C)(iii) of the Act is met.
        Although we received no comments on the recalibration of the DRG 
    weights, we did receive one comment that relates to that process.
        Comment: One commenter was concerned about the reduction in the 
    proposed FY 1998 relative weight for DRG 480 (Liver Transplant), 
    compared to the FY 1997 weight. The commenter noted that Table 5 of the 
    proposed rule (62 FR 29990) indicated approximately an 8-day reduction 
    in length of stay from FY 1995 to FY 1996 and asked that we review the 
    MedPAR data for this DRG to verify the accuracy of the data and the 
    consequent change in the relative weight.
        Response: Every year when the relative weights are recalibrated, we 
    use charge information from the most recent Medicare data available. 
    That is, we use the charges reported by hospitals for the cases under 
    each DRG to establish the relative weights. As the commenter requested, 
    we have re-examined the FY 1996 MedPAR data that are used in 
    establishing the DRG relative weights for FY 1998. We have not 
    identified any problems or anomalies related to the cases in DRG 480 
    and are confident that the relative weight and length of stay data set 
    forth in Table 5 of this final rule are accurate. We note that the 
    final FY 1996 MedPAR data result in a slightly higher relative weight 
    and average length of stay for DRG 480 than shown in the proposed rule, 
    although the data still indicate close to a 7-day reduction in average 
    length of stay for these cases. (Data for the final rule are taken from 
    the June 1997 update of the FY 1996 MedPAR data, rather than the 
    December 1996 file used for the proposed rule.)
        Both the relative weight and the length of stay for liver 
    transplant cases have exhibited continuing declines since the early 
    1990's. Although the decline between FY 1995 and FY 1996 was more 
    pronounced than in some other years, this change is not unusual for a 
    relatively low volume DRG (fewer than 400 cases) with a large range of 
    reported charges and lengths of stay. A few very low or very high 
    charge cases can make a dramatic difference in the DRG weight.
    
    [[Page 45984]]
    
    III. Changes to the Hospital Wage Index and Medicare Geographic 
    Reclassification Guidelines
    
    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 (OMB). OMB also designates Consolidated MSAs 
    (CMSAs). A CMSA is a metropolitan area with a population of one million 
    or more, comprised of 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.
        In the proposed rule, we noted that, effective April 1, 1990, the 
    term Metropolitan Area (MA) replaced the term Metropolitan Statistical 
    Area (MSA) (which had been used since June 30, 1983) to describe the 
    set of metropolitan areas comprised 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.
        Section 1886(d)(3)(E) of the Act also requires that the wage index 
    be updated annually beginning October 1, 1993. 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. We also adjust the wage index, as discussed below in section 
    III.B.3, to take into account the geographic reclassification of 
    hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of 
    the Act.
    
    B. FY 1998 Wage Index Update
    
        The final FY 1998 wage index in section V. of the Addendum 
    (effective for hospital discharges occurring on or after October 1, 
    1997 and before October 1, 1998) is based on the data collected from 
    the Medicare cost reports submitted by hospitals for cost reporting 
    periods beginning in FY 1994 (the FY 1997 wage index was based on FY 
    1993 wage data). We used the same categories of data that were used in 
    the FY 1997 wage index. Therefore, the FY 1998 wage index reflects the 
    following:
         Total salaries and hours from short-term, acute care 
    hospitals.
         Home office costs and hours.
         Fringe benefits associated with hospital and home office 
    salaries.
         Direct patient care contract labor costs and hours.
         The exclusion of salaries and hours for nonhospital type 
    services such as skilled nursing facility services, home health 
    services, or other subprovider components that are not subject to the 
    prospective payment system.
        We proposed to calculate a separate Puerto Rico-specific wage index 
    to be applied to the Puerto Rico standardized amount. We stated that 
    this wage index would be calculated in the same manner as the national 
    wage index described below, but will be based solely on Puerto Rico's 
    data. We received several comments supporting the new Puerto Rico-
    specific wage index. We are implementing that change and revising 
    Sec. 412.210(e) accordingly.
        We did not propose any changes in the reporting of hospital wage 
    index data, but we received numerous comments regarding the FY 1995 
    wage data, which will not be used until we develop the FY 1999 wage 
    index. The Medicare cost report for reporting periods beginning during 
    FY 1995 included several changes to the Worksheet S-3 that will allow 
    us to analyze further refinements to the wage index. Among those 
    changes are the separate reporting of all salary costs for physicians 
    (including teaching physicians), residents, and certified registered 
    nurse anesthetists (CRNAs). In addition, we collected overhead cost 
    data by cost center in order to analyze the possibility of excluding 
    overhead costs attributable to skilled nursing facilities and other 
    excluded areas from the wage index. These comments are discussed in 
    detail below.
        Comment: Two commenters stated that we should exclude physician 
    salaries (as recommended by the Medicare Technical Advisory Group); one 
    suggested that we should immediately exclude these costs using 
    information from the Worksheet A-8-2 of the Medicare cost report. 
    Alternatively, a few commenters suggested that we should include 
    contracted Part A physician salaries for those States in which 
    hospitals are prohibited from employing physicians. Several commenters 
    are concerned that the removal of teaching physician and resident 
    salaries would redistribute revenues from large metropolitan areas with 
    large teaching programs to areas that support medical education to a 
    lesser extent. The commenters noted that recent legislation revising 
    the payments for disproportionate share and the indirect medical 
    education adjustments (sections 4403 and 4621 of Public Law 105-33) 
    will further reduce payment for hospitals in major metropolitan areas.
        Other commenters suggested that we analyze the impact of excluding 
    the data before making a final decision. Some commenters specifically 
    recommended that we determine whether hospitals that are prohibited 
    from employing physicians are disadvantaged by our current policy, and, 
    if so, that we develop a policy that minimizes the redistribution of 
    revenue and the concentration of losses in particular geographic areas.
        Response: These comments relate to the FY 1995 wage data, which we 
    are not using in developing the FY 1998 wage index. We will consider 
    these comments in developing the FY 1999 wage index. Although the 
    deadline for fiscal intermediaries to submit all of the reviewed FY 
    1995 wage data to HCFA is mid-November 1997, we intend to begin our 
    analysis of these data prior to that time, based on the data that have 
    already been submitted to the Health Care Provider Cost Report 
    Information System (HCRIS). We note that our fundamental objective in 
    administering the wage index is to ensure that it is accurate and fair, 
    and we will evaluate the use of the FY 1995 wage data with that 
    objective in mind.
        Regarding the suggestion that we use Worksheet A-8-2 to exclude 
    Part A physician salaries, we noted in the proposed rule (62 FR 29914) 
    that, because the intermediaries had already begun reviewing the FY 
    1994 cost report and finalizing the Worksheet S-3 data, we did not 
    believe it would be appropriate to revise their instructions and 
    require them to make a change to their procedure. Therefore, we will 
    review and evaluate for the FY 1995 data, which provides for the 
    separate
    
    [[Page 45985]]
    
    reporting of physician salaries when considering appropriate changes in 
    the FY 1999 wage index.
        Comment: One hospital association commented that it had analyzed 
    unedited preliminary FY 1995 HCRIS data and concluded that revising our 
    policy to include contracted Part A physician salaries would 
    redistribute current payments by only half of what would result if we 
    changed our policy to exclude all Part A physician and resident 
    salaries. (Currently, we exclude contracted Part A physician salaries, 
    but include similar salaries if the physician is employed by the 
    hospital.) Other commenters noted other data issues that arise using 
    the preliminary FY 1995 HCRIS wage data.
        Response: In response to these comments, we would emphasize that 
    the cost report data analyzed by these commenters are very preliminary, 
    and in many cases, have not yet been reviewed by the intermediaries. 
    The data were extracted from the HCRIS Minimum Data Set, which is 
    updated quarterly and becomes more accurate and complete after the 
    deadline for completion of the wage data desk reviews by the 
    intermediaries. We are aware of the need to carefully review these data 
    due to the changes discussed above, and we will work with those in the 
    hospital industry that have taken the initiative to begin to examine 
    the data in order to draw upon their findings while proceeding with our 
    analysis.
        Comment: Two commenters stated that wages and wage-related costs 
    for physicians, residents, and CRNAs are not reported separately for FY 
    1995, but are reported separately for FY 1996. They requested that HCFA 
    postpone its evaluation of the exclusion of these data until the FY 
    1996 data are available, and that HCFA announce this 1-year delay in 
    the FY 1998 final rule.
        Response:  We are aware that for the FY 1995 cost reports some 
    hospitals may have reported teaching physicians' salaries with 
    residents' wages, and also did not separately report wage-related costs 
    for physicians, residents, and CRNAs. To address this situation we 
    revised the FY 1996 cost reporting instructions. We will consider the 
    impact of this problem in our FY 1995 data analysis.
        Comment: Four commenters disputed the rationale that Part A 
    physician and resident salaries should be excluded from the wage index 
    because these costs are largely paid through Medicare direct graduate 
    medical education payments. They stated that other costs, such as 
    outpatient and general service costs that are allocated to excluded 
    cost centers, are similarly paid outside the prospective payment 
    system, but are included in the wage index calculation.
        Response: The FY 1995 revised Worksheet S-3 allows for the separate 
    reporting of direct salaries and hours by general service cost centers 
    as well as physician salaries. We plan to analyze these data to 
    determine the feasibility of allocating general service costs and 
    removing those costs that are associated with excluded areas. Regarding 
    outpatient costs, hospital staff frequently provide services in both 
    the outpatient and inpatient departments, and we believe that the 
    inclusion of outpatient salaries causes little or no distortion to the 
    wage index.
    1. Verification of Wage Data From the Medicare Cost Report
        The data for the FY 1998 wage index were obtained from Worksheet S-
    3, Part II of the Medicare cost report. The data file used to construct 
    the final wage index includes FY 1994 data submitted to HCRIS. As in 
    past years, we performed an intensive review of the wage data, mostly 
    through the use of edits designed to identify aberrant data.
        In the proposed rule, we discussed in detail our review of the wage 
    data as well as the process that hospitals could use to verify their 
    wage data and submit requests for corrections if necessary (62 FR 
    29914). To be reflected in the final wage index, wage data corrections 
    had to be reviewed, verified, and transmitted to HCFA through HCRIS by 
    June 16, 1997. (Any changes after this date are limited to errors 
    related to handling the data, as described below in section III.C of 
    this preamble.) All data elements that failed edits have been resolved 
    and are reflected in the final wage index.
    2. Computation of the Wage Index
        The method used to compute the final wage index is as follows:
        Step 1--As noted above, we based the FY 1998 wage index on wage 
    data reported on the FY 1994 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, Part II of the Medicare 
    cost report for the hospital's cost reporting period beginning on or 
    after October 1, 1993 and before October 1, 1994. In addition, we 
    included data from a few hospitals that had cost reporting periods 
    beginning in September 1993 and reported a cost reporting period 
    exceeding 52 weeks. These data were included because no other data from 
    these hospitals would be available for the cost reporting period 
    described above, and particular labor market areas might be affected 
    due to the omission of these hospitals. However, we generally describe 
    these wage data as FY 1994 data.
        Step 2--For each hospital, we subtracted the excluded salaries 
    (that is, direct salaries attributable to skilled nursing facility 
    services, home health services, and other subprovider components not 
    subject to the prospective payment system) from gross hospital salaries 
    to determine net hospital salaries. To determine total salaries plus 
    fringe benefits, we added direct patient care contract labor costs, 
    hospital fringe benefits, and any home office salaries and fringe 
    benefits reported by the hospital, to the net hospital salaries.
        Step 3--For each hospital, we adjusted the total salaries plus 
    fringe benefits resulting from Step 2 to a common period to determine 
    total adjusted salaries. To make the wage inflation adjustment, we used 
    the percentage change in average hourly earnings estimated for each 30-
    day increment from October 14, 1993 through April 15, 1995, for 
    hospital industry workers from Standard Industry Classification 806, 
    Bureau of Labor Statistics Employment and Earnings Bulletin. The annual 
    inflation rates used were 3.6 percent for FY 1993, 2.7 percent for FY 
    1994, and 3.3 percent for FY 1995. The inflation factors used to 
    inflate the hospital's data were based on the midpoint of the cost 
    reporting period as indicated below.
    
                        Midpoint of Cost Reporting Period                   
    ------------------------------------------------------------------------
                                                                  Adjustment
                   After                         Before             factor  
    ------------------------------------------------------------------------
    10/14/93...........................  11/15/93..............     1.038679
    11/14/93...........................  12/15/93..............     1.036376
    12/14/93...........................  01/15/94..............     1.034077
    01/14/94...........................  02/15/94..............     1.031784
    02/14/94...........................  03/15/94..............     1.029496
    03/14/94...........................  04/15/94..............     1.027213
    04/14/94...........................  05/15/94..............     1.024935
    05/14/94...........................  06/15/94..............     1.022662
    06/14/94...........................  07/15/94..............     1.020394
    07/14/94...........................  08/15/94..............     1.018131
    08/14/94...........................  09/15/94..............     1.015873
    09/14/94...........................  10/15/94..............     1.013620
    10/14/94...........................  11/15/94..............     1.010881
    11/14/94...........................  12/15/94..............     1.008150
    12/14/94...........................  01/15/95..............     1.005426
    01/14/95...........................  02/15/95..............     1.002709
    02/14/95...........................  03/15/95..............     1.000000
    03/14/95...........................  04/15/95..............     0.997298
    ------------------------------------------------------------------------
    
        For example, the midpoint of a cost reporting period beginning 
    January 1, 1994 and ending December 31, 1994 is June 30, 1994. An 
    inflation adjustment factor of 1.020394 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
    
    [[Page 45986]]
    
    began in FY 1994 and covers a period of less than 360 days or greater 
    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 4--For each hospital, we subtracted the reported excluded 
    hours from the gross hospital hours to determine net hospital hours. We 
    increased the net hours by the addition of any direct patient care 
    contract labor hours and home office hours to determine total hours.
        Step 5--As part of our editing process, we deleted data for 18 
    hospitals for which we lacked sufficient documentation to verify data 
    that failed edits because the hospitals are no longer participating in 
    the Medicare program or are in bankruptcy status. We retained the data 
    for other hospitals that are no longer participating in the Medicare 
    program because these hospitals reflected the relative wage levels in 
    their labor market areas during their FY 1994 cost reporting period.
        Step 6--Each hospital was assigned to its appropriate urban or 
    rural labor market area prior to any reclassifications under sections 
    1886(d)(8)(B) or 1886(d)(10) of the Act. Within each urban or rural 
    labor market area, we added the total adjusted salaries plus fringe 
    benefits obtained in Step 3 for all hospitals in that area to determine 
    the total adjusted salaries plus fringe benefits for the labor market 
    area.
        Step 7--We divided the total adjusted salaries plus fringe benefits 
    obtained in Step 6 by the sum of the total hours (from Step 4) for all 
    hospitals in each labor market area to determine an average hourly wage 
    for the area.
        Step 8--We added the total adjusted salaries plus fringe benefits 
    obtained in Step 3 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 data as described above, the 
    national average hourly wage is $20.0950.
        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. We added the total adjusted salaries 
    plus fringe benefits (as calculated in Step 3) 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 
    $9.1364 for Puerto Rico. For each labor market area in Puerto Rico, we 
    calculated the hospital 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(a) 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 the State in which the hospital is located. For FY 1998, this change 
    affects 128 hospitals in 32 MSAs. The MSAs affected by this provision 
    are identified in Table 4A by a footnote. Furthermore, this wage index 
    floor is to be implemented in such a manner as to assure that aggregate 
    prospective payment system payments are not greater or less than those 
    which would have been made in the year if this section did not apply. 
    We note that the Secretary has exercised the authority granted to her 
    by section 4408 of Public Law 105- 33 to include Stanly County in the 
    Charlotte-Gastonia-Rock Hill, North Carolina-South Carolina MSA. This 
    change is reflected in the final wage index.
    3. 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 Medicare Geographic Classification Review 
    Board (MGCRB) considers applications by hospitals for geographic 
    reclassification for purposes of payment under the prospective payment 
    system.
        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 hospitals that are 
    redesignated are subject to that combined wage index value.
         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.
         The wage index value for an urban area is calculated 
    exclusive of the wage data for hospitals that have been reclassified to 
    another area. However, geographic reclassification may not reduce the 
    wage index value for an urban area below the statewide rural wage index 
    value.
        We note that, except for those rural areas where redesignation 
    would reduce the rural wage index value, the wage index value for each 
    area is computed exclusive of the wage data for hospitals that have 
    been redesignated from the area for purposes of their wage index. As a 
    result, several urban areas listed in Table 4a have no hospitals 
    remaining in the area. This is because all the hospitals originally in 
    these urban areas have been reclassified to another area by the MGCRB. 
    These areas with no remaining hospitals receive the prereclassified 
    wage index value. The prereclassified wage index value will apply as 
    long as the area remains empty.
        The final wage index values for FY 1998 are shown in Tables 4A, 4B, 
    4C, and 4F in the Addendum to this final rule. Subject to the 
    provisions of Public
    
    [[Page 45987]]
    
    Law 105-33, the FY 1998 wage index values incorporate all hospital 
    redesignations for FY 1998, withdrawals of requests for 
    reclassification, wage index corrections, appeals, and the 
    Administrator's review process. For FY 1998, 357 hospitals are 
    redesignated for purposes of the wage index (hospitals redesignated 
    under section 1886(d)(8)(B) or 1886(d)(10) of the Act). 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 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 rural hospital is redesignated is lower than the wage index value for 
    the rural areas of the State in which the rural hospital is located, 
    the redesignated rural 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.
        Tables 4D and 4E list the average hourly wage for each labor market 
    area, prior to the redesignation of hospitals, based on the FY 1994 
    wage data. In addition, Table 3C in the Addendum to this final rule 
    includes the adjusted (inflated) average hourly wage for each hospital 
    based on the FY 1994 data. The MGCRB will use the average hourly wage 
    published in the final rule to evaluate a hospital's application for 
    reclassification, unless that average hourly wage is later revised in 
    accordance with the wage data correction policy described in 
    Sec. 412.63(s)(2). In such cases, the MGCRB will use the most recent 
    revised data used for purposes of the hospital wage index.
    
    C. Changes to the Medicare Geographic Classification Review Board 
    (MGCRB) Guidelines and Timeframes
    
        Various provisions of Public Law 105-33 address the guidelines the 
    MGCRB uses to reclassify hospitals to other geographic areas as well as 
    the timetable under which hospitals must submit applications for 
    reclassification and the MGCRB and the Secretary must make decisions on 
    those applications.
    1. Revised Application and MGCRB Timeframes
        Currently, a hospital must submit an application to the MGCRB for 
    geographic reclassification for a fiscal year by the first day of the 
    preceding fiscal year (that is, October 1, 1997 for reclassification 
    effective in FY 1999). The MGCRB has 180 days to make a decision on 
    that application (no later than March 31 of the fiscal year), the 
    hospital has 15 days to request a review of that decision by the 
    Administrator of HCFA (by April 15), and the Administrator has up to 90 
    days to issue a final decision (July 15). Under our current publication 
    schedule, the July 15 deadline allows the final geographic 
    reclassification decisions to be incorporated in the wage index and 
    payment rates that are published in the final rule on or about 
    September 1.
        Sections 4644 (a)(1) and (b)(1) of Public Law 105-33 amend section 
    1886 (d)(6) and (e) of the Act to provide that the final rule setting 
    the payment rates for years beginning with FY 1999 must be published by 
    August 1. Because this change in publication dates would conflict with 
    the timetable for geographic reclassification decisions, section 
    4644(c) of Public Law 105-33 amended section 1886(d)(10)(C)(ii) of the 
    Act to require a hospital to submit an application for reclassification 
    no later than the first day of the month preceding the beginning of the 
    Federal fiscal year (that is, by September 1) beginning with 
    applications filed for reclassification for FY 2000. Under this 
    timetable, the amount of time the MGCRB and the Administrator have to 
    make decisions will not change from the current schedule.
        In addition, because applications filed for reclassification 
    effective in FY 1999 are not due until October 1, 1997, section 
    4644(c)(2) requires us to shorten the deadlines under section 
    1886(d)(10)(C) of the Act so that all final decisions on MGCRB 
    applications will be completed by June 15, 1998. We have consulted with 
    the staff of the MGCRB and the reclassification decisions will be made 
    by the MGCRB by February 28, 1998. This will allow final decisions of 
    the Secretary to be completed by June 15, 1998.
        We are revising Secs. 412.256 and 412.274 to implement the change 
    in the application deadline.
    2. Alternative Wage Index Reclassification Guidelines for Individual 
    Hospitals
        a. In the September 1, 1992 final rule, we revised the wage index 
    guidelines at Sec. 412.230(e) to add the requirement that a hospital 
    cannot be reclassified unless its average hourly wage is at least 108 
    percent of the average hourly wage of the area in which it is located. 
    For FY 1998 reclassification, section 4409 of Public Law 105-33 
    requires the Secretary to establish alternative wage index guidelines 
    for geographic reclassification. As provided in the statute, a hospital 
    may reclassify for wage index purposes if it demonstrates that:
         Its average hourly wage is at least 108 percent of the 
    average hourly wage of all other hospitals in its MSA, that is, not 
    including its own wage data.
         It pays at least 40 percent of the adjusted uninflated 
    wages in the MSA.
         It reclassified for the wage index for each of the fiscal 
    years 1992 through 1997.
        The hospital must also meet all other applicable guidelines (for 
    example, proximity).
        As noted above, this provision is effective for FY 1998 
    reclassifications. Because the application and decision making process 
    for FY 1998 reclassification is already completed, we must provide 
    special guidelines for hospitals to apply for reclassification under 
    this provision for FY 1998.
        A hospital seeking reclassification for FY 1998 under this 
    provision must submit its application to the MGCRB by September 15, 
    1997. In addition, the hospital must submit 7 copies of a completed 
    application to the MGCRB. The MGCRB will dismiss a hospital's request 
    for reclassification if the completed application is not received by 
    September 15, 1997. If the MGCRB renders a favorable decision on a 
    hospital's application, the hospital will be reclassified for purposes 
    of the wage index for FY 1998 as if that decision had been made under 
    the usual guidelines and timetable.
        Ordinarily, a hospital seeking MGCRB reclassification for a fiscal 
    year must submit its application by October 1 of the preceding fiscal 
    year, and all reclassification decisions with respect to a fiscal year 
    must be finalized before the beginning of the fiscal year (this 
    includes decisions of the MGCRB as well as decisions of the HCFA 
    Administrator when the Administrator undertakes review). However, 
    sections 4409 and 4410 of Public Law 105-33, enacted on August 5, 1997, 
    set forth special reclassification provisions under which certain 
    hospitals may be reclassified for FY 1998 (beginning on October 1, 
    1997). The MGCRB will make decisions on applications for 
    reclassification based on these provisions before the beginning of the 
    fiscal year, but it will not be feasible to complete the process for 
    appeals or other review before October 1. Nevertheless, we believe it 
    is appropriate to permit appeals of decisions on requests for 
    reclassification under sections 4409 and 4410. Therefore, for such 
    appeals, we are incorporating the current appeals and
    
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    review process (including the timetables for a hospital to request 
    review and for the Administrator to complete review) even though that 
    process will not be finalized until after the beginning of the fiscal 
    year. Our general position has been, and continues to be, that changes 
    to the prospective payment rates should be made prospectively only. 
    Nevertheless, given the extraordinary circumstances presented by the 
    recent enactment of the legislation, if a decision on a request for 
    reclassification under section 4409 or section 4410 becomes final under 
    this process after the beginning of the fiscal year, the decision will 
    be effective as of the beginning of the fiscal year. We are revising 
    the regulations at Sec. 412.230(e) to implement this provision.
        b. In the case of a hospital that is owned by a municipality and 
    that was reclassified as an urban hospital for FY 1996, in calculating 
    the hospital's average hourly wage for the purposes of geographic 
    reclassification for FY 1998 only, section 4410(c) of Public Law 105-33 
    requires the exclusion of general service wages and hours of personnel 
    associated with a skilled nursing facility that is owned by the 
    hospital of the same municipality and that is physically separated from 
    the hospital to the extent that such wages and hours of such personnel 
    are not shared with the hospital and are separately documented. A 
    hospital seeking reclassification under this provision must submit 7 
    copies of a completed application to the MGCRB by September 15, 1997. 
    The MGCRB will dismiss a hospital's request for reclassification if the 
    completed application is not received by September 15, 1997. If the 
    MGCRB renders a favorable decision on a hospital's application, the 
    hospital will be reclassified for purposes of the wage index for FY 
    1998 as if that decision had been made under the usual guidelines and 
    timetable. The special appeals procedures discussed earlier apply to 
    this context as well.
    3. Alternative Guidelines for Rural Referral Centers
        Currently, under section 1886(d)(10)(D) of the Act, rural referral 
    centers (RRCs) are allowed to apply to the MGCRB to be reclassified for 
    purposes of the wage index adjustment. To be reclassified, RRCs must 
    meet the following criteria:
         The hospital's average hourly wage must be at least 108 
    percent of the Statewide rural hourly wage.
         The hospital's average hourly wage must be at least 84 
    percent of the average hourly wage of the target urban area to which 
    the RRC is applying.
        As provided in section 4202 of Public Law 105-33, the MGCRB is 
    prohibited from rejecting a hospital's request for reclassification on 
    the basis of any comparison between the average hourly wage and the 
    average hourly wage of hospitals in the area in which the hospital is 
    located if the hospital was ever classified as an RRC. However, RRCs 
    will continue to be required to have an average hourly wage that is at 
    least 84 percent of the average hourly wage of the target urban area to 
    which the RRC is applying. In addition, while RRCs do not have to meet 
    the proximity requirements for reclassification, they continue to be 
    required to seek reclassification to the nearest urban area. We are 
    revising Sec. 412.230(a)(3) to implement this provision.
    4. Reclassification for the Disproportionate Share Adjustment
        Section 4203 of Public Law 105-33 provides that for a limited time 
    a rural hospital may apply and qualify for reclassification to another 
    area for purposes of disproportionate share adjustment payments whether 
    or not the standardized amount is the same for both areas. For 30 
    months after the date of enactment of Public Law 105-33, the MGCRB will 
    consider the application under section 1886(d)(10)(C)(i) of a hospital 
    requesting a change in the hospital's geographic classification for 
    purposes of determining for a fiscal year eligibility for and 
    additional payment amounts under section 1886(d)(5)(F) of the Act. 
    Under Public Law 105-33, the MGCRB will apply the guidelines for 
    standardized amount reclassification (Sec. 412.230(d)) until the 
    Secretary establishes separate guidelines. Therefore, hospitals seeking 
    such reclassification for FY 1998 must submit a reclassification 
    application to the MGCRB by October 1, 1997. Decisions based on these 
    applications will be effective for FY 1999 (beginning on October 1, 
    1998). Section 4203 of Public Law 105-33 is effective for the 30 month 
    period beginning on the date of enactment. Accordingly, hospitals may 
    seek reclassification for purposes of DSH for FY 2000 and FY 2001. We 
    are revising Sec. 412.230(a)(5)(ii) of the regulations to implement 
    this provision.
    5. Occupational Mix Adjustment
        Section 412.230(e) describes the criteria for hospital 
    reclassification for purposes of the wage index. One of the criteria 
    relates to the relationship between the hospital's wages and those of 
    the area to which it seeks reclassification. Specifically, 
    Sec. 412.230(e)(1)(iv) provides that the hospital must demonstrate that 
    its wages are at least 84 percent of the average hourly wage of 
    hospitals in the area to which it seeks reclassification, or that the 
    hospital's average hourly wage weighted for occupational mix is at 
    least 90 percent of the average hourly wage of hospitals in the area to 
    which it seeks reclassification. Under Secs. 412.232(c) and 412.234(b), 
    a group of hospitals seeking to reclassify must demonstrate that its 
    aggregate average hourly wage is at least 85 percent of the average 
    hourly wage of the hospitals in the area to which it seeks 
    reclassification. These sections also provide that the threshold for 
    the occupational-mix adjusted hourly wage for hospital groups is the 
    same as that for a single hospital, that is, 90 percent.
        In the August 30, 1996 final rule, we stated that, because the 
    American Hospital Association (AHA) was terminating its collection of 
    information on the Hospital Personnel by Occupation Category as of 
    1994, there would be no suitable source of occupational mix data for 
    hospitals to use for geographic reclassification under 
    Secs. 412.230(e)(1)(iv), 412.232(c) and 412.234(b) beginning with 
    reclassifications effective for FY 1999 (61 FR 46185). In that rule, we 
    stated that we would not make a final decision on this issue until the 
    next year in case another suitable source of occupational mix data were 
    found. Although we did not include any alternative data source in the 
    proposed rule, we received some comments suggesting another way to 
    obtain occupational mix data.
        Comment: One commenter proposed a methodology for collecting 
    occupational mix data for those hospitals that seek to be reclassified 
    through the MGCRB process using occupational mix data as part of their 
    wage index calculations. The commenter proposed the following process:
         Any hospital that wants to use the 90 percent occupational 
    mix adjustment criteria should be allowed to use the 1993 AHA data for 
    FY 1999 reclassifications, which must be filed by October 1, 1997.
         For any hospital that successfully reclassifies for FY 
    1999 using the 1993 AHA data, HCFA would contact the State or local 
    hospital associations in the State in which the reclassified hospital 
    is located to obtain more current occupational mix data for the 
    affected MSAs that could be used by the individual hospital for future 
    years' occupational mix data. In some cases, there may be costs 
    incurred in collecting these data. The commenter suggested that the 
    individual reclassified hospitals would bear any costs of data 
    collection incurred by the State or local hospital
    
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    associations or, alternatively, the costs could be distributed by the 
    associations to the individual hospitals in the MSA asked to provide 
    these data.
         The applicable hospital associations would provide the 
    data to HCFA for any data review deemed necessary by HCFA. The 
    individual hospitals would obtain the occupational mix data directly 
    from HCFA after HCFA had completed any data edits or performed any 
    other procedures that HCFA believes necessary to determine the validity 
    and usability of the data. The data would be collected in a single 
    survey for FY 1995, FY 1996, and FY 1997 to correspond with the next 3 
    years of wage survey data. Thus, current data would be available for 
    the next 3 years for the individual MSA to which a hospital was 
    successfully reclassified using the 90 percent occupational mix data.
         For future years, individual hospitals seeking to qualify 
    using the occupational mix criterion for a wage index reclassification 
    to an MSA where the data are not already being collected could use the 
    1993 AHA data for the first year. This would then trigger a data 
    accumulation request for that area. It is the opinion of the commenter 
    that this would allow all prospective payment hospitals to use the 90 
    percent criterion if needed.
        Three State hospital associations also wrote to indicate support 
    for this proposal. The AHA supports the use of its 1993 occupational 
    mix data on an interim basis. In addition, although the AHA does not 
    wish to be the future vehicle of data collection, it supports the 
    concept of hospitals designing a method to collect occupational mix 
    data for use in future years.
        Response: As we stated in the June 4, 1991 final rule with comment 
    period (56 FR 25458), the reclassification process requires the use of 
    occupational mix data that are comparable across areas and that can be 
    consistently applied. We are unaware of any sources other than the AHA 
    data that meet these criteria. (Originally, these data were also 
    available from the Department of Labor Statistics, which has since 
    discontinued its hospital wage survey.) We responded to comments on 
    this issue in the August 30, 1996 final rule (61 FR 46186). In that 
    document, we reiterated that we were interested only in occupational 
    mix data that are available on a national basis. We also noted that we 
    were not interested in collecting the data ourselves.
        The commenter's proposal fails to meet the ``national basis'' 
    criterion that we set. The commenter proposes that only hospitals in 
    certain areas would have to report occupational mix data. This does not 
    provide a national database for those other hospitals that might want 
    to use the data at some future time, nor does it allow verification of 
    the data through edit checks performed on a national basis, such as 
    those that we perform on the wage data. The commenter also proposes 
    that HCFA ensure that the data are collected and that HCFA edit and 
    validate the data and provide them to those who request the data. We do 
    not want to be either the requestor or the repository of these data, 
    nor do we have the resources to edit or validate these data.
        In addition, this proposal contemplates the use of the 1993 AHA 
    data for several years. For example, if a hospital first attempts to 
    qualify using occupational mix data for FY 2002 in an area not already 
    collecting these data, it would have to use the 1993 AHA occupational 
    mix categories to adjust 1997 wage data. We believe that this would not 
    be an accurate measure of the hospital's weighted average hourly wage 
    for purposes of reclassification.
        Finally, the commenter suggests that those hospitals that benefit 
    from the use of occupational mix data should fund the data collection 
    effort. This could lead to some inconsistency in availability of the 
    data. If some hospitals that could benefit are unable to fund the 
    collection effort, they would be at a disadvantage. Moreover, we are 
    uncomfortable with the concept of allowing hospitals that will benefit 
    from certain data to pay others for those data. We are unsure about how 
    the payment incentive might influence the data.
        Since we have discovered no other suitable source of occupational 
    mix data during the past year, we have no updated occupational mix data 
    to correspond with the FY 1994 wage data that will be used for FY 1999 
    reclassifications. Therefore, this option will no longer be available 
    to hospitals. We have amended the regulations at Secs. 412.230(e), 
    412.232(c), and 412.234(b) to reflect this decision. We remain 
    interested in any occupational mix data proposals that meet our 
    criteria.
    
    D. Requests for Wage Data Corrections
    
        In the proposed rule, we stated that, as in past years, we would 
    make a data file available in mid-August containing the wage data used 
    to construct the wage index values in the final rule. (Please note that 
    this data file is also available through the Internet at HCFA's home 
    page (http://www.hcfa.gov).) As with the file made available in March 
    1997, HCFA makes the August wage data file available to hospital 
    associations and the public. This August file is being made available 
    only 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 process described above, not for the initiation of new 
    wage data correction requests.
        If, after reviewing the August data file or the information in this 
    final rule, 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 September 15, 1997. Requests mailed to 
    HCFA should be sent to: Health Care Financing Administration; Center 
    for Health Plans and Providers; Attention: Stephen Phillips, Technical 
    Advisor; Division of Acute Care; C5-06-27; 7500 Security Boulevard; 
    Baltimore, MD 21244-1850. Each request also must be sent to the 
    hospital's fiscal intermediary. The intermediary will review requests 
    upon receipt and contact HCFA immediately to discuss its findings.
        As noted in the proposed rule, after mid-August, we will make 
    changes to the hospital wage data only 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 August wage data file. 
    Specifically, after that point, neither the intermediary nor HCFA will 
    accept the following types of requests in conjunction with this 
    process:
         Requests for wage data corrections that were submitted too 
    late to be included in the data transmitted to HCRIS on or before June 
    16, 1997.
         Requests for correction of errors that were not, but could 
    have been, identified during the hospital's review of the March 1997 
    data.
         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 
    September 15, 1997) will be effective October 1, 1997.
        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 
    had access to the wage data in mid-August, they will have
    
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    had the opportunity to detect any data entry or tabulation errors made 
    by the intermediary or HCFA before the implementation of the FY 1998 
    wage index on October 1, 1997. If hospitals avail themselves of this 
    opportunity, the wage index implemented on October 1 should be free of 
    such errors. Nevertheless, in the unlikely event that such errors 
    should occur, we retain the right to make midyear changes to the wage 
    index under very limited circumstances.
        Specifically, in accordance with Sec. 412.63(s)(2), we may make 
    midyear corrections to the wage index only in those limited 
    circumstances where 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 1998 (that is, by the 
    September 15, 1997 deadline). As indicated earlier, since a hospital 
    will have had 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 made. 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.
    
    E. Modification of the Process and Timetable for Updating the Wage 
    Index
    
        Although the wage data correction process described above has 
    proven successful for ensuring that the wage data used each year to 
    calculate the wage indexes are generally reliable and accurate, we 
    expressed concern in the proposed rule that there have been an 
    excessive number of revisions being requested after the release of the 
    wage data in mid-March. Last year, in developing the FY 1997 wage 
    index, the wage data were revised between the proposed and the final 
    rules for more than 13 percent of the hospitals (approximately 700 of 
    5,200). The number of revisions this year was similar. Since hospitals 
    are expected to submit complete and accurate data, and the data are 
    reviewed and edited by the intermediaries and HCFA, we believe that we 
    should be making few revisions after the release of the March wage data 
    file. According to information received from the intermediaries, these 
    late revisions are partly due to the lack of responsiveness of 
    hospitals in providing sufficient information to the intermediaries 
    during the desk reviews (that is, during the intermediary's review of 
    the hospital's cost report).
        Our analysis of last year's wage data also showed that, although 
    the volume of revisions was high, the effect of the changes on the wage 
    index was minimal. Of the 370 labor market areas, only 4 (1.1 percent) 
    experienced a change of 5 percent or more in their wage index value and 
    only 39 (10.6 percent) experienced a change of 1 percent or more. Thus, 
    the intensity of work that must be performed in order to incorporate 
    these revisions in the 1 month available between the mid-June date for 
    revision requests and the mid-July date by which we must begin 
    calculation of the final wage index is not warranted in light of the 
    minimal changes to the actual wage index values.
        Another feature of the current process is that it results in 
    corrections to the final wage index after the September 1 final rule 
    publication and before the October 1 effective date of the wage index. 
    Immediately following the development of the final wage index, a second 
    wage data file is made available in mid-August so that hospitals may 
    again verify the accuracy of their wage data. If a hospital detects an 
    error made by the intermediary or HCFA in the handling (entry or 
    transmission) of the wage data, the hospital may request a correction 
    (this year, by September 15). The corrections are published in the 
    Federal Register after the October 1 implementation date in a 
    correction notice to the final rule. We would prefer to minimize the 
    need to republish certain wage index values after the final rule is in 
    effect.
        Finally, hospitals base their geographic reclassification decisions 
    (whether or not to withdraw their applications) on the wage index 
    published in the proposed rule. Although the FY 1997 proposed and final 
    wage indexes were quite similar, we cannot ensure this will happen each 
    year if increasing numbers of hospitals delay the submittal to their 
    intermediaries of wage data supporting documentation until the May 15 
    deadline. We believe that hospitals could make more informed decisions 
    regarding reclassification if the proposed wage index more closely 
    resembles the final wage index. Therefore, in the proposed rule, we 
    discussed possible revisions to the wage data verification process.
    1. Process and Timetable
        The major change we proposed to the current process was the 
    requirement that wage data revisions be requested (and resolved) 
    earlier, before publication of the proposed rule. Subsequent 
    corrections would be allowed only for errors in handling the data (our 
    current timetable allows for such corrections after the final rule is 
    published). For example, the FY 1999 wage index will use FY 1995 cost 
    report data (that is, cost reports beginning in FY 1995) and become 
    effective October 1, 1998. Under the proposed timetable, hospitals 
    would be required to submit all requests for wage data revisions to 
    their intermediary by mid-December 1997. We indicated this would 
    provide ample opportunity for hospitals to evaluate the results of 
    intermediaries' desk reviews and prepare any requests for corrections. 
    We noted that the desk reviews are to be performed on an ongoing basis 
    as cost reports are received from hospitals and, for the FY 1995 wage 
    data, must be completed prior to the mid-November 1997 deadline for 
    submitting all FY 1995 wage data to HCRIS.
        As under the current process, after reviewing requests for wage 
    data revisions submitted by hospitals, fiscal intermediaries would 
    transmit any revised cost report to HCRIS and forward a copy of the 
    revised wage index Worksheet S-3 to the hospital. If requested 
    revisions are not accepted, the fiscal intermediaries would notify the 
    hospital in writing of reasons why the changes were not accepted. 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 policy interpretation, the 
    hospital may contact HCFA in an effort to resolve the dispute. All 
    policy issues would be resolved by mid-January.
        The proposed timetable for developing the annual update to the wage 
    index was as follows (an asterisk indicates no change from prior 
    years):
    
    Mid-November*  All desk reviews for hospital wage data are completed 
    and revised data transmitted by intermediaries to HCRIS.
    Mid-December  Deadline for hospitals to request wage data revisions and 
    provide adequate documentation to support the request.
    Mid-January  Deadline for intermediaries to submit to HCRIS all 
    revisions resulting from hospitals' requests for adjustments (as of 
    mid-December) (and verification of data submitted to HCRIS (as of mid-
    November)).
    Early April  Edited wage data are available for release to the public.
    May 1*  Proposed rule published with 60-day comment period and 45-day 
    withdrawal deadline for geographic reclassification.
    
    [[Page 45991]]
    
    Early May (2 weeks after publication of proposed rule)  Deadline for 
    hospitals to notify HCFA and intermediary that wage data are incorrect 
    due to mishandling of data (that is, error in data entry or 
    transmission) by intermediary or HCFA.
    Late May (2 weeks after previous deadline)  Deadline for intermediaries 
    to transmit all revisions to HCRIS.
    September 1*  Publication of the final rule.
    October 1*  Effective date of updated wage index.
    
        The most significant change reflected in the proposed timetable is 
    that we would no longer make available a preliminary wage data file 
    prior to hospitals' final opportunity to request corrections.
        As noted in section V of this preamble, section 4644(b) of Public 
    Law 105-33 requires that, beginning with FY 1999, we publish a proposed 
    rule on changes to the prospective payment system by April 1 prior to 
    the fiscal year when such changes are to become effective, and a final 
    rule by August 1. In light of this and for other reasons discussed 
    below, we are revising this proposed timetable for preparing the FY 
    1999 wage index to allow for release of a public use file containing 
    the edited preliminary FY 1995 wage data.
    2. Cost Reporting Timetable
        In the proposed rule, we stated that the proposed timetable would 
    not significantly alter the time hospitals have to ensure the accuracy 
    of their data. In developing the wage index for a given fiscal year, we 
    use the most recent, reviewed wage data, that is, wage data from cost 
    reports that began in the fiscal year 4 years earlier. For example, for 
    the FY 1999 wage index, we will use data from cost reporting periods 
    beginning in FY 1995. Hospitals must submit cost reports to their 
    intermediaries within 150 days of the end of their cost reporting 
    periods. Once the cost report is received, the intermediary has 12 
    months to review and settle it.
        As part of the settlement process, we require intermediaries to 
    conduct a desk review of the wage data. The desk review program for 
    hospital wage data targets potentially aberrant data and checks the 
    completeness and accuracy of the data, including verifying that 
    reported costs are in conformance with our policy, before they are used 
    in calculating the wage index. The intermediary checks the wage data 
    and supporting documentation submitted by the hospital and contacts the 
    hospital if additional information is needed to verify the accuracy of 
    the data. When it is necessary for the intermediary to adjust a 
    hospital's wage data, the intermediary notifies the hospital in writing 
    of the change to the cost report and hospitals then have the 
    opportunity to request adjustments. This would continue to be the case.
        Since intermediaries must settle cost reports within 12 months of 
    their receipt, most of the cost reports are settled by the time we 
    compile the data to calculate the wage index. We note, however, that 
    the annual update of the wage index is not tied directly to the cost 
    report settlement process since extensions or reopenings of settled 
    cost reports may be granted.
        The following is an illustration of the process for settling a 
    typical cost report beginning in FY 1995. Of course, hospitals' cost 
    reporting periods may begin at any time during the year.
    
    January 1, 1995  Cost reporting period begins.
    December 31, 1995  Cost reporting period ends.
    May 31, 1996  Cost report must be submitted by the hospital to the 
    intermediary.
    July 31, 1996  Cost report must be transmitted by the intermediary to 
    HCRIS.
    May 31, 1997  Cost report must be settled by the intermediary. (Desk 
    review of hospital wage data is performed on an ongoing basis by the 
    intermediary before the cost report is settled.)
    July 31, 1997  Settled cost report must be transmitted by the 
    intermediary to HCRIS.
    
        Comment: One association representing fiscal intermediaries 
    objected to our statement that the intermediaries must settle cost 
    reports within 12 months of their receipt. The commenter stated that 
    this is not consistent with our current audit and reimbursement 
    performance standards.
        Response: The regulations at Sec. 405.1835(c) provide that the 
    intermediary has up to 12 months from receipt of a cost report in which 
    to settle it. For purposes of the contractor performance evaluation 
    program (CPEP) for FY 1997, the standard is that the intermediary has 
    at least 21 months from receipt of a hospital's cost report in which to 
    settle it. While we are not changing the CPEP instructions or standards 
    for FY 1997, the instructions are subject to change from year to year. 
    Therefore, in the discussion of the wage index timetable, we used the 
    cost report settlement information from the regulations, which are 
    relatively constant, not the performance evaluation standard, which is 
    subject to change from year to year. Since we are required by statute 
    to update the wage index on an annual basis, the wage index update is 
    not tied directly to the cost report settlement process as the 
    settlement may be delayed for several reasons, including allowances by 
    the CPEP, extensions, and reopenings.
        Comment: The same commenter was also concerned that the proposed 
    modification to the timetable for developing the FY 1999 wage index 
    would require intermediaries to complete desk reviews for two cost 
    reporting periods within the same budget year and that this substantial 
    increase in work would require additional funding.
        Response: Regarding the commenter's concern that additional funding 
    would be needed to handle the increased desk review workload (which 
    would result from revising the timetable as proposed), in the 
    instructions for the wage index desk review the intermediaries are 
    instructed to perform the desk reviews as the cost reports are 
    received. We do not agree with the commenter's assertion that 
    shortening the timeframe for developing the wage index will result in a 
    substantial increase in the intermediaries' workload. In fact, as we 
    pointed out in the preamble to the proposed rule, under the current 
    process, intermediaries are required to verify the inclusion and 
    accuracy of all hospitals' wage data twice during the wage index 
    development. Our proposed timetable would have eliminated the need for 
    the second verification by the intermediaries.
        Comment: One hospital association suggested that the number of late 
    revisions could be reduced if intermediaries completed the wage data 
    desk reviews within 60 days from receipt of hospitals' cost reports and 
    if HCFA and the intermediaries would use the same edits. Others 
    commented that HCFA's edits are unrealistic and that improved edits 
    would reduce the need for a preliminary wage data file.
        Response: We agree with the commenter's suggestion that the number 
    of late revisions could be reduced if intermediaries completed the wage 
    data desk reviews soon after receipt of the hospitals' cost reports. 
    There is a desk review being developed to perform an automated review 
    of the entire cost report, including the hospital wage index 
    information, as the cost reports are received by the intermediary. The 
    expectation is that desk review would integrate the editing of the wage 
    data and the other cost report data, as well
    
    [[Page 45992]]
    
    as eliminate the need for a separate desk review of the wage data by 
    the intermediary and editing of the wage data by HCFA. Until that desk 
    review is in place, the wage data desk review is a necessary part of 
    the annual update to the wage index.
        Regarding the edits, the same types of edits are used by HCFA and 
    the intermediaries. The initial edits, performed by the intermediary in 
    the desk review, are broad in order to identify problem areas. We then 
    perform a more focused review, using the same types of edits as in the 
    desk review, once the data are received and aggregated. Also, 
    additional edits on the aggregated data are performed. We update the 
    wage data edits each year and will reevaluate and revise the types and 
    thresholds of the edits to better identify incomplete or inaccurate 
    data.
    3. The Final Revised Timetable for Finalizing Wage Data
        We received approximately 40 comments regarding our proposal to 
    reduce the amount of time for developing the wage index.
        Comment: Most of the commenters were opposed to our proposal, 
    stating that it would reduce the number of days that the hospital 
    industry has for reviewing the wage data. Another commenter believes 
    that the fact that the preliminary wage data file is released only 2 
    months prior to the mid-May deadline for revisions is the main cause of 
    late submissions. One hospital added that the expedited timeframe would 
    be disadvantageous for rural hospitals, especially in an environment in 
    which their wage index values are decreasing while the urban values are 
    increasing.
        Response: We continue to believe that expediting the resolution of 
    all wage data issues earlier in the process will improve the accuracy 
    of the wage index. Hospitals are ultimately responsible for the 
    accuracy of their cost report information. Because intermediaries are 
    required to notify hospitals of changes to their cost reports, 
    including those affecting the wage data, we do not agree that the 
    timing of the release of the preliminary data file is the cause for the 
    volume of last minute revisions. Hospitals should know what is included 
    in their wage data well before the release of this file. In fact, our 
    intent in releasing the preliminary data file is primarily to allow 
    hospitals to verify that the data on file at HCFA matches their latest 
    wage data information. We remain concerned that the release of the 
    preliminary file itself and the final opportunity for revisions it 
    provides actually encourages hospitals to wait to request revisions 
    until after its release.
        With regard to the comment that the proposed timetable would 
    adversely impact rural hospitals, it is not clear to us from the 
    comment how this proposal would have that effect. By placing greater 
    emphasis on individual hospitals to ensure the accuracy of their data 
    earlier in the process, we believe the result would be a more accurate 
    wage index overall.
        Comment: Two commenters stated that they agreed that the schedule 
    for developing the wage data should be shortened, but that HCFA should 
    continue to make available the preliminary wage data file. A few 
    commenters suggested that the preliminary file could be released to the 
    public earlier, for example, in mid-December (about 30 days after the 
    deadline for the intermediaries to transmit the data to HCRIS) to 
    reduce the amount of late changes.
        Response: Due to the requirement that the changes to the inpatient 
    prospective payment system be published one month earlier (beginning 
    with FY 1999), we have no choice but to expedite this process. Although 
    commenters suggested that a preliminary file could be released in mid-
    December, that date would not provide sufficient time for the fiscal 
    intermediaries to verify hospitals' data that are included on the file. 
    We believe it would be counterproductive to ask the industry to review 
    the data file prior to the fiscal intermediaries' verification. 
    However, in light of the concerns about eliminating the preliminary 
    file, we plan to make available an edited, preliminary FY 1995 wage 
    data file in February 1998.
        Comment: Several commenters stated that since the wage data 
    requirements in the FY 1995 cost report have changed significantly from 
    previous years, it would be inappropriate to implement an expedited 
    process for the FY 1999 wage index. Two hospital associations commented 
    that they evaluated preliminary FY 1995 wage data from the HCRIS 
    Minimum Data Set and concluded that the data showed serious reporting 
    problems.
        Many of the commenters stated that the hospital industry uses the 
    preliminary file to evaluate the quality of the wage data and to ensure 
    that Medicare payment is properly allocated among hospitals. Some of 
    the commenters said that the wage data would likely be less accurate 
    without the industry's review of the preliminary wage data file. One 
    association added that, without the edited preliminary file, those 
    evaluating hospital wage data would have to rely on the HCRIS file, 
    which is less accurate and less complete.
        Response: Effective with cost reporting periods beginning on or 
    after October 1, 1994, we revised the Medicare cost report to provide 
    for the separate reporting of all salary costs for physicians 
    (including teaching physicians), residents, and CRNAs. In addition, in 
    order to analyze the feasibility of excluding overhead costs 
    attributable to skilled nursing facilities and other excluded areas, 
    overhead cost data is collected by cost center. After evaluating these 
    data, we will consider appropriate changes in developing the FY 1999 
    and future wage index updates.
        Thus, we have decided to release a preliminary wage data file for 
    the FY 1999 wage index prior to hospitals' final opportunity to request 
    corrections. The combination of the changes to the FY 1995 wage data, 
    the earlier publication schedule, and the comments we received 
    regarding the timing of intermediaries' audits caused us to reverse our 
    intention to eliminate the preliminary data file during the processing 
    of the FY 1999 wage index and to make other adjustments. Therefore, we 
    are making several changes to the current timetable as well as the 
    timetable we proposed. The most significant of these changes is that 
    the preliminary public use file will now be made available in February 
    (we will contact the hospital industry regarding the precise release 
    date), and that hospitals will then have 30 days (rather than the 
    current 60 days) to request revisions to their data. This shortened 
    review period is necessitated by the earlier publication date and our 
    intent to eliminate the need for an annual correction notice reflecting 
    changes due to data handling errors.
        We believe that this will enable us to utilize the hospital 
    industry's analyses to help ensure the accuracy of the data. However, 
    due to the earlier publication schedule, hospitals will have only 30 
    days to review their data and request adjustments. We believe the 
    trade-off between making preliminary data available earlier and 
    shortening the time for review is fair. Intermediaries will have 30 
    days to review the requests, make their determinations, and transmit 
    the revised data to HCRIS.
        We plan to release a final wage data file in May for the limited 
    purpose of allowing hospitals the opportunity to identify errors made 
    by HCFA or the intermediary in the transmission of the final wage data. 
    We anticipate that this revised timetable will meet our objective of 
    enabling us to correct any data errors contained in the final wage data 
    file prior to publication of the final rule on August 1.
    
    [[Page 45993]]
    
        Thus, the final revised timetable is as follows:
        Mid-November--All desk reviews for hospital wage data are completed 
    and revised data transmitted by fiscal intermediaries to HCRIS.
        Early February--Edited wage data are available for release to the 
    public.
        Early March--Deadline for hospitals to request wage data revisions 
    and provide adequate documentation to support the request.
        Early April--Deadline for intermediaries to transmit appropriate 
    revised wage data to HCRIS.
        April 1--Proposed rule published with 60-day comment period and 45-
    day withdrawal deadline for geographic reclassification.
        Early May--Final wage data are available for release to the public.
        Early June--Deadline for hospitals to notify HCFA and their fiscal 
    intermediary that wage data are incorrect due to mishandling of data 
    (that is, an error in data entry or transmission) by intermediary or 
    HCFA.
        August 1--Publication of the final rule.
        October 1--Effective date of updated wage index.
        We believe this timetable, like the timetable reflected in the 
    proposed rule, is a logical step in the evolution of the process for 
    compiling the wage data used to calculate the hospital wage index. For 
    a number of years, the hospital wage index was based on a wage survey 
    that was not updated every year. Applicable policies permitted 
    hospitals to request and receive midyear corrections to the data on the 
    wage survey. Beginning with FY 1994 (beginning on October 1, 1993), we 
    used wage data submitted by hospitals on Worksheet S-3, Part II of the 
    hospital cost report, and we update the wage data every year. We 
    revised our wage data process accordingly--we stopped making midyear 
    corrections to the wage data (except under very limited circumstances, 
    as noted below), and instead attempted to finalize the wage data by the 
    final rule.
        The new timetable would shorten the time for revisions somewhat 
    further. Because we have used cost report data for 5 years now, 
    hospitals should be well aware of the importance of submitting accurate 
    wage data on the Worksheet S-3, Part II. Also, as intermediaries and 
    hospitals have become increasingly familiar with the data collection 
    and verification process, handling the data has become more routine and 
    streamlined. For example, over the past year, we have greatly improved 
    the overall efficiency of our communications with the intermediaries 
    through greater reliance on electronic transmission of wage data. In 
    short, then, there should be less need for revising wage data after 
    desk reviews, and we believe it is reasonable and appropriate to revise 
    the timetable for requesting and resolving wage data revisions.
        We would continue to make midyear corrections to the wage index in 
    accordance with Sec. 412.63(s)(2), in those limited circumstances where 
    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 the fiscal year. Although we do not anticipate 
    that such situations would arise, this regulation would remain 
    unchanged.
    
    F. Wage Index Workgroup
    
        As stated in the proposed rule, we are concerned that the rapid and 
    dramatic changes occurring in hospitals' operating environments, 
    combined with the current time lag in the data used to construct the 
    wage index, is leading to a situation where the wage index may be 
    becoming less representative of hospitals' current labor costs. 
    Hospitals' increasing reliance on contract labor for a broadening array 
    of functions, hospital mergers and the development of integrated 
    delivery systems, and the expansion of the prospective payment system 
    to other sites of care are factors that indicate a need for a concerted 
    effort to ensure that the data required for calculating the wage index 
    are available and reliable. Furthermore, despite the improvements that 
    resulted from the work of the special Medicare Technical Advisory Group 
    (MTAG) several years ago, technical questions about the treatment of 
    certain types of labor costs continue to arise.
        For these reasons, we believe there is a need for an ongoing 
    workgroup to address wage index related issues periodically. We 
    solicited input from representatives of the hospital industry (and 
    other provider types interested in the collection of wage data) 
    regarding the need for such a workgroup and their willingness to 
    participate. We also sought public input regarding the structure and 
    scope of such a workgroup.
        Comment: The response to the proposed wage index workgroup was 
    favorable. Some commenters believe the group should be formally 
    established and meet on a regular basis to ensure the attention and 
    resources needed to accomplish its objectives. Several commenters 
    recommended that the wage index workgroup be formed under the auspices 
    of the MTAG. Another commenter suggested that a workgroup formed on an 
    ad hoc basis, with one or more specific issues to address, might be the 
    best way to structure the group. Several commenters stated that the 
    group's agenda should be broadly defined to encompass input price 
    adjustment issues related to hospitals, skilled nursing facilities, 
    home health agencies, rehabilitation facilities, and managed care 
    plans. Some commenters expressed interest in participating in such a 
    workgroup.
        Response: We will proceed with the development of the wage index 
    workgroup. We will be in contact with interested parties to arrange a 
    meeting to discuss issues related to its structure and focus. We 
    appreciate the enthusiastic responses, and believe that utilization of 
    a workgroup will expedite many procedural improvements in the wage 
    index process.
    
    IV. Revising the Hospital Operating Market Baskets
    
    A. General Discussion
    
        We used a hospital input price index (that is, the hospital 
    ``market basket'') to develop the inflation component update factors 
    for operating costs. Although ``market basket'' technically describes 
    the mix of goods and services used to produce hospital care, this term 
    is also commonly used to denote the input price index (that is, cost 
    category weights and price proxies combined) derived from that market 
    basket. Accordingly, the term ``market basket'' as used in this 
    document refers to the hospital input price index.
        The terms rebasing and revising, although often used 
    interchangeably, actually denote different activities. Rebasing moves 
    the base year for the structure of costs of an input price index (for 
    example, moving the base year cost structure from FY 1987 to FY 1992). 
    Revising means changing data sources, cost categories, or price proxies 
    used in the input price index for a given base year. In the August 30, 
    1996 final rule, effective for FY 1997, we both rebased and revised the 
    hospital operating market baskets (61 FR 46186).
    
    B. Revising the Hospital Market Basket
    
        We used a revised hospital market basket for the FY 1998 update 
    framework for the operating prospective payment rates. In the August 
    30, 1996 final rule, we discussed the possibility of revising the 
    market basket when additional data became available (61 FR 46187). 
    Consistent with that discussion, we used a revised market basket that 
    still has a base year of FY 1992, but
    
    [[Page 45994]]
    
    incorporates additional data, specifically the Asset and Expenditure 
    Survey, 1992 Census of Service Industries, by the Bureau of the Census, 
    Economics and Statistics Administration, U.S. Department of Commerce, 
    which did not become available until after the FY 1997 final rule was 
    published. (For further discussion of the differences between the 
    revised market basket for FY 1998 and the current market basket, see 
    Appendix C of this final rule with comment period.)
        In the current market basket, data for four major expense 
    categories (wages and salaries, employee benefits, pharmaceuticals, and 
    a residual category) are from Medicare hospital cost reports for 
    periods beginning in FY 1992 (that is, periods beginning on or after 
    October 1, 1991 and before October 1, 1992). These cost reports, which 
    we refer to as PPS-9 cost reports (the 9th year of the prospective 
    payment system), are reported in the Health Care Provider Cost Report 
    Information System (HCRIS). In the revised hospital market basket, we 
    still use the cost report data, and categories and weights are 
    unchanged from the current market basket. Within the residual category, 
    the categories and weights for nonmedical professional fees and 
    professional liability insurance are also unchanged. (For a detailed 
    discussion of the determination of weights, see the August 30, 1996 
    final rule (61 FR 46187)).
        Table 1 shows a comparison of the current and the revised operating 
    market basket cost categories, weights, and price proxies. For the 
    revised market basket, weights for the ``Utilities'' and ``All Other'' 
    cost categories, as well as most subcategories, were derived using the 
    Asset and Expenditure Survey, published by the Bureau of the Census, 
    Economics and Statistics Administration, U.S. Department of Commerce, 
    in conjunction with the latest available (1987) Input-Output Table, 
    produced by the Bureau of Economic Analysis (BEA), U.S. Department of 
    Commerce. The 1987 input-output cost shares, aged to 1992 using 
    historical price changes between 1987 and 1992 for each category, were 
    allocated to be consistent with the newly available 1992 asset and 
    expenditure data.
        The resulting combined data were allocated to be consistent with 
    the 1992 hospital cost report data. Revised relative weights for the 
    base year were then calculated for various expenditure categories. This 
    work resulted in the identification of 22 separate cost categories in 
    the revised market basket. Four categories previously separate were 
    combined with existing categories. Specifically, Business Services, and 
    Computer and Data Processing Services were combined with All Other 
    Labor-Intensive Services. Transportation Services was combined with All 
    Other Nonlabor-Intensive Services, and the Fuel, Oil, Coal etc. 
    category was split between Fuels (nonhighway) and Miscellaneous 
    Products. We combined these categories so that the market basket would 
    conform more closely with the 1992 Asset and Expenditure Survey. 
    Detailed descriptions of each of the four categories and their 
    respective price proxies can be found in the August 30, 1996 final rule 
    (61 FR 46323). Changing the structure of the market basket using the 
    1992 Asset and Expenditure Survey allows for a more accurate reflection 
    of the cost structures faced by hospitals. When the Bureau of the 
    Census or the BEA improves methodologies for the collection and 
    categorization of data, it is likely the weights will also change.
    
     Table 1.--Comparison of Current 1992-Based Prospective Payment Hospital
       Market Basket with Revised 1992-Based Prospective Payment Hospital   
                                  Market Basket                             
    ------------------------------------------------------------------------
                                                         Current    Revised 
                                                          1992-      1992-  
         Expense categories            Price proxy      based PPS  based PPS
                                                          market     market 
                                                          basket     basket 
    -------------------------------------------------------\1\--------------
    1. Compensation:............  ....................     61.390     61.390
        A. Wages and salaries...  HCFA occupational        50.244     50.244
                                   wage index.                              
        B. Employee benefits....  HCFA occupational        11.146     11.146
                                   benefits index.                          
    2. Nonmedical professional    ECI-compensation for      2.127      2.127
     fees.                         professional,                            
                                   specialty, and                           
                                   technical.                               
    3. Utilities:...............  ....................      2.470      1.542
        A. Electricity..........  PPI commercial            1.349      0.927
                                   electric power.                          
        B. Fuels (nonhighway)...  PPI commercial            1.015      0.369
                                   natural gas.                             
        C. Water and sewerage...  CPI-U water and           0.106      0.246
                                   sewerage                                 
                                   maintenance.                             
    4. Professional liability     HCFA professional         1.189      1.189
     insurance.                    liability insurance                      
                                   premium index.                           
    5. All other expenses:......  ....................     32.825     33.752
        A. All other products:..  ....................     24.033     24.825
          (1) Pharmaceuticals...  PPI ethical               4.162      4.162
                                   (prescription)                           
                                   drugs.                                   
          (2) Food..............  ....................      3.459      3.386
          (a) Direct purchase...  PPI processed foods       2.363      2.314
                                   and feeds.                               
          (b) Contract service..  CPI food away from        1.096      1.072
                                   home.                                    
          (3) Chemicals.........  PPI industrial            3.795      3.666
                                   chemicals.                               
          (4) Medical             PPI medical               3.128      3.080
           instruments.            instruments and                          
                                   equipment.                               
          (5) Photographic        PPI photographic          0.399      0.391
           supplies.               supplies.                                
          (6) Rubber and          PPI rubber and            4.868      4.750
           plastics.               plastic products.                        
          (7) Paper products....  PPI converted paper       2.062      2.078
                                   and paperboard                           
                                   products.                                
          (8) Apparel...........  PPI apparel.........      0.875      0.869
          (9) Machinery and       PPI machinery and         0.211      0.207
           equipment.              equipment.                               
          (10) Miscellaneous      PPI finished goods..      1.074      2.236
           products.                                                        
        B. All other services:..  ....................      8.792      8.927
          (1) Postage...........  CPI-U postage.......      0.272      0.272
          (2) Telephone services  CPI-U telephone           0.531      0.581
                                   services.                                
          (3) All other: labor    ECI compensation for      7.457      7.277
           intensive.              private service                          
                                   occupations.                             
          (4) All other:          CPI-U all items.....      0.532      0.796
           nonlabor intensive.                                              
    
    [[Page 45995]]
    
                                                                            
            Total...............  ....................    100.000   100.000 
    ------------------------------------------------------------------------
    Note: Due to rounding, weights may not sum to total.                    
    \1\ Expense categories based on revised 1992-based hospital market      
      basket for comparison purposes.                                       
    
        In calculating payments to hospitals, the labor-related portion of 
    the standardized amounts is adjusted by the hospital wage index. As 
    discussed in the August 30, 1996 final rule (61 FR 46189), for purposes 
    of determining the labor-related portion of the standardized amounts, 
    we sum the percentages of the labor-related items (that is, wages and 
    salaries, employee benefits, professional fees, business services, 
    computer and data processing services, postage, and all other labor-
    intensive services) in the operating hospital market basket. Effective 
    for FY 1997, this summation resulted in a labor-related portion of the 
    hospital market basket of 71.246 percent, and a nonlabor-related 
    portion of 28.754 percent. Thus, since October 1, 1996, we have 
    considered 71.2 percent of operating costs to be labor-related for 
    purposes of the prospective payment system (we rounded to the nearest 
    tenth).
        In connection with the revisions to the hospital market basket, we 
    have reestimated the labor-related share of the standardized amounts. 
    Based on the relative weights described in Table 2, the labor-related 
    portion (wages and salaries, employee benefits, professional fees, 
    postage, and all other labor-intensive services) is 71.066 percent, and 
    the nonlabor-related portion is 28.934 percent. Accordingly, effective 
    with discharges occurring on or after October 1, 1997, we are revising 
    the labor-related and nonlabor-related shares of the large urban and 
    other areas' standardized amounts used to establish the prospective 
    payment rates to 71.1 and 28.9, respectively. The amounts in Table 2 
    reflect the revised labor-related and nonlabor-related portions. We 
    note that the labor-related portions of the rates published in Table 2 
    have remained approximately the same. The labor-related portion has 
    decreased from 71.2 percent to 71.1 percent.
    
     Table 2.--Labor-Related Share of Revised 1992-Based Prospective Payment
                             Hospital Market Basket                         
    ------------------------------------------------------------------------
                             Cost category                           Weight 
    ------------------------------------------------------------------------
    Wages and salaries............................................    50.244
    Employee benefits.............................................    11.146
    Professional fees.............................................     2.127
    Postal services...............................................     0.272
    All other labor intensive.....................................     7.277
                                                                   ---------
        Total labor-related.......................................    71.066
        Total nonlabor-related....................................    28.934
    ------------------------------------------------------------------------
    
        Comment: We received comments encouraging us to revisit the market 
    basket framework annually to adjust for changes such as additional 
    administrative costs for hospitals that revise their Medicare billing 
    procedures to screen claims in response to current policies such as the 
    3-day payment window and pending legislation such as the change in 
    definition of a transfer.
        Response: When slight adjustments are made to individual weights 
    within the hospital market baskets, there is typically little or no 
    change in the historical or forecasted market baskets. A shift in 
    weights from one cost category to another results in a zero sum. Cost 
    categories rising in relative importance are offset by cost categories 
    falling in relative importance. The total weight is 100 before and 
    after the shift. There is an impact on the weighted average of price 
    changes only when the price changes (not levels) of the cost categories 
    shifted are substantially different. This is not typically the case.
        Regarding administrative costs, we note that rebasing the market 
    basket is done at 5-year intervals. In the interim, additional costs 
    for administration are appropriately handled in the update framework, 
    which includes factors such as hospital productivity and intensity of 
    services.
        Comment: We received a comment requesting that the market baskets 
    be revised again when more recent Input- Output Tables become available 
    from the Bureau of Economic Analysis. The commenter also questioned 
    changes to the market baskets that (1) reduce weights within the 
    utilities cost category by moving some of the weight to the 
    miscellaneous products category and (2) combine business and computer 
    services into all other labor-intensive services.
        Response: The changes in weights in the revised market baskets are 
    the result of using data from the Asset and Expenditure Survey. We did 
    a sensitivity analysis in which we developed a test index identical to 
    the revised prospective payments market basket except that the weights 
    and proxies for the current version of ``All Other Services'' were 
    substituted for those in the revised market basket's ``All Other 
    Services'' category. For the historical and forecast period of 1992-
    2002, half of the years showed no difference and half showed a 0.1 
    percentage point difference in the percent change upon which updates 
    are based. We feel that the revised market baskets represent an 
    improvement in cost categories and price proxies, and therefore are 
    better measures of composite price changes. When the Input-Output 
    Tables for 1992 become available we will review these data carefully. 
    Revised Input-Output data are automatically included in rebasing on a 
    regular schedule (approximately every 5 years).
    
    C. Selection of Price Proxies
    
        Only four categories that are part of the current hospital market 
    basket do not appear in the revised hospital market basket. Of the 22 
    categories that are part of both the current and the revised market 
    baskets, only the weights might differ. The wage and price proxies 
    selected for these cost categories are the same as those selected last 
    year. A description and discussion of each price proxy are set forth in 
    the August 30, 1996 final rule (61 FR 46324). The price proxies are 
    shown in Table 1, above. The makeup of the HCFA Blended Occupational 
    Wage Index and the HCFA Blended Occupational Benefits Index used as 
    proxies for Wages and Salaries
    
    [[Page 45996]]
    
    and Employee Benefits, respectively, remain the same as last year. (See 
    61 FR 27463.)
        To examine the impact of the changes to the weights and the 
    reduction of the number of cost categories, we developed a comparison 
    for the period FY 1994 through FY 1999. Using historical data for FY 
    1994 through FY 1996, and forecasts for FY 1997 through FY 1999 for the 
    prospective payment market basket, we compared the percentage changes 
    for the current and the revised market baskets.
    
     Table 3.--Comparison of the Current Prospective Payment Hospital Market
        Basket and the Revised Prospective Payment Hospital Market Basket   
                          Percent Change, FY 1994-1999                      
    ------------------------------------------------------------------------
                                               Current   Revised            
                                              hospital  hospital            
               Federal fiscal year             market    market   Difference
                                               basket    basket             
    ------------------------------------------------------------------------
    Historical:                                                             
        1994................................       2.6       2.6        0.0 
        1995................................       3.2       3.2        0.0 
        1996................................       2.5       2.4       -0.1 
    Forecasted:                                                             
        1997................................       2.3       2.1       -0.2 
        1998................................       2.7       2.7        0.0 
        1999................................       3.0       2.9       -0.1 
     Historical average: 1994-1996..........       2.8       2.7       -0.1 
    Forecasted average: 1997-1999...........       2.7       2.6       -0.1 
    ------------------------------------------------------------------------
    
        Note that the historical average rate of growth for 1994 through 
    1996 for the improved revised prospective payment hospital market 
    basket is almost equal to that of the current market basket. The 0.1 
    percentage point difference is less than the +/- 0.25 percent threshold 
    for corrections for forecast error. The forecasted average rate of 
    growth for 1997 through 1999 for the revised market basket is 0.1 
    percentage points less than that of the current market basket.
    
    D. Separate Market Basket for Hospitals and Hospital Units Excluded 
    From the Prospective Payment System
    
        As in the prospective payment hospital market basket, weights for 
    the six main cost categories contained in the excluded hospital market 
    basket (that is, weights for wages and salaries, employee benefits, 
    professional fees, malpractice insurance, pharmaceuticals, and the 
    residual category) remain the same. Only the weights for ``Utilities'' 
    and the categories within ``All Other'' have been revised. Table 4 
    below shows weights for the current and revised 1992-based excluded 
    hospital market basket.
    
       Table 4.--Comparison of Current 1992-Based Excluded Hospital Market  
         Basket with Revised 1992-Based Excluded Hospital Market Basket     
    ------------------------------------------------------------------------
                                                         Current    Revised 
                                                          1992-      1992-  
                                                          based      based  
         Expense categories            Price proxy       excluded   excluded
                                                          market     market 
                                                          basket     basket 
    -------------------------------------------------------\1\--------------
    1. Compensation:............  ....................     63.721     63.721
        A. Wages and salaries...  HCFA occupational        52.152     52.152
                                   wage index.                              
        B. Employee benefits....  HCFA occupational        11.569     11.569
                                   benefits index.                          
    2. Nonmedical professional    ECI-compensation for      2.098      2.098
     fees.                         professional,                            
                                   specialty, and                           
                                   technical.                               
    3. Utilities................  ....................      2.557      1.675
        A. Electricity..........  WPI commercial            1.396      1.007
                                   electric power.                          
        B. Fuels (nonhighway)...  WPI commercial            1.051      0.401
                                   natural gas.                             
        C. Water and sewerage...  CPI-U water and           0.110      0.267
                                   sewerage                                 
                                   maintenance.                             
    4. Professional liability     HCFA professional         1.081      1.081
     insurance.                    liability insurance                      
                                   premium index.                           
    5. All other expenses.......  ....................     30.541     31.425
        A. All other products...  ....................     23.640     24.227
          (1) Pharmaceuticals...  PPI ethical               3.070      3.070
                                   (prescription)                           
                                   drugs.                                   
          (2) Food..............  ....................      3.581      3.468
          (a) Direct purchase...  PPI processed foods       2.446      2.370
                                   and feeds.                               
          (b) Contract service..  CPI food away from        1.135      1.098
                                   home.                                    
          (3) Chemicals.........  PPI industrial            3.929      3.754
                                   chemicals.                               
          (4) Medical             PPI medical               3.238      3.154
           instruments.            instruments and                          
                                   equipment.                               
          (5) Photographic        PPI photographic          0.413      0.400
           supplies.               supplies.                                
          (6) Rubber and          PPI rubber and            5.039      4.865
           plastics.               plastic products.                        
          (7) Paper products....  PPI converted paper       2.134      2.182
                                   and paperboard                           
                                   products.                                
          (8) Apparel...........  PPI apparel.........      0.906      0.890
          (9) Machinery and       PPI machinery and         0.218      0.212
           equipment.              equipment.                               
          (10) Miscellaneous      PPI finished goods..      1.112      2.232
           products.                                                        
        B. All other services...  ....................      6.901      7.198
          (1) Postage...........  CPI-U postage.......      0.282      0.295
          (2) Telephone services  CPI-U telephone           0.549      0.631
                                   services.                                
    
    [[Page 45997]]
    
                                                                            
          (3) All other: labor    ECI compensation for      5.519      5.439
           intensive.              private service                          
                                   occupations.                             
          (4) All other:          CPI-U all items.....      0.551      0.833
           nonlabor intensive.                                              
                                                       ---------------------
          Total.................  ....................    100.000    100.000
    ------------------------------------------------------------------------
    Note: Due to rounding, weights may not sum to total.                    
    \1\ Expense categories based on revised 1992-based hospital market      
      basket for comparison purposes.                                       
    
    V. Other Decisions and Changes to the Prospective Payment System for 
    Inpatient Operating Costs
    
    A. Outlier Payments (Secs. 412.80, 412.82, 412.84, and 412.86)
    
    1. Elimination of Day Outlier Payments
        Section 1886(d)(5)(A) of the Act provides for payments in addition 
    to the basic prospective payments for ``outlier'' cases, that is, cases 
    involving extraordinarily high costs (cost outliers) or long lengths of 
    stay (day outliers). That section also provides that, beginning with FY 
    1995, payments for day outliers will be phased out over 3 years. We 
    have discussed this phase out and its implementation in detail in the 
    September 1, 1994, September 1, 1995, and August 30, 1996 final rules 
    (59 FR 45366, 60 FR 45854, and 61 FR 46228, respectively). Since 
    payment for day outliers will be eliminated effective with discharges 
    occurring in FY 1998, we proposed conforming revisions to the 
    regulations at Secs. 412.80, 412.82, 412.84, and 412.86. At the same 
    time, we proposed to make a technical change to the provision 
    concerning outlier payments for transfer cases to conform the 
    regulations to policies that we have stated in previous prospective 
    payment system rules but did not codify. See the final rules published 
    September 1, 1995 (60 FR 45804) and September 1, 1993 (58 FR 46306-07).
        We received no comments on these conforming changes and are 
    incorporating them in this final rule with comment period as proposed.
    2. Changes to Outlier Payments in Pub. L. 105-33
        Section 4405 of Public Law 105-33 amended sections 1886 
    (d)(5)(B)(i)(I) and (d)(5)(F)(ii)(I) of the Act to provide that, in 
    determining the additional payment for indirect medical education (IME) 
    and/or disproportionate share hospitals (DSH), the IME and DSH 
    adjustment factors are applied only to the base DRG payment, not the 
    sum of the base DRG payment and any cost outlier payments, effective 
    with discharges occurring on or after October 1, 1997. The same section 
    of Pub. L. 105-33 also amended section 1886(d)(5)(A)(ii) of the Act to 
    require that the fixed loss cost outlier threshold is based on the sum 
    of DRG payments and IME and DSH payments for purposes of comparing 
    costs to payments. Therefore, we are revising our regulations at 
    Sec. 412.84(g) to remove the provision that costs be reduced by the IME 
    and DSH adjustment factors for purposes of comparing costs to payments 
    to determine if costs exceed the fixed loss cost outlier threshold, as 
    well as deleting current Sec. 412.80(c). Conforming changes are made at 
    current Sec. 412.105(a) (IME) and Sec. 412.106(a)(2) (DSH). We are also 
    making a corresponding change to the capital cost outlier methodology. 
    We received two public comments urging us to implement this provision 
    in the final rule.
        As indicated above, one change resulting from Pub. L. 105-33 is 
    that, in determining whether a case meets the cost outlier threshold, 
    we will not standardize the costs of the case to account for IME and 
    DSH payments. The following examples show the effect on two hospitals 
    of this change in methodology. In the example, we use DRG 286, which 
    has a relative weight of 2.2671. Each hospital has a wage index of 1. 
    The labor-related national large urban standardized amount is 
    $2,776.21; the nonlabor-related large urban standardized amount is 
    $1,128.44.
    
    Before the Change
    
    Standard Cost = (Billed Charges  x  Cost to Charge Ratio)  (1 + 
    IME + DSH)
    Outlier Payments = (80 percent of (Standard Cost--Threshold)) * (1 + 
    IME + DSH)
    Total Payments = Outlier Payments + (Federal Rate  x  (1 + IME + DSH))
    
    ------------------------------------------------------------------------
                                                                   Non-IME, 
                                                    IME and DSH    Non-DSH  
                                                      hospital     hospital 
    ------------------------------------------------------------------------
    Billed charges................................     $100,000     $100,000
    IME adjustment factor.........................       0.0744          0.0
    DSH adjustment factor.........................       0.1413          0.0
    Cost to charge ratio..........................         0.72         0.72
    Standard cost.................................   $59,225.14      $72,000
    Outlier threshold.............................   $17,806.30   $17,806.30
    Outlier payments..............................   $40,282.30   $43,354.96
    Total payments................................   $51,043.96   $52,207.19
    ------------------------------------------------------------------------
    
        Even with high IME and DSH adjustments, the IME and DSH hospital 
    receives a lower payment for an identical outlier case. This case uses 
    the fixed loss outlier threshold of $7,600 from the proposed rule.
        In the following example, the IME and DSH hospital's costs are not 
    adjusted for IME and DSH. The outlier threshold amount includes IME and 
    DSH payments. There are no IME and DSH payments for outliers. The 
    outlier threshold increases under this method for all hospitals.
    
    After the Change
    
    Standard Cost = (Billed Charges  x  Cost to Charge Ratio)
    Outlier Payments = 80 percent of (Standard Cost--Threshold)
    Total Payments = Outlier Payments + (Federal Rate  x  (1 + IME + DSH))
    
    ------------------------------------------------------------------------
                                                                   Non-IME, 
                                                     ME and DSH    non-DSH  
                                                      hospital     hospital 
    ------------------------------------------------------------------------
    Billed charges................................     $100,000     $100,000
    IME adjustment factor.........................       0.0744          0.0
    DSH adjustment factor.........................       0.1413          0.0
    Cost to charge ratio..........................         0.72         0.72
    Standard cost.................................      $72,000      $72,000
    Outlier threshold.............................   $20,961.91   $19,052.49
    Outlier payments..............................   $40,830.47   $42,358.01
    Total payments................................   $51,592.13   $51,210.24
    ------------------------------------------------------------------------
    
    
    [[Page 45998]]
    
        This case uses the final fixed loss threshold of $11,050 for FY 
    1998. The fixed loss threshold increase from the proposed rule is due 
    to the higher standard costs of IME and DSH hospitals.
    
    B. Rural Referral Centers (Sec. 412.96)
    
        Under section 1886(d) of the Act, hospitals generally are paid by 
    the Medicare program for inpatient hospital services covered by 
    Medicare in accordance with the prospective payment system. Certain 
    hospitals, however, receive special treatment under that system. 
    Section 1886(d)(5)(C)(i) of the Act specifically provides for 
    exceptions and adjustments to prospective payment amounts, as the 
    Secretary deems appropriate, to take into account the special needs of 
    rural referral centers.
        Section 412.96(d) of the regulations provides that, for discharges 
    occurring before October 1, 1994, rural referral centers received the 
    benefit of payment for inpatient operating costs per discharge based on 
    the other urban payment amount rather than the rural standardized 
    amount. As of October 1, 1994, the other urban and rural standardized 
    amounts are the same. However, rural referral centers continue to 
    receive special treatment under both the disproportionate share 
    hospital payment adjustment and the criteria for geographic 
    reclassification. One of the ways that a rural hospital may qualify as 
    a rural referral center is to meet two mandatory criteria (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 volume of referrals). These 
    criteria are described in detail in Sec. 412.96(c).
    1. Case-Mix Index Criteria
        Section 412.96(c)(1) sets forth the case-mix index criteria and 
    provides that, for cost reporting periods beginning on or after October 
    1, 1986, a hospital's case-mix index for discharges ``during the 
    Federal fiscal year that ended 1 year prior to the beginning of the 
    cost reporting period for which the hospital is seeking referral center 
    status'' must be at least equal to the national case-mix index value as 
    established by HCFA or the median case-mix value for urban hospitals in 
    the region in which the hospital is located (excluding hospitals 
    receiving indirect medical education payments), whichever is lower. As 
    discussed in the proposed rule, we feel that the language in 
    Sec. 412.96(c)(1) does not clearly address situations in which the 
    Federal fiscal year does not end exactly 1 year prior to the beginning 
    of the cost reporting period for which the hospitals are seeking 
    referral center status. Therefore, we clarified which case-mix index 
    values are used to determine referral center status. We emphasized that 
    this clarification represents no substantive change in policy.
        Our policy, which we have applied consistently since 1986, is that 
    the case-mix index used for an individual hospital in the determination 
    of whether it meets the case-mix index criterion is the case-mix index 
    for discharges during the most recent Federal fiscal year that ended at 
    least 1 year prior to the beginning of the cost reporting period for 
    which the hospital is seeking referral center status.
        We received no comments on our proposal to revise Sec. 412.96(c)(1) 
    to clarify the time period used to calculate the case-mix index, and we 
    are adopting it as proposed.
    2. Updated Case-Mix and Discharge Criteria
        As noted above, a rural hospital can qualify as a rural referral 
    center if the hospital meets two mandatory criteria (case-mix index and 
    number of discharges) and at least one of three optional criteria 
    (medical staff, source of inpatients, or volume of referrals). With 
    respect to the two mandatory criteria, 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 discharges 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.)
    a. 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. In determining the proposed national and 
    regional case-mix index values, we follow the same methodology we used 
    in the November 24, 1986 final rule, as set forth in regulations at 
    Sec. 412.96(c)(1)(ii). Therefore, 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 with approved teaching programs (that 
    is, those hospitals receiving indirect medical education payments as 
    provided in Sec. 412.105).
        These values are based on discharges occurring during FY 1996 
    (October 1, 1995 through September 30, 1996) and include bills posted 
    to HCFA's records through December 1996. Therefore, in addition to 
    meeting other criteria, we proposed that to qualify for initial rural 
    referral center status, a hospital's case-mix index value for FY 1996 
    would have to be at least--
         1.3525; or
         Equal to the median case-mix index value for urban 
    hospitals (excluding hospitals with approved teaching programs as 
    identified in Sec. 412.105) calculated by HCFA for the census region in 
    which the hospital is located (see the table set forth in the June 2, 
    1997 proposed rule at 62 FR 29923).
        Based on the latest data available (FY 1996 bills received through 
    June 1997), the final national case-mix value is 1.3529 and the median 
    case-mix values by region are set forth in the table below:
    
    ------------------------------------------------------------------------
                                                                    Case-mix
                                Region                               index  
                                                                     value  
    ------------------------------------------------------------------------
    1. New England (CT, ME, MA, NH, RI, VT)......................     1.2322
    2. Middle Atlantic (PA, NJ, NY)..............................     1.2455
    3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).......     1.3701
    4. East North Central (IL, IN, MI, OH, WI)...................     1.2610
    5. East South Central (AL, KY, MS, TN).......................     1.3023
    6. West North Central (IA, KS, MN, MO, NE, ND, SD)...........     1.2088
    7. West South Central (AR, LA, OK, TX).......................     1.3265
    8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).................     1.3476
    9. Pacific (AK, CA, HI, OR, WA)..............................     1.3450
    ------------------------------------------------------------------------
    
        For the benefit of hospitals seeking to qualify as referral centers 
    or those wishing to know how their case-mix index value compares to the 
    criteria, we are publishing each hospital's FY 1996 case-mix index 
    value in Table 3C in section IV of the Addendum to this final rule with 
    comment period. 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.
    b. Discharges
        Section 412.96(c)(2)(i) provides that HCFA will set forth the 
    national and regional numbers of discharges in each
    
    [[Page 45999]]
    
    year's annual notice of prospective payment rates for purposes of 
    determining referral center status. As specified in section 
    1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 
    discharges. However, we proposed to update the regional standards. The 
    proposed regional standards are based on discharges for urban 
    hospitals' cost reporting periods that began during FY 1995 (that is, 
    October 1, 1994 through September 30, 1995). That is the latest year 
    for which we have complete discharge data available.
        Therefore, in addition to meeting other criteria, we proposed that 
    to qualify for initial rural referral center status or to meet the 
    triennial review standards for cost reporting periods beginning on or 
    after October 1, 1997, the number of discharges a hospital must have 
    for its cost reporting period that began during FY 1996 would have to 
    be at least--
         5,000; or
         Equal to the median number of discharges for urban 
    hospitals in the census region in which the hospital is located. (See 
    the table set forth in the June 2, 1997 proposed rule at 62 FR 29924.)
        Based on the latest discharge data available, the final median 
    numbers of discharges for urban hospitals by census regions are as 
    follows:
    
    ------------------------------------------------------------------------
                                                                   Number of
                               Region                             discharges
    ------------------------------------------------------------------------
    1. New England (CT, ME, MA, NH, RI, VT).....................        6658
    2. Middle Atlantic (PA, NJ, NY).............................        8367
    3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)......        7515
    4. East North Central (IL, IN, MI, OH, WI)..................        7290
    5. East South Central (AL, KY, MS, TN)......................        6650
    6. West North Central (IA, KS, MN, MO, NE, ND, SD)..........        5189
    7. West South Central (AR, LA, OK, TX)......................        5133
    8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)................        7982
    9. Pacific (AK, CA, HI, OR, WA).............................        5919
    ------------------------------------------------------------------------
    
        We reiterate that, to qualify for rural referral center status for 
    cost reporting periods beginning on or after October 1, 1997, an 
    osteopathic hospital's number of discharges for its cost reporting 
    period that began during FY 1996 would have to be at least 3,000.
        We received no comments on the rural referral center criteria.
    3. Retention of Referral Center Status
        Section 1886(d)(5)(C)(i) of the Act states that ``the Secretary 
    shall provide for such exceptions and adjustments to the payment 
    amounts * * * as the Secretary deems appropriate to take into account 
    the special needs of regional and national referral centers * * *'' The 
    Conference Committee Report accompanying Public Law 98-21 (the original 
    legislation implementing the prospective payment system) contained 
    little additional language concerning the definition of ``regional and 
    national referral centers.'' The Report did indicate, however, that 
    they should include very large acute care hospitals located in rural 
    areas. Thus, we established qualifying criteria for referral center 
    status to identify those rural hospitals that, because of bed size, a 
    large number of complicated cases, a high number of discharges, or a 
    large number of referrals from other hospitals or from physicians 
    outside the hospital's service area, were likely to have operating 
    costs more similar to urban hospitals than to the average smaller 
    community hospitals. The regulations implementing the referral center 
    provision are codified at Sec. 412.96.
        In 1984, after a year's experience with the referral center 
    criteria, we determined that once approved for the referral center 
    adjustment, a hospital would retain its status for a 3-year period. At 
    the end of the 3-year period, we would review the hospital's 
    performance to determine whether it should be requalified for an 
    additional 3-year period. The requirement for triennial review was 
    added to the regulations in 1984 (Sec. 412.96(f)) to be effective for 
    cost reporting periods beginning on or after October 1, 1987 (the end 
    of the first 3 years of the referral center adjustment). However, since 
    then, three statutory moratoria on the performance of the triennial 
    reviews were enacted by Congress. When the third of these moratoria 
    expired at the end of cost reporting periods that began during FY 1994, 
    we implemented the triennial review requirements and some hospitals 
    lost their referral center status. (See the September 1, 1993 final 
    rule (58 FR 46310) for a detailed explanation of the moratoria and the 
    implementation of the triennial reviews.)
        Hospitals could lose rural referral center status in other ways. 
    With the creation of the Medicare Geographic Classification Review 
    Board (MGCRB) and a hospital's ability, beginning in FY 1992, to 
    request that it be reclassified from one geographic location to 
    another, we stated that if a referral center was reclassified to an 
    urban area for purposes of the standardized amount, it would, in most 
    instances, be voluntarily terminating its referral center status. (See 
    the June 4, 1991 final rule with comment period (56 FR 25482).) This 
    was true because, in most instances, a hospital's ability to qualify as 
    a ``rural referral center'' was contingent upon (among other criteria) 
    its status as a rural hospital.
        In addition, rural referral centers located in areas that were 
    redesignated as urban by the Office of Management and Budget lost their 
    referral center status. These hospitals had qualified for referral 
    center status under criteria applicable only to hospitals located in 
    rural areas. OMB's designation of the areas to urban status meant that 
    such hospitals were urban for all purposes and thus could no longer 
    qualify as rural referral centers.
        Section 4202(b)(1) of Public Law 105-33 states that, ``Any hospital 
    classified as a rural referral center by the Secretary * * * for fiscal 
    year 1991 shall be classified as such a rural referral center for 
    fiscal year 1998 and each subsequent fiscal year.'' Thus, many of the 
    hospitals that lost their referral center status for the reasons listed 
    above must be reinstated. For the purpose of implementing this 
    provision, we consider that a hospital that was classified as a 
    referral center for any day during FY 1991 (October 1, 1990 through 
    September 30, 1991) meets the reinstatement criterion.
        We have identified 136 hospitals that were classified as rural 
    referral centers in 1991 and are no longer classified as referral 
    centers at this time. Of these, approximately 70 lost their referral 
    center status for failure to meet the triennial review requirements; 
    approximately 40 lost their status due to MGCRB reclassification; 
    approximately 20 were in areas redesignated as urban by OMB, and 6 
    hospitals voluntarily requested withdrawal of their referral center 
    status.
        We are reinstating rural referral center status for all hospitals 
    that lost the status due to triennial review or MGCRB reclassification. 
    The HCFA regional offices will notify each hospital (and the hospital's 
    fiscal intermediary) of their reinstatement as referral centers 
    effective October 1, 1997. If a hospital believes it should be 
    reinstated but does not receive notification, it should contact the 
    appropriate regional office.
        We are not reinstating rural referral center status to hospitals in 
    areas redesignated as urban by OMB or hospitals that requested 
    withdrawal of such status. The language of section 4202(b)(1) states 
    that any hospital classified as a rural referral center for FY 1991, 
    ``* * * shall be classified as such a rural referral center for fiscal 
    year 1998 and each subsequent fiscal year.'' (Emphasis added.) 
    Hospitals located in
    
    [[Page 46000]]
    
    areas redesignated as urban by OMB, since FY 1991, are no longer 
    physically located in a rural area and they can no longer be classified 
    as ``rural'' referral centers. We also do not believe the law intended 
    that referral center classification be forced on hospitals that do not 
    want it and we are, therefore, not reinstating the status of the six 
    hospitals that requested withdrawal. If, however, any of these 
    hospitals wish to be requalified as a referral center, they should 
    contact their HCFA regional office.
        We note that section 4202(b)(1) provides reinstatement to only 
    those hospitals that were classified as rural referral centers during 
    FY 1991. That is, any hospital approved as a referral center after FY 
    1991 would not be protected by this provision. We do not believe that 
    it is equitable or administratively practical to maintain two lists of 
    referral centers, that is, a list of those hospitals approved for 
    referral center status in 1991 and thus protected by the reinstatement 
    provision and a list of those hospitals approved after FY 1991 and not 
    protected by the provision. Therefore, we are terminating the 
    requirement for triennial reviews of referral center status and 
    reinstating all hospitals that lost referral center status due to those 
    reviews. Thus, Secs. 412.96 (f) and (g) (1) and (2) are deleted. If we 
    later discover some hospital or class of hospitals that we believe 
    should not be allowed to retain referral center status because they 
    fail to meet some basic requirement we believe is essential to 
    receiving this special designation, we will consider reinstating some 
    type of annual or periodic qualifying criteria.
        In addition, we recognize that there are hospitals that qualified 
    for referral center status after 1991 and that may have lost that 
    status in a subsequent year due to reclassification by the MGCRB. 
    Again, we do not believe it is equitable or administratively practical 
    to treat such hospitals differently than those protected by the 
    provision of Public Law 105-33. Thus, we believe that any hospital that 
    lost its referral center status due to reclassification by the MGCRB, 
    regardless of whether it was classified as a referral center during FY 
    1991, should be reinstated effective October 1, 1997. The regional 
    offices will make every effort to identify and notify all affected 
    hospitals. However, hospitals that believe they meet the criteria for 
    reinstatement but do not receive notification from the regional office 
    or their fiscal intermediary, should contact the appropriate regional 
    office.
        We are also eliminating the policy that a hospital loses RRC status 
    if it is reclassified as urban by the MGCRB. We note that for 
    reclassified hospitals, RRC status would have no payment effect.
        Every effort will be made to process all reinstatements as quickly 
    as possible.
    
    C. Payment for Medicare-Dependent, Small Rural Hospitals (Sec. 412.108)
    
        Section 4204 of Public Law 105-33 amended section 1886(d)(5)(G) of 
    the Act to reinstate the classification of Medicare-dependent, small 
    rural hospitals (MDHs) for cost reporting periods beginning on or after 
    October 1, 1997 and before October 1, 2001. This category of hospitals 
    was originally created by section 6003(f) of the Omnibus Budget 
    Reconciliation Act of 1989 (Public Law 101-239), enacted on December 
    19, 1989, which added a new section 1886(d)(5)(G) of the Act. As 
    provided by that law, the special payment for MDHs was to be available 
    for cost reporting periods beginning on or after April 1, 1990 and 
    ending on or before March 31, 1993. Hospitals classified as MDHs were 
    paid using the same methodology applicable to sole community hospitals; 
    that is, based on whichever of the following rates yielded the greatest 
    aggregate payment for the cost reporting period:
         The national Federal rate applicable to the hospital.
         The updated hospital-specific rate using FY 1982 cost per 
    discharge.
         The updated hospital-specific rate using FY 1987 cost per 
    discharge.
        Section 13501(e)(1) of the Omnibus Budget Reconciliation Act of 
    1993 (Pub. L. 103-66), enacted on August 10, 1993, extended the MDH 
    provision through discharges occurring before October 1, 1994. Under 
    this revised provision, after the hospital's first three 12-month cost 
    reporting periods beginning on or after April 1, 1990, the additional 
    payment to an MDH whose applicable hospital-specific rate exceeded the 
    Federal rate was limited to 50 percent of the amount by which that 
    hospital-specific rate exceeded the Federal rate.
        In reinstating the MDH special payment for discharges occurring on 
    or after October 1, 1997 and before October 1, 2001, section 4204 of 
    Public Law 105-33 did not revise either the qualifying criteria for 
    these hospitals nor the most recent payment methodology. Therefore, the 
    criteria a hospital must meet in order to be classified as an MDH are 
    the same as before. Section 1886(d)(5)(G)(iv) of the Act defines an MDH 
    as any hospital that meets all of the following criteria:
         The hospital is located in a rural area.
         The hospital has 100 or fewer beds.
         The hospital is not classified as an SCH (as defined at 
    Sec. 412.92) at the same time that it is receiving payment under this 
    provision.
         In the hospital's cost reporting period that began during 
    FY 1987, not less than 60 percent of its inpatient days or discharges 
    were attributable to inpatients entitled to Medicare Part A benefits.
        For the purpose of implementing section 4204 of Pub. L. 105-33, we 
    consider that a hospital that meets the criteria above and that was 
    classified as an MDH on September 30, 1994 is reinstated as an MDH. We 
    have identified 414 hospitals that were classified as MDHs on September 
    30, 1994. Of these, 20 hospitals no longer participate in the Medicare 
    program, 15 hospitals are now classified as SCHs, 6 hospitals are now 
    located in urban areas, and 5 have more than 100 beds. We will provide 
    fiscal intermediaries with a list of the hospitals we have identified; 
    therefore, hospitals that meet the criteria for classification as an 
    MDH and that were classified as an MDH on September 30, 1994 do not 
    need to take any action in order to be reinstated as an MDH. At the 
    time the year-end settlement is made, the fiscal intermediary will 
    determine for each cost reporting period which hospitals meet the 
    criteria to qualify as MDHs. In addition, the intermediary will 
    determine for each cost reporting period which of the payment options 
    yields the highest rate of payment to a hospital that qualifies as an 
    MDH.
        We note that classification as an MDH is not optional. Therefore, 
    hospitals that meet the criteria in Sec. 412.108(a) are not eligible 
    for the temporary special payment provided for in section 4401(b) of 
    Public Law 105-33 (discussed below in section IV-D). However, if a 
    hospital that receives notification that it is being reinstated as an 
    MDH believes it no longer meets the criteria because, for example, it 
    has had an increase in its bed size to more than 100 beds, it should 
    contact its fiscal intermediary.
        For purposes of determining a hospital's bed size, we will continue 
    to use the same definition (which is defined for indirect medical 
    education purposes at Sec. 412.105(b)). That is, the number of beds in 
    a hospital is determined by counting the number of available bed days 
    during the hospital's cost reporting period, not including beds or 
    bassinets in the healthy newborn nursery, custodial care, and excluded 
    distinct part units, and dividing that number by the number of days in 
    the cost reporting period.
    
    [[Page 46001]]
    
        We are revising Secs. 412.90 and 412.108 to reflect the 
    reinstatement of the MDH special payment.
        Section 4204(a)(3) of Public Law 105-33 permits those hospitals 
    that applied and were approved for reclassification to a large urban 
    area for purposes of receiving the large urban rates through the MGCRB 
    to decline that reclassification for FY 1998. Normally, hospitals 
    approved for reclassification have only 45 days from the date of the 
    proposed rule to withdraw their request for reclassification. However, 
    the statute provides that, in this situation, hospitals may withdraw 
    their request for FY 1998 reclassification to a large urban area for 
    purposes of the standardized amount. Any hospital that does not 
    requalify for MDH reinstatement for FY 1998 because of a 
    reclassification to an urban area by the MGCRB for FY 1998 will be 
    notified and given the opportunity to decline that reclassification.
    
    D. Special Payment for Certain Nonteaching, Nondisproportionate Share 
    Hospitals That Do Not Qualify as Medicare-Dependent, Small Rural 
    Hospitals (Sec. 412.107)
    
        Section 4401(b) of Public Law 105-33 provides a temporary special 
    payment for FYs 1998 and 1999 for certain hospitals that do not receive 
    any additional payment through the IME or DSH adjustment and do not 
    meet the criteria to be classified as a Medicare-dependent, small rural 
    hospital (MDH). As set forth in section 4401(b)(2), in order to qualify 
    for the special payment, a hospital must be located in a State in which 
    the aggregate operating prospective payment for hospitals that meet the 
    special payment criteria (that is, non-IME, non-DSH, non-MDH hospitals) 
    is less than the aggregate allowable operating costs of inpatient 
    hospital services (referred to hereafter as a negative operating 
    prospective payment margin) for those hospitals for their cost 
    reporting periods that began during FY 1995. In addition, a hospital 
    must have a negative operating prospective payment margin during the 
    cost reporting period at issue (beginning in FY 1998 or 1999).
        Under the provisions of section 4401(b)(1), for these hospitals, 
    the percentage increase otherwise applicable to the standardized amount 
    for FY 1998 will be increased by 0.5 percentage points and, for FY 
    1999, the applicable percentage increase will be increased by 0.3 
    percentage points. Based on the current law, this means that these 
    hospitals will receive an update of 0.5 percent for FY 1998 (the update 
    for all other hospitals is 0) and, for FY 1999, an update of the market 
    basket increase minus 1.6 percentage points (1.9 for all other 
    hospitals). Under section 4401(b)(1), in applying these updates, the 
    increase provided in FY 1998 will not apply in computing the update for 
    FY 1999 and neither update will affect the updates provided for 
    discharges in fiscal years after FY 1999.
        Under section 4401(b)(2) of Public Law 105-33, in determining 
    whether a hospital qualifies for the special payment for a given cost 
    reporting period, we must look first at statewide aggregate data for 
    non-IME, non-DSH, non-MDH hospitals for cost reporting periods 
    beginning during FY 1995, and second at hospital-specific 
    characteristics for the cost reporting period at issue. With respect to 
    the first criterion, we used the best data currently available. We used 
    the latest update to the provider-specific file to identify those 
    hospitals that do not receive IME or DSH payments. We also identified 
    those hospitals that meet the criteria to be designated as an MDH. 
    Using the latest update to the Health Care Provider Cost Report 
    Information System (HCRIS), we examined the FY 1995 cost report data 
    for the non-IME, non-DSH, and non-MDH hospitals identified above and 
    found that the following States meet the criteria set forth in section 
    4401(b)(2)(B):
        Alaska, Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa, 
    Louisiana, Maine, Missouri, New Hampshire, New Jersey, Ohio, Puerto 
    Rico, Rhode Island, Vermont, Wisconsin,
        For purposes of determining qualification for special payment under 
    section 4401(b), this is the final list of qualifying States. We 
    recognize that cost reports for cost reporting periods beginning during 
    FY 1995 might be subject to further adjustments, and we considered the 
    option of waiting until all FY 1995 cost reports are finally settled 
    before determining the qualifying States. We rejected this approach 
    because under the prospective payment system, we believe that, to the 
    extent possible, we must set the payment parameters that will be 
    applied to hospitals before the start of the fiscal year. If we waited 
    several years for all FY 1995 cost reports to be settled before making 
    this additional payment to the qualifying hospitals, hospitals would 
    have less certainty about the amount of payments they would receive. 
    Moreover, the intent of Congress to provide relief to hospitals in FYs 
    1998 and 1999 would be compromised. In addition, for purposes of 
    computing the FY 1998 and 1999 standardized amounts and performing the 
    necessary related calculations (for example, the budget neutrality 
    adjustments), we need to make a prospective determination about which 
    hospitals are likely to be affected. In short, then, for purposes of 
    determining the qualifying States under section 4401(b)(2)(B), we have 
    decided to use the best data available now.
        With respect to hospital-specific characteristics, however, the 
    statute requires that we look at data for the cost reporting period at 
    issue (beginning in FY 1998 or 1999). That is, we must look at the cost 
    reporting period at issue and determine whether the hospital has a 
    negative operating prospective payment margin for that period, and 
    whether the hospital received IME or DSH payments or qualified as an 
    MDH for that period. Thus, the final determination as to whether a 
    hospital is eligible for the add-on cannot be made until cost report 
    settlement. We intend to make interim payment to these hospitals 
    beginning with discharges occurring on or after October 1, 1997, based 
    on the latest information available to the fiscal intermediaries. That 
    is, if a hospital is in one of the 17 designated States, is not 
    receiving IME or DSH payments in FY 1998 or 1999, is not an MDH, and, 
    based on the latest cost report information available to the 
    intermediary, has a negative operating prospective payment margin, the 
    intermediary will pay the hospital based on the higher standardized 
    amount during the fiscal year. As noted above, the final decision as to 
    a hospital's qualification for the additional payment will be made at 
    cost report settlement.
        We have added a new Sec. 412.107 to the regulations and revised 
    Sec. 412.90 to implement this provision. We note that in the Addendum 
    and Appendix A to this final rule with comment period, we refer to the 
    hospitals that qualify for the higher standardized amount as 
    ``temporary relief'' hospitals.
    
    E. Payments to Disproportionate Share Hospitals (Sec. 412.106)
    
        Effective for discharges beginning on or after May 1, 1986, 
    hospitals that treat a disproportionately large number of low-income 
    patients receive additional payments through the DSH adjustment. 
    Section 4403(a) of Public Law 105-33 reduces the payment a hospital 
    would otherwise receive under the current disproportionate share 
    formula by 1 percent for FY 1998, 2 percent for FY 1999, 3 percent for 
    FY 2000, 4 percent for FY 2001, 5 percent for FY 2002, and 0 percent 
    for FY 2003 and each subsequent fiscal year. Therefore, the actual 
    payment a hospital receives under DSH will be reduced by 1 percent for 
    FY 1998. We are adding a new
    
    [[Page 46002]]
    
    paragraph (e) to Sec. 412.106 to implement this provision.
        In addition, section 4403(b) of Public Law 105-33 requires the 
    Secretary to submit to Congress, no later than 1 year after enactment 
    (that is, by August 5, 1998), a report that contains a formula for 
    determining the amount of additional payments to disproportionate share 
    hospitals. In determining the formula, the Secretary is required to 
    establish a single threshold for costs incurred by hospitals in serving 
    low-income patients, and consider the following costs:
        (1) the costs incurred for furnishing hospital services to 
    individuals entitled to Medicare Part A and SSI; and
        (2) the costs incurred for furnishing services to individuals 
    receiving Medicaid who are not entitled to benefits under Part A of 
    Medicare, including individuals enrolled in a managed care organization 
    or any other managed care plan under Medicaid and individuals who 
    receive medical assistance in a State with an 1115 waiver under 
    Medicaid. In developing the formula, the Secretary is given the 
    authority to require hospitals receiving DSH payments to submit any 
    information the Secretary finds necessary in order to develop the 
    formula.
    
    F. Payment for Blood Clotting Factor for Hemophilia Inpatients 
    (Secs. 412.2 and 412.115)
    
        Hemophilia is a blood disorder characterized by prolonged 
    coagulation time, caused by an inherited deficiency of a factor in 
    plasma necessary for blood to clot. For purposes of this final rule 
    with comment period, hemophilia is considered to encompass the 
    following three conditions: Factor VIII deficiency (classical 
    hemophilia); Factor IX deficiency (plasma thromboplastin component); 
    and Von Willebrand's disease.
        Section 6011 of Public Law 101-239 amended section 1886(a)(4) of 
    the Act to provide that prospective payment hospitals receive an 
    additional payment for the costs of administering blood clotting factor 
    to Medicare hemophiliacs who are hospital inpatients. Section 6011(b) 
    specified that the payment is to be based on a predetermined price per 
    unit of clotting factor multiplied by the number of units provided. 
    This add-on payment originally was effective for blood clotting factor 
    furnished on or after June 19, 1990, and before December 19, 1991. 
    Section 13505 of Public Law 103-66 amended section 6011(d) of Public 
    Law 101-239 to extend the period covered by the add-on payment for 
    blood clotting factors administered to Medicare inpatients with 
    hemophilia through September 30, 1994. Most recently, section 4452 of 
    Public Law 105-33 amended section 6011(d) of Public Law 101-239 to 
    reinstate the add-on payment for the costs of administering blood 
    clotting factor to Medicare beneficiaries who have hemophilia and who 
    are hospital inpatients for discharges occurring on or after October 1, 
    1997.
        We are calculating the add-on payment for FY 1998 using the same 
    methodology we used in the past. That is, we are establishing a price 
    per unit of clotting factor based on the current price listing 
    available from the 1997 Drug Topics Red Book, the publication of 
    pharmaceutical average wholesale prices (AWP). We are setting separate 
    add-on amounts, for the following clotting factors, as described by 
    HCFA's Common Procedure Coding System (HCPCS). The add-on payment 
    amount for each HCPCS code is based on the median AWP of the several 
    products available in that category of factor, discounted by 15 
    percent.
        Based on this methodology, the prices per unit of factor are as 
    follows:
    
                                                                            
                                                                            
                                                                            
    Per unit                                                                
    J7190 Factor VIII (antihemophilic factor-human).................   $0.76
    J7192 Factor VIII (antihemophilic factor-recombinant)...........    1.00
    J7194 Factor IX (complex).......................................    0.32
    J7196 Other hemophilia clotting factors (e.g., anti-inhibitors).    1.10
                                                                            
    
        These prices will be effective for add-on payment for blood 
    clotting factors administered to inpatients who have hemophilia for 
    discharges beginning on or after October 1, 1997 through September 30, 
    1998.
        As noted above, we are following the same methodology as we have in 
    previous years in calculating the FY 1998 add-on payment for the cost 
    of administering blood clotting factors to hospital inpatients with 
    hemophilia. In view of the brief period of time between the enactment 
    of Public Law 105-33 and the need to reinstitute the add-on payment for 
    blood clotting factors, we believe that using this methodology is the 
    only viable alternative. However, we understand that hospitals may be 
    able to obtain blood clotting factors at prices substantially below the 
    median AWP. Thus, we believe it is possible that the methodology for 
    determining add-on payment amounts could be revised to better reflect 
    the actual costs of administering the blood clotting factors. We intend 
    to examine our methodology before establishing the add-on payment 
    amount for FY 1999 and are soliciting comments on the appropriateness 
    of the add-on payment amount and suggestions for the best methodology 
    to calculate this amount.
        We have revised Secs. 412.2(f)(8) and 412.115(b) to indicate that 
    for discharges occurring on or after October 1, 1997, we will make an 
    add-on payment for the costs of administering blood clotting factor to 
    Medicare hospital inpatients who have hemophilia. We will reissue 
    instructions to Medicare hospitals and fiscal intermediaries concerning 
    the codes to use for clotting factor and how to use them. We note that 
    payment will be made for blood clotting factor only if there is an ICD-
    9-CM diagnosis code for hemophilia and the appropriate HCPCS code 
    included on the bill.
    
    G. Payments to Hospitals in Puerto Rico (Sec. 412.204)
    
        Currently, the Puerto Rico payment rate for operating costs is 
    based on 75 percent of the Puerto Rico-specific standardized amount and 
    25 percent of a national standardized amount. Section 4406 of Public 
    Law 105-33 amended section 1886(d)(9)(A) of the Act to revise the 
    Puerto Rico and national shares of the Puerto Rico payment rate. 
    Beginning with discharges occurring on or after October 1, 1997, the 
    Puerto Rico payment rate will be a blend of 50 percent of the Puerto 
    Rico standardized amount and 50 percent of a national standardized 
    amount. We are revising Sec. 412.204 of the regulations to conform with 
    this amendment.
    
    H. Changes to the Indirect Medical Education Adjustment (Sec. 412.105)
    
    1. Changes in the June 2, 1997 Proposed Rule
        Section 1886(d)(5)(B) of the Act provides that prospective payment 
    hospitals that have residents in an approved graduate medical education 
    program receive an additional payment to reflect the higher indirect 
    operating costs associated with graduate medical education. The 
    regulations regarding the calculation of this additional payment, known 
    as the IME adjustment, are at Sec. 412.105. The additional payment is 
    based in part on the applicable IME adjustment factor. The adjustment 
    factor is calculated by using a hospital's ratio of residents-to-beds 
    in the formula set forth at section 1886(d)(5)(B)(ii) of the Act.
        The criteria governing whether a program is considered approved are 
    currently at Sec. 412.105(g)(1)(i). These criteria are the same as 
    those used to identify approved programs for the direct graduate 
    medical education
    
    [[Page 46003]]
    
    payment under Sec. 413.86(b). In the August 30, 1991 final rule (56 FR 
    43237), we added a criterion to Sec. 413.86(b), but inadvertently did 
    not add it to Sec. 412.105(g)(1)(i). This criterion added the Annual 
    Report and Reference Handbook of the American Board of Medical 
    Specialties (ABMS) as another publication to be used to identify 
    approved programs.
        Historically, we have used the same criteria to determine whether a 
    residency training program is approved for payments under both the 
    indirect and the direct graduate medical education payments. This has 
    in fact been our policy with regard to whether programs listed in the 
    ABMS' Annual Report and Reference Handbook are considered approved for 
    IME adjustment payments, even though Sec. 412.105(g)(1)(i) was not 
    changed. To avoid any future confusion, we proposed to revise this 
    section to parallel the changes made at Sec. 413.86(b). We received no 
    public comments on this proposal and are adopting this change in the 
    final rule with comment period.
        In addition, we proposed to delete current Sec. 412.105(g)(1)(iv), 
    which excludes from the IME resident count any anesthesiology residents 
    employed to replace anesthetists. This exclusion was originally 
    intended to prevent hospitals from hiring residents in lieu of 
    nonphysician anesthetists. Given that certain rural hospitals continue 
    to receive pass-through cost-based payment for their anesthetist costs, 
    we no longer believe this provision is warranted. Nor are we aware of 
    any specific instances where it has been applied. We received one 
    public comment in support of this proposed revision and no opposing 
    comments. Therefore, we are implementing this change in the final rule 
    with comment period.
    2. Changes to IME in Public Law 105-33
        In addition to making the changes set forth above, we are revising 
    the regulations to incorporate the provisions of section 4621 of Public 
    Law 105-33, which revised section 1886(d)(5)(B) of the Act in several 
    ways. First, it gradually reduces the current level of IME adjustment 
    (approximately a 7.7 percent increase for every 10 percent increase in 
    the resident-to-bed ratio) over the next several years. The schedule 
    for the IME adjustment is as follows: 7.0 percent for discharges during 
    FY 1998; 6.5 percent during FY 1999; 6.0 percent during FY 2000; and 
    5.5 percent during FY 2001 and thereafter.
        Second, section 4621 established certain limits both on the full-
    time equivalent (FTE) number of residents counted by each hospital and 
    on the resident-to-bed ratio. Effective for discharges on or after 
    October 1, 1997, section 4621(b)(1) added a new section 
    1886(d)(5)(B)(v) to the Act to provide that a hospital's total number 
    of resident FTEs in the fields of allopathic and osteopathic medicine 
    may not exceed the total number of such resident FTEs in the hospital 
    during its most recent cost reporting period ending on or before 
    December 31, 1996. Furthermore, section 1886(d)(5)(B)(vi)(I), as added 
    by section 4621(b)(1) of Public Law 105-33, provides that the ratio of 
    residents-to-beds may not exceed the ratio of residents-to-beds during 
    the prior cost reporting period (after accounting for the cap on the 
    number of resident FTEs).
        Third, for cost reporting periods beginning on or after October 1, 
    1997, and subject to the new limit on counting residents described 
    above (as well as the expansion of allowable settings to off-site 
    services, as described below), new section 1886(d)(5)(B)(vi)(II) 
    provides that residents will be counted based on a 3-year rolling 
    average. This policy will decrease the financial impact of downsizing 
    residency programs. Resident counts for cost reporting periods 
    beginning during FY 1998 will be based on an average of the number of 
    residents from the past 2 years, and for subsequent periods, resident 
    counts will be based on an average of the past 3 years.
        With respect to medical residency training programs established on 
    or after January 1, 1995, section 1886(d)(5)(B)(viii) provides that the 
    Secretary must develop rules to apply these limits to new programs, 
    giving special consideration to ``facilities that meet the needs of 
    underserved areas,'' and to facilitate the application of aggregate 
    limits in the case of affiliated groups (as defined by the Secretary). 
    The Secretary may require any entity that operates a medical residency 
    training program to submit additional information necessary to carry 
    out the limits. We have revised the regulations at Sec. 413.86(g)(6) to 
    comply with these directions. For a more detailed explanation of this 
    provision, see section V.I of the preamble concerning the direct 
    graduate medical education payments.
        Finally, section 4621(b)(2) amended section 1886(d)(5)(B)(iv) to 
    allow all the time spent by a resident in patient care activities under 
    an approved medical residency training program at an entity in a 
    nonhospital setting to be counted towards the determination of full-
    time equivalency if the hospital incurs all, or substantially all, of 
    the costs for the training program in the nonhospital setting. 
    Therefore, we are revising current Sec. 412.105(g)(1)(ii)(C), which 
    allowed hospitals to include the time residents spent in certain 
    community health centers, to also include nonhospital settings where 
    residents' time may be counted for purposes of IME. The eligibility 
    criteria for this new provision is similar to a provision regarding 
    direct graduate medical education payments at section 1886(h)(4)(E) of 
    the Act, and implemented at Sec. 413.86(f)(iii). We will rely upon the 
    same criteria for direct graduate medical education to identify 
    eligible situations under this new IME provision.
        In addition to the regulatory changes, we intend to issue 
    instructions to fiscal intermediaries to implement these changes 
    effective October 1, 1997.
        We are also revising Sec. 412.105(d) to reinsert instructions for 
    determining the education adjustment factors that were incorrectly 
    deleted in a correction notice published on January 29, 1996 (61 FR 
    2725), and deleting current paragraph (f), which describes the 
    determination of full-time resident counts for cost reporting periods 
    beginning prior to July 1, 1991.
        Section 4622 of Public Law 105-33 added a new section 1886(d)(11) 
    to the Act to provide for IME payments to teaching hospitals for 
    discharges associated with Medicare managed care beneficiaries for 
    portions of cost reporting periods occurring on or after January 1, 
    1998. The additional payment is equal to an ``applicable percentage'' 
    of the estimated average per discharge amount that would have been made 
    for that discharge if the beneficiary were not enrolled in managed 
    care. The applicable percentage is set forth in section 
    1886(h)(3)(D)(ii) of the Act and is equal to 20 percent in 1998, 40 
    percent in 1999, 60 percent in 2000, 80 percent in 2001, and 100 
    percent in 2002 and subsequent years. We are adding a new paragraph (g) 
    to Sec. 412.105 to implement this provision.
    
    I. Direct Graduate Medical Education (GME)
    
    1. Newly Participating Hospitals (Sec. 413.86(e))
        Under section 1886(h) of the Act and implementing regulations, 
    Medicare pays hospitals for the direct costs of graduate medical 
    education on the basis of per resident costs in a 1984 base year. Under 
    existing regulations at
    
    [[Page 46004]]
    
     Sec. 413.86(e)(4), if a hospital did not have residents in the 1984 
    base period but later participates in teaching activities, the fiscal 
    intermediaries calculate a per resident amount based on a weighted 
    average of all the hospitals in the same geographic wage area. There 
    must be at least three hospitals for this calculation. If there are 
    fewer than three hospitals, the regulations require the fiscal 
    intermediary to contact the HCFA Central Office for a determination of 
    the appropriate amount to use.
        We proposed to revise the regulations for determining base year per 
    resident amounts for hospitals that participated in residency training 
    after the 1984 base period. Under the proposed changes to 
    Sec. 413.86(e)(4)(i)(B), we sequentially follow the criteria listed 
    below until we would base the weighted average calculation on a minimum 
    of 3 per resident amounts:
         If there are fewer than three hospitals in the hospital's 
    geographic wage area, we would determine a weighted average based on 
    the per resident amounts for all hospitals in the hospital's own wage 
    area, plus hospitals in geographically contiguous wage areas.
         If there are still fewer than three hospitals in the 
    hospital's own wage area, plus hospitals in contiguous wage areas, the 
    weighted average would be based on the per resident amounts for all 
    hospitals in the State.
         If there are fewer than three hospitals in the entire 
    State, the weighted average would be based on the per resident amounts 
    for all hospitals in that State plus hospitals in contiguous States.
         If there are fewer than three hospitals in that State and 
    contiguous States, the weighted average per resident amount would be 
    based on the national average per resident amount.
        Comment: One commenter stated that our proposed policy appears 
    reasonable but we have not indicated how the policy would affect the 
    per resident amounts for hospitals that previously had their payment 
    amounts determined by HCFA Central Office.
        Response: The proposed policy simply reflects the methodology in 
    effect prior to this final rule with comment period. As discussed 
    below, we are revising the methodology in this final rule with comment 
    period. However hospitals that previously had a per resident amount 
    determined by HCFA Central Office will be unaffected since policy 
    changes can only be effective prospectively.
        Comment: Two commenters suggested that the proposed methodology may 
    negatively affect the expansion of training sites, particularly in 
    rural areas where there might not be three hospitals with established 
    per resident amounts. One of these commenters suggested that the 
    hospital with the new training program be given the option of 
    establishing a per resident amount based on its ``cost, not to exceed 
    the higher of the contiguous area average, or the national average cost 
    per resident, perhaps adjusted by the appropriate wage index.'' The 
    other commenter suggested that if there are fewer than three hospitals, 
    that we use the lower of the new hospital's cost per resident or the 
    national average cost per resident adjusted by the hospital wage index. 
    The commenter suggested that this approach would be consistent with 
    HCFA initiatives to move from historical local or regional cost based 
    payments to national averages. Another benefit of this approach 
    according to this commenter is that it is simple and would 
    overwhelmingly benefit rural hospitals.
        Response: The per resident amounts vary widely among hospitals 
    nationwide. Given this wide variation, we believe it is difficult to 
    know whether a hospital establishing a new program in any given 
    geographic area will receive a high or low per resident amount using 
    our proposed methodology. Although the first commenter's suggested 
    alternative is similar to the proposed policy, it guarantees a per 
    resident amount for the new hospital that is either equal to or higher 
    than the per resident amount under the proposed methodology if the 
    hospital's own costs exceed the contiguous area average or the national 
    average per resident amount. We find merit in the latter commenter's 
    suggested alternative of using the lower of the hospital's own costs or 
    a national average per resident amount. It has the advantage of being 
    simple and equally as likely to produce an equitable rate as our 
    proposed methodology. We support using the commenter's proposed 
    methodology with a modification.
        Thus, effective October 1, 1997 the per resident amount for new 
    teaching hospitals is based on the lower of the hospital's actual per 
    resident costs or:
         The weighted average of the per resident amounts for 
    hospitals located in the same geographic area as that term is used in 
    the prospective payment system under 42 CFR part 412.
         Where there are fewer than three hospitals in a geographic 
    wage area, we will use regional weighted average per resident amounts 
    determined for each of the nine census regions established by the 
    Bureau of Census for statistical and reporting purposes.
    2. New Legislative Changes to Direct Graduate Medical Education (Direct 
    GME)
    a. Limit on the Count of Residents (Sec. 413.86(g))
        Section 4623 of Public Law 105-33 adds section 1886(h)(4)(F) of the 
    Act to establish a limit on the number of allopathic and osteopathic 
    residents that a hospital can include in its full time equivalent (FTE) 
    count for Direct GME payment. Residents in dentistry and podiatry are 
    exempt from the cap. For cost reporting periods beginning on or after 
    October 1, 1997, a hospital's unweighted direct medical education FTE 
    count may not exceed the hospital's unweighted FTE count for its most 
    recent cost reporting period ending on or before December 31, 1996.
        Currently, hospitals report their weighted but not their unweighted 
    FTE count on their Medicare cost report. New section 1886(h)(4)(H)(iii) 
    of the Act gives the Secretary authority to collect whatever data are 
    necessary to implement this provision. Hospitals have been required to 
    report resident-specific information to their fiscal intermediaries 
    under longstanding requirements of Sec. 413.86, and we believe it is 
    possible to implement section 1886(h)(4)(F) without mandating 
    significant additional reporting. Since the unweighted direct GME FTE 
    count will be used in calculating direct GME payments, we expect to 
    amend the Medicare cost report to require hospitals to report the 
    unweighted FTE direct GME count for future cost reporting periods. A 
    separate data collection effort will be required to obtain the 
    information for the most recent cost reporting periods ending on or 
    before December 31, 1996.
        We believe the hospital's unweighted FTE limit for its most recent 
    cost reporting period ending on or before December 31, 1996 should be 
    based on a 12 month cost reporting period. If the hospital's most 
    recent cost reporting period ending on or before December 31, 1996, is 
    a short period report, the fiscal intermediaries shall make adjustments 
    so that the hospital's unweighted FTE limit corresponds to the 
    equivalent of a 12 month cost reporting period. We are revising 
    Sec. 413.86(g)(4) accordingly.
    (1) Counting Residents Based on a 3-Year Average (Sec. 413.86(g)(5))
        Section 1886(h)(4)(G)(iii) of the Act, as added by section 4623 of 
    Public Law 105-33, provides that for the hospital's first cost 
    reporting period beginning on or after October 1, 1997, the hospital's 
    weighted FTE count for payment
    
    [[Page 46005]]
    
    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 the preceding 2 cost reporting periods. This provision 
    provides incentives for hospitals to reduce the number of residents in 
    training by phasing in the associated reduction in payment over a 3-
    year period. We are revising Sec. 413.86(g)(5) accordingly.
        For cost reporting periods beginning on or after October 1, 1997, 
    we will determine the hospital's direct GME payment as follows:
        Step one. 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 two. Determine the hospital's allowable direct GME costs 
    without regard to the FTE cap (before determining Medicare's share). 
    That is, take the sum of (a) the product of the primary care per 
    resident amount and the primary care weighted FTE count, and (b) the 
    product of the non-primary care per resident amount and the non-primary 
    care weighted FTE count.
        Step three. Divide the hospital's allowable direct GME costs by the 
    total number of FTE residents (including the effect of weighting 
    factors) for the cost reporting period to determine the average per 
    resident payment amount (this amount reflects the FTE weighted average 
    of the primary and non-primary care per resident amounts) for the cost 
    reporting period.
        Step four. Multiply the average per resident payment amount 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.
        The following example illustrates determination of direct GME 
    payment under the rolling average methodology:
        Assume a hospital with a cost reporting period ending December 31, 
    1996 (beginning January 1, 1996) had 100 unweighted FTE residents and 
    90 weighted FTE residents. The hospital's FTE cap is 100 unweighted 
    residents.
        Step one. In its cost reporting period beginning January 1, 1997, 
    it had 100 unweighted residents and 90 weighted residents.
         The hospital had 90 unweighted residents and 85 weighted 
    residents for its cost reporting period beginning January 1, 1998.
         In its cost reporting period beginning on January 1, 1999, 
    the hospital had 80 unweighted residents and 80 weighted residents.
         The 3 year weighted average for the hospital's cost 
    reporting period beginning January 1, 1999 is 85 (90+85+80)/3).
        Step two. Payment for the cost reporting period is determined by 
    multiplying hypothetical per resident amounts for primary care and non-
    primary care residents as follows:
         Primary Care--$50,000 x 70 weighted FTEs=$3,500,000
         Other--$47,000 x 10 weighted FTEs=$470,000
         Total direct GME payments before using the 3-year average 
    FTE counts and applying the Medicare patient load would be $3,970,000 
    ($3,500,000 + $470,000).
        Step three. Divide $3,970,000 by 80 total FTEs (70+10) to determine 
    an average per resident FTE payment of $49,625.
        Step four. Multiply this figure by 85 FTEs (from step 1 above) to 
    determine a total payment $4,218,125. Apply the hospital's Medicare 
    patient load to determine Medicare's direct GME payment.
        To address situations in which a hospital increases the number of 
    FTE residents over the cap, notwithstanding the limit established under 
    section 1886(h)(4)(F), we are establishing the following policy for 
    determining the hospital's weighted direct GME FTE count for cost 
    reporting periods beginning on or after October 1, 1997.
         Determine the ratio of the hospital's unweighted FTE count 
    for residents in those specialties for the most recent cost reporting 
    period ending on or before December 31, 1996, to the hospital's number 
    of FTE residents without application of the cap for the cost reporting 
    period at issue.
         Multiply the ratio determined above by the weighted FTE 
    count for those residents for the cost reporting period. Add the 
    weighted count of residents in dentistry and podiatry to determine the 
    weighted FTEs for the cost reporting period. This methodology should be 
    used for purposes of determining payment for cost reporting periods 
    beginning on or after October 1, 1997. The hospital's unweighted count 
    of interns and residents for a cost reporting period beginning before 
    October 1, 1997 will not be subject to the FTE limit.
        For example, if the hospital's FTE count of residents in its cost 
    reporting period ending December 31, 1996 is 100 residents before 
    application of the initial residency weighting factors and the 
    hospital's number of residents for its December 31, 1990 cost reporting 
    period is 110 FTE residents, the ratio of residents in the two cost 
    reporting periods equals 100/110. If the hospital's weighted FTE count 
    is 100 FTE residents in the December 31, 1998 cost reporting period 
    (that is, of the 110 unweighted residents, 20 are beyond the initial 
    residency period and are weighted as 0.5 FTE), the hospital's weighted 
    FTE count for determining direct GME payment is equal to (100/110) * 
    100, or 90.9 FTE residents.
        If a hospital's unweighted count of residents in specialties other 
    than dentistry and podiatry does not exceed the limit, the weighted FTE 
    count equals the actual weighted FTE count for the cost reporting 
    period. The weighted FTE count in either instance will be used to 
    determine a hospital's payment under the 3 year rolling average payment 
    rules. We believe this proportional reduction in the hospital's 
    unweighted FTE count is an equitable mechanism for implementing the 
    statutory provision.
        Section 1886(h)(4)(G)(ii) of the Act provides that the Secretary 
    makes appropriate modifications to ensure that the average FTE resident 
    counts are based on the equivalent of full 12 month cost reporting 
    periods. We are revising Sec. 413.86(g)(5) to allow the fiscal 
    intermediaries to make the appropriate adjustments to ensure that 3 
    year and 2 year average FTE counts are based on the equivalent of 12 
    month periods.
    (2) Exceptions to the Direct GME FTE Limit (Sec. 413.86(g)(6))
        Under new section 1886(h)(4)(H)(i) of the Act, the Secretary is 
    required, consistent with the principles of establishing a limitation 
    on the number of residents paid for by Medicare and the 3-year rolling 
    average, to establish rules with respect to the counting of residents 
    medical residency training programs established on or after January 1, 
    1995. Such rules must give special consideration to facilities that 
    meet the needs of underserved rural areas. Language in the Conference 
    Report indicates concern that there be proper flexibility to respond to 
    changing needs given the sizeable number of hospitals
    
    [[Page 46006]]
    
    that elect to initiate new (or terminate existing) training programs.
        Pursuant to the statute, we are establishing the following rules 
    for applying the FTE limit and determining the FTE count for hospitals 
    that established new medical residency training programs on or after 
    January 1, 1995. For purposes of this provision, a ``program'' will be 
    considered newly established if it is accredited for the first time, 
    including provisional accreditation on or after January 1, 1995, by the 
    appropriate accrediting body. Although the Secretary has broad 
    authority to prescribe rules for counting residents in new programs, 
    the Conference Report for Public Law 105-33 indicates concern that 
    aggregate number of FTE residents should not increase over current 
    levels. Accordingly, we will continue to monitor growth in the 
    aggregate number of residency positions and may consider changes to the 
    policies described below if there continues to be growth in the number 
    of residency positions. We are providing for adjustments in the 
    following situations:
        (i) Hospitals with no Residents prior to January 1, 1995.
        If a hospital had no residents before January 1, 1995 and it 
    establishes one or more new medical residency training programs on or 
    after that date, the hospital's FTE cap will be based on the number of 
    first year residents participating in its accredited graduate medical 
    education training programs in the third year of receiving payments for 
    direct GME. The hospital's unweighted FTE resident cap will equal the 
    product of the number of first year residents in that year and the 
    number of years in which residents are expected to complete that 
    program based on the minimum accredited length for the type of program 
    as published in the Graduate Medical Education Directory.
        For example, assume a hospital that did not receive any direct GME 
    payment in its cost reporting period ending December 31, 1994 (the 
    hospital's most recent cost reporting period ending before January 1, 
    1995) established an internal medicine program and receives direct GME 
    payment for residents beginning a training program on July 1, 1998. The 
    hospital's cap would be adjusted to reflect the resident cap for 
    residents in the internal medicine program for its cost reporting 
    periods ending in 1998 and 1999. In the hospital's cost reporting 
    period ending December 31, 2000 (the third cost reporting period in 
    which the hospital has residents), there are five first-year FTE 
    residents participating in the hospital's internal medicine program. 
    Since the minimum length listed for internal medicine programs in the 
    Graduate Medical Education Directory is 3 years, this hospital's 
    unweighted FTE cap can subsequently be adjusted by up to 15 FTEs.
        (ii) Hospitals with Residents prior to January 1, 1995, not Located 
    in Rural Areas
        If a hospital is not located in a rural area and had residents in 
    its most recent cost reporting period ending before January 1, 1995, 
    the hospital's unweighted FTE cap may be adjusted for new medical 
    residency training programs established on or after January 1, 1995 but 
    before August 5, 1997. An adjustment under this policy allows programs 
    which began between January 1, 1995 and enactment of the statute to 
    grow to full capacity. No adjustments to the FTE cap will be allowed 
    for new medical residency training programs established on or after 
    August 5, 1997.
        An adjustment in the hospital's FTE limit for a new program will be 
    based on the product of the number of first year residents in the third 
    year of the newly established program and the minimum accredited length 
    for the type of program published in the Graduate Medical Education 
    Directory. The hospital's revised unweighted FTE limit reflects the 
    number of residents in its most recent cost reporting period ending on 
    or before December 31, 1996 adjusted for the incremental increase in 
    its FTE count for newly established programs.
        We are providing the following example to illustrate how to make 
    adjustments to the FTE cap for newly established medical residency 
    training programs in hospitals that received direct GME payments prior 
    to January 1, 1995. Assume a hospital had an unweighted direct GME 
    count of 100 FTE residents for its cost reporting period ending June 
    30, 1996 and the hospital, although it had 6 first year positions, 
    began an internal medicine program on July 1, 1995 with only 4 first 
    year residents. On July 1, 1996, the program expands to 10 residents 
    (six first-year residents and four second-year residents). On July 1, 
    1997, the program has 16 residents (six first-year residents, six 
    second-year residents and four third-year residents). Since the minimum 
    accredited length for allopathic internal medicine programs listed in 
    the Graduate Medical Education Directory is 3 years, the hospital's 
    unweighted FTE cap can subsequently be adjusted to reflect 18 residents 
    in the internal medicine program (six first-year residents  x  3 
    years). In the hospital's cost reporting period ending June 30, 1996 
    (the initial cap year), the hospital had a total of 100 FTE residents 
    including 4 in internal medicine. Thus, the hospital's adjusted cap 
    equals 100 residents plus 14 (18-4) or 114 residents.
        (iii) Hospitals Located in Rural Areas that had Residents before 
    January 1, 1995 and Other Rural Hospitals that Added Residents Under 
    (i) of this Section.
        We would treat these rural hospitals the same as all other 
    hospitals which had residents before January 1, 1995 with the exception 
    that the unweighted FTE limit for these hospitals could be adjusted to 
    reflect residents in new medical residency training programs 
    established on or after August 5, 1997. That is, if these hospitals 
    added new programs on or after August 5, 1997 the cap would be adjusted 
    but not without limit. A hospital's unweighted limit would be adjusted 
    for each new program based on the methodology described above based on 
    the product of the number of first year residents in the third year of 
    the newly established program and the minimum number of years of the 
    accredited program. For these hospitals, the limit will only be 
    adjusted for additional new programs but not for expansions of existing 
    or previously existing programs.
        A hospital seeking an adjustment to the unweighted direct GME FTE 
    resident count limit under this exception policy must provide 
    documentation to its fiscal intermediary justifying the adjustment.
    (3) Aggregate Direct GME FTE Limit for Affiliated Institutions 
    (Sec. 413.86(g)(4))
        Section 1886(h)(4)(H)(ii) of the Act permits but does not require 
    the Secretary to prescribe rules that allow institutions that are 
    members of the same affiliated group (as defined by the Secretary) to 
    elect to apply the FTE resident limit on an aggregate basis. This 
    provision would permit hospitals flexibility in structuring rotations 
    within a combined cap when they share residents.
        Pursuant to the broad authority conferred by the statute, we are 
    establishing the following criteria to define ``affiliated group''.
         Hospitals in the same geographic wage area. For purposes 
    of this provision, ``affiliated group'' includes two or more hospitals 
    located in the same geographic wage area (as that term is used for 
    purposes of the inpatient operating prospective payment system), if the 
    hospital rotate residents to the other hospitals of the group during 
    the course of the approved program.
         Hospitals that are not located in the same geographic wage 
    area. If the hospitals are not located in the same
    
    [[Page 46007]]
    
    geographic wage area, we will consider them part of the same affiliated 
    group if the hospitals are jointly listed in common as a major 
    participating institution (as that term is used in the Graduate Medical 
    Education Directory, 1997-1998) for one or more programs.
        We are defining an affiliated group on an institution-wide basis. 
    Hospitals may participate in many different specialty programs and may 
    share residents for one specialty program with one hospital but share 
    residents for a different program with another hospital. We recognize 
    that hospitals may affiliate for the purpose of specific specialty 
    programs, but for purposes of applying an aggregate cap, it is not 
    administratively feasible to apply the cap on a program by program 
    basis.
        We are implementing all of the above provisions of section 
    1886(h)(4) of the Act effective with cost reporting periods beginning 
    on or after October 1, 1997. The statute does not provide a specific 
    effective date for the rules related to affiliated groups aggregating 
    resident FTE counts. Because each of the special rules is operative in 
    conjunction with FTE limit, we believe it is appropriate to implement 
    these provisions on October 1, 1997. We welcome public comments on 
    implementation of the provisions of Public Law 105-33 relating to 
    direct GME payments.
    b. Payments to Hospitals for Direct Costs of Graduate Medical Education 
    of Medicare Managed Care Beneficiaries (Sec. 413.86(d)(2))
        Section 4624 of Public Law 105-33 amended section 1886(h)(3) of the 
    Act to provide a 5-year phase-in of payments to teaching hospitals for 
    graduate medical education associated with services to Medicare managed 
    care discharges for portions of cost reporting periods occurring on or 
    after January 1, 1998. The amount of payment is equal to the product of 
    the per resident amount, the total weighted number of FTE residents 
    working all areas of the hospital (and nonhospital setting in certain 
    circumstances) subject to the limit on number of FTE residents under 
    section 1886(h)(4)(F) and the averaging rules under section 
    1886(h)(4)(G) of the Act described above, the ratio of the total number 
    of inpatient bed days that are attributable to Medicare managed care 
    enrollees to total inpatient days and the applicable percentage. The 
    applicable percentages are 20 percent in 1998, 40 percent in 1999, 60 
    percent in 2000, 80 percent in 2001, and 100 percent in 2002 and 
    subsequent years.
        We are revising Sec. 413.86(d)(2) to establish a 5-year phase-in 
    payment methodology to hospitals for direct GME payments based on 
    Medicare managed care enrollees for portions of cost reporting periods 
    beginning on or after January 1, 1998. We will modify the Medicare cost 
    report to determine direct GME payments associated with services to 
    Medicare managed care enrollees.
        Section 4001 of Public Law 105-33 adds section 1853(a)(3)(C) of the 
    Act. New section 1853(a)(3)(C) requires the Secretary to implement a 
    risk adjustment methodology that accounts for variations in per capita 
    costs based on health status and other demographic factors in Medicare 
    payments to managed care organizations by no later than January 1, 
    2000. Public Law 105-33 also adds section 1853(a)(3)(B) of the Act to 
    require the Secretary to collect data necessary from managed care 
    organizations to implement this provision. We are currently considering 
    the data requirements necessary to implement both the direct and 
    indirect medical education and risk adjustment provisions. We plan to 
    consult with organizations representing hospitals and managed care 
    plans to develop an administrative mechanism for implementing both of 
    these provisions.
    c. Permitting Payment to Nonhospital Providers
        Under section 4625 of Public Law 105-33, for cost reporting periods 
    beginning on or after October 1, 1997, the Secretary is authorized but 
    not required to establish rules for payment to ``qualified nonhospital 
    providers'' for the direct costs of medical education incurred in the 
    operation of an approved medical residency training program. Under the 
    statute, qualified nonhospital providers include Federally Qualified 
    Health Centers, Rural Health Clinics, Medicare + Choice organizations 
    and such other nonhospital providers the Secretary determines to be 
    appropriate. We expect to establish rules that specify the amounts, 
    form, and manner in which payments will be made and the portion of such 
    payments that will be made from each of the Medicare trust funds. The 
    Secretary must reduce the aggregate amount paid to nonhospital 
    providers to the extent payment is made for residents included in the 
    hospital's FTE count. Since we have not previously made payments for 
    direct graduate medical education to nonhospital providers, we are 
    interested in receiving comment on how to implement this provision. We 
    are particularly concerned that any methodology assure that Medicare 
    does not pay two entities for the same training time.
        In particular, we are interested in receiving public comments on 
    how to determine appropriate payment for ambulatory sites. Under 42 CFR 
    part 405 subpart E, federally qualified health centers and rural health 
    clinics are paid on the basis of an all inclusive rate for each 
    beneficiary visit for the covered services. We are interested in 
    receiving public comments on whether we should pay these entities for 
    GME on a cost basis, a per resident amount, or some other basis and how 
    to determine Medicare's share of their costs. Similarly, since we have 
    not previously made explicit payments to managed care plans for direct 
    GME we are interested in how we should pay them.
        Section 413.86(f)(1) allows hospitals to include resident time in 
    nonhospital sites when the hospital incurs all or substantially all of 
    the costs. Under Sec. 413.86(f)(1)(iii)(B) we have defined ``all or 
    substantially all'' to mean that the hospital has a written agreement 
    with the nonhospital site that it will continue to pay the resident's 
    salary for training time in that setting. We are interested in 
    receiving comments on whether this is an appropriate standard for 
    determining which institution should be paid for the resident's 
    training time or whether there are other financial arrangements we 
    should consider in determining which entity incurs ``all or 
    substantially all'' of the costs.
    d. Medicare Special Reimbursement Rule for Primary Care Combined 
    Residency Programs (Sec. 413.86(g)(1))
        Section 413.86(g)(2) requires full payment for residents within an 
    initial residency period. Section 413.86(g)(3) requires residents 
    beyond the initial residency period to be weighted as 0.5 FTE for 
    purposes of determining GME payment. The initial residency period is 
    defined as the minimum number of years required to become board 
    eligible in specialty and is determined at the time a resident enters a 
    medical residency training program. In the August 30, 1996 final rule 
    (61 FR 46211), we clarified that the initial residency period for 
    residents in combined medical residency training programs is limited to 
    the time required to complete the longer of the composite programs.
        Effective for residents in or beginning training on or after July 
    1, 1997, section 4627 of Public Law 105-33 amends section 1886(h)(5)(G) 
    of the Act to require that the initial residency period for combined 
    programs consisting only of primary care training, equals the longer of 
    the composite programs plus one year. A primary care resident is a 
    resident enrolled in an approved medical residency training program in
    
    [[Page 46008]]
    
    family medicine, general internal medicine, general pediatrics, 
    preventive medicine, geriatric medicine, or osteopathic general 
    practice. This provision also adds one year to the initial residency 
    period for combined primary care and obstetrics and gynecology 
    programs. We are amending Sec. 413.86(g)(1) to implement the provisions 
    of section 1886(h)(5)(G) for residents in or beginning training on or 
    after July 1, 1997.
    
    J. Medicare Rural Hospital Flexibility Program
    
    1. Previous Law--EACH/RPCH Program
        Section 1820 of the Act, before the enactment of the Public Law 
    105-33 of 1997, established the Essential Access Community Hospital 
    (EACH) program. Under that program, seven States received grants to 
    develop rural health networks consisting of Rural Primary Care 
    Hospitals (RPCHs) and EACHs. RPCHs are limited-service rural hospitals 
    that provide outpatient and short-term inpatient hospital care on an 
    urgent or emergency basis. They then release patients or transfer them 
    to an EACH or other acute care hospital. To be designated as RPCHs, 
    hospitals had to meet certain criteria, including requirements that 
    they not have more than 6 inpatient beds for acute (hospital-level) 
    care and maintain an average inpatient length of stay of no more than 
    72 hours.
        Montana also has a separate, limited-service hospital program 
    called the Medical Assistance Facility (MAF) program, which has been in 
    operation since 1988. This program operates under a demonstration 
    waiver from HCFA that allows these limited service hospitals to be 
    reimbursed for providing treatment to Medicare beneficiaries even 
    though they are not required to meet all requirements applicable to 
    hospitals. In addition, HCFA supplies grant funding to the Montana 
    Hospital Research and Education Foundation to provide technical 
    assistance, liaison, public education, and other services to the MAFs. 
    The first MAF was licensed and began participating in the demonstration 
    in 1990. At this point a total of 12 MAFs have been licensed and 
    certified. Additional facilities are in the process of considering a 
    conversion to MAF status.
    2. Changes Made by Balanced Budget Act of 1997
        The new legislation replaces the current 7-State EACH/RPCH program 
    with a new Medicare Rural Hospital Flexibility Program that will be 
    available in any State that chooses to set up such a program and 
    provide HCFA with the necessary assurances that it has developed, or is 
    in the process of developing, a State rural health care plan meeting 
    certain requirements, and that it has designated, or is in the process 
    of designating, rural nonprofit hospitals or facilities as critical 
    access hospitals (CAH).
        To be eligible as a CAH, a facility must be a rural public or 
    nonprofit hospital located in a State that has established a Medicare 
    rural hospital flexibility program, and must be located more than a 35-
    mile drive from any other hospital or critical access hospital. In 
    mountainous terrain or in areas with only secondary roads available, 
    the mileage criterion is 15 miles. In addition, the facility must make 
    available 24-hour emergency care services, provide not more than 15 
    beds for acute (hospital-level) inpatient care, and keep each inpatient 
    for no longer than 96 hours, unless a longer period is required because 
    of inclement weather or other emergency conditions, or a PRO or other 
    equivalent entity, on request, waives the 96-hour restriction. An 
    exception to the 15-bed requirement is made for swing-bed facilities, 
    which are allowed to have up to 25 inpatient beds that can be used 
    interchangeably for acute or SNF-level care, provided that not more 
    than 15 beds are used at any one time for acute care. The facility is 
    also required to meet certain staffing and other requirements that 
    closely parallel the requirements for RPCHs.
        The new legislation also defines a rural health network as an 
    organization consisting of at least one CAH and at least one acute care 
    hospital, the members of which have entered into agreements regarding 
    patient referral and transfer, the development and use of 
    communications systems, and the provision of emergency and nonemergency 
    transportation. In addition, each CAH in a network must have an 
    agreement for credentialing and quality assurance with at least one 
    hospital that is a member of the network, or with a PRO or equivalent 
    entity, or with another appropriate and qualified entity identified in 
    the rural health care plan for the State.
    3. Grandfathering of Existing Facilities
        Under the new legislation, no new EACH designations would be made, 
    but rural hospitals designated as EACHs under previous law would 
    continue to be paid as sole community hospitals. The previous payment 
    provisions applicable to RPCHs are repealed, and the law instead 
    provides that CAHs will be paid on a reasonable cost basis for their 
    inpatient and outpatient services. The law specifically provides that 
    existing RPCHs and MAFs will be deemed as CAHs if these facilities or 
    hospitals are otherwise eligible to be designated by the State as CAHs. 
    Under a special provision applicable to the MAF program, the MAF 
    demonstration project is extended until at least October 1, 1998, to 
    allow for an appropriate transition between the MAF and CAH programs.
    4. Provision of SNF-Level Care in RPCHs
        Previous law provided specific rules relating to the number of beds 
    that an RPCH could use to provide SNF-level care. As noted above, the 
    new legislation provides considerable flexibility to a CAH with a 
    swing-bed agreement to use inpatient beds for either SNF or acute care, 
    as long as the total number of inpatient beds does not exceed 25 and 
    the number of beds used at any one time for acute care does not exceed 
    15.
    5. Implementing Regulations
        To allow the changes made by the enactment of Public Law 105-33 to 
    be implemented by the statutory effective date of October 1, 1997, we 
    are publishing the interim rules set forth below. In developing these 
    rules, our general approach has been to retain the provisions of 
    existing RPCH regulations, except where the new legislation clearly 
    requires us to make a change. We believe this approach will allow the 
    new amendments to be implemented with a minimum of inconvenience for 
    existing facilities and will serve as the basis for a smooth transition 
    between the RPCH and CAH programs.
        To implement the section 4201 amendments, we are revising existing 
    regulations as follows:
         Part 409 (Hospital Insurance Benefits), Sec. 409.30(a) is 
    revised to specify that to qualify for posthospital SNF care in a 
    hospital or CAH, a beneficiary must have received inpatient CAH care 
    for at least 3 consecutive calendar days (rather than the 72 hours 
    required previously for RPCHs). This change ensures that care in CAHs 
    and in acute care hospitals is counted uniformly toward the prior stay 
    requirement.
         Part 410 (Supplementary Insurance Benefits), Sec. 410.2 is 
    revised to add a ``CAH'' in the definitions of both ``Participating'' 
    providers and ``nonparticipating'' providers. Also, Sec. 410.152(k) is 
    revised to delete the description of payment methods for RPCH 
    outpatient services that were mandated under previous law and to 
    reflect the new statutory provision. As
    
    [[Page 46009]]
    
    explained more fully below, the statute now provides that payment for 
    these services is to be made on a reasonable cost basis. We are 
    specifying that ``reasonable cost'' is to be determined under section 
    1861(v)(1)(A) of the Act and existing regulations in Parts 413 and 415. 
    Then, Sec. 410.155(a) is revised to add a critical access hospital 
    (CAH) that meets the requirements of part 485 in the definition of 
    ``Hospital''. Furthermore, paragraph (b) is revised to add a CAH as a 
    provider in which inpatient mental health services that are identified 
    in paragraphs (b) (1) through (4) are not subject to mental health 
    services limitations described in paragraph (b).
         Part 412 (Prospective Payment Systems for Inpatient 
    Hospital Services) Sec. 412.109 is revised to reflect the elimination 
    of the EACH designation. However, we are retaining the provisions in 
    current regulations that are needed to allow rural hospitals designated 
    as EACHs under previous law to continue to be paid as sole community 
    hospitals and, where appropriate, to obtain adjustments to their 
    hospital-specific rates. We are revising the regulations to clarify 
    that HCFA will terminate the EACH designation of a hospital that no 
    longer complies with the terms, conditions, and limitations that were 
    applicable when it was designated as an EACH.
         Part 413 (Principles of Reasonable Cost Reimbursement; 
    Payment for End-Stage Renal Disease Services; Optional Prospectively 
    Determined Payment Rates for Skilled Nursing Facilities), 
    Secs. 413.1(a)(1)(G), 413.13(c)(2)(iv), and 413.70 are revised to 
    reflect the elimination of the previously applicable payment methods 
    for RPCHs. As noted above, the provisions of the Medicare law 
    applicable to payment for both inpatient and outpatient RPCH services 
    (sections 1814(l) and section 1834(g) of the Act, respectively) were 
    amended by sections 4201 (c)(3)(B) and (c)(5) of Public Law 105-33 to 
    remove the previous payment provisions, including the provisions of 
    section 1834(g)(1)(B), and require that payment to CAHs for these 
    services be made on a reasonable cost basis. Reasonable cost is defined 
    at section 1861(v)(1)(A) of the Act and in regulations. We have 
    specified that ``reasonable cost'' is to be determined under section 
    1861(v)(1)(A) of the Act and existing Medicare reimbursement 
    regulations at 42 CFR parts 413 and 415 and in the statute.
         Part 485, Subpart F (previously Conditions of 
    Participation for Rural Primary Care Hospitals) is revised to reflect 
    the new CAH statutory requirements regarding the definition of a rural 
    health network, status and location requirements, designation 
    requirements for CAHs, the requirements regarding the content of 
    network agreements, number of beds and length of stay permitted, and 
    the special requirements for CAHs that provide SNF-level services.
        We recognize that some facilities which received approval from HCFA 
    under previous law to provide SNF-level services, may wish to continue 
    operating under the terms of that approval. To authorize this, the 
    regulations will allow a CAH that participated in the Medicare program 
    as a rural primary care hospital (RPCH) on September 30, 1997 and, on 
    that date, had in effect an approval from HCFA to use its inpatient 
    facilities to provide posthospital SNF care, to continue in that status 
    under the same terms, conditions, and limitations that were applicable 
    at the time those approvals were granted.
        However, a CAH that was granted swing-bed approval under previous 
    law may request by January 1, 1998 that HCFA evaluate its application 
    to be a CAH and a swing-bed provider under the current law and the 
    regulations set forth below. If this request is approved, the approval 
    is effective not earlier than October 1997. As of the date of approval, 
    the CAH no longer has any status based on its previous approval and may 
    not request reinstatement under previously effective provisions.
        We are also making nomenclature changes in various sections of 
    Parts 400, 409, 410, 411, 413, 414, 424, 440, 485, 488, 489, and 498 to 
    reflect the statutory change from RPCHs to CAHs.
    6. Other Implementation Issues
    a. Process for Review and Acceptance of State Assurances
        States interested in establishing a Medicare rural hospital 
    flexibility program will submit to the Regional Administrator of the 
    HCFA Regional Office responsible for oversight of Medicare and Medicaid 
    in the State, an application signed by an official of the State. The 
    application will express the State's interest in establishing a 
    Medicare rural hospital flexibility program and will contain, at a 
    minimum, the following assurances and other information:
        The State must provide assurances that--
        (1) The State has developed, or is in the process of developing, a 
    State rural health care plan that provides for the creation of one or 
    more rural health networks as defined in Sec. 485.603(a), promotes 
    regionalization of rural health services in the State, and improves 
    access to hospitals and other health services for rural residents of 
    the State;
        (2) The State has developed a rural health care plan in 
    consultation with the hospital association of the State, rural 
    hospitals located in the State, and the State Office of Rural Health 
    (or, in the case of a State in the process of developing such a plan, 
    that assures the Secretary that the State will consult with these 
    organizations); and
        (3) The State has designated or is in the process of designating 
    (consistent with the rural health plan), rural nonprofit or public 
    hospitals or facilities located in the State as critical access 
    hospitals; and
        The State must also provide other information to support its 
    assurances, as follows:
        (1) A copy of the State rural health care plan. If the State is in 
    the process of developing the plan, the State should submit a copy of 
    the current draft of the plan along with an anticipated completion 
    date;
        (2) An explanation of how the State rural health plan will provide 
    for the creation of one or more rural health networks, promote 
    regionalization of rural health services, and improve access to 
    hospitals and other health services for rural residents of the State; 
    and
        (3) a listing of the facilities which the State has designated, or 
    plans to designate, as critical access hospitals.
        Section 1820(b)(3) of the Act authorizes HCFA to require other 
    information and assurances in support of a State rural health plan. 
    Therefore, HCFA will send the State a written request for any other 
    information it may need to complete review of the application to 
    establish a Medicare Rural Hospital Flexibility Program. HCFA will 
    review the application from the State for the assurances listed above 
    and will notify the State in writing of its decision on the State's 
    application. Facilities designated under an approved plan will be 
    eligible for certification by the HCFA Regional Office as CAHs, in 
    accordance with the regulations in 42 CFR Part 485, Subpart F.
        We welcome comments on whether the information and assurances set 
    forth above are sufficient, or whether other information or assurances 
    are needed. We will consider this issue carefully and notify States in 
    writing of any changes in the information or assurances required.
    b. Designation of Facilities in Border States
        Section 1820(k), as in effect prior to the enactment of the Public 
    Law 105-
    
    [[Page 46010]]
    
    33, explicitly authorized States with EACH programs to designate 
    facilities in adjacent States as EACHs or RPCHs if certain conditions 
    were met. Section 4201 of Public Law 105-33 deleted that authority. 
    Therefore, a facility can be designated as a CAH only by a State in 
    which it is located. The regulations as revised at Sec. 485.606 have 
    deleted any reference to this authority.
    c. Designation of Closed Facilities
        Section 1820(f)(1)(B), as in effect prior to the enactment of 
    Public Law 105-33, explicitly allowed, under certain circumstances, 
    States with EACH programs to designate facilities as RPCHs even though 
    the facilities had closed and were not longer functioning as hospitals 
    at the time they applied for RPCH status. The new legislation removed 
    that authority so there is now no basis on which a closed facility can 
    be designated as a CAH. We have revised Sec. 485.612 to reflect this 
    change.
    
    K. Changes to the Update Factors for Federal Rates for Inpatient 
    Operating Costs (Sec. 412.63)
    
        Public Law 105-33 made several revisions to the applicable 
    percentage change (the update factor) to the Federal rates for 
    prospective payment hospitals. Section 4401(a)(1) of Public Law 105-33 
    amended section 1886(b)(3)(B)(i) of the Act to revise the update 
    factors for the Federal rates for inpatient operating costs for FYs 
    1998 through 2002. The update factor for FY 1998 is now 0 percent for 
    hospitals in all areas. For FY 1999, the update for hospitals in all 
    areas is the market basket rate of increase minus 1.9 percentage 
    points. (As discussed in detail in section V.D. of this final rule with 
    comment period, section 4401(b) provides for a higher update in FY 1998 
    and FY 1999 for certain hospitals that do not receive disproportionate 
    share or indirect medical education payments and are not designated as 
    Medicare-dependent, small rural hospitals.) For FY 2000, the update for 
    all areas is the market basket rate of increase minus 1.8 percentage 
    points. For FY 2001 and FY 2002, the update for all areas is the market 
    basket rate of increase minus 1.1 percentage points. For FY 2003 and 
    subsequent years, the update for all areas is the market basket rate of 
    increase. The specific updates to be applied for FY 1998 are discussed 
    in the addendum and Appendix D to this document.
        In this final rule with comment period, we are making the necessary 
    changes to Sec. 412.63 to implement these provisions.
    
    L. Change in the Publication Date of the Proposed and Final Rules for 
    the Hospital Inpatient Prospective Payment System (Sec. 412.8)
    
        Section 4644(b) of Public Law 105-33 amends section 1886(e) of the 
    Act to require the Secretary to publish the proposed and final rules 
    that contain her proposed and final recommendations on the annual 
    update factor applicable to the hospital payment rates by the April 1 
    and August 1 prior to the start of the fiscal year to which the rates 
    apply beginning with the FY 1999 rates. The current schedule calls for 
    publication on May 1 and September 1. We are revising Sec. 412.8(b) and 
    (c) of the regulations to implement this change. In that section, we 
    are also deleting the current paragraph (a) since it is redundant.
    
    M. Technical Change: Correction of Statutory Citation
    
        The August 30, 1996 final rule (61 FR 46165) included an amendment 
    to Sec. 489.27 that reprinted the statutory reference governing the 
    distribution of an ``Important Message from Medicare.'' This reference, 
    ``section 1886(a)(1)(M)'', was incorrect. We are correcting this 
    reference to read ``section 1866(a)(1)(M)''.
    
    VI. Changes to the Prospective Payment System for Capital-Related 
    Costs
    
    A. Possible Adjustment to Capital Prospective Payment System Minimum 
    Payment Levels
    
        Section 412.348(b) of the regulations provides that, during the 
    capital prospective payment system transition period, any hospital may 
    receive an additional payment under an exceptions process if its total 
    inpatient capital-related payments under its payment methodology (that 
    is, fully prospective or hold-harmless) are less than a minimum 
    percentage of its allowable Medicare inpatient capital-related costs. 
    The minimum payment levels are established by class of hospitals under 
    Sec. 412.348(c). The minimum payment levels for portions of cost 
    reporting periods occurring in FY 1997 are:
         Sole community hospitals (located in either an urban or 
    rural area), 90 percent;
         Urban hospitals with at least 100 beds and a 
    disproportionate share patient percentage of at least 20.2 percent and 
    urban hospitals with at least 100 beds that qualify for 
    disproportionate share payments under Sec. 412.106(c)(2), 80 percent; 
    and
         All other hospitals, 70 percent.
        Under Sec. 412.348(d), the amount of the 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 for previous cost reporting periods exceeds its 
    cumulative minimum payment levels for those cost reporting periods is 
    deducted from the additional payment that would otherwise be payable 
    for a cost reporting period.
        Section 412.348(g) also provides for a separate special exceptions 
    process for hospitals undertaking major renovations or replacement of 
    aging facilities during the decade of the transition. For as long as 10 
    years beyond the end of the transition period, certain hospitals may be 
    eligible to receive special exceptions payments at a 70 percent minimum 
    payment level. For hospitals that qualify for the special exceptions 
    provision before the end of the transition, the general and special 
    exceptions provisions will run concurrently during the later years of 
    the transition. However, since the minimum payment level for the 
    special exceptions provision is at the same level that applies to all 
    hospitals under the general provision (currently 70 percent), the 
    special exceptions provision will generate no additional payment to 
    hospitals until the end of the transition period.
        Section 412.348(h) further provides that total aggregate estimated 
    exceptions payments under both the regular exceptions process and the 
    special exceptions process may not exceed 10 percent of the total 
    estimated capital prospective payments (exclusive of hold-harmless 
    payments for old capital) for the same fiscal year. In the FY 1997 
    final rule implementing the prospective payment system for capital-
    related costs, we stated that the minimum payment levels in subsequent 
    transition years would be revised, if necessary, to keep the projected 
    percentage of payments under the exceptions process at no more than 10 
    percent of capital prospective payments.
        In section III of the Addendum to the June 2, 1997, proposed rule 
    (62 FR 29951), we discussed the factors and adjustments used to develop 
    the FY 1998 Federal and hospital-specific rates. In particular, we 
    discussed the FY 1998 exceptions payment reduction factor. This factor 
    adjusts the annual payment rates for the estimated level of additional 
    payments for exceptions in FY 1998. In the proposed rule, we estimated 
    that exceptions payments would equal 7.24 percent of aggregate
    
    [[Page 46011]]
    
    payments based on the Federal rate and the hospital-specific rate. We 
    indicated that in the final rule we would develop a new estimate of the 
    level of exceptions payments, and revise the exceptions payment 
    adjustment factor accordingly, on the basis of the data that became 
    available to us prior to publication of the final rule for FY 1998. We 
    model exceptions payments based on the best information available on 
    hospitals' actual payment methodology. We also indicated that while it 
    was not necessary at that time to propose reductions in the minimum 
    payment levels, we might find it necessary to implement adjustments to 
    the minimum payment levels in the final rule. We, therefore, provided 
    public notification that adjustments to the minimum payment levels were 
    possible in the FY 1998 final rule.
        As explained in Appendix B, since publication of the proposed rule, 
    we have made a change to our model with regard to admissions. This 
    change has caused the number and dollar value of exceptions to drop 
    significantly. We are now estimating that exceptions payments will 
    equal 3.41 percent of aggregate payments based on the Federal rate and 
    hospital-specific rate in FY 1998, instead of the 7.24 percent we 
    estimated in the proposed rule. This also means the exceptions payment 
    reduction factor, which accounts for expected exceptions payments, will 
    reflect a 3.41 percent reduction to the rates for FY 1998, rather than 
    a 7.24 percent reduction. Because of this change in our estimate of 
    exceptions payments, we will not have to adjust minimum payment levels 
    for FY 1998 to keep exceptions within 10 percent of total payments.
        In the proposed rule we indicated that when it did become necessary 
    to adjust the minimum payment levels in accordance with 
    Sec. 412.348(h), we would contemplate adjusting each of the existing 
    levels (that is, 90 percent for sole community hospitals, 80 percent 
    for large urban DSH hospitals, and 70 percent for all other hospitals 
    and special exceptions) by 5 percentage point increments until 
    estimated exceptions payments were within the 10 percent limit. For 
    example, we would set minimum payment levels at 85 percent for sole 
    community hospitals, 75 percent for large urban DSH hospitals, and 65 
    percent for all other hospitals and special exceptions, provided that 
    aggregate exceptions payments at those minimum payment levels were 
    projected to be no more than 10 percent of total rate-based payments. 
    We indicated our belief that this policy appropriately provided for all 
    classes of hospitals to share in the reduction in exceptions payments, 
    while simultaneously preserving the special protections provided by 
    higher minimum payment levels for sole community hospitals and large 
    urban DSH hospitals relative to all other hospitals. If aggregate 
    exceptions payments at those minimum payment levels still exceeded 10 
    percent of total rate-based payments, we proposed to continue reducing 
    the minimum payment levels by 5 percentage point increments each until 
    the requirement of Sec. 412.348(h) was satisfied. We provided 
    notification of our thinking on this issue in order to solicit public 
    comment on the appropriate method for adjusting the minimum payment 
    levels.
        Comment: We received several comments expressing concern about our 
    proposal to cut minimum payment levels in five percentage point 
    increments, if necessary, to stay within the ten percent limit on 
    overall exceptions payments. The commenters expressed concern that 
    cutting the minimum payment levels by five percentage increments might 
    reduce exception payments more than necessary to stay within the ten 
    percent cap. Some commenters stated that using five percent incremental 
    adjustments instead of something more exact was not consistent with the 
    level of specificity that HCFA uses to make other types of adjustments, 
    and recommended that we use the same level of specificity in making 
    adjustments to the minimum payment levels that we use in making other 
    types of adjustments. Some commenters recommended that we adjust 
    minimum payment levels by tenths of a percent. One commenter noted that 
    because the minimum payment levels vary by type of hospital--90 percent 
    for sole community hospitals, 80 percent for urban DSH hospitals, and 
    70 percent for all other hospitals and special exceptions, cutting all 
    hospitals by the same percentages would affect some hospitals more than 
    others.
        Response: After considering the commenters' concerns, we have 
    decided it would be appropriate to adjust each of the minimum payment 
    levels by one percentage point increments in order to meet the ten 
    percent limit. We are changing the regulations at Sec. 412.348 to 
    reflect this change in our policy. We will make an adjustment to the 
    minimum payment levels when necessary by applying this policy.
        We decided not to implement the suggestion made by some commenters 
    that we adjust the minimum payment levels to the tenth of a percent 
    level. We believe such precise adjustments are inappropriate in this 
    context because our calculations reflect estimates, not exact figures. 
    We have also decided not to adjust groups with higher minimum payment 
    levels, such as sole community hospitals and urban DSH hospitals, more 
    than groups with lower minimum payment levels, such as all other 
    hospitals and special exceptions. At the time we established the 
    minimum payments, at the inception of capital PPS, we decided that some 
    groups warranted higher exception payments because of the type of care 
    they provided or their location in a particular community. We believe 
    it is still appropriate to maintain those higher levels of exception 
    payments for sole community hospitals and urban DSH hospitals.
        Comment: One commenter suggested that we use excess funds not paid 
    out for outliers to fund the shortfall in capital exceptions.
        Response: The commenter misunderstands the prospective nature of 
    outlier and capital exceptions policies and projections. We set payment 
    parameters such as outlier thresholds and capital minimum payment 
    levels before a fiscal year based on estimates. We also make 
    prospective adjustments to the applicable rates (operating standardized 
    amounts or capital Federal rates) to account for the projected level of 
    outlier payments or capital exceptions payments. Thus, for example, we 
    set outlier thresholds so that the outlier payments for operating costs 
    are projected to equal 5.1 percent of total DRG operating payments, and 
    we adjust the operating standardized amounts correspondingly. We do not 
    set aside a pool of money to fund outlier cases. Moreover, once the 
    payment parameters and adjustments are established for a fiscal year, 
    we do not make retroactive adjustments based on differences between 
    estimated and actual payments, whether actual payments are higher or 
    lower than estimated payments.
    
    B. Special Exceptions Application Process
    
        As discussed in section VI.A above, a separate special exceptions 
    provision extends protection to certain hospitals undertaking major 
    renovation or replacement of aging facilities during the decade of the 
    transition. The regulation establishing eligibility for this special 
    exceptions provision, and describing the criteria by which eligible 
    hospitals qualify for special exceptions payments (Sec. 412.348(g)), 
    was finalized on September 1, 1994 (59 FR 45385). In the proposed rule, 
    we did not propose to make any policy changes to the
    
    [[Page 46012]]
    
    special exceptions provision. However, we had received questions from 
    hospitals and intermediaries about the special exceptions process, and 
    we discussed a few aspects of that process particularly with regard to 
    the age of assets test and the excess capacity test. We reviewed the 
    application process, the project need requirement, the project size 
    requirement, and the excess capacity test. We specified that based on 
    the latest data available, we had decided to set the 75th percentile 
    for the age of assets test at 15.4 years rather than the 16.4 years we 
    had originally contemplated.
        We received no comments on these clarifications to the special 
    exceptions process.
    
    C. Reduction to the Standard Federal Capital Payment Rate and the 
    Unadjusted Hospital-Specific Rate
    
        Section 4402 of Public Law 105-33 amended section 1886(g)(1)(A) of 
    the Act to require that, for discharges occurring on or after October 
    1, 1997, the Secretary must apply the budget neutrality adjustment 
    factor used to determine the Federal capital payment rate in effect on 
    September 30, 1995 (as described in Sec. 412.352) to the unadjusted 
    standard Federal capital payment rate (as described in Sec. 412.308(c)) 
    effective September 30, 1997, and the unadjusted hospital-specific rate 
    (as described in Sec. 412.328(e)(1)) effective September 30, 1997. For 
    discharges occurring on or after October 1, 1997, and before September 
    30, 2002, the Secretary must reduce the same rates an additional 2.1 
    percent.
        The budget neutrality adjustment factor effective September 30, 
    1995 was .8432 (59 FR 45416) which is equivalent to a 15.68 percent 
    ((1.0-.8432) * 100) reduction in the unadjusted standard Federal 
    capital payment rate and the unadjusted hospital-specific rate in 
    effect on September 30, 1997. The additional 2.1 percent reduction to 
    the rates reduces the rates in effect on September 30, 1997 by a total 
    of 17.78 percent. The unadjusted standard Federal rate must be 
    distinguished from the annual Federal rate actually used in making 
    payment under the capital PPS system. The unadjusted standard Federal 
    rate is the underlying or base rate used to determine the Federal rate 
    for each Federal fiscal year by applying the formula described in 
    Sec. 412.308(c). The annual Federal rate is the result of that 
    determination process in Sec. 412.308(c).
        Under the statute, the additional 2.1 percent reduction applies for 
    a limited time. The language at section 4402 indicates the 2.1 percent 
    reduction applies to discharges occurring ``before September 30, 
    2002''. This would require that we calculate special rates that would 
    be in effect for only one day. We believe that Congress intended to 
    apply the reduction to discharges occurring through September 30, 2002. 
    Accordingly, we plan to seek a technical correction to change the date 
    that the 2.1 percent reduction expires from September 29, 2002, to 
    September 30, 2002. Since we assume this technical error will be 
    corrected, we are using the September 30, 2002 expiration date in our 
    regulations.
        When we restore the 2.1 percent reduction to the Federal rate after 
    September 30, 2002, we plan to restore the rate to the level that it 
    would have been without the reduction. We determined the adjustment 
    factor for FY 1998 by deducting both cuts (.1568 and .021) from 1 
    (1-.1568-.021-.8222). We then applied .8222 to the unadjusted standard 
    Federal rate. The adjustment factor to restore the 2.1 percent cut 
    would be the adjustment without the 2.1 percent cut (.8432) divided by 
    the adjustment with the 2.1 percent cut (.8222) (.8432/.8222=1.02554). 
    To restore the 2.1 percent reduction, we will apply 1.02554 to the 
    unadjusted standard Federal capital payment rate in setting rates for 
    discharges after September 30, 2002.
        Section 412.328(e) of the regulations provides that the hospital-
    specific rate for each fiscal year is determined by adjusting the 
    previous fiscal year's hospital specific rate by the hospital specific 
    rate update factor and the exceptions payment adjustment factor. After 
    these two adjustments are applied, a net adjustment to the rate is 
    determined. The previous year's hospital specific rate is analogous to 
    the standard Federal rate, which is updated each year to become the 
    annual Federal rate.
        When the 2.1 percent reduction is restored, most hospitals will 
    have completed the transition to a fully prospective payment system for 
    capital related costs. However, new hospitals might be eligible for 
    hold harmless payments beyond the transition, so we may need to 
    continue to compute a hospital specific rate. If we need to restore the 
    2.1 percent reduction to the hospital specific rates, we will do so in 
    a manner similar to that described above with respect to the unadjusted 
    standard Federal capital payment rate.
        In this final rule with comment period, we are revising two 
    sections of the capital prospective payment system regulations to 
    implement these statutory requirements. Specifically, we are revising 
    the regulations at Secs. 412.308(c) and 412.328(e) to provide for the 
    required 15.68 and 2.1 percent reduction to the rates. The 2.1 percent 
    reduction will be restored after September 30, 2002.
        We discuss the effect of this reduction to the standard Federal 
    rate and other changes in the adjustment factors to the FY 1998 Federal 
    rate in section III of the Addendum to this final rule with comment 
    period.
    
    D. Revision to the Calculation of the Puerto Rico Rate
    
        Currently, operating and capital payments to hospitals in Puerto 
    Rico are paid on a blend of 75 percent of the Puerto Rico rate based on 
    data from Puerto Rico hospitals only, and 25 percent of the national 
    rate based on data from all hospitals nationwide. As described in 
    section V.I of this preamble, the Balanced Budget Act of 1997 increases 
    the national share of the operating payment from 25 percent to 50 
    percent, and decreases the Puerto Rico share of the operating payment 
    from 75 percent to 50 percent. Under the broad authority of section 
    1886(g) of the Act, we are revising the calculation of capital payments 
    to Puerto Rico as well, to parallel the change that is being made in 
    the calculation of operating payments to Puerto Rico. Effective October 
    1, 1997, we will base capital payments to hospitals in Puerto Rico on a 
    blend of 50 percent of the national rate and 50 percent of the Puerto 
    Rico specific rate. This change will increase payments to Puerto Rico 
    hospitals since the national rate is higher than the Puerto Rico rate.
        In this final rule with comment period, as required by Public Law 
    105-33, we are reducing the unadjusted standard Federal rate and 
    hospital-specific rate by 17.78 percent for discharges occurring on or 
    after October 1, 1997, and before October 1, 2002. Section 1886(g) of 
    the Act confers broad authority on the Secretary to implement a capital 
    prospective payment system. In accordance with this authority, we are 
    extending the reduction to the capital rates to the Puerto Rico capital 
    rates as described in Sec. 412.374(a).
    
    VII. Changes for Hospitals and Units Excluded From the Prospective 
    Payment System
    
    A. New Requirements for Certain Hospitals Excluded From the Prospective 
    Payment System (Sec. 412.22(e))
    
        In the September 1, 1994 final rule (59 FR 45330), we established 
    several additional criteria for excluding from
    
    [[Page 46013]]
    
    the prospective payment system long-term care hospitals that occupy 
    space in the same building or on the same campus as another hospital 
    (Sec. 412.23(e)). Under these criteria, such facilities (sometimes 
    called ``hospitals within hospitals'') could qualify for exclusion only 
    if the two entities have separate governing bodies, chief executive 
    officers, medical staffs, and chief medical officers. In addition, they 
    were required to be capable of performing certain basic hospital 
    functions without assistance from the hospitals with which they are co-
    located, or they had to receive at least 75 percent of their inpatients 
    from sources other than the co-located hospital. We further revised 
    these regulations on September 1, 1995 (60 FR 45778), by adding a third 
    option under which hospitals that did not meet the criteria specified 
    above could establish separate operation by showing that no more than 
    15 percent of their inpatient operating costs were attributable to the 
    hospital with which they share space.
        The regulations were necessary to prevent inappropriate Medicare 
    payments to entities that are in effect, long-stay units of other 
    hospitals. At the same time, the regulations set forth criteria to 
    ensure that entities may qualify for exclusion from the prospective 
    payment system if an exclusion is warranted. Exclusion of long-term 
    care hospitals from the prospective payment system is appropriate when 
    hospitals have few short-stay or low-cost cases and might be 
    systematically underpaid if the prospective payment system were applied 
    to them. These reasons for exclusion do not apply if the entity that 
    provides the long-term care is part of a larger hospital, which does 
    have short-stay and low-cost cases and can be paid appropriately under 
    the prospective payment system.
        ProPAC has recommended that HCFA monitor the growth in the number 
    of long-term care hospitals within hospitals and evaluate whether the 
    current Medicare certification rules that apply to these facilities 
    should be changed (Recommendation 31). ProPAC noted that there is 
    concern that the hospital-within-a-hospital model was devised as a way 
    for acute care hospitals to receive higher payments for their long-stay 
    cases. At the same time, the model may be an appropriate and efficient 
    alternative to acute inpatient care for cases that require additional 
    services, but at a more intense level than those provided in other 
    post-acute settings. ProPAC recommended that HCFA conduct a 
    comprehensive study of the characteristics, patient mix, treatment 
    patterns, costs, and financial performance of hospitals within 
    hospitals.
        We have been monitoring the development of the hospital-within-a-
    hospital model. We agree with ProPAC that our policy should 
    simultaneously strive to prevent inappropriate exclusions of units as 
    separate hospitals, while allowing an appropriate degree of flexibility 
    for facilities to respond to changing patient care needs. As a result 
    of our monitoring efforts, in the June 2, 1997 proposed rule, we 
    proposed two changes to the hospital-within-a-hospital regulations (62 
    FR 29928). We proposed to add a new Sec. 412.22(f) to address hospitals 
    that are unable to meet certain exclusion criteria solely because of 
    State law. In addition, we proposed to extend the application of these 
    rules to other classes of facilities that might seek exclusion from the 
    prospective payment system as hospitals-within-hospitals.
        As discussed in detail in the proposed rule, the first proposed 
    change concerned the relationship between the exclusion criteria and 
    State laws. Specifically, we proposed to add Sec. 412.22(f) to address 
    hospitals that, as a matter of State law, would be unable to make the 
    necessary organizational changes to meet the hospital-within-a-hospital 
    criteria. Under our proposal, if a hospital could not meet the criteria 
    in Secs. 412.23(e)(3) (i) or (iii) (proposed to be redesignated as 
    Secs. 412.22(e) (1) and (3)) solely because its governing body or 
    medical staff is under the control of a third entity that also controls 
    the hospital with which it shares a building or a campus or cannot meet 
    the criteria in Secs. 412.23(e)(3) (ii) or (iv) (proposed to be 
    redesignated as Secs. 412.22 (e)(2) and (e)(4)) solely because its 
    chief medical officer or chief executive officer is employed by or 
    under contract with such a third entity, the hospital could 
    nevertheless qualify for an exclusion if that hospital meets the other 
    applicable criteria and:
         Is owned and operated by a State university;
         Has been continuously owned and operated by that 
    university since October 1, 1994;
         Is required by State law to be subject to the ultimate 
    authority of the university's governing body; and
         Was excluded from the prospective payment system as a 
    long-term care hospital for any cost reporting period beginning on or 
    after October 1, 1993, but before October 1, 1994.
        We solicited comments and suggestions on this issue as well as on 
    whether the language of the proposed rule effectively addressed the 
    situation of hospitals disadvantaged by State law.
        We also proposed to redesignate Sec. 412.23 (e)(3) through (e)(5) 
    which specifies the criteria for hospitals-within-hospitals as 
    Sec. 412.22(e), (g), and (h). This change would have extended the 
    application of the hospital-within-a-hospital rules to all types of 
    facilities that can be excluded from the prospective payment system. As 
    we stated in the proposed rule, we believe it is important to exclude, 
    as hospitals only bona fide separate hospitals, not units of larger 
    hospitals. We also proposed to incorporate, within this extended 
    hospital-within-a-hospital rule, the above provisions that we proposed 
    for facilities owned and operated by a State university.
        At the same time, we were considering whether it was appropriate 
    for new hospitals-within-hospitals to receive the exemption from the 
    TEFRA rate-of-increase ceiling during the first 2 years of operation. 
    We stated that the purpose of the new hospital exemption was to 
    recognize that a hospital might face a period of cost distortions as it 
    began operations and tried to establish its presence in its market. We 
    did not believe that newly established hospitals-within-hospitals would 
    necessarily face the same degree of cost distortion during their 
    initial periods of operation since they operate within existing, 
    identifiable hospitals. While we did not formally propose elimination 
    of the new hospital exemption for hospitals-within-hospitals at this 
    time, we proposed considering adoption of such a provision in this 
    year's final rule. We invited comment on whether elimination of the new 
    hospital exemption for hospitals-within-hospitals would be advisable.
        As discussed in detail below, Public Law 105-33 made changes in the 
    treatment of certain long-term care hospitals. As a result of this new 
    legislation, we are withdrawing our proposal regarding State owned 
    hospitals-within-hospitals and implementing our proposal concerning the 
    extension of the hospital-within-hospital rules with some changes. The 
    discussion that follows details the provisions of section 4417 of 
    Public Law 105-33, explains how these provisions will be implemented, 
    and responds to comments on the proposed rule.
        Section 4417 of Public Law 105-33 specifies that a hospital that 
    was classified by the Secretary on or before September 30, 1995, as an 
    excluded long-term care hospital shall continue to be so classified 
    notwithstanding that it is located in the same building as, or on the 
    same campus as, another hospital.
    
    [[Page 46014]]
    
     This statutory provision supersedes certain aspects of the current 
    regulatory requirements for long-term care hospitals-within-hospitals, 
    and affects our proposal to extend the hospital-within-a-hospital 
    criteria to excluded hospitals other than long-term care hospitals. 
    While the amendment made by section 4417 of Public Law 105-33 is 
    specific to long term care hospitals, we believe the considerations 
    underlying the legislation also apply to other types of hospitals-
    within-hospitals.
        In view of this statutory change and to provide for consistent 
    treatment of all excluded hospitals-within-hospitals, we have decided 
    to withdraw our proposal to include a specific provision for State-
    owned hospitals-within-hospitals. Instead, we are revising 
    Sec. 412.22(e) of the regulations to provide that for cost reporting 
    periods beginning on or after October 1, 1997, if a hospital occupies 
    space in a building also used by another hospital, or in one or more 
    entire buildings located on the same campus as buildings used by 
    another hospital, the hospital must meet the hospital-within-a-hospital 
    criteria unless the hospital was excluded from the prospective payment 
    system on or before September 30, 1995, in which case the hospital-
    within-a-hospital criteria do not apply. This provision would apply to 
    all types of excluded hospitals, not just long-term care hospitals. The 
    extension of the hospital-within-a-hospital criteria to hospitals not 
    exempt from the criteria based on their status before October 1995 
    would be prospective only for cost reporting periods beginning on or 
    after October 1, 1997. We wish to emphasize that the grandfathering 
    provision based on a hospital's pre-October 1995 status would not be 
    made available to any hospital which may have been excluded at one time 
    but lost its exclusion for reasons unrelated to hospital-within-a-
    hospital status.
        Comment: One commenter argued that many hospitals sharing space 
    with others will need additional time to comply with the hospital-
    within-a-hospital rules, since they may need to recruit added staff, 
    make arrangements with new vendors, and reorganize their administrative 
    staff and governing bodies. The commenter suggested that, to allow 
    these changes to be made, the effective date should be changed so that 
    these hospitals would first have to meet the requirements for cost 
    reporting periods beginning on or after October 1, 1998 or October 1, 
    1999. Another commenter suggested that the proposed effective dates 
    would result in impermissible retroactive rulemaking, and recommended 
    that each hospital potentially subject to the new rules be 
    grandfathered for at least one cost reporting period to allow for an 
    orderly transition. Another commenter suggested that the proposal 
    regarding State-owned hospitals may be moot as a result of section 4417 
    of Public Law 105-33, which specifically requires grandfathering of all 
    long-term care hospitals-within-hospitals that were excluded on 
    September 30, 1995.
        Response: We agree that, in view of section 4417 of Public Law 105-
    33, it would not be appropriate to adopt our proposals regarding 
    hospitals-within-hospitals as stated in the proposed rule. We have 
    considered the commenter's concerns; however, we believe use of a 
    single effective date of October 1, 1997 will result in the most simple 
    and consistent implementation of the rule.
        Comment: One commenter objected to the parts of the proposal under 
    which a hospital would have been required to have been continuously 
    owned and operated by a State university since October 1, 1994, and 
    would have been required to have been excluded for a cost reporting 
    period beginning after September 30, 1993 but before October 1, 1994. 
    The commenter asserted that these provisions would exclude otherwise 
    qualified facilities from the grandfathering provision.
        Response: As noted above, we are not adopting the proposal 
    regarding State-owned hospitals, but have extended the grandfathering 
    provision to all types of excluded hospitals which were excluded on or 
    before September 30, 1995.
        Comment: A commenter suggested that the provisions of the proposed 
    rule not be applied to hospitals co-located with long-term care 
    hospitals or to any excluded hospitals that share space. The commenter 
    reasoned that this would be unnecessary because in such cases where 
    both hospitals are excluded and serve discrete patient types, there is 
    no incentive for inappropriate transfers, referrals, or other abusive 
    practices. The commenter also recommended that the organizational 
    separateness requirements not be applied where 75 percent or more of a 
    hospital's referrals come from outside sources.
        Response: We believe the rule should be applied to situations in 
    which the hospitals that share space are all excluded. Even in the 
    absence of a new provider exemption to the TEFRA limit, a hospital may 
    have incentives to inappropriately establish a hospital-within-a-
    hospital. For example, the two facilities may have different target 
    rates and this may lead to the diversion of some patients to one of the 
    hospitals for reasons of payment rather than for the benefit of the 
    patient. Moreover, the types of populations treated by different types 
    of excluded facilities are not mutually exclusive: rehabilitation 
    patients can be treated in a long-term care hospital, and 
    rehabilitation hospitals are not precluded from accepting and treating 
    long-stay patients. Thus, permitting exclusion of such ``hospitals'' 
    within other hospitals may create incentives for abuse that would be 
    diluted or absent if the facilities were freestanding. Regarding the 75 
    percent referral requirement, we note that it is intended to measure 
    functional separateness and thus complements, but cannot replace, the 
    structural separateness tests.
        Comment: One commenter stated that although some hospitals have 
    been co-located with others for many years they have not gained an 
    unfair advantage. The commenter also believed that the hospital-within-
    a-hospital criteria relating to control over two co-located hospitals 
    by a third entity are too stringent and do not recognize that such 
    arrangements are common among nonprofit hospitals and are used by 
    organizations to carry out their fiduciary responsibilities with 
    respect to subordinate corporations. The commenter suggested that the 
    proposed rules be withdrawn or, if they are not withdrawn, applied only 
    to requests for exclusion received on or after October 1, 1997, applied 
    only where the rate of referral between hospitals is over 25 percent, 
    or both.
        Response: As explained above, we agree that our proposals to extend 
    the application of the hospital-within-a-hospital rules should be 
    applied only prospectively, starting with cost reporting periods 
    beginning on or after October 1, 1997. Further, the rules will not 
    apply to all excluded hospitals which were excluded on or before 
    September 30, 1995. However, we do not agree that our criteria 
    regarding control by a third entity are too stringent or that they 
    unfairly disadvantage nonprofit hospitals. While it may be common for 
    corporations to exercise significant control over their subordinate 
    components, we continue to believe this control indicates that the 
    components are part of a larger organization, not bona fide separate 
    hospitals. We also do not agree that a low rate of referrals between 
    co-located hospitals is sufficient to avoid the need to determine that 
    an entity is a bona fide separate hospital. Even in the absence of a 
    significant level of referrals, a hospital unit may be misrepresented 
    as a separate hospital in order to obtain a more favorable 
    reimbursement. Thus,
    
    [[Page 46015]]
    
    avoiding referrals does not eliminate all incentives for abuse.
        Comment: ProPAC recommended that the Secretary conduct an extensive 
    review of hospitals-within-hospitals, to determine if the existence of 
    this model undermines the incentives of the prospective payment system.
        Response: We share this concern and are monitoring the status of 
    these facilities. We will continue to review the status of these 
    facilities and evaluate the implications of the changes in Public Law 
    105-33 affecting newly excluded hospitals and the hospital-within-a-
    hospital issue.
        In addition to the changes discussed above, in Sec. 412.22(e)(5) 
    (ii) and (iii), we are adding a reference to ``the six-month period 
    immediately preceding the first cost reporting period for which 
    exclusion is sought.'' This language clarifies that the criteria in 
    these paragraphs also apply to excluded hospitals other than long term 
    care or children's hospitals, since excluded hospitals other than long-
    term care or children's hospitals do not always have a prior cost 
    reporting period of at least 6 months that is used to establish length 
    of stay or treatment of an inpatient population which is predominantly 
    individuals under age 18.
    
    B. Exclusion of New Rehabilitation Units and Expansion of Existing 
    Rehabilitation Units (Sec. 412.30(b)(4))
    
        In the September 1, 1995 final rule (60 FR 45839), we made certain 
    changes to clarify the regulations applicable to the exclusion of new 
    rehabilitation units and the expansion of units already excluded. These 
    changes were intended only to clarify existing policy, not to change 
    it. However, in making these changes we inadvertently omitted a 
    paragraph that explicitly allowed newly participating hospitals to open 
    new rehabilitation units and also to allow the new rehabilitation units 
    to be excluded immediately from the prospective payment system. In 
    omitting this paragraph, we had no intention of rescinding the policy. 
    In the June 2, 1997 proposed rule, we indicated that we would restore 
    this paragraph to the regulations, which the proposed rule would have 
    redesignated at (Sec. 412.30(b)(4)), to correct this omission and to 
    reaffirm current policy. (For further information on this policy, see 
    the Federal Register published September 1, 1992 (57 FR 39746)). We 
    received no comments on this proposal and are implementing the change 
    in this final rule with comment period.
    
    C. Delicensing and Relicensing of Beds (Sec. 412.30)
    
        We have received a number of questions about cases in which 
    hospitals remove some bed capacity from their State license and 
    Medicare certifications, then later increase the number of their 
    licensed and certified beds and seek to have the bed capacity ``added'' 
    and considered part of a new, or newly expanded, prospective payment 
    system-exempt rehabilitation unit. Assuming that simultaneous 
    delicensure and relicensure of beds would not be accepted as the 
    addition of new bed capacity, we also have been asked how long bed 
    capacity would have to be excluded from a hospital's licensure and 
    certification to be considered ``new'' for purposes of the prospective 
    payment system exclusion rules at Sec. 412.30.
        Section 412.30 establishes separate ways for new and converted 
    units to meet the exclusion criterion related to the type of patient 
    population treated. New units are allowed to qualify for initial 
    exclusion based in part on a certification regarding their intent to 
    treat a patient population of the kind described in Sec. 412.23(b)(2), 
    rather than on a showing that they have actually treated such a 
    population during the hospital's most recent cost reporting period. 
    Converted units may not be excluded based on a certification, but must 
    show that they actually met the Sec. 412.23(b) requirement during the 
    hospital's most recent 12-month cost reporting period. New units are 
    defined as those that are part of a hospital that has not previously 
    sought exclusion for any rehabilitation unit and that comprise greater 
    than 50 percent of the newly licensed and certified bed capacity, while 
    converted units are those that do not qualify as new. Section 412.30 
    also provides for separate treatment of new and converted bed capacity 
    that is used to expand existing units.
        Different rules apply to the addition of new (as opposed to 
    converted) bed capacity, and it would not be appropriate to recognize 
    an ``increase'' in the bed capacity that coincides with a decrease in 
    bed capacity in another area, resulting in no net increase in the 
    hospital's total licensed and certified bed capacity. Similarly, it 
    would not be appropriate to allow a hospital to circumvent those rules 
    simply by removing some bed capacity from its licensure and 
    certification on a temporary basis, and then increasing its bed size a 
    few days, weeks, or months later. Thus, when a hospital seeks to add a 
    new excluded rehabilitation unit, or to increase the size of an 
    existing unit by adding new bed capacity, the bed size of the hospital 
    in the past must be taken into account.
        The current regulations do not specify how long a decrease in a 
    hospital's bed capacity must be effective before a subsequent increase 
    in the hospital's licensure and certification can be considered as 
    ``new'' capacity. However, to ensure consistent and equitable treatment 
    of all hospitals with excluded rehabilitation units, in the June 2, 
    1997 proposed rule, we proposed to provide in the regulations (proposed 
    Sec. 412.30(a)) that a decrease in capacity must remain effective for 
    at least a full 12-month cost reporting period before an equal or 
    lesser number of beds can be added to the hospital's licensure and 
    certification and considered ``new''. This means that when a hospital 
    seeks to establish a new unit, or to enlarge an existing unit, under 
    the criteria in Sec. 412.30, the HCFA Regional Office will review its 
    records on the facility to determine whether any beds have been 
    delicensed and decertified during the 12-month cost reporting period 
    before the period for which the new beds are to be added. To the extent 
    that bed capacity was removed from the hospital's licensure and 
    certification during that period, that amount of bed capacity cannot be 
    considered ``new'' under Sec. 412.30. For example, if a hospital with a 
    calendar year cost reporting period had removed 15 beds from its 
    licensure and certification in calendar year 1997 and, for calendar 
    year 1998, sought to set up a new rehabilitation unit that would 
    include 20 beds that would be added to its licensure and certification 
    as of January 1, 1998, only 5 of those beds could be considered ``new'' 
    under Sec. 412.30. The remaining beds would be considered converted 
    beds.
        This guideline applies to changes in a hospital's total licensed 
    and certified bed capacity, regardless of whether specific beds or 
    physical areas within a hospital have previously been operational and 
    available to rehabilitation patients. Thus, if a hospital delicenses 25 
    beds on one floor in the third month of a cost reporting period and, 2 
    months later, increases its licensure and certification by adding a 25-
    bed unit in a previously unoccupied area on another floor, that unit 
    could not be considered ``new'' under Sec. 412.30 even though it 
    occupies different space from the beds that represented the delicensed 
    capacity. This guideline applies only for purposes of exclusion from 
    the prospective payment system and is not intended to limit a 
    hospital's ability to add to its licensed and certified bed capacity 
    for the provision
    
    [[Page 46016]]
    
    of services paid for under the prospective payment system.
        We are also revising Sec. 412.30(c)(1)(ii) to state that beds that 
    a hospital wishes to add to an excluded rehabilitation unit can be 
    considered ``new,'' and thus subject to earlier exclusion than existing 
    beds, only if the hospital's total inpatient bed capacity has increased 
    by an amount that is more than 50 percent of the number of beds the 
    hospital seeks to add to the unit, so that the added beds represent 
    primarily newly licensed and certified capacity.
        Comment: One commenter suggested that the proposal is too 
    stringent, in that it does not take into account that hospitals may be 
    pursuing separate CON activities--construction of a new facility to 
    replace an older, larger facility, and creation of a new rehabilitation 
    unit. The commenter suggested that the coincidence of these events 
    could result in an inadvertent appearance of shifting of bed capacity 
    and recommended that we not impose the delicensing rule but instead 
    rely solely on CON approval to determine the appropriateness of 
    expansions in rehabilitation units. Another commenter suggested that 
    the proposal is unnecessarily restrictive.
        Response: We understand that there may be situations in which it is 
    appropriate for a hospital, acting in response to community needs and 
    changes in demand for specific types of services, to separately pursue 
    changes in bed size as described by this commenter. While such changes 
    would not be undertaken with any intent to evade exclusion 
    requirements, it nevertheless is clear that they would constitute a 
    shift of the hospital's existing net bed capacity from acute to 
    rehabilitation use, rather than an increase in bed capacity. Thus, we 
    believe such shifts would appropriately be treated under the rules for 
    conversion of bed capacity, and thus have not adopted this comment.
    
    D. Special Excluded Hospital Criteria Added by Public Law 105-33 
    (Sec. 412.23)
    
        Public Law 105-33 added special criteria for certain hospitals to 
    be excluded from the prospective payment system. Section 
    1886(d)(1)(B)(iv) of the Act as amended by section 4417(b) of Public 
    Law 105-33 allows certain hospitals with an average length of stay of 
    less than 25 days to be excluded from the prospective payment system as 
    a long-term care hospital. In order to be excluded under this 
    provision, a hospital must have first been excluded as a long-term care 
    hospital in calendar year 1986, have an average inpatient length of 
    stay of greater than 20 days, and demonstrate that 80 percent or more 
    of its annual Medicare inpatient discharges in the 12-month cost 
    reporting period ending in Federal fiscal year 1997 have a principal 
    diagnosis that reflects a finding of neoplastic disease. The exclusion 
    under this provision is effective for cost reporting periods beginning 
    on or after August 5, 1997 (the date of enactment of Pub. L. 105-33). 
    We are revising Sec. 412.23(e) to implement this provision.
        Section 4418 of Public Law 105-33 provides an additional category 
    of hospitals that can qualify as cancer hospitals for purposes of 
    exclusion from the prospective payment system. As amended, section 
    1886(d)(1)(B)(v) of the Act includes a hospital that meets the 
    following criteria:
         The hospital was recognized as a comprehensive cancer 
    center or clinical cancer research center by the National Cancer 
    Institute of the National Institutes of Health as of April 20, 1983.
         The hospital must have applied for and been denied, on or 
    before December 31, 1990, classification as a cancer hospital.
         The hospital was licensed for fewer than 50 acute care 
    beds as of the date of enactment of this subclause (that is, August 5, 
    1997).
         The hospital is located in a State that, as of December 
    19, 1989, was not operating a demonstration project under section 
    1814(b) of the Act.
         The hospital demonstrates that, for the 4-year period 
    ending on December 31, 1996, at least 50 percent of the hospital's 
    total discharges have a principal finding of neoplastic disease; that 
    is, the discharge has a principal diagnosis code of 140-239, V58.0, 
    V58.1, V66.1, V66.2, or 990.
        A hospital that meets these criteria is classified as an excluded 
    cancer hospital for cost reporting periods beginning on or after 
    January 1, 1991. In addition, for purposes of payment, the base period 
    applicable to such a hospital is the hospital's cost reporting period 
    beginning during FY 1990 or the period under new section 1886(b)(3)(F) 
    of the Act (discussed below). We are revising the regulations at 
    Sec. 412.23(f) to incorporate this provision.
    
    E. Changes Based on New Legislation for the Payment of Hospitals and 
    Units Excluded from the Prospective Payment System (Sec. 413.40)
    
        Public Law 105-33 significantly altered the payment provisions for 
    excluded hospitals and units. Prior to the passage of Public Law 105-
    33, the payment provisions for excluded hospitals and units applied 
    consistently to all categories of excluded providers (that is, 
    psychiatric, rehabilitation, long-term care, children's, and cancer). 
    However, effective for cost reporting periods beginning on or after 
    October 1, 1997, there are specific payment provisions for psychiatric, 
    rehabilitation, and long-term care providers and modifications to 
    payment provisions for all excluded providers. Following is a complete 
    discussion of the new provisions and the revised regulations.
        1. Rate-of-Increase Percentages for Excluded Hospitals and Units 
    (Sec. 413.40 (c) and (g))
        Hospitals and units excluded from the prospective payments system 
    receive payment for inpatient hospital services they furnish on the 
    basis of reasonable costs, subject to a rate-of-increase ceiling. An 
    annual per discharge limit (the target amount as defined in 
    Sec. 413.40(a)) is set for each hospital or hospital unit based on the 
    hospital's own cost experience in its base year. The target amount is 
    multiplied by the Medicare discharges and applied as an aggregate upper 
    limit (the ceiling as defined in Sec. 413.40(a)) on total inpatient 
    operating costs for a hospital's cost reporting period.
        Section 4411 of Public Law 105-33 amended sections 1886(b)(3)(B) of 
    the Act regarding the rate-of-increase percentages to be applied to 
    each target amount as set forth below.
        The applicable rate-of-increase percentage for the cost reporting 
    period beginning during FY 1998 is 0 percent.
        For cost reporting periods beginning in FY 1999 through FY 2002, 
    the applicable rate-of-increase percentage is the market basket rate of 
    increase percentage minus a factor based on the percentage by which the 
    hospital's operating costs exceed the hospital's ceiling for the most 
    recent cost reporting period for which information is available.
         If the hospital's operating costs are equal to or exceed 
    110 percent of the ceiling amount, the rate-of- increase percentage 
    increase is equal to the market basket percentage.
         If the hospital's costs exceed the ceiling but are less 
    than 110 percent of the ceiling, the rate-of-increase percentage is the 
    market basket rate of increase minus .25 percentage points for each 
    percentage point by which costs are less than 10 percent over the 
    ceiling. The rate-of- increase percentage is in no case less than 0 
    percent.
         If the hospital's costs are equal to or less than ceiling 
    but greater than 66.7 percent of the ceiling, the rate-of-increase 
    percentage is the greater of the market basket minus 2.5 percentage 
    points or 0 percent.
    
    [[Page 46017]]
    
         If the hospital's costs do not exceed 66.7 percent of the 
    ceiling, the rate-of-increase percentage is 0 percent.
         If the hospital first receives payments as an excluded 
    provider on or after October 1, 1997, the new statutory payment 
    methodology for new hospitals applies.
        Examples of how the rate-of-increase percentage provision applies 
    in determining the applicable rate-of- increase percentages are as 
    follows:
    
    
                                    Example 1                               
    Cost reporting period beginning in FY 1999:                             
      FY 1997 target amount....................................       $8,000
      Medicare discharges......................................        x 100
                                                                ------------
      FY 1997 ceiling..........................................     $800,000
      FY 1997 allowable inpatient operating costs..............   $1,000,000
      FY 1997 costs over (under) of the ceiling................     $200,000
      FY 1997 costs as percentage of the ceiling...............          125
      FY 1998 rate-of-increase percentage......................            0
      FY 1999 rate-of-increase percentage: market basket.......         2.60
      FY 1999 target amount (FY 1998 target amount of $8,000 x              
       1.026)..................................................       $8,208
                                                                            
    
    
                                    Example 2                               
    Cost reporting period beginning in FY 1999:                             
      FY 1997 target amount....................................       $9,800
      Medicare discharges......................................        x 100
                                                                ------------
      FY 1997 ceiling..........................................     $980,000
      FY 1997 allowable inpatient operating costs..............   $1,000,000
      FY 1997 costs over (under) the ceiling...................      $20,000
      FY 1997 percent by which costs exceed (do not exceed) the             
       ceiling.................................................         2.04
      FY 1998 rate-of-increase percentage......................            0
    FY 1999 rate-of-increase percentage:                                    
      Market basket............................................         2.60
      Percentage point reduction (.25 x (10-2.04)).............       (1.99)
                                                                ------------
      Update (percent).........................................          .61
    FY 1999 target amount (FY 1998 target amount $9,800 x                   
     1.0061)...................................................    $9,859.78
                                                                            
    
    
                                    Example 3                               
    Cost reporting period beginning in FY 1999:                             
      FY 1997 target amount....................................      $10,500
      Medicare discharges......................................        x 100
                                                                ------------
      FY 1997 ceiling..........................................   $1,050,000
      FY 1997 allowable inpatient operating costs..............   $1,000,000
      FY 1997 costs over (under) the ceiling...................    $(50,000)
      FY 1997 costs as percentage of the ceiling...............         95.2
      FY 1998 rate-of-increase percentage......................            0
    FY 1999 percentage increase:                                            
      Market basket............................................         2.60
      Percentage point reduction...............................       (2.50)
                                                                ------------
      Update (percent).........................................          .10
      FY 1999 target amount (FY 1998 target amount $10,500 x                
       1.001)..................................................   $10,510.50
                                                                            
    
    
                                    Example 4                               
    Cost reporting period beginning in FY 1999:                             
      FY 1997 target amount....................................      $16,000
      Medicare discharges......................................        x 100
                                                                ------------
      FY 1997 ceiling..........................................   $1,600,000
      FY 1997 allowable inpatient operating costs..............   $1,000,000
      FY 1997 costs over (under) the ceiling...................   $(600,000)
      FY 1997 costs as percentage of the ceiling...............         62.5
      FY 1998 rate-of-increase percentage:.....................            0
      FY 1999 rate-of-increase percentage......................            0
      FY 1999 target amount (FY 1998 target amount of $16,000 x             
       1.0)....................................................      $16,000
                                                                            
    
        We are revising Sec. 413.40(c)(3)(vi) and adding new paragraphs 
    (c)(3)(vii) and (c)(3)(viii) and (g)(5) to set forth the new rate-of-
    increase percentage provisions.
    2. Request for a new base period (Sec. 413.40(b))
        Sections 4413(a) and 4413(b) of Public Law 105-33 amended sections 
    1886(b)(3) of the Act in order to permit excluded hospitals and units 
    to elect (``in a form and manner determined by the Secretary'') a 
    rebasing of the target amount for the 12-month cost reporting period 
    beginning during FY 1998 (October 1, 1997 through September 30, 1998). 
    Except for a qualified long-term care hospital, as discussed below, 
    each excluded hospital or unit under present or previous ownership that 
    received Medicare payments during cost reporting periods beginning 
    before October 1, 1990 may submit to its fiscal intermediary a request 
    for rebasing its target amount. The new section 1886(b)(3)(F) of the 
    Act instructs the Secretary to determine the rebased target amount as 
    follows:
        (1) The Secretary shall determine the hospital's allowable 
    inpatient operating costs ``for each of the 5 cost reporting periods 
    for which the Secretary has the most recent settled cost reports as of 
    the date of enactment (August 5, 1997)''.
        (2) For each of the 5 cost reporting periods, the Secretary shall 
    update the inpatient operating cost per case to FY 1998 using the 
    update factors cited at section 1886(b)(3)(B) of the Act 
    (Sec. 413.40(c)).
        (3) The Secretary shall exclude the highest and lowest of the five 
    updated amounts for inpatient operating cost per case.
        (4) The Secretary shall compute the average for the remaining three 
    updated inpatient operating cost per case.
        Under the statute the methodology for determining a rebased target 
    amount uses the updated inpatient operating costs per case from the 
    five most recent cost reports that have been settled as of the date of 
    the enactment of the statute (August 5, 1997). For purposes of this 
    provision, we will not recalculate the target amount to reflect cost 
    report reopenings, changes, or other adjustments made after August 5, 
    1997. Reopenings (or even multiple reopenings) of any of the five 
    settled cost reports at later dates could create a uncertainty of the 
    applicable FY 1998 target amount until well after the end of FY 1998 
    and uncertainty about target amounts for subsequent years. Accordingly, 
    the hospital must carefully consider the inpatient operating costs per 
    case of its five most recent settled cost reports as of August 5, 1997 
    in deciding whether to apply for rebasing under this provision.
        Similarly, if a hospital that received payments during cost 
    reporting periods beginning before October 1, 1990 has reorganized or 
    acquired another similar excluded provider so that its five most recent 
    settled cost reports reflect substantial differences in the size and 
    expenses of the excluded hospital or unit, the same considerations 
    apply. It is not permissible to use fewer than (or more than) the five 
    most recent settled cost reports in an attempt to reflect an 
    operational reorganization. Also, if the hospital elects rebasing under 
    this provision, the revised target amount for FY 1998 continues to be 
    subject to the 75th percentile cap established on the target amount by 
    Section 4414 of Public Law 105-33 (discussed below). Exception payments 
    as governed by Secs. 413.40(g) and (i) will be evaluated based on a 
    comparison of the hospital's operating costs and its costs during the 
    three years used to calculate the rebased target amount.
        In order to implement the statutory provision, we are adding 
    Sec. 413.40(b)(1)(iv) to describe the manner in which a hospital must 
    request a rebased target amount. The hospital submits the request to 
    its fiscal intermediary. Due to the extremely short timeframe between 
    enactment of Public Law 105-33 on August 5, 1997 and the
    
    [[Page 46018]]
    
    beginning of FY 1998 (on October 1), we believe it is necessary and 
    appropriate to establish special rules to address those hospitals whose 
    cost reporting periods begin early in FY 1998, in order to treat all 
    hospitals equitably. Therefore, the hospital must submit its request 
    for rebasing by the later of November 1, 1997 or 60 days prior to the 
    beginning of its cost reporting period beginning during FY 1998. We 
    emphasize that the intermediary must receive the request by the 
    deadline. Also, we note that this is a one time request that must be 
    received by the deadline for the FY 1998 cost reporting period.
        Upon receipt of a request for a rebased FY 1998 target amount, the 
    fiscal intermediary should verify the submitted request and notify the 
    hospital of its FY 1998 target amount.
        The request for a new base period must include the following:
         Cover letter, which must include the items listed below.
    
    --The name of the excluded hospital or unit;
    --The Medicare provider number;
    --The beginning and ending dates for the FY 1998 cost reporting period;
    --The fiscal year of the existing base period and FY 1998 updated 
    target amount;
    --A statement requesting a rebased FY 1998 target amount under 
    Sec. 413.40(b)(1)(iv);
    --A statement of the rebased FY 1998 target amount per discharge with 
    supporting documentation in attachment work papers;
    --A list of attachments; and
    --A contact person: name, phone number, and address
    
         Attachments
    
    --Copies of the Notices of Program Reimbursement for the five most 
    recent settled cost reporting periods
    --Copies of Worksheet D-1 for the five most recent settled cost 
    reporting periods
    --A list and/or calculation of the following for each of the five most 
    recent settled cost reporting periods:
    
        + Total Medicare inpatient operating costs (excluding pass through 
    costs);
        + Total Medicare discharges;
        + Medicare inpatient operating costs per case; and
        + Medicare inpatient operating costs per case updated to FY 1998
    
    --A list the highest and lowest of the five updated inpatient operating 
    cost per case; and
    --A calculation of the average for the remaining three updated 
    inpatient operating cost per case
    
        Section 4413(b) of Public Law 105-33 also specified a separate 
    rebasing election for a qualified long-term care hospital. The statute 
    defines a qualified long-term care hospital as a long-term care 
    hospital that meets the following two conditions for its two most 
    recent settled cost reports as of August 5, 1997:
        (1) The hospital's Medicare inpatient operating costs exceed 115 
    percent of the ceiling; and
        (2) The hospital would have had a disproportionate patient 
    percentage (as defined in Sec. 412.106) equal to or greater than 70 
    percent if it were a prospective payment system hospital. A qualified 
    long-term care hospital must submit a request to its fiscal 
    intermediary to have a rebased target amount in the same manner as 
    discussed above for other excluded hospitals. The request must be 
    received by the fiscal intermediary by the later of November 1, 1997 or 
    60 days prior to the beginning of its cost reporting period during FY 
    1998. For a qualified long-term care hospital, the methodology for 
    rebasing the target amount differs. The FY 1998 rebased target amount 
    is the hospital's FY 1996 inpatient operating costs updated by the 
    market basket percentage to FY 1997 only, not to FY 1998, subject to 
    the 75th percentile cap.
        To assist with the application of the updating of the cost per case 
    to the subject fiscal period, the increase in the market basket and the 
    applicable update factors for excluded hospitals and units since FY 
    1990 are:
    
    ------------------------------------------------------------------------
                                                       Market               
                      Fiscal year                      basket       Update  
                                                     (percent)      factor  
    ------------------------------------------------------------------------
    1990..........................................          5.5        1.055
    1991..........................................          5.3        1.053
    1992..........................................          4.7        1.047
    1993..........................................          4.2        1.042
    1994..........................................          4.3    \1\ 1.043
    1995..........................................          3.7    \1\ 1.037
    1996..........................................          3.4    \1\ 1.034
    1997..........................................          2.5    \1\ 1.025
    1998..........................................          2.7       1.000 
    ------------------------------------------------------------------------
    \1\ See Sec.  413.40(b)(3)(v) for method of determining applicable      
      reduction.                                                            
    
        We are adding Secs. 413.40(b) (iv) and (v) to set forth the new 
    provisions regarding request for new base periods.
    3. Limitation on the Target Amount for Excluded Hospitals and Units 
    (Sec. 413.40(c))
        Section 4414 of Public Law 105-33 amended section 1886(b)(3) of the 
    Act, to establish caps on the target amounts for excluded hospitals or 
    units 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 categories of excluded hospitals: psychiatric hospitals 
    and units, rehabilitation hospitals and units, and long-term care 
    hospitals. For purposes of calculating the caps, the statute requires 
    the Secretary to first ``estimate the 75th percentile of the target 
    amounts for such hospitals within [each] class for cost reporting 
    periods ending during fiscal year 1996''. For cost reporting periods 
    beginning in FY 1998, the Secretary shall update the amount so 
    determined by the market basket percentage increase to FY 1998. For 
    cost reporting periods beginning during FY 1999 through 2002, the 
    Secretary shall update the resulting amount by the market basket 
    percentage.
        The estimates of the 75th percentile of the target amounts were 
    developed from the best available data on the hospital specific target 
    amounts for cost reporting periods ending during fiscal year 1996 and 
    then updated by the market basket percentage to FY 1998. Given the 
    extraordinarily short time frame between the enactment of Public Law 
    105-33 (August 5, 1997) and the required publication date of this final 
    rule, we used the best available data that has been reported to HCFA by 
    the fiscal intermediaries for over 3,000 hospitals and units within the 
    classes specified by the statute.
        When an exact target amount was not available for a particular 
    hospital, we used the best available information to estimate the 
    hospital's target amount. For example, if the hospital's target amount 
    for its cost reporting period ending during FY 1996 was not available 
    but the target amount for FY 1995 was available, we updated the FY 1995 
    target amount by the applicable percentage increase to determine an 
    estimate of the hospital's target amount for its cost reporting ending 
    during FY 1996. We note that, with respect to long-term care hospitals, 
    we were able to obtain exact target amount figures for virtually all 
    hospitals within the class.
        A hospital that has a target amount that is capped at the 75th 
    percentile would not be granted an exception payment as governed by 
    Secs. 413.40 (a) and (i) based solely on a comparison of its costs or 
    patient mix in its base year to its costs or patient mix in the payment 
    year. Since the hospital's target amount would not be determined based 
    on its own experience in a base year, any comparison of costs or 
    patient mix in its base year to costs or patient mix in the payment 
    year would be irrelevant. However, exception payments would still be 
    available for hospitals that have target amounts that are determined by 
    the hospital's costs in a base year unaffected by the 75th percentile 
    cap.
    
    [[Page 46019]]
    
        The 75th percentile of the target amounts for cost reporting 
    periods ending during fiscal year 1996, and updated by the market 
    basket up to FY 1998 are as follows:
        (1) Psychiatric hospitals and units: $10,188
        (2) Rehabilitation hospitals and units: $18,476
        (3) Long-term care hospitals: $36,449
        We are revising Sec. 413.40(c)(4) (i) and (ii) to set forth the 
    limitation on the ceiling provisions.
    4. Bonus and Relief Payments (Sec. 413.40(d))
    a. Bonus Payments
        For cost reporting periods beginning before October 1, 1997, a 
    hospital that had inpatient operating costs less than its ceiling is 
    paid costs plus the lower of 50 percent of the difference between the 
    inpatient operating costs and the ceiling; or 5 percent of the ceiling. 
    Section 4415 of Public Law 105-33 amended section 1886(b)(1)(A) of the 
    Act to provide that for cost reporting periods beginning on or after 
    October 1, 1997, the amount of bonus payment is the lower of the 
    following:
        (1) 15 percent of the difference between the inpatient operating 
    costs and the ceiling, or
        (2) 2 percent of the ceiling.
        In addition, section 4415 of Public Law 105-33 amended Section 
    1886(b)(2) of the Act to provide for ``continuous improvement bonus 
    payments''. Under this new provision, for cost reporting periods 
    beginning on or after October 1, 1997, an ``eligible hospital'' will 
    receive payments in addition to the bonus payment discussed above. An 
    ``eligible hospital'' is a hospital that been an excluded provider for 
    at least three full cost reporting periods prior to the subject period 
    and whose operating costs per discharge for the subject period are 
    below the lower of its target amount, trended costs (as defined by the 
    statute), or expected costs (as defined by the statute) for the subject 
    period. The amount of the continuous improvement bonus payment will be 
    equal to the lesser of--
        (1) 50 percent of the amount by which operating costs were less 
    than the expected costs for the period; or
        (2) 1 percent of the ceiling.
        Under the statute, for a hospital with its third or subsequent cost 
    reporting period ending in FY 1996, trended costs are the lesser of 
    allowable inpatient costs per discharge or the target amount in FY 
    1996, increased (in a compounded manner) for each succeeding fiscal 
    year by the percentage increase in the market basket. For all other 
    hospitals, trended costs are the allowable inpatient operating costs 
    per discharge for its third full cost reporting period increased (in a 
    compounded manner) for each succeeding fiscal year by the percentage 
    increase in the market basket.
        Expected costs are the lesser of operating costs per discharge or 
    the target amount for the previous cost reporting period, updated by 
    the percentage increase in the market basket for the fiscal year.
    b. Relief Payments
        For cost reporting periods beginning on or after October 1, 1984 
    and before October 1, 1991, hospitals that had inpatient operating 
    costs in excess of their ceiling are to be paid no more than the 
    ceiling. Section 4005(a) of Public Law 101-508 (OBRA 1990, enacted 
    November 5, 1990) amended section 1886(b)(1)(B) of the Act to provide 
    that for cost reporting periods beginning on or after October 1, 1991, 
    a hospital could receive relief payments equal to 50 percent of the 
    costs in excess of the ceiling not to exceed 10 percent of the ceiling 
    (after any exceptions or adjustments).
        Section 4415 of Public Law 105-33 amended section 1886(b)(1) of the 
    Act to provide that for cost reporting periods beginning on or after 
    October 1, 1997, if a hospital's operating costs are greater than the 
    ceiling but less than 110 percent of the ceiling, payment will be the 
    ceiling. If a hospital's costs are greater than 110 percent of the 
    ceiling, payment will be the ceiling plus 50 percent of the costs in 
    excess of 110 percent of the ceiling. Total payment may not exceed 110 
    percent of the ceiling.
        Because section 4415 of Public Law 105-33 does not provide relief 
    for costs that are within 110 percent of the ceiling, we are making a 
    corresponding change to the exception payment provision at 
    Sec. 413.40(g)(1) so that qualification for the amount of an exception 
    payment does not encompass costs within 110 percent of the ceiling.
        We have revised Secs. 413.40(d)(3) and added (d)(4) and (d)(5) to 
    implement these provisions.
    5. New Excluded Hospitals and Units (Sec. 413.40(f))
        Under Sec. 413.40(f), a new excluded hospital is exempted from the 
    rate-of-increase ceiling until the end of the first cost reporting 
    period ending at least two years after the hospital accepts its first 
    patient (through the second 12-month cost reporting period). As we 
    discussed in the June 2, 1997 proposed rule (62 FR 29937), the growth 
    of new excluded hospitals increasingly includes a large number of 
    hospitals that are merely reconfigurations of existing facilities. 
    These new providers do not require the same length of time to establish 
    a presence in the marketplace and increase patient load. As a result, 
    there is evidence that the new hospital exemption does not always serve 
    its original purpose to recognize certain cost distortions that may be 
    present as a hospital begins operations. In addition, the new hospital 
    exemption period could create incentives to increase costs in the 
    exempt years. In its March 1, 1997 report, ProPAC recommended that the 
    new hospital exemption period should be eliminated and that Medicare 
    payments for new providers should be based on an average target amount 
    for facilities serving comparable types of patients.
        With the enactment of sections 4416 and 4419 of Public Law 105-33, 
    which amend section 1886(b)(4) of the Act and add section 1886(b)(7) of 
    the Act, Congress has established a new framework for payments for new 
    excluded providers. First, section 4419(a) amends section 
    1886(b)(4)(A)(i) of the Act, to eliminate ``exemptions'' for all 
    classes of excluded entities except children's hospitals. This 
    provision applies to entities that first qualify for exclusion for cost 
    reporting periods beginning on or after October 1, 1997. Thus, 
    effective October 1, 1997, we will no longer grant new provider 
    exemptions under section 1886(b)(4) of the Act except with respect to 
    children's hospitals.
        Second, section 4416 adds a new section 1886(b)(7) of the Act to 
    establish a new statutory payment methodology for certain new 
    hospitals. For purposes of this provision, the statute specifies three 
    classes of hospitals: psychiatric hospitals and units, rehabilitation 
    hospitals and units, and long-term care hospitals. Under the statutory 
    methodology, for a hospital that is within a class of hospitals 
    specified in the statute and which first receives payments on or after 
    October 1, 1997, the amount of payment shall be determined as follows.
        For each of the first two 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 and 
    adjusted for differences in area wage levels. For purposes of computing 
    the target amount for the subsequent cost reporting period, the target 
    amount for the preceding cost reporting period
    
    [[Page 46020]]
    
    is equal to the amount determined under the methodology above for the 
    preceding period.
        To determine payments for a new hospital's first two cost reporting 
    periods, the statute requires a calculation of a national median of the 
    target amounts for hospitals in the same class, updated and adjusted. 
    For each class of hospitals, using the best available data we 
    determined the national median of the target amounts for hospitals 
    within the class for cost reporting periods ending during fiscal year 
    1996. In determining the national median, the Secretary makes 
    adjustments to account for area differences in wage-related costs. 
    Pursuant to the broad authority conferred on the Secretary to determine 
    an appropriate wage adjustment, we are making an adjustment on the 
    basis of the data used to calculate the FY 1998 hospital wage index 
    under the hospital inpatient prospective payment system (see 
    Sec. 412.63), without taking into account reclassifications under 
    section 1886(d)(10) and (d)(8)(B) of the Act. We recognize that wages 
    may differ for prospective payment hospitals and excluded hospitals, 
    but we believe the wage data do reflect area differences in wage-
    related costs; moreover, in light of the extraordinarily short 
    timeframe for implementing this provision, this is the only feasible 
    data source.
        We note that, under the statute, the special payment methodology 
    for new hospitals applies for each of the hospital's first 2 cost 
    reporting periods. However, a new hospital might begin operations on a 
    date other than the first day of its ``usual'' cost reporting period, 
    so that its first cost reporting period is a short period. In order to 
    treat these hospitals equitably, we believe the special payment 
    methodology should be applied to the hospital's first two full cost 
    reporting periods.
        We also note that, under the calculation prescribed in new section 
    1886(b)(7)(A)(i)(II), the limit on payment for each of the hospital's 
    first two cost reporting periods is based on the national median target 
    amount for cost reporting periods ending during FY 1996, updated by the 
    hospital market basket ``to the fiscal year in which the hospital first 
    received payments''. That is, the limit on payment is not updated by 
    the market basket for the second cost reporting period. For example, if 
    a new rehabilitation hospital commences operation on January 1, 1999 
    (during FY 1999), it receives the lower of the hospital's operating 
    costs or 110 percent of the applicable national median of target 
    amounts for cost reporting periods ending during FY 1996 updated to FY 
    1999. For its second 12-month cost reporting period (FY 2000), the 
    limit on payment is the same (110 percent of the applicable national 
    median updated to FY 1999). The statute appears to provide that the 
    target amount for succeeding cost reporting periods will be based on 
    the payment amount in the second 12-month cost reporting period 
    increased by the applicable update factors. Although we are codifying 
    the policies for subsequent cost reporting periods in this final rule 
    with comment period, a technical amendment may be needed to clarify 
    statutory intent.
        The updating process also raises an issue with respect to hospitals 
    with short cost reporting periods. The statute requires that the 
    national median is updated ``to the fiscal year in which the hospital 
    first received payments.'' Thus, for hospitals with short cost 
    reporting periods, we would calculate the limit based on the beginning 
    of its short cost reporting period, even though the limit would not be 
    applied until its first full cost reporting period (as discussed 
    earlier). We believe these policies treat such hospitals equitably, so 
    that they are neither benefitted nor disadvantaged by the short cost 
    reporting period.
        We are revising Secs. 413.40(f) (1) and (2) to incorporate these 
    changes for new excluded providers.
        The table below lists 110 percent of the national median target 
    amounts for each class of excluded hospitals for cost reporting periods 
    ending during FY 1996, adjusted for area wages updated by the market 
    basket to FY 1998.
    
    (1) Psychiatric hospitals and units...........................    $8,203
    (2) Rehabilitation hospitals and units........................    16,129
    (3) Long-term care hospitals..................................    18,324
                                                                            
    
    6. Capital Payments for Excluded Hospitals and Units (Sec. 413.40(j))
        Section 4412 of Public Law 105-33 amended section 1886(g) of the 
    Act to establish a 15 percent reduction on capital payments for certain 
    hospitals and hospital distinct part units excluded from the 
    prospective payment system for portions of cost reporting periods 
    beginning on or after October 1, 1997, through September 30, 2002. The 
    capital reduction applies to psychiatric hospitals and units, 
    rehabilitation hospitals and units, and long-term care hospitals.
        We are adding Sec. 413.40(j) to set forth the capital reduction 
    provision.
    7. Report on Adjustment Payments to the Ceiling (Sec. 413.40(g))
        Section 1886(b)(4) of the Act provides for an adjustment 
    (exception) payment to the ceiling if a hospital submits a request to 
    its fiscal intermediary within 180 days of the date of the Notice of 
    Program Reimbursement. Changes in the types of patients served or in-
    patient care services that distort the comparability of a cost 
    reporting period to the base year are grounds for requesting an 
    adjustment request. The reasons and process for requesting an 
    adjustment request are implemented at Sec. 413.40(g). Section 4419(b) 
    of Public Law 105-33 amended section 1886(b)(4) of the Act. This 
    section requires the Secretary to publish annually, in the Federal 
    Register, a report describing the total adjustment payments made to 
    excluded hospitals and units for cost reporting periods ending during 
    the previous fiscal year. Effective with the FY 1999 notice of changes 
    to the hospital inpatient payment systems, we will publish the total 
    adjustment payments made to excluded hospitals and units by category of 
    hospital (psychiatric, rehabilitation, long-term care, cancer, and 
    children's) during the previous fiscal year.
    
    VIII. ProPAC Recommendations
    
        As required by law, we reviewed the March 1, 1997 report submitted 
    by ProPAC to Congress and gave its recommendations careful 
    consideration in conjunction with the proposals set forth in the 
    proposed rule. We also responded to the individual recommendations in 
    the proposed rule. The comments we received on the treatment of the 
    ProPAC recommendations are set forth below, along with our responses to 
    those comments. However, if we received no comments from the public 
    concerning a ProPAC recommendation or our response to that 
    recommendation, we have not repeated the recommendation and response in 
    the discussion below. Recommendation 2, concerning the update for the 
    prospective payment system operating payment rates, is discussed in 
    Appendix D of this final rule with comment period. Recommendations 3 
    and 4, concerning the prospective payment system capital payment rates, 
    are discussed in section III. of the Addendum of this final rule with 
    comment period. Recommendation 13, concerning updating the target 
    amounts for excluded hospitals and distinct part units, is discussed in 
    Appendix D of this final rule with comment period. Recommendation 31, 
    concerning long-term care hospitals within hospitals, is discussed in 
    section VII. of this final rule with comment period. The remaining 
    recommendations on which we received comments are discussed below.
    
    [[Page 46021]]
    
    A. Improving Medicare's Disproportionate Share Hospital (DSH) Payments 
    and Distribution of those Payments (Recommendation 9, 10, and 11)
    
        Recommendation: DSH payments should be concentrated among hospitals 
    with the highest shares of poor patients. Therefore, a minimum 
    threshold should be established for the low-income patient cost share. 
    Hospitals falling just above the threshold should receive only a 
    minimal per case payment, with the amount then increasing as low-income 
    share rises. The same general approach for distributing payments should 
    apply to all PPS hospitals.
        Response in the Proposed Rule: Congress set the current threshold 
    payments for Medicare disproportionate share hospitals in section 
    6003(c) of the Omnibus Budget Reconciliation Act of 1989. This 
    provision expanded both the number of hospitals that could qualify for 
    disproportionate share payments as well as the level of those payments 
    for some categories. We note that large urban hospitals already receive 
    payments based on this graduated payment structure. ProPAC notes that 
    95 percent of the hospitals receiving disproportionate share payments 
    are designated as large urban hospitals. A May 1990 Congressional 
    Budget Office (CBO) report to Congress, found that only large urban 
    hospitals were overburdened by the cost of caring for the indigent 
    population.
        We agree with ProPAC that the disproportionate share payments 
    should be concentrated on the hospitals in greatest need of assistance.
        Comment: ProPAC indicated that the goal of DSH payments should be 
    to protect access to hospital care for Medicare beneficiaries, not 
    merely to compensate a hospital for the added costs of treating 
    Medicare patients due to the hospital's indigent patient load. To that 
    end, ProPAC recommended that the same distribution formula be applied 
    to all hospitals, regardless of their size or location. A ProPAC 
    simulation of a payment system based on its recommendations showed that 
    some payments would be redistributed to rural hospitals (largely 
    because the current system imposes a stricter standard for those 
    hospitals to qualify for a DSH payment) and to hospitals with large 
    shares of uncompensated care costs (because the current system does not 
    recognize this important component of the hospital industry's 
    commitment to treating indigent patients). This redistribution would be 
    appropriate, in ProPAC's view, because it would result in DSH payments 
    more closely reflecting the burden borne by hospitals that treat a 
    large share of poor patients.
        ProPAC's approach to distributing DSH payments is aimed at ensuring 
    that available funds are used to help those hospitals most in need of 
    assistance. Accordingly, it is important to reflect all low-income 
    hospital care in the variable upon which payments will be based, and 
    ProPAC's low-income share measure would capture the costs associated 
    with all Medicaid patient days. However, a system based on ProPAC's 
    recommendations could be designed to distribute any level of DSH 
    funding, and so the inclusion of all Medicaid costs need not have any 
    implications for HCFA's overall expenditures. The number of hospitals 
    receiving payments can also be determined through the choice of the 
    threshold (minimum low-income cost share needed to qualify for a DSH 
    payment).
        ProPAC firmly agreed with the Secretary's goal of targeting 
    payments to hospitals with the largest shares of low-income patients. 
    But this goal can only be achieved through the development of a 
    comprehensive and consistently measured low-income share indicator. 
    ProPAC's recommended measure reflects all relevant groups of low-income 
    patients (low-income Medicare, Medicaid, local indigent care program, 
    and uncompensated care patients), measured in a consistent fashion that 
    automatically weights each group according to its contribution to the 
    hospital's overall patient care costs.
        The Commission believes that including bad debts in its recommended 
    measure of low-income costs would not materially weaken the incentive 
    to attempt collection on unpaid accounts. For the majority of 
    hospitals, the amount of additional DSH payment that might be received 
    by foregoing collection efforts would be dwarfed by the amount they 
    stand to gain from the patient. These institutions, therefore, can be 
    expected to continue their collection efforts. On the other hand, those 
    few hospitals with very large low-income shares, rarely serve the type 
    of patients among whom aggressive collection would be worthwhile.
        ProPAC believes that the data needed to implement the low-income 
    cost share measure it recommends could be obtained by straightforward 
    means. Each hospital's low-income patient cost share could be estimated 
    by dividing the sum of charges for all low-income patient groups by 
    total patient charges. In its simplest form, only five variables would 
    need to be collected from each hospital--aggregate charges for: (1) 
    patients sponsored by Medicaid, (2) patients sponsored by indigent care 
    programs other than Medicaid, (3) Medicare patients, (4) uncompensated 
    care, and (5) all patients. Because hospitals currently must use the 
    same price schedule for all patients, a measure of low-income charges 
    as a percent of total charges would yield reasonable, accurate, and 
    comparable estimates of the proportion of costs devoted to treating 
    low-income patients across all hospitals.
        Another commenter supported ProPAC's approach to calculating DSH 
    payments, and urged HCFA to include both bad debt and uncompensated 
    care. This commenter supported HCFA's intention to move away from the 
    current DSH formula, which is based on Medicaid and Supplemental 
    Security Income eligibility.
        Response: We continue to believe that there are inconsistencies in 
    the current Medicare disproportionate share adjustment calculation, 
    because Medicaid data varies from State to State. Therefore, we 
    continue to be interested in ways to improve the data and the 
    calculation to better target those hospitals that treat a 
    disproportionate share of indigent patients.
        We are reluctant to include bad debts in the calculation because we 
    continue to believe that it provides an incentive for hospitals to 
    discontinue their collection efforts. In addition, examination of bad 
    debt data has shown no correlation between bad debts and hospitals that 
    currently receive some level of a Medicare disproportionate share 
    adjustment. In other words, our examination of the data has shown that 
    a hospital that currently receives a large Medicare disproportionate 
    share adjustment does not necessarily have a correspondingly large 
    amount of bad debt.
        We also continue to believe that collection of uncompensated care 
    data would be burdensome to both the hospital industry and HCFA and its 
    fiscal intermediaries. In addition, as noted in the proposed rule, HCFA 
    has no means to verify such data. As we have consistently stated on 
    many previous occasions, in order for a data source to be considered 
    usable, it must be nationally available and auditable.
        Hospitals should also be aware that a change in the formula will 
    almost certainly produce a change in the universe of qualifying 
    hospitals and the levels of the adjustments that these hospitals 
    receive. We note that section 4403(b) of Public Law 105-33 requires us 
    to submit a report to Congress by August 5, 1998 that contains a 
    revised DSH formula. In determining this formula, we must do the 
    following:
    
    [[Page 46022]]
    
         Establish a single threshold for costs incurred by 
    hospitals in serving low-income patients.
         Consider the costs incurred by the hospital in serving 
    both Medicare Part A beneficiaries who receive SSI and Medicaid 
    beneficiaries (including those enrolled in managed care organizations) 
    who are not entitled to Medicare Part A benefits.
    
    B. Modifying the Tax Equity and Fiscal Responsibility Act (TEFRA) 
    Payment System (Recommendation 14)
    
        Recommendation: Congress should consider modifying the TEFRA 
    payment system to correct for the payment disparity between new and old 
    providers.
        Response in the Proposed Rule: HCFA has developed legislative 
    proposals to modify the TEFRA payment system. Our proposals include 
    rebasing the target rates for excluded hospitals and units using an 
    average of each facility's two most recent cost reporting periods. This 
    measure would realign payment rates with costs for both old and new 
    providers. In conjunction with rebasing, the new target rates would be 
    capped at 150 percent of a national mean rate for each type of facility 
    in order to prevent newer high cost hospitals from receiving excessive 
    target rates. Lower cost hospitals would be protected by establishing a 
    floor of 70 percent of the national mean rate for each type of 
    facility. Incentive payments would be modified by providing that no 
    such payment would be made where a provider incurs costs that are less 
    than or equal to 110 percent of the target amount. Finally, the 
    President's FY 1998 budget proposal would revise the payment of capital 
    costs to excluded hospitals and units by reducing reimbursement for 
    capital to 85 percent of reasonable costs. TEFRA providers are the only 
    hospitals that continue to be reimbursed for capital on a dollar-for-
    dollar basis; consequently, they have no incentive to control their 
    capital expenditures. This policy would make capital reimbursement 
    policy more consistent among all hospitals and provide a needed 
    incentive for cost control, particularly for newer excluded hospitals 
    and units that may have more resources for capital expenditures because 
    they are not as limited by the target rates on inpatient operating 
    costs.
        Comment: Based on its analytic framework, ProPAC supported an 
    average update of 2.0 percent for prospective payment system-excluded 
    facilities. ProPAC believes that imposing the prospective payment 
    system update on prospective payment system-excluded facilities is not 
    appropriate. Medicare payment policies for specialty hospitals and 
    units excluded from the prospective payment system differ from those 
    for general acute care hospitals because these provider types 
    historically have treated different patient populations. Likewise, the 
    financial performance of prospective payment system-excluded providers 
    is dissimilar from their prospective payment system counterparts, 
    largely because of the underlying payment policy differences. 
    Consequently, ProPAC maintains that separate methodologies should be 
    used to arrive at appropriate updates.
        Both the Secretary and ProPAC agree that the payment system for 
    prospective payment system-excluded providers should be modified to 
    correct for the payment disparity between new and old providers. ProPAC 
    will continue to monitor the financial performance of providers paid 
    under this system.
        Response: We believe that ProPAC's concerns are addressed by 
    Section 4411 of Pub. L. 105-33, which amended sections 1886(b)(3) of 
    the Act regarding the rate-of-increase percentages. We have discussed 
    the statutory changes in section VII of this preamble.
    
    C. Prospective Payment System for Skilled Nursing Facilities (SNFs) 
    (Recommendation 19)
    
        Recommendation: A case-mix adjusted prospective payment system for 
    skilled nursing facilities should be implemented as soon as possible.
        Response in the Proposed Rule: We concur with the recommendation to 
    implement a prospective payment system for SNFs as soon as possible. 
    The President's FY 1998 budget includes a provision for a prospective 
    payment system for SNFs to be implemented on July 1, 1998. This system 
    will include payment for all costs (routine, ancillary, and capital) 
    related to the services furnished to beneficiaries under Medicare Part 
    A. By including all costs of services in the payment rates, spending 
    growth per day of care can be contained. In addition, the provision 
    includes authority to adjust payments to providers where inappropriate 
    utilization (that is, excessive lengths of stay) of SNF services is 
    found. Finally, the proposed prospective payment system would include 
    case-mix adjustments using a resident classification system based on 
    resource utilization groups. These resource utilization groups are tied 
    to elements contained on the Minimum Data Set (MDS) 2.0 resident 
    assessment instrument for nursing homes.
        Comment: ProPAC commended the Secretary's efforts to create a 
    prospective payment system for SNF services, and looks forward to 
    reviewing HCFA's analyses of resource utilization groups and their 
    ability to describe the services provided by SNFs. ProPAC is concerned 
    about the incentive created under a per diem payment system for 
    facilities to increase length of stay, and believes, therefore, that 
    the Secretary should continue efforts to develop a case-mix 
    classification system for use with an admission-based payment system. 
    In addition, ProPAC believes that the Secretary's efforts to discourage 
    inappropriate utilization are particularly important.
        Response: While the significant copayment associated with the 
    Medicare SNF benefit ($95.00 per day) acts as a powerful force limiting 
    the growth of overall length of stay in SNFs, HCFA is concerned about 
    increases in utilization under the new prospective payment system and 
    plans to study this issue. In addition, HCFA will continue its efforts 
    towards the development of a per diem integrated payment and delivery 
    system that applies to all Medicare post-acute services. This type of 
    system has the greatest potential for providing system-wide financial 
    integrity, while assuring high quality care.
    
    D. Home Health Visit Coding (Recommendation 26)
    
        Recommendation: Medicare should require consistent home health 
    visit coding. Such information is essential for monitoring and 
    evaluating the home health benefit and developing an effective case-mix 
    adjustment system.
        Response in the Proposed Rule: Currently, there is no standard 
    definition of what comprises a visit and there is variation in the type 
    of service and length of time for providing those services. We agree 
    such information is critical to developing an effective case-mix 
    measure for a home health prospective payment system. In the case-mix 
    research we are beginning, we will collect information on the length of 
    time and procedures performed during a visit. This information will 
    feed into the development of a prospective payment system and related 
    coding system. We cannot proceed with specific coding refinements until 
    the findings are available and a prospective payment system is 
    designed. We are researching aspects of that approach rather than 
    imposing reporting burdens on all home health agencies.
        Comment: ProPAC indicated that although the Secretary agrees that 
    information about home health visit length and content is critical to 
    developing an effective case-mix
    
    [[Page 46023]]
    
    measure, she does not want to proceed with specific coding refinements 
    until the findings from the case-mix demonstration project are 
    available and a prospective payment system is designed.
        ProPAC is concerned that without uniform coding requirements, the 
    implementation of a prospective payment system would be further 
    delayed. ProPAC notes that there is little information about the types 
    of services that are provided during a visit and that the case-mix 
    demonstration project should guide coding requirements. Concurrent with 
    the research on a prospective payment system, the Commission believes 
    it is important to begin gathering basic data about the content of home 
    health visits, which would be critical in any efforts to improve the 
    payment method. The Medicare Home Health Agency Manual contains a 
    series of aggregate code definitions that would capture some detail 
    about the services that are provided during a visit. HCFA's Common 
    Procedure Coding System (HCPCS) describe some skilled nursing services 
    and a range of therapy services. Time increments also could be useful 
    in understanding visit duration.
        Response: Section 1895(c) of the Act, as added by section 4603 of 
    Public Law 105-33, requires payment information on all claims for home 
    health services furnished on or after October 1, 1998. All claims for 
    home health services must include a unique physician identifier and a 
    code (or codes) specified by the Secretary that identifies the length 
    of time of the home health visit as measured in 15 minute increments. 
    Since there is no standard definition of what comprises a visit and 
    there is variation in the length of time for providing those services, 
    the new payment information requirements will provide needed 
    information on the length of time required for the provision of home 
    health services. Additionally, as discussed in our previous response in 
    the August 30, 1996 final rule, a contract was awarded to develop a 
    case-mix measurement for a home health prospective payment system. 
    Under the terms of this contract, extensive information about the 
    characteristics of patients and resource utilization will be collected. 
    Information also will be collected about visit lengths and procedures 
    performed during all home health visits during an episode of care.
    
    E. Home Health Copayments (Recommendation 27)
    
        Recommendation: Modest beneficiary copayments, subject to an annual 
    limit, should be introduced for home health care services.
        Response in the Proposed Rule: We are concerned about the impact 
    that higher beneficiary out-of-pocket expenses would have on poorer 
    Medicare beneficiaries who are not covered by Medicaid and cannot 
    afford supplemental insurance. Poorer beneficiaries spend a greater 
    proportion of their income on out-of-pocket costs. Our proposed interim 
    system of limits should help control the growth in service use.
        Comment: The Commission continued to maintain its position that 
    copayments for home health services are appropriate. ProPAC believes 
    that Medicare beneficiaries who receive home health services should 
    participate financially in the payment for those services. Such a 
    policy would be consistent with Medicare cost-sharing requirements for 
    other services and could result in increased involvement by 
    beneficiaries in treatment decisions. Copayments also might limit 
    fraudulent billing practices, since beneficiaries could identify 
    services for which Medicare was billed but that were never delivered. 
    ProPAC recognizes that a copayment policy would have a more direct 
    financial impact on beneficiaries who lack Medicaid or supplemental 
    coverage. Accordingly, ProPAC believes that the copayment amount should 
    be minimal and subject to an annual limit.
        Response: The issue of copayments was thoroughly considered in the 
    deliberations over Public Law 105-33 and ultimately not adopted in the 
    legislation. We remain concerned about the impact that higher 
    beneficiary out-of-pocket costs would have on poorer Medicare 
    beneficiaries who are not covered by Medicaid and cannot afford 
    supplemental insurance. Our interim system of limits should help 
    control the growth in service use.
    
    F. Prospective Payment System for Rehabilitation Hospitals and 
    Distinct-Part Units (Recommendation 29)
    
        Recommendation: A case-mix adjusted prospective payment system for 
    rehabilitation hospitals and distinct-part units should be implemented 
    as soon as possible.
        Response in the Proposed Rule: We have sponsored research on 
    possible patient classification systems for rehabilitation care. In 
    particular, a study by the RAND Corporation evaluated the prospects for 
    a prospective payment system based on the rehabilitation coding system 
    known as Functional Independence Measure (FIM) and the patient 
    classification system known as Function-Related Groups (FRGs). The 
    final report on this research will soon be complete. However, the 
    preliminary results indicate much work would be necessary before a 
    prospective payment system based on FRGs could be implemented. There 
    are at least two important implementation issues: the reliability of 
    the patient status measures and the recognition of patient 
    complications and comorbidities. In addition, implementation of a case-
    mix payment system for rehabilitation hospitals and units would require 
    significant program resources and impose data reporting and collection 
    requirements on providers. As a result, fewer resources would be 
    available for research into developing an integrated payment approach 
    for payment of rehabilitation care across all settings (excluded 
    hospitals, SNFs, HHAs, comprehensive outpatient rehabilitation 
    facilities, etc.) Thus, we prefer to focus our efforts on developing a 
    coordinated payment system for post-acute care that relies on a core 
    assessment tool.
        Comment: ProPAC strongly supported coordinating payment methods 
    across postacute sites. The Commission believes that a separate 
    prospective payment system for rehabilitation hospitals and units could 
    be implemented in the near term, however, as an incremental step toward 
    a more comprehensive system for all post-acute care services. ProPAC's 
    understanding is that most Medicare-certified inpatient rehabilitation 
    facilities already collect and use the types of data necessary for the 
    FIM or other standardized patient assessment instruments. Therefore, 
    reporting these data to HCFA would not be an undue burden on providers.
        Response: Section 4421 of Public Law 105-33 amended section 1886 of 
    the Act by adding a new subsection (j), which provides for 
    implementation of a prospective case-mix payment system for excluded 
    rehabilitation hospitals and units, and begins to phase-in payments 
    under that system for cost reporting periods beginning on or after 
    October 1, 2000. The case-mix payment system is to be fully implemented 
    for cost reporting periods beginning on or after October 1, 2002. We 
    will continue to work on developing a prospective payment system for 
    rehabilitation hospitals and units consistent with this statutory 
    requirement.
    
    G. Prospective Payment System for Long-Term Care Hospitals 
    (Recommendation 30)
    
        Recommendation: A case-mix adjusted prospective payment system for 
    long-term care hospitals should be developed and implemented as soon as 
    possible.
    
    [[Page 46024]]
    
        Response in the Proposed Rule: We continually examine data and 
    analyze proposals to simplify payment mechanisms and ensure that 
    Medicare payments reflect efficient and high quality health care. We 
    will be interested in evaluating the results of independent studies on 
    case-mix measurement for long-stay hospital patients. At the same time, 
    it is evident that many long-term care hospitals furnish extensive 
    rehabilitation care that overlaps with care furnished in rehabilitation 
    hospitals. Thus, a prospective payment system for postacute care 
    providers which includes SNFs and rehabilitation hospitals and units 
    could conceivably be used for patients in long-term care hospitals. As 
    a result, we have concerns that the development and implementation of a 
    separate prospective payment system for fewer than 200 Medicare-
    certified, long-term care hospitals may not be an efficient use of 
    program resources and may result in overlapping complexity and 
    manipulation of payment.
        Comment: ProPAC asserted that a better understanding of long-term 
    care hospitals with respect to the types of patients they treat, 
    patterns of care, and facility costs would be necessary before these 
    providers could be folded into an integrated payment system. ProPAC, 
    therefore, believes that the Secretary should begin researching patient 
    classification systems and resource use for long-term care hospitals 
    soon.
        Response: We will continue to examine data and analyze proposals 
    consistent with the requirements of section 4422 of Public Law 105-33. 
    This section requires the Secretary to submit a report to Congress not 
    later than October 1, 1999, regarding different payment methodologies 
    which may be feasible for paying long-term care hospitals under the 
    Medicare program.
    
    IX. 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 set up a process under which 
    commenters can gain access to the raw data on an expedited basis. 
    Generally, the data are available in computer tape format or 
    cartridges; however, some files are available on diskette, and on the 
    Internet at HTTP://WWW.HCFA.GOV/STATS/PUBFILES.HTML. In our June 2 
    proposed rule, we published a list of data files that are available for 
    purchase (62 FR 29939).
    
    B. Waiver of Notice of Proposed Rulemaking and 30-Day Delay in the 
    Effective Date
    
        We ordinarily publish a notice of proposed rulemaking in the 
    Federal Register to provide a period for public comment before the 
    provisions of the rule take effect. However, section 1871(b) of the Act 
    provides that publication of a notice of proposed rulemaking is not 
    required before a rule takes effect where ``a statute establishes a 
    specific deadline for the implementation of the provision and the 
    deadline is less than 150 days after the date of the enactment of the 
    statute in which the deadline is contained.'' In addition, we may waive 
    a notice of proposed rulemaking if we find good cause that notice and 
    comment are impracticable, unnecessary, or contrary to the public 
    interest.
        On June 2, 1997, we published a proposed rule addressing FY 1998 
    payment rates and policies for prospective payment system hospitals and 
    excluded hospitals (62 FR 29902). Subsequently, on August 5, 1997, 
    Public Law 105-33 was enacted. Public Law 105-33 contains a number of 
    provisions relating to issues addressed in the proposed rule, as well 
    as issues that were not specifically addressed in the proposed rule. 
    These statutory provisions are generally effective October 1, 1997.
        In accordance with section 1871(b) of the Act, publication of a 
    notice of proposed rulemaking is not required before implementing the 
    statutory provisions of Public Law 105-33 that take effect on October 
    1, 1997. In addition, given the extremely short timeframe for 
    implementing these statutory provisions, we find good cause to waive 
    notice and comment procedures with respect to the provisions of this 
    final rule with comment period that implement Public Law 105-33, 
    because it would be impracticable to undertake such procedures before 
    those provisions take effect. We are, however, providing a 60-day 
    period for public comment on those provisions.
    
    C. Response to Comments
    
        Because of the large number of items of correspondence we normally 
    receive on FR documents published for comment, we are not able to 
    acknowledge or respond to them individually. Comments on the provisions 
    of this final rule that implement provisions of the Balanced Budget Act 
    of 1997 will be considered if we receive them by the date specified in 
    the DATES section of this preamble. We will not consider comments 
    concerning provisions that remain unchanged from the June 2, 1997 
    proposed rule or that were changed based on public comments.
    
    List of Subjects
    
    42 CFR Part 400
    
        Grant programs-health, Health facilities, Health maintenance 
    organizations (HMO), Medicaid, Medicare, Reporting and recordkeeping 
    requirements.
    
    42 CFR Part 409
    
        Health facilities, Medicare.
    
    42 CFR Part 410
    
        Health facilities, Health professions, Kidney diseases, 
    Laboratories, Medicare, Reporting and recordkeeping requirements, Rural 
    areas, X-rays.
    
    42 CFR Part 411
    
        Kidney diseases, Medicare, Recovery against third parties, 
    Reporting and recordkeeping requirements, Secondary payments.
    
    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 424
    
        Emergency medical services, Health facilities, Health professions, 
    Medicare.
    
    42 CFR Part 440
    
        Grant programs--health, Medicaid.
    
    42 CFR Part 485
    
        Grant programs-health, Health facilities, Medicaid, Medicare, 
    Reporting and recordkeeping requirements.
    
    42 CFR Part 488
    
        Administrative practice and procedure, Forms and guidelines, Health 
    facilities, Survey and certification.
    
    42 CFR Part 489
    
        Health facilities, Medicare, Reporting and recordkeeping 
    requirements.
    
    42 CFR Part 498
    
        Administrative practice and procedure, Health facilities, Health 
    professions, Medicare, Reporting and recordkeeping requirements.
    
        42 CFR chapter IV is amended as set forth below:
    
    [[Page 46025]]
    
    PART 400--INTRODUCTION; DEFINITIONS
    
        A. Part 400 is amended as follows:
        1. The authority citation for Part 400 continues to read as 
    follows:
    
        Authority: Secs. 1102 and 1871 of the Social Security Act (42 
    U.S.C. 1302 and 1395hh) and 44 U.S.C. Chapter 35.
    
        2. In Sec. 400.202, the introductory text is republished, the 
    definitions of ``Essential access community hospital (EACH)'', 
    ``Provider'', and ``Services'' are revised, the definition of ``Rural 
    primary care hospital (RPCH)'' is removed, and a new definition of 
    ``Critical access hospital (CAH)'' is added in alphabetical order, to 
    read as follows:
    
    
    Sec. 400.202  Definitions specific to Medicare.
    
        As used in connection with the Medicare program, unless the context 
    indicates otherwise--
    * * * * *
        Critical access hospital (CAH) means a facility designated by HFCA 
    as meeting the applicable requirements of section 1820 of the Act and 
    of subpart F of part 485 of this chapter.
    * * * * *
        Essential access community hospital (EACH) means a hospital 
    designated by HCFA as meeting the applicable requirements of section 
    1820 of the Act and of subpart G of part 412 of this chapter, as in 
    effect on September 30, 1997.
    * * * * *
        Provider means a hospital, a CAH, a skilled nursing facility, a 
    comprehensive outpatient rehabilitation facility, a home health agency, 
    or a hospice that has in effect an agreement to participate in 
    Medicare, or a clinic, a rehabilitation agency, or a public health 
    agency that has in effect a similar agreement but only to furnish 
    outpatient physical therapy or speech pathology services, or a 
    community mental health center that has in effect a similar agreement 
    but only to furnish partial hospitalization services.
    * * * * *
        Services means medical care or services and items, such as medical 
    diagnosis and treatment, drugs and biologicals, supplies, appliances, 
    and equipment, medical social services, and use of hospital, CAH, or 
    SNF facilities.
    * * * * *
    
    PART 409--HOSPITAL INSURANCE BENEFITS
    
        B. Part 409 is amended as follows:
        1. The authority citation for Part 409 continues to read as 
    follows:
    
        Authority: Secs. 1102 and 1871 of the Social Security Act (42 
    U.S.C. 1302 and 1395hh).
    
    Subpart D--Requirements for Coverage of Posthospital SNF Care
    
        2. In Sec. 409.30, the introductory text of paragraph (a) is 
    republished and paragraph (a)(1) is revised to read as follows:
    
    
    Sec. 409.30  Basic requirements.
    
    * * * * *
        (a) Preadmission requirements. The beneficiary must--
        (1) Have been hospitalized in a participating or qualified hospital 
    or participating CAH, for medically necessary inpatient hospital or 
    inpatient CAH care, for at least 3 consecutive calendar days, not 
    counting the date of discharge; and
    * * * * *
    
    PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS
    
        C. Part 410 is amended as follows:
        1. The authority citation for Part 410 continues to read as 
    follows:
    
        Authority: Secs. 1102 and 1871 of the Social Security Act (42 
    U.S.C. 1302 and 1395hh)), unless otherwise noted.
    
        2. Section 410.2 is amended by revising the definition of 
    ``Participating'' to read as follows:
    
    
    Sec. 410.2  Definitions.
    
    * * * * *
        Participating refers to a hospital, CAH, SNF, HHA, CORF, or hospice 
    that has in effect an agreement to participate in Medicare; or a 
    clinic, rehabilitation agency, or public health agency that has a 
    provider agreement to participate in Medicare but only for purposes of 
    providing outpatient physical therapy, occupational therapy, or speech 
    pathology services; or a CMHC that has in effect a similar agreement 
    but only for purposes of providing partial hospitalization services, 
    and nonparticipating refers to a hospital, CAH, SNF, HHA, CORF, 
    hospice, clinic, rehabilitation agency, public health agency, or CMHC 
    that does not have in effect a provider agreement to participate in 
    Medicare.
        3. Section 410.152 is amended by revising paragraph (k) to read as 
    follows:
    
    
    Sec. 410.152  Amounts of payment.
    
    * * * * *
        (k) Amount of payment: Outpatient CAH services. Payment for 
    critical access hospital outpatient services is the reasonable cost of 
    the CAH in providing these services, as determined in accordance with 
    section 1861(v)(1)(A) of the Act and with the applicable principles of 
    cost reimbursement in part 413 and in part 415 of this chapter. Payment 
    for CAH outpatient services is subject to the applicable Medicare Part 
    B deductible and coinsurance amounts, as described in Sec. 413.70(b)(3) 
    of this chapter.
    
    
    Sec. 410.155  [Amended]
    
        4. Section 410.155 is amended by adding the phrase ``; or a 
    critical access hospital (CAH) meeting the requirements of Part 485, 
    subpart F of this chapter'' at the end of the last sentence of 
    paragraph (a); and adding the phrase ``or CAH'' at the end of the last 
    sentence of the introductory text of paragraph (b).
        D. Part 412 is amended as follows:
    
    PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
    SERVICES
    
        1. The authority citation for part 412 continues to read as 
    follows:
    
        Authority: Secs. 1102 and 1871 of the Social Security Act (42 
    U.S.C. 1302 and 1395hh).
    
    Subpart A--General Provisions
    
        2. In Sec. 412.2, the introductory text of paragraph (f) is 
    republished and paragraph (f)(8) is revised to read as follows:
    
    
    Sec. 412.2  Basis of payment.
    
    * * * * *
        (f) Additional payments to hospitals. In addition to payments based 
    on the prospective payment rates for inpatient operating costs and 
    inpatient capital-related costs, hospitals receive payments for the 
    following:
    * * * * *
        (8) For discharges on or after June 19, 1990, and before October 1, 
    1994, and for discharges on or after October 1, 1997, a payment amount 
    per unit for blood clotting factor provided to Medicare inpatients who 
    have hemophilia.
        3. Section 412.8 is amended by revising paragraph (b) to read as 
    follows:
    
    
    Sec. 412.8  Publication of schedules for determining prospective 
    payment rates.
    
    * * * * *
        (b) Annual publication of schedule for determining prospective 
    payment rates. (1) HCFA proposes changes in the methods, amounts, and 
    factors used to determine inpatient prospective payment rates in a 
    Federal Register document published for public comment not later than 
    the April 1 before the beginning of the Federal
    
    [[Page 46026]]
    
    fiscal year in which the proposed changes would apply.
        (2) HCFA publishes a Federal Register document setting forth final 
    methods, amounts, and factors for determining inpatient prospective 
    payment rates not later than the August 1 before the Federal fiscal 
    year in which the rates would apply.
    
    Subpart B--Hospital Services Subject to and Excluded From the 
    Prospective Payment Systems for Inpatient Operating Costs and 
    Inpatient Capital-Related Costs
    
        4. Section 412.22 is amended by revising paragraph (a) and adding 
    new paragraphs (e), (f), and (g), to read as follows:
    
    
    Sec. 412.22  Excluded hospitals and hospital units: General rules.
    
        (a) Criteria. Subject to the criteria set forth in paragraph (e) of 
    this section, a hospital is excluded from the prospective payment 
    systems if it meets the criteria for one or more of the excluded 
    classifications described in Sec. 412.23.
    * * * * *
        (e) Hospitals within hospitals. Except as provided in paragraph (f) 
    of this section, for cost reporting periods beginning on or after 
    October 1, 1997, a hospital that occupies space in a building also used 
    by another hospital, or in one or more entire buildings located on the 
    same campus as buildings used by another hospital, must meet the 
    following criteria in order to be excluded from the prospective payment 
    system:
        (1) Separate governing body. The hospital has a governing body that 
    is separate from the governing body of the hospital occupying space in 
    the same building or on the same campus. The hospital's governing body 
    is not under the control of the hospital occupying space in the same 
    building or on the same campus, or of any third entity that controls 
    both hospitals.
        (2) Separate chief medical officer. The hospital has a single chief 
    medical officer who reports directly to the governing body and who is 
    responsible for all medical staff activities of the hospital. The chief 
    medical officer of the hospital is not employed by or under contract 
    with either the hospital occupying space in the same building or on the 
    same campus or any third entity that controls both hospitals.
        (3) Separate medical staff. The hospital has a medical staff that 
    is separate from the medical staff of the hospital occupying space in 
    the same building or on the same campus. The hospital's medical staff 
    is directly accountable to the governing body for the quality of 
    medical care provided in the hospital, and adopts and enforces bylaws 
    governing medical staff activities, including criteria and procedures 
    for recommending to the governing body the privileges to be granted to 
    individual practitioners.
        (4) Chief executive officer. The hospital has a single chief 
    executive officer through whom all administrative authority flows, and 
    who exercises control and surveillance over all administrative 
    activities of the hospital. The chief executive officer is not employed 
    by, or under contract with, either the hospital occupying space in the 
    same building or on the same campus or any third entity that controls 
    both hospitals.
        (5) Performance of basic hospital functions. The hospital meets one 
    of the following criteria:
        (i) The hospital performs the basic functions specified in 
    Secs. 482.21 through 482.27, 482.30, and 482.42 of this chapter through 
    the use of employees or under contracts or other agreements with 
    entities other than the hospital occupying space in the same building 
    or on the same campus, or a third entity that controls both hospitals. 
    Food and dietetic services and housekeeping, maintenance, and other 
    services necessary to maintain a clean and safe physical environment 
    could be obtained under contracts or other agreements with the hospital 
    occupying space in the same building or on the same campus, or with a 
    third entity that controls both hospitals.
        (ii) For the same period of at least 6 months used to determine 
    compliance with the criterion regarding the age of patients in 
    Sec. 412.23(d)(2) or the length-of-stay criterion in Sec. 412.23(e)(2), 
    or for hospitals other than children's or long-term care hospitals, for 
    a period of at least 6 months immediately preceding the first cost 
    reporting period for which exclusion is sought, the cost of the 
    services that the hospital obtained under contracts or other agreements 
    with the hospital occupying space in the same building or on the same 
    campus, or with a third entity that controls both hospitals, is no more 
    than 15 percent of the hospital's total inpatient operating costs, as 
    defined in Sec. 412.2(c). For purposes of this paragraph (e)(5)(ii), 
    however, the costs of preadmission services are those specified under 
    Sec. 413.40(c)(2) rather than those specified under Sec. 412.2(c)(5).
        (iii) For the same period of at least 6 months used to determine 
    compliance with the criterion regarding the age of inpatients in 
    Sec. 412.23(d)(2) or the length-of-stay criterion in Sec. 412.23(e)(2), 
    or for hospitals other than children's or long-term care hospitals, for 
    the period of at least 6 months immediately preceding the first cost 
    reporting period for which exclusion is sought, the hospital has an 
    inpatient population of whom at least 75 percent were referred to the 
    hospital from a source other than another hospital occupying space in 
    the same building or on the same campus.
        (f) Application for certain hospitals. If a hospital has been 
    excluded from the prospective payment systems under this section on or 
    before September 30, 1995, the criteria in paragraph (e) of this 
    section do not apply to the hospital.
        (g) Definition of control. For purposes of this section, control 
    exists if an individual or an organization has the power, directly or 
    indirectly, significantly to influence or direct the actions or 
    policies of an organization or institution.
        5. Section 412.23 is amended by revising paragraphs (e) and (f) to 
    read as follows:
    
    
    Sec. 412.23  Excluded hospitals: Classifications.
    
    * * * * *
        (e) Long-term care hospitals. A long-term care hospital must meet 
    the requirements of paragraphs (e)(1) or (e)(2) of this section, and, 
    where applicable, the additional requirements Sec. 412.22(e).
        (1) The hospital must have a provider agreement under part 489 of 
    this chapter to participate as a hospital and an average inpatient 
    length of stay greater than 25 days as calculated under paragraph 
    (e)(3) of this section.
        (2) For cost reporting periods beginning on or after August 5, 
    1997, a hospital that was first excluded from the prospective payment 
    system under this section in 1986 must have an average inpatient length 
    of stay of greater than 20 days, as calculated under paragraph (e)(3) 
    of this section, and must demonstrate that at least 80 percent of its 
    annual Medicare inpatient discharges in the 12-month cost reporting 
    period ending in fiscal year 1997 have a principal diagnosis that 
    reflects a finding of neoplastic disease as defined in paragraph 
    (f)(1)(iv) of this section.
        (3) The average inpatient length of stay is calculated--
        (i) By dividing the number of total inpatient days (less leave or 
    pass days) by the number of total discharges for the hospital's most 
    recent complete cost reporting period;
        (ii) If a change in the hospital's average length-of-stay is 
    indicated, by the same method for the immediately preceding 6-month 
    period; or
    
    [[Page 46027]]
    
        (iii) If a hospital has undergone a change of ownership (as 
    described in Sec. 489.18 of this chapter) at the start of a cost 
    reporting period or at any time within the preceding 6 months, the 
    hospital may be excluded from the prospective payment system as a long-
    term care hospital for a cost reporting period if, for the 6 months 
    immediately preceding the start of the period (including time before 
    the change of ownership), the hospital has the required average length 
    of stay, continuously operated as a hospital, and continuously 
    participated as a hospital in Medicare.
        (f) Cancer hospitals--(1) General rule. Except as provided in 
    paragraph (f)(2) of this section, if a hospital meets the following 
    criteria, it is classified as a cancer hospital and is excluded from 
    the prospective payment systems beginning with its first cost reporting 
    period beginning on or after October 1, 1989. A hospital classified 
    after December 19, 1989, is excluded beginning with its first cost 
    reporting period beginning after the date of its classification.
        (i) It was recognized as a comprehensive cancer center or clinical 
    cancer research center by the National Cancer Institute of the National 
    Institutes of Health as of April 20, 1983.
        (ii) It is classified on or before December 31, 1990, or, if on 
    December 19, 1989, the hospital was located in a State operating a 
    demonstration project under section 1814(b) of the Act, the 
    classification is made on or before December 31, 1991.
        (iii) It demonstrates that the entire facility is organized 
    primarily for treatment of and research on cancer (that is, the 
    facility is not a subunit of an acute general hospital or university-
    based medical center).
        (iv) It shows that at least 50 percent of its total discharges have 
    a principal diagnosis that reflects a finding of neoplastic disease. 
    (The principal diagnosis for this purpose is defined as the condition 
    established after study to be chiefly responsible for occasioning the 
    admission of the patient to the hospital. For the purposes of meeting 
    this definition, only discharges with ICD-9-CM principal diagnosis 
    codes of 140 through 239, V58.0, V58.1, V66.1, V66.2, or 990 will be 
    considered to reflect neoplastic disease.)
        (2) Alternative. A hospital that applied for and was denied, on or 
    before December 31, 1990, classification as a cancer hospital under the 
    criteria set forth in paragraph (f)(1) of this section is classified as 
    a cancer hospital and is excluded from the prospective payment systems 
    beginning with its first cost reporting period beginning on or after 
    January 1, 1991, if it meets the criterion set forth in paragraph 
    (f)(1)(i) of this section and the hospital is--
        (i) Licensed for fewer than 50 acute care beds as of August 5, 
    1997;
        (ii) Is located in a State that as of December 19, 1989, was not 
    operating a demonstration project under section 1814(b) of the Act; and
        (iii) Demonstrates that, for the 4-year period ending on December 
    31, 1996, at least 50 percent of its total discharges have a principal 
    diagnosis that reflects a finding of neoplastic disease as defined in 
    paragraph (f)(1)(iv) of this section.
    * * * * *
        6. Section 412.30 is amended by redesignating paragraphs (a) 
    through (d) as paragraphs (b) through (e), respectively, and adding a 
    new paragraph (a). Redesignated paragraph (b) is further amended by 
    redesignating paragraph (b)(4) as paragraph (b)(5), and adding a new 
    paragraph (b)(4). The introductory text of redesignated paragraph 
    (d)(1) is republished and redesignated paragraph (d)(1)(ii) is revised 
    to read as follows:
    
    
    Sec. 412.30  Exclusion of new rehabilitation units and expansion of 
    units already excluded.
    
        (a) Bed capacity in units. A decrease in bed capacity must remain 
    in effect for at least a full 12-month cost reporting period before an 
    equal or lesser number of beds can be added to the hospital's licensure 
    and certification and considered ``new'' under paragraph (b) of this 
    section. Thus, when a hospital seeks to establish a new unit under the 
    criteria under paragraph (b) of this section, or to enlarge an existing 
    unit under the criteria under paragraph (d) of this section, the 
    regional office will review its records on the facility to determine 
    whether any beds have been delicensed and decertified during the 12-
    month cost reporting period before the period for which the hospital 
    seeks to add the beds. To the extent bed capacity was removed from the 
    hospital's licensure and certification during that period, that amount 
    of bed capacity may not be considered ``new'' under paragraph (b) of 
    this section.
        (b) New units.
    * * * * *
        (4) If a hospital that has not previously participated in the 
    Medicare program seeks exclusion of a rehabilitation unit, it may 
    designate certain beds as a new rehabilitation unit for the first full 
    12-month cost reporting period that occurs after it becomes a Medicare-
    participating hospital. The written certification described in 
    paragraph (b)(2) of this section also is effective for any cost 
    reporting period of not less than 1 month and not more than 11 months 
    occurring between the date the hospital began participating in Medicare 
    and the start of the hospital's regular 12-month cost reporting period.
    * * * * *
        (d) Expansion of excluded rehabilitation units.
        (1) New bed capacity. The beds that a hospital seeks to add to its 
    excluded rehabilitation unit are considered new beds only if--
    * * * * *
        (ii) The hospital has obtained approval, under State licensure and 
    Medicare certification, for an increase in its hospital bed capacity 
    that is greater than 50 percent of the number of beds it seeks to add 
    to the unit.
    * * * * *
    
    Subpart D--Basic Methodology for Determining Prospective Payment 
    Federal Rates for Inpatient Operating Costs
    
        7. In Sec. 412.63, paragraph (p) is revised, paragraphs (q) through 
    (s) are redesignated as paragraphs (u) through (w), respectively, and 
    new paragraphs (q) through (t) are added to read as follows:
    
    
    Sec. 412.63   Federal rates for inpatient operating costs for fiscal 
    years after Federal fiscal year 1984.
    
    * * * * *
        (p) Applicable percentage change for fiscal year 1998. The 
    applicable percentage change for fiscal year 1998 is 0 percent for 
    hospitals in all areas.
        (q) Applicable percentage change for fiscal year 1999. The 
    applicable percentage change for fiscal year 1999 is the percentage 
    increase in the market basket index for prospective payment hospitals 
    (as defined in Sec. 413.40(a) of this subchapter) minus 1.9 percentage 
    points for hospitals in all areas.
        (r) Applicable percentage change for fiscal year 2000. The 
    applicable percentage change for fiscal year 2000 is the percentage 
    increase in the market basket index for prospective payment hospitals 
    (as defined in Sec. 413.40(a) of this chapter) minus 1.8 percentage 
    points for hospitals in all areas.
        (s) Applicable percentage change for fiscal years 2001 and 2002. 
    The applicable percentage change for fiscal years 2001 and 2002 is the 
    percentage increase in the market basket index for prospective payment 
    hospitals (as defined in Sec. 413.40(a) of this subchapter) minus 1.1 
    percentage points for hospitals in all areas.
    
    [[Page 46028]]
    
        (t) Applicable percentage change for fiscal year 2003 and for 
    subsequent years. The applicable percentage change for fiscal year 2003 
    and for subsequent years is the percentage increase in the market 
    basket index for prospective payment hospitals (as defined in 
    Sec. 413.40(a)) for hospitals in all areas.
    * * * * *
    
    Subpart F--Payment for Outlier Cases
    
        8. Section 412.80 is revised to read as follows:
    
    
    Sec. 412.80   General provisions.
    
        (a) Basic rule--(1) Discharges occurring on or after October 1, 
    1994 and before October 1, 1997. For discharges occurring on or after 
    October 1, 1994, and before October 1, 1997, except as provided in 
    paragraph (b) of this section concerning transferring hospitals, HCFA 
    provides for additional payment, beyond standard DRG payments, to a 
    hospital for covered inpatient hospital services furnished to a 
    Medicare beneficiary if either of the following conditions is met:
        (i) The beneficiary's length-of-stay (including days at the SNF 
    level of care if a SNF bed is not available in the area) exceeds the 
    mean length-of-stay for the applicable DRG by the lesser of the 
    following:
        (A) A fixed number of days, as specified by HCFA; or
        (B) A fixed number of standard deviations, as specified by HCFA.
        (ii) The beneficiary's length-of-stay does not exceed criteria 
    established under paragraph (a)(1)(i) of this section, but the 
    hospital's charges for covered services furnished to the beneficiary, 
    adjusted to operating costs and capital costs by applying cost-to-
    charge ratios as described in Sec. 412.84(h), exceed the DRG payment 
    for the case plus a fixed dollar amount (adjusted for geographic 
    variation in costs) as specified by HCFA.
        (2) Discharges occurring on or after October 1, 1997. For 
    discharges occurring on or after October 1, 1997, except as provided in 
    paragraph (b) of this section concerning transfers, HCFA provides for 
    additional payment, beyond standard DRG payments, 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 Sec. 412.84(h), exceed the DRG payment for the case plus a fixed 
    dollar amount (adjusted for geographic variation in costs) as specified 
    by HCFA.
        (b) Outlier cases in transferring hospitals. HCFA provides cost 
    outlier payments to a transferring hospital that does not receive 
    payment under Sec. 412.2(b) for discharges specified in 
    Sec. 412.4(d)(2), if the hospital's charges for covered services 
    furnished to the beneficiary, adjusted to cost by applying a national 
    cost/charge ratio, exceed the DRG payment for the case plus a fixed 
    dollar amount (adjusted for geographic variation in costs) as specified 
    by HCFA, divided by the geometric mean length of stay for the DRG and 
    multiplied by the beneficiary's length of stay plus 1 day.
        (c) Publication and revision of outlier criteria. HCFA will issue 
    threshold criteria for determining outlier payment in the annual notice 
    of the prospective payment rates published in accordance with 
    Sec. 412.8(b).
    
    
    Sec. 412.82   [Amended]
    
        9. In Sec. 412.82(a), in the first sentence, the word ``If'' is 
    removed and the phrase ``For discharges occurring before October 1, 
    1997, if'' is added in its place.
    
    
    Sec. 412.84   [Amended]
    
        10. In Sec. 412.84, in the first sentence of paragraph (a), the 
    reference ``Sec. 412.80(a)(1)(ii)'' is revised to read 
    ``Sec. 412.80(a)'', and the last sentence of paragraph (g) is removed.
    
    
    Sec. 412.86   [Amended]
    
        11. In the introductory text to Sec. 412.86, the word ``If'' is 
    removed and the phrase ``For discharges occurring before October 1, 
    1997, if'' is added in its place.
    
    Subpart G--Special Treatment of Certain Facilities Under the 
    Prospective Payment System for Inpatient Operating Costs
    
        12. Section 412.90 is amended by redesignating paragraphs (i) and 
    (j) as paragraphs (j) and (k), respectively, adding a new paragraph 
    (i), and revising newly designated paragraphs (j) and (k), to read as 
    follows:
    
    
    Sec. 412.90   General rules.
    
    * * * * *
        (i) Hospitals that receive an additional update for FYs 1998 and 
    1999. For FYs 1998 and 1999, HCFA makes an upward adjustment to the 
    standardized amounts for certain hospitals that do not receive indirect 
    medical education or disproportionate share payments and are not 
    Medicare- dependent, small rural hospitals. The criteria for 
    identifying these hospitals are set forth in Sec. 412.107.
        (j) Medicare-dependent, small rural hospitals. For cost reporting 
    periods beginning on or after April 1, 1990 and ending before October 
    1, 1994, or beginning on or after October 1, 1997 and ending before 
    October 1, 2001, HCFA adjusts the prospective payment rates for 
    inpatient operating costs determined under subparts D and E of this 
    part if a hospital is classified as a Medicare-dependent, small rural 
    hospital. Criteria for identifying these hospitals are set forth in 
    Sec. 412.108.
        (k) Essential access community hospitals (EACHs). If a hospital was 
    designated as an EACH by HCFA as described in Sec. 412.109(a) and is 
    located in a rural area as defined in Sec. 412.109(b), HCFA determines 
    the prospective payment rate for that hospital, as it does for sole 
    community hospitals, under Sec. 412.92(d).
        13. In Sec. 412.96, the introductory text of paragraph (c)(1) is 
    revised, paragraph (f) is removed and reserved, and paragraph (g) is 
    revised, to read as follows:
    
    
    Sec. 412.96   Special treatment: Referral centers.
    
    * * * * *
        (c) * * *
        (1) Case-mix index. HCFA sets forth national and regional case-mix 
    index values in each year's annual notice of prospective payment rates 
    published under Sec. 412.8(b). The methodology HCFA uses to calculate 
    these criteria is described in paragraph (g) of this section. The case-
    mix index value to be used for an individual hospital in the 
    determination of whether it meets the case-mix index criteria is that 
    calculated by HCFA from the hospital's own billing records for Medicare 
    discharges as processed by the fiscal intermediary and submitted to 
    HCFA. The hospital's case-mix index for discharges (not including 
    discharges from units excluded from the prospective payment system 
    under subpart B of this part) during the most recent Federal fiscal 
    year that ended at least one year prior to the beginning of the cost 
    reporting period for which the hospital is seeking referral center 
    status must be at least equal to--
    * * * * *
        (e)-(f) [Reserved]
        (g) Hospital cancellation of referral center status. (1) A hospital 
    may at any time request cancellation of its status as a referral center 
    and be paid prospective payments per discharge based on the applicable 
    rural rate as determined in accordance with Sec. 412.63, as adjusted by 
    the hospital's area wage index value.
        (2) The cancellation becomes effective no later than 30 days after 
    the date the hospital submits its request.
        (3) If a hospital requests that its referral center status be 
    canceled, it may not be reclassified as a referral center unless it 
    meets the qualifying criteria set
    
    [[Page 46029]]
    
    forth in paragraph (a) of this section in effect at the time it 
    reapplies.
    * * * * *
        14. In Sec. 412.105, paragraphs (a) and (d) are revised, paragraph 
    (f) is removed, paragraph (g) is redesignated as paragraph (f), and a 
    new paragraph (g) is added. In redesignated paragraph (f), paragraph 
    (f)(1)(i) introductory text is republished, paragraph (f)(1)(i)(B) is 
    revised, paragraph (f)(1)(ii) introductory text is republished and 
    paragraph (f)(1)(ii)(C) is revised, paragraph (f)(1)(iv) is revised, 
    and a new paragraph (f)(1)(v) is added, to read as follows:
    
    
    Sec. 412.105   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 in paragraph (b) 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.
        (2) The hospital's DRG revenue for inpatient operating costs based 
    on DRG-adjusted prospective payment rates for inpatient operating 
    costs, excluding outlier payments for inpatient operating costs 
    determined under subpart F of this part and additional payments made 
    under the provisions of Sec. 412.106 .
    * * * * *
        (d) Determination of education adjustment factor. Each hospital's 
    education adjustment factor is calculated as follows:
        (1) Step one. A factor representing the sum of 1.00 plus the 
    hospital's ratio of full-time equivalent residents to beds, as 
    determined under paragraph (a)(1) of this section, is raised to an 
    exponential power equal to the factor set forth in paragraph (c) of 
    this section.
        (2) Step two. The factor derived from step one is reduced by 1.00.
        (3) Step three. The factor derived from completing steps one and 
    two is multiplied by `c', and where `c' is equal to the following:
        (i) For discharges occurring on or after October 1, 1988, and 
    before October 1, 1997, 1.89.
        (ii) For discharges occurring during fiscal year 1998, 1.72.
        (iii) For discharges occurring during fiscal year 1999, 1.6.
        (iv) For discharges occurring during fiscal year 2000, 1.47.
        (v) For discharges occurring on or after October 1, 2000, 1.35.
    * * * * *
        (f) Determining the total number of full-time equivalent residents 
    for cost reporting periods beginning on or after July 1, 1991. (1) For 
    cost reporting periods beginning on or after July 1, 1991, the count of 
    full-time equivalent residents for the purpose of determining the 
    indirect medical education adjustment is determined as follows:
        (i) The residents must be enrolled in an approved teaching program. 
    An approved teaching program is one that meets one of the following 
    requirements:
     * * * * *
        (B) May count towards certification of the participant in a 
    specialty or subspecialty listed in the current edition of either of 
    the following publications:
        (1) The Directory of Graduate Medical Education Programs published 
    by the American Medical Association.
        (2) The Annual Report and Reference Handbook published by the 
    American Board of Medical Specialties.
     * * * * *
        (ii) In order to be counted, the resident must be assigned to one 
    of the following areas:
     * * * * *
        (C) Effective for discharges occurring on or after October 1, 1997, 
    the time spent by a resident in a nonhospital 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 at Sec. 413.86(f)(1)(iii) are met.
     * * * * *
        (iv) Effective for discharges occurring on or after October 1, 
    1997, the total number of full-time equivalent residents in the fields 
    of allopathic and osteopathic medicine in either a hospital or 
    nonhospital setting that meets the criteria listed in paragraph 
    (f)(1)(ii) of this section may not exceed the number of such full-time 
    equivalent residents in the hospital with respect to the hospital's 
    most recent cost reporting period ending on or before December 31, 
    1996.
        (v) For a hospital's cost reporting periods beginning on or after 
    October 1, 1997, and before October 1, 1998, the total number of full-
    time equivalent residents for payment purposes is equal to the average 
    of the actual full-time equivalent resident counts (subject to the 
    requirements listed in paragraphs (f)(1)(ii)(C) and (f)(1)(iv) of this 
    section) for that cost reporting period and the preceding cost 
    reporting period. For a hospital's cost reporting periods beginning on 
    or after October 1, 1998, the total number of full-time equivalent 
    residents for payment purposes is equal to the average of the actual 
    full-time equivalent resident count (subject to the requirements listed 
    in paragraphs (f)(10)(ii)(C) and (f)(1)(iv) of this section) for that 
    cost reporting period and the preceding two cost reporting periods.
     * * * * *
        (g) Indirect medical education payment for managed care enrollees. 
    For portions of cost reporting periods beginning on or after January 1, 
    1998, a payment is made to a hospital for indirect medical education 
    costs, as determined under paragraph (e) of this section, for 
    discharges associated with individuals who are enrolled under a risk-
    sharing contract with an eligible organization under section 1876 of 
    the Act or with a Medicare+Choice organization under title XVIII, Part 
    C of the Act during the period.
        15. Section 412.106 is amended by revising paragraphs (a)(2) and 
    (d)(1) and adding a new paragraph (e) to read as follows:
    
    
    Sec. 412.106  Special treatment: Hospitals that serve a 
    disproportionate share of low-income patients.
    
        (a) General considerations. * * *
     * * * * *
        (2) The payment adjustment is applied to the hospital's DRG revenue 
    for inpatient operating costs based on DRG-adjusted prospective payment 
    rates for inpatient operating costs, excluding outlier payments for 
    inpatient operating costs under subpart F of this part and additional 
    payments made under the provisions of Sec. 412.105.
     * * * * *
        (d) Payment adjustment.
        (1) Method of adjustment. Subject to the reduction factor set forth 
    in paragraph (e) of this section, if a hospital serves a 
    disproportionate number of low-income patients, its DRG revenues for 
    inpatient operating costs are increased by an adjustment factor as 
    specified in paragraph (d)(2) of this section.
     * * * * *
        (e) Reduction in payments for FYs 1998 through 2002. The amounts 
    otherwise payable to a hospital under paragraph (d) of this section are 
    reduced by the following:
        (1) For FY 1998, 1 percent.
        (2) For FY 1999, 2 percent.
        (3) For FY 2000, 3 percent.
        (4) For FY 2001, 4 percent.
        (5) For FY 2002, 5 percent.
        (6) For FYs 2003 and thereafter, 0 percent.
        16. A new Sec. 412.107 is added to read as follows:
    
    [[Page 46030]]
    
    Sec. 412.107  Special treatment: Hospitals that receive an additional 
    update for FYs 1998 and 1999.
    
        (a) Additional payment update. A hospital that meets the criteria 
    set forth in paragraph (b) of this section receives the following 
    increase to its applicable percentage amount set forth in Sec. 412.63 
    (p) and (q):
        (1) For FY 1998, 0.5 percent.
        (2) For FY 1999, 0.3 percent.
        (b) Criteria for classification. A hospital is eligible for the 
    additional payment update set forth in paragraph (a) of this section if 
    it meets all of the following criteria:
        (1) Definition. The hospital is not a Medicare-dependent, small 
    rural hospital as defined in Sec. 412.108(a) and does not receive any 
    additional payment under the following provisions:
        (i) The indirect medical education adjustment made under 
    Sec. 412.105.
        (ii) The disproportionate share adjustment made under Sec. 412.106.
        (2) State criteria. The hospital is located in a State in which the 
    aggregate payment made under Sec. 412.112 (a) and (c) for hospitals 
    described in paragraph (b)(1) of this section for their cost reporting 
    periods beginning in FY 1995 is less than the allowable operating costs 
    described in Sec. 412.2(c) for those hospitals.
        (3) Hospital criteria. The aggregate payment made to the hospital 
    under Sec. 412.112 (a) and (c) for the hospital's cost reporting period 
    beginning in the fiscal year in which the additional payment update 
    described in paragraph (a) of this section is made is less than the 
    allowable operating cost described in Sec. 412.2(c) for that hospital.
        17. In Sec. 412.108 paragraph (a)(1) is revised, the introductory 
    text of paragraphs (c) and (c)(2) are republished, and the introductory 
    text of paragraph (c)(2)(ii) is revised to read as follows:
    
    
    Sec. 412.108  Special treatment: Medicare-dependent, small rural 
    hospitals.
    
        (a) Criteria for classification as a Medicare-dependent, small 
    rural hospital.
        (1) General considerations. For cost reporting periods beginning on 
    or after April 1, 1990 and ending before October 1, 1994, or beginning 
    on or after October 1, 1997 and ending before October 1, 2001, a 
    hospital is classified as a Medicare-dependent, small rural hospital if 
    it is located in a rural area (as defined in Sec. 412.63(b)) and meets 
    all of the following conditions:
     * * * * *
        (c) Payment methodology. A hospital that meets the criteria in 
    paragraph (a) of this section is paid for its inpatient operating costs 
    the sum of paragraphs (c)(1) and (c)(2) of this section.
     * * * * *
        (2) The amount, if any, determined as follows:
     * * * * *
        (ii) For discharges occurring during any subsequent cost reporting 
    period (or portion thereof) and before October 1, 1994, and for 
    discharges occurring on or after October 1, 1997 and before October 1, 
    2001, 50 percent of the amount that the Federal rate determined under 
    paragraph (c)(1) of this section is exceeded by the higher of the 
    following:
     * * * * *
        18. In Sec. 412.109, paragraph (a) is revised, paragraphs (c) and 
    (d) are removed, paragraphs (e), (f), and (g) are redesignated as 
    paragraphs (c), (d), and (e), respectively, and redesignated paragraphs 
    (c)(3)(ii), (d), and (e) are revised to read as follows:
    
    
    Sec. 412.109   Special treatment: Essential access community hospitals 
    (EACHs).
    
        (a) General rule. For payment purposes, HCFA treats as a sole 
    community hospital any hospital that is located in a rural area as 
    described in paragraph (b) of this section and that HCFA designated as 
    an EACH under section 1820(i)(1) of the Act as in effect on September 
    30, 1997, for as long as the hospital continues to comply with the 
    terms, conditions, and limitations that were applicable at the time 
    HCFA designated the hospital as an EACH. The payment methodology for 
    sole community hospitals is set forth at Sec. 412.92(d).
     * * * * *
        (c) Adjustment to the hospital-specific rate for rural EACHs 
    experiencing increased costs.
     * * * * *
        (3) Intermediary recommendation. * * *
        (ii) The intermediary's analysis and recommendation of the request.
     * * * * *
        (d) Termination of EACH designation. If HCFA determines that a 
    hospital no longer complies with the terms, conditions, and limitations 
    that were applicable at the time HCFA designated the hospital as an 
    EACH, HCFA will terminate the EACH designation of the hospital, 
    effective with discharges occurring on or after 30 days after the date 
    of the determination.
        (e) Review of HCFA determination. A determination by HCFA that a 
    hospital's EACH designation should be terminated, is subject to review 
    under part 405, subpart R of this chapter, including the time limits 
    for filing requests for hearings as specified in Secs. 405.1811(a) and 
    405.1841(a)(1) and (b) of this chapter.
    
    Subpart H--Payment to Hospitals Under the Prospective Payment 
    Systems
    
        19. Section 412.115 is amended by revising paragraph (b) to read as 
    follows:
    
    
    Sec. 412.115  Additional payments.
    
    * * * * *
        (b) Administration of blood clotting factor. For discharges 
    occurring on or after June 19, 1990, and before October 1, 1994, and 
    for discharges occurring on or after October 1, 1997, an additional 
    payment is made to a hospital for each unit of blood clotting factor 
    furnished to a Medicare inpatient who is a hemophiliac.
    * * * * *
    
    Subpart K--Prospective Payment System for Inpatient Operating Costs 
    for Hospitals Located in Puerto Rico
    
        20. Section 412.204 is revised to read as follows:
    
    
    Sec. 412.204   Payment to hospitals located in Puerto Rico.
    
        (a) FY 1988 through FY 1997. For discharges occurring on or after 
    October 1, 1997, payments for inpatient operating costs to hospitals 
    located in Puerto Rico that are paid under the prospective payment 
    system are equal to the sum of--
        (1) 75 percent of the Puerto Rico prospective payment rate for 
    inpatient operating costs, as determined under Sec. 412.208 or 
    Sec. 412.210; and
        (2) 25 percent of a national prospective payment rate for inpatient 
    operating costs, as determined under Sec. 412.212.
        (b) FY 1998 and thereafter. For discharges occurring on or after 
    October 1, 1997, payments for inpatient operating costs to hospitals 
    located in Puerto Rico that are paid under the prospective payment 
    system are equal to the sum of--
        (1) 50 percent of the Puerto Rico prospective payment rate for 
    inpatient operating costs, as determined under Sec. 412.208 or 
    Sec. 412.210; and
        (2) 50 percent of a national prospective payment rate for inpatient 
    operating costs, as determined under Sec. 412.212.
    
    
    Sec. 412.210   [Amended]
    
        21. In Sec. 412.210(e), the phrase ``the national average hospital 
    wage level'' is revised to read ``the Puerto Rico average hospital wage 
    level''.
    
    [[Page 46031]]
    
    Subpart L--The Medicare Geographic Classification Review Board
    
        22. Section 412.230 is amended by revising paragraphs (a)(5)(ii), 
    (e)(1) introductory text, and (e)(1)(iv)(B) and adding new paragraphs 
    (e)(3) and (e)(4), to read as follows:
    
    
    Sec. 412.230  Criteria for an individual hospital seeking redesignation 
    to another rural area or an urban area.
    
        (a) * * *
        (5) * * *
        (ii) For redesignations effective in fiscal years 1997 and 1998 and 
    2002 and thereafter, a hospital may not be redesignated for purposes of 
    the standardized amount if the area to which the hospital seeks 
    redesignation does not have a higher standardized amount than the 
    standardized amount the hospital currently receives.
     * * * * *
        (e) Use of urban or other rural area's wage index.--(1) Criteria 
    for use of area's wage index. Except as provided in paragraphs (e)(3) 
    and (e)(4) of this section, to use an area's wage index, a hospital 
    must demonstrate the following:
    * * * * *
        (iv) One of the following conditions apply:
    * * * * *
        (B) For redesignations effective before fiscal year 1999, the 
    hospital's average hourly wage weighted for occupational categories is 
    at least 90 percent of the average hourly wages of hospitals in the 
    area to which it seeks redesignation.
    * * * * *
        (3) Rural referral center exception. If a hospital is a rural 
    referral center, it does not have to demonstrate that it meets the 
    criterion set forth in paragraph (e)(1)(iii) of this section concerning 
    its average hourly wage.
        (4) Special dominating hospital exception. The requirements of 
    paragraph (e)(1)(i) and (e)(1)(iii) of this section do not apply if a 
    hospital meets the following criteria:
        (i) Its average hourly wage is at least 108 percent of the average 
    hourly wage of all other hospitals in the area in which the hospital is 
    located.
        (ii) It pays at least 40 percent of the adjusted uninflated wages 
    in the MSA.
        (iii) It was approved for redesignation under this paragraph (e) 
    for each year from fiscal year 1992 through fiscal year 1997.
        23. Section 412.232 is amended by revising paragraph (c)(2) to read 
    as follows:
    
    
    Sec. 412.232  Criteria for all hospitals in a rural county seeking 
    urban redesignation.
    
    * * * * *
        (c) Wage criteria. * * *
        (2) Aggregate hourly wage weighted for occupational mix. For 
    redesignations effective before fiscal year 1999, the aggregate hourly 
    wage for all hospitals in the rural county, weighted for occupational 
    categories, is at least 90 percent of the average hourly wage in the 
    adjacent urban area.
    * * * * *
        24. Section 412.234 is amended by revising paragraph (b)(2) to read 
    as follows:
    
    
    Sec. 412.234  Criteria for all hospitals in an urban county seeking 
    redesignation to another urban area.
    
    * * * * *
        (b) Wage criteria. * * *
        (2) Aggregate hourly wage weighted for occupational mix. For 
    redesignations effective before fiscal year 1999, the aggregate average 
    hourly wage for all hospitals in the county, weighted for occupational 
    categories, is at least 90 percent of the average hourly wage in the 
    adjacent urban area.
    * * * * *
        25. In Sec. 412.256, paragraphs (a)(2) and (c)(1) are revised to 
    read as follows:
    
    
    Sec. 412.256  Application requirements.
    
        (a) * * *
        (2) A complete application must be received not later than the 
    first day of the month preceding the Federal fiscal year for which 
    reclassification is requested.
    * * * * *
        (c) Opportunity to complete a submitted application. (1) The MGCRB 
    will review an application within 15 days of receipt to determine if 
    the application is complete. If the MGCRB determines that an 
    application is incomplete, the MGCRB will notify the hospital, with a 
    copy to HCFA, within the 15 day period, that it has determined that the 
    application is incomplete and may dismiss the application if a complete 
    application is not filed by September 1 .
    * * * * *
        26. Section 412.274 is amended by revising paragraph (b) to read as 
    follows:
    
    
    Sec. 412.274  Scope and effect of an MGCRB decision.
    
    * * * * *
        (b) Effective date and term of the decision. Any 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).
    * * * * *
    
    Subpart M--Prospective Payment System for Inpatient Hospital 
    Capital Costs
    
        27. Section 412.308 is amended by adding new paragraphs (b)(4) and 
    (b)(5) to read as follows:
    
    
    Sec. 412.308  Determining and updating the Federal rate.
    
    * * * * *
        (b) Standard Federal rate. * * *
        (4) Effective FY 1998, the unadjusted standard Federal capital 
    payment rate in effect on September 30, 1997, used to determine the 
    Federal rate each year under paragraph (c) of this section is reduced 
    by 15.68 percent.
        (5) For discharges occurring on or after October 1, 1997 through 
    September 30, 2002, the unadjusted standard Federal capital payment 
    rate as in effect on September 30, 1997, used to determine the Federal 
    rate each year under paragraph (c) of this section is further reduced 
    by 2.1 percent.
    * * * * *
        28. Section 412.328 is amended by revising paragraph (e)(4) and 
    adding new paragraphs (e)(5) and (e)(6) to read as follows:
    
    
    Sec. 412.328  Determining and updating the hospital-specific rate.
    
    * * * * *
        (e) Hospital-specific rate. * * *
        (4) Payment for transfer cases. Effective FY 1996, the intermediary 
    reduces the updated amount determined in paragraph (d) of this section 
    by 0.28 percent to account for the effect of the revised policy for 
    payment of transfers under Sec. 412.4(d).
        (5) Reduction of rate: FY 1998. Effective FY 1998, the unadjusted 
    hospital-specific rate as in effect on September 30, 1997 described in 
    paragraph (e)(1) of this section is reduced by 15.68 percent.
        (6) Reduction of rate: FY 1998 through FY 2002. For discharges 
    occurring on or after October 1, 1997 through September 30, 2002, the 
    unadjusted hospital-specific rate in effect on September 30, 1997, 
    described in paragraph (e)(1) of this section is further reduced by 2.1 
    percent.
    * * * * *
        29. Section 412.348 is amended by revising paragraph (c)(2) to read 
    as follows:
    
    
    Sec. 412.348  Exception payments.
    
    * * * * *
    
    [[Page 46032]]
    
        (c) Minimum payment level by class of hospital.
    * * * * *
        (2) When it is necessary to adjust the minimum payment levels set 
    by class of hospitals specified in paragraphs (c)(1)(i) and (g)(6) of 
    this section, HCFA will adjust those levels for each class of hospitals 
    in one percentage point increments as necessary to satisfy the 
    requirement specified in paragraph (h) of this section that total 
    estimated payments under the exception process not exceed 10 percent of 
    the total estimated capital prospective payments (exclusive of hold-
    harmless payments for old capital) for the same fiscal year.
    * * * * *
        30. Section 412.374 is revised to read as follows:
    
    
    Sec. 412.374  Payments to hospitals located in Puerto Rico.
    
        (a) Payments for capital-related costs to hospitals located in 
    Puerto Rico that are paid under the prospective payment system are 
    equal to the sum of the following:
        (1) 50 percent of a Puerto Rico capital rate based on data from 
    Puerto Rico hospitals only, which is determined in accordance with 
    procedures for developing the Federal rate; and
        (2) 50 percent of the Federal rate, as determined under 
    Sec. 412.308.
        (b) Effective for fiscal year 1998, the Puerto Rico capital rate 
    described in paragraph (a) of this section in effect on September 30, 
    1997, is reduced by 15.68 percent.
        (c) For discharges occurring on or after October 1, 1997 through 
    September 30, 2002, the Puerto Rico capital rate described in paragraph 
    (a) of this section in effect on September 30, 1997 is further reduced 
    by 2.1 percent.
        E. Part 413 is amended as set forth below:
    
    PART 416--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
    END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
    PAYMENT RATES FOR SKILLED NURSING FACILITIES
    
        1. The authority citation for Part 413 continues to read as 
    follows:
    
        Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social 
    Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).
    
        2. Section 413.1 is amended by revising paragraph (a)(1)(ii)(G) to 
    read as follows:
    
    
    Sec. 413.1  Introduction.
    
        (a) * * *
        (ii) * * *
        (G) Section 1834(g) of the Act provides that payment for critical 
    access hospital (CAH) outpatient services is the reasonable costs of 
    the CAH in providing these services, 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.
    * * * * *
    
    
    Sec. 413.13  [Amended]
    
        3. In Sec. 413.13, paragraph (c)(2)(iv) is removed.
        4. Section 413.40 is amended by adding new paragraphs (b)(1)(iv) 
    and (b)(1)(v); revising paragraph (c)(3)(vi) and adding new paragraphs 
    (c)(3)(vii) and (c)(3)(viii); revising paragraph (c)(4); revising 
    paragraphs (d)(2) and (d)(3) and adding new paragraphs (d)(4)and 
    (d)(5); revising paragraphs (f)(1), (f)(2), (g)(1), and (g)(5); and 
    adding a new paragraph (j), to read as follows:
    
    
    Sec. 413.40  Ceiling on the rate of increase in hospital inpatient 
    costs.
    
    * * * * *
        (b) Cost reporting periods subject to the rate-of-increase ceiling. 
    (1) * * *
        (iv) Request for rebased target amount for the cost reporting 
    period beginning on or after October 1, 1997 and on or before September 
    30, 1998. Except for qualified long-term care hospitals as defined in 
    paragraph (b)(1)(v) of this section, each hospital or unit under 
    present or previous ownership that received payment under section 
    1886(b) of the Act during cost reporting periods beginning before 
    October 1, 1990, may submit a request to its fiscal intermediary to 
    rebase its target amount. The request must be received by the fiscal 
    intermediary by the later of November 1, 1997 or 60 days before the 
    beginning of its cost reporting period beginning during fiscal year 
    1998. The rebased target amount for the cost reporting period beginning 
    during fiscal year 1998 is determined as follows:
        (A) Determine the hospital's inpatient operating costs per case for 
    each of the five most recent settled cost reports as of August 5, 1997.
        (B) For each of the five cost reports, update the operating costs 
    per case by the applicable update factors up to the hospital's cost 
    reporting period beginning during FY 1998.
        (C) Exclude the highest and lowest of the five updated amounts 
    determined under paragraph (b)(1)(iv)(B) of this section.
        (D) Compute the average for the remaining three updated amounts for 
    operating cost per case.
        (v) Request by qualified long-term care hospital. A qualified long-
    term care hospital may file a request to its fiscal intermediary for a 
    rebased FY 1998 target amount. The request must be received by the 
    fiscal intermediary by the later of November 1, 1997 or 60 days before 
    the beginning of its cost reporting period beginning during fiscal year 
    1998. The rebased FY 1998 target amount is the hospital's FY 1996 
    inpatient operating costs updated to FY 1997. A qualified long-term 
    care hospital means a long-term care hospital that meets the following 
    two conditions for its two most recent settled cost reports as of 
    August 5, 1997:
        (A) Its Medicare inpatient operating costs exceed 115 percent of 
    the ceiling.
        (B) The hospital would have had a disproportionate patient 
    percentage (as defined in Sec. 412.106) equal to or greater than 70 
    percent if it were a prospective payment hospital.
    * * * * *
        (c) Costs subject to the ceiling.
    * * * * *
        (3) Rate-of-increase percentages and update factors. * * *
        (vi) Federal fiscal year 1998. The applicable rate-of-increase 
    percentage for cost reporting periods beginning on or after October 1, 
    1997 is 0 percent.
        (vii) Federal fiscal year 1999 through Federal fiscal year 2002. 
    The applicable rate-of-increase percentage for cost reporting periods 
    beginning on or after October 1, 1998, and before October 1, 2002, 
    based on data from the most recent available cost report, is:
        (A) The percentage increase in the market basket, if inpatient 
    operating costs are equal to or exceed the ceiling amount by 10 percent 
    or more of the ceiling.
        (B) The percentage increase in the market basket minus .25 
    percentage points for each percentage point by which inpatient 
    operating costs are less than 10 percent over the ceiling (but not less 
    than 0), if inpatient operating costs exceed the ceiling by less than 
    10 percent of the ceiling.
        (C) The greater of the percentage increase in the market basket 
    minus 2.5 percentage points or 0 percent, if inpatient operating costs 
    are equal to or less than the ceiling but greater than 66.7 percent of 
    the ceiling.
        (D) 0 percent, if inpatient operating costs do not exceed 66.7 
    percent of the ceiling.
        (viii) Federal fiscal year 2003 and following. The applicable rate-
    of-increase percentage for cost reporting periods beginning on or after 
    October 1, 2002, is the percentage increase projected by the hospital 
    market basket index.
    
    [[Page 46033]]
    
        (4) Target amount. The intermediary will establish a target amount 
    for each hospital. The target amount for a cost reporting period is 
    determined as follows:
        (i) Except as provided in paragraph (c)(4)(iv) of this section, and 
    subject to the provisions of paragraph (c)(4)(iii) of this section, for 
    the first cost reporting period to which this ceiling applies, the 
    target amount equals the hospital's allowable net inpatient operating 
    costs per case for the hospital's base period increased by the update 
    factor for the subject period.
        (ii) Subject to the provisions of paragraph (c)(4)(iii) of this 
    section, for subsequent cost reporting periods, the target amount 
    equals the hospital's target amount for the previous cost reporting 
    period increased by the update factor for the subject cost reporting 
    period, unless the provisions of paragraph (c)(5)(ii) of this section 
    apply.
        (iii) In the case of a psychiatric hospital or unit, rehabilitation 
    hospital or unit, or long term care hospital, the target amount may not 
    exceed--
        (A) For cost reporting periods beginning during fiscal year 1998, 
    the 75th percentile of target amounts for hospitals in the same class 
    (psychiatric hospital or unit, rehabilitation hospital or unit, or long 
    term care hospital) for cost reporting periods ending during FY 1996, 
    increased by the applicable market basket percentage up to the first 
    cost reporting period beginning on or after October 1, 1997.
        (B) For cost reporting periods beginning during FYs 1999 through 
    2002, the amount determined under paragraph (c)(4)(iii)(A) increased by 
    the market basket percentage increase up through the subject period, 
    subject to paragraph (c)(4)(iv) of this section.
        (iv) In the case of a hospital that received payments under 
    paragraph (f)(2)(ii) of this section, for purposes of determining the 
    hospital's target amount for the hospital's third 12-month cost 
    reporting period, the target amount for the preceding cost reporting 
    period is equal to the amount determined under paragraph (f)(2)(ii)(A) 
    of this section.
    * * * * *
        (d) Application of the target amount in determining the amount of 
    payment. * * *
        (2) Net inpatient operating costs are less than or equal to the 
    ceiling. For cost reporting periods beginning on or after October 1, 
    1997, if a hospital's allowable net inpatient operating costs do not 
    exceed the hospital's ceiling, payment to the hospital will be 
    determined on the basis of the lower of the--
        (i) Net inpatient operating costs plus 15 percent of the difference 
    between inpatient operating costs and the ceiling; or
        (ii) Net inpatient operating costs plus 2 percent of the ceiling.
        (3) Net inpatient operating costs are greater than the ceiling. For 
    cost reporting periods beginning on or after October 1, 1997--
        (i) If a hospital's allowable net inpatient operating costs do not 
    exceed 110 percent of the ceiling (or the adjusted ceiling, if 
    applicable), payment will be the ceiling (or the adjusted ceiling, if 
    applicable);
        (ii) If a hospital's allowable net inpatient operating costs are 
    greater than 110 percent of the ceiling (or the adjusted ceiling, if 
    applicable), payment will be the ceiling (or the adjusted ceiling, if 
    applicable) plus the lesser of:
        (A) 50 percent of the allowable net inpatient operating costs in 
    excess of 110 percent of the ceiling (or the adjusted ceiling, if 
    applicable); or
        (B) 10 percent of the ceiling (or the adjusted ceiling, if 
    applicable).
        (4) Continuous improvement bonus payments. For cost reporting 
    periods beginning on or after October 1, 1997, eligible hospitals (as 
    defined in paragraph (d)(5) of this section) receive payments in 
    addition to those in paragraph (d)(2) of this section, as applicable. 
    These payments are equal to the lesser of--
        (i) 50 percent of the amount by which the operating costs are less 
    than the expected costs for the period; or
        (ii) 1 percent of the ceiling.
        (5) Eligibility requirements for continuous improvement bonus 
    payments. To qualify, a hospital must have been paid as a prospective 
    payment excluded hospital for at least three full cost reporting 
    periods prior to the applicable period, and the hospital's operating 
    costs per discharge for the period must be less than the least of the 
    following:
        (i) The hospital's target amount.
        (ii) The hospital's trended costs.
        (A) For a hospital for which its cost reporting period ending 
    during fiscal year 1996 was its third or subsequent full cost reporting 
    period, trended costs are the lesser of the allowable inpatient 
    operating costs per discharge or the target amount for the cost 
    reporting period ending in fiscal year 1996, increased in a compounded 
    manner for each succeeding fiscal year by the market basket percentage 
    increase;
        (B) For all other hospitals, trended costs are the allowable 
    inpatient operating costs per discharge for its third full cost 
    reporting period increased in a compounded manner for each succeeding 
    fiscal year by the market basket increase.
        (iii) The hospital's expected costs. The hospital's expected costs 
    are the lesser of its allowable inpatient operating costs per discharge 
    or the target amount for the previous cost reporting period, updated by 
    the market basket percentage increase for the fiscal year.
    * * * * *
        (f) Comparison to the target amount for new hospitals and units--
    (1) New hospitals and units--(i) New hospitals. For purposes of this 
    section, a new hospital is a provider of hospital inpatient services 
    that--
        (A) Has operated as the type of hospital for which HCFA granted it 
    approval to participate in the Medicare program, under present or 
    previous ownership (or both), for less than 2 full years; and
        (B) Has provided the type of hospital inpatient services for which 
    HCFA granted it approval to participate in the Medicare program, for 
    less than 2 years.
        (ii) New units. A newly established unit that is excluded from the 
    prospective payments system under the provisions of Secs. 412.25 
    through 412.30 of this chapter does not qualify for the exemption 
    afforded to a new hospital under paragraph (f)(2)(i) of this section 
    unless the unit is located in an acute care hospital that, if it were 
    subject to the provisions of this section, would qualify as a new 
    hospital under paragraph (f)(1)(i) of this section.
        (2) Comparison--(i) Exemptions. (A) A new children's hospital is 
    exempt from the rate-of-increase ceiling imposed under this section. 
    The exemption begins when the hospital accepts its first patient and 
    ends at the end of the first cost reporting period ending at least 2 
    years after the hospital accepts its first patient. The first cost 
    reporting period of at least 12 months beginning at least 1 year after 
    the hospital accepts its first patient is the base year, in accordance 
    with paragraph (b) of this section.
        (B) Within 180 days of the date a hospital is excluded from the 
    prospective payment system, the intermediary determines whether the 
    hospital is exempt from the rate-of-increase ceiling. The intermediary 
    notifies the hospital of its determination and the hospital's base 
    period.
        (C) A decision issued under paragraph (f)(2)(ii)(B) of this section 
    is considered final unless the hospital submits additional information 
    and requests a review of the decision no later than 180 days after the 
    date on the intermediary's notice of the decision. The final
    
    [[Page 46034]]
    
    decision is subject to review under subpart R of part 405 of this 
    chapter, provided the hospital has received a notice of program 
    reimbursement (NPR) for the cost reporting period in question and the 
    NPR does not reflect an exemption (see the definitions in 
    Sec. 405.1801(a) of this chapter and the provisions regarding a 
    provider's right to a Board hearing in Sec. 405.1835 of this chapter).
        (ii) Median target amount. (A) For cost reporting periods beginning 
    on or after October 1, 1997, the amount of payment for a new 
    psychiatric hospital or unit, a new rehabilitation hospital or unit, or 
    a new long-term care hospital that was not paid as an excluded hospital 
    prior to October 1, 1997, is the lower of the hospital's net inpatient 
    operating costs per case or 110 percent of the national median of the 
    target amounts for the class of excluded hospitals and units 
    (psychiatric, rehabilitation, long-term care) as adjusted and updated. 
    This methodology applies to the hospital's first two 12-month cost 
    reporting periods.
        (B) The national median of the target amounts is the FY 1996 median 
    target amount--
        (1) Adjusted to account for differences in area wage levels;
        (2) Updated by the market basket percentage increase to the fiscal 
    year in which the hospital first received payments as an excluded 
    provider.
     * * * * *
        (g) Adjustments.--(l) General rule. HCFA may adjust the amount of 
    the operating costs considered in establishing the rate-of-increase 
    ceiling for one or more cost reporting periods, including both periods 
    subject to the ceiling and the hospital's base period, under the 
    circumstances specified below. When an adjustment is requested by the 
    hospital, HCFA makes an adjustment only to the extent that the 
    hospital's operating costs are reasonable, attributable to the 
    circumstances specified separately identified by the hospital, and 
    verified by the intermediary. HCFA may grant an adjustment requested by 
    the hospital only if a hospital's operating costs exceed the rate-of-
    increase ceiling imposed under this section. The amount of payment made 
    to a hospital after an adjustment under paragraph (g) of this section 
    is based on the difference between the hospital's operating costs and 
    110 percent of the ceiling.
    * * * * *
        (5) Adjustment limitations. For cost reporting periods beginning on 
    or after October 1, 1993, and before October 1, 2003, the payment 
    reductions under paragraph (c)(3)(v) through (c)(3)(vii) of this 
    section will not be considered when determining adjustments under this 
    paragraph.
    * * * * *
        (j) Reduction to capital-related costs. For psychiatric hospitals 
    and units, rehabilitation hospitals and units, and long-term hospitals, 
    the amount otherwise payable for capital-related costs is reduced by 15 
    percent for portions of cost reporting periods occurring on or after 
    October 1, 1997, through September 30, 2002.
        5. Section 413.70 is revised to read as follows:
    
    
    Sec. 413.70  Payment for services of a CAH.
    
        Payment for inpatient and outpatient services of a CAH is the 
    reasonable costs of the CAH in providing such services, 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.
    
    Subpart F--Specific Categories of Costs
    
        6. In Sec. 413.86, the introductory text of paragraph (b) is 
    republished, paragraph (b) is amended by adding the definition of 
    ``Affiliated group'' in alphabetical order, paragraph (d)(3) is 
    redesignated as paragraph (d)(5) and redesignated paragraph (d)(5) is 
    revised, new paragraphs (d)(3) and (d)(4) are added, paragraph 
    (e)(4)(i)(B) is revised, the introductory text of paragraph (g)(1) is 
    amended by adding a sentence to the end, and new paragraphs (g)(4), 
    (g)(5), (g)(6) and (g)(7) are added, to read as follows:
    
    
    Sec. 413.86  Direct graduate medical education payments.
    
    * * * * *
        (b) Definitions. For purposes of this section, the following 
    definitions apply:
        Affiliated group means two or more hospitals located in the same 
    geographic wage area (as that term is used under part 412 of this 
    subchapter for the prospective payment system) in which individual 
    residents work at each of the hospitals seeking to be treated as an 
    affiliated group during the course of the approved program; or, if the 
    hospitals are not located in the same geographic wage area, the 
    hospitals are jointly listed as major participating institutions for 
    one or more programs as that term is used in Graduate Medical Education 
    Directory, 1997-1998.
    * * * * *
        (d) Calculating payment for graduate medical education costs. * * *
        (3) Step three. For portions of cost reporting periods beginning on 
    or after January 1, 1998, the product derived in step one is multiplied 
    by the proportion of the hospital's inpatient days attributable to 
    individuals who are enrolled under a risk-sharing contract with an 
    eligible organization under section 1876 of the Act and who are 
    entitled to Medicare Part A or with a Medicare+Choice organization 
    under Title XVIII, Part C of the Act. This amount is multiplied by an 
    applicable payment percentage equal to--
        (i) 20 percent for 1998;
        (ii) 40 percent for 1999;
        (iii) 60 percent in 2000;
        (iv) 80 percent in 2001; and
        (v) 100 percent in 2002 and subsequent years.
        (4) Step four. Add the results of steps 2 and 3.
        (5) Step five. The product derived in step two is apportioned 
    between Part A and Part B of Medicare based on the ratio of Medicare's 
    share of reasonable costs excluding graduate medical education costs 
    attributable to each part as determined through the Medicare cost 
    report.
    * * * * *
        (e) Determining per resident amounts for the base period. * * *
        (4) Exceptions. (i) Base period for certain hospitals.
    * * * * *
        (B) The mean value of per resident amounts of hospitals located in 
    the same geographic wage area, as that term is used in the prospective 
    payment system under part 412 of this chapter, for cost reporting 
    periods beginning in the same fiscal years. If there are fewer than 
    three amounts that can be used to calculate the mean value, the 
    calculation of the per resident amounts includes all hospitals in the 
    hospital's region as that term is used in Sec. 412.62(f)(1)(i).
    * * * * *
        (g) Determining the weighted number of FTE residents. * * *
        (1) * * * If the resident is enrolled in a combined medical 
    residency training program in which all of the individual programs 
    (that are combined) are for training primary care residents (as defined 
    in paragraph (b) of this section) or obstetrics and gynecology 
    residents, the initial residency period is the time required for 
    individual certification in the longer of the programs plus one year.
    * * * * *
        (4) For purposes of determining direct graduate medical education 
    payment, for cost reporting periods beginning on or after October 1, 
    1997, a hospital's
    
    [[Page 46035]]
    
    unweighted FTE count for residents in allopathic and osteopathic 
    medicine may not exceed the hospital's unweighted FTE count for these 
    residents for the most recent cost reporting period ending on or before 
    December 31, 1996. If the hospital's number of FTE residents in a cost 
    reporting period beginning on or after October 1, 1997, exceeds the 
    limit described in this paragraph (g), the hospital's 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. Hospitals that 
    are part of the same affiliated group may elect to apply the limit on 
    an aggregate basis. 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, 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. For cost 
    reporting periods beginning on or after October 1, 1998, 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. The fiscal intermediary may make appropriate 
    modifications to apply the provisions of this paragraph based on the 
    equivalent of 12-month cost reporting periods.
        (6) If a hospital established a new medical residency training 
    program as defined in this paragraph (g) after January 1, 1995, the 
    hospital's FTE cap described under paragraph (g)(4) of this section may 
    be adjusted as follows:
        (i) If a hospital had no residents before January 1, 1995, and it 
    establishes a new medical residency training program on or after that 
    date, the hospital's unweighted FTE resident cap under paragraph (g)(4) 
    of this section may be adjusted based on the product of the number of 
    first year residents in the program in the third year of the program's 
    existence and the number of years in which residents are expected to 
    complete that program based on the minimum accredited length for the 
    type of program. For these hospitals, the cap will only be adjusted 
    based on the first program (or programs, if established simultaneously) 
    beginning on or after January 1, 1995. The cap will not be revised for 
    programs subsequently established.
        (ii) If a hospital had residents in its most recent cost reporting 
    period ending before January 1, 1995, the hospital's unweighted FTE cap 
    may be adjusted for new medical residency training programs established 
    on or after January 1, 1995 and August 5, 1997. Increases in the 
    hospital's FTE resident limit are permitted for the new program based 
    on the product of the number of first-year residents in the third year 
    of the newly established program and the number of years in which 
    residents are expected to complete each program based on the minimum 
    accredited length for the type of program. The hospital's unweighted 
    FTE limit for a cost reporting period may be adjusted to reflect the 
    number of residents in its most recent cost reporting period ending on 
    or before December 31, 1996 and up to the incremental increase in its 
    FTE count only for the newly established programs.
        (iii) If a hospital with residents in its most recent cost 
    reporting period ending on or before January 1, 1995, is located in a 
    rural area (or other hospitals located in rural areas which added 
    residents under paragraph (g)(6)(i) of this section), the hospital's 
    unweighted FTE limit may be adjusted in the same manner described in 
    paragraph (g)(6)(ii) of this section to reflect the increase for 
    residents in the new medical residency training programs established 
    after August 5, 1997. For these hospitals, the limit will be adjusted 
    for additional new programs but not for expansions of existing or 
    previously existing programs.
        (iv) A hospital seeking an adjustment to the limit on its 
    unweighted resident count policy must provide documentation to its 
    fiscal intermediary justifying the adjustment.
        (7) For purposes of paragraph (g) of this section, new medical 
    residency training program means a medical residency training program 
    that receives initial accreditation by the appropriate accrediting body 
    on or after July 1, 1995.
    * * * * *
        F. Part 424 is amended as set forth below:
    
    PART 424--CONDITIONS FOR MEDICARE PAYMENT
    
        1. The authority citation for Part 424 continues to read as 
    follows:
    
        Authority: Section 1102 and 1871 of the Social Security Act (42 
    U.S.C. 1302 and 1395hh).
    
        2. In Sec. 424.1(a)(1), the introductory text is republished and a 
    new statutory citation is added in numerical order, to read as follows:
    
    
    Sec. 424.1  Basis and scope.
    
        (a) Statutory basis. (1) This part is based on the indicated 
    provisions of the following sections of the Act:
    * * * * *
        1820--Conditions for designating certain hospitals as critical 
    assess hospitals.
     * * * * *
        3. In Sec. 424.15, the section heading and paragraph (a) are 
    revised to read as follows:
    
    
    Sec. 424.15  Requirements for inpatient CAH services.
    
        (a) Content of certification. Medicare Part A pays for inpatient 
    CAH services only if a physician certifies that the individual may 
    reasonably be expected to be discharged or transferred to a hospital 
    within 96 hours after admission to the CAH.
     * * * * *
        H. Part 485 is amended as set forth below:
    
    PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS
    
        1. The authority citation for Part 485 continues to read as 
    follows:
    
        Authority: Secs. 1102 and 1871 of the Social Security Act (42 
    U.S.C. 1302 and 1395hh).
    
        2. The heading for Subpart F is revised to read as follows:
    
    Subpart F--Conditions of Participation: Critical Access Hospitals 
    (CAHs)
    
        3. In Sec. 485.603, the introductory text is republished, 
    paragraphs (a)(1) and (a)(2) are revised, and a new paragraph (c) is 
    added to read as follows:
    
    
    Sec. 485.603  Rural health network.
    
        A rural health network is an organization that meets the following 
    specifications:
        (a) It includes--
        (1) At least one hospital that the State has designated or plans to 
    designate as a CAH; and
        (2) At least one hospital that furnishes acute care services.
    * * * * *
        (c) Each CAH that is a member of the rural health network has an 
    agreement with respect to credentialing and quality assurance with at 
    least--
        (1) One hospital that is a member of the network
        (2) One PRO or equivalent entity; or
        (3) One other appropriate and qualified entity identified in the 
    State rural health care plan.
    
    [[Page 46036]]
    
        4. Section 485.606 is revised to read as follows:
    
    
    Sec. 485.606  Designation of CAHs.
    
        (a) Criteria for State designation. (1) A State that has 
    established a Medicare rural hospital flexibility program described in 
    section 1820(c) of the Act may designate one or more facilities as CAHs 
    if each facility meets the CAH conditions of participation in this 
    subpart F.
        (2) The State must not deny any hospital that is otherwise eligible 
    for designation as a CAH under this paragraph (a) solely because the 
    hospital has entered into an agreement under which the hospital may 
    provide posthospital SNF care as described in Sec. 482.66 of this 
    chapter.
        (b) Criteria for HCFA designation. HCFA designates a facility as a 
    CAH if--
        (1) The facility is designated as a CAH by the State in which it is 
    located; or
        (2) The facility is a medical assistance facility operating in 
    Montana or a rural primary care hospital designated by HCFA before 
    August 5, 1997, and is otherwise eligible to be designated as a CAH by 
    the State under the rules in this subpart.
        5. Section 485.610 is revised to read as follows:
    
    
    Sec. 485.610  Condition of participation: Status and location.
    
        (a) Standard: Status. The facility is a public or nonprofit 
    hospital.
        (b) Standard: Location. The CAH meets the following requirements:
        (1) 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 the regulations in 
    Sec. 412.62(f) of this chapter.
        (2) The CAH is not deemed to be located in an urban area under 
    Sec. 412.63(b) of this chapter.
        (3) 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 Sec. 412.230(e) of this 
    chapter, and is not among a group of hospitals that have been 
    redesignated to an adjacent urban area under Sec. 412.232 of this 
    chapter.
        (4) 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.
        6. Section 485.612 is revised to read as follows:
    
    
    Sec. 485.612  Condition of participation: Compliance with hospital 
    requirements at time of application.
    
        The hospital has a provider agreement to participate in the 
    Medicare program as a hospital at the time the hospital applies for 
    designation as a CAH.
        7. Section 485.614 is removed.
        8. Section 485.616 is revised to read as follows:
    
    
    Sec. 485.616  Condition of participation: Agreements.
    
        (a) Standard: Agreements with network hospitals. In the case of a 
    CAH that is a member of a rural health network as defined in 
    Sec. 485.603 of this chapter, the CAH has in effect an agreement with 
    at least one hospital that is a member of the network for--
        (1) Patient referral and transfer;
        (2) The development and use of communications systems of the 
    network, including the network's system for the electronic sharing of 
    patient data, and telemetry and medical records, if the network has in 
    operation such a system; and
        (3) The provision of emergency and nonemergency transportation 
    between the facility and the hospital.
        (b) Standard: Agreements for credentialing and quality assurance. 
    Each CAH that is a member of a rural health network shall have an 
    agreement with respect to credentialing and quality assurance with at 
    least--
        (1) One hospital that is a member of the network;
        (2) One PRO or equivalent entity; or
        (3) One other appropriate and qualified entity identified in the 
    State rural health care plan.
        9. Section 485.620 is revised to read as follows:
    
    
    Sec. 485.620  Condition of participation: Number of beds and length of 
    stay.
    
        (a) Standard: Number of beds. Except as permitted for CAHs having 
    swing-bed agreements under Sec. 485.645 of this chapter, the CAH 
    maintains no more than 15 inpatient beds.
        (b) Standard: Length of stay. The CAH discharges or transfers each 
    inpatient within 96 hours after admission, unless a longer period is 
    required because transfer to a hospital is precluded because of 
    inclement weather or other emergency conditions. A PRO or equivalent 
    entity may also, on request, waive the 96-hour restriction on a case-
    by-case basis.
        10. In Sec. 485.623, the address under paragraphs (d)(1) and (d)(2) 
    ``HCFA Information Resource Center, 6325 Security Boulevard, Room G-10-
    A East High Rise Building, Baltimore, MD 21207'' is revised to read 
    ``HCFA Information Resource Center, 7500 Security Boulevard, Room C2-
    07-13, Central Building, Baltimore, MD 21244-1850''.
        11. In Sec. 485.645, the section heading, the introductory text, 
    paragraphs (a) and the first sentence of the introductory text of 
    paragraph (b) are revised to read as follows:
    
    
    Sec. 485.645  Special requirements for CAH providers of long-term care 
    services (``swing-beds'').
    
        A CAH must meet the following requirements in order to be granted 
    an approval from HCFA to provide post-hospital SNF care, as specified 
    in Sec. 409.30 of this chapter, and to be paid for SNF-level services, 
    in accordance with paragraph (b) of this section.
        (a) Eligibility. A CAH must meet the following eligibility 
    requirements:
        (1) Effective October 1, 1997, a facility that, at the time it 
    applied to the State for designation as a CAH, had an agreement in 
    effect under Sec. 482.66 of this chapter may continue to use its 
    inpatient facilities for the provision of post-hospital SNF care, so 
    long as the total number of beds that are used at any time for the 
    furnishing of either such services or acute care inpatient services 
    does not exceed 25 beds and the number of beds used at any time for 
    acute care inpatient services does not exceed 15 beds.
        (2) Notwithstanding paragraph (a)(1) of this section, a CAH that 
    participated in Medicare as a rural primary care hospital (RPCH) on 
    September 30, 1997 and on that date had in effect an approval from HCFA 
    to use its inpatient facilities to provide post-hospital SNF care may 
    continue in that status under the same terms, conditions, and 
    limitations that were applicable at the time those approvals were 
    granted.
        (3) A CAH that was granted swing-bed approval under paragraph 
    (a)(2) of this section may request that its application to be a CAH and 
    a swing-bed provider be reevaluated under paragraph (a)(1) of this 
    section. If this request is approved, the approval is effective not 
    earlier than October 1, 1997. As of the date of approval, the CAH no 
    longer has any status under paragraph (a)(2) of this section, and may 
    not request reinstatement under paragraph (a)(2) of this section.
        (4) Any bed of a unit of the facility that is licensed as a 
    distinct-part SNF at the time the facility applies to the State for 
    designation as a CAH is not counted under paragraph (a)(1) of this 
    section.
        (b) Payment. Payment for inpatient CAH services to a CAH that has 
    qualified as a CAH under the provisions in paragraph (a) of this 
    section is made
    
    [[Page 46037]]
    
    in accordance with Sec. 413.70 of this chapter. * * *
    * * * * *
        H. Part 489 is amended as set forth below:
    
    PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL
    
        1. The authority citation for Part 489 continues to read as 
    follows:
    
        Authority: Secs. 1102, 1819, 1861, 1864(m), 1866, and 1871 of 
    the Social Security Act (42 U.S.C. 1302, 1395i-3, 1395x, 1395aa(m), 
    1395cc, and 1395hh).
    
    
    Sec. 489.27  [Amended]
    
        2. In Sec. 489.27, the reference ``section 1886(a)(1)(M) of the 
    Act'' is revised to read ``section 1866(a)(1)(M) of the Act''.
    
    
    Sec. 489.53  [Amended]
    
        3. In Sec. 489.53, paragraph (a)(14) is removed.
    
    Nomenclature Changes
    
        1. In the following sections, ``rural primary care hospital 
    (RPCH)'' is revised to read ``critical access hospital (CAH)'':
    
    Sec. 410.150(b)(12)
    Sec. 440.170(g) heading
    Sec. 498.2 definition of provider
    
        2. In the following parts or sections, ``rural primary care 
    hospitals (RPCHs)'' is revised to read ``critical access hospital 
    (CAHs)'':
    
    Sec. 413.1(a)(2)(i)
    Sec. 489.2(b)(7)
    
        3. In the following sections or section headings, ``an RPCH'' is 
    revised to read ``a CAH'', wherever it appears:
    
    Sec. 409.10(b)
    Sec. 409.20(c)(3)
    Sec. 409.27
    Sec. 409.60(b)(1)(ii)
    Sec. 409.61(b) paragraph heading
    Sec. 409.82(a)(1)
    Sec. 410.3(a)(1)
    Sec. 410.10(c)
    Sec. 410.38(b)
    Sec. 410.60(b)
    Sec. 411.15(m)(1)
    Sec. 440.170 (g)(1) and (g)(2)
    Sec. 485.601(b)
    Sec. 485.604 introductory text
    Sec. 489.20(d)
    
        4. In the following sections, ``RPCH'' is revised to read ``CAH'' 
    wherever it appears:
    
    Sec. 409.5 first sentence
    Sec. 409.10(a) introductory text and (a)(3)
    Sec. 409.11 (b)(1)(ii), (b)(1)(iii), (b)(3) introductory text, and 
    (b)(3)(ii)
    Sec. 409.12 section heading, (a), and (b)
    Sec. 409.13(a) introductory text, (a)(1), (a)(2), (a)(3), and (b)
    Sec. 409.14(a) introductory text, (a)(1), (a)(2), (b) introductory 
    text, (b)(1), and (b)(2)
    Sec. 409.15 introductory text
    Sec. 409.16 introductory text, (a), (b), and (c)
    Sec. 409.20(a) introductory text
    Sec. 409.30 introductory text,(a)(2), (b)(1), (b)(2), and footnote 1
    Sec. 409.31 (b)(2)(i) and (b)(2)(ii)
    Sec. 409.60(a)
    Sec. 409.61(a) paragraph heading, (a)(1)(i), (a)(2), (a)(3), (b), and 
    (c)
    Sec. 409.64(a)(2)(ii)
    Sec. 409.65 (a)(1), (a)(3), (a)(4), (d)(1), (d)(2), (d)(3), (e)(1), 
    (e)(2) introductory text, (e)(2)(i), and (e)(2)(ii)
    Sec. 409.66(b) and (c)(2)
    Sec. 409.68 heading, (a) introductory text, (a)(1), (a)(2), (a)(3), 
    (a)(4), (b)(2), and (c)
    Sec. 409.80 (a)(1) and (a)(2)
    Sec. 409.82(c)
    Sec. 409.83(a)(1) and (c)(1)
    Sec. 409.87(a)(3) and (b)(1)
    Sec. 410.10(d)
    Sec. 410.28 heading, (a) introductory text, (a)(1), (a)(2), and (a)(4)
    Sec. 410.32(b)(1)
    Sec. 410.40(a) in the definitions of ``Appropriate hospital'', 
    ``Hospital inpatient'', ``Locality'', and ``Outside supplier'', (b)(3) 
    introductory text, (b)(3)(i), (c)(1), (c)(2), (c)(3), (e)(1), (e)(2), 
    and (e)(3)
    Sec. 410.60 (b) and (d)
    Sec. 410.62 (b) and (c)
    Sec. 410.150(b)(12)
    Sec. 410.161(b)(2)
    Sec. 413.114(b), definition of ``Swing-bed hospital''
    Sec. 424.15 (a) and (b)
    Sec. 424.20 introductory text
    Sec. 440.170 (g)(1) and (g)(2)
    Sec. 485.602
    Sec. 485.608 introductory text, (a), (c), and (d)
    Sec. 485.618 introductory text, (b) introductory text, and (e)
    Sec. 485.623(a), (b) introductory text, (c) introductory text, (c)(4), 
    and (d)(1), (2), (3), and (4)
    Sec. 485.627(a), (b) introductory text, (b)(1), and (b)(2)
    Sec. 485.631 (a)(1), (a)(3), (a)(4), (a)(5), (b)(1)(i), (b)(1)(ii), 
    (b)(1)(iii), (b)(2), (c)(1) introductory text, (c)(1)(i), (c)(2)(i), 
    (c)(2)(ii), and (c)(3)
    Sec. 485.635 (a)(1), (a)(2), (a)(3)(i), (a)(3)(iii), (a)(3)(vii), 
    (a)(4), (b)(1), (b)(2) introductory text, (b)(3), (b)(4), (c)(1) 
    introductory text, (c)(1)(iii), (c)(1)(iv), (c)(2), (c)(3), (c)(4) 
    introductory text, (c)(4)(i), (c)(4)(ii), (d)(1), and (d)(2)
    Sec. 485.638 (a)(1), (a)(4), (b)(1), and (b)(2)
    Sec. 485.639 introductory text, (a) introductory text, (b), and (c) 
    introductory text
    Sec. 485.641(a)(1) introductory text, (a)(1)(i), (a)(1)(iii), (b) 
    introductory text, (b)(3), (b)(4), (b)(5)(i), (b)(5)(ii), and 
    (b)(5)(iii)
    Sec. 485.645(c) introductory text
    Sec. 489.20(e)
    
        5. In the following sections, ``RPCHs'' is revised to read 
    ``CAHs'', wherever it appears:
    
    Sec. 485.601(a)
    
        6. In the following parts or sections, ``rural primary care 
    hospital'' is revised to read ``critical access hospital'', whenever it 
    appears:
    
    Part 409, subpart B heading
    Sec. 409.1(c)
    Sec. 414.60(b)
    Sec. 488.1 in the definition of ``Provider of services''
    Sec. 488.10(d)
    Sec. 488.18(d)
    Sec. 489.24(b) in the definitions of ``Hospital'' and ``Participating 
    hospital''
    Sec. 489.53(a)(10) and (b) introductory text
    
        7. In the following sections, ``rural primary care hospitals'' is 
    revised to read ``critical access hospitals'', wherever it appears:
    
    Sec. 413.124(a)
    Sec. 413.130(j)(1)
    Sec. 488.6(a)
    Sec. 489.102(a)
    
    (Catalog of Federal Domestic Assistance Program No. 93.773, 
    Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
    Supplementary Medical Insurance)
    
        Dated: August 22, 1997.
    Bruce C. Vladeck,
    Administrator, Health Care Financing Administration.
    
        Dated: August 22, 1997.
    Donna E. Shalala,
    Secretary.
    
    [Editorial Note: The following addendum and appendixes will not 
    appear in the Code of Federal Regulations.]
    
    Addendum--Schedule of Standardized Amounts Effective With Discharges 
    Occurring On or After October 1, 1997 and Update Factors and Rate-of-
    Increase Percentages Effective With Cost Reporting Periods Beginning On 
    or After October 1, 1997
    
    I. Summary and Background
    
        In this addendum, we set forth the amounts and factors for 
    determining prospective payment rates for Medicare inpatient operating 
    costs and Medicare inpatient capital-related costs. We also set forth 
    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, 1997, except for 
    sole community hospitals, Medicare-dependent, small rural hospitals, 
    and
    
    [[Page 46038]]
    
    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.
        Sole community hospitals are paid based on whichever of the 
    following rates yield the greatest aggregate payment: the Federal 
    national rate, the updated hospital-specific rate based on FY 1982 cost 
    per discharge, or the updated hospital-specific rate based on FY 1987 
    cost per discharge. Medicare-dependent, small rural hospitals 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 national rate (section 4406 of Pub. L. 
    105-33 amended section 1886(d)(9)(A) of the Act to change the basis of 
    the payment per discharge for hospitals in Puerto Rico from 75 percent 
    of a Puerto Rico rate to 50 percent of a Puerto Rico rate and from 25 
    percent of a national rate to 50 percent of a national rate).
        As discussed below in section II, we are making changes in the 
    determination of the prospective payment rates for Medicare inpatient 
    operating costs. The changes, to be applied prospectively, affect the 
    calculation of the Federal rates. In section III, we discuss our 
    changes for determining the prospective payment rates for Medicare 
    inpatient capital-related costs. Section IV sets forth our changes for 
    determining the rate-of-increase limits for hospitals excluded from the 
    prospective payment system. The tables to which we refer in the 
    preamble to this final rule are presented at the end of this addendum 
    in section V.
    
    II. Changes to Prospective Payment Rates for Inpatient Operating Costs 
    for FY 1998
    
        The basic methodology for determining prospective payment rates for 
    inpatient operating costs is set forth at Sec. 412.63 for hospitals 
    located outside of Puerto Rico. The basic methodology for determining 
    the prospective payment rates for inpatient operating costs for 
    hospitals located in Puerto Rico is set forth at Secs. 412.210 and 
    412.212. (See section V.I of the preamble for a discussion of the 
    Puerto Rico payment rate.) Below, we discuss the manner in which we are 
    changing some of the factors used for determining the prospective 
    payment rates. The Federal and Puerto Rico rate changes will be 
    effective with discharges occurring on or after October 1, 1997. As 
    required by section 1886(d)(4)(C) of the Act, we must also adjust the 
    DRG classifications and weighting factors for discharges in FY 1998.
        In summary, the standardized amounts set forth in Tables 1A and 1C 
    of section V of this addendum reflect--
         Updates of 0 percent for all areas;
         An adjustment to ensure budget neutrality as provided for 
    in 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 1997 budget 
    neutrality factor and applying a revised factor;
         An adjustment to apply the revised outlier offset by 
    removing the FY 1997 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.
        The standardized amounts set forth in Tables 1E and 1F of section V 
    of this addendum, which apply to ``temporary relief'' hospitals (see 
    section V.D of the preamble for a discussion of these hospitals), 
    reflect updates of 0.5 percent for all areas but otherwise reflect the 
    same adjustments as the national standardized amounts.
    
    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 that Medicare target 
    amounts be determined for each hospital located in Puerto Rico for its 
    cost reporting period beginning in FY 1987. The September 1, 1987 final 
    rule contains a detailed explanation of how the target amounts were 
    determined and how they are used in computing the Puerto Rico rates (52 
    FR 33043, 33066).
        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 (C) of the Act required that the base-
    year per discharge costs be updated for FY 1984 and then standardized 
    in order to remove from the cost data the effects of certain sources of 
    variation in cost among hospitals. These 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, 1996, when the market basket was last 
    revised and rebased, we have considered 71.2 percent of costs to be 
    labor-related for purposes of the prospective payment system. As 
    discussed in section IV of the preamble, we are including data not 
    available when the market basket was last rebased to adjust the market 
    basket effective for FY 1998. Based on the proposed revised market 
    basket, we are revising the labor and nonlabor proportions of the 
    standardized amounts. Effective with discharges occurring on or after 
    October 1, 1997, we are establishing a labor-related proportion of 71.1 
    percent and a nonlabor-related proportion of 28.9 percent. (We are 
    revising the Puerto Rico standardized amounts by the average labor 
    share in Puerto Rico of 71.3 percent. We are revising the discharged-
    weighted national standardized amount to reflect the proportion of 
    discharges in large urban and other areas from the FY 1996 MedPAR 
    file.)
    2. Computing Large Urban and Other Area Averages
        Sections 1886(d) (2)(D) and (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 (C)(i) of the Act, the average standardized 
    amount per discharge must be determined for hospitals located in urban 
    and other areas in Puerto Rico. Hospitals in Puerto Rico are paid a 
    blend of 50 percent of the applicable Puerto Rico standardized
    
    [[Page 46039]]
    
    amount and 50 percent of a national standardized payment amount. 
    (Section 4406 of Public Law 105-33 amended section 1886(d)(9)(A) of the 
    Act to change the payment for hospitals in Puerto Rico from 75 percent 
    of the applicable Puerto Rico standardized payment amount and 25 
    percent of the applicable national standardized payment amount to 50 
    percent of the applicable Puerto Rico standardized payment amount and 
    50 percent of the applicable 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 
    1,000,000. 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 1996 population estimates published by the Bureau of the 
    Census, 60 areas meet the criteria to be defined as large urban areas 
    for FY 1998. These areas are identified by a footnote in Table 4A. We 
    note that the Secretary has chosen to exercise the authority granted by 
    section 4408 of Public Law 105-33 to include Stanly County, North 
    Carolina in the Charlotte-Gastonia-Rock Hill, North Carolina-South 
    Carolina MSA for purposes of payment under the prospective payment 
    system.
    3. Updating the Average Standardized Amounts
        Under section 1886(d)(3)(A) of the Act, we update the area average 
    standardized amounts each year. In accordance with section 
    1886(d)(3)(A)(iv) of the Act, we are updating the large urban and the 
    other areas average standardized amounts for FY 1998 using the 
    applicable percentage increases specified in section 1886(b)(3)(B)(i) 
    of the Act. As amended by section 4401 of Public Law 105-33, Section 
    1886(b)(3)(B)(i)(XIII) of the Act specifies that, for hospitals in all 
    areas, the update factor for the standardized amounts for FY 1998 is 
    equal to zero percent. Section 4401 of Public Law 105-33 also provides 
    for an update of 0.5 percent for hospitals that are not Medicare-
    dependent small rural hospitals, that receive no IME or DSH payments, 
    that are located in a State in which aggregate Medicare operating 
    payments for such hospitals were less than their aggregate allowable 
    Medicare operating costs for their cost reporting periods beginning 
    during FY 1995, and whose Medicare operating payments are less than 
    their allowable Medicare operating costs in FY 1998.
        As in the past, we are adjusting the FY 1997 standardized amounts 
    to remove the effects of the FY 1997 geographic reclassifications and 
    outlier payments before applying the FY 1998 updates. That is, we are 
    increasing the standardized amounts to restore the reductions that were 
    made for the effects of geographic reclassification and outliers in FY 
    1997. After including new offsets to the standardized amounts for 
    outliers and geographic reclassification for FY 1998, we estimate that 
    there will be an overall decrease of 5.6 percent to the large urban and 
    other area standardized amounts.
        Although the update factor for FY 1998 is set by law, we are 
    required by section 1886(e)(4)(A) of the Act to report to Congress on 
    our final recommendation of update factors for FY 1998 for both 
    prospective payment hospitals and hospitals excluded from the 
    prospective payment system. We have included our final recommendation 
    in Appendix D to this final 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 specifies that the hospital wage 
    index must be updated on an annual basis beginning October 1, 1993. 
    This provision also requires that any updates or adjustments to the 
    wage index must be made 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 historical 
    discharge data to simulate payments and compared aggregate payments 
    using the FY 1997 relative weights and wage index to aggregate payments 
    using the FY 1998 relative weights and wage index. The same methodology 
    was used for the FY 1997 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 0.997731. We 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 0.999117. These budget neutrality 
    adjustment factors are applied to the standardized amounts without 
    removing the effects of the FY 1997 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 will continue to apply the same FY 1998 adjustment 
    factor to the hospital-specific rates that are effective for cost 
    reporting periods beginning on or after October 1, 1997, in order to 
    ensure that we meet the statutory requirement that aggregate payments 
    neither increase nor decrease as a result of the implementation of the 
    FY 1998 DRG weights and updated wage index. (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 certain rural hospitals are 
    deemed urban effective with discharges occurring on or after October 1, 
    1988. 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
    
    [[Page 46040]]
    
    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 total 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 historical discharge data to simulate payments, and 
    compared total prospective payments (including IME and DSH payments) 
    prior to any reclassifications to total prospective payments after 
    reclassifications. We are applying an adjustment factor of 0.994720 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 1997 budget neutrality adjustment 
    factor. We note that the FY 1998 adjustment reflects wage index and 
    standardized amount reclassifications approved by the MGCRB or the 
    Administrator as of February 27, 1997. The effects of additional 
    reclassification changes resulting from appeals and reviews of the 
    MGCRB decisions for FY 1998 or from a hospital's request for the 
    withdrawal of a reclassification request are reflected in the final 
    budget neutrality adjustment required under section 1886(d)(8)(D) of 
    the Act and published in the final rule for FY 1998.
        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) or long 
    lengths of stay (day 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.
        Beginning with FY 1995, section 1886(d)(5)(A) of the Act requires 
    the Secretary to phase out payments for day outliers (correspondingly, 
    payments for cost outliers would increase). Under the requirements of 
    section 1886(d)(5)(A)(v), the proportion of day outlier payments to 
    total outlier payments is reduced from FY 1994 levels as follows: 75 
    percent of FY 1994 levels in FY 1995, 50 percent of FY 1994 levels in 
    FY 1996, and 25 percent of FY 1994 levels in FY 1997. For discharges 
    occurring after September 30, 1997, the Secretary will no longer pay 
    for day outliers under the provisions of section 1886(d)(5)(A)(i) of 
    the Act.
        i. FY 1998 Outlier Payment Thresholds. For FY 1997, the day outlier 
    threshold is the geometric mean length of stay for each DRG plus the 
    lesser of 24 days or 3.0 standard deviations. The marginal cost factor 
    for day outliers (the percent of Medicare's average per diem payment 
    paid for each outlier day) is 33 percent for FY 1997. The fixed loss 
    cost outlier threshold is equal to the prospective payment for the DRG 
    plus $9,700 ($8,850 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) is 80 percent. We applied an outlier 
    adjustment to the FY 1997 standardized amounts of 0.948766 for the 
    large urban and other areas rates and 0.9481 for the capital Federal 
    rate.
        As noted above, section 1886(d)(5)(A)(v) of the Act provides that 
    payment will not be made for day outliers beginning with discharges 
    occurring in FY 1998.
        In the proposed rule, we proposed to establish a fixed loss cost 
    outlier threshold in FY 1998 equal to the prospective payment rate for 
    the DRG plus $7,600 ($6,950 for hospitals that have not yet entered the 
    prospective payment system for capital-related costs). In addition, we 
    proposed to maintain the marginal cost factor for cost outliers at 80 
    percent. Section 4405 of Public Law 105-33 amended section 
    1886(d)(5)(A)(ii) of the Act to revise the definition of the cost 
    outlier threshold. For FY 1997, the statute required the fixed loss 
    cost outlier threshold to be based on ``the applicable DRG prospective 
    payment rate plus a fixed dollar amount determined by the Secretary''. 
    Public Law 105-33 provides that, beginning in FY 1998, the fixed loss 
    cost outlier threshold is based on ``the sum of the applicable DRG 
    prospective payment rate plus any amounts payable under subparagraphs 
    (B) [IME payments] and (F) [DSH payments] plus a fixed dollar amount 
    determined by the Secretary''. Consistent with this statutory change, 
    the methodology for setting the final FY 1998 cost outlier threshold 
    differs from the methodology used for the proposed rule because we no 
    longer adjust hospital costs to exclude IME and DSH payments (see 
    section V.A. of the preamble). In addition, in setting the final FY 
    1998 outlier thresholds, we used updated data and revised cost 
    inflation factor (discussed below). Thus, for FY 1998, in order for a 
    case to qualify for cost outlier payments, the costs must exceed the 
    prospective payment rate for the DRG plus the IME and DSH payments plus 
    $11,050 ($10,080 for hospitals that have not yet entered the 
    prospective payment system for capital-related costs). We are also 
    establishing a marginal cost factor for cost outliers of 80 percent, as 
    proposed.
        In accordance with section 1886(d)(5)(A)(iv) of the Act, we 
    calculated 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 FY 1998 
    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 1998 will result in outlier 
    payments equal to 5.1 percent of operating DRG payments and 6.2 percent 
    of capital payments based on the Federal rate.
        The proposed outlier adjustment factors applied to the standardized 
    amounts for FY 1998 were as follows:
    
    ------------------------------------------------------------------------
                                                       Operating    Capital 
                                                     standardized   federal 
                                                        amounts       rate  
    ------------------------------------------------------------------------
    National.......................................     0.949117      0.9449
    Puerto Rico....................................     0.961448      0.9449
    ------------------------------------------------------------------------
    
        The final outlier adjustment factors applied to the standardized 
    amounts for FY 1998 are as follows:
    
    ------------------------------------------------------------------------
                                                       Operating    Capital 
                                                     standardized   federal 
                                                        amounts       rate  
    ------------------------------------------------------------------------
    National.......................................     0.948840      0.9382
    
    [[Page 46041]]
    
                                                                            
    Puerto Rico....................................     0.971967      0.9598
    ------------------------------------------------------------------------
    
        As in the proposed rule, we apply the outlier adjustment factors 
    after removing the effects of the FY 1997 outlier adjustment factors on 
    the standardized amounts.
        ii. Other Changes Concerning Outliers. 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 
    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 30, 1996 final rule (61 FR 46302), 
    effective October 1, 1997. 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 intermediary computes operating cost-to-charge ratios lower than 
    0.227808 or greater than 1.29731 and capital cost-to-charge ratios 
    lower than 0.01270 or greater than 0.18955. 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 will be used for all cost 
    reports settled during FY 1998 (regardless of the actual cost reporting 
    period) when hospital-specific cost-to-charge ratios are either not 
    available or outside the three standard deviations range.
        iii. FY 1996 and FY 1997 Outlier Payments. In the August 30, 1996 
    final rule (61 FR 46229), we stated that, based on available data, we 
    estimated that actual FY 1996 outlier payments would be approximately 
    4.0 percent of actual total DRG payments. This was computed by 
    simulating payments using actual FY 1995 bill data available at the 
    time. That is, the estimate of actual FY 1996 outlier payments did not 
    reflect actual FY 1996 bills but instead reflected the application of 
    FY 1996 rates and policies to available FY 1995 bills. Our current 
    estimate, using available FY 1996 bills, is that actual outlier 
    payments for FY 1996 were approximately 4.2 percent of actual total DRG 
    payments. We note that the MedPAR file for FY 1996 discharges continues 
    to be updated.
        We currently estimate that actual outlier payments for FY 1997 will 
    be approximately 4.8 percent of actual total DRG payments (slightly 
    lower than the 5.1 percent we projected in setting outlier policies for 
    FY 1997). This estimate is based on simulations using the June 1997 
    update of the provider-specific file and the June 1997 update of the FY 
    1996 MedPAR file (discharge data for FY 1996 bills). We used these data 
    to calculate an estimate of the actual outlier percentage for FY 1997 
    by applying FY 1997 rates and policies to available FY 1996 bills.
        In FY 1994, we began using a cost inflation factor rather than a 
    charge inflation factor to update billed charges for purposes of 
    estimating outlier payments. This refinement was made to improve our 
    estimation methodology. We believe that actual FY 1996 and FY 1997 
    outlier payments as a percentage of total DRG payments may be lower 
    than expected in part because actual hospital costs may be lower than 
    reflected in the methodology used to set outlier thresholds for those 
    years. Our most recent data on hospital costs show that rates of 
    increase are continuing to decline. Thus, the cost inflation factor of 
    0.871 percent used to set FY 1996 outlier policy (based on the best 
    data then available) appears to have been overstated. For FY 1997, we 
    used a cost inflation factor of minus 1.906 percent (a cost per case 
    decrease of 1.906 percent). In the proposed rule, based on data then 
    available, we used a cost inflation factor of minus 1.969 percent to 
    set outlier thresholds for FY 1998. Based on the most recent data 
    available, we are using a cost inflation factor of minus 2.005 percent 
    for purposes of setting the final 1998 outlier thresholds.
        Although we estimate that FY 1996 outlier payments will approximate 
    4.2 percent of total DRG payments, we note that the estimate of the 
    market basket rate of increase used to set the FY 1996 rates was 3.5 
    percentage points, while the latest FY 1996 market basket rate of 
    increase forecast is 2.7 percent. Thus, the net effect is that 
    hospitals received higher FY 1996 payments than would have been 
    established based on a more recent forecast of the market basket rate 
    of increase.
        Comment: One commenter modeled the outlier payments and was able to 
    replicate HCFA's result of 5.1 percent for operating outlier payments, 
    but the commenter's analysis yielded only 5.3 percent for capital 
    outlier payments as compared with HCFA's result of 5.5 percent.
        Response: Although we are unable to analyze the commenter's 
    modeling methodology before publication of this document, we will 
    attempt to ascertain the source of the discrepancy between the 
    commenter's outlier model and HCFA's outlier model before next year's 
    proposed rule.
    5. FY 1998 Standardized Amounts
        The adjusted standardized amounts are divided into labor and 
    nonlabor portions. Table 1A (and Table 1E for ``temporary relief'' 
    hospitals) contain the standardized amounts that are applicable to all 
    hospitals, except for 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 Tables 1A and 1E). The labor and nonlabor 
    portions of the national average standardized amounts for Puerto Rico 
    hospitals are set forth in Table 1C (and Table 1F for ``temporary 
    relief'' hospitals). These tables also include the Puerto Rico 
    standardized amounts.
        The Puerto Rico standardized amounts reflect application of a 
    Puerto Rico-specific wage index for FY 1998. Thus, before application 
    of the wage index, the FY 1998 Puerto Rico standardized amounts are 
    lower than the FY 1997 standardized amounts. However, after application 
    of the wage index, the FY 1998 Puerto Rico rate is higher than the rate 
    for FY 1997. This is due to the higher Puerto Rico wage index values 
    that will be applied to these standardized amounts in calculating the 
    FY 1998 Puerto Rico rate. Below, we use two wage areas to illustrate 
    that the FY 1998 Puerto Rico wage-adjusted standardized amounts are 
    higher than the FY 1997 Puerto Rico wage-adjusted standardized amounts.
    
    Puerto Rico Standardized Amounts
    
    ----------------------------------------------------------------------------------------------------------------
                                                                  FY 1997                         FY 1998           
                          Area                       ---------------------------------------------------------------
                                                           Labor         Nonlabor          Labor         Nonlabor   
    ----------------------------------------------------------------------------------------------------------------
    Large Urban.....................................       $2,488.70         $518.65       $1,323.01         $532.55
    Other Areas.....................................       $2,449.31         $510.45       $1,302.07         $524.11
    ----------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46042]]
    
    Puerto Rico Wage-Adjusted Standardized Amount for the San Juan MSA 
    and Rural Puerto Rico
    
    ------------------------------------------------------------------------
                                                        FY 1997     FY 1998 
    ------------------------------------------------------------------------
    San Juan Wage Index.............................      0.4506      1.0156
    Wage-Adjusted Standardized Amount...............   $1,640.06   $1,877.44
    Rural Wage Index................................      0.4026      0.9291
    Wage-Adjusted Standardized Amount...............   $1,496.54   $1,735.01
    ------------------------------------------------------------------------
    
        Table 1E contains the two national standardized amounts that are 
    applicable to the ``temporary relief'' hospitals discussed in section 
    V.D of the preamble to this rule, except those located in Puerto Rico. 
    The labor and nonlabor portions of the national average standardized 
    amounts for hospitals in that group that are located in Puerto Rico are 
    set forth in Table 1F. This table also includes the Puerto Rico 
    standardized amounts for hospitals in that group.
    
    B. Adjustments for Area Wage Levels and Cost-of-Living
    
        Tables 1A, 1C, 1E and 1F, as set forth in this addendum, contain 
    the labor-related and nonlabor-related shares 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.
    1. Adjustment for Area Wage Levels
        Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
    that an adjustment be made 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 
    the preamble, we discuss certain revisions we are making to the wage 
    index. These changes include the calculation of a Puerto Rico-specific 
    wage index that are being applied to the Puerto Rico standardized 
    amounts. The wage index is set forth in Tables 4A through 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 1998, 
    we adjusted 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.
    
    Table of Cost-of-Living Adjustment Factors, Alaska and Hawaii 
    Hospitals
    
    Alaska--All areas...............................................   1.25 
    Hawaii:                                                                 
        County of Honolulu..........................................   1.225
        County of Hawaii............................................   1.225
        County of Kauai.............................................   1.225
        County of Maui..............................................   1.225
        County of Kalawao...........................................   1.225 
                                                                            
    (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 will use for discharges occurring in FY 1998. These 
    factors have been recalibrated as explained in section II of the 
    preamble.
        One commenter noted that there was a typographical error in the 
    proposed Table 5. The proposed relative weight for DRG 92 was 
    incorrectly printed as .1929 rather than 1.1929. The final weight is 
    1.1947.
    
    D. Calculation of Prospective Payment Rates for FY 1998
    
    General Formula for Calculation of Prospective Payment Rates for FY 
    1998
        Prospective payment rate for all hospitals located outside Puerto 
    Rico except sole community hospitals and Medicare-dependent, small 
    rural hospitals = Federal rate.
        Prospective payment rate for sole community hospitals = Whichever 
    of the following rates yields the greatest aggregate payment: 100 
    percent of the Federal rate, 100 percent of the updated FY 1982 
    hospital-specific rate, or 100 percent of the updated FY 1987 hospital-
    specific rate.
        Prospective payment rate for Medicare-dependent, small rural 
    hospitals = 100 percent of the Federal rate plus, 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, 50 percent of the 
    difference between the applicable hospital-specific rate and the 
    Federal rate.
        Prospective payment rate for Puerto Rico = 50 percent of the Puerto 
    Rico rate + 50 percent of a discharge-weighted average of the national 
    large urban standardized amount and the national other standardized 
    amount.
    1. Federal Rate
        For discharges occurring on or after October 1, 1997 and before 
    October 1, 1998, except for sole community hospitals, Medicare-
    dependent small rural hospitals, and hospitals in Puerto Rico, the 
    hospital's payment is based exclusively on the Federal national rate. 
    Section 1866(d)(1)(A)(iii) of the Act provides that the Federal rate is 
    comprised of 100 percent of 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 Tables 1A or 1E, 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 Sole Community Hospitals 
    and Medicare-Dependent, Small Rural Hospitals)
        Sections 1886(d)(5)(D)(i) and (b)(3)(C) of the Act provide that 
    sole community hospitals are paid based on whichever of the following 
    rates yields the greatest aggregate payment: The Federal rate, the 
    updated hospital-specific rate based on FY 1982 cost per discharge, or 
    the updated hospital-specific rate based on FY 1987 cost per discharge.
        Sections 1886(d)(5)(G) and (b)(3)(D) of the Act (as amended by 
    section 4204 of Publ. L. 105-33) provide that Medicare-dependent, small 
    rural hospitals are
    
    [[Page 46043]]
    
    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 both the FY 1982 cost per discharge and the FY 1987 
    cost per discharge. For a more detailed discussion of the calculation 
    of the FY 1982 hospital-specific rate and the FY 1987 hospital-specific 
    rate, we refer the reader to the September 1, 1983 interim final rule 
    (48 FR 39772); the April 20, 1990 final rule with comment period (55 FR 
    15150); and the September 4, 1990 final rule (55 FR 35994).
        a. Updating the FY 1982 and FY 1987 Hospital-Specific Rates for FY 
    1998. We are increasing the hospital-specific rates by 0 percent for 
    sole community hospitals and Medicare-dependent, small rural hospitals 
    located in all areas for FY 1998. Section 1886(b)(3)(C)(iv) of the Act 
    provides that the update factor applicable to the hospital-specific 
    rates for sole community hospitals equals the update factor provided 
    under section 1886(b)(3)(B)(iv) of the Act, which, as amended by 
    section 4401 of Pub. L. 105-33, is 0 percent for FY 1998. Section 
    1886(b)(3)(D) of the Act (as amended by section 4204 of Publ. L. 105-
    33) provides that the update factor applicable to the hospital-specific 
    rates for Medicare-dependent, small rural hospitals equals the update 
    factor provided under section 1886(b)(3)(B)(iv) of the Act, which, as 
    amended by section 4401 of Pub. L. 105-33, is 0 percent for FY 1998.
        b. Calculation of Hospital-Specific Rate. For sole community 
    hospitals and Medicare-dependent, small rural hospitals, the applicable 
    FY 1998 hospital-specific rate would be calculated by increasing the 
    hospital's hospital-specific rate for the preceding fiscal year by the 
    applicable update factor (0 percent), which is the same as the update 
    for all prospective payment hospitals except temporary relief 
    hospitals. In addition, the hospital-specific rate would be adjusted by 
    the budget neutrality adjustment factor (that is, 0.997731) as 
    discussed in section II.A.4.a of this Addendum. This resulting rate 
    would be used in determining under which rate a sole community hospital 
    or Medicare-dependent, small rural hospital is paid for its discharges 
    beginning on or after October 1, 1997, based on the formulas set forth 
    above.
    3. General Formula for Calculation of Prospective Payment Rates for 
    Hospitals Located in Puerto Rico Beginning On or After October 1, 1997 
    and Before October 1, 1998
        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 or 1F 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 or 1F 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. Changes to Payment Rates for Inpatient Capital-Related Costs 
    for FY 1998
    
        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 Secs. 412.308 through 412.352. Below we discuss 
    the factors that we used to determine the Federal rate and the 
    hospital-specific rates for FY 1998. The rates are effective for 
    discharges occurring on or after October 1, 1997.
        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 Sec. 412.308(c)(1), to account for capital input price 
    increases and other factors. Also, Sec. 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, Sec. 412.308(c)(3) 
    requires that the Federal rate be reduced by an adjustment factor equal 
    to the estimated proportion of payments for exceptions under 
    Sec. 412.348. Furthermore, Sec. 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, 
    Sec. 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. Finally, Sec. 412.308(b)(2) describes the 7.4 percent 
    reduction to the rate which was made in FY 1994, and Sec. 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 this final rule with comment period we are implementing section 
    4402 of Public Law 105-33, which requires that, effective for 
    discharges occurring on or after October 1, 1997, and before October 1, 
    2002, the unadjusted standard Federal rate shall be reduced by 17.78 
    percent. Part of that reduction will be restored effective October 1, 
    2002.
        For each hospital, the hospital-specific rate was calculated by 
    dividing the hospital's Medicare inpatient capital-related costs for a 
    specified base year by its Medicare discharges (adjusted for 
    transfers), and dividing the
    
    [[Page 46044]]
    
    result by the hospital's case mix index (also adjusted for transfers). 
    The resulting case-mix adjusted average cost per discharge was then 
    updated to FY 1992 based on the national average increase in Medicare's 
    inpatient capital cost per discharge and adjusted by the exceptions 
    payment adjustment factor and the budget neutrality adjustment factor 
    to yield the FY 1992 hospital-specific rate. Since FY 1992, the 
    hospital-specific rate has been updated annually for inflation and for 
    changes in the exceptions payment adjustment factor. For FYs 1992 
    through 1995, the hospital-specific rate was also adjusted by a budget 
    neutrality adjustment factor. In this final rule with comment period we 
    are implementing section 4402 of Public Law 105-33, which requires 
    that, effective for discharges occurring on or after October 1, 1997, 
    and before October 1, 2002, the unadjusted hospital specific rate shall 
    be reduced by 17.78 percent. Part of that reduction will be restored 
    effective October 1, 2002.
        To determine the appropriate budget neutrality adjustment factor 
    and the exceptions payment adjustment factor, 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 exceptions payment adjustment and other 
    factors. The model and its application are described in greater detail 
    in Appendix B.
        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. These hospitals are paid a blended rate that comprises 
    75 percent of the applicable standardized amount specific to Puerto 
    Rico hospitals and 25 percent of the applicable national average 
    standardized amount. Under Sec. 412.374, the methodology for payments 
    to Puerto Rico hospitals under the prospective payment system for 
    inpatient capital-related costs parallels the blended payment 
    methodology for operating payments to Puerto Rico hospitals. Effective 
    October 1, 1997, as a result of section 4406 of Public Law 105-33, 
    operating payments to hospitals in Puerto Rico shall be 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. However, in conjunction with this change to the 
    operating blend percentage, effective with discharges on or after 
    October 1, 1997, we are computing 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.
    
    A. Determination of Federal Inpatient Capital-Related Prospective 
    Payment Rate Update
    
        For FY 1997, the Federal rate was $438.92. In the proposed rule, we 
    stated that the proposed FY 1998 Federal rate was $438.43. In this 
    final rule with comment period, we are establishing a FY 1998 Federal 
    rate of $371.51.
        In the discussion that follows, we explain the factors that were 
    used to determine the FY 1998 Federal rate. In particular, we explain 
    why the FY 1998 Federal rate has decreased 15.36 percent compared to 
    the FY 1997 Federal rate. The major factor contributing to the decrease 
    in the FY 1998 rate in comparison to the FY 1997 rate is the 17.78 
    percent reduction to the Federal rate required by Public Law 105-33. 
    Also, capital payments per case are estimated to decrease 8.92 percent. 
    Taking into account the effects of increases in projected discharges, 
    we estimate that aggregate capital payments will decrease 6.74 percent.
        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.
    1. Reduction to the Standard Federal Rate
        Section 4402 of Pub. L. 105-33 requires that for discharges 
    occurring after October 1, 1997 the unadjusted standard Federal rate be 
    reduced by 15.68 percent, and by an additional 2.1 percent from October 
    1, 1997 through September 30, 2002. Thus, the unadjusted standard 
    Federal rate used to set the Federal rate each year is reduced a total 
    of 17.78 percent from October 1, 1997 through September 30, 2002. After 
    that date the 2.1 percent reduction to the rate will be restored.
        The regulation changes we are making to implement this statutory 
    requirement are discussed in section VI.C of the preamble. Here we 
    discuss the effects of the required reduction in computing the FY 1998 
    Federal capital rate.
        Under Sec. 412.308(b), HCFA determines the standard Federal rate by 
    adjusting the FY 1992 updated national average cost per discharge by a 
    factor so that estimated payments based on the standard Federal rate, 
    adjusted by the payment adjustments described in Sec. 412.312(b), equal 
    estimated aggregate payments based solely on the national average cost 
    per discharge. Section 412.308(c) provides further that the standard 
    Federal rate is updated for inflation each Federal fiscal year and 
    adjusted each year by an outlier payment adjustment factor, and an 
    exceptions payment adjustment factor, to determine the Federal capital 
    payment rate for that year. The standard Federal rate is to be 
    distinguished from the annual Federal rate actually used in making 
    payment under the capital prospective payment system. The standard 
    Federal rate is, in effect, the underlying or base rate used to 
    determine the annual Federal rate by means of the formula in 
    Sec. 412.308(c).
        Because the 17.78 percent reduction applies to the standard Federal 
    rate before the application of the adjustment factors for outliers, 
    exceptions, and budget neutrality, the reduction to the standard 
    Federal rate does not have the effect of simply lowering the FY 1998 
    Federal rate by 17.78 percent compared to FY 1997. Rather, the 17.78 
    percent reduction is one factor contributing to the overall 15.36 
    percent reduction in the FY 1998 Federal rate compared to FY 1997. The 
    FY 1998 exceptions reduction factor increases the rate by 3.22 percent 
    relative to the FY 1997 exceptions reduction factor. For a more 
    complete description of changes to the Federal rate, see the table that 
    compares the FY 1997 rate with the FY 1998 rate later in this addendum.
        As discussed in the proposed rule, ProPAC recommended that the rate 
    be adjusted to a more appropriate level (Recommendation 3). They 
    indicated that the FY 1997 rate was 15 to 17 percent too high and 
    attributed this to the overstatement of the 1992 base payment rates and 
    the method used to update the rates prior to implementation of the 
    update framework. ProPAC outlined several possible approaches we could 
    use for adjusting the rate by regulation. In our response, we agreed 
    with ProPAC that the capital rates were too high and noted that the 
    President's FY 1998 budget included a provision to reduce the base 
    Federal and hospital-specific rates by approximately the magnitude 
    suggested by ProPAC. We restated our belief that it was most 
    appropriate to make such adjustments to the capital rates in the 
    context of a comprehensive package of Medicare program changes. We 
    therefore did not propose to implement a revision to the base capital 
    rates by regulation for FY 1998.
    
    [[Page 46045]]
    
        Comment: ProPAC noted that both HCFA and ProPAC had recommended 
    that the base capital rate should be cut. They also noted that a 
    proposal to cut the rate was included in the President's budget under 
    consideration by the Congress. However, ProPAC expressed its belief 
    that absent action by the Congress to cut the capital rate, the 
    Secretary should cut the rate using her regulatory authority.
        Response: After ProPAC commented, the Congress passed Public Law 
    105-33 and the President signed it into law in early August. As 
    anticipated, the legislation included a reduction to the unadjusted 
    standard Federal rate and the unadjusted hospital specific rate along 
    with several other changes to the Medicare program. As discussed 
    previously, we are implementing the reduction to the rate as part of 
    this final rule with comment period.
        Comment: One State hospital association expressed its opposition to 
    a reduction in capital payments. The association stated that reducing 
    capital payments to hospitals would likely increase borrowing costs by 
    making hospitals less attractive to investors, and inhibit hospital's 
    abilities to modernize their physical plants. The commenter was 
    especially concerned about the impact of a rate cut on low volume rural 
    hospitals.
        Response: As we noted in our response to ProPAC's previous comment, 
    we did not propose to cut the capital rate by regulation in the 
    proposed rule. We stated our belief that the capital rate should be 
    addressed by the Congress in conjunction with other changes to the 
    Medicare program. The Congress included a 17.78 percent reduction to 
    the capital rate and the hospital specific rate in Public Law 105-33, 
    which we are implementing in this final rule with comment period. We 
    have stated on several occasions that due to a variety of factors 
    capital payments to hospitals are over-stated and should be reduced. 
    Based on data we updated for this final rule with comment period, we 
    estimate that for FY 1997 Medicare capital payments to hospitals 
    exceeded Medicare capital costs by 8.7 percent. Many small rural 
    hospitals are also low cost hospitals that have benefitted from the 
    introduction of a capital prospective payment system. Many of these 
    hospitals are paid on the full prospective payment methodology and 
    capital payments are based on an increasing percentage of the Federal 
    rate during the transition to fully prospective capital payment system, 
    where the Federal rate is higher than the hospital specific rate. 
    However, because capital payments are determined on a per discharge 
    basis, hospitals with few discharges will necessarily receive payments 
    that are consistent with the number of Medicare patients they serve. We 
    note however, that sole community hospitals benefit from a higher 
    minimum payment threshold for purposes of capital exceptions payments. 
    Further, together with this capital rate reduction provision, Congress 
    has made other changes that affect small rural hospitals. For example, 
    as of October 1, 1997, the Medicare-dependent hospital provisions are 
    reinstated and the Critical Access Hospital Program is established 
    nationwide.
    2. Standard Federal Rate Update
        a. Description of the Update Framework. Section 412.308(c)(1) 
    provides that 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 rule 
    reflected an update factor of 1.1 percent, based on data available at 
    that time. The final update factor for FY 1998 under that framework is 
    0.9 percent. This update factor is based on a projected 1.1 percent 
    increase in the CIPI, and on policy adjustment factors of -0.2. We 
    explain the basis for the FY 1998 CIPI projection in section D of this 
    addendum. Here 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 adjusted for the effects of the FY 1992 DRG 
    reclassification and recalibration as part of our FY 1994 update 
    recommendation.) The operating adjustment consists of a reduction for 
    total observed case-mix change, an increase for the portion of case-mix 
    change that we determine is due to real case-mix change rather than 
    coding modifications, and an adjustment for the effect of prior DRG 
    reclassification and recalibration changes. We have adopted this case-
    mix index adjustment in the capital update framework as well.
        For FY 1998, we are projecting a 1.0 percent increase in the case-
    mix index. We estimate that real case-mix increase will equal 0.8 
    percent in FY 1998. Therefore, the net adjustment for case-mix change 
    in FY 1998 is -0.2 percentage points.
        We estimate that DRG reclassification and recalibration resulted 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.
        The current operating 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 faced by hospitals and the forecast used 
    in calculating the update factors. In setting a prospective payment 
    rate under this framework, we make an adjustment for forecast error 
    only if our estimate of the capital input price index rate of increase 
    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. Thus, for example, we would adjust for a forecast error made in 
    FY 1996 through an adjustment to the FY 1998 update. Because we only 
    introduced this analytical framework in FY 1996, FY
    
    [[Page 46046]]
    
    1998 is the first year in which a forecast error adjustment could be 
    required. We estimate that the FY 1996 CIPI was .20 percentage points 
    higher than our current data show, which means that we estimate a 
    forecast error of .20 percentage points for FY 1996. Therefore no 
    adjustment for forecast error will be made in FY 1998.
        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 
    hospital component), 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. We have, therefore, 
    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 1998, we have developed a Medicare-specific intensity 
    measure based on a 5-year average using FY 1991-1995. In determining 
    case-mix constant intensity, we found that observed case-mix increase 
    was 2.8 percent in FY 1991, 1.8 percent in FY 1992, 0.9 percent in FY 
    1993, 0.8 percent in FY 1994, 1.7 percent in FY 1995, and 1.6 percent 
    in FY 1996. For FY 1992, FY 1995, and FY 1996, 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 rather a fairly steady 1.0 to 1.5 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 1991 through FY 1995. Based on this analysis, we believe 
    that all of the observed case-mix increase for FY 1993 and FY 1994 is 
    real.
        We calculate case-mix constant intensity as the change in total 
    charges per admission, adjusted for price level changes (the CPI 
    hospital component), and changes in real case-mix. Given estimates of 
    real case-mix increase of 1.0 percent for FY 1992, 0.9 percent for FY 
    1993, 0.8 percent for FY 1994, 1.0 percent for FY 1995, and 1.0 percent 
    for FY 1996, we estimate that case-mix constant intensity declined by 
    an average 1.4 percent during FYs 1992 through 1996, for a cumulative 
    decrease of 7.0 percent. If we assume that real case-mix increase was 
    1.4 percent for FY 1992, 0.9 percent for FY 1993, 0.8 percent for FY 
    1994, 1.4 percent for FY 1995, and 1.4 percent for FY 1996, we estimate 
    that case-mix constant intensity declined by an average 1.6 percent 
    during FYs 1992 through 1996, for a cumulative decrease of 7.5 percent. 
    Since we estimate that intensity has declined during that period, we 
    are recommending a 0.0 percent intensity adjustment for FY 1998.
        b. Comparison of HCFA and ProPAC Update Recommendations. In 
    Recommendation 4 of the proposed rule, ProPAC recommended a zero update 
    to the standard Federal rate, and we recommended a 1.1 percent update. 
    (See the June 2, 2997 proposed rule for a discussion of the differences 
    between the ProPAC and HCFA update frameworks (62 FR 29950). In this 
    final rule with comment period, as discussed in the previous section, 
    we are implementing a 0.9 update to the capital rate. ProPAC 
    recommended a zero update to the rate for FY 1998 because it believed 
    that a zero update applied to revised base rates would permit hospitals 
    to maintain quality of care while meeting Medicare's responsibility to 
    act as a prudent purchaser.
        Comment: In response to our statements in the proposed rule about 
    why we recommended an update to the capital rate, ProPAC stated that it 
    had applied the same reasoning for recommending a zero update to the 
    capital rate that it had used in recommending a zero update to the 
    operating rate. ProPAC restated its belief that a zero update was 
    appropriate for both the operating and capital rates.
        Response: As required by Pub. L. 105-33, we are implementing a 
    17.78 percent reduction to the unadjusted standard Federal capital 
    payment rate and the unadjusted hospital-specific rate effective 
    October 1, 1997. To the extent this statutory reduction to the base 
    capital rate addresses the issues of the rates being overstated, we 
    believe we should not, at the same time, further address the issue 
    through the update framework.
    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. We note that as 
    indicated in section V of the preamble, in conjunction with our policy 
    of a unified outlier methodology for operating and capital, we are 
    adopting the change required by Pub. L. 105-33 concerning outlier 
    payments. The law requires the fixed loss cost outlier threshold to be 
    based on the sum of the base DRG payment, indirect medical education 
    (IME) payment and the disproportionate share hospital (DSH) payment 
    effective with discharges occurring on or after October 1, 1997.
        Outlier payments are made only on the portion of the Federal rate 
    that is used to calculate the hospital's inpatient capital-related 
    payments (for example, 70 percent for cost reporting periods beginning 
    in FY 1998 for hospitals paid under the fully prospective methodology). 
    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 outlier payments under the Federal 
    rate to total inpatient capital-related payments under the Federal 
    rate. The outlier thresholds are set so that operating outlier payments 
    are projected to be 5.1 percent of total operating DRG payments. The 
    inpatient capital-related outlier reduction factor reflects the 
    inpatient capital-related outlier
    
    [[Page 46047]]
    
    payments that would be made if all hospitals were paid according to 100 
    percent of the Federal rate. For purposes of calculating the outlier 
    thresholds and the outlier reduction factor, we model all hospitals as 
    if they were paid 100 percent of the Federal rate because, as explained 
    above, outlier payments are made only on the portion of the Federal 
    rate that is included in the hospital's inpatient capital-related 
    payments.
        In the August 30, 1996 final rule, we estimated that outlier 
    payments for capital in FY 1997 would equal 5.19 percent of inpatient 
    capital-related payments based on the Federal rate. Accordingly, we 
    applied an outlier adjustment factor of 0.9481 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 6.18 
    percent of inpatient capital-related payments based on the Federal rate 
    in FY 1998. We are, therefore, applying an outlier adjustment factor of 
    0.9382 to the Federal rate. Thus, estimated capital outlier payments 
    for FY 1998 represent a higher percentage of total capital standard 
    payments than for FY 1997.
        The outlier reduction factors are not built permanently into the 
    rates; that is, they are not applied cumulatively in determining the 
    Federal rate. Therefore, the net change in the outlier adjustment to 
    the Federal rate for FY 1998 is 0.9896 (0.9382/0.9481). Thus, the 
    outlier adjustment decreases the FY 1998 Federal rate by 1.04 percent 
    (1 -0.9896) compared with the FY 1997 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 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 these figures to compute the adjustment required 
    to maintain budget neutrality for changes in DRG weights and in the 
    GAF.
        For FY 1997, we calculated a GAF/DRG budget neutrality factor of 
    0.9987. In the proposed rule for FY 1998, we proposed a GAF/DRG budget 
    neutrality factor of 1.0001. In this final rule with comment period, 
    based on calculations using updated data, we are applying a factor of 
    0.9989 to meet this requirement. 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 or 
    less than they would have been in the absence of the annual DRG 
    reclassification and recalibration and changes in the GAF. The 
    incremental change in the adjustment from FY 1997 to FY 1998 is 0.9989. 
    The cumulative change in the rate due to this adjustment is 1.0001 (the 
    product of the incremental factors for FY 1993, FY 1994, FY 1995, FY 
    1996, FY 1997, and FY 1998: 0.9980  x  1.0053  x  0.9998  x  0.9994  x  
    0.9987  x  0.9989=1.0001).
        This factor accounts for DRG reclassifications and recalibration 
    and for changes in the GAF. It also incorporates the effects on the GAF 
    of FY 1998 geographic reclassification decisions made by the MGCRB 
    compared to FY 1997 decisions. However, it does not account for changes 
    in payments due to changes in the disproportionate share and indirect 
    medical education 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 Sec. 412.348 relative to total payments under the hospital-
    specific rate and Federal rate. We use an actuarial model described in 
    Appendix B to determine the exceptions payment adjustment factor.
        For FY 1997, we estimated that exceptions payments would equal 6.42 
    percent of aggregate payments based on the Federal rate and the 
    hospital-specific rate. Therefore, we applied an exceptions reduction 
    factor of 0.9358 (1--0.0642) in determining the FY 1997 Federal rate. 
    For FY 1998, we estimated in the June 2, 1997 proposed rule that 
    exceptions payments would equal 7.24 percent of aggregate payments 
    based on the Federal rate and the hospital-specific rate. Therefore we 
    proposed to apply an exceptions payment reduction factor of .9276 (1--
    0.0724) to determine the FY 1998 Federal rate. For this final rule with 
    comment period, we estimate that exceptions payments for FY 1998 will 
    equal 3.41 percent of aggregate payments based on the Federal rate and 
    the hospital-specific rate. We are, therefore, applying an exceptions 
    payment reduction factor of 0.9659 (1--0.0341) to the Federal rate for 
    FY 1998.
        The final exceptions reduction factor for FY 1998 is thus 3.22 
    percent higher than the factor for FY 1997 and 4.13 percent higher than 
    the factor in the FY 1998 proposed rule. This change is due to a 
    modeling refinement we have implemented since publication of the 
    proposed rule described in Appendix B. The exceptions reduction factors 
    are not built permanently into the rates; that is, the factors are not 
    applied cumulatively in determining the Federal rate. Therefore, the 
    net adjustment for exceptions to the FY 1998 Federal rate over the FY 
    1997 Federal rate is 0.9659/0.9358, or 1.0322.
    5. Standard Capital Federal Rate for FY 1998
        For FY 1997, the capital Federal rate was $438.92. With the changes 
    we proposed to the factors used to establish the Federal rate, we 
    proposed that the FY 1998 Federal rate would be $438.43. In this final 
    rule with comment period, we are establishing a FY 1998 Federal rate of 
    $371.51. The Federal rate for FY 1998 was calculated as follows:
         The FY 1998 update factor is .0090, that is, the update is 
    0.9 percent.
         The FY 1998 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 0.9989.
         The FY 1998 outlier adjustment factor is 0.9382.
         The FY 1998 exceptions payments adjustment factor is 
    0.9659.
        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 have made 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 1998 affected the computation of the FY 1998 Federal 
    rate in comparison to the FY 1997 Federal rate. We have added the 
    effect of the 17.78 percent reduction to the rate required by Public 
    Law 105-33 to the chart. The FY 1998 update factor has the effect of 
    increasing the Federal rate by 0.90 percent
    
    [[Page 46048]]
    
    compared to the rate in FY 1997, while the final geographic and DRG 
    budget neutrality factor has the effect of decreasing the Federal rate 
    by 0.11 percent. The FY 1998 outlier adjustment factor has the effect 
    of decreasing the Federal rate by 1.04 percent compared to FY 1997. The 
    FY 1998 exceptions reduction factor has the effect of increasing the 
    Federal rate by 3.22 percent compared to the exceptions reduction for 
    FY 1997. The combined effect of all the changes is to decrease the 
    Federal rate by 15.36 percent compared to the Federal rate for FY 1997.
    
    Comparison of Factors and Adjustments: FY 1997 Federal Rate and FY 1998 
    Federal Rate
    
    ----------------------------------------------------------------------------------------------------------------
                                                           FY 97           FY 98          Change      Percent change
    ----------------------------------------------------------------------------------------------------------------
    Public Law 105-33 Standard Federal Rate                                                                         
     Reduction......................................              NA          0.8222          0.8222          -17.78
    Update factor 1.................................          1.0070          1.0090          1.0090            0.90
    GAF/DRG Adjustment Factor 1.....................          0.9987          0.9989          0.9989           -0.11
    Outlier Adjustment Factor 2.....................          0.9481          0.9382          0.9896           -1.04
    Exceptions Adjustment Factor 2..................          0.9358          0.9659          1.0322            3.22
    Federal Rate....................................         $438.92         $371.51          0.8464         -15.36 
    ----------------------------------------------------------------------------------------------------------------
    \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 1997 to FY 1998 resulting from the application of the 0.9989 GAF/DRG  
      budget neutrality factor for FY 1998 is 0.9989.                                                               
    \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 1998 outlier reduction factor is 0.9382/0.9481, or 0.9896.    
    
        We are also providing a chart that shows how the final FY 1998 
    Federal rate differs from the proposed FY 1998 Federal rate.
    
    Comparison of Factors and Adjustments: Proposed FY 1998 Federal Rate 
    and Final FY 1998 Federal Rate
    
    ----------------------------------------------------------------------------------------------------------------
                                                       Proposed  FY                                                 
                                                            98          Final FY 98       Change      Percent change
    ----------------------------------------------------------------------------------------------------------------
    Public Law 105-33 Standard Federal Rate                                                                         
     Reduction......................................              NA          0.8222          0.8222          -17.78
    Update factor...................................          1.0110          1.0090          0.9980           -0.20
    GAF/DRG Adjustment Factor.......................          1.0001          0.9989          0.9988           -0.12
    Outlier Adjustment Factor.......................          0.9449          0.9382          0.9929           -0.71
    Exceptions Adjustment Factor....................          0.9276          0.9659          1.0413            4.13
    Federal Rate....................................         $438.43         $371.51          0.8474          -15.26
    ----------------------------------------------------------------------------------------------------------------
    
    6. Special Rate for Puerto Rico Hospitals
        As explained at the beginning of this section, in the past, 
    hospitals in Puerto Rico were paid based on 75 percent of the Puerto 
    Rico rate and 25 percent of the Federal rate. To parallel the change to 
    the Puerto Rico blended payment amount mandated for operating payments 
    by Public Law 105-33, effective with discharges on or after October 1, 
    1997, capital payments to hospitals in Puerto Rico will be based on 50 
    percent of the Puerto Rico capital 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 PPS wage 
    index, and varies depending on the MSA or rural area in which the 
    hospital is located. Since the GAF is based on the wage index, we are 
    revising the method of accounting for geographical variation in Puerto 
    Rico, to parallel the change that is being proposed on the operating 
    rate, where a Puerto Rico-specific wage index is being calculated (see 
    section III.B. of this preamble). Specifically, we used the new Puerto 
    Rico wage index to determine the GAF for the Puerto Rico part of the 
    capital blended rate, and retained the use of the national wage index 
    to determine the GAF for the national part of the blended rate. As 
    noted above, effective October 1, 1997, hospitals in Puerto Rico will 
    be paid based on 50 percent of the Puerto Rico rate and 50 percent of 
    the Federal rate. This means that, in computing the payment for a 
    particular Puerto Rico hospital, the Puerto Rico portion of the rate 
    will be multiplied by the Puerto Rico-specific GAF for the MSA in which 
    the hospital is located, and the national portion of the rate will be 
    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).
        We have adjusted the Puerto Rico rate to account for the 
    application of Puerto Rico-specific GAFs. We did this in order to be 
    consistent with the method by which we originally determined the 
    national and Puerto Rico rates. This resulting standard Puerto Rico 
    rate does not translate into a reduction in payments to Puerto Rico 
    hospitals. The Puerto Rico-specific GAFs are higher than the national 
    GAFs because they use the Puerto Rico mean only rather than the 
    national mean. As a result, application of Puerto Rico-specific GAFs 
    means Puerto Rico hospitals receive more money.
        For FY 1997, before application of the GAF, the special rate for 
    Puerto Rico hospitals was $337.63. With the changes we proposed to the 
    factors used to determine the rate, the proposed FY 1998 special rate 
    for Puerto Rico was $204.46. In this final rule with comment period, 
    the FY 1998 capital rate for Puerto Rico is $177.57. Since publication 
    of the proposed rule, the Puerto Rico rate has declined because of the 
    effect of the 17.78 percent reduction to the rate implemented as a 
    result of Public Law 105-33.
    
    B. Determination of Hospital-Specific Rate Update
    
        Section 412.328(e) of the regulations provides that the hospital-
    specific rate for FY 1998 be determined by adjusting the FY 1997 
    hospital-specific rate by the
    
    [[Page 46049]]
    
    hospital-specific rate update factor and the exceptions payment 
    adjustment factor. Before application of these factors the FY 1997 
    unadjusted hospital-specific rate was reduced 17.78 percent to comply 
    with the provisions of Public Law 105-33. The 17.78 percent reduction 
    will be in force from October 1, 1997 through September 30, 2002. A 
    15.68 percent reduction to the unadjusted hospital specific rate will 
    remain in effect from October 1, 2002 onward.
    1. Impact of Public Law 105-33
        Public Law 105-33 reduces the hospital specific rate 17.78 percent 
    through September 30, 2002. After that date a 15.68 percent reduction 
    to the rate shall remain in effect.
    2. Hospital-Specific Rate Update Factor
        The hospital-specific rate is updated in accordance with the update 
    factor for the standard Federal rate determined under 
    Sec. 412.308(c)(1). For FY 1998, we have updated the hospital-specific 
    rate by a factor of 1.0090.
    3. Exceptions Payment Adjustment Factor
        For FYs 1992 through 2001, the updated hospital-specific rate is 
    multiplied by an adjustment factor to account for estimated exceptions 
    payments for capital-related costs under Sec. 412.348, which is 
    determined as a proportion of the total amount of payments under the 
    hospital-specific rate and the Federal rate. For FY 1998, we estimated 
    in the proposed rule that exceptions payments would be 7.24 percent of 
    aggregate payments based on the Federal rate and the hospital-specific 
    rate. We therefore proposed that the updated hospital-specific rate be 
    reduced by a factor of 0.9276. In this final rule with comment period, 
    we estimate that exceptions payments will be 3.53 percent of aggregate 
    payments based on the Federal rate and the hospital specific rate. We 
    are applying an exceptions reduction factor of 0.9659 to the hospital-
    specific rate.
        The exceptions reduction factors are not built permanently into the 
    rates; that is, the factors are not applied cumulatively in determining 
    the hospital-specific rate. Therefore, the net adjustment to the FY 
    1998 hospital-specific rate is 0.9659/0.9358, or 1.0322.
    4. Net Change to Hospital-Specific Rate
        We are providing a chart to show the net change to the hospital-
    specific rate. The chart shows the factors for FY 1997 and FY 1998 and 
    the net adjustment for each factor. It also shows that the cumulative 
    net adjustment from FY 1997 to FY 1998 is 0.8563, which represents a 
    decrease of 13.66 percent to the hospital-specific rate. For each 
    hospital, the FY 1998 hospital-specific rate is determined by 
    multiplying the FY 1997 hospital-specific rate by the cumulative net 
    adjustment of 0.8563.
    
    FY 1998 Update and Adjustments to Hospital-Specific Rates
    
    ----------------------------------------------------------------------------------------------------------------
                                                           FY 97           FY 98      Net adjustment  Percent change
    ----------------------------------------------------------------------------------------------------------------
    Public Law 105-33 Hospital-Specific Rate                                                                        
     Reduction......................................           (\1\)          0.8222          0.8222          -17.78
    Update Factor...................................          1.0070          1.0090          1.0090            0.90
    Exceptions Payment Adjustment Factor............          0.9358          0.9659          1.0322            3.22
    Cumulative Adjustments..........................          0.9424          0.8070          0.8563         -14.37 
    ----------------------------------------------------------------------------------------------------------------
    \1\ Not applicable.                                                                                             
    
        Note: The update factor for the hospital-specific rate is 
    applied cumulatively in determining the rates. Thus, the incremental 
    increase in the update factor from FY 1997 to FY 1998 is 1.0090. In 
    contrast, the exceptions payment adjustment factor is not applied 
    cumulatively. Thus, for example, the incremental increase in the 
    exceptions reduction factor from FY 1997 to FY 1998 is 0.9659/
    0.9358, or 1.0322.
    
    C. Calculation of Inpatient Capital-Related Prospective Payments for FY 
    1998
    
        During the capital prospective payment system transition period, a 
    hospital is paid for the inpatient capital-related costs under one of 
    two alternative payment methodologies; the fully prospective payment 
    methodology or the hold-harmless methodology. The payment methodology 
    applicable to a particular hospital is determined when a hospital comes 
    under the prospective payment system for capital-related costs by 
    comparing its hospital-specific rate to the Federal rate applicable to 
    the hospital's first cost reporting period under the prospective 
    payment system. 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 adjustment factors applicable to the 
    hospital (that is, the hospital's GAF, the disproportionate share 
    adjustment factor, and the indirect medical education adjustment 
    factor, when appropriate).
        If the hospital-specific rate is above the applicable Federal rate, 
    the hospital is paid under the hold-harmless methodology. If the 
    hospital-specific rate is below the applicable Federal rate, the 
    hospital is paid under the fully prospective methodology.
        For purposes of calculating payments for each discharge under both 
    the hold-harmless payment methodology and the fully prospective payment 
    methodology, the standard Federal rate is adjusted as follows: 
    (Standard Federal Rate)  x  (DRG weight)  x  (GAF)  x  (Large Urban 
    Add-on, if applicable)  x  (COLA adjustment for hospitals located in 
    Alaska and Hawaii)  x  (1 + Disproportionate Share Adjustment Factor + 
    IME Adjustment Factor, if applicable). The result is termed the 
    adjusted Federal rate.
        Payments under the hold-harmless methodology are determined under 
    one of two formulas. A hold-harmless hospital is paid the higher of:
         100 percent of the adjusted Federal rate for each 
    discharge; or
         An old capital payment equal to 85 percent (100 percent 
    for sole community hospitals) of the hospital's allowable Medicare 
    inpatient old capital costs per discharge for the cost reporting period 
    plus a new capital payment based on a percentage of the adjusted 
    Federal rate for each discharge. The percentage of the adjusted Federal 
    rate equals the ratio of the hospital's allowable Medicare new capital 
    costs to its total Medicare inpatient capital-related costs in the cost 
    reporting period.
        Once a hospital receives payment based on 100 percent of the 
    adjusted Federal rate in a cost reporting period beginning on or after 
    October 1, 1994 (or the first cost reporting period after obligated 
    capital that is recognized as old capital under Sec. 412.302(c) is put 
    in use for patient care, if later), the hospital continues to receive 
    capital prospective payment system payments on that basis for the 
    remainder of the transition period.
        Payment for each discharge under the fully prospective methodology 
    is the sum of:
    
    [[Page 46050]]
    
         The hospital-specific rate multiplied by the DRG relative 
    weight for the discharge and by the applicable hospital-specific 
    transition blend percentage for the cost reporting period; and
         The adjusted Federal rate multiplied by the Federal 
    transition blend percentage.
        The blend percentages for cost reporting periods beginning in FY 
    1998 are 70 percent of the adjusted Federal rate and 30 percent of the 
    hospital-specific rate.
        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. Outlier payments are made only on that portion of the Federal 
    rate that is used to calculate the hospital's inpatient capital-related 
    payments. For fully prospective hospitals, that portion is 70 percent 
    of the Federal rate for discharges occurring in cost reporting periods 
    beginning during FY 1998. Thus, a fully prospective hospital will 
    receive 70 percent of the capital-related outlier payment calculated 
    for the case for discharges occurring in cost reporting periods 
    beginning in FY 1998. For hold-harmless hospitals paid 85 percent of 
    their reasonable costs for old inpatient capital, the portion of the 
    Federal rate that is included in the hospital's outlier payments is 
    based on the hospital's ratio of Medicare inpatient costs for new 
    capital to total Medicare inpatient capital costs. For hold-harmless 
    hospitals that are paid 100 percent of the Federal rate, 100 percent of 
    the Federal rate is included in the hospital's outlier payments.
        The outlier thresholds for FY 1998 are published in section 
    II.A.4.c of this Addendum. For FY 1998, a case qualifies as a cost 
    outlier if the cost for the case is greater than the sum of the 
    prospective payment rate for the DRG plus IME and DSH payments plus 
    $11,050. During the capital prospective payment system transition 
    period, a hospital may also receive an additional payment under an 
    exceptions process 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 Sec. 412.348. The minimum payment levels for 
    portions of cost reporting periods occurring in FY 1998 are:
         Sole community hospitals (located in either an urban or 
    rural area), 90 percent;
         Urban hospitals with at least 100 beds and a 
    disproportionate share patient percentage of at least 20.2 percent; and
         Urban hospitals with at least 100 beds that qualify for 
    disproportionate share payments under Sec. 412.106(c)(2), 80 percent; 
    and
         All other hospitals, 70 percent.
        Under Sec. 412.348(d), the amount of the 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.
        New hospitals 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.
    
    D. Capital Input Price Index
    
    1. Background
        Like the prospective payment hospital operating input price index, 
    the Capital Input Price Index (CIPI) is a fixed-weight price index. A 
    fixed-weight price index measures how much it would cost at a later 
    date to purchase the same mix of goods and services purchased in the 
    base period. For the prospective payment hospital operating and capital 
    input price indices, the base period is selected and cost category 
    weights are determined using available data on hospitals. Next, 
    appropriate price proxy indices are chosen for each cost category. Then 
    a price proxy index level for each expenditure category is multiplied 
    by the comparable cost category weight. The sum of these products (that 
    is, weights multiplied by price proxy index levels) for all cost 
    categories yields the composite index level of the market basket for a 
    given year. Repeating the step for other years produces a time series 
    of composite market basket index levels. Dividing an index level by a 
    later index level produces a rate of growth in the input price index. 
    Since the percent change is computed for the fixed mix of total capital 
    inputs with a 1992 base, the index is fixed-weight.
        Like the operating input price index, the CIPI measures the price 
    changes associated with costs during a given year. In order to do so, 
    the CIPI must differ from the operating input price index in one 
    important aspect. The CIPI must reflect 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, AHA data, and Securities Data 
    Corporation 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 explanation of the CIPI was discussed 
    in the proposed rule for FY 1998 published in the June 2, 1997 Federal 
    Register (62 FR 29953). The following Federal Register documents also 
    describe development and revisions of the methodology involved with the 
    construction of the CIPI: September 1, 1992 (57 FR 40016), May 26, 1993 
    (58 FR 30448), September 1, 1993 (58 FR 46490), May 27, 1994 (59 FR 
    27876), September 1, 1994 (59 FR 45517), June 2, 1995 (60 FR 29229), 
    and September 1, 1995 (60 FR 45815), May 31, 1996 (61 FR 27466), and 
    August 30, 1996 (61 FR 46196).
    2. Research on Reweighting the CIPI
        After analyzing various data sources and methodologies for 
    determining capital weights for the HCFA PPS CIPI, we will continue to 
    use the weights published in the August 30, 1996 Federal Register (61 
    FR 46196). We
    
    [[Page 46051]]
    
    explained in the June 2, 1997 proposed rule that we had decided not to 
    use the 1992 Department of Commerce Asset and Expenditure data to 
    revise the cost category weights in the CIPI. The three reasons why we 
    are staying with the current HCFA PPS CIPI cost category weights are: 
    (1) HCFA's prefers to continue to use the Medicare Cost Reports for the 
    Medicare subset of hospitals (PPS only); (2) the detail needed for 
    future rebasing of the index will be available from the Medicare Cost 
    Reports; and (3) the CIPI cost shares are similar to those provided by 
    the 1992 Asset and Expenditures Survey. We received no comments on this 
    issue.
    3. Forecast of the CIPI for Federal Fiscal Year 1998
        DRI forecasts a 1.1 percent increase in the CIPI for FY 1998. This 
    is the outcome of a projected 2.2 percent increase in vintage-weighted 
    depreciation prices (building and fixed equipment, and movable 
    equipment) and a 3.2 percent increase in other capital expense prices 
    in FY 1998, partially offset by a 2.0 percent decline in vintage-
    weighted interest rates in FY 1998. The weighted average of these three 
    factors produces the 1.1 percent increase for the CIPI as a whole.
    
    IV. Changes to Payment Rates for Excluded Hospitals and Hospital 
    Units: Rate-of-Increase Percentages
    
    A. Rate-of-Increase Percentages for Excluded Hospitals and Hospital 
    Units
    
        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 Sec. 413.40 of the regulations. Under 
    these limits, an annual 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). 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's target amount is adjusted annually, at the 
    beginning of its cost reporting period, by an applicable rate-of-
    increase percentage. Section 1886(b)(3)(B) of the Act provides that for 
    cost reporting periods beginning on or after October 1, 1997 and before 
    October 1, 1998, the rate- of-increase percentage is 0. In order to 
    determine a hospital's target amount for its cost reporting period 
    beginning in FY 1998, the hospital's target amount for its cost 
    reporting period that began in FY 1997 is increased by 0. In addition, 
    as indicated in section VII of the preamble, Public Law 105-33 
    significantly altered several aspects of payments for excluded 
    hospitals and units, effective for cost reporting periods beginning on 
    or after October 1, 1997. Section 4413 of Public Law 105-33 permits 
    certain excluded hospitals--hospitals that were excluded for the cost 
    reporting period beginning before October 1, 1990 and are within 
    certain specified classes, as well as ``qualified long-term care 
    hospitals''--to elect a rebasing of the hospital's target amount for 
    the 12-month cost reporting period beginning during FY 1998. The 
    rebased target amount for a hospital would reflect operating costs in 
    recent cost reporting periods. Section 4414 establishes a cap on target 
    amounts for certain classes of excluded hospitals, based on target 
    amounts for hospitals in the same class, for cost reporting periods 
    beginning during FY 1998. Section 4415 revises the formulas for 
    determining bonus and relief payments for excluded hospitals and also 
    establishes an additional bonus payment for continuous improvement, for 
    cost reporting periods beginning during FY 1998. Finally, sections 4416 
    and 4419 establish a new statutory payment methodology for new 
    hospitals, effective October 1, 1997.
    
    B. Wage Index Exceptions for Excluded Hospitals and Units
    
        In the August 30, 1991 final rule (56 FR 43232), we set forth our 
    policy for target amount adjustments for significant wage increases. 
    Effective with cost reporting periods beginning on or after April 1, 
    1990, significant increases in wages since the base period are 
    recognized as a basis for an adjustment in the target amount under 
    Sec. 413.40(g).
        To qualify for an adjustment, the excluded hospital or hospital 
    unit must be located in a labor market area for which the average 
    hourly wage increased significantly more than the national average 
    hourly wage between the hospital's base period and the period subject 
    to the ceiling. We use the hospital wage index for prospective payment 
    hospitals to determine the rate of increase in the average hourly wage 
    in the labor market area. For a hospital to qualify for an adjustment, 
    the wage index value for the cost reporting period subject to the 
    ceiling must be at least 8 percent higher than the wage index based on 
    wage survey data collected for the base year cost reporting period. If 
    survey data are not available for one (or both) of the cost reporting 
    periods used in the comparison, the wage index based on the latest 
    available survey data collected before that cost reporting period will 
    be used. For example, to make the comparison between a 1983 base period 
    and a hospital's cost reporting period beginning in FY 1995, we would 
    use the rate of increase between the wage index based on 1982 wage data 
    and the wage index based on the FY 1994 data, since the FY 1994 data 
    are the most recent data currently available. Further, the comparison 
    is made without regard to geographic reclassifications made by the 
    MGCRB under sections 1886(d) (8) and (10) of the Act. Therefore, the 
    comparison is made based on the wage index value of the labor market 
    area in which the hospital is actually located.
        We determine the amount of the adjustment for wage increases by 
    considering three factors for the time between the base period and the 
    period for which an adjustment is requested: the rate of increase in 
    the hospital's average hourly wage; the rate of increase in the average 
    hourly wage in the labor market area in which the hospital is located; 
    and, the rate of increase in the national average hourly wage for 
    hospital workers. The adjustment is limited to the amount by which the 
    lower of the hospital's or the labor market area's rate of increase in 
    average hourly wages significantly exceeds the national increase (that 
    is, exceeds the national rate of increase by more than 8 percent). For 
    purposes of computing the adjustment, the relative rate of increase in 
    the average hourly wage for the labor market area is assumed to have 
    been the same over each of the intervening years between the wage 
    surveys.
        To determine the rate of increase in the national average hourly 
    wage, we use the average hourly earnings (AHE) component of the wages 
    and salaries portion of the market basket. This measure is derived from 
    the 1982-based market basket since the 1987-based market basket uses 
    the employment cost index (ECI) for hospital workers as the price proxy 
    for this component. Unlike the AHE, the ECI for hospital workers can be 
    measured historically only back to 1986. In addition, the ECI does not 
    adjust for skill-mix shifts and, therefore, measures only the change in 
    wage rates per hour.
        The average hourly earnings for hospital workers show the following 
    increases:
    
    1992 = 4.8 percent
    1993 = 3.6 percent
    1994 = 2.7 percent
    1995 = 3.3 percent
    
    [[Page 46052]]
    
    1996 = 3.1 percent
    1997 = 2.2 percent
    1998 = 3.2 percent
    
        We note that this section merely provides updated information with 
    respect to areas that would qualify for the wage index adjustment under 
    Sec. 413.30(g). This information was calculated in accordance with 
    established policy and does not reflect any change in that policy. The 
    geographic areas in which the percentage difference in wage indexes was 
    sufficient to qualify for a wage index adjustment are listed in Table 
    10 of section V of the addendum to this final rule with comment period.
    
    V. Tables
    
        This section contains the tables referred to throughout the 
    preamble to this final rule with comment period and in this Addendum. 
    For purposes of this final rule with comment period, 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, 1E, 1F, 3C, 4A, 4B, 4C, 
    4D, 4E, 4F, 5, 6A, 6B, 6C, 6D, 6E, 6F, 7A, 7B, 8A, 8B, and 10 are 
    presented below. The tables presented below are as follows:
    
    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 1E--National Adjusted Operating Standardized Amounts for 
    ``Temporary Relief'' Hospitals, Labor/Nonlabor
    Table 1F--Adjusted Operating Standardized Amounts for ``Temporary 
    Relief'' Hospitals in Puerto Rico, Labor/Nonlabor
    Table 3C--Hospital Case Mix Indexes for Discharges Occurring in Federal 
    Fiscal Year 1996 and Hospital Average Hourly Wage for Federal Fiscal 
    Year 1998 Wage Index
    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 4D--Average Hourly Wage for Urban Areas
    Table 4E--Average Hourly Wage for Rural Areas
    Table 4F--Puerto Rico Wage Index and Capital Geographic Adjustment 
    Factor (GAF)
    Table 5--List of Diagnosis Related Groups (DRGs), Relative Weighting 
    Factors, Geometric Mean Length of Stay, and Arithmetic Mean Length of 
    Stay Points Used in the Prospective Payment System
    Table 6A--New Diagnosis Codes
    Table 6B--New Procedure Codes
    Table 6C--Invalid Diagnosis Codes
    Table 6D--Revised Diagnosis Code Titles
    Table 6E--Additions to the CC Exclusions List
    Table 6F--Deletions to the CC Exclusions List
    Table 7A--Medicare Prospective Payment System Selected Percentile 
    Lengths of Stay FY 96 MEDPAR Update 06/97 GROUPER V14.0
    Table 7B--Medicare Prospective Payment System Selected Percentile 
    Lengths of Stay FY 96 MEDPAR Update 06/97 GROUPER V15.0
    Table 8A--Statewide Average Operating Cost-to-Charge Ratios for Urban 
    and Rural Hospitals (Case Weighted) August 1997
    Table 8B--Statewide Average Capital Cost-to-Charge Ratios (Case 
    Weighted) August 1997
    Table 10--Percentage Difference in Wage Indexes for Areas that Qualify 
    for a Wage Index Exception for Excluded Hospitals and Units
    
                       Table 1A.--National Adjusted Operating Standardized Amounts, Labor/Nonlabor                  
    ----------------------------------------------------------------------------------------------------------------
                        Large urban areas                                           Other areas                     
    ----------------------------------------------------------------------------------------------------------------
           Labor-related               Nonlabor-related              Labor-related             Nonlabor-related     
    ----------------------------------------------------------------------------------------------------------------
    2,776.21...................                   1,128.44                    2,732.26                    1,110.58  
    ----------------------------------------------------------------------------------------------------------------
    
    
                   Table 1C.--Adjusted Operating Standardized Amounts For Puerto Rico, Labor/Nonlabor               
    ----------------------------------------------------------------------------------------------------------------
                                                                      Large urban areas            Other areas      
                                                                 ---------------------------------------------------
                                                                     Labor       Nonlabor      Labor       Nonlabor 
    ----------------------------------------------------------------------------------------------------------------
    National....................................................     2,752.36     1,118.74     2,752.36     1,118.74
    Puerto Rico.................................................     1,323.01       532.55     1,302.07       524.11
    ----------------------------------------------------------------------------------------------------------------
    
    
                Table 1D.--Capital Standard Federal Payment Rate            
    ------------------------------------------------------------------------
                                                                     Rate   
    ------------------------------------------------------------------------
    National...................................................       371.51
    Puerto Rico................................................       177.57
    ------------------------------------------------------------------------
    
    
     Table 1E.--National Adjusted Operating Standardized Amounts For ``Temporary Relief'' Hospitals, Labor/Nonlabor 
    ----------------------------------------------------------------------------------------------------------------
                        Large urban areas                                           Other areas                     
    ----------------------------------------------------------------------------------------------------------------
           Labor-related               Nonlabor-related              Labor-related             Nonlabor-related     
    ----------------------------------------------------------------------------------------------------------------
    2,790.09...................                   1,134.08                    2,745.92                    1,116.13  
    ----------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46053]]
    
    
      Table 1F.--Adjusted Operating Standardized Amounts For ``Temporary Relief'' Hospitals In Puerto Rico, Labor/  
                                                        Nonlabor                                                    
    ----------------------------------------------------------------------------------------------------------------
                                                                      Large urban areas            Other areas      
                                                                 ---------------------------------------------------
                                                                     Labor       Nonlabor      Labor       Nonlabor 
    ----------------------------------------------------------------------------------------------------------------
    National....................................................     2,766.12     1,124.33     2,766.12     1,124.33
    Puerto Rico.................................................     1,329.63       535.21     1,308.58       526.73
    ----------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46054]]
    
    
                     Table 3C.--Hospital Case Mix Indexes for Discharges Occurring in Federal Fiscal Year 1996; Hospital Average Hourly Wage for Federal Fiscal Year 1998 Wage Index                
                                                                                              Page 1 of 16                                                                                          
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    010001.......................   01.4825   15.78   010095..........   00.9801   12.06   030004.........   01.0972   13.75   040002.........   01.1973   12.84   040107.........   01.2002   15.29
    010004.......................   00.9676   11.63   010097..........   00.9079   14.47   030006.........   01.5610   18.02   040003.........   01.0165   12.72   040109.........   01.1817   13.56
    010005.......................   01.2091   15.74   010098..........   01.2489   11.65   030007.........   01.3193   16.96   040004.........   01.6332   15.84   040114.........   01.8852   17.60
    010006.......................   01.4496   15.81   010099..........   01.1682   14.38   030008.........   02.3016   19.75   040005.........   01.0097   12.83   040116.........   01.3704   19.05
    010007.......................   01.0711   13.52   010100..........   01.2651   15.26   030009.........   01.3458   16.25   040007.........   01.8429   17.91   040118.........   01.2209   14.54
    010008.......................   01.1607   12.11   010101..........   01.0607   14.05   030010.........   01.4373   17.79   040008.........   01.0327   11.22   040119.........   01.1544   14.58
    010009.......................   01.1291   15.17   010102..........   01.0052   13.60   030011.........   01.5237   18.32   040010.........   01.3176   15.80   040124.........   01.1341   13.82
    010010.......................   01.0737   14.78   010103..........   01.8566   18.70   030012.........   01.2358   16.41   040011.........   00.9916   10.85   040126.........   00.9510   11.98
    010011.......................   01.6409   19.62   010104..........   01.7062   18.20   030013.........   01.2716   19.56   040014.........   01.1905   16.40   040132.........   00.5050   11.69
    010012.......................   01.3020   16.65   010108..........   01.2341   14.48   030014.........   01.4919   18.50   040015.........   01.2941   13.52   050002.........   01.5829   26.90
    010015.......................   01.0958   13.70   010109..........   01.1081   13.36   030016.........   01.2453   17.47   040016.........   01.6692   16.02   050006.........   01.4566   19.54
    010016.......................   01.2749   16.88   010110..........   01.0520   14.12   030017.........   01.5067   18.11   040017.........   01.3301   11.89   050007.........   01.6171   27.21
    010018.......................   00.9370   16.77   010112..........   01.1867   15.28   030018.........   01.8034   19.31   040018.........   01.2275   18.03   050008.........   01.5161   26.68
    010019.......................   01.3226   14.52   010113..........   01.6944   15.80   030019.........   01.2819   19.75   040019.........   01.1380   13.94   050009.........   01.7352   29.57
    010021.......................   01.2524   15.75   010114..........   01.3212   16.45   030022.........   01.4840   17.44   040020.........   01.6069   15.06   050013.........   01.8362   22.18
    010022.......................   01.0183   17.25   010115..........   00.8516   12.02   030023.........   01.3266   18.26   040021.........   01.2523   14.96   050014.........   01.1738   22.16
    010023.......................   01.6476   15.43   010117..........   00.8712   13.59   030024.........   01.7156   20.56   040022.........   01.6750   14.96   050015.........   01.3849   23.94
    010024.......................   01.4637   15.95   010118..........   01.3326   18.41   030025.........   01.1285   14.24   040024.........   01.0635   14.26   050016.........   01.1630   17.90
    010025.......................   01.4608   13.24   010119..........   00.9630   18.53   030027.........   01.0548   15.39   040025.........   00.9145   12.38   050017.........   02.0535   25.36
    010027.......................   00.8284   14.12   010120..........   00.9715   15.39   030030.........   01.7308   18.21   040026.........   01.6072   16.65   050018.........   01.3072   20.37
    010029.......................   01.5709   15.54   010121..........   01.3052   15.80   030033.........   01.2274   15.72   040027.........   01.2943   12.96   050021.........   01.5250   25.59
    010031.......................   01.2310   15.57   010123..........   01.3119   15.81   030034.........   01.0042   15.05   040028.........   01.0928   11.93   050022.........   01.5018   23.58
    010032.......................   00.9628   12.86   010124..........   01.3732   13.53   030035.........   01.2917   18.82   040029.........   01.2903   15.78   050024.........   01.3075   21.10
    010033.......................   01.9450   17.81   010125..........   01.0057   15.83   030036.........   01.1928   18.51   040030.........   00.9400   11.36   050025.........   01.6846   21.84
    010034.......................   01.0855   12.64   010126..........   01.1881   14.11   030037.........   02.0983   19.86   040032.........   00.9578   10.60   050026.........   01.4621   28.03
    010035.......................   01.2533   15.94   010127..........   01.3531   16.36   030038.........   01.6478   18.39   040035.........   00.9687   10.26   050028.........   01.3819   15.43
    010036.......................   01.1301   16.08   010128..........   01.0004   12.39   030040.........   01.1504   16.07   040036.........   01.5195   17.87   050029.........   01.4308   22.42
    010038.......................   01.3196   17.78   010129..........   01.0814   14.62   030041.........   00.9799   13.77   040037.........   01.1132   11.92   050030.........   01.3244   20.23
    010039.......................   01.6833   17.26   010130..........   01.0341   14.47   030043.........   01.2492   17.86   040039.........   01.2296   13.00   050032.........   01.2349   26.01
    010040.......................   01.5892   18.14   010131..........   01.3381   18.57   030044.........   01.0792   16.15   040040.........   00.9709   14.02   050033.........   01.4525   26.08
    010043.......................   01.1319   10.75   010134..........   00.8561   10.10   030046.........   00.9632   18.53   040041.........   01.3631   15.91   050036.........   01.6825   19.57
    010044.......................   01.1616   14.54   010137..........   01.2998   16.93   030047.........   00.9556   20.45   040042.........   01.2352   14.76   050038.........   01.4592   28.87
    010045.......................   01.1903   13.53   010138..........   00.9272   10.96   030049.........   00.9882   14.67   040044.........   01.0303   11.22   050039.........   01.6258   21.59
    010046.......................   01.5214   16.79   010139..........   01.6887   19.60   030054.........   00.8543   12.51   040045.........   01.0246   15.07   050040.........   01.2705   22.01
    010047.......................   00.9795   10.30   010143..........   01.2910   16.04   030055.........   01.2188   16.56   040047.........   01.1375   15.13   050042.........   01.3518   20.78
    010049.......................   01.1616   14.77   010144..........   01.3015   16.55   030059.........   01.3958   18.88   040048.........   01.1836   14.02   050043.........   01.6121   30.35
    010050.......................   01.1221   13.88   010145..........   01.3023   15.68   030060.........   01.1372   16.21   040050.........   01.1593   12.27   050045.........   01.2807   18.28
    010051.......................   00.8513   09.93   010146..........   01.1750   15.81   030061.........   01.6808   17.13   040051.........   01.0998   12.97   050046.........   01.2665   21.20
    010052.......................   01.0489   09.88   010148..........   01.0002   12.52   030062.........   01.2672   15.94   040053.........   01.1245   13.04   050047.........   01.5727   31.60
    010053.......................   01.0767   13.31   010149..........   01.3649   16.73   030064.........   01.7564   18.53   040054.........   01.0611   12.44   050051.........   01.0491   17.04
    010054.......................   01.2094   17.02   010150..........   01.1059   16.28   030065.........   01.7363   19.65   040055.........   01.4707   15.29   050054.........   01.2156   20.60
    010055.......................   01.4429   16.99   010152..........   01.4925   17.56   030067.........   01.0534   15.78   040058.........   01.0324   13.64   050055.........   01.4024   27.81
    010056.......................   01.4318   18.78   010155..........   01.0502   06.99   030068.........   01.0784   15.77   040060.........   00.9853   10.20   050056.........   01.3688   29.73
    010058.......................   01.0898   12.93   020001..........   01.5629   26.31   030069.........   01.3333   20.13   040062.........   01.6840   15.85   050057.........   01.5572   19.64
    010059.......................   01.1095   14.92   020002..........   01.2556   23.88   030071.........   00.9698  .......  040064.........   01.0541   11.01   050058.........   01.4522   21.47
    010061.......................   01.1895   15.20   020004..........   01.1115   25.46   030072.........   00.8317  .......  040066.........   01.2232   15.86   050060.........   01.5351   20.46
    010062.......................   01.0358   14.36   020005..........   00.8208   25.53   030073.........   01.0031  .......  040067.........   01.0943   12.18   050061.........   01.4652   21.87
    010064.......................   01.8034   18.52   020006..........   01.2585   25.07   030074.........   00.9004  .......  040069.........   01.1556   14.87   050063.........   01.4029   21.02
    010065.......................   01.3457   15.39   020007..........   01.0349   22.76   030075.........   00.8568  .......  040070.........   00.9323   13.68   050065.........   01.6381   22.82
    010066.......................   00.9479   10.41   020008..........   01.1380   28.97   030076.........   01.0931  .......  040071.........   01.6768   15.73   050066.........   01.2678   20.99
    010068.......................   01.3086   16.70   020009..........   00.9789   21.88   030077.........   00.8398  .......  040072.........   01.1038   13.94   050067.........   01.3721   21.53
    010069.......................   01.1938   13.10   020010..........   01.0878   26.44   030078.........   01.1397  .......  040074.........   01.3224   14.39   050068.........   01.0669   18.92
    010072.......................   01.2125   13.45   020011..........   00.9374   22.61   030079.........   00.8800  .......  040075.........   01.1151   11.73   050069.........   01.6487   24.14
    010073.......................   01.0216   10.41   020012..........   01.2409   24.23   030080.........   01.5987   21.05   040076.........   01.0521   16.33   050070.........   01.2795   33.06
    010078.......................   01.2745   16.51   020013..........   01.0509   24.21   030083.........   01.3190   21.06   040077.........   00.9301   11.30   050071.........   01.3314   32.76
    010079.......................   01.2576   15.43   020014..........   01.1842   22.13   030084.........   01.0306  .......  040078.........   01.5579   17.77   050072.........   01.3261   32.63
    010080.......................   01.0093   11.89   020017..........   01.6662   24.50   030085.........   01.5587   23.63   040080.........   01.1206   14.65   050073.........   01.3306   32.62
    010081.......................   01.8574   14.84   020018..........   00.7773  .......  030086.........   01.3371   18.01   040081.........   00.9499   10.75   050074.........   01.3610   38.56
    010083.......................   01.0102   15.43   020019..........   00.7868  .......  030087.........   01.6346   18.93   040082.........   01.1559   14.31   050075.........   01.3921   32.75
    010084.......................   01.4836   17.66   020020..........   00.7621  .......  030088.........   01.4134   19.07   040084.........   01.1216   14.18   050076.........   01.8221   32.11
    010085.......................   01.2703   17.11   020021..........   00.9121  .......  030089.........   01.5854   19.68   040085.........   01.1894   14.81   050077.........   01.5831   22.86
    010086.......................   01.0808   13.70   020024..........   01.0845   23.72   030092.........   01.6117   20.36   040088.........   01.4011   14.36   050078.........   01.2955   24.76
    010087.......................   01.8483   18.51   020025..........   00.9808   24.32   030093.........   01.4070   17.81   040090.........   00.9226   13.54   050079.........   01.5781   29.34
    010089.......................   01.2615   15.60   020026..........   01.3051  .......  030094.........   01.3544   18.46   040091.........   01.2623   19.82   050080.........   01.3947   20.59
    010090.......................   01.5853   17.57   020027..........   01.0980  .......  030095.........   01.1437   18.24   040093.........   01.0361   10.11   050081.........   01.7055   22.17
    010091.......................   01.0099   14.57   030001..........   01.3356   20.07   030098.........   00.9923  .......  040100.........   01.3209   13.29   050082.........   01.5529   21.60
    010092.......................   01.4076   16.61   030002..........   01.8070   21.04   030099.........   00.9435  .......  040105.........   01.0256   13.29   050084.........   01.6782   23.55
    010094.......................   01.2351   15.11   030003..........   01.9769   20.37   040001.........   01.1189   12.95   040106.........   01.2151   14.08   050088.........   01.0377   23.02
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46055]]
    
    
                                                                                              Page 2 of 16                                                                                          
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    050089.......................   01.4267   20.50   050188..........   01.3813   26.63   050298.........   01.2567   21.05   050421.........   01.3719   24.84   050546.........   00.7784   22.14
    050090.......................   01.2947   23.06   050189..........   01.0628   21.87   050299.........   01.3551   22.62   050423.........   01.0305   19.52   050547.........   00.8743   21.94
    050091.......................   01.1912   22.02   050191..........   01.4969   20.99   050300.........   01.3966   22.60   050424.........   01.8245   22.86   050549.........   01.7309   25.79
    050092.......................   00.9918   15.98   050192..........   01.1894   18.17   050301.........   01.3386   22.43   050425.........   01.3271   33.00   050550.........   01.5817   23.60
    050093.......................   01.5676   23.44   050193..........   01.3103   23.13   050302.........   01.3707   27.57   050426.........   01.3357   22.53   050551.........   01.2992   24.63
    050095.......................   00.7794   29.00   050194..........   01.2778   28.00   050305.........   01.5747   30.80   050427.........   00.8258   17.79   050552.........   01.2447   21.99
    050096.......................   01.3087   19.75   050195..........   01.6036   32.79   050307.........   01.3606   21.59   050430.........   00.8488   17.06   050557.........   01.5742   21.58
    050097.......................   01.4627   18.53   050196..........   01.4084   17.33   050308.........   01.5170   30.55   050431.........   01.0903   19.94   050559.........   01.4058   24.92
    050099.......................   01.4724   23.23   050197..........   01.8388   28.44   050309.........   01.3687   24.92   050432.........   01.6738   24.04   050560.........   01.4220  ......
    050100.......................   01.7325   28.66   050204..........   01.5056   24.18   050310.........   01.2220   19.66   050433.........   01.1020   17.37   050561.........   01.1895   32.17
    050101.......................   01.4330   28.42   050205..........   01.3804   17.74   050312.........   01.9988   24.11   050434.........   01.2082   20.09   050564.........   01.1459   17.84
    050102.......................   01.4247   18.79   050207..........   01.2943   19.79   050313.........   01.2235   21.97   050435.........   01.2970   23.02   050565.........   01.1268   21.68
    050103.......................   01.6353   26.99   050208..........   00.9009   28.76   050315.........   01.2143   19.97   050436.........   00.9665   14.81   050566.........   00.9128   23.47
    050104.......................   01.5264   22.61   050211..........   01.3133   30.44   050317.........   01.3259   18.92   050438.........   01.7470   25.46   050567.........   01.6154   24.19
    050107.......................   01.4795   20.75   050213..........   01.5197   21.12   050320.........   01.3153   27.83   050440.........   01.3246   21.46   050568.........   01.3628   19.64
    050108.......................   01.7215   21.54   050214..........   01.4983   20.90   050324.........   01.9108   25.52   050441.........   02.0088   28.23   050569.........   01.3434   23.05
    050109.......................   02.4142   23.68   050215..........   01.5327   28.12   050325.........   01.2376   21.42   050443.........   00.9266   16.07   050570.........   01.7746   23.41
    050110.......................   01.3004   19.33   050217..........   01.3523   20.45   050327.........   01.5961   22.32   050444.........   01.3956   23.98   050571.........   01.4447   22.36
    050111.......................   01.3067   19.21   050219..........   01.1281   20.76   050328.........   01.5403   30.01   050446.........   00.9652   21.02   050573.........   01.6566   23.85
    050112.......................   01.5376   24.56   050222..........   01.5805   30.02   050329.........   01.3549   22.38   050447.........   01.1512   19.37   050575.........   01.1815  ......
    050113.......................   01.3358   28.10   050224..........   01.6094   22.29   050331.........   01.4005   26.07   050448.........   01.2546   20.75   050577.........   01.4076   19.70
    050114.......................   01.4946   20.53   050225..........   01.4968   20.67   050333.........   01.1112   19.36   050449.........   01.3307   20.38   050578.........   01.2150   24.65
    050115.......................   01.5823   20.21   050226..........   01.3707   23.58   050334.........   01.7852   31.52   050454.........   01.8478   27.56   050579.........   01.5024   27.75
    050116.......................   01.4891   23.17   050228..........   01.3742   27.09   050335.........   01.4100   21.78   050455.........   01.8811   21.07   050580.........   01.3773   26.95
    050117.......................   01.3288   20.76   050230..........   01.2962   25.94   050336.........   01.4158   20.42   050456.........   01.1970   20.18   050581.........   01.3786   24.80
    050118.......................   01.2326   23.37   050231..........   01.6983   24.69   050337.........   01.1495  .......  050457.........   01.9759   28.16   050583.........   01.6338   23.49
    050121.......................   01.3924   19.17   050232..........   01.7470   25.52   050342.........   01.3596   18.03   050459.........   01.2153   28.95   050584.........   01.3161   19.70
    050122.......................   01.7008   25.77   050233..........   01.2032   27.97   050343.........   01.0652   16.57   050464.........   01.8583   23.28   050585.........   01.3144   25.79
    050124.......................   01.2435   19.10   050234..........   01.3174   22.79   050348.........   01.6833   23.57   050468.........   01.4947   16.95   050586.........   01.3705   21.47
    050125.......................   01.3780   27.26   050235..........   01.6162   27.60   050349.........   00.9539   14.75   050469.........   01.1172   18.34   050588.........   01.3156   27.41
    050126.......................   01.4894   23.86   050236..........   01.4925   23.47   050350.........   01.3637   23.74   050470.........   01.1185   18.14   050589.........   01.3256   24.78
    050127.......................   01.3466   23.71   050238..........   01.5330   22.98   050351.........   01.4729   25.97   050471.........   01.8600   22.75   050590.........   01.4116   23.26
    050128.......................   01.6460   23.71   050239..........   01.5401   23.40   050352.........   01.3231   23.99   050476.........   01.3719   21.89   050591.........   01.3412   24.97
    050129.......................   01.6057   20.66   050240..........   01.4210   25.28   050353.........   01.6090   24.23   050477.........   01.5088   26.49   050592.........   01.3612   10.96
    050131.......................   01.2856   30.45   050241..........   01.1957   25.59   050355.........   00.9765   14.97   050478.........   00.9877   20.58   050593.........   01.2930   29.77
    050132.......................   01.3951   24.69   050242..........   01.4391   28.77   050357.........   01.6573   22.99   050481.........   01.4382   25.47   050594.........   01.7808   24.64
    050133.......................   01.3417   21.73   050243..........   01.5626   20.95   050359.........   01.3024   19.88   050482.........   00.9894   17.87   050597.........   01.2691   22.40
    050135.......................   01.4325   26.20   050245..........   01.4680   22.03   050360.........   01.4636   31.81   050483.........   01.2210   22.32   050598.........   01.3740   28.26
    050136.......................   01.3721   22.84   050248..........   01.2419   24.55   050366.........   01.4377   20.59   050485.........   01.6259   22.39   050599.........   01.6899   23.22
    050137.......................   01.4279   33.54   050251..........   01.0788   18.41   050367.........   01.2687   27.02   050486.........   01.4102   24.19   050601.........   01.5778   29.22
    050138.......................   01.8973   33.14   050253..........   00.4249   18.80   050369.........   01.3261   23.77   050488.........   01.3907   29.71   050603.........   01.4323   20.95
    050139.......................   01.3177   32.31   050254..........   01.1834   20.57   050373.........   01.4652   23.73   050491.........   01.2715   24.39   050604.........   01.5612   32.65
    050140.......................   01.3995   31.70   050256..........   01.7909   19.46   050376.........   01.5358   29.05   050492.........   01.3788   21.96   050607.........   01.1803   21.26
    050144.......................   01.6110   25.92   050257..........   01.1487   21.76   050377.........   01.0097   16.14   050494.........   01.3412   24.67   050608.........   01.3296   18.75
    050145.......................   01.3651   30.22   050260..........   00.9841   19.43   050378.........   01.1780   21.42   050496.........   01.7003   32.52   050609.........   01.4420   33.78
    050146.......................   01.3676  .......  050261..........   01.2252   18.54   050379.........   01.2054   16.93   050497.........   00.7910  .......  050613.........   01.1557   19.90
    050147.......................   00.7180   22.54   050262..........   01.9975   26.95   050380.........   01.6598   29.85   050498.........   01.2875   22.93   050615.........   01.6623   25.67
    050148.......................   01.0774   19.07   050264..........   01.4160   28.04   050382.........   01.4271   22.15   050502.........   01.6469   21.94   050616.........   01.3571   21.21
    050149.......................   01.5033   22.14   050267..........   01.6376   27.72   050385.........   01.3306   23.94   050503.........   01.3565   23.35   050618.........   01.1709   20.05
    050150.......................   01.2365   22.69   050270..........   01.3329   22.02   050388.........   00.9186   18.08   050506.........   01.3762   24.67   050623.........   01.1288   23.78
    050152.......................   01.4223   25.51   050272..........   01.3322   20.79   050390.........   01.2318   22.09   050510.........   01.3492   32.12   050624.........   01.3769   22.51
    050153.......................   01.6645   27.98   050274..........   00.9860   19.47   050391.........   01.3459   23.34   050512.........   01.5448   33.56   050625.........   01.6065   24.95
    050155.......................   01.1105   25.69   050276..........   01.1316   26.93   050392.........   00.9991   18.23   050515.........   01.3429   31.82   050630.........   01.4308   21.07
    050158.......................   01.3725   25.37   050277..........   01.5097   19.57   050393.........   01.4471   23.72   050516.........   01.5785   24.92   050633.........   01.2932   21.92
    050159.......................   01.3833   21.88   050278..........   01.6190   22.89   050394.........   01.6194   20.12   050517.........   01.3047   20.14   050635.........   01.3192   32.09
    050167.......................   01.2762   22.00   050279..........   01.2257   21.00   050396.........   01.6165   22.02   050522.........   01.3442   31.46   050636.........   01.4725   22.11
    050168.......................   01.5431   23.71   050280..........   01.6873   24.62   050397.........   01.0470   18.22   050523.........   01.3228   28.96   050638.........   01.0334   19.35
    050169.......................   01.5183   22.75   050281..........   01.4700   15.36   050401.........   01.1317   19.06   050526.........   01.3231   24.45   050641.........   01.1948   18.27
    050170.......................   01.5727   21.33   050282..........   01.3631   23.18   050404.........   01.1069   16.60   050528.........   01.3531   21.06   050643.........   00.7614  ......
    050172.......................   01.2438   18.44   050283..........   01.1136   26.91   050406.........   01.0309   15.92   050531.........   01.1935   20.24   050644.........   00.8951   22.79
    050173.......................   01.3490   20.24   050286..........   00.9444   17.82   050407.........   01.3244   28.37   050534.........   01.4117   24.32   050660.........   01.3514  ......
    050174.......................   01.6348   29.60   050289..........   01.8946   26.67   050410.........   01.0841   16.71   050535.........   01.4595   22.87   050661.........   00.8437   20.15
    050175.......................   01.3591   27.08   050290..........   01.6535   20.42   050411.........   01.3692   31.16   050537.........   01.2746   21.53   050662.........   00.8759   22.31
    050177.......................   01.2483   20.35   050291..........   01.2360   25.51   050414.........   01.3039   24.60   050539.........   01.2817   22.25   050663.........   01.1244   25.63
    050179.......................   01.3109   19.55   050292..........   01.0631   21.76   050417.........   01.3222   20.22   050541.........   01.5423   32.88   050666.........   00.8852   20.95
    050180.......................   01.6207   31.19   050293..........   01.1601   20.14   050418.........   01.3206   22.71   050542.........   01.2228   14.92   050667.........   00.9877   25.58
    050183.......................   01.1383   20.36   050295..........   01.4631   21.39   050419.........   01.3474   20.46   050543.........   00.9027   21.76   050668.........   01.1152   28.90
    050186.......................   01.3308   23.83   050296..........   01.2093   22.43   050420.........   01.5283   23.03   050545.........   00.7751   21.20   050670.........   00.8585  ......
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
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                                                                                              Page 3 of 16                                                                                          
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    050674.......................   01.2985   30.04   060047..........   01.1034   11.84   080004.........   01.3471   18.69   100071.........   01.3332   16.21   100167.........   01.4606   19.21
    050675.......................   01.8407   17.60   060049..........   01.4796   17.34   080005.........   01.3302   18.53   100072.........   01.3115   16.55   100168.........   01.3946   20.23
    050676.......................   00.9699   14.37   060050..........   01.2714   14.36   080006.........   01.3735   19.73   100073.........   01.7705   21.99   100169.........   01.8544   16.46
    050677.......................   01.4370   34.53   060052..........   01.0914   13.04   080007.........   01.4046   17.29   100075.........   01.5930   18.14   100170.........   01.4624   16.86
    050678.......................   01.1143   24.44   060053..........   01.0018   14.81   090001.........   01.5345   21.36   100076.........   01.3531   16.80   100172.........   01.3777   13.93
    050680.......................   01.2283   26.19   060054..........   01.3927   17.69   090002.........   01.2858   19.74   100077.........   01.4074   16.10   100173.........   01.6794   16.87
    050682.......................   00.9226   15.55   060056..........   00.9237   14.05   090003.........   01.3454   20.56   100078.........   01.1916   16.86   100174.........   01.5820   20.80
    050684.......................   01.2016   21.85   060057..........   01.0693   21.47   090004.........   01.8143   23.95   100079.........   01.6005   20.49   100175.........   01.2618   16.65
    050685.......................   01.2131   28.69   060058..........   00.9407   13.87   090005.........   01.3518   17.58   100080.........   01.6309   23.98   100176.........   02.1175   22.94
    050686.......................   01.3154   32.30   060060..........   00.8480   12.53   090006.........   01.3509   19.77   100081.........   01.0598   17.93   100177.........   01.3710   18.76
    050688.......................   01.2787   27.87   060062..........   00.9361   14.11   090007.........   01.2828   20.38   100082.........   01.4572   17.52   100179.........   01.6384   19.38
    050689.......................   01.3938   29.96   060063..........   00.9516   11.82   090008.........   01.5419   23.59   100083.........   01.3327   17.98   100180.........   01.3734   19.01
    050690.......................   01.5106   32.26   060064..........   01.4668   20.71   090010.........   01.1704   22.39   100084.........   01.4579   18.10   100181.........   01.2699   19.10
    050693.......................   01.6216   28.58   060065..........   01.3170   21.03   090011.........   01.9805   25.13   100085.........   01.4188   18.83   100183.........   01.3911   19.62
    050694.......................   01.5184   22.78   060066..........   00.9696   12.79   090015.........   01.1274  .......  100086.........   01.3132   22.05   100187.........   01.4032   18.31
    050695.......................   01.0993   25.42   060068..........   01.1323   13.46   100001.........   01.5737   18.08   100087.........   01.8737   21.91   100189.........   01.4251   20.96
    050696.......................   02.1091   28.17   060070..........   01.0209   16.03   100002.........   01.4879   19.10   100088.........   01.7306   17.43   100191.........   01.3109   18.63
    050697.......................   01.2473   18.05   060071..........   01.2383   14.39   100004.........   01.0696   13.13   100090.........   01.4094   16.46   100199.........   01.4361   18.30
    050698.......................   00.8012  .......  060073..........   00.9705   15.25   100006.........   01.6454   19.01   100092.........   01.4490   16.27   100200.........   01.3447   22.72
    050699.......................   00.6001   23.01   060075..........   01.3327   21.20   100007.........   01.8737   19.63   100093.........   01.5386   15.36   100203.........   01.3411   19.70
    050700.......................   01.4904   32.32   060076..........   01.4838   16.86   100008.........   01.7737   20.00   100098.........   01.1592   18.36   100204.........   01.6730   21.27
    050701.......................   01.3580   29.00   060085..........   00.9510   10.30   100009.........   01.5015   19.22   100099.........   01.2974   13.12   100206.........   01.4404   19.98
    050702.......................   00.9243   19.02   060087..........   01.7036   21.04   100010.........   01.5351   22.50   100102.........   01.0900   17.62   100207.........   01.0774   20.37
    050704.......................   01.0845   20.41   060088..........   01.0231   13.86   100012.........   01.6899   16.77   100103.........   01.0706   15.41   100208.........   01.5784   16.92
    050707.......................   01.0506   25.90   060090..........   00.8731   14.19   100014.........   01.4574   18.79   100105.........   01.4631   18.87   100209.........   01.6095   18.40
    050708.......................   00.9919   27.17   060096..........   01.0859   21.65   100015.........   01.3414   18.06   100106.........   01.1228   16.92   100210.........   01.6357   19.34
    050709.......................   01.3400   20.44   060100..........   01.4754   21.75   100017.........   01.5625   16.86   100107.........   01.4044   18.26   100211.........   01.3504   18.47
    050710.......................   01.3425  .......  060103..........   01.3627   22.66   100018.........   01.3521   20.31   100108.........   01.0646   13.74   100212.........   01.6492   18.75
    050711.......................   02.0900  .......  060104..........   01.2956   21.84   100019.........   01.5370   18.40   100109.........   01.3642   18.44   100213.........   01.5697   18.46
    050712.......................   01.5251  .......  060107..........   01.0652  .......  100020.........   01.3432   20.82   100110.........   01.4230   17.14   100217.........   01.2974  ......
    050713.......................   00.8063  .......  070001..........   01.7289   26.42   100022.........   01.8823   23.14   100112.........   01.0152   12.61   100220.........   01.9425   18.82
    050714.......................   01.3579  .......  070002..........   01.7836   26.03   100023.........   01.3698   16.89   100113.........   02.1189   19.34   100221.........   01.6934   19.65
    050715.......................   02.1945  .......  070003..........   01.1170   25.30   100024.........   01.4033   19.26   100114.........   01.4437   19.70   100222.........   01.3988   18.63
    060001.......................   01.6077   20.29   070004..........   01.2533   23.33   100025.........   01.8800   16.92   100117.........   01.3112   18.77   100223.........   01.4942   17.42
    060003.......................   01.2643   18.34   070005..........   01.4033   25.79   100026.........   01.7115   16.88   100118.........   01.2401   17.18   100224.........   01.4283   21.35
    060004.......................   01.3542   20.06   070006..........   01.3414   28.36   100027.........   00.9127   14.31   100121.........   01.3095   15.75   100225.........   01.4063   20.63
    060006.......................   01.1533   16.89   070007..........   01.4048   23.69   100028.........   01.2619   17.30   100122.........   01.3639   16.54   100226.........   01.4196   17.73
    060007.......................   01.2498   14.98   070008..........   01.2617   23.02   100029.........   01.3384   19.04   100124.........   01.3668   18.33   100228.........   01.3737   20.28
    060008.......................   01.0677   14.75   070009..........   01.3499   23.68   100030.........   01.4021   18.54   100125.........   01.2986   16.50   100229.........   01.3312   16.87
    060009.......................   01.4393   19.81   070010..........   01.6244   23.63   100032.........   01.9493   18.08   100126.........   01.4869   19.41   100230.........   01.4397   19.70
    060010.......................   01.5808   21.74   070011..........   01.3465   25.98   100034.........   01.7164   18.88   100127.........   01.6995   18.39   100231.........   01.6894   16.90
    060011.......................   01.2815   20.17   070012..........   01.2220   23.53   100035.........   01.6455   17.26   100128.........   02.1390   21.19   100232.........   01.2868   18.29
    060012.......................   01.4711   17.66   070013..........   01.3776   26.05   100038.........   01.5655   21.34   100129.........   01.2599   17.91   100234.........   01.5399   19.22
    060013.......................   01.3100   19.42   070015..........   01.4402   24.61   100039.........   01.5702   21.69   100130.........   01.2298   19.48   100235.........   01.4441   18.19
    060014.......................   01.7947   22.41   070016..........   01.3413   24.32   100040.........   01.6728   17.79   100131.........   01.3976   19.68   100236.........   01.4010   18.30
    060015.......................   01.5818   20.04   070017..........   01.3508   24.82   100043.........   01.4510   15.12   100132.........   01.3755   15.46   100237.........   02.1834   21.32
    060016.......................   01.1928   13.66   070018..........   01.4211   27.48   100044.........   01.4336   19.86   100134.........   01.0399   14.63   100238.........   01.5873   17.06
    060018.......................   01.2683   16.89   070019..........   01.1945   25.50   100045.........   01.4240   16.32   100135.........   01.6183   16.63   100239.........   01.4590   19.01
    060020.......................   01.6399   16.15   070020..........   01.3551   25.82   100046.........   01.4939   18.40   100137.........   01.3818   21.08   100240.........   00.9266   19.10
    060022.......................   01.6763   18.46   070021..........   01.2943   25.42   100047.........   01.8198   18.47   100138.........   00.9577   12.12   100241.........   00.9718   13.68
    060023.......................   01.6681   18.98   070022..........   01.8465   24.06   100048.........   00.9769   12.80   100139.........   01.0680   14.97   100242.........   01.4999   16.47
    060024.......................   01.7950   23.68   070024..........   01.3757   24.79   100049.........   01.3204   18.49   100140.........   01.1672   17.64   100243.........   01.4291   17.93
    060027.......................   01.6711   20.38   070025..........   01.8612   25.92   100050.........   01.2284   15.21   100142.........   01.3319   18.12   100244.........   01.4738   18.36
    060028.......................   01.5301   20.69   070026..........   01.1913   25.91   100051.........   01.1799   17.96   100144.........   01.2106   15.29   100246.........   01.4064   21.86
    060029.......................   00.8982   11.90   070027..........   01.2398   25.65   100052.........   01.3791   15.15   100145.........   01.3341   19.01   100248.........   01.7042   17.76
    060030.......................   01.2955   18.79   070028..........   01.5045   24.91   100053.........   01.3588   17.17   100146.........   01.0803   16.01   100249.........   01.3760   19.41
    060031.......................   01.6946   18.97   070029..........   01.4122   22.06   100054.........   01.3015   17.75   100147.........   01.0947   13.18   100252.........   01.2387   19.72
    060032.......................   01.5169   17.36   070030..........   01.3122   26.51   100055.........   01.4205   17.02   100150.........   01.4309   19.30   100253.........   01.4817   19.73
    060033.......................   01.0987   12.53   070031..........   01.2814   22.20   100056.........   01.5137   18.89   100151.........   01.7824   19.37   100254.........   01.6114   17.99
    060034.......................   01.4683   22.34   070033..........   01.3695   26.22   100057.........   01.3921   16.01   100154.........   01.6732   19.96   100255.........   01.2325   19.80
    060036.......................   01.0990   14.70   070034..........   01.3677   27.52   100060.........   01.8118   15.28   100156.........   01.1559   19.34   100256.........   01.9087   18.78
    060037.......................   01.0476   13.16   070035..........   01.4409   23.11   100061.........   01.4753   20.71   100157.........   01.6173   20.46   100258.........   01.6458   21.27
    060038.......................   01.0363   12.96   070036..........   01.6080   27.46   100062.........   01.7555   17.75   100159.........   00.9163   12.79   100259.........   01.4904   17.31
    060041.......................   00.9054   14.99   070038..........   00.6569  .......  100063.........   01.3311   16.56   100160.........   01.2200   18.48   100260.........   01.4650   20.13
    060042.......................   01.1304   16.83   070039..........   00.9101  .......  100067.........   01.4572   16.77   100161.........   01.7317   20.07   100262.........   01.4430   18.60
    060043.......................   00.9371   13.31   080001..........   01.6742   24.79   100068.........   01.3780   16.37   100162.........   01.4422   17.78   100263.........   01.4125   17.42
    060044.......................   01.2746   16.98   080002..........   01.2519   17.15   100069.........   01.3870   17.95   100165.........   01.1791   17.55   100264.........   01.3958   17.27
    060046.......................   01.0985   16.64   080003..........   01.3456   20.79   100070.........   01.4506   18.13   100166.........   01.5356   20.44   100265.........   01.3923   14.58
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46057]]
    
    
                                                                                              Page 4 of 16                                                                                          
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    100266.......................   01.3567   16.53   110066..........   01.5392   18.78   110163.........   01.4700   18.54   130010.........   00.9235   15.97   140043.........   01.2331   17.04
    100267.......................   01.3515   15.67   110069..........   01.2619   19.05   110164.........   01.4737   19.49   130011.........   01.3075   17.11   140045.........   01.0692   13.11
    100268.......................   01.2095   23.23   110070..........   01.0212   12.19   110165.........   01.3694   18.35   130012.........   01.0283   20.53   140046.........   01.3163   14.79
    100269.......................   01.4373   19.39   110071..........   01.1784   10.43   110166.........   01.5345   17.45   130013.........   01.2638   17.73   140047.........   01.1477   14.21
    100270.......................   00.8362   14.31   110072..........   01.0009   12.37   110168.........   01.7282   21.92   130014.........   01.3868   16.50   140048.........   01.4278   22.08
    100271.......................   01.7347   20.00   110073..........   01.2226   13.04   110169.........   01.1751   21.80   130015.........   00.8545   13.50   140049.........   01.5605   20.48
    100275.......................   01.4042   21.30   110074..........   01.4618   18.47   110171.........   01.4770   23.10   130016.........   00.9422   17.37   140051.........   01.5469   19.42
    100276.......................   01.2982   22.26   110075..........   01.3606   15.50   110172.........   01.4150   19.98   130017.........   01.1854   12.16   140052.........   01.3706   18.11
    100277.......................   01.0751   13.03   110076..........   01.4355   19.08   110174.........   00.9636   13.19   130018.........   01.7030   17.05   140053.........   01.9782   18.04
    100279.......................   01.3599   18.73   110078..........   01.7043   20.66   110176.........   01.4585   20.47   130019.........   01.1185   14.30   140054.........   01.3506   24.77
    100280.......................   01.3734   16.76   110079..........   01.4037   19.53   110177.........   01.5652   26.92   130021.........   01.0006   11.89   140055.........   01.0313   12.61
    100281.......................   01.2594   20.52   110080..........   01.2684   18.15   110178.........   01.4061   17.41   130022.........   01.2169   16.88   140058.........   01.2470   15.74
    100282.......................   01.1224   14.86   110082..........   02.0407   20.53   110179.........   01.2257   21.81   130024.........   01.1092   16.52   140059.........   01.1860   13.96
    110001.......................   01.3100   17.26   110083..........   01.7837   20.63   110181.........   00.9756   12.32   130025.........   01.0874   14.90   140061.........   01.0964   14.14
    110002.......................   01.3087   15.75   110086..........   01.2402   16.50   110183.........   01.4248   19.97   130026.........   01.1228   18.80   140062.........   01.2675   25.30
    110003.......................   01.3377   12.66   110087..........   01.3393   19.53   110184.........   01.2670   18.82   130027.........   00.9792   17.34   140063.........   01.4672   24.56
    110004.......................   01.3711   14.62   110088..........   00.9425   12.52   110185.........   01.1241   12.44   130028.........   01.2707   18.86   140064.........   01.3583   17.02
    110005.......................   01.1453   19.77   110089..........   01.2363   16.07   110186.........   01.3818   16.69   130029.........   01.0342   15.77   140065.........   01.5866   23.89
    110006.......................   01.3772   17.90   110091..........   01.3388   20.17   110187.........   01.3395   18.27   130030.........   01.0073   17.62   140066.........   01.3048   14.92
    110007.......................   01.5469   15.29   110092..........   01.1788   12.84   110188.........   01.4320   18.16   130031.........   01.0779   12.21   140067.........   01.7828   18.84
    110008.......................   01.3463   16.25   110093..........   00.9510   12.42   110189.........   01.1175   18.39   130034.........   00.9862   17.80   140068.........   01.2205   18.58
    110009.......................   00.9912   13.65   110094..........   01.0040   11.90   110190.........   01.1014   14.95   130035.........   01.0837   19.75   140069.........   01.0061   14.69
    110010.......................   02.1198   21.49   110095..........   01.3281   14.45   110191.........   01.3767   18.34   130036.........   01.3041   13.11   140070.........   01.2445   16.86
    110011.......................   01.2429   16.73   110096..........   01.1410   13.95   110192.........   01.4551   18.88   130037.........   01.1847   16.09   140074.........   00.9695   14.23
    110013.......................   01.1032   14.97   110097..........   01.0230   13.43   110193.........   01.2501   17.43   130043.........   01.0073   15.45   140075.........   01.4790   20.98
    110014.......................   01.0237   14.25   110098..........   01.0524   12.75   110194.........   01.0069   13.81   130044.........   01.1645   12.49   140077.........   01.1879   16.68
    110015.......................   01.2373   16.42   110100..........   01.0948   12.76   110195.........   01.0547   11.35   130045.........   01.0068   12.07   140079.........   01.2407   19.72
    110016.......................   01.3097   14.79   110101..........   01.1680   11.58   110198.........   01.3714   24.04   130048.........   01.0818   13.31   140080.........   01.6437   21.22
    110017.......................   00.8642   13.54   110103..........   00.9614   10.15   110200.........   01.8297   17.05   130049.........   01.2812   18.00   140081.........   01.0873   13.46
    110018.......................   01.1504   17.79   110104..........   01.0884   14.01   110201.........   01.5086   17.52   130054.........   00.8937   17.61   140082.........   01.4347   19.59
    110020.......................   01.3479   16.21   110105..........   01.1841   14.60   110203.........   00.9967   17.25   130056.........   00.8733   11.05   140083.........   01.2436   17.22
    110023.......................   01.3398   18.43   110107..........   01.8230   18.50   110204.........   00.8066   14.34   130058.........   00.7670   14.21   140084.........   01.2282   18.60
    110024.......................   01.4870   16.41   110108..........   00.9444   11.26   110205.........   01.1252   17.06   130060.........   01.3323   19.41   140086.........   01.0865   14.36
    110025.......................   01.4319   17.54   110109..........   01.0931   13.63   110207.........   01.0857   14.02   130061.........   00.9433  .......  140087.........   01.3968   16.15
    110026.......................   01.2107   14.59   110111..........   01.0973   16.55   110208.........   00.9420   16.97   130062.........   00.6589  .......  140088.........   01.6745   24.52
    110027.......................   01.0937   13.41   110112..........   01.0839   11.88   110209.........   00.7487   16.39   140001.........   01.2820   14.89   140089.........   01.2535   16.59
    110028.......................   01.6530   19.36   110113..........   01.0936   12.40   110211.........   00.8898  .......  140002.........   01.3159   18.78   140090.........   01.5327   27.83
    110029.......................   01.4107   18.29   110114..........   01.0737   14.35   110212.........   01.1691  .......  140003.........   01.0178   14.52   140091.........   01.8062   17.60
    110030.......................   01.3315   17.58   110115..........   01.6022   18.84   110213.........   00.5284  .......  140004.........   01.1142   16.34   140093.........   01.2077   17.01
    110031.......................   01.3091   19.99   110118..........   00.9737   13.49   120001.........   01.8272   25.27   140005.........   00.9615   09.56   140094.........   01.3943   19.46
    110032.......................   01.2694   12.68   110120..........   01.0244   12.28   120002.........   01.1994   21.80   140007.........   01.4823   21.10   140095.........   01.4094   20.09
    110033.......................   01.4346   19.79   110121..........   01.2007   12.83   120003.........   01.0674   22.69   140008.........   01.5818   19.43   140097.........   00.9670   12.49
    110034.......................   01.6452   17.89   110122..........   01.3894   16.17   120004.........   01.2661   21.72   140010.........   01.3786   22.90   140100.........   01.2485   18.78
    110035.......................   01.4345   20.02   110124..........   01.0847   15.63   120005.........   01.2518   18.94   140011.........   01.1969   16.24   140101.........   01.2227   18.49
    110036.......................   01.6988   18.37   110125..........   01.2361   15.97   120006.........   01.3096   24.62   140012.........   01.2719   18.60   140102.........   01.1121   14.37
    110037.......................   01.1697   11.02   110127..........   00.9362   18.26   120007.........   01.6811   20.90   140013.........   01.5844   15.59   140103.........   01.3623   16.25
    110038.......................   01.4667   15.98   110128..........   01.1766   19.01   120009.........   01.0424   20.40   140014.........   01.1687   16.19   140105.........   01.3043   20.28
    110039.......................   01.3795   18.62   110129..........   01.7851   15.69   120010.........   01.8716   22.71   140015.........   01.2876   14.20   140107.........   01.0708   11.82
    110040.......................   01.1215   15.52   110130..........   01.1632   11.11   120011.........   01.2451   31.56   140016.........   00.9556   11.89   140108.........   01.3553   21.81
    110041.......................   01.2723   15.82   110132..........   01.1253   12.99   120012.........   00.8969   20.20   140018.........   01.3988   19.38   140109.........   01.1761   13.08
    110042.......................   01.2739   14.92   110134..........   00.8917   12.19   120014.........   01.4437   22.59   140019.........   01.1687   12.65   140110.........   01.1910   17.31
    110043.......................   01.7887   16.83   110135..........   01.2956   14.04   120015.........   00.9237   22.77   140024.........   01.0067   13.99   140112.........   01.2391   13.42
    110044.......................   01.1492   14.51   110136..........   01.1900   17.74   120016.........   00.8833   24.58   140025.........   01.0608   16.65   140113.........   01.5191   17.90
    110045.......................   01.3219   21.18   110140..........   01.0284   16.75   120018.........   00.9540   20.92   140026.........   01.2846   15.90   140114.........   01.3524   19.55
    110046.......................   01.3460   17.14   110141..........   00.9531   12.29   120019.........   01.2500   19.16   140027.........   01.3405   16.37   140115.........   01.3228   19.66
    110048.......................   01.3732   13.59   110142..........   00.9502   11.78   120021.........   00.9273   18.74   140029.........   01.3589   21.43   140116.........   01.3016   20.98
    110049.......................   01.1274   14.58   110143..........   01.4557   20.77   120022.........   01.7000   20.74   140030.........   01.8079   21.56   140117.........   01.5393   20.42
    110050.......................   01.2024   13.35   110144..........   01.1608   17.41   120026.........   01.2756   24.26   140031.........   01.2719   13.76   140118.........   01.6536   23.74
    110051.......................   01.0340   16.68   110146..........   01.1436   15.09   120027.........   01.5804   23.43   140032.........   01.2657   16.71   140119.........   01.7239   23.27
    110052.......................   01.1173   10.83   110149..........   01.1587   16.88   120028.........   01.0146  .......  140033.........   01.2783   19.82   140120.........   01.4592   15.45
    110054.......................   01.3574   16.85   110150..........   01.3259   17.62   130001.........   01.0126   15.75   140034.........   01.1745   17.31   140121.........   01.5391   11.54
    110056.......................   01.1733   14.40   110152..........   01.1022   14.44   130002.........   01.4330   15.30   140035.........   00.9305   11.22   140122.........   01.6581   21.47
    110059.......................   01.3155   13.38   110153..........   01.0153   19.87   130003.........   01.3679   19.28   140036.........   01.2088   16.60   140124.........   01.2722   23.81
    110061.......................   01.0721   12.61   110154..........   00.8230   13.98   130005.........   01.5281   19.70   140037.........   01.1042   12.49   140125.........   01.3597   15.71
    110062.......................   00.8945   10.97   110155..........   01.0562   13.62   130006.........   01.8420   17.59   140038.........   01.1785   16.23   140127.........   01.3922   17.32
    110063.......................   01.1481   12.76   110156..........   01.0376   12.34   130007.........   01.6306   18.20   140040.........   01.2942   14.72   140128.........   01.1103   14.92
    110064.......................   01.3339   17.46   110161..........   01.3272   21.00   130008.........   01.0035   11.00   140041.........   01.3305   16.02   140129.........   01.2226   14.94
    110065.......................   01.0391   13.40   110162..........   00.8006  .......  130009.........   00.9620   10.74   140042.........   01.0137   14.16   140130.........   01.3646   21.74
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                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    140132.......................   01.4451   19.03   140230..........   00.9258   10.84   150043.........   01.0838   21.96   150127.........   01.0241   13.90   160073.........   00.9761   12.18
    140133.......................   01.3392   21.21   140231..........   01.5927   20.80   150044.........   01.2610   18.32   150128.........   01.2162   19.14   160074.........   01.0986   14.36
    140135.......................   01.3065   14.91   140233..........   01.7888   18.47   150045.........   01.0998   15.68   150129.........   01.2317   22.47   160075.........   01.1442   13.73
    140137.......................   01.0630   14.58   140234..........   01.2898   16.47   150046.........   01.5284   15.90   150130.........   01.3599   16.61   160076.........   01.0731   15.50
    140138.......................   00.9835   12.15   140236..........   00.9644   13.24   150047.........   01.5639   22.77   150132.........   01.4214   19.24   160077.........   01.1723   10.60
    140139.......................   01.1361   14.70   140239..........   01.6836   18.73   150048.........   01.2057   16.52   150133.........   01.2178   14.12   160079.........   01.4096   16.28
    140140.......................   01.1398   13.06   140240..........   01.4851   20.44   150049.........   01.1663   13.29   150134.........   01.1751   17.17   160080.........   01.2022   16.06
    140141.......................   01.2514   13.76   140242..........   01.6293   21.68   150050.........   01.2047   14.73   150136.........   01.0683   18.42   160081.........   01.0670   14.77
    140143.......................   01.1478   16.64   140245..........   01.1694   14.47   150051.........   01.4788   18.34   150138.........   01.2073   17.33   160082.........   01.8242   17.03
    140144.......................   01.0291   17.83   140246..........   01.0832   12.05   150052.........   01.1504   14.14   150139.........   01.4731   14.62   160083.........   01.6850   18.37
    140145.......................   01.1791   15.14   140250..........   01.3797   21.98   150053.........   01.0508   18.10   160001.........   01.2891   17.61   160085.........   01.0802   11.50
    140146.......................   01.0442   16.38   140251..........   01.3829   19.16   150054.........   01.1554   12.55   160002.........   01.1697   13.74   160086.........   00.9984   13.93
    140147.......................   01.2801   16.29   140252..........   01.4473   23.41   150056.........   01.7839   22.38   160003.........   01.0195   12.61   160088.........   01.1633   12.75
    140148.......................   01.8518   17.11   140253..........   01.4156   17.49   150057.........   02.3206   18.94   160005.........   01.1311   13.80   160089.........   01.1873   14.80
    140150.......................   01.6279   25.55   140258..........   01.5772   20.93   150058.........   01.7195   19.57   160007.........   01.0323   12.37   160090.........   00.9797   15.58
    140151.......................   01.1103   16.64   140271..........   01.0850   13.01   150059.........   01.4121   19.81   160008.........   01.1305   14.02   160091.........   01.0810   10.80
    140152.......................   01.1184   22.91   140275..........   01.2390   16.50   150060.........   01.1657   14.93   160009.........   01.2378   13.73   160092.........   01.0879   13.23
    140155.......................   01.2969   16.96   140276..........   01.9603   21.37   150061.........   01.2378   15.73   160012.........   01.0294   13.15   160093.........   01.2058   13.86
    140158.......................   01.3077   21.36   140280..........   01.3142   17.16   150062.........   01.0996   16.55   160013.........   01.2266   15.35   160094.........   01.1302   14.17
    140160.......................   01.2232   15.93   140281..........   01.6474   20.89   150063.........   01.0938   17.57   160014.........   01.0125   12.59   160095.........   01.0915   12.79
    140161.......................   01.2168   17.76   140285..........   01.2802   15.37   150064.........   01.2141   15.84   160016.........   01.2505   16.32   160097.........   01.1409   13.00
    140162.......................   01.7542   17.96   140286..........   01.1253   17.93   150065.........   01.1631   18.49   160018.........   00.9298   13.27   160098.........   00.9679   14.81
    140164.......................   01.3924   17.44   140288..........   01.8518   23.17   150066.........   00.9993   15.93   160020.........   01.0718   12.38   160099.........   00.9671   11.69
    140165.......................   01.1383   12.90   140289..........   01.3190   15.79   150067.........   01.1295   15.48   160021.........   01.0703   13.57   160101.........   01.1730   18.64
    140166.......................   01.3636   17.21   140290..........   01.4617   21.07   150069.........   01.2618   16.90   160023.........   01.0386   12.35   160102.........   01.3886   17.51
    140167.......................   01.1286   14.97   140291..........   01.4126   22.95   150070.........   01.0279   14.83   160024.........   01.5221   18.06   160103.........   01.0399   13.57
    140168.......................   01.1895   15.57   140292..........   01.1602   20.63   150071.........   01.1162   13.86   160026.........   01.0593   14.43   160104.........   01.3168   17.37
    140170.......................   01.1141   12.53   140294..........   01.1859   16.20   150072.........   01.2089   15.48   160027.........   01.1570   13.19   160106.........   01.0620   14.03
    140171.......................   00.9150   13.87   140297..........   01.5673   27.06   150073.........   01.0134   19.47   160028.........   01.3255   17.39   160107.........   01.1797   14.12
    140172.......................   01.6091   18.71   140300..........   01.4471   18.71   150074.........   01.5964   18.80   160029.........   01.5134   18.14   160108.........   01.2018   14.95
    140173.......................   00.9277   13.77   150001..........   01.1125   17.36   150075.........   01.1711   14.49   160030.........   01.3852   17.37   160109.........   01.0406   12.35
    140174.......................   01.5683   18.33   150002..........   01.5434   18.35   150076.........   01.2164   20.39   160031.........   01.1197   13.37   160110.........   01.5234   17.97
    140176.......................   01.3064   21.33   150003..........   01.7180   19.57   150077.........   01.1796   16.58   160032.........   01.0998   15.56   160111.........   01.0272   11.04
    140177.......................   01.1644   16.52   150004..........   01.4342   19.97   150078.........   01.0840   15.66   160033.........   01.7885   16.80   160112.........   01.4213   15.00
    140179.......................   01.3195   20.12   150005..........   01.1913   18.43   150079.........   01.1368   13.96   160034.........   01.2092   14.53   160113.........   01.0022   12.03
    140180.......................   01.5086   21.03   150006..........   01.2242   17.31   150082.........   01.5181   17.44   160035.........   01.0318   12.57   160114.........   01.0662   14.21
    140181.......................   01.3825   19.20   150007..........   01.2036   17.98   150084.........   01.8769   22.28   160036.........   00.9707   14.66   160115.........   01.0262   14.32
    140182.......................   01.3711   20.67   150008..........   01.3534   20.70   150086.........   01.3365   16.45   160037.........   01.1614   15.14   160116.........   01.1790   15.68
    140184.......................   01.2542   14.26   150009..........   01.3747   17.26   150088.........   01.3466   17.20   160039.........   01.0809   15.84   160117.........   01.4518   15.96
    140185.......................   01.4152   16.78   150010..........   01.1825   15.87   150089.........   01.4284   18.43   160040.........   01.3187   16.30   160118.........   01.0205   13.15
    140186.......................   01.3530   17.75   150011..........   01.2266   17.83   150090.........   01.2517   18.72   160041.........   01.0854   13.45   160120.........   01.0296   10.62
    140187.......................   01.4893   16.54   150012..........   01.6946   21.01   150091.........   01.1381   15.75   160043.........   01.0374   13.44   160122.........   01.1314   16.24
    140188.......................   01.0402   10.77   150013..........   01.1254   13.90   150092.........   01.0304   15.04   160044.........   01.3190   13.86   160123.........   01.0588   13.19
    140189.......................   01.1952   16.64   150014..........   01.5059   20.39   150094.........   01.0148   16.85   160045.........   01.7651   17.72   160124.........   01.2799   15.87
    140190.......................   01.1402   15.99   150015..........   01.2169   18.32   150095.........   01.1048   17.97   160046.........   01.0014   12.75   160126.........   01.0198   13.59
    140191.......................   01.4511   21.87   150017..........   01.8651   17.20   150096.........   01.1653   17.34   160047.........   01.3677   15.37   160129.........   01.0290   13.75
    140193.......................   01.0432   13.31   150018..........   01.2899   18.23   150097.........   01.1381   17.09   160048.........   01.0373   11.54   160130.........   01.1777   13.02
    140197.......................   01.2610   16.96   150019..........   01.1022   15.47   150098.........   01.1494   13.03   160049.........   00.9485   12.21   160131.........   01.0519   13.55
    140199.......................   01.1014   15.72   150020..........   01.1488   12.96   150099.........   01.2905   17.79   160050.........   01.0755   14.64   160134.........   01.0482   11.84
    140200.......................   01.4765   21.79   150021..........   01.6386   18.34   150100.........   01.7163   17.65   160051.........   00.9646   13.54   160135.........   01.0968   13.67
    140202.......................   01.3540   19.71   150022..........   01.0910   16.65   150101.........   01.1111   14.50   160052.........   01.0875   14.79   160138.........   01.1290   14.36
    140203.......................   01.1609   19.32   150023..........   01.5116   18.19   150102.........   01.0431   14.93   160054.........   01.0755   12.37   160140.........   01.1716   14.76
    140205.......................   00.8789   13.64   150024..........   01.4348   15.82   150103.........   01.0075   15.02   160055.........   00.9798   12.37   160142.........   01.0866   13.98
    140206.......................   01.1121   20.81   150025..........   01.3892   17.57   150104.........   01.0990   15.63   160056.........   01.0863   13.11   160143.........   01.0270   14.24
    140207.......................   01.3959   20.01   150026..........   01.1868   18.29   150105.........   01.3508   16.20   160057.........   01.3465   16.15   160145.........   01.1210   14.16
    140208.......................   01.6948   24.07   150027..........   01.0461   15.55   150106.........   01.0805   16.06   160058.........   01.7461   19.00   160146.........   01.4322   14.59
    140209.......................   01.6697   15.99   150029..........   01.3137   20.17   150109.........   01.4613   16.85   160060.........   01.0442   13.44   160147.........   01.3056   16.09
    140210.......................   01.1194   14.00   150030..........   01.2098   16.69   150110.........   01.0000   17.16   160061.........   01.0428   14.27   160151.........   01.0503   13.74
    140211.......................   01.1916   20.84   150031..........   01.0741   15.56   150111.........   01.1642   14.02   160062.........   00.9492   12.22   160152.........   00.9935   13.78
    140212.......................   01.2953   22.47   150032..........   01.8880   19.50   150112.........   01.3074   17.80   160063.........   01.1653   15.88   160153.........   01.7437   17.53
    140213.......................   01.2782   22.67   150033..........   01.6073   21.09   150113.........   01.2230   17.88   160064.........   01.7113   17.38   170001.........   01.1849   16.35
    140215.......................   01.1308   13.49   150034..........   01.3884   21.18   150114.........   01.0122   14.58   160065.........   01.0284   14.73   170004.........   01.0730   13.57
    140217.......................   01.3185   21.67   150035..........   01.5318   18.97   150115.........   01.3808   17.55   160066.........   01.1723   14.74   170006.........   01.1492   15.02
    140218.......................   00.9966   13.65   150036..........   01.0412   17.43   150122.........   01.1253   17.11   160067.........   01.4125   17.13   170008.........   01.0265   14.53
    140220.......................   01.0925   15.16   150037..........   01.2684   18.20   150123.........   01.2043   12.98   160068.........   01.0660   13.52   170009.........   01.1988   16.31
    140223.......................   01.6457   28.66   150038..........   01.4044   17.22   150124.........   01.1085   15.97   160069.........   01.4620   16.42   170010.........   01.2496   15.77
    140224.......................   01.3885   22.97   150039..........   00.9657   16.33   150125.........   01.3906   18.69   160070.........   01.0507   14.47   170011.........   01.2378   15.40
    140228.......................   01.6939   18.22   150042..........   01.2975   16.00   150126.........   01.5082   20.17   160072.........   01.0756   11.60   170012.........   01.4732   16.08
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46059]]
    
    
                                                                                              Page 6 of 16                                                                                          
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    170013.......................   01.3228   15.33   170098..........   01.0500   17.00   180023.........   00.8812   13.12   180122.........   01.0903   15.01   190088.........   01.3480  ......
    170014.......................   01.0365   16.40   170099..........   01.2666   11.34   180024.........   01.3911   17.24   180123.........   01.4774   20.98   190089.........   01.0784   11.47
    170015.......................   01.0652   14.36   170100..........   00.9917   14.47   180025.........   01.2141   17.17   180124.........   01.4878   16.52   190090.........   01.1650   16.84
    170016.......................   01.6876   19.52   170101..........   00.9485   13.26   180026.........   01.2402   12.39   180125.........   00.9976   16.46   190092.........   01.3982  ......
    170017.......................   01.2527   15.34   170102..........   00.9926   13.11   180027.........   01.2873   15.58   180126.........   01.2371   12.22   190095.........   01.0677   14.66
    170018.......................   01.1576   13.13   170103..........   01.2089   15.62   180028.........   00.9959   16.39   180127.........   01.4053   17.22   190098.........   01.5464   18.86
    170019.......................   01.2248   15.65   170104..........   01.4508   19.81   180029.........   01.2772   15.97   180128.........   01.1761   16.64   190099.........   01.1522   17.98
    170020.......................   01.2898   14.98   170105..........   01.0962   15.91   180030.........   01.2383   13.31   180129.........   01.0116   14.45   190102.........   01.5617   17.77
    170022.......................   01.1756   14.80   170106..........   00.8948   12.18   180031.........   01.2070   12.60   180130.........   01.4718   17.91   190103.........   00.8823   09.75
    170023.......................   01.4656   16.42   170109..........   01.0364   14.50   180032.........   00.9250   15.83   180132.........   01.2950   15.20   190106.........   01.1721   17.69
    170024.......................   01.1515   12.84   170110..........   00.9577   13.67   180033.........   01.1365   12.86   180133.........   01.3505   24.67   190109.........   01.2153   13.50
    170025.......................   01.2269   15.81   170112..........   00.9853   13.90   180034.........   01.2655   14.14   180134.........   01.0389   13.87   190110.........   00.9437   12.43
    170026.......................   01.0417   12.83   170113..........   01.1475   14.95   180035.........   01.5526   18.73   180136.........   01.6029   16.47   190111.........   01.5997   18.33
    170027.......................   01.3447   15.50   170114..........   01.0128   13.80   180036.........   01.2050   17.11   180137.........   01.8119   18.38   190112.........   01.5901   19.46
    170030.......................   01.0153   13.99   170115..........   01.0238   11.34   180037.........   01.3414   19.79   180138.........   01.2091   17.99   190113.........   01.3584   18.49
    170031.......................   00.9092   12.62   170116..........   01.0473   15.74   180038.........   01.4104   15.04   180139.........   01.1543   18.64   190114.........   01.0182   12.20
    170032.......................   01.1647   14.89   170117..........   00.9415   13.50   180040.........   02.0226   19.20   180140.........   00.8743  .......  190115.........   01.2236   18.33
    170033.......................   01.3701   14.59   170119..........   00.9812   12.09   180041.........   01.1036   13.42   180141.........   01.8022  .......  190116.........   01.1871  ......
    170034.......................   00.9962   14.61   170120..........   01.2988   16.06   180042.........   01.1987   13.59   190001.........   00.8702   17.98   190118.........   01.0964   12.38
    170035.......................   00.8580   14.82   170122..........   01.7447   19.93   180043.........   01.0028   15.84   190002.........   01.6861   18.15   190120.........   01.0003   13.75
    170036.......................   00.9007   13.19   170123..........   01.7667   19.02   180044.........   01.1644   16.29   190003.........   01.3867   17.41   190122.........   01.2265   15.70
    170037.......................   01.2485   16.31   170124..........   01.0109   14.25   180045.........   01.2627   16.79   190004.........   01.4153   15.24   190124.........   01.6508   20.23
    170038.......................   00.9237   11.46   170126..........   00.9445   11.50   180046.........   01.2348   16.65   190005.........   01.6473   17.60   190125.........   01.5592   17.99
    170039.......................   01.1505   13.62   170128..........   00.9794   14.42   180047.........   01.0286   13.80   190006.........   01.2974   14.32   190128.........   01.0852   18.56
    170040.......................   01.6026   18.83   170131..........   01.2140   09.38   180048.........   01.2851   16.17   190007.........   01.0081   13.52   190130.........   01.0318   12.09
    170041.......................   00.9985   11.29   170133..........   01.1285   14.20   180049.........   01.3320   15.45   190008.........   01.6674   17.72   190131.........   01.2019   16.12
    170043.......................   01.0095   13.49   170134..........   00.9462   12.48   180050.........   01.2528   16.12   190009.........   01.1614   13.79   190133.........   00.9749   12.08
    170044.......................   01.1045   14.42   170137..........   01.1888   17.30   180051.........   01.4299   14.78   190010.........   01.0337   16.62   190134.........   01.0188   14.79
    170045.......................   01.0555   10.72   170139..........   01.0392   11.82   180053.........   01.0895   14.30   190011.........   01.1664   14.41   190135.........   01.4616   22.58
    170049.......................   01.2898   18.28   170142..........   01.3501   16.49   180054.........   01.1107   13.76   190013.........   01.3986   15.95   190136.........   01.2005   11.22
    170051.......................   00.9202   13.66   170143..........   01.1128   13.82   180055.........   01.1648   14.00   190014.........   01.1133   15.35   190138.........   00.8846   17.51
    170052.......................   01.0589   12.60   170144..........   01.6127   14.73   180056.........   01.0761   16.38   190015.........   01.2521   17.78   190140.........   01.0146   12.16
    170053.......................   00.9478   15.39   170145..........   01.1395   14.83   180058.........   00.9870   12.63   190017.........   01.4478   16.02   190142.........   00.9041   12.39
    170054.......................   01.0865   13.19   170146..........   01.5244   19.54   180059.........   00.9160   12.59   190018.........   01.1910   15.92   190144.........   01.3101   15.22
    170055.......................   01.0974   14.55   170147..........   01.2724   20.70   180060.........   01.0317   10.17   190019.........   01.6081   18.39   190145.........   00.9987   13.66
    170056.......................   00.9193   13.72   170148..........   01.4120   17.64   180063.........   00.9916   10.79   190020.........   01.1829   15.85   190146.........   01.6349   19.61
    170057.......................   01.0283   13.90   170150..........   01.0938   13.41   180064.........   01.3317   14.03   190025.........   01.3560   13.62   190147.........   01.0237   13.69
    170058.......................   01.1682   15.80   170151..........   01.0380   11.66   180065.........   01.0472   10.82   190026.........   01.4931   16.17   190148.........   00.9081   12.77
    170060.......................   01.0543   13.41   170152..........   00.9840   12.99   180066.........   01.1561   18.09   190027.........   01.5790   16.49   190149.........   01.0591   11.47
    170061.......................   01.1320   12.90   170160..........   00.9790   11.17   180067.........   01.8053   16.40   190029.........   01.1538   15.40   190151.........   01.2260   11.73
    170063.......................   00.8933   10.92   170164..........   00.9859   14.42   180069.........   01.0138   15.33   190033.........   00.9378   09.66   190152.........   01.5161   21.27
    170064.......................   01.0420   12.09   170166..........   01.2016   13.65   180070.........   01.1195   14.66   190034.........   01.2429  .......  190155.........   01.0392   12.29
    170066.......................   00.9793   12.58   170168..........   00.9222   09.33   180072.........   01.0649   13.91   190035.........   01.3660  .......  190156.........   00.8732   11.99
    170067.......................   01.1302   11.76   170171..........   01.0731   11.22   180075.........   01.0012   14.13   190036.........   01.6990   19.10   190158.........   01.1877   21.59
    170068.......................   01.3080   15.24   170175..........   01.3540   17.53   180078.........   01.1591   17.57   190037.........   00.8934   10.84   190160.........   01.3255   17.03
    170069.......................   00.8338   14.01   170176..........   01.6200   19.83   180079.........   01.3352   13.03   190039.........   01.4034   17.21   190161.........   01.1212   12.65
    170070.......................   01.0108   12.56   170182..........   01.2299   19.43   180080.........   01.0543   15.57   190040.........   01.4397   19.32   190162.........   01.0388   18.47
    170073.......................   01.0663   14.67   170183..........   02.0361  .......  180085.........   02.2480   17.70   190041.........   01.5692   19.72   190164.........   01.2269   16.05
    170074.......................   01.2456   14.34   170184..........   01.1905  .......  180087.........   01.1722   13.74   190043.........   01.0383   11.79   190166.........   00.9327   14.04
    170075.......................   00.9439   10.67   180001..........   01.2323   17.03   180088.........   01.5598   19.99   190044.........   01.1678   17.11   190167.........   01.2338   18.49
    170076.......................   01.0546   11.60   180002..........   01.0634   16.78   180092.........   01.2627   15.25   190045.........   01.4070   20.17   190170.........   00.9454   13.08
    170077.......................   00.9418   12.07   180004..........   01.1027   14.47   180093.........   01.3756   16.05   190046.........   01.4636   17.58   190173.........   01.4730   20.12
    170079.......................   01.0260   12.66   180005..........   01.1767   18.54   180094.........   01.0358   11.51   190048.........   01.2833   13.72   190175.........   01.3200   20.26
    170080.......................   00.9806   10.65   180006..........   00.9857   08.51   180095.........   01.2459   12.94   190049.........   00.9962   15.70   190176.........   01.7427   19.11
    170081.......................   01.0204   10.44   180007..........   01.5365   16.29   180099.........   01.3192   12.31   190050.........   01.0311   14.58   190177.........   01.6579   22.84
    170082.......................   01.0284   10.80   180009..........   01.4058   19.11   180101.........   01.3237   18.01   190053.........   01.0753   12.11   190178.........   00.9581   10.87
    170084.......................   00.9539   10.93   180010..........   01.8565   18.19   180102.........   01.4761   16.43   190054.........   01.3375   14.09   190182.........   00.9681   20.02
    170085.......................   00.9648   12.69   180011..........   01.2791   15.29   180103.........   02.1571   17.93   190059.........   00.9187   13.44   190183.........   01.1238   14.79
    170086.......................   01.7259   18.50   180012..........   01.4064   17.51   180104.........   01.5751   18.07   190060.........   01.4553   15.43   190184.........   01.0796   13.09
    170087.......................   16.1090   18.78   180013..........   01.4569   16.63   180105.........   01.0042   12.82   190064.........   01.6010   18.33   190185.........   01.3600   18.53
    170088.......................   00.9759   10.80   180014..........   01.7118   19.99   180106.........   00.8943   12.27   190065.........   01.4987   14.71   190186.........   00.9457   13.16
    170089.......................   00.9506   15.53   180015..........   01.3127   15.02   180108.........   00.8561   13.54   190071.........   00.8980   12.15   190189.........   01.0752   13.17
    170090.......................   01.0397   09.80   180016..........   01.3243   14.50   180115.........   01.0271   15.07   190077.........   00.9526   13.65   190190.........   00.9250   12.66
    170092.......................   00.8270   11.80   180017..........   01.3423   13.87   180116.........   01.4484   15.66   190078.........   01.1690   11.60   190191.........   01.3301   17.54
    170093.......................   00.9986   11.76   180018..........   01.2533   14.59   180117.........   01.1145   17.03   190079.........   01.2555   16.98   190196.........   00.8663   16.29
    170094.......................   00.9536   15.42   180019..........   01.3260   16.70   180118.........   01.0362   12.03   190081.........   00.9078   10.23   190197.........   01.2380   18.98
    170095.......................   01.1349   13.69   180020..........   01.0728   15.86   180120.........   01.0568   13.12   190083.........   01.0600   15.02   190199.........   01.1999   16.26
    170097.......................   01.0695   13.17   180021..........   01.1131   13.69   180121.........   01.2249   13.68   190086.........   01.4128   15.47   190200.........   01.5575   21.70
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46060]]
    
    
                                                                                              Page 7 of 16                                                                                          
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    190201.......................   01.2734   18.93   210015..........   01.2807   18.58   220051.........   01.2093   20.56   230019.........   01.5032   22.60   230118.........   01.2187   16.37
    190202.......................   01.4760   17.85   210016..........   01.7192   23.30   220052.........   01.3214   23.88   230020.........   01.7231   22.21   230119.........   01.3042   22.31
    190203.......................   01.5075   20.83   210017..........   01.2275   14.51   220053.........   01.2594   19.48   230021.........   01.6150   17.90   230120.........   01.1809   17.47
    190204.......................   01.5863   20.85   210018..........   01.2493   21.26   220055.........   01.3462   23.52   230022.........   01.3615   18.27   230121.........   01.2510   19.69
    190205.......................   01.9236   17.90   210019..........   01.4990   18.17   220057.........   01.4076   21.39   230024.........   01.4369   23.71   230122.........   01.4028   19.20
    190206.......................   01.5515   21.53   210022..........   01.4499   20.79   220058.........   01.0836   16.26   230027.........   01.1510   15.73   230124.........   01.1633   16.89
    190207.......................   01.2969   16.42   210023..........   01.3678   20.78   220060.........   01.3041   25.32   230029.........   01.5797   20.36   230125.........   01.2952   14.51
    190208.......................   00.8122   11.17   210024..........   01.5604   19.73   220062.........   00.5838   18.49   230030.........   01.2204   16.47   230128.........   01.3852   21.24
    190218.......................   01.1988   15.33   210025..........   01.4143   18.21   220063.........   01.2285   19.40   230031.........   01.4361   19.72   230129.........   01.7824   19.92
    190223.......................   00.4249   16.58   210026..........   01.3749   19.52   220064.........   01.2338   20.51   230032.........   01.7412   19.08   230130.........   01.6730   23.74
    190227.......................   00.8255   10.56   210027..........   01.3029   18.58   220065.........   01.2265   19.58   230034.........   01.2288   17.99   230132.........   01.4154   23.25
    190231.......................   01.3079   16.00   210028..........   01.2217   17.19   220066.........   01.3350   20.73   230035.........   01.1178   16.17   230133.........   01.2207   15.07
    190233.......................   02.1157  .......  210029..........   01.3174   17.99   220067.........   01.2868   22.58   230036.........   01.2775   18.79   230134.........   01.1074   17.91
    190234.......................   01.0506  .......  210030..........   01.1539   19.44   220068.........   00.5263   16.67   230037.........   01.1284   17.40   230135.........   01.2642   20.25
    190235.......................   01.2869  .......  210031..........   01.5487   16.42   220070.........   01.2498   18.77   230038.........   01.7083   21.21   230137.........   01.1949   18.51
    190236.......................   01.2668  .......  210032..........   01.1789   17.90   220071.........   01.9236   21.67   230040.........   01.2243   20.53   230141.........   01.6822   22.44
    200001.......................   01.3804   16.92   210033..........   01.2620   18.58   220073.........   01.4101   24.14   230041.........   01.2174   20.75   230142.........   01.2188   18.90
    200002.......................   01.0723   17.70   210034..........   01.3689   20.34   220074.........   01.1894   22.82   230042.........   01.2231   19.32   230143.........   01.3145   16.58
    200003.......................   01.0974   16.02   210035..........   01.2687   18.11   220075.........   01.2619   19.51   230046.........   01.8844   25.32   230144.........   01.2250   21.19
    200006.......................   01.0590   14.97   210037..........   01.2433   17.38   220076.........   01.1859   25.46   230047.........   01.3420   20.37   230145.........   01.1856   15.96
    200007.......................   01.1251   17.01   210038..........   01.3320   21.63   220077.........   01.7917   22.92   230053.........   01.6445   24.16   230146.........   01.3105   19.56
    200008.......................   01.2258   20.19   210039..........   01.1897   17.55   220079.........   01.1692   21.68   230054.........   01.8208   21.45   230147.........   01.4445   19.70
    200009.......................   01.8129   19.95   210040..........   01.3323   21.01   220080.........   01.2719   19.58   230055.........   01.1628   18.26   230149.........   01.1767   15.51
    200012.......................   01.1117   16.55   210043..........   01.3063   21.32   220081.........   01.0044   24.81   230056.........   00.9866   14.55   230151.........   01.3931   22.02
    200013.......................   01.1261   15.69   210044..........   01.2665   19.38   220082.........   01.3096   23.04   230058.........   01.1539   18.69   230153.........   01.1329   19.70
    200015.......................   01.2305   17.41   210045..........   01.0746   11.42   220083.........   01.1972   20.43   230059.........   01.4456   19.01   230154.........   00.9371   12.43
    200016.......................   01.0109   15.76   210048..........   01.2050   23.30   220084.........   01.3134   23.23   230060.........   01.3047   17.97   230155.........   00.9383   16.62
    200017.......................   01.2501   17.94   210049..........   01.1551   17.77   220086.........   01.6491   26.01   230062.........   01.0249   14.41   230156.........   01.7141   22.91
    200018.......................   01.1961   15.20   210051..........   01.4237   20.03   220088.........   01.6090   22.68   230063.........   01.3178   19.15   230157.........   01.2020   20.15
    200019.......................   01.2392   18.59   210054..........   01.3311   21.05   220089.........   01.3337   22.69   230065.........   01.3391   19.44   230159.........   01.5106   19.64
    200020.......................   01.1405   20.96   210055..........   01.2655   24.26   220090.........   01.2575   20.95   230066.........   01.3879   20.58   230162.........   01.0467   15.60
    200021.......................   01.1723   17.78   210056..........   01.3809   17.67   220092.........   01.2336   20.66   230068.........   01.4483   22.15   230165.........   01.8519   21.91
    200023.......................   00.9047   16.15   210057..........   01.4140   25.76   220094.........   01.4156   19.82   230069.........   01.1621   21.95   230167.........   01.7996   19.23
    200024.......................   01.3279   19.84   210058..........   01.5351   18.09   220095.........   01.2483   19.06   230070.........   01.5713   19.57   230169.........   01.3465   20.88
    200025.......................   01.0790   19.51   210059..........   01.2620   21.44   220098.........   01.2576   19.71   230071.........   01.1340   22.00   230171.........   01.0260   14.42
    200026.......................   01.0265   15.97   210060..........   01.1836   23.61   220100.........   01.2637   23.69   230072.........   01.2305   19.32   230172.........   01.2797   18.87
    200027.......................   01.1183   17.27   210061..........   01.1780   17.65   220101.........   01.4392   23.41   230075.........   01.4720   19.41   230174.........   01.2978   19.50
    200028.......................   00.9729   16.24   220001..........   01.2880   21.80   220104.........   01.3000   24.79   230076.........   01.3501   22.67   230175.........   03.1496   11.15
    200031.......................   01.2812   15.26   220002..........   01.5420   23.02   220105.........   01.2698   22.16   230077.........   02.0635   18.62   230176.........   01.2352   20.69
    200032.......................   01.3456   18.90   220003..........   01.0746   16.71   220106.........   01.2620   22.14   230078.........   01.1336   15.79   230178.........   01.0050   17.92
    200033.......................   01.7912   20.16   220004..........   01.1627   18.66   220107.........   01.1929   19.21   230080.........   01.2285   20.74   230180.........   01.1057   15.79
    200034.......................   01.2381   18.05   220006..........   01.4307   21.04   220108.........   01.1992   21.13   230081.........   01.2949   16.73   230184.........   01.1534   17.45
    200037.......................   01.1963   16.09   220008..........   01.2955   20.45   220110.........   02.0108   31.74   230082.........   01.2055   15.97   230186.........   01.2243   17.37
    200038.......................   01.1101   18.23   220010..........   01.3125   21.44   220111.........   01.2703   21.76   230085.........   01.1164   17.76   230188.........   01.1813   16.01
    200039.......................   01.2718   19.03   220011..........   01.1494   27.00   220116.........   02.0069   24.40   230086.........   01.0061   14.88   230189.........   00.9246   14.93
    200040.......................   01.1080   17.37   220012..........   01.3759   30.46   220118.........   02.0709   27.44   230087.........   01.0463   17.12   230190.........   01.0342   20.21
    200041.......................   01.0933   16.19   220015..........   01.2323   20.94   220119.........   01.3231   24.27   230089.........   01.2842   21.86   230191.........   00.9118   16.65
    200043.......................   00.5276   16.46   220016..........   01.3819   20.87   220123.........   01.0394   22.86   230092.........   01.3128   18.29   230193.........   01.2127   16.97
    200050.......................   01.1870   17.84   220017..........   01.3926   23.16   220126.........   01.3385   20.63   230093.........   01.2211   18.91   230194.........   01.1254   15.94
    200051.......................   00.9682   18.29   220019..........   01.1521   17.57   220128.........   01.2038   22.97   230095.........   01.1969   16.51   230195.........   01.3147   21.44
    200052.......................   00.9788   14.12   220020..........   01.2411   18.68   220133.........   00.8368   29.15   230096.........   01.1728   20.60   230197.........   01.3474   21.41
    200055.......................   01.1748   15.29   220021..........   01.3635   23.88   220135.........   01.2397   24.67   230097.........   01.5928   19.03   230199.........   01.1846   16.61
    200062.......................   00.9125   15.03   220023..........   01.1724   19.92   220153.........   00.9842   19.37   230099.........   01.1191   18.90   230201.........   01.1826   14.03
    200063.......................   01.2548   18.27   220024..........   01.2011   20.61   220154.........   01.0025   20.72   230100.........   01.2050   14.82   230204.........   01.3955   20.13
    200066.......................   01.2157   15.65   220025..........   01.2146   19.07   220162.........   01.1174  .......  230101.........   01.0781   17.28   230205.........   01.0457   13.00
    210001.......................   01.4359   19.45   220028..........   01.4903   21.29   220163.........   02.0494   24.21   230103.........   01.0526   17.37   230207.........   01.2669   21.19
    210002.......................   02.0301   16.46   220029..........   01.1504   23.54   220171.........   01.6465   21.72   230104.........   01.6096   21.24   230208.........   01.2412   18.18
    210003.......................   01.5454   22.78   220030..........   01.1142   17.02   230001.........   01.1916   18.72   230105.........   01.6864   19.47   230211.........   00.9096   14.11
    210004.......................   01.3604   21.20   220031..........   02.0045   29.21   230002.........   01.2641   18.80   230106.........   01.3011   18.64   230212.........   01.0720   22.89
    210005.......................   01.2337   18.52   220033..........   01.3844   19.62   230003.........   01.1456   18.79   230107.........   00.9245   11.54   230213.........   01.0473   13.19
    210006.......................   01.0987   17.09   220035..........   01.3148   19.49   230004.........   01.6847   24.03   230108.........   01.2350   18.02   230216.........   01.6086   19.50
    210007.......................   01.6811   20.55   220036..........   01.5951   22.33   230005.........   01.2549   18.69   230110.........   01.3936   17.31   230217.........   01.2395   19.60
    210008.......................   01.3385   19.03   220038..........   01.2902   21.60   230006.........   01.1078   15.91   230111.........   00.9900   17.97   230219.........   00.9318   16.58
    210009.......................   01.8256   19.93   220041..........   01.2145   21.02   230007.........   01.0590   17.82   230113.........   00.9699   18.07   230221.........   01.1033   17.78
    210010.......................   01.1897   16.40   220042..........   01.2037   25.43   230012.........   00.9618   11.92   230114.........   00.6644   25.66   230222.........   01.3910   18.46
    210011.......................   01.2790   21.24   220046..........   01.3759   23.55   230013.........   01.3026   20.55   230115.........   01.0034   15.79   230223.........   01.3134   21.86
    210012.......................   01.6303   21.50   220049..........   01.3204   21.16   230015.........   01.1338   19.54   230116.........   00.9514   14.84   230227.........   01.4686   22.63
    210013.......................   01.2454   18.65   220050..........   01.0930   18.78   230017.........   01.5755   20.51   230117.........   01.9294   25.77   230230.........   01.6739   21.30
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                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    230232.......................   00.9775   18.31   240065..........   01.0639   10.79   240152.........   01.0432   18.30   250057.........   01.2901   14.84   260012.........   01.1120   12.21
    230235.......................   01.0780   14.12   240066..........   01.4080   18.87   240153.........   01.0196   15.01   250058.........   01.1584   13.20   260013.........   01.1128   13.85
    230236.......................   01.3039   21.82   240069..........   01.2138   18.58   240154.........   01.0483   14.45   250059.........   01.0879   14.15   260014.........   01.7531   18.62
    230239.......................   01.1599   16.38   240071..........   01.1332   17.67   240155.........   00.9544   16.25   250060.........   00.7832   10.79   260015.........   01.3476   12.13
    230241.......................   01.1124   17.56   240072..........   01.0874   17.53   240157.........   01.1163   11.54   250061.........   00.8589   09.59   260017.........   01.2927   14.90
    230244.......................   01.3635   21.20   240073..........   00.9506   15.03   240160.........   00.9811   15.61   250063.........   00.8529   12.96   260018.........   00.9297   10.14
    230253.......................   00.9665   18.09   240075..........   01.1877   19.26   240161.........   00.9741   14.77   250065.........   00.9859   11.60   260019.........   01.0453   12.50
    230254.......................   01.2864   21.85   240076..........   01.1076   20.82   240162.........   00.9992   15.08   250066.........   00.9305   14.05   260020.........   01.6738   20.95
    230257.......................   00.8638   18.77   240077..........   00.9344   12.01   240163.........   00.9475   14.68   250067.........   01.1461   15.22   260021.........   01.5109   18.46
    230259.......................   01.1898   19.63   240078..........   01.5036   21.81   240166.........   01.0721   15.70   250068.........   00.8507   09.05   260022.........   01.2923   16.51
    230264.......................   01.0486   19.01   240079..........   01.0478   13.53   240169.........   00.9590   15.46   250069.........   01.4098   13.92   260023.........   01.3274   16.81
    230269.......................   01.3682   22.82   240080..........   01.4004   21.73   240170.........   01.1711   14.40   250071.........   00.9012   10.90   260024.........   00.9475   12.58
    230270.......................   01.2231   20.42   240082..........   01.0933   15.87   240171.........   01.0599   14.30   250072.........   01.3508   16.19   260025.........   01.2408   14.22
    230273.......................   01.5791   21.61   240083..........   01.3701   16.80   240172.........   01.0622   14.86   250076.........   01.5698   08.95   260027.........   01.5512   20.66
    230275.......................   00.5037   16.62   240084..........   01.3013   17.76   240173.........   00.9750   14.79   250077.........   00.9415   11.54   260029.........   01.1498   16.88
    230276.......................   00.6974   17.39   240085..........   00.9624   15.55   240179.........   01.0875   15.05   250078.........   01.4511   14.35   260030.........   01.1773   10.28
    230277.......................   01.2458   21.07   240086..........   01.0731   15.22   240184.........   01.0888   11.77   250079.........   00.8988   13.59   260031.........   01.5415   18.47
    230278.......................   01.8501   21.54   240087..........   01.1736   15.74   240187.........   01.1716   18.89   250081.........   01.3350   15.13   260032.........   01.6162   18.24
    230279.......................   00.6949   15.06   240088..........   01.4370   18.72   240193.........   01.0850   15.54   250082.........   01.2696   12.99   260034.........   01.0286   15.30
    230280.......................   01.0876   14.88   240089..........   00.9741   15.79   240196.........   00.6148   22.86   250083.........   01.0209   10.67   260035.........   01.0432   11.67
    240001.......................   01.5822   22.07   240090..........   01.0671   13.53   240200.........   00.9038   13.54   250084.........   01.1159   15.95   260036.........   01.0354   18.28
    240002.......................   01.7315   20.58   240093..........   01.3382   16.86   240205.........   01.0346  .......  250085.........   00.9834   12.43   260037.........   01.4487   15.56
    240004.......................   01.5268   21.05   240094..........   00.9928   17.38   240206.........   00.9570  .......  250088.........   00.9081   14.66   260039.........   01.1663   12.17
    240005.......................   01.0266   15.07   240096..........   00.9783   14.74   240207.........   01.2804   22.23   250089.........   01.1680   13.27   260040.........   01.6549   15.94
    240006.......................   01.1154   20.02   240097..........   01.1033   18.17   240210.........   01.2460   22.69   250093.........   01.1083   12.75   260042.........   01.2618   16.78
    240007.......................   01.0769   15.81   240098..........   00.9425   16.39   240211.........   01.0014   11.52   250094.........   01.2614   14.92   260044.........   01.0934   14.86
    240008.......................   01.0662   16.32   240099..........   01.0621   10.76   250001.........   01.4559   16.92   250095.........   01.0168   14.72   260047.........   01.4644   15.90
    240009.......................   01.0015   14.35   240100..........   01.2967   18.25   250002.........   00.8370   14.44   250096.........   01.2783   15.77   260048.........   01.2365   19.25
    240010.......................   01.9744   21.16   240101..........   01.1792   17.70   250003.........   01.0137   15.14   250097.........   01.3211   13.86   260050.........   01.0968   14.63
    240011.......................   01.1601   15.71   240102..........   00.9227   12.87   250004.........   01.4726   16.68   250098.........   00.8662   14.72   260052.........   01.3373   16.89
    240013.......................   01.3128   16.96   240103..........   01.0701   13.76   250005.........   01.0613   10.43   250099.........   01.3168   12.67   260053.........   01.1651   10.83
    240014.......................   01.0839   19.10   240104..........   01.1850   21.72   250006.........   00.9608   14.73   250100.........   01.2729   14.27   260054.........   01.3178   14.83
    240016.......................   01.3772   16.31   240105..........   01.0170   12.35   250007.........   01.2974   18.24   250101.........   00.8766   09.75   260055.........   01.0236   08.93
    240017.......................   01.2008   15.66   240106..........   01.3884   23.85   250008.........   00.9270   11.91   250102.........   01.6510   14.56   260057.........   01.1559   14.12
    240018.......................   01.3331   17.17   240107..........   00.9699   14.74   250009.........   01.1951   15.81   250104.........   01.4468   16.31   260059.........   01.2358   11.75
    240019.......................   01.1997   20.69   240108..........   00.9753   12.35   250010.........   01.0272   11.88   250105.........   00.9242   11.52   260061.........   01.1323   11.91
    240020.......................   01.1545   20.05   240109..........   00.9763   12.06   250012.........   00.9493   13.18   250107.........   00.8879   14.99   260062.........   01.2004   17.75
    240021.......................   01.0040   13.13   240110..........   00.9880   14.66   250015.........   01.1025   10.43   250109.........   00.9619   12.97   260063.........   01.1235   15.61
    240022.......................   01.1171   18.13   240111..........   01.0264   15.65   250017.........   00.9743   14.92   250112.........   00.9503   14.95   260064.........   01.3135   15.06
    240023.......................   01.1030   16.17   240112..........   01.0120   14.22   250018.........   01.0885   11.21   250117.........   01.0158   13.39   260065.........   01.7978   16.07
    240025.......................   01.1265   14.54   240114..........   00.8971   13.21   250019.........   01.4948   16.51   250119.........   01.1128   11.94   260066.........   01.0288   15.31
    240027.......................   01.0280   15.50   240115..........   01.6575   21.53   250020.........   00.9503   11.47   250120.........   01.0898   13.47   260067.........   00.9511   10.89
    240028.......................   01.1803   18.14   240116..........   00.9560   12.54   250021.........   00.9206   08.33   250122.........   01.2659  .......  260068.........   01.6925   19.07
    240029.......................   01.2190   17.00   240117..........   01.1415   17.40   250023.........   00.8554  .......  250123.........   01.3245   18.31   260070.........   01.0637   12.16
    240030.......................   01.2864   17.33   240119..........   00.8838   17.45   250024.........   00.9613   08.37   250124.........   00.9107   11.28   260073.........   01.0411   11.87
    240031.......................   00.9918   13.83   240121..........   00.9377   17.85   250025.........   01.1325   15.43   250125.........   01.3265   18.00   260074.........   01.3241   17.22
    240036.......................   01.5677   19.89   240122..........   01.0774   16.25   250027.........   01.0193   11.14   250126.........   00.9963   13.81   260077.........   01.7094   16.86
    240037.......................   01.0459   17.05   240123..........   01.0887   13.80   250029.........   00.8793   11.91   250127.........   00.7981   10.67   260078.........   01.2180   14.84
    240038.......................   01.4768   24.33   240124..........   00.9980   16.84   250030.........   00.9894   11.26   250128.........   01.1054   11.86   260079.........   01.0338   11.96
    240040.......................   01.1838   19.00   240125..........   00.9119   12.16   250031.........   01.3401   17.65   250131.........   00.9853   10.41   260080.........   01.0487   10.85
    240041.......................   01.2688   15.42   240127..........   01.0956   12.16   250032.........   01.2651   15.27   250134.........   00.9847   15.67   260081.........   01.5242   18.50
    240043.......................   01.2180   17.60   240128..........   01.1103   14.99   250033.........   01.1179   12.63   250136.........   00.9293   15.06   260082.........   01.1931   13.85
    240044.......................   01.1777   16.75   240129..........   01.0683   13.13   250034.........   01.6275   13.70   250138.........   01.2493   16.52   260085.........   01.5683   18.89
    240045.......................   01.1170   18.25   240130..........   01.0694   15.14   250035.........   00.8775   13.38   250141.........   01.2384   16.11   260086.........   00.9991   13.83
    240047.......................   01.5112   19.66   240132..........   01.2511   21.26   250036.........   01.0177   10.97   250145.........   00.9805  .......  260089.........   01.0806   12.16
    240048.......................   01.2509   21.83   240133..........   01.1407   16.89   250037.........   00.8394   09.52   250146.........   01.0293   12.44   260091.........   01.6447   20.21
    240049.......................   01.7860   21.16   240135..........   00.9022   11.98   250038.........   00.9491   12.49   250148.........   01.1361   14.14   260094.........   01.2142   17.53
    240050.......................   01.1382   22.26   240137..........   01.2280   15.99   250039.........   01.0330   12.23   250149.........   00.9158   12.56   260095.........   01.4130   15.92
    240051.......................   00.9385   14.60   240138..........   00.9613   12.39   250040.........   01.3378   16.36   260001.........   01.6347   16.79   260096.........   01.5959   23.01
    240052.......................   01.2651   18.14   240139..........   00.9705   14.07   250042.........   01.2431   13.72   260002.........   01.4563   20.60   260097.........   01.1569   16.79
    240053.......................   01.5135   19.37   240141..........   01.1692   18.92   250043.........   01.0021   11.48   260003.........   00.9752   13.10   260100.........   01.0555   13.31
    240056.......................   01.2694   21.66   240142..........   01.1055   15.56   250044.........   00.9974   14.17   260004.........   01.0307   12.81   260102.........   01.0467   17.58
    240057.......................   01.7845   21.08   240143..........   01.1220   11.76   250045.........   01.1352   17.75   260005.........   01.6959   20.17   260103.........   01.3939   16.96
    240058.......................   00.9705   08.83   240144..........   01.0129   13.66   250047.........   00.9859   11.39   260006.........   01.4637   16.81   260104.........   01.7038   18.80
    240059.......................   01.1096   19.63   240145..........   00.9274   12.01   250048.........   01.5334   14.39   260007.........   01.6391   14.42   260105.........   01.8450   21.41
    240061.......................   01.7813   21.05   240146..........   00.9883   18.68   250049.........   00.9044   11.19   260008.........   01.2715   16.18   260107.........   01.4336   19.39
    240063.......................   01.5152   22.26   240148..........   01.0915   08.84   250050.........   01.2911   12.79   260009.........   01.2277   15.64   260108.........   01.8662   18.57
    240064.......................   01.2556   20.39   240150..........   00.8854   12.16   250051.........   00.8720   08.88   260011.........   01.6403   17.12   260109.........   00.9885   11.86
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46062]]
    
    
                                                                                              Page 9 of 16                                                                                          
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                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    260110.......................   01.5703   14.92   270035..........   01.0128   16.94   280050.........   00.9679   13.74   290021.........   01.6450   19.51   310041.........   01.3388   21.96
    260113.......................   01.0828   14.31   270036..........   00.9373   09.94   280051.........   01.2066   13.85   290022.........   01.6828   20.47   310042.........   01.2149   22.13
    260115.......................   01.2400   14.59   270039..........   01.0684   12.96   280052.........   00.9828   12.52   290027.........   00.9732   15.03   310043.........   01.2896   19.99
    260116.......................   01.1030   13.89   270040..........   01.0918   19.79   280054.........   01.2703   16.10   290029.........   00.8983  .......  310044.........   01.3360   20.03
    260119.......................   01.1917   13.28   270041..........   01.0796   11.52   280055.........   00.9249   12.19   290032.........   01.4471   18.24   310045.........   01.4249   27.62
    260120.......................   01.2217   14.60   270044..........   01.1485   14.40   280056.........   01.0135   13.28   290036.........   01.0870   13.90   310047.........   01.3531   24.05
    260122.......................   01.1474   13.40   270046..........   00.9270   13.70   280057.........   00.9801   15.61   290038.........   00.9351   17.61   310048.........   01.2560   21.34
    260123.......................   01.0221   12.27   270048..........   01.0968   14.13   280058.........   01.3647   14.36   290039.........   01.3412  .......  310049.........   01.3224   23.91
    260127.......................   00.9860   13.88   270049..........   01.8343   19.33   280060.........   01.5785   18.24   300001.........   01.3841   21.03   310050.........   01.2281   21.48
    260128.......................   01.0214   09.22   270050..........   01.0747   17.43   280061.........   01.4895   15.95   300003.........   01.8856   21.59   310051.........   01.3357   23.27
    260129.......................   01.2018   13.53   270051..........   01.3399   19.12   280062.........   01.1451   12.55   300005.........   01.2741   19.13   310052.........   01.2886   21.19
    260131.......................   01.4057   15.91   270052..........   01.0912   12.73   280064.........   01.0800   13.94   300006.........   01.1402   17.36   310054.........   01.3056   23.97
    260134.......................   01.1561   14.28   270053..........   00.9396   09.78   280065.........   01.2745   17.49   300007.........   01.1618   17.04   310056.........   01.3867   20.63
    260137.......................   01.5544   14.25   270057..........   01.2164   18.21   280066.........   01.0357   11.48   300008.........   01.2110   18.30   310057.........   01.2922   23.67
    260138.......................   01.8949   21.17   270058..........   00.9476   11.51   280068.........   01.0870   09.89   300009.........   01.1504   18.16   310058.........   01.0906   26.79
    260141.......................   01.9549   17.43   270059..........   00.8656   15.65   280070.........   01.0149   11.63   300010.........   01.2297   17.88   310060.........   01.2000   18.73
    260142.......................   01.2382   13.99   270060..........   00.9067   13.00   280073.........   01.0115   13.94   300011.........   01.3613   22.07   310061.........   01.2538   20.23
    260143.......................   00.9915   11.96   270063..........   00.9363   14.23   280074.........   01.1316   13.76   300012.........   01.3381   21.42   310062.........   01.2965   24.98
    260147.......................   01.0190   12.74   270068..........   00.9009   15.59   280075.........   01.2322   13.10   300013.........   01.1476   17.06   310063.........   01.3660   21.28
    260148.......................   00.9522   09.30   270072..........   00.7740   11.39   280076.........   01.0519   12.93   300014.........   01.2209   19.36   310064.........   01.2783   22.29
    260158.......................   01.1057   11.77   270073..........   01.1623   11.16   280077.........   01.3421   17.26   300015.........   01.1797   18.08   310067.........   01.3279   23.76
    260159.......................   01.0850   19.81   270074..........   00.8787  .......  280079.........   01.2143   10.42   300016.........   01.2009   15.73   310069.........   01.2838   20.03
    260160.......................   01.0947   11.84   270075..........   00.9757  .......  280080.........   01.0583   12.11   300017.........   01.2344   21.96   310070.........   01.4058   22.98
    260162.......................   01.5751   19.55   270076..........   00.7949  .......  280081.........   01.6898   18.79   300018.........   01.2172   19.62   310072.........   01.2874   20.57
    260163.......................   01.3342   15.35   270079..........   00.9165   13.66   280082.........   01.0127   13.48   300019.........   01.2814   18.78   310073.........   01.6854   23.77
    260164.......................   00.9984   12.17   270080..........   01.2060   15.54   280083.........   01.1020   14.54   300020.........   01.2710   20.72   310074.........   01.4715   22.61
    260166.......................   01.2345   21.39   270081..........   01.0741   12.39   280084.........   01.0433   11.01   300021.........   01.1849   15.34   310075.........   01.3895   23.13
    260172.......................   00.9976   12.72   270082..........   01.0736   14.48   280088.........   01.7915   17.98   300022.........   01.1134   17.22   310076.........   01.4399   28.74
    260173.......................   01.0104   11.78   270083..........   01.0503   16.28   280089.........   01.0285   14.37   300023.........   01.2978   19.78   310077.........   01.5635   23.51
    260175.......................   01.1633   14.99   270084..........   00.9318   14.12   280090.........   00.9935   13.49   300024.........   01.1828   16.74   310078.........   01.3027   24.59
    260176.......................   01.7313   18.43   280001..........   01.1150   12.98   280091.........   01.2088   14.18   300028.........   01.2388   16.75   310081.........   01.2885   21.29
    260177.......................   01.3273   20.42   280003..........   02.0371   19.15   280092.........   00.8942   12.18   300029.........   01.3275   22.39   310083.........   01.2987   22.33
    260178.......................   01.4928   18.91   280005..........   01.4351   17.19   280094.........   01.0535   14.07   300033.........   01.1132   13.69   310084.........   01.3541   21.20
    260179.......................   01.6451   18.70   280009..........   01.7538   17.25   280097.........   01.0852   12.27   300034.........   02.0364   23.29   310086.........   01.2266   21.30
    260180.......................   01.7006   20.07   280011..........   00.8644   11.91   280098.........   00.9677   10.40   310001.........   01.7992   26.40   310087.........   01.2818   19.26
    260183.......................   01.5643   16.14   280012..........   01.3040   15.43   280101.........   01.0917   13.18   310002.........   01.7327   26.31   310088.........   01.2278   20.64
    260186.......................   01.2995   15.97   280013..........   01.8405   20.57   280102.........   01.1442   12.76   310003.........   01.2627   24.08   310090.........   01.2294   25.46
    260188.......................   01.2526   18.64   280014..........   00.9583   13.39   280104.........   00.9763   10.84   310005.........   01.2319   20.54   310091.........   01.3343   20.80
    260189.......................   00.8480   11.26   280015..........   01.0124   15.19   280105.........   01.3758   17.28   310006.........   01.2052   19.62   310092.........   01.3108   20.70
    260190.......................   01.2528   18.90   280017..........   01.1012   13.94   280106.........   00.9288   13.93   310008.........   01.3806   22.73   310093.........   01.1706   19.79
    260191.......................   01.2514   17.92   280018..........   01.0931   13.35   280107.........   01.0876   11.13   310009.........   01.2807   22.80   310096.........   01.8668   23.17
    260193.......................   01.2323   18.75   280020..........   01.6154   18.93   280108.........   01.2167   13.96   310010.........   01.2537   20.92   310105.........   01.2442   23.63
    260195.......................   01.1679   14.49   280021..........   01.3263   15.49   280109.........   00.9153   09.80   310011.........   01.2873   21.55   310108.........   01.4315   21.85
    260197.......................   01.1444   20.98   280022..........   01.0087   12.52   280110.........   01.0169   11.19   310012.........   01.5915   24.33   310110.........   01.2368   20.38
    260198.......................   01.3378   15.86   280023..........   01.4093   15.69   280111.........   01.2161   15.63   310013.........   01.2770   21.84   310111.........   01.3068   20.46
    260200.......................   01.3613   19.10   280024..........   00.9413   13.05   280114.........   00.9765   12.99   310014.........   01.7131   24.26   310112.........   01.3241   21.02
    270002.......................   01.2856   15.06   280025..........   00.9422   12.14   280115.........   00.9474   14.77   310015.........   01.9529   24.97   310113.........   01.2395   20.60
    270003.......................   01.2214   19.98   280026..........   01.0265   15.28   280117.........   01.1921   14.47   310016.........   01.2564   22.34   310115.........   01.2923   19.31
    270004.......................   01.7045   19.96   280028..........   01.0549   14.53   280118.........   00.9889   15.17   310017.........   01.3661   23.40   310116.........   01.2370   21.96
    270006.......................   01.0898   14.78   280029..........   01.2195   14.02   280119.........   00.8659  .......  310018.........   01.1268   20.55   310118.........   01.2551   22.53
    270007.......................   00.9224   13.18   280030..........   01.7278   24.40   280123.........   00.9506   15.63   310019.........   01.6124   23.53   310119.........   01.6198   30.37
    270009.......................   01.0810   15.34   280031..........   01.0191   13.10   290001.........   01.6662   21.85   310020.........   01.2521   21.55   310120.........   01.0709   17.44
    270011.......................   01.0719   15.52   280032..........   01.3303   15.57   290002.........   00.9831   17.79   310021.........   01.3931   22.03   310121.........   01.1650   20.34
    270012.......................   01.6741   17.63   280033..........   01.0971   14.24   290003.........   01.6600   20.74   310022.........   01.2806   21.47   320001.........   01.4682   17.14
    270013.......................   01.4138   17.77   280034..........   01.3131   13.86   290005.........   01.4915   19.03   310024.........   01.3560   22.85   320002.........   01.3511   20.74
    270014.......................   01.7987   16.83   280035..........   00.9238   11.81   290006.........   01.1731   16.15   310025.........   01.2619   22.27   320003.........   01.1841   15.65
    270016.......................   00.9321   13.23   280037..........   01.0168   14.28   290007.........   01.9114   27.06   310026.........   01.2312   22.67   320004.........   01.2645   17.19
    270017.......................   01.3064   18.66   280038..........   01.0809   14.53   290008.........   01.1790   18.73   310027.........   01.3355   20.94   320005.........   01.3203   18.87
    270019.......................   01.0378   14.02   280039..........   01.1314   13.99   290009.........   01.5603   22.25   310028.........   01.1787   21.21   320006.........   01.3638   15.96
    270021.......................   01.1545   16.23   280040..........   01.6214   18.67   290010.........   01.1286   11.93   310029.........   01.9766   22.49   320009.........   01.5899   16.52
    270023.......................   01.3584   20.28   280041..........   00.9179   11.80   290011.........   01.0396   14.67   310031.........   02.8736   24.35   320011.........   01.0253   17.06
    270024.......................   00.9913   13.05   280042..........   01.1032   13.11   290012.........   01.3984   20.71   310032.........   01.3445   21.17   320012.........   00.9834   16.21
    270026.......................   00.9309   12.95   280043..........   01.0605   14.76   290013.........   01.0682   15.39   310034.........   01.2696   21.26   320013.........   01.1618   19.19
    270027.......................   01.0785   11.91   280045..........   01.2844   13.63   290014.........   01.0288   16.38   310036.........   01.1474   19.86   320014.........   01.1042   13.79
    270028.......................   01.0841   15.37   280046..........   01.1494   11.04   290015.........   01.0036   15.04   310037.........   01.3407   26.92   320016.........   01.1839   13.77
    270029.......................   00.9507   16.24   280047..........   01.0939   15.54   290016.........   01.2251   19.81   310038.........   02.0204   24.49   320017.........   01.1548   16.85
    270032.......................   01.1189   15.80   280048..........   01.1833   12.06   290019.........   01.3517   19.06   310039.........   01.2885   21.42   320018.........   01.5098   17.37
    270033.......................   00.8853   12.22   280049..........   01.0480   13.94   290020.........   01.0868   17.08   310040.........   01.2597   24.06   320019.........   01.5443   22.95
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46063]]
    
    
                                                                                              Page 10 of 16                                                                                         
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    320021.......................   01.7533   17.31   330057..........   01.6977   16.97   330167.........   01.7092   28.82   330265.........   01.3607   16.53   340021.........   01.2689   16.22
    320022.......................   01.2423   16.07   330058..........   01.3103   15.76   330169.........   01.4110   32.57   330267.........   01.2246   23.35   340022.........   01.0375   14.98
    320023.......................   00.9909   16.72   330059..........   01.5940   29.90   330171.........   01.3203   21.95   330268.........   01.0334   14.44   340023.........   01.4060   17.97
    320030.......................   01.0487   18.27   330061..........   01.3131   23.60   330175.........   01.1554   14.35   330270.........   01.9732   32.47   340024.........   01.1772   15.07
    320031.......................   00.9027   12.36   330062..........   01.1628   15.58   330177.........   01.0005   13.74   330273.........   01.3707   23.35   340025.........   01.1840   14.99
    320032.......................   00.9301   15.10   330064..........   01.4496   29.63   330179.........   00.8725   14.38   330275.........   01.3082   18.58   340027.........   01.1891   15.59
    320033.......................   01.1267   20.90   330065..........   01.1872   17.24   330180.........   01.1898   16.40   330276.........   01.1936   17.02   340028.........   01.5458   17.32
    320035.......................   00.9731   14.58   330066..........   01.3095   17.55   330181.........   01.3087   30.46   330277.........   01.1398   16.32   340030.........   02.0708   20.58
    320037.......................   01.2157   15.59   330067..........   01.3397   20.60   330182.........   02.4691   28.41   330279.........   01.3457   18.52   340031.........   01.0081   11.97
    320038.......................   01.2291   13.85   330072..........   01.3517   27.84   330183.........   01.5101   18.74   330285.........   01.7862   22.52   340032.........   01.3860   18.60
    320046.......................   01.2573   18.15   330073..........   01.1565   14.87   330184.........   01.3734   26.85   330286.........   01.3224   24.25   340035.........   01.1828   15.73
    320048.......................   01.3064   17.40   330074..........   01.2166   18.14   330185.........   01.3291   25.44   330290.........   01.7785   29.90   340036.........   01.2472   17.33
    320056.......................   00.9777  .......  330075..........   01.0853   17.25   330186.........   00.8858   19.79   330293.........   01.1588   13.48   340037.........   01.1215   15.85
    320057.......................   00.9860  .......  330078..........   01.3888   17.05   330188.........   01.2089   18.28   330304.........   01.2571   27.34   340038.........   01.0707   15.42
    320058.......................   00.8563  .......  330079..........   01.2315   17.05   330189.........   01.4328   16.85   330306.........   01.4672   27.44   340039.........   01.2910   19.52
    320059.......................   01.1562  .......  330080..........   01.4550   27.21   330191.........   01.3345   17.14   330307.........   01.2474   19.43   340040.........   01.7921   18.22
    320060.......................   00.9435  .......  330084..........   01.0610   16.46   330193.........   01.3182   27.97   330308.........   01.2507   29.68   340041.........   01.2364   17.24
    320061.......................   01.1137  .......  330085..........   01.3273   18.64   330194.........   01.8320   29.32   330309.........   01.2698   24.10   340042.........   01.1970   14.01
    320062.......................   00.9094  .......  330086..........   01.2423   24.99   330195.........   01.6507   29.85   330314.........   01.4593   22.18   340044.........   01.0253   13.44
    320063.......................   01.2911   16.46   330088..........   01.0571   24.62   330196.........   01.3114   00.34   330315.........   16.1090   25.23   340045.........   00.9968   09.61
    320065.......................   01.3721   17.00   330090..........   01.5514   16.76   330197.........   01.0574   14.99   330316.........   01.2635   21.85   340047.........   01.8734   18.38
    320067.......................   00.8637   17.64   330091..........   01.3268   18.50   330198.........   01.4037   22.87   330327.........   00.9920   16.17   340048.........   00.8186   14.02
    320068.......................   00.8763   15.36   330092..........   01.1180   14.07   330199.........   01.4010   25.87   330331.........   01.2269   29.77   340049.........   00.6961   13.94
    320069.......................   00.9960   10.67   330094..........   01.1768   16.51   330201.........   01.6465   27.62   330332.........   01.2958   26.61   340050.........   01.1941   17.37
    320070.......................   00.9059  .......  330095..........   01.2330   17.55   330202.........   01.6534   28.76   330333.........   01.2526   23.81   340051.........   01.3394   16.08
    320074.......................   01.0785   17.04   330096..........   01.0917   15.45   330203.........   01.3909   19.06   330336.........   01.3450   28.99   340052.........   01.0093   18.41
    320079.......................   01.1533   17.22   330097..........   01.2483   15.36   330204.........   01.4006   30.31   330338.........   01.2358   23.09   340053.........   01.6663   19.08
    330001.......................   01.1757   25.49   330100..........   00.7182   26.07   330205.........   01.1539   20.29   330339.........   00.8847   18.73   340054.........   01.1083   13.09
    330002.......................   01.4142   25.22   330101..........   01.7684   33.56   330208.........   01.2513   24.55   330340.........   01.1880   21.17   340055.........   01.1907   17.40
    330003.......................   01.3152   17.67   330102..........   01.3513   17.47   330209.........   01.2154   23.11   330350.........   01.8015   28.27   340060.........   01.1491   16.69
    330004.......................   01.3320   19.08   330103..........   01.2733   16.46   330211.........   01.1993   17.23   330353.........   01.3368   30.33   340061.........   01.7040   19.91
    330005.......................   01.7984   20.49   330104..........   01.3905   26.74   330212.........   01.1041   21.12   330354.........   01.5264  .......  340063.........   01.0417   13.08
    330006.......................   01.2710   23.92   330106..........   01.5962   34.42   330213.........   01.1771   16.58   330357.........   01.3809   33.49   340064.........   01.2144   17.12
    330007.......................   01.3464   17.71   330107..........   01.3262   25.92   330214.........   01.7550   29.72   330359.........   00.9243   19.54   340065.........   01.3430   14.39
    330008.......................   01.2061   15.62   330108..........   01.2139   16.28   330215.........   01.2276   15.66   330372.........   01.2018   24.47   340067.........   01.2792   15.88
    330009.......................   01.3815   30.32   330111..........   01.0633   14.81   330218.........   01.1335   17.94   330381.........   01.1971   28.03   340068.........   01.2351   14.77
    330010.......................   01.2801   15.07   330114..........   00.9802   16.13   330219.........   01.6778   19.13   330385.........   01.1776   -2.89   340069.........   01.7382   19.47
    330011.......................   01.3290   17.81   330115..........   01.2248   15.23   330221.........   01.3386   27.53   330386.........   01.2009   22.53   340070.........   01.3823   17.57
    330012.......................   01.7038   31.01   330116..........   00.9813   14.21   330222.........   01.2772   17.64   330387.........   01.0268   23.95   340071.........   01.0851   15.08
    330013.......................   02.0608   17.36   330118..........   01.6299   18.94   330223.........   01.0642   15.37   330389.........   01.7489   29.43   340072.........   01.0654   15.20
    330014.......................   01.3788   30.31   330119..........   01.7640   33.48   330224.........   01.2453   20.32   330390.........   01.2900   30.36   340073.........   01.5496   20.23
    330016.......................   01.0547   15.47   330121..........   01.0392   16.10   330225.........   01.1722   24.43   330393.........   01.7141   27.22   340075.........   01.2024   16.26
    330019.......................   01.2902   25.33   330122..........   01.0867   21.84   330226.........   01.2740   17.05   330394.........   01.5390   17.96   340080.........   01.0607   12.72
    330020.......................   01.0620   15.26   330125..........   01.8729   19.78   330229.........   01.3074   15.73   330395.........   01.3045   30.64   340084.........   01.0587   15.61
    330023.......................   01.2479   23.30   330126..........   01.1881   22.34   330230.........   01.4285   28.69   330396.........   01.3520   24.91   340085.........   01.1720   15.65
    330024.......................   01.8143   30.17   330127..........   01.3437   24.82   330231.........   01.0938   30.02   330397.........   01.2858   25.47   340087.........   01.1024   16.01
    330025.......................   01.1813   18.51   330128..........   01.3917   28.29   330232.........   01.2394   16.42   330398.........   01.2749   26.92   340088.........   01.1388   16.42
    330027.......................   01.4780   30.17   330132..........   01.0770   14.60   330233.........   01.5512   29.70   330399.........   01.2737   29.65   340089.........   01.0348   12.85
    330028.......................   01.4234   24.95   330133..........   01.3665   30.50   330234.........   02.2563   29.60   340001.........   01.5504   19.47   340090.........   01.1542   17.15
    330029.......................   01.0148   19.09   330135..........   01.1572   18.28   330235.........   01.1452   18.33   340002.........   01.8974   18.38   340091.........   01.7238   19.42
    330030.......................   01.2083   14.75   330136..........   01.2992   16.54   330236.........   01.4044   27.87   340003.........   01.1484   17.08   340093.........   01.0733   12.10
    330033.......................   01.2824   13.81   330140..........   01.7638   17.79   330238.........   01.2306   14.19   340004.........   01.4886   17.16   340094.........   01.4431   17.65
    330034.......................   00.7369   32.72   330141..........   01.3548   24.27   330239.........   01.1936   15.39   340005.........   01.1591   13.24   340096.........   01.1673   17.33
    330036.......................   01.2231   22.66   330144..........   00.9791   13.70   330240.........   01.3305   28.41   340006.........   01.0881   14.60   340097.........   01.1830   16.61
    330037.......................   01.1592   14.92   330148..........   01.0830   14.58   330241.........   01.9102   22.54   340007.........   01.1617   16.20   340098.........   01.7209   19.46
    330038.......................   01.2065   14.81   330151..........   01.0751   14.55   330242.........   01.3802   23.99   340008.........   01.1475   16.97   340099.........   01.1578   12.70
    330039.......................   00.8432   14.25   330152..........   01.4444   28.88   330245.........   01.3022   17.51   340009.........   01.4763   19.70   340101.........   01.1697   11.80
    330041.......................   01.3306   30.19   330153..........   01.7128   17.15   330246.........   01.3541   25.33   340010.........   01.3236   16.97   340104.........   00.8600   12.36
    330043.......................   01.3108   26.60   330154..........   01.6429  .......  330247.........   00.7659   29.15   340011.........   01.1355   14.36   340105.........   01.3859   17.94
    330044.......................   01.2722   17.63   330157..........   01.3608   19.48   330249.........   01.1711   15.98   340012.........   01.3193   15.92   340106.........   01.2109   18.52
    330045.......................   01.4075   26.13   330158..........   01.4129   23.06   330250.........   01.3086   16.89   340013.........   01.2557   15.63   340107.........   01.4165   16.65
    330046.......................   01.4956   29.75   330159..........   01.3177   17.67   330252.........   00.8785   15.72   340014.........   01.5864   22.01   340109.........   01.3485   16.84
    330047.......................   01.2551   16.37   330160..........   01.4457   29.16   330254.........   01.1651   15.21   340015.........   01.3037   17.05   340111.........   01.1783   13.75
    330048.......................   01.2230   16.94   330161..........   00.7222   16.75   330258.........   01.3696   26.99   340016.........   01.2047   15.58   340112.........   01.0683   13.87
    330049.......................   01.3252   17.74   330162..........   01.2585   26.51   330259.........   01.5046   22.78   340017.........   01.2671   16.06   340113.........   02.0121   21.03
    330053.......................   01.1943   15.15   330163..........   01.2523   18.88   330261.........   01.2906   25.24   340018.........   01.1777   15.29   340114.........   01.5618   19.74
    330055.......................   01.4882   31.04   330164..........   01.3928   19.40   330263.........   01.0194   18.52   340019.........   01.0467   13.86   340115.........   01.5417   18.15
    330056.......................   01.3144   27.86   330166..........   01.0011   15.11   330264.........   01.2443   23.18   340020.........   01.2083   17.65   340116.........   01.8211   20.54
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                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    340119.......................   01.2911   16.28   350041..........   00.9769   14.99   360062.........   01.5165   19.27   360143.........   01.3986   18.13   370012.........   00.8913   09.07
    340120.......................   01.0917   12.31   350042..........   01.0876   11.16   360063.........   01.1515   18.08   360144.........   01.3179   20.90   370013.........   01.7919   19.41
    340121.......................   01.1182   15.36   350043..........   01.7067   16.69   360064.........   01.6063   21.61   360145.........   01.6494   17.67   370014.........   01.2905   18.49
    340123.......................   01.1194   16.92   350044..........   00.8710   10.29   360065.........   01.2762   17.59   360147.........   01.2388   15.85   370015.........   01.2695   14.88
    340124.......................   01.0603   13.70   350047..........   01.1747   16.78   360066.........   01.4343   18.88   360148.........   01.1249   17.65   370016.........   01.4272   15.52
    340125.......................   01.4926   18.36   350049..........   01.2578   10.74   360067.........   01.2705   12.77   360149.........   01.2285   17.72   370017.........   01.0956   11.48
    340126.......................   01.4258   16.47   350050..........   00.9330   10.74   360068.........   01.7423   22.41   360150.........   01.2490   19.17   370018.........   01.3350   16.66
    340127.......................   01.2939   15.72   350051..........   00.9947   15.46   360069.........   01.1370   16.74   360151.........   01.3513   17.46   370019.........   01.2757   13.17
    340129.......................   01.2939   17.50   350053..........   01.0948   10.34   360070.........   01.7333   17.18   360152.........   01.4715   17.88   370020.........   01.3047   12.51
    340130.......................   01.4419   17.78   350055..........   00.8596   12.12   360071.........   01.3523   16.78   360153.........   01.1796   14.12   370021.........   00.8951   09.76
    340131.......................   01.5338   17.10   350056..........   00.9765   12.81   360072.........   01.2124   16.99   360154.........   01.0368   12.79   370022.........   01.2941   16.91
    340132.......................   01.4383   13.48   350058..........   00.8563   12.32   360074.........   01.3725   19.42   360155.........   01.3327   19.43   370023.........   01.3248   15.36
    340133.......................   01.0956   14.59   350060..........   00.7725   07.81   360075.........   01.4496   20.74   360156.........   01.3468   17.17   370025.........   01.3637   16.03
    340137.......................   01.1410   16.93   350061..........   01.0745   14.05   360076.........   01.3490   17.88   360159.........   01.2231   19.63   370026.........   01.4154   16.34
    340138.......................   01.0567   14.77   350063..........   00.8461  .......  360077.........   01.5389   19.34   360161.........   01.2521   19.38   370028.........   01.9042   19.01
    340141.......................   01.6716   19.46   350064..........   00.9598  .......  360078.........   01.3080   20.54   360162.........   01.2452   18.42   370029.........   01.2199   13.67
    340142.......................   01.2340   14.52   350066..........   00.4249  .......  360079.........   01.8681   21.00   360163.........   01.8349   19.83   370030.........   01.2212   15.66
    340143.......................   01.4482   17.07   360001..........   01.3384   16.97   360080.........   01.1083   15.47   360164.........   00.9007   14.82   370032.........   01.5792   15.46
    340144.......................   01.3645   18.62   360002..........   01.2162   16.93   360081.........   01.3841   19.32   360165.........   01.1742   14.70   370033.........   01.0221   11.30
    340145.......................   01.4125   16.83   360003..........   01.7712   21.00   360082.........   01.3414   20.33   360166.........   01.2030   14.95   370034.........   01.2616   13.35
    340146.......................   01.0456   12.52   360006..........   01.7607   20.88   360083.........   01.2828   16.28   360170.........   01.3775   17.38   370035.........   01.6378   16.49
    340147.......................   01.3150   18.57   360007..........   01.0849   16.02   360084.........   01.6067   19.41   360172.........   01.3901   16.51   370036.........   01.1174   10.48
    340148.......................   01.5007   18.58   360008..........   01.2525   17.40   360085.........   01.7980   20.40   360174.........   01.3088   17.57   370037.........   01.7461   17.69
    340151.......................   01.2148   15.08   360009..........   01.3939   17.80   360086.........   01.4480   18.21   360175.........   01.2520   18.78   370038.........   00.9834   11.67
    340153.......................   01.8980   19.07   360010..........   01.1941   16.42   360087.........   01.4085   17.90   360176.........   01.1680   14.85   370039.........   01.4126   14.24
    340155.......................   01.4119   20.03   360011..........   01.3105   18.17   360088.........   01.2530   16.38   360177.........   01.2971   16.97   370040.........   01.0732   12.21
    340156.......................   00.8453  .......  360012..........   01.2907   19.29   360089.........   01.1458   17.82   360178.........   01.1892   16.88   370041.........   01.0325   14.17
    340158.......................   01.2122   16.64   360013..........   01.1167   17.72   360090.........   01.2435   19.06   360179.........   01.2990   19.34   370042.........   00.8601   12.67
    340159.......................   01.1730   17.58   360014..........   01.1749   17.98   360091.........   01.2344   19.17   360180.........   02.1407   22.61   370043.........   00.9385   13.83
    340160.......................   01.1167   13.34   360016..........   01.5907   17.92   360092.........   01.1738   18.70   360184.........   00.4826   16.57   370045.........   01.0062   10.45
    340162.......................   01.1881   17.44   360017..........   01.8253   20.42   360093.........   01.2307   16.69   360185.........   01.2327   17.09   370046.........   01.0062   11.67
    340164.......................   01.5860   18.61   360018..........   01.6307   19.25   360094.........   01.3184   19.51   360186.........   01.1293   14.23   370047.........   01.3674   15.46
    340166.......................   01.3553   19.31   360019..........   01.2457   19.11   360095.........   01.2967   17.00   360187.........   01.3884   16.45   370048.........   01.2342   14.10
    340168.......................   00.5173   14.86   360020..........   01.4476   19.77   360096.........   01.1102   16.11   360188.........   00.9743   15.83   370049.........   01.3882   15.65
    340171.......................   01.1321   20.34   360021..........   01.2174   17.75   360098.........   01.3556   17.96   360189.........   01.0811   16.02   370051.........   00.9683   12.64
    340173.......................   01.2798  .......  360024..........   01.4071   18.60   360099.........   01.0454   15.01   360192.........   01.3259   20.42   370054.........   01.4885   15.15
    350001.......................   01.0123   11.96   360025..........   01.2808   18.44   360100.........   01.2628   16.54   360193.........   01.3581   16.93   370056.........   01.5839   18.24
    350002.......................   01.7471   15.76   360026..........   01.3129   15.99   360101.........   01.5606   19.00   360194.........   01.2097   16.98   370057.........   01.1540   13.78
    350003.......................   01.1860   16.16   360027..........   01.5042   19.53   360102.........   01.3166   20.31   360195.........   01.1428   18.15   370059.........   01.1079   17.59
    350004.......................   01.9396   17.55   360028..........   01.4059   16.15   360103.........   01.3796   19.64   360197.........   01.2406   18.15   370060.........   01.0892   12.84
    350005.......................   01.1759   12.94   360029..........   01.1959   17.00   360106.........   01.0886   14.96   360200.........   01.0117   14.16   370063.........   01.0280   13.43
    350006.......................   01.4658   15.92   360030..........   01.3039   16.35   360107.........   01.2908   17.73   360203.........   01.1555   15.13   370064.........   01.0078   10.63
    350007.......................   00.9387   11.95   360031..........   01.3375   18.56   360108.........   01.0396   15.34   360204.........   01.1930   17.97   370065.........   00.9975   15.50
    350008.......................   00.9673   15.65   360032..........   01.0924   18.26   360109.........   01.0923   17.32   360210.........   01.1623   19.78   370071.........   01.0650   11.99
    350009.......................   01.2044   15.95   360034..........   01.2896   13.90   360112.........   01.8045   22.51   360211.........   01.2500   18.78   370072.........   00.9083   12.83
    350010.......................   01.1975   12.15   360035..........   01.5988   20.13   360113.........   01.3367   19.20   360212.........   01.3950   19.17   370076.........   01.2782   12.00
    350011.......................   01.9030   17.35   360036..........   01.3855   17.71   360114.........   01.0906   17.10   360213.........   01.1504   17.17   370077.........   01.1968   16.27
    350012.......................   01.2136   11.99   360037..........   02.0437   20.51   360115.........   01.2874   17.65   360218.........   01.3232   16.46   370078.........   01.6803   14.49
    350013.......................   01.0734   15.32   360038..........   01.5766   18.07   360116.........   01.1189   16.64   360230.........   01.5121   19.37   370079.........   00.9507   12.41
    350014.......................   01.0049   15.46   360039..........   01.3052   16.07   360118.........   01.3818   18.32   360231.........   01.0866   12.11   370080.........   00.9633   11.68
    350015.......................   01.6959   15.63   360040..........   01.4268   17.31   360121.........   01.2342   17.90   360234.........   01.3527   18.54   370082.........   00.8647   13.46
    350016.......................   01.0278   10.92   360041..........   01.3556   18.33   360123.........   01.1997   18.37   360236.........   01.2897   17.59   370083.........   00.9410   11.35
    350017.......................   01.4347   15.24   360042..........   01.1551   17.62   360125.........   01.0747   17.38   360239.........   01.3234   19.51   370084.........   01.1272   11.02
    350018.......................   01.0690   11.21   360044..........   01.1741   15.64   360126.........   01.2090   20.09   360241.........   00.5799   18.86   370085.........   00.8936   14.52
    350019.......................   01.6318   18.43   360045..........   01.5348   20.90   360127.........   01.2236   16.48   360242.........   01.6800  .......  370086.........   01.1242   07.79
    350020.......................   01.7038   20.24   360046..........   01.1457   17.85   360128.........   01.2053   14.73   360243.........   00.7547   15.52   370089.........   01.2565   13.16
    350021.......................   01.0657   11.41   360047..........   01.1558   13.65   360129.........   01.0204   14.59   360244.........   00.6212   15.74   370091.........   01.7693   17.18
    350023.......................   00.9056   12.86   360048..........   01.7911   21.55   360130.........   01.1377   15.59   360245.........   00.7563   14.33   370092.........   01.0486   14.38
    350024.......................   01.0901   15.40   360049..........   01.2049   18.18   360131.........   01.3624   17.38   360247.........   00.4249  .......  370093.........   01.8714   18.71
    350025.......................   01.0197   13.34   360050..........   01.1543   12.37   360132.........   01.3101   18.78   360248.........   01.7716  .......  370094.........   01.4088   17.00
    350027.......................   00.9438   12.32   360051..........   01.6080   21.90   360133.........   01.4858   18.44   370001.........   01.7032   18.73   370095.........   00.9450   11.66
    350029.......................   00.8818   13.02   360052..........   01.7565   18.41   360134.........   01.7139   19.43   370002.........   01.2588   13.98   370097.........   01.4520   18.02
    350030.......................   00.9794   15.93   360054..........   01.2912   15.83   360135.........   01.1809   16.82   370004.........   01.3080   15.35   370099.........   01.1924   12.65
    350033.......................   00.9672   14.33   360055..........   01.2726   19.12   360136.........   01.0773   15.96   370005.........   01.0106   13.12   370100.........   00.9622   13.45
    350034.......................   00.9622   18.05   360056..........   01.4296   16.47   360137.........   01.6206   18.82   370006.........   01.2229   15.45   370103.........   00.9375   15.07
    350035.......................   00.8570   09.95   360057..........   01.1168   13.87   360140.........   01.0258   16.19   370007.........   01.2061   13.82   370105.........   01.9923   16.23
    350038.......................   01.0479   14.07   360058..........   01.3461   16.66   360141.........   01.4692   21.06   370008.........   01.4030   16.68   370106.........   01.5356   16.46
    350039.......................   01.0484   13.84   360059..........   01.5754   20.39   360142.........   00.9969   15.98   370011.........   01.0547   12.95   370108.........   01.0528   11.73
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46065]]
    
    
                                                                                              Page 12 of 16                                                                                         
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    370112.......................   01.0771   13.21   380029..........   01.1586   18.45   390032.........   01.2762   18.10   390115.........   01.3809   22.31   390205.........   01.4138   20.63
    370113.......................   01.2416   16.23   380031..........   01.0219   18.48   390035.........   01.2570   17.79   390116.........   01.2586   21.78   390206.........   01.4057   20.14
    370114.......................   01.6787   15.49   380033..........   01.7402   24.13   390036.........   01.4202   18.06   390117.........   01.1972   15.62   390209.........   01.0481   15.09
    370121.......................   01.1451   17.38   380035..........   01.3725   19.01   390037.........   01.3360   18.93   390118.........   01.2115   16.26   390211.........   01.2749   16.99
    370122.......................   01.1357   07.58   380036..........   01.0566   20.26   390039.........   01.1244   15.66   390119.........   01.3748   17.59   390213.........   01.0016   16.41
    370123.......................   01.2119   12.32   380037..........   01.1645   19.53   390040.........   00.9686   13.13   390121.........   01.3448   17.47   390215.........   01.2812   21.06
    370125.......................   01.0097   13.37   380038..........   01.3393   22.64   390041.........   01.3187   17.07   390122.........   01.0693   17.57   390217.........   01.2357   18.51
    370126.......................   00.9543   15.34   380039..........   01.3779   29.30   390042.........   01.5624   21.73   390123.........   01.3537   20.71   390219.........   01.3287   19.67
    370131.......................   01.0012   12.88   380040..........   01.2637   19.96   390043.........   01.1719   14.85   390125.........   01.2284   15.61   390220.........   01.1983   19.08
    370133.......................   01.1472   10.09   380042..........   01.1612   20.57   390044.........   01.6556   19.63   390126.........   01.2945   21.03   390222.........   01.3122   20.33
    370138.......................   01.1325   15.23   380047..........   01.7067   22.12   390045.........   01.7661   18.05   390127.........   01.2538   20.96   390223.........   01.5528   23.17
    370139.......................   01.1354   12.56   380048..........   01.0410   14.68   390046.........   01.6117   19.79   390128.........   01.2119   18.14   390224.........   00.9223   13.35
    370140.......................   00.9528   10.99   380050..........   01.3901   17.45   390047.........   01.7852   28.26   390130.........   01.1560   17.20   390225.........   01.2083   17.19
    370141.......................   01.3715   17.30   380051..........   01.5648   20.05   390048.........   01.1647   16.60   390131.........   01.2907   16.30   390226.........   01.7768   24.15
    370146.......................   01.0085   10.73   380052..........   01.1918   16.61   390049.........   01.6474   20.69   390132.........   01.3448   15.42   390228.........   01.2582   19.38
    370148.......................   01.5151   18.46   380055..........   01.1757   24.14   390050.........   02.1314   22.39   390133.........   01.8281   21.71   390231.........   01.3348   25.11
    370149.......................   01.2706   15.35   380056..........   01.0666   17.36   390051.........   02.2272   25.28   390135.........   01.3066   21.05   390233.........   01.3161   17.22
    370153.......................   01.1557   14.05   380060..........   01.4373   21.98   390052.........   01.2179   19.41   390136.........   01.1980   15.39   390235.........   01.6702   24.38
    370154.......................   00.9897   13.05   380061..........   01.5351   22.07   390054.........   01.2347   16.08   390137.........   01.5015   16.35   390236.........   01.2217   15.88
    370156.......................   01.0800   12.49   380062..........   01.1543   14.40   390055.........   01.8450   21.81   390138.........   01.3173   17.93   390237.........   01.5935   20.36
    370158.......................   00.9865   11.75   380063..........   01.2864   19.01   390056.........   01.1639   16.81   390139.........   01.5607   23.54   390238.........   01.4213   16.51
    370159.......................   01.2594   15.59   380064..........   01.3688   21.25   390057.........   01.2716   18.70   390142.........   01.6526   23.18   390242.........   01.2889   18.48
    370163.......................   00.8591   12.16   380065..........   01.0800   22.49   390058.........   01.3370   18.67   390145.........   01.3905   19.48   390244.........   00.8920   09.83
    370165.......................   01.2006   12.46   380066..........   01.4293   18.58   390060.........   01.1510   16.92   390146.........   01.2882   16.44   390245.........   01.3803   24.05
    370166.......................   01.1406   16.32   380068..........   01.0516   19.05   390061.........   01.4893   19.08   390147.........   01.2376   19.08   390246.........   01.2473   17.25
    370169.......................   01.1037   11.25   380069..........   01.1438   18.59   390062.........   01.2096   16.01   390150.........   01.1109   18.10   390247.........   01.0371   18.26
    370170.......................   01.0855       .   380070..........   01.3961   21.24   390063.........   01.7640   19.24   390151.........   01.2813   18.58   390249.........   00.9800   12.06
    370171.......................   01.0678  .......  380071..........   01.3440   20.07   390065.........   01.2780   19.30   390152.........   01.0750   18.81   390256.........   01.8586   23.45
    370172.......................   00.9962  .......  380072..........   00.9537   14.66   390066.........   01.3186   17.77   390153.........   01.2419   22.46   390258.........   01.2671   20.08
    370173.......................   01.1933  .......  380075..........   01.4047   19.72   390067.........   01.7794   18.91   390154.........   01.2332   16.67   390260.........   01.2216   21.17
    370174.......................   01.1211  .......  380078..........   01.1150   17.41   390068.........   01.2742   17.23   390155.........   01.2835   19.44   390262.........   02.1059   17.77
    370176.......................   01.1972   15.29   380081..........   01.0847   18.84   390069.........   01.2051   17.75   390156.........   01.4396   21.37   390263.........   01.4786   19.16
    370177.......................   01.0146   10.09   380082..........   01.3405   22.96   390070.........   01.2858   20.39   390157.........   01.3451   17.99   390265.........   01.2976   18.82
    370178.......................   01.0055   10.96   380083..........   01.2349   20.06   390071.........   01.1351   13.68   390158.........   01.5819   18.96   390266.........   01.1930   16.81
    370179.......................   00.8169   17.33   380084..........   01.3216   21.43   390072.........   01.0913   15.91   390160.........   01.2468   18.50   390267.........   01.2771   19.80
    370180.......................   00.9740  .......  380087..........   01.0052   15.38   390073.........   01.6266   19.03   390161.........   01.1266   14.43   390268.........   01.3964   20.44
    370183.......................   01.0165   12.06   380088..........   01.0315   16.16   390074.........   01.3127   16.05   390162.........   01.4556   19.59   390270.........   01.3202   16.67
    370186.......................   01.0206   13.15   380089..........   01.3738   22.25   390075.........   01.3025   16.41   390163.........   01.2420   15.99   390272.........   00.5074  ......
    370189.......................   00.9532   07.82   380090..........   01.3211   25.71   390076.........   01.3566   21.07   390164.........   02.1542   20.37   390277.........   00.4880   22.55
    370190.......................   01.5794   15.31   380091..........   01.2631   25.13   390078.........   01.0424   16.88   390166.........   01.1022   18.31   390278.........   00.6661   18.42
    370192.......................   01.3093   17.57   390001..........   01.3373   18.25   390079.........   01.7564   16.81   390167.........   01.3544   21.30   390279.........   01.0584   15.32
    370194.......................   01.8180  .......  390002..........   01.3644   18.62   390080.........   01.3323   19.14   390168.........   01.2625   18.43   390281.........   02.6697  ......
    370195.......................   01.7401  .......  390003..........   01.2554   15.88   390081.........   01.3776   22.88   390169.........   01.2856   18.72   390282.........   02.9409  ......
    370196.......................   01.1671  .......  390004..........   01.4319   18.12   390083.........   01.1662   22.01   390170.........   01.9087   21.25   400001.........   01.3065   08.65
    370197.......................   01.0898  .......  390005..........   01.0806   14.24   390084.........   01.1944   15.57   390173.........   01.1949   16.79   400002.........   01.6129   11.34
    380001.......................   01.3616   21.21   390006..........   01.7592   18.17   390086.........   01.2005   15.86   390174.........   01.7675   25.41   400003.........   01.2768   08.61
    380002.......................   01.1954   19.35   390007..........   01.1638   21.90   390088.........   01.3124   22.62   390176.........   01.1748   18.14   400004.........   01.1628   08.18
    380003.......................   01.2096   20.71   390008..........   01.1579   15.47   390090.........   01.8633   18.97   390178.........   01.2993   18.44   400005.........   01.0828   06.61
    380004.......................   01.7682   23.34   390009..........   01.6174   17.81   390091.........   01.1348   17.40   390179.........   01.3019   22.12   400006.........   01.1998   07.59
    380005.......................   01.2457   21.15   390010..........   01.1940   17.10   390093.........   01.1530   14.99   390180.........   01.5552   23.40   400007.........   01.2160   07.46
    380006.......................   01.3673   19.26   390011..........   01.2706   16.82   390095.........   01.1941   14.46   390181.........   01.0669   18.59   400009.........   01.0124   07.71
    380007.......................   01.5837   23.43   390012..........   01.2607   19.75   390096.........   01.3470   17.00   390183.........   01.2194   18.03   400010.........   00.9370   08.53
    380008.......................   01.0565   17.83   390013..........   01.2410   16.90   390097.........   01.3270   21.56   390184.........   01.1453   18.07   400011.........   00.9932   08.12
    380009.......................   01.8640   23.30   390015..........   01.1668   13.12   390098.........   01.7998   20.75   390185.........   01.2099   16.34   400012.........   01.2679   07.40
    380010.......................   01.1177   20.67   390016..........   01.2448   16.40   390100.........   01.6693   20.03   390189.........   01.0930   16.73   400013.........   01.2504   07.44
    380011.......................   01.0880   20.97   390017..........   01.1347   15.43   390101.........   01.2430   16.62   390191.........   01.1775   14.33   400014.........   01.3895   08.92
    380013.......................   01.2741   17.76   390018..........   01.3507   20.05   390102.........   01.3992   20.51   390192.........   01.1868   16.36   400015.........   01.2239   09.83
    380014.......................   01.5560   20.77   390019..........   01.1182   15.59   390103.........   01.1030   18.00   390193.........   01.2146   16.13   400016.........   01.3497   10.89
    380017.......................   01.8253   23.17   390022..........   01.3276   21.40   390104.........   01.0899   14.99   390194.........   01.1010   18.91   400017.........   01.2425   07.70
    380018.......................   01.7644   21.22   390023..........   01.3010   18.98   390106.........   01.0768   15.15   390195.........   01.8873   22.93   400018.........   01.2993   09.67
    380019.......................   01.3170   19.33   390024..........   00.9898   23.26   390107.........   01.2972   19.04   390196.........   01.4406  .......  400019.........   01.8030   09.34
    380020.......................   01.4406   21.43   390025..........   00.6308   15.97   390108.........   01.3512   20.08   390197.........   01.3014   18.49   400021.........   01.4988   08.78
    380021.......................   01.2983   19.44   390026..........   01.2830   20.94   390109.........   01.1606   14.14   390198.........   01.2247   15.75   400022.........   01.3222   10.01
    380022.......................   01.2344   21.01   390027..........   01.8940   25.88   390110.........   01.5989   18.05   390199.........   01.3118   15.40   400024.........   00.9975   07.79
    380023.......................   01.2476   17.43   390028..........   01.9133   17.78   390111.........   01.8414   27.88   390200.........   01.0929   14.88   400026.........   00.9746   05.66
    380025.......................   01.2534   22.55   390029..........   01.9558   18.83   390112.........   01.1966   12.26   390201.........   01.2589   19.26   400027.........   01.1943   09.06
    380026.......................   01.1657   17.54   390030..........   01.2417   17.37   390113.........   01.2118   16.25   390203.........   01.3873   20.96   400028.........   01.0387   07.89
    380027.......................   01.3334   23.09   390031..........   01.1640   17.15   390114.........   01.2644   22.27   390204.........   01.2800   18.56   400029.........   01.1383  ......
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46066]]
    
    
                                                                                              Page 13 of 16                                                                                         
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    400031.......................   01.1913   08.38   420053..........   01.2774   14.99   430056.........   00.8741   09.56   440068.........   01.2254   17.28   440205.........   01.1096   15.47
    400032.......................   01.1933   08.21   420054..........   01.2603   17.08   430057.........   00.9229   10.73   440070.........   01.1011   14.28   440206.........   01.0829   13.80
    400044.......................   01.2118   09.14   420055..........   01.0222   14.59   430060.........   00.9262   08.64   440071.........   01.3979   16.32   440208.........   01.9916  ......
    400048.......................   01.2251  .......  420056..........   01.1518   13.66   430062.........   00.8090   10.50   440072.........   01.4186   14.81   440209.........   01.7802  ......
    400061.......................   01.5945   13.14   420057..........   01.1676   15.20   430064.........   01.1664   12.48   440073.........   01.3463   18.39   440211.........   00.7914  ......
    400079.......................   01.2989   08.37   420059..........   00.9864   13.80   430065.........   01.0035   10.34   440078.........   01.0317   13.14   450002.........   01.5261   18.75
    400087.......................   01.4162   08.10   420061..........   01.1701   16.99   430066.........   00.9891   11.87   440081.........   01.1820   15.86   450004.........   01.2254   12.21
    400094.......................   01.1058   09.07   420062..........   01.3804   16.51   430073.........   01.0158   13.25   440082.........   02.0430   21.47   450005.........   01.2221   14.82
    400098.......................   01.2338   07.55   420064..........   01.1545   14.32   430076.........   00.9849   10.30   440083.........   01.1480   12.16   450007.........   01.2626   13.51
    400102.......................   01.2188   07.59   420065..........   01.3538   17.37   430077.........   01.6495   16.77   440084.........   01.1833   12.89   450008.........   01.3661   14.74
    400103.......................   01.4253   09.13   420066..........   00.9250   15.38   430079.........   00.9968   11.63   440090.........   00.8532   11.62   450010.........   01.4024   15.12
    400104.......................   01.4137   09.01   420067..........   01.2687   16.48   430081.........   00.9338  .......  440091.........   01.6477   16.91   450011.........   01.5959   17.67
    400105.......................   01.3250   09.05   420068..........   01.3430   17.25   430082.........   00.9221  .......  440100.........   01.0678   13.60   450014.........   01.0411   14.53
    400106.......................   01.2027   07.87   420069..........   01.0606   14.29   430083.........   00.7736  .......  440102.........   01.0777   12.64   450015.........   01.5299   15.25
    400109.......................   01.4914   09.67   420070..........   01.2890   15.76   430084.........   00.9792  .......  440103.........   01.2605   16.57   450016.........   01.6408   17.49
    400110.......................   01.1463   08.39   420071..........   01.3340   17.29   430085.........   00.9069  .......  440104.........   01.6987   18.53   450018.........   01.5929   21.98
    400111.......................   01.1311   08.52   420072..........   01.0354   11.94   430087.........   00.9333   08.64   440105.........   01.0989   16.52   450020.........   01.0246   16.23
    400112.......................   01.2492   08.03   420073..........   01.3185   18.17   430089.........   00.8346  .......  440109.........   01.1123   12.71   450021.........   01.8352   21.68
    400113.......................   01.2692   07.41   420074..........   00.9857   11.49   440001.........   01.1456   12.99   440110.........   00.9587   16.41   450023.........   01.4560   16.45
    400114.......................   01.0613   07.55   420075..........   00.9638   14.51   440002.........   01.6285   16.75   440111.........   01.4009   18.75   450024.........   01.3308   16.74
    400115.......................   01.0254   07.86   420078..........   01.8003   19.92   440003.........   01.1383   15.46   440114.........   01.0824   12.28   450025.........   01.5918   15.72
    400117.......................   01.1717   09.01   420079..........   01.5954   18.15   440006.........   01.4804   18.40   440115.........   01.0713   15.34   450028.........   01.5626   18.19
    400118.......................   01.2078   09.52   420080..........   01.3386   21.29   440007.........   00.9713   11.94   440120.........   01.5429   18.26   450029.........   01.4570   14.12
    400120.......................   01.3175   09.23   420081..........   01.2360   19.59   440008.........   01.0206   12.34   440125.........   01.4791   18.20   450031.........   01.5193   19.54
    400121.......................   01.0939   06.53   420082..........   01.4171   19.00   440009.........   01.2679   14.38   440130.........   01.2138   13.33   450032.........   01.2471   12.89
    400122.......................   01.0230   06.66   420083..........   01.2856   17.31   440010.........   00.9448   10.15   440131.........   01.1302   13.71   450033.........   01.6126   17.70
    400123.......................   01.1446   09.36   420085..........   01.5083   17.52   440011.........   01.3301   16.51   440132.........   01.1419   14.75   450034.........   01.7095   18.08
    400124.......................   02.3583   11.31   420086..........   01.3750   16.96   440012.........   01.5155   18.04   440133.........   01.5684   18.67   450035.........   01.5326   19.16
    410001.......................   01.3371   22.95   420087..........   01.6990   16.86   440014.........   01.1200   09.84   440135.........   01.2866   17.25   450037.........   01.6270   18.03
    410004.......................   01.3139   21.15   420088..........   01.1999   15.27   440015.........   01.7323   18.12   440137.........   01.0171   13.14   450039.........   01.3288   17.37
    410005.......................   01.3535   22.61   420089..........   01.2336   20.60   440016.........   00.9970   12.59   440141.........   01.0474   14.12   450040.........   01.5635   17.73
    410006.......................   01.3134   20.75   420091..........   01.2895   18.32   440017.........   01.6425   20.72   440142.........   01.0235   11.05   450042.........   01.7513   15.78
    410007.......................   01.7033   21.60   420093..........   01.0290  .......  440018.........   01.4087   17.06   440143.........   01.1029   16.45   450044.........   01.6323   19.72
    410008.......................   01.2207   21.52   420094..........   01.0142  .......  440019.........   01.7245   17.21   440144.........   01.2377   18.01   450046.........   01.3332   15.81
    410009.......................   01.3152   21.03   430004..........   01.1098   15.06   440020.........   01.2198   15.78   440145.........   00.9917   14.42   450047.........   01.1063   13.46
    410010.......................   01.0663   25.32   430005..........   01.3635   14.44   440022.........   01.1220   14.01   440147.........   01.5380   23.56   450050.........   01.0051   14.35
    410011.......................   01.2322   23.54   430007..........   01.0876   12.77   440023.........   01.0845   13.04   440148.........   01.1478   15.54   450051.........   01.6238   18.53
    410012.......................   01.8243   20.26   430008..........   01.1139   13.56   440024.........   01.3163   16.88   440149.........   01.1533   15.28   450052.........   01.0402   13.01
    410013.......................   01.3321   27.36   430010..........   01.1619   11.70   440025.........   01.1310   13.54   440150.........   01.2975   19.97   450053.........   01.0950   13.82
    420002.......................   01.3781   20.19   430011..........   01.2805   14.49   440029.........   01.2898   16.88   440151.........   01.3044   16.20   450054.........   01.6713   21.71
    420004.......................   01.8270   18.16   430012..........   01.2848   15.08   440030.........   01.2286   12.15   440152.........   01.8133   17.68   450055.........   01.1386   13.89
    420005.......................   01.2076   14.51   430013..........   01.2924   15.39   440031.........   01.0158   13.14   440153.........   01.2942   15.19   450056.........   01.6924   17.92
    420006.......................   01.1694   17.19   430014..........   01.3101   17.03   440032.........   01.0561   14.47   440156.........   01.5826   19.18   450058.........   01.5836   16.46
    420007.......................   01.4966   16.92   430015..........   01.2209   15.17   440033.........   01.1140   14.61   440157.........   01.0397   13.83   450059.........   01.2884   13.85
    420009.......................   01.2382   16.92   430016..........   01.8665   17.78   440034.........   01.5576   17.68   440159.........   01.3156   14.02   450063.........   00.9369   10.66
    420010.......................   01.1211   15.13   430018..........   00.9509   13.13   440035.........   01.3309   16.53   440161.........   01.8754   20.06   450064.........   01.4910   15.57
    420011.......................   01.1251   15.28   430022..........   00.9348   11.95   440039.........   01.6969   17.44   440166.........   01.5786   18.25   450065.........   01.1163   14.73
    420014.......................   01.0959   14.36   430023..........   00.9495   10.34   440040.........   01.0122   10.81   440168.........   01.0442   12.43   450068.........   01.8865   21.36
    420015.......................   01.3676   16.84   430024..........   00.9521   12.07   440041.........   01.0586   12.23   440173.........   01.5485   17.50   450072.........   01.2275   18.67
    420016.......................   01.0741   14.21   430026..........   01.0086   11.24   440046.........   01.2850   15.30   440174.........   01.0180   12.74   450073.........   01.1003   12.06
    420018.......................   01.8145   20.00   430027..........   01.7854   17.63   440047.........   00.9397   14.52   440175.........   01.1775   18.60   450076.........   01.6678  ......
    420019.......................   01.1995   14.70   430028..........   01.1346   13.29   440048.........   01.8500   17.82   440176.........   01.4502   19.17   450078.........   00.9703   11.75
    420020.......................   01.3498   16.94   430029..........   00.9654   13.84   440049.........   01.6746   16.37   440178.........   01.2514   17.07   450079.........   01.4563   21.93
    420023.......................   01.4485   18.50   430031..........   00.9226   11.58   440050.........   01.3461   16.28   440180.........   01.2307   16.96   450080.........   01.2802   15.99
    420026.......................   01.8750   18.16   430033..........   01.0529   13.10   440051.........   00.9678   13.82   440181.........   01.0352   12.37   450081.........   01.0888   14.50
    420027.......................   01.3572   16.82   430034..........   01.1129   11.59   440052.........   01.1948   14.76   440182.........   01.0190   12.53   450082.........   01.0035   14.70
    420030.......................   01.2764   17.28   430036..........   01.0216   11.83   440053.........   01.3459   16.28   440183.........   01.5114   19.69   450083.........   01.7818   19.58
    420031.......................   00.9784   11.88   430037..........   00.9883   13.15   440054.........   01.2016   14.55   440184.........   01.3997   18.96   450085.........   01.0862   17.24
    420033.......................   01.1614   18.91   430038..........   01.0476   10.83   440056.........   01.1017   13.57   440185.........   01.2202   17.48   450087.........   01.4647   19.68
    420036.......................   01.3499   16.42   430040..........   01.0233   12.64   440057.........   01.0237   12.15   440186.........   01.0746   15.77   450090.........   01.2180   13.26
    420037.......................   01.2802   20.66   430041..........   00.9677   12.47   440058.........   01.2495   16.30   440187.........   01.1420   14.58   450092.........   01.2103   14.59
    420038.......................   01.2725   14.80   430043..........   01.2163   11.82   440059.........   01.3842   14.85   440189.........   01.5092   19.13   450094.........   01.3336   17.87
    420039.......................   01.1654   15.64   430044..........   00.8361   14.07   440060.........   01.3027   14.20   440192.........   01.1999   15.37   450096.........   01.5711   17.19
    420042.......................   01.1386   14.05   430047..........   01.0845   11.92   440061.........   01.1956   15.89   440193.........   01.2971   18.60   450097.........   01.4826   18.51
    420043.......................   01.2699   19.12   430048..........   01.2958   15.48   440063.........   01.6377   17.90   440194.........   01.2212   17.13   450098.........   01.1761   15.10
    420048.......................   01.1477   15.56   430049..........   00.9275   12.70   440064.........   01.1174   14.56   440197.........   01.3749   19.23   450099.........   01.3103   14.66
    420049.......................   01.2069   15.89   430051..........   00.9280   13.84   440065.........   01.2888   17.78   440200.........   01.0979   15.64   450101.........   01.4893   15.44
    420051.......................   01.6352   18.06   430054..........   01.0393   12.79   440067.........   01.2835   14.99   440203.........   00.9109   13.09   450102.........   01.7046   17.87
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                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    450104.......................   01.2431   14.23   450219..........   01.1560   14.78   450379.........   01.5227   21.62   450591.........   01.1493   18.92   450713.........   01.4979   20.85
    450107.......................   01.6232   22.05   450221..........   01.1643   14.40   450381.........   00.9920   12.86   450596.........   01.3891   17.15   450715.........   01.3738   18.59
    450108.......................   00.9827   12.48   450222..........   01.6034   18.35   450388.........   01.8109   17.12   450597.........   01.0350   14.53   450716.........   01.2943   19.56
    450109.......................   00.9150   14.72   450224..........   01.3620   20.66   450389.........   01.3265   17.71   450603.........   00.7116   16.81   450717.........   01.2538   23.86
    450110.......................   01.2792   19.30   450229..........   01.5626   15.41   450393.........   01.3164   19.70   450604.........   01.4372   14.00   450718.........   01.2333   19.03
    450111.......................   01.2174   18.93   450231..........   01.6412   18.25   450395.........   01.0473   16.49   450605.........   01.3880   17.67   450723.........   01.3871   18.22
    450112.......................   01.3183   14.31   450234..........   00.9989   13.07   450399.........   01.0599   15.59   450609.........   00.9188   11.77   450724.........   01.3696   17.44
    450113.......................   01.3022   17.93   450235..........   01.0302   13.46   450400.........   01.1885   11.76   450610.........   01.5475   17.21   450725.........   00.9390   17.49
    450118.......................   01.5826   20.36   450236..........   01.2206   15.28   450403.........   01.3015   21.22   450614.........   01.0086   12.53   450727.........   01.1724   10.80
    450119.......................   01.3813   17.13   450237..........   01.6258   16.83   450411.........   00.9144   12.20   450615.........   01.0918   12.80   450728.........   00.9311   12.62
    450121.......................   01.5556   19.99   450239..........   01.0605   13.70   450417.........   01.0947   19.31   450617.........   01.3521   20.12   450730.........   01.3241   21.46
    450123.......................   01.0933   15.98   450241..........   00.9279   12.67   450418.........   01.4996   21.43   450620.........   01.1348   12.16   450733.........   01.3628   16.88
    450124.......................   01.7210   19.68   450243..........   00.7767   11.59   450419.........   01.2762   20.34   450623.........   01.1891   16.71   450735.........   01.0637   12.02
    450126.......................   01.3625   16.01   450246..........   00.9464   17.09   450422.........   00.8249   24.65   450626.........   01.0634   16.57   450742.........   01.2932   19.47
    450128.......................   01.1955   15.37   450249..........   00.9676   09.95   450423.........   01.5850   21.56   450628.........   00.9320   12.34   450743.........   01.4228   17.79
    450130.......................   01.4846   16.93   450250..........   00.9480   11.36   450424.........   01.2492   17.77   450630.........   01.6658   23.25   450746.........   01.0195   13.81
    450131.......................   01.4057   18.24   450253..........   01.3024   11.92   450429.........   01.1208   12.87   450631.........   01.7515   20.15   450747.........   01.3610   17.04
    450132.......................   01.7205   16.46   450258..........   01.1072   10.85   450431.........   01.6315   18.76   450632.........   00.9769   11.39   450749.........   01.0118   14.63
    450133.......................   01.6057   17.90   450259..........   01.1636   18.29   450438.........   01.2603   13.51   450633.........   01.6399   20.20   450750.........   01.0231   12.20
    450135.......................   01.6757   23.54   450264..........   00.8806   13.08   450446.........   00.6453   12.67   450634.........   01.6147   23.56   450751.........   01.3418   15.58
    450137.......................   01.4998   22.19   450269..........   01.0765   13.96   450447.........   01.3882   18.07   450638.........   01.5883   22.00   450754.........   00.9546   13.49
    450140.......................   00.9941   17.44   450270..........   01.2477   10.42   450451.........   01.1574   16.96   450639.........   01.4387   22.12   450755.........   01.1688   15.54
    450142.......................   01.4544   20.28   450271..........   01.2655   14.84   450457.........   01.7817   17.61   450641.........   01.0408   13.24   450757.........   00.9466   13.62
    450143.......................   01.0340   11.10   450272..........   01.3466   15.38   450460.........   01.0539   12.46   450643.........   01.2270   17.43   450758.........   02.0193   21.92
    450144.......................   01.0933   15.29   450276..........   01.0101   12.63   450462.........   01.7722   20.49   450644.........   01.5090   19.07   450760.........   01.2573   18.35
    450145.......................   00.8163   13.36   450278..........   00.9870   13.64   450464.........   01.0035   15.14   450646.........   01.6539   31.36   450761.........   01.1320   09.57
    450146.......................   00.9883   20.32   450280..........   01.5303   23.09   450465.........   01.3391   17.10   450647.........   01.9577   23.27   450763.........   01.0156   16.60
    450147.......................   01.4189   17.72   450283..........   01.1089   12.43   450467.........   00.9711   14.01   450648.........   00.9835   09.48   450766.........   02.0719   20.76
    450148.......................   01.2604   20.21   450286..........   01.0057   16.36   450469.........   01.3759   17.25   450649.........   01.0406   14.06   450769.........   00.9957   13.40
    450149.......................   01.4207   19.76   450288..........   01.2705   13.67   450473.........   00.9937   15.03   450651.........   01.7505   22.80   450770.........   01.0417   14.57
    450150.......................   00.9250   13.75   450289..........   01.4339   19.14   450475.........   01.1405   14.96   450652.........   00.8637   13.96   450771.........   01.7803   22.32
    450151.......................   01.1248   14.16   450292..........   01.2470   21.03   450484.........   01.4469   18.14   450653.........   01.2233   15.20   450774.........   01.0767   21.24
    450152.......................   01.2600   15.74   450293..........   00.9767   12.41   450488.........   01.3234   16.08   450654.........   00.9499   12.28   450775.........   01.2796   17.09
    450153.......................   01.6196   18.44   450296..........   01.3759   18.76   450489.........   01.0173   12.72   450656.........   01.5367   17.19   450776.........   00.9194   11.18
    450154.......................   01.1960   13.12   450299..........   01.3431   16.01   450497.........   01.1693   12.88   450658.........   00.9719   12.32   450777.........   01.0464   16.60
    450155.......................   01.0291   14.09   450303..........   00.9927   11.50   450498.........   01.0512   13.15   450659.........   01.5366   20.23   450779.........   01.2621   21.36
    450157.......................   00.9708   13.25   450306..........   01.2219   12.82   450508.........   01.4218   16.12   450661.........   01.2306   18.51   450780.........   01.4049   16.91
    450160.......................   00.9428   21.47   450307..........   00.7803   14.25   450514.........   01.1886   18.47   450662.........   01.6164   17.38   450781.........   01.5749   11.01
    450162.......................   01.2530   18.76   450309..........   01.0613   14.17   450517.........   00.9025   11.11   450665.........   00.9129   12.95   450785.........   01.0228   16.39
    450163.......................   01.1402   16.82   450315..........   01.0420   18.63   450518.........   01.5700   16.38   450666.........   01.3361   19.17   450788.........   01.4500   19.31
    450164.......................   01.1323   12.83   450320..........   01.3553   18.45   450523.........   01.5823   19.45   450668.........   01.5988   19.60   450794.........   01.4278   16.20
    450165.......................   01.0215   14.19   450321..........   01.0170   13.51   450530.........   01.3726   14.27   450669.........   01.3407   19.26   450795.........   00.8686   20.22
    450166.......................   01.0279   13.06   450322..........   00.8184   16.61   450534.........   01.0374   18.02   450670.........   01.3131   17.24   450797.........   00.7374   16.67
    450169.......................   01.0085   13.79   450324..........   01.7039   15.66   450535.........   01.2951   21.25   450672.........   01.6229   20.69   450798.........   00.8393   08.88
    450170.......................   00.9944   12.46   450325..........   00.9022   11.47   450537.........   01.3071   19.69   450673.........   01.0518   12.14   450801.........   01.4832  ......
    450176.......................   01.2956   15.32   450327..........   01.0130   12.60   450538.........   01.2091   20.77   450674.........   00.9801   19.88   450802.........   01.2272  ......
    450177.......................   01.2760   13.52   450330..........   01.1514   15.62   450539.........   01.4094   14.67   450675.........   01.5223   20.99   450803.........   00.8612  ......
    450178.......................   01.0251   15.84   450334..........   01.0501   12.11   450544.........   01.3519   19.25   450677.........   01.4273   23.91   450804.........   01.5602  ......
    450181.......................   01.0644   14.13   450337..........   01.1588   14.10   450545.........   01.2665   20.93   450678.........   01.5041   20.85   450807.........   00.9215  ......
    450184.......................   01.5239   17.20   450340..........   01.3279   14.68   450547.........   01.1549   15.13   450683.........   01.3412   20.91   450808.........   01.2870  ......
    450185.......................   01.0771   08.69   450341..........   01.0487   15.87   450550.........   01.0679   18.37   450684.........   01.3022   21.41   450809.........   01.6785  ......
    450187.......................   01.2404   16.51   450346..........   01.4354   16.05   450551.........   01.2276   13.01   450686.........   01.6066   14.14   450810.........   01.1663  ......
    450188.......................   01.0902   12.80   450347..........   01.1515   16.68   450558.........   01.7260   20.85   450688.........   01.3635   19.63   450811.........   02.1655  ......
    450190.......................   01.1702  .......  450348..........   00.9841   11.20   450559.........   00.9350   12.26   450690.........   01.4068   21.41   450812.........   01.5923  ......
    450191.......................   01.0843   15.87   450351..........   01.1952   17.71   450561.........   01.6864   17.18   450691.........   00.9630  .......  460001.........   01.8027   20.73
    450192.......................   01.2918   17.51   450352..........   01.1041   16.53   450563.........   01.2755   23.92   450694.........   01.1412   18.16   460003.........   01.6975   17.86
    450193.......................   02.0470   21.80   450353..........   01.2638   16.98   450565.........   01.2685   16.10   450696.........   01.9768   22.02   460004.........   01.7352   21.45
    450194.......................   01.2664   17.65   450355..........   01.1492   13.03   450570.........   01.0784   15.39   450697.........   01.4936   13.82   460005.........   01.6823   18.56
    450196.......................   01.4866   17.04   450358..........   02.0820   21.20   450571.........   01.4774   15.53   450698.........   00.9737   11.65   460006.........   01.4506   19.40
    450200.......................   01.4247   17.40   450362..........   01.1670   13.83   450573.........   01.0633   14.35   450700.........   00.9478   13.15   460007.........   01.3572   20.40
    450201.......................   01.0028   15.45   450369..........   01.0555   13.10   450574.........   00.9359   11.73   450702.........   01.5794   19.02   460008.........   01.3920   15.91
    450203.......................   01.2237   17.46   450370..........   01.2731   12.87   450575.........   01.0769   16.62   450703.........   01.5445   18.46   460009.........   01.8544   19.39
    450209.......................   01.5068   21.78   450371..........   01.1668   12.16   450578.........   00.9338   12.99   450704.........   01.4195   18.02   460010.........   02.0179   20.86
    450210.......................   01.1673   12.30   450372..........   01.3120   21.02   450580.........   01.1396   13.29   450705.........   00.9145   18.50   460011.........   01.4594   16.34
    450211.......................   01.4145   16.70   450373..........   01.1592   13.38   450583.........   00.9779   13.04   450706.........   01.2505   22.63   460013.........   01.5172   16.74
    450213.......................   01.6568   18.26   450374..........   00.9104   11.66   450584.........   01.1828   13.02   450709.........   01.3415   19.78   460014.........   01.1366   15.12
    450214.......................   01.4227   19.51   450376..........   01.4817   17.78   450586.........   01.0491   11.16   450711.........   01.5989   18.18   460015.........   01.2168   20.40
    450217.......................   01.0015   11.56   450378..........   01.1022   19.87   450587.........   01.2528   16.14   450712.........   00.7871   13.25   460016.........   00.9547   12.50
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46068]]
    
    
                                                                                              Page 15 of 16                                                                                         
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    460017.......................   01.5589   16.40   490032..........   01.7716   19.42   490127.........   01.0048   14.52   500094.........   00.9101   15.30   510068.........   01.1159   14.34
    460018.......................   01.0027   15.45   490033..........   01.2338   16.00   490129.........   01.1961   19.20   500096.........   00.9886   19.50   510070.........   01.3303   15.86
    460019.......................   01.1127   14.45   490035..........   01.1321   13.02   490130.........   01.3038   15.07   500097.........   01.2189   17.46   510071.........   01.3254   15.64
    460020.......................   01.0418   16.33   490037..........   01.2365   14.06   490131.........   00.9879   14.74   500098.........   01.0355   15.44   510072.........   01.0592   14.37
    460021.......................   01.3866   19.46   490038..........   01.2628   13.62   490132.........   01.0313  .......  500101.........   01.0064   15.92   510077.........   01.1916   15.36
    460022.......................   00.9383   19.23   490040..........   01.4798   21.72   500001.........   01.3669   21.66   500102.........   01.0209   19.46   510080.........   01.2132   11.53
    460023.......................   01.2243   21.08   490041..........   01.2703   16.22   500002.........   01.4343   19.10   500104.........   01.3276   19.88   510081.........   01.1592   12.97
    460024.......................   01.0133   14.78   490042..........   01.3532   15.75   500003.........   01.3891   25.32   500106.........   00.9016   20.08   510082.........   01.2166   12.89
    460025.......................   00.8149   13.73   490043..........   01.4482   24.19   500005.........   01.8255   21.58   500107.........   01.1533   15.79   510084.........   00.9560   13.24
    460026.......................   00.9812   17.03   490044..........   01.3527   17.15   500007.........   01.3881   21.79   500108.........   01.7163   21.74   510085.........   01.3533   17.90
    460027.......................   00.9409   19.08   490045..........   01.2333   19.25   500008.........   01.9493   23.18   500110.........   01.2349   19.44   510086.........   01.0754   15.08
    460029.......................   01.0389   18.60   490046..........   01.4948   17.80   500011.........   01.4304   22.64   500118.........   01.1761   21.92   520002.........   01.2174   18.84
    460030.......................   01.1784   17.32   490047..........   01.0934   16.50   500012.........   01.4822   21.18   500119.........   01.3376   20.39   520003.........   01.1191   15.41
    460032.......................   01.0291   21.16   490048..........   01.6100   17.44   500014.........   01.4987   20.92   500122.........   01.2814   21.99   520004.........   01.1859   16.78
    460033.......................   00.9787   17.97   490050..........   01.4629   21.02   500015.........   01.3772   21.85   500123.........   00.8526   18.56   520006.........   01.0231   18.17
    460035.......................   00.9265   12.17   490052..........   01.6086   15.45   500016.........   01.4764   23.26   500124.........   01.3158   22.83   520007.........   01.2287   14.55
    460036.......................   01.0267   20.05   490053..........   01.2701   14.77   500019.........   01.3370   21.38   500125.........   01.0071   11.61   520008.........   01.5786   22.49
    460037.......................   00.9886   17.48   490054..........   01.0984   14.36   500021.........   01.5616   21.91   500129.........   01.7389   23.35   520009.........   01.6559   17.31
    460039.......................   01.0874   20.37   490057..........   01.5488   17.69   500023.........   01.2117   19.53   500132.........   00.9561   18.51   520010.........   01.1793   19.33
    460041.......................   01.2644   20.90   490059..........   01.6184   19.41   500024.........   01.6823   22.23   500134.........   00.6989   15.59   520011.........   01.2164   16.85
    460042.......................   01.4809   17.04   490060..........   01.0834   17.79   500025.........   01.8739   23.44   500138.........   04.3602  .......  520013.........   01.3851   18.80
    460043.......................   01.2702   21.71   490063..........   01.7059   23.01   500026.........   01.4032   23.85   500139.........   01.5089   21.71   520014.........   01.1387   16.08
    460044.......................   01.1922   19.83   490066..........   01.3652   18.00   500027.........   01.5357   25.23   500141.........   01.3249   22.22   520015.........   01.1912   16.72
    460046.......................   00.9068   12.27   490067..........   01.2287   15.82   500028.........   01.1235   14.69   500143.........   00.7297   15.20   520016.........   01.1027   13.21
    460047.......................   01.7394   19.82   490069..........   01.4526   14.96   500029.........   00.9578   13.71   500146.........   01.2100   26.11   520017.........   01.1523   17.45
    460049.......................   01.9737   17.85   490071..........   01.5023   17.40   500030.........   01.5287   22.55   510001.........   01.8263   17.35   520018.........   01.1219   16.17
    460050.......................   01.2736   21.99   490073..........   01.4717   17.55   500031.........   01.3434   20.58   510002.........   01.2917   14.18   520019.........   01.3048   16.63
    460051.......................   01.2890   32.89   490074..........   01.3704   16.77   500033.........   01.2738   18.41   510004.........   01.1211   13.65   520021.........   01.3120   19.90
    470001.......................   01.1596   18.73   490075..........   01.3998   16.37   500036.........   01.3200   19.95   510005.........   00.9588   14.19   520024.........   01.0460   13.11
    470003.......................   01.7896   20.83   490077..........   01.2583   17.87   500037.........   01.1678   18.70   510006.........   01.2972   17.42   520025.........   01.1099   18.58
    470004.......................   01.1094   15.85   490079..........   01.3234   15.15   500039.........   01.3890   22.10   510007.........   01.4902   17.98   520026.........   01.0837   17.49
    470005.......................   01.2726   20.26   490083..........   00.7754   15.02   500041.........   01.2884   23.23   510008.........   01.1461   15.55   520027.........   01.2448   19.27
    470006.......................   01.2455   17.83   490084..........   01.3006   15.43   500042.........   01.3514   22.37   510012.........   01.1013   14.37   520028.........   01.3020   17.76
    470008.......................   01.1896   16.76   490085..........   01.2407   13.39   500043.........   01.1913   17.16   510013.........   01.1685   15.80   520029.........   00.9692   16.94
    470010.......................   01.1226   19.03   490088..........   01.1873   14.44   500044.........   01.9855   20.99   510015.........   00.9465   12.51   520030.........   01.6462   21.19
    470011.......................   01.1940   19.82   490089..........   01.1298   16.18   500045.........   01.1331   20.81   510016.........   00.9182   12.66   520031.........   01.1241   15.24
    470012.......................   01.2425   17.88   490090..........   01.2038   15.17   500048.........   00.9599   16.46   510018.........   01.1815   15.26   520032.........   01.2406   15.25
    470015.......................   01.2207   16.67   490091..........   01.2790   18.78   500049.........   01.5178   19.24   510020.........   01.1178   10.56   520033.........   01.1692   16.22
    470018.......................   01.2215   20.53   490092..........   01.2061   15.13   500050.........   01.4336   20.96   510022.........   01.8968   19.16   520034.........   01.1969   17.64
    470020.......................   00.9818   15.18   490093..........   01.3619   15.83   500051.........   01.6724   23.18   510023.........   01.2001   16.62   520035.........   01.3383   15.87
    470023.......................   01.2839   19.08   490094..........   01.1741   14.52   500052.........   01.3139  .......  510024.........   01.4367   18.43   520037.........   01.6525   19.06
    470024.......................   01.1460   18.26   90095...........   01.4744   16.79   500053.........   01.3079   20.42   510026.........   01.0247   12.33   520038.........   01.3145   16.45
    490001.......................   01.2421   19.51   490097..........   01.1556   14.52   500054.........   01.8795   21.08   510027.........   00.9512   14.62   520039.........   00.9955   16.33
    490002.......................   01.0970   14.56   490098..........   01.2294   11.89   500055.........   01.1303   20.13   510028.........   01.0802   18.99   520040.........   01.4720   19.34
    490003.......................   00.5817   17.38   490099..........   00.9524   16.51   500057.........   01.3033   17.22   510029.........   01.2896   16.78   520041.........   01.1755   14.93
    490004.......................   01.2321   16.97   490100..........   01.4519   17.21   500058.........   01.5239   20.32   510030.........   01.0520   14.39   520042.........   01.0959   16.42
    490005.......................   01.5901   16.31   490101..........   01.2184   23.01   500059.........   01.1465   20.76   510031.........   01.4816   15.97   520044.........   01.4077   16.15
    490006.......................   01.1325   13.82   490104..........   00.8468   16.07   500060.........   01.4066   23.27   510033.........   01.3557   15.30   520045.........   01.7375   18.68
    490007.......................   02.0908   17.16   490105..........   00.6278   18.83   500061.........   01.0337   18.19   510035.........   01.3544   16.81   520047.........   00.9924   15.41
    490009.......................   01.8662   18.25   490106..........   00.8531   16.48   500062.........   01.1280   18.80   510036.........   01.0700   11.64   520048.........   01.4686   18.11
    490010.......................   01.1620   17.32   490107..........   01.3316   22.98   500064.........   01.5976   22.08   510038.........   01.1634   13.36   520049.........   02.0343   18.52
    490011.......................   01.4246   17.33   490108..........   00.9024   15.63   500065.........   01.2132   18.72   510039.........   01.3333   15.48   520051.........   01.7979   20.21
    490012.......................   01.2241   15.30   490109..........   00.9343   17.44   500068.........   01.0323   18.40   510043.........   00.9309   11.52   520053.........   01.1225   15.45
    490013.......................   01.2162   16.87   490110..........   01.4172   15.07   500069.........   01.2241   19.76   510046.........   01.2754   15.91   520054.........   01.0821   17.03
    490014.......................   01.4751   22.42   490111..........   01.2461   15.83   500071.........   01.2885   19.80   510047.........   01.2479   18.06   520056.........   01.7830   18.87
    490015.......................   01.4306   18.76   490112..........   01.6008   18.51   500072.........   01.2068   22.83   510048.........   01.0995   18.22   520057.........   01.1240   16.59
    490017.......................   01.3604   16.73   490113..........   01.3485   21.59   500073.........   01.0538   16.74   510050.........   01.5736   16.11   520058.........   01.1053   18.17
    490018.......................   01.2979   17.15   490114..........   01.1423   15.47   500074.........   01.1566   15.67   510053.........   01.0292   14.12   520059.........   01.4116   18.74
    490019.......................   01.1915   16.46   490115..........   01.2238   15.28   500077.........   01.3828   21.68   510055.........   01.2750   19.68   520060.........   01.4316   15.26
    490020.......................   01.2068   15.76   490116..........   01.3302   15.48   500079.........   01.3693   21.40   510058.........   01.1979   17.03   520062.........   01.3513   16.73
    490021.......................   01.2417   17.33   490117..........   01.1816   12.41   500080.........   00.8662   11.72   510059.........   01.4663   14.25   520063.........   01.1984   17.63
    490022.......................   01.4384   19.33   490118..........   01.7802   21.05   500084.........   01.1803   20.78   510060.........   01.1522   15.55   520064.........   01.7055   20.15
    490023.......................   01.2952   18.01   490119..........   01.3722   16.80   500085.........   01.0712   19.55   510061.........   01.0354   13.37   520066.........   01.5293   18.82
    490024.......................   01.8236   16.47   490120..........   01.3270   17.49   500086.........   01.3028   20.03   510062.........   01.1776   15.77   520068.........   00.9933   16.85
    490027.......................   01.1664   13.62   490122..........   01.4656   21.27   500088.........   01.3456   23.37   510063.........   00.9557   16.84   520069.........   01.1907   17.13
    490028.......................   01.3111   20.18   490123..........   01.1882   15.29   500089.........   01.0257   15.05   510065.........   01.0484   11.49   520070.........   01.6330   17.38
    490030.......................   01.1733   10.83   490124..........   01.2019   17.12   500090.........   00.9484   13.67   510066.........   01.1361   11.93   520071.........   01.1630   17.53
    490031.......................   01.1165   13.00   490126..........   01.4239   14.85   500092.........   01.0566   17.86   510067.........   01.2728   17.97   520074.........   01.0679   15.42
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46069]]
    
    
                                                                                              Page 16 of 16                                                                                         
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
               Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                     index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    520075.......................   01.4659   18.02   520178..........   01.0937   15.23                                                                                                            
    520076.......................   01.1585   15.11   530002..........   01.1955   19.16                                                                                                            
    520077.......................   00.8551   14.03   530003..........   01.0202   12.47                                                                                                            
    520078.......................   01.6233   18.63   530004..........   00.9991   14.18                                                                                                            
    520082.......................   01.2821   16.43   530005..........   01.0060   13.47                                                                                                            
    520083.......................   01.6785   21.60   530006..........   01.1364   16.52                                                                                                            
    520084.......................   01.0951   16.87   530007..........   01.0868   12.98                                                                                                            
    520087.......................   01.6994   18.12   530008..........   01.3367   16.82                                                                                                            
    520088.......................   01.3078   17.98   530009..........   01.0070   16.77                                                                                                            
    520089.......................   01.5203   19.50   530010..........   01.4089   16.12                                                                                                            
    520090.......................   01.2399   16.18   530011..........   01.1090   16.94                                                                                                            
    520091.......................   01.3644   18.13   530012..........   01.5439   18.11                                                                                                            
    520092.......................   01.1184   15.74   530014..........   01.4219   15.18                                                                                                            
    520094.......................   00.7907   16.12   530015..........   01.2693   18.00                                                                                                            
    520095.......................   01.3677   17.93   530016..........   01.2968   14.93                                                                                                            
    520096.......................   01.4350   18.94   530017..........   00.8748   16.97                                                                                                            
    520097.......................   01.3153   18.65   530018..........   01.0355   18.67                                                                                                            
    520098.......................   01.8227   20.17   530019..........   01.0131   15.32                                                                                                            
    520100.......................   01.2523   16.72   530022..........   01.0905   16.71                                                                                                            
    520101.......................   01.1235   16.09   530023..........   00.8558   18.57                                                                                                            
    520102.......................   01.2023   19.37   530025..........   01.2400   18.76                                                                                                            
    520103.......................   01.3272   17.94   530026..........   01.0951   15.48                                                                                                            
    520107.......................   01.3034   17.50   530027..........   00.9181   10.62                                                                                                            
    520109.......................   01.0055   17.63   530029..........   01.0278   13.46                                                                                                            
    520110.......................   01.1560   17.94   530031..........   00.8952   11.67                                                                                                            
    520111.......................   00.9540   16.01   530032..........   01.0887   18.13                                                                                                            
    520112.......................   01.1157   16.89                                                                                                                                                 
    520113.......................   01.2035   19.18                                                                                                                                                 
    520114.......................   01.0837   13.27                                                                                                                                                 
    520115.......................   01.2596   16.02                                                                                                                                                 
    520116.......................   01.2507   18.13                                                                                                                                                 
    520117.......................   01.0605   15.78                                                                                                                                                 
    520118.......................   00.9421   10.53                                                                                                                                                 
    520120.......................   00.8814   12.70                                                                                                                                                 
    520121.......................   00.9486   15.67                                                                                                                                                 
    520122.......................   00.9718   14.73                                                                                                                                                 
    520123.......................   01.0916   16.93                                                                                                                                                 
    520124.......................   01.1417   14.93                                                                                                                                                 
    520130.......................   01.0461   13.47                                                                                                                                                 
    520131.......................   01.0271   16.78                                                                                                                                                 
    520132.......................   01.1689   14.48                                                                                                                                                 
    520134.......................   01.0798   15.97                                                                                                                                                 
    520135.......................   00.9421   17.28                                                                                                                                                 
    520136.......................   01.5062   19.05                                                                                                                                                 
    520138.......................   01.8573   19.44                                                                                                                                                 
    520139.......................   01.2790   19.89                                                                                                                                                 
    520140.......................   01.6111   21.15                                                                                                                                                 
    520141.......................   01.0486   15.86                                                                                                                                                 
    520142.......................   00.8690   13.20                                                                                                                                                 
    520144.......................   01.0297   16.42                                                                                                                                                 
    520145.......................   00.9171   16.59                                                                                                                                                 
    520146.......................   01.0863   13.94                                                                                                                                                 
    520148.......................   01.0827   15.34                                                                                                                                                 
    520149.......................   00.9713   13.44                                                                                                                                                 
    520151.......................   01.0919   15.42                                                                                                                                                 
    520152.......................   01.1594   17.07                                                                                                                                                 
    520153.......................   00.9221   13.81                                                                                                                                                 
    520154.......................   01.0972   17.71                                                                                                                                                 
    520156.......................   01.1062   16.69                                                                                                                                                 
    520157.......................   01.0427   13.77                                                                                                                                                 
    520159.......................   00.9343   16.85                                                                                                                                                 
    520160.......................   01.7979   19.07                                                                                                                                                 
    520161.......................   01.0019   15.94                                                                                                                                                 
    520170.......................   01.2386   19.95                                                                                                                                                 
    520171.......................   00.9327   13.23                                                                                                                                                 
    520173.......................   01.1538   18.34                                                                                                                                                 
    520174.......................   01.3545   21.51                                                                                                                                                 
    520177.......................   01.5931   20.16                                                                                                                                                 
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: Case mix indexes do not include discharges from PPS-exempt units.                                                                                                                         
    Case mix indexes include cases received in HCFA central office through December 1996.                                                                                                           
    
    
    [[Page 46070]]
    
    
    Table 4a.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                                   Urban Areas                              
    ------------------------------------------------------------------------
                                                            Wage            
              Urban Area (Constituent Counties)             index      GAF  
    ------------------------------------------------------------------------
    0040  Abilene, TX...................................    0.8287    0.8793
      Taylor, TX                                                            
    0060  \2\ Aguadilla, PR.............................    0.4224    0.5542
      Aguada, PR                                                            
      Aguadilla, PR                                                         
      Moca, PR                                                              
    0080  Akron, OH.....................................    0.9728    0.9813
      Portage, OH                                                           
      Summit, OH                                                            
    0120  Albany, GA....................................    0.7914    0.8520
      Dougherty, GA                                                         
      Lee, GA                                                               
    0160  Albany-Schenectady-Troy, NY...................    0.8480    0.8932
      Albany, NY                                                            
      Montgomery, NY                                                        
      Rensselaer, NY                                                        
      Saratoga, NY                                                          
      Schenectady, NY                                                       
      Schoharie, NY                                                         
    0200  Albuquerque, NM...............................    0.9329    0.9535
      Bernalillo, NM                                                        
      Sandoval, NM                                                          
      Valencia, NM                                                          
    0220  Alexandria, LA................................    0.8269    0.8780
      Rapides, LA                                                           
    0240  Allentown-Bethlehem-Easton, PA................    1.0086    1.0059
      Carbon, PA                                                            
      Lehigh, PA                                                            
      Northampton, PA                                                       
    0280  Altoona, PA...................................    0.9137    0.9401
      Blair, PA                                                             
    0320  Amarillo,.....................................                    
      TX Potter, TX                                         0.9425    0.9603
      Randall, TX                                                           
    0380  Anchorage, AK.................................    1.2998    1.1967
      Anchorage, AK                                                         
    0440  Ann Arbor, MI.................................    1.1785    1.1190
      Lenawee, MI                                                           
      Livingston, MI                                                        
      Washtenaw, MI                                                         
    0450  Anniston, AL..................................    0.8266    0.8777
      Calhoun, AL                                                           
    0460  Appleton-Oshkosh-Neenah, WI...................    0.8996    0.9301
      Calumet, WI                                                           
      Outagamie, WI                                                         
      Winnebago, WI                                                         
    0470  \2\ Arecibo, PR...............................    0.4224    0.5542
      Arecibo, PR                                                           
      Camuy, PR                                                             
      Hatillo, PR                                                           
    0480  Asheville, NC.................................    0.9072    0.9355
      Buncombe, NC                                                          
      Madison, NC                                                           
    0500  Athens, GA....................................    0.9087    0.9365
      Clarke, GA                                                            
      Madison, GA                                                           
      Oconee, GA                                                            
    0520  \1\ Atlanta, GA...............................    0.9823    0.9878
      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, NJ.........................    1.0724    1.0490
      Atlantic, NJ                                                          
      Cape May, NJ                                                          
    0600  Augusta-Aiken, GA-SC..........................    0.9333    0.9538
      Columbia, GA                                                          
      McDuffie, GA                                                          
      Richmond, GA                                                          
      Aiken, SC                                                             
      Edgefield, SC                                                         
    0640  \1\ Austin-San Marcos, TX.....................    0.9133    0.9398
      Bastrop, TX                                                           
      Caldwell, TX                                                          
      Hays, TX                                                              
      Travis, TX                                                            
      Williamson, TX                                                        
    0680  Bakersfield, CA...............................    1.0014    1.0010
      Kern, CA                                                              
    0720  \1\ Baltimore, MD.............................    0.9689    0.9786
      Anne Arundel, MD                                                      
      Baltimore, MD                                                         
      Baltimore City, MD                                                    
      Carroll, MD                                                           
      Harford, MD                                                           
      Howard, MD                                                            
      Queen Anne's, MD                                                      
    0733  Bangor, ME....................................    0.9478    0.9640
      Penobscot, ME                                                         
    0743  Barnstable-Yarmouth, MA.......................    1.4291    1.2770
      Barnstable, MA                                                        
    0760  Baton Rouge, LA...............................    0.8382    0.8862
      Ascension, LA                                                         
      East Baton Rouge, LA                                                  
      Livingston, LA                                                        
      West Baton Rouge, LA                                                  
    0840  Beaumont-Port Arthur, TX......................    0.8593    0.9014
      Hardin, TX                                                            
      Jefferson, TX                                                         
      Orange, TX                                                            
    0860  Bellingham, WA................................    1.1221    1.0821
      Whatcom, WA                                                           
    0870  \2\ Benton Harbor, MI.........................    0.8923    0.9249
      Berrien, MI                                                           
    0875  \1\ Bergen-Passaic, NJ........................    1.1570    1.1050
      Bergen, NJ                                                            
      Passaic, NJ                                                           
    0880  Billings, MT..................................    0.9783    0.9851
      Yellowstone, MT                                                       
    0920  Biloxi-Gulfport-Pascagoula, MS................    0.8415    0.8885
      Hancock, MS                                                           
      Harrison, MS                                                          
      Jackson, MS                                                           
    0960  Binghamton, NY................................    0.8914    0.9243
      Broome, NY                                                            
      Tioga, NY                                                             
    1000  Birmingham, AL................................    0.9005    0.9307
      Blount, AL                                                            
      Jefferson, AL                                                         
      St. Clair, AL                                                         
      Shelby, AL                                                            
    1010  Bismarck, ND..................................    0.7859    0.8479
      Burleigh, ND                                                          
      Morton, ND                                                            
    1020  Bloomington, IN...............................    0.9128    0.9394
      Monroe, IN                                                            
    1040  Bloomington-Normal, IL........................    0.8733    0.9114
      McLean, IL                                                            
    1080  Boise City, ID................................    0.8887    0.9224
      Ada, ID                                                               
      Canyon, ID                                                            
    1123  \1\ Boston-Worcester-Lawrence-Lowell-Brockton,                    
     MA-NH..............................................    1.1436    1.0962
      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, CO..........................    1.0015    1.0010
      Boulder, CO                                                           
    1145  Brazoria, TX..................................    0.9129    0.9395
      Brazoria, TX                                                          
    1150  Bremerton, WA.................................    1.0999    1.0674
      Kitsap, WA                                                            
    1240  Brownsville-Harlingen-San Benito, TX..........    0.8740    0.9119
      Cameron, TX                                                           
    1260  Bryan-College Station, TX.....................    0.8571    0.8998
      Brazos, TX                                                            
    1280  \1\ Buffalo-Niagara Falls, NY.................    0.9272    0.9496
      Erie, NY                                                              
      Niagara, NY                                                           
    1303  Burlington, VT................................    1.0142    1.0097
      Chittenden, VT                                                        
      Franklin, VT                                                          
      Grand Isle, VT                                                        
    1310  Caguas, PR....................................    0.4508    0.5795
      Caguas, PR                                                            
      Cayey, PR                                                             
      Cidra, PR                                                             
      Gurabo, PR                                                            
      San Lorenzo, PR                                                       
    1320  Canton-Massillon, OH..........................    0.8961    0.9276
    
    [[Page 46071]]
    
                                                                            
      Carroll, OH                                                           
      Stark, OH                                                             
    1350  Casper, WY....................................    0.9013    0.9313
      Natrona, WY                                                           
    1360  Cedar Rapids, IA..............................    0.8529    0.8968
      Linn, IA                                                              
    1400  Champaign-Urbana, IL..........................    0.8824    0.9179
      Champaign, IL                                                         
    1440  Charleston-North Charleston, SC...............    0.8807    0.9167
      Berkeley, SC                                                          
      Charleston, SC                                                        
      Dorchester, SC                                                        
    1480  Charleston, WV................................    0.9142    0.9404
      Kanawha, WV                                                           
      Putnam, WV                                                            
    1520  \1\ Charlotte-Gastonia-Rock Hill, NC-SC.......    0.9710    0.9800
      Cabarrus, NC                                                          
      Gaston, NC                                                            
      Lincoln, NC                                                           
      Mecklenburg, NC                                                       
      Rowan, NC                                                             
      Stanly, NC                                                            
      Union, NC                                                             
      York, SC                                                              
    1540  Charlottesville, VA...........................    0.9051    0.9340
      Albemarle, VA                                                         
      Charlottesville City, VA                                              
      Fluvanna, VA                                                          
      Greene, VA                                                            
    1560  Chattanooga, TN-GA............................    0.8658    0.9060
      Catoosa, GA                                                           
      Dade, GA                                                              
      Walker, GA                                                            
      Hamilton, TN                                                          
      Marion, TN                                                            
    1580  \2\ Cheyenne, WY..............................    0.8247    0.8764
      Laramie, WY                                                           
    1600\1\ Chicago, IL.................................    1.0860    1.0581
      Cook, IL                                                              
      DeKalb, IL                                                            
      DuPage, IL                                                            
      Grundy, IL                                                            
      Kane, IL                                                              
      Kendall, IL                                                           
      Lake, IL                                                              
      McHenry, IL                                                           
      Will, IL                                                              
    1620  Chico-Paradise, CA............................    1.0429    1.0292
      Butte, CA                                                             
    1640\1\ Cincinnati, OH-KY-IN........................    0.9521    0.9669
      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-KY...............    0.7852    0.8474
      Christian, KY                                                         
      Montgomery, TN                                                        
    1680\1\ Cleveland-Lorain-Elyria, OH.................    0.9804    0.9865
      Ashtabula, OH                                                         
      Cuyahoga, OH                                                          
      Geauga, OH                                                            
      Lake, OH                                                              
      Lorain, OH                                                            
      Medina, OH                                                            
    1720  Colorado Springs, CO..........................    0.9316    0.9526
      El Paso, CO                                                           
    1740  Columbia, MO..................................    0.9001    0.9305
      Boone, MO                                                             
    1760  Columbia, SC..................................    0.9192    0.9439
      Lexington, SC                                                         
      Richland, SC                                                          
    1800  Columbus, GA-AL...............................    0.8288    0.8793
      Russell, AL                                                           
      Chattahoochee, GA                                                     
      Harris, GA                                                            
      Muscogee, GA                                                          
    1840\1\ Columbus, OH................................    0.9793    0.9858
      Delaware, OH                                                          
      Fairfield, OH                                                         
      Franklin, OH                                                          
      Licking, OH                                                           
      Madison, OH                                                           
      Pickaway, OH                                                          
    1880  Corpus Christi, TX............................    0.8945    0.9265
      Nueces, TX                                                            
      San Patricio, TX                                                      
    1900  Cumberland, MD-WV.............................    0.8822    0.9178
      Allegany, MD                                                          
      Mineral, WV                                                           
    1920  \1\ Dallas, TX................................    0.9674    0.9776
      Collin, TX                                                            
      Dallas, TX                                                            
      Denton, TX                                                            
      Ellis, TX                                                             
      Henderson, TX                                                         
      Hunt, TX                                                              
      Kaufman, TX                                                           
      Rockwall, TX                                                          
    1950  Danville, VA..................................    0.8146    0.8690
      Danville City, VA                                                     
      Pittsylvania, VA                                                      
    1960  Davenport-Moline-Rock Island, IA-IL...........    0.8405    0.8878
      Scott, IA                                                             
      Henry, IL                                                             
      Rock Island, IL                                                       
    2000  Dayton-Springfield, OH........................    0.9279    0.9500
      Clark, OH                                                             
      Greene, OH                                                            
      Miami, OH                                                             
      Montgomery, OH                                                        
    2020  \2\ Daytona Beach, FL.........................    0.8838    0.9189
      Flagler, FL                                                           
      Volusia, FL                                                           
    2030  Decatur, AL...................................    0.8286    0.8792
      Lawrence, AL                                                          
      Morgan, AL                                                            
    2040  Decatur, IL...................................    0.7915    0.8520
      Macon, IL                                                             
    2080  \1\ Denver, CO................................    1.0386    1.0263
      Adams, CO                                                             
      Arapahoe, CO                                                          
      Denver, CO                                                            
      Douglas, CO                                                           
      Jefferson, CO                                                         
    2120  Des Moines, IA................................    0.8837    0.9188
      Dallas, IA                                                            
      Polk, IA                                                              
      Warren, IA                                                            
    2160\1\ Detroit, MI.................................    1.0840    1.0568
      Lapeer, MI                                                            
      Macomb, MI                                                            
      Monroe, MI                                                            
      Oakland, MI                                                           
      St. Clair, MI                                                         
      Wayne, MI                                                             
    2180  Dothan, AL....................................    0.8070    0.8634
      Dale, AL                                                              
      Houston, AL                                                           
    2190  Dover, DE.....................................    0.9303    0.9517
      Kent, DE                                                              
    2200  Dubuque, IA...................................    0.8088    0.8647
      Dubuque, IA                                                           
    2240  Duluth-Superior, MN-WI........................    0.9779    0.9848
      St. Louis, MN                                                         
      Douglas, WI                                                           
    2281  Dutchess County, NY...........................    1.0632    1.0429
      Dutchess, NY                                                          
    2290  Eau Claire, WI................................    0.8764    0.9136
      Chippewa, WI                                                          
      Eau Claire, WI                                                        
    2320  El Paso, TX...................................    1.0123    1.0084
      El Paso, TX                                                           
    2330  Elkhart-Goshen, IN............................    0.9081    0.9361
      Elkhart, IN                                                           
    2335  \2\ Elmira, NY................................    0.8401    0.8875
      Chemung, NY                                                           
    2340  Enid, OK......................................    0.7962    0.8555
      Garfield, OK                                                          
    2360  Erie, PA......................................    0.8862    0.9206
      Erie, PA                                                              
    2400  Eugene-Springfield, OR........................    1.1659    1.1108
      Lane, OR                                                              
    2440  Evansville-Henderson, IN-KY...................    0.8641    0.9048
      Posey, IN                                                             
      Vanderburgh, IN                                                       
      Warrick, IN                                                           
      Henderson, KY                                                         
    2520  Fargo-Moorhead, ND-MN.........................    0.8837    0.9188
    
    [[Page 46072]]
    
                                                                            
      Clay, MN                                                              
      Cass, ND                                                              
    2560  Fayetteville, NC..............................    0.8734    0.9115
      Cumberland, NC                                                        
    2580  Fayetteville-Springdale-Rogers, AR............    0.7461    0.8183
      Benton, AR                                                            
      Washington, AR                                                        
    2620  Flagstaff, AZ-UT..............................    0.9115    0.9385
      Coconino, AZ                                                          
      Kane, UT                                                              
    2640  Flint, MI.....................................    1.1171    1.0788
      Genesee, MI                                                           
    2650  Florence, AL..................................    0.7716    0.8373
      Colbert, AL                                                           
      Lauderdale, AL                                                        
    2655  Florence, SC..................................    0.8711    0.9098
      Florence, SC                                                          
    2670  Fort Collins-Loveland, CO.....................    1.0248    1.0169
      Larimer, CO                                                           
    2680  \1\ Ft. Lauderdale, FL........................    1.0487    1.0331
      Broward, FL                                                           
    2700  \2\ Fort Myers-Cape Coral, FL.................    0.8838    0.9189
      Lee, FL                                                               
    2710  Fort Pierce-Port St. Lucie, FL................    1.0257    1.0175
      Martin, FL                                                            
      St. Lucie, FL                                                         
    2720  Fort Smith, AR-OK.............................    0.7769    0.8412
      Crawford, AR                                                          
      Sebastian, AR                                                         
      Sequoyah, OK                                                          
    2750  \2\ Fort Walton Beach, FL.....................    0.8838    0.9189
      Okaloosa, FL                                                          
    2760  Fort Wayne, IN................................    0.8901    0.9234
      Adams, IN                                                             
      Allen, IN                                                             
      De Kalb, IN                                                           
      Huntington, IN                                                        
      Wells, IN                                                             
      Whitley, IN                                                           
    2800  \1\ Forth Worth-Arlington, TX.................    0.9997    0.9998
      Hood, TX                                                              
      Johnson, TX                                                           
      Parker, TX                                                            
      Tarrant, TX                                                           
    2840  Fresno, CA....................................    1.0607    1.0412
      Fresno, CA                                                            
      Madera, CA                                                            
    2880  Gadsden, AL...................................    0.8815    0.9173
      Etowah, AL                                                            
    2900  Gainesville, FL...............................    0.9616    0.9735
      Alachua, FL                                                           
    2920  Galveston-Texas City, TX......................    1.0564    1.0383
      Galveston, TX                                                         
    2960  Gary, IN......................................    0.9270    0.9494
      Lake, IN                                                              
      Porter, IN                                                            
    2975  \2\ Glens Falls, NY...........................    0.8401    0.8875
      Warren, NY                                                            
      Washington, NY                                                        
    2980  Goldsboro, NC.................................    0.8443    0.8906
      Wayne, NC                                                             
    2985  Grand Forks, ND-MN............................    0.8815    0.9173
      Polk, MN                                                              
      Grand Forks, ND                                                       
    2995  Grand Junction, CO............................    0.9491    0.9649
      Mesa, CO                                                              
    3000  \1\ Grand Rapids-Muskegon-Holland, MI.........    1.0147    1.0100
      Allegan, MI                                                           
      Kent, MI                                                              
      Muskegon, MI                                                          
      Ottawa, MI                                                            
    3040  Great Falls, MT...............................    0.9306    0.9519
      Cascade, MT                                                           
    3060  Greeley, CO...................................    1.0097    1.0066
      Weld, CO                                                              
    3080  Green Bay, WI.................................    0.9585    0.9714
      Brown, WI                                                             
    3120  \1\ Greensboro-Winston-Salem-High Point, NC...    0.9351    0.9551
      Alamance, NC                                                          
      Davidson, NC                                                          
      Davie, NC                                                             
      Forsyth, NCGuilford, NC                                               
      Randolph, NC                                                          
      Stokes, NC                                                            
      Yadkin, NC                                                            
    3150  Greenville, NC................................    0.9064    0.9349
      Pitt, NC                                                              
    3160  Greenville-Spartanburg-Anderson, SC...........    0.9059    0.9346
      Anderson, SC                                                          
      Cherokee, SC                                                          
      Greenville, SC                                                        
      Pickens, SC                                                           
      Spartanburg, SC                                                       
    3180  Hagerstown, MD................................    0.9681    0.9780
      Washington, MD                                                        
    3200  Hamilton-Middletown, OH.......................    0.8767    0.9138
      Butler, OH                                                            
    3240  Harrisburg-Lebanon-Carlisle, PA...............    1.0187    1.0128
      Cumberland, PA                                                        
      Dauphin, PA                                                           
      Lebanon, PA                                                           
      Perry, PA                                                             
    3283  1,2Hartford, CT...............................    1.2617    1.1726
      Hartford, CT                                                          
      Litchfield, CT                                                        
      Middlesex, CT                                                         
      Tolland, CT                                                           
    3285  Hattiesburg, MS...............................    0.7192    0.7979
      Forrest, MS                                                           
      Lamar, MS                                                             
    3290  Hickory-Morganton-Lenoir, NC..................    0.8285    0.8791
      Alexander, NC                                                         
      Burke, NC                                                             
      Caldwell, NC                                                          
      Catawba, NC                                                           
    3320  Honolulu, HI..................................    1.1817    1.1211
      Honolulu, HI                                                          
    3350  Houma, LA.....................................    0.7854    0.8475
      Lafourche, LA                                                         
      Terrebonne, LA                                                        
    3360  \1\ Houston, TX...............................    0.9855    0.9900
      Chambers, TX                                                          
      Fort Bend, TX                                                         
      Harris, TX                                                            
      Liberty, TX                                                           
      Montgomery, TX                                                        
      Waller, TX                                                            
    3400  Huntington-Ashland, WV-KY-OH..................    0.9160    0.9417
      Boyd, KY                                                              
      Carter, KY                                                            
      Greenup, KY                                                           
      Lawrence, OH                                                          
      Cabell, WV                                                            
      Wayne, WV                                                             
    3440  Huntsville, AL................................    0.8485    0.8936
      Limestone, AL                                                         
      Madison, AL                                                           
    3480  \1\ Indianapolis, IN..........................    0.9848    0.9896
      Boone, IN                                                             
      Hamilton, IN                                                          
      Hancock, IN                                                           
      Hendricks, IN                                                         
      Johnson, IN                                                           
      Madison, IN                                                           
      Marion, IN                                                            
      Morgan, IN                                                            
      Shelby, IN                                                            
    3500  Iowa City, IA.................................    0.9401    0.9586
      Johnson, IA                                                           
    3520  Jackson, MI...................................    0.9052    0.9341
      Jackson, MI                                                           
    3560  Jackson, MS...................................    0.7790    0.8428
      Hinds, MS                                                             
      Madison, MS                                                           
      Rankin, MS                                                            
    3580  Jackson, TN...................................    0.8522    0.8963
      Madison, TN                                                           
      Chester, TN                                                           
    3600  \1\ Jacksonville, FL..........................    0.8969    0.9282
      Clay, FL                                                              
      Duval, FL                                                             
      Nassau, FL                                                            
      St. Johns, FL                                                         
    3605  \2\ Jacksonville, NC..........................    0.7939    0.8538
      Onslow, NC                                                            
    3610  \2\ Jamestown, NY.............................    0.8401    0.8875
      Chautauqua, NY                                                        
    3620  Janesville-Beloit, WI.........................    0.8824    0.9179
      Rock, WI                                                              
    3640  Jersey City, NJ...............................    1.1412    1.0947
      Hudson, NJ                                                            
    3660  Johnson City-Kingsport-Bristol, TN-VA.........    0.9114    0.9384
      Carter, TN                                                            
      Hawkins, TN                                                           
      Sullivan, TN                                                          
    
    [[Page 46073]]
    
                                                                            
      Unicoi, TN                                                            
      Washington, TN                                                        
      Bristol City, VA                                                      
      Scott, VA                                                             
      Washington, VA                                                        
    3680  \2\ Johnstown, PA.............................    0.8421    0.8890
      Cambria, PA                                                           
      Somerset, PA                                                          
    3700  Jonesboro, AR.................................    0.7443    0.8169
      Craighead, AR                                                         
    3710  Joplin, MO....................................    0.7541    0.8243
      Jasper, MO                                                            
      Newton, MO                                                            
    3720  Kalamazoo-Battlecreek, MI.....................    1.0668    1.0453
      Calhoun, MI                                                           
      Kalamazoo, MI                                                         
      Van Buren, MI                                                         
    3740  Kankakee, IL..................................    0.8653    0.9057
      Kankakee, IL                                                          
    3760  \1\ Kansas City, KS-MO........................    0.9564    0.9699
      Johnson, KS                                                           
      Leavenworth, KS                                                       
      Miami, KS                                                             
      Wyandotte, KS                                                         
      Cass, MO                                                              
      Clay, MO                                                              
      Clinton, MO                                                           
      Jackson, MO                                                           
      Lafayette, MO                                                         
      Platte, MO                                                            
      Ray, MO                                                               
    3800  Kenosha, WI...................................    0.9196    0.9442
      Kenosha, WI                                                           
    3810  Killeen-Temple, TX............................    1.0252    1.0172
      Bell, TX                                                              
      Coryell, TX                                                           
    3840  Knoxville, TN.................................    0.8831    0.9184
      Anderson, TN                                                          
      Blount, TN                                                            
      Knox, TN                                                              
      Loudon, TN                                                            
      Sevier, TN                                                            
      Union, TN                                                             
    3850  Kokomo, IN....................................    0.8416    0.8886
      Howard, IN                                                            
      Tipton, IN                                                            
    3870  La Crosse, WI-MN..............................    0.8749    0.9125
      Houston, MN                                                           
      La Crosse, WI                                                         
    3880  Lafayette, LA.................................    0.8227    0.8749
      Acadia, LA                                                            
      Lafayette, LA                                                         
      St. Landry, LA                                                        
      St. Martin, LA                                                        
    3920  Lafayette, IN.................................    0.9174    0.9427
      Clinton, IN                                                           
      Tippecanoe, IN                                                        
    3960  Lake Charles, LA..............................    0.7776    0.8418
      Calcasieu, LA                                                         
    3980  \2\ Lakeland-Winter Haven, FL.................    0.8838    0.9189
      Polk, FL                                                              
    4000  Lancaster, PA.................................    0.9481    0.9642
      Lancaster, PA                                                         
    4040  Lansing-East Lansing, MI......................    1.0088    1.0060
      Clinton, MI                                                           
      Eaton, MI                                                             
      Ingham, MI                                                            
    4080  \2\ Laredo, TX................................    0.7404    0.8140
      Webb, TX                                                              
    4100  Las Cruces, NM................................    0.8658    0.9060
      Dona Ana, NM                                                          
    4120  \1\ Las Vegas, NV-AZ..........................    1.0592    1.0402
      Mohave, AZ                                                            
      Clark, NV                                                             
      Nye, NV                                                               
    4150  Lawrence, KS..................................    0.8608    0.9024
      Douglas, KS                                                           
    4200  Lawton, OK....................................    0.9045    0.9336
      Comanche, OK                                                          
    4243  Lewiston-Auburn, ME...........................    0.9536    0.9680
      Androscoggin, ME                                                      
    4280  Lexington, KY.................................    0.8416    0.8886
      Bourbon, KY                                                           
      Clark, KY                                                             
      Fayette, KY                                                           
      Jessamine, KY                                                         
      Madison, KY                                                           
      Scott, KY                                                             
      Woodford, KY                                                          
    4320  Lima, OH......................................    0.9185    0.9434
      Allen, OH                                                             
      Auglaize, OH                                                          
    4360  Lincoln, NE...................................    0.9231    0.9467
      Lancaster, NE                                                         
    4400  Little Rock-North Little Rock, AR.............    0.8490    0.8940
      Faulkner, AR                                                          
      Lonoke, AR                                                            
      Pulaski, AR                                                           
      Saline, AR                                                            
    4420  Longview-Marshall, TX.........................    0.8613    0.9028
      Gregg, TX                                                             
      Harrison, TX                                                          
      Upshur, TX                                                            
    4480\1\ Los Angeles-Long Beach, CA..................    1.2268    1.1503
      Los Angeles, CA                                                       
    4520  Louisville, KY-IN.............................    0.9507    0.9660
      Clark, IN                                                             
      Floyd, IN                                                             
      Harrison, IN                                                          
      Scott, IN                                                             
      Bullitt, KY                                                           
      Jefferson, KY                                                         
      Oldham, KY                                                            
    4600  Lubbock, TX...................................    0.8400    0.8875
      Lubbock, TX                                                           
    4640  Lynchburg, VA.................................    0.8228    0.8750
      Amherst, VA                                                           
      Bedford, VA                                                           
      Bedford City, VA                                                      
      Campbell, VA                                                          
      Lynchburg City, VA                                                    
    4680  Macon, GA.....................................    0.9227    0.9464
      Bibb, GA                                                              
      Houston, GA                                                           
      Jones, GA                                                             
      Peach, GA                                                             
      Twiggs, GA                                                            
    4720  Madison, WI...................................    1.0055    1.0038
      Dane, WI                                                              
    4800  Mansfield, OH.................................    0.8639    0.9047
      Crawford, OH                                                          
      Richland, OH                                                          
    4840  Mayaguez, PR..................................    0.4475    0.5766
      Anasco, PR                                                            
      Cabo Rojo, PR                                                         
      Hormigueros, PR                                                       
      Mayaguez, PR                                                          
      Sabana Grande, PR                                                     
      San German, PR                                                        
    4880  McAllen-Edinburg-Mission, TX..................    0.8371    0.8854
      Hidalgo, TX                                                           
    4890  Medford-Ashland, OR...........................    1.0354    1.0241
      Jackson, OR                                                           
    4900\2\ Melbourne-Titusville-Palm Bay, FL...........    0.8838    0.9189
      Brevard, FL                                                           
    4920  \1\ Memphis, TN-AR-MS.........................    0.8589    0.9011
      Crittenden, AR                                                        
      DeSoto, MS                                                            
      Fayette, TN                                                           
      Shelby, TN                                                            
      Tipton, TN                                                            
    4940  Merced, CA....................................    1.0947    1.0639
      Merced, CA                                                            
    5000  \1\ Miami, FL.................................    0.9859    0.9903
      Dade, FL                                                              
    5015  \1\ Middlesex-Somerset-Hunterdon, NJ..........    1.0875    1.0591
      Hunterdon, NJ                                                         
      Middlesex, NJ                                                         
      Somerset, NJ                                                          
    5080  \1\ Milwaukee-Waukesha, WI....................    0.9819    0.9876
      Milwaukee, WI                                                         
      Ozaukee, WI                                                           
      Washington, WI                                                        
      Waukesha, WI                                                          
    5120  \1\ Minneapolis-St. Paul, MN-WI...............    1.0733    1.0496
      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                                                         
    5160  Mobile, AL....................................    0.8455    0.8914
      Baldwin, AL                                                           
      Mobile, AL                                                            
    5170  Modesto, CA...................................    1.0377    1.0257
    
    [[Page 46074]]
    
                                                                            
      Stanislaus, CA                                                        
    5190  \1\ Monmouth-Ocean, NJ........................    1.0934    1.0631
      Monmouth, NJ                                                          
      Ocean, NJ                                                             
    5200  Monroe, LA....................................    0.8414    0.8885
      Ouachita, LA                                                          
    5240  Montgomery, AL................................    0.7813    0.8445
      Autauga, AL                                                           
      Elmore, AL                                                            
      Montgomery, AL                                                        
    5280  Muncie, IN....................................    0.9173    0.9426
      Delaware, IN                                                          
    5330  Myrtle Beach, SC..............................    0.8072    0.8636
      Horry, SC                                                             
    5345  Naples, FL....................................    1.0109    1.0075
      Collier, FL                                                           
    5360  \1\ Nashville, TN.............................    0.9182    0.9432
      Cheatham, TN                                                          
      Davidson, TN                                                          
      Dickson, TN                                                           
      Robertson, TN                                                         
      Rutherford, TN                                                        
      Sumner, TN                                                            
      Williamson, TN                                                        
      Wilson, TN                                                            
    5380  \1\ Nassau-Suffolk, NY........................    1.3807    1.2472
      Nassau, NY                                                            
      Suffolk, NY                                                           
    5483  \1\ New Haven-Bridgeport-Stamford-Waterbury-..    1.2619    1.1727
      Danbury, CT                                                           
      Fairfield, CT                                                         
      New Haven, CT                                                         
    5523  \2\ New London-Norwich, CT....................    1.2617    1.1726
      New London, CT                                                        
    5560  \1\ New Orleans, LA...........................    0.9566    0.9701
      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, NY..............................    1.3982    1.2580
      Bronx, NY                                                             
      Kings, NY                                                             
      New York, NY                                                          
      Putnam, NY                                                            
      Queens, NY                                                            
      Richmond, NY                                                          
      Rockland, NY                                                          
      Westchester, NY                                                       
    5640  \1\ Newark, NJ................................    1.1111    1.0748
      Essex, NJ                                                             
      Morris, NJ                                                            
      Sussex, NJ                                                            
      Union, NJ                                                             
      Warren, NJ                                                            
    5660  Newburgh, NY-PA...............................    1.1283    1.0862
      Orange, NY                                                            
      Pike, PA                                                              
    5720 \1\ Norfolk-Virginia Beach-Newport News, VA-NC.    0.8316    0.8814
      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, CA...............................    1.5158    1.3295
      Alameda, CA                                                           
      Contra Costa, CA                                                      
    5790  Ocala, FL.....................................    0.9032    0.9327
      Marion, FL                                                            
    5800  Odessa-Midland, TX............................    0.8660    0.9062
      Ector, TX                                                             
      Midland, TX                                                           
    5880  \1\ Oklahoma City, OK.........................    0.8481    0.8933
      Canadian, OK                                                          
      Cleveland, OK                                                         
      Logan, OK                                                             
      McClain, OK                                                           
      Oklahoma, OK                                                          
      Pottawatomie, OK                                                      
    5910  Olympia, WA...................................    1.0901    1.0609
      Thurston, WA                                                          
    5920  Omaha, NE-IA..................................    0.9421    0.9600
      Pottawattamie, IA                                                     
      Cass, NE                                                              
      Douglas, NE                                                           
      Sarpy, NE                                                             
      Washington, NE                                                        
    5945\1\ Orange County, CA...........................    1.1532    1.1025
      Orange, CA                                                            
    5960\1\ Orlando, FL.................................    0.9397    0.9583
      Lake, FL                                                              
      Orange, FL                                                            
      Osceola, FL                                                           
      Seminole, FL                                                          
    5990\2\ Owensboro, KY...............................    0.7772    0.8415
      Daviess, KY                                                           
    6015\2\ Panama City, FL.............................    0.8838    0.9189
      Bay, FL                                                               
    6020\2\ Parkersburg-Marietta, WV-OH (West Virginia                      
     Hospitals).........................................    0.8046    0.8617
      Washington, OH                                                        
      Wood, WV                                                              
    6020\2\ Parkersburg-Marietta, WV-OH (Ohio Hospitals)    0.8434    0.8899
      Washington, OH                                                        
      Wood, WV                                                              
    6080\2\ Pensacola, FL...............................    0.8838    0.9189
      Escambia, FL                                                          
      Santa Rosa, FL                                                        
    6120  Peoria-Pekin, IL..............................    0.8586    0.9009
      Peoria, IL                                                            
      Tazewell, IL                                                          
      Woodford, IL                                                          
    6160\1\ Philadelphia, PA-NJ.........................    1.1379    1.0925
      Burlington, NJ                                                        
      Camden, NJ                                                            
      Gloucester, NJ                                                        
      Salem, NJ                                                             
      Bucks, PA                                                             
      Chester, PA                                                           
      Delaware, PA                                                          
      Montgomery, PA                                                        
      Philadelphia, PA                                                      
    6200\1\ Phoenix-Mesa, AZ............................    0.9606    0.9728
      Maricopa, AZ                                                          
      Pinal, AZ                                                             
    6240  Pine Bluff, AR................................    0.7826    0.8455
      Jefferson, AR                                                         
    6280\1\ Pittsburgh, PA..............................    0.9725    0.9811
      Allegheny, PA                                                         
      Beaver, PA                                                            
      Butler, PA                                                            
      Fayette, PA                                                           
      Washington, PA                                                        
      Westmoreland, PA                                                      
    6323  Pittsfield, MA................................    1.0960    1.0648
      Berkshire, MA                                                         
    6340  Pocatello, ID.................................    0.9586    0.9715
      Bannock, ID                                                           
    6360  Ponce, PR.....................................    0.4589    0.5866
      Guayanilla, PR                                                        
      Juana Diaz, PR                                                        
      Penuelas, PR                                                          
      Ponce, PR                                                             
      Villalba, PR                                                          
      Yauco, PR                                                             
    6403  Portland, ME..................................    0.9627    0.9743
      Cumberland, ME                                                        
      Sagadahoc, ME                                                         
      York, ME                                                              
    6440\1\ Portland-Vancouver, OR-WA...................    1.1344    1.0902
      Clackamas, OR                                                         
      Columbia, OR                                                          
      Multnomah, OR                                                         
      Washington, OR                                                        
      Yamhill, OR                                                           
      Clark, WA                                                             
    6483\1\ Providence-Warwick-Pawtucket, RI............    1.1049    1.0707
      Bristol, RI                                                           
      Kent, RI                                                              
      Newport, RI                                                           
      Providence, RI                                                        
      Washington, RI                                                        
    6520  Provo-Orem, UT................................    1.0073    1.0050
      Utah, UT                                                              
    6560  Pueblo, CO....................................    0.8450    0.8911
      Pueblo, CO                                                            
    
    [[Page 46075]]
    
                                                                            
    6580\2\ Punta Gorda, FL.............................    0.8838    0.9189
      Charlotte, FL                                                         
    6600  Racine, WI....................................    0.8934    0.9257
      Racine, WI                                                            
    6640\1\ Raleigh-Durham-Chapel Hill, NC..............    0.9818    0.9875
      Chatham, NC                                                           
      Durham, NC                                                            
      Franklin, NC                                                          
      Johnston, NC                                                          
      Orange, NC                                                            
      Wake, NC                                                              
    6660  Rapid City, SD................................    0.8345    0.8835
      Pennington, SD                                                        
    6680  Reading, PA...................................    0.9516    0.9666
      Berks, PA                                                             
    6690  Redding, CA...................................    1.1790    1.1194
      Shasta, CA                                                            
    6720  Reno, NV......................................    1.0768    1.0520
      Washoe, NV                                                            
    6740\2\ Richland-Kennewick-Pasco, WA................    1.0221    1.0151
      Benton, WA                                                            
      Franklin, WA                                                          
    6760  Richmond-Petersburg, VA.......................    0.9152    0.9411
      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, CA..............    1.1145    1.0771
      Riverside, CA                                                         
      San Bernardino, CA                                                    
    6800  Roanoke, VA...................................    0.8402    0.8876
      Botetourt, VA                                                         
      Roanoke, VA                                                           
      Roanoke City, VA                                                      
      Salem City, VA                                                        
    6820  Rochester, MN.................................    1.0502    1.0341
      Olmsted, MN                                                           
    6840  \1\ Rochester, NY.............................    0.9524    0.9672
      Genesee, NY                                                           
      Livingston, NY                                                        
      Monroe, NY                                                            
      Ontario, NY                                                           
      Orleans, NY                                                           
      Wayne, NY                                                             
    6880  Rockford, IL..................................    0.9081    0.9361
      Boone, IL                                                             
      Ogle, IL                                                              
      Winnebago, IL                                                         
    6895  Rocky Mount, NC...............................    0.9029    0.9324
      Edgecombe, NC                                                         
      Nash, NC                                                              
    6920  \1\ Sacramento, CA............................    1.2202    1.1460
      El Dorado, CA                                                         
      Placer, CA                                                            
      Sacramento, CA                                                        
    6960  Saginaw-Bay City-Midland, MI..................    0.9564    0.9699
      Bay, MI                                                               
      Midland, MI                                                           
      Saginaw, MI                                                           
    6980  St. Cloud, MN.................................    0.9544    0.9685
      Benton, MN                                                            
      Stearns, MN                                                           
    7000  St. Joseph, MO................................    0.8366    0.8850
      Andrew, MO                                                            
      Buchanan, MO                                                          
    7040  \1\ St. Louis, MO-IL..........................    0.9130    0.9396
      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, OR.................................    0.9976    0.9984
      Marion, OR                                                            
      Polk, OR                                                              
    7120  Salinas, CA...................................    1.4513    1.2905
      Monterey, CA                                                          
    7160\1\ Salt Lake City-Ogden, UT....................    0.9862    0.9905
      Davis, UT                                                             
      Salt Lake, UT                                                         
      Weber, UT                                                             
    7200  San Angelo, TX................................    0.7780    0.8421
      Tom Green, TX                                                         
    7240  \1\ San Antonio, TX...........................    0.8499    0.8946
      Bexar, TX                                                             
      Comal, TX                                                             
      Guadalupe, TX                                                         
      Wilson, TX                                                            
    7320  \1\ San Diego, CA.............................    1.2225    1.1475
      San Diego, CA                                                         
    7360  \1\ San Francisco, CA.........................    1.4091    1.2647
      Marin, CA                                                             
      San Francisco, CA                                                     
      San Mateo, CA                                                         
    7400  \1\ San Jose, CA..............................    1.4332    1.2795
      Santa Clara, CA                                                       
    7440  \1\ San Juan-Bayamon, PR......................    0.4618    0.5891
      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, CA....    1.1374    1.0922
      San Luis Obispo, CA                                                   
    7480  Santa Barbara-Santa Maria-Lompoc, CA..........    1.0688    1.0466
      Santa Barbara, CA                                                     
    7485  Santa Cruz-Watsonville, CA....................    1.4187    1.2706
      Santa Cruz, CA                                                        
    7490  Santa Fe, NM..................................    1.0332    1.0226
      Los Alamos, NM                                                        
      Santa Fe, NM                                                          
    7500  Santa Rosa, CA................................    1.2267    1.1502
      Sonoma, CA                                                            
    7510  Sarasota-Bradenton, FL........................    0.9757    0.9833
      Manatee, FL                                                           
      Sarasota, FL                                                          
    7520  Savannah, GA..................................    0.8638    0.9046
      Bryan, GA                                                             
      Chatham, GA                                                           
      Effingham, GA                                                         
    7560  Scranton--Wilkes-Barre--Hazleton, PA..........    0.8539    0.8975
      Columbia, PA                                                          
      Lackawanna, PA                                                        
      Luzerne, PA                                                           
      Wyoming, PA                                                           
    7600  \1\ Seattle-Bellevue-Everett, WA..............    1.1375    1.0922
      Island, WA                                                            
      King, WA                                                              
      Snohomish, WA                                                         
    7610  Sharon, PA....................................    0.8783    0.9150
      Mercer, PA                                                            
    7620  \2\ Sheboygan, WI.............................    0.8471    0.8926
      Sheboygan, WI                                                         
    7640  Sherman-Denison, TX...........................    0.8499    0.8946
      Grayson, TX                                                           
    7680  Shreveport-Bossier City, LA...................    0.9381    0.9572
    
    [[Page 46076]]
    
                                                                            
      Bossier, LA                                                           
      Caddo, LA                                                             
      Webster, LA                                                           
    7720  Sioux City, IA-NE.............................    0.8031    0.8606
      Woodbury, IA                                                          
      Dakota, NE                                                            
    7760  Sioux Falls, SD...............................    0.8712    0.9099
      Lincoln, SD                                                           
      Minnehaha, SD                                                         
    7800  South Bend, IN................................    0.9880    0.9918
      St. Joseph, IN                                                        
    7840  Spokane, WA...................................    1.0486    1.0330
      Spokane, WA                                                           
    7880  Springfield, IL...............................    0.8713    0.9100
      Menard, IL                                                            
      Sangamon, IL                                                          
    7920  Springfield, MO...............................    0.8036    0.8609
      Christian, MO                                                         
      Greene, MO                                                            
      Webster, MO                                                           
    8003  \2\ Springfield, MA...........................    1.0718    1.0486
      Hampden, MA                                                           
      Hampshire, MA                                                         
    8050  State College, PA.............................    0.9635    0.9749
      Centre, PA                                                            
    8080  Steubenville-Weirton, OH-WV...................    0.8645    0.9051
      Jefferson, OH                                                         
      Brooke, WV                                                            
      Hancock, WV                                                           
    8120  Stockton-Lodi, CA.............................    1.1518    1.1016
      San Joaquin, CA                                                       
    8140  \2\ Sumter, SC................................    0.7921    0.8525
      Sumter, SC                                                            
    8160  Syracuse, NY..................................    0.9480    0.9641
      Cayuga, NY                                                            
      Madison, NY                                                           
      Onondaga, NY                                                          
      Oswego, NY                                                            
    8200  Tacoma, WA....................................    1.1016    1.0685
      Pierce, WA                                                            
    8240  \2\ Tallahassee, FL...........................    0.8838    0.9189
      Gadsden, FL                                                           
      Leon, FL                                                              
    8280  \1\ Tampa-St. Petersburg-Clearwater, FL.......    0.9196    0.9442
      Hernando, FL                                                          
      Hillsborough, FL                                                      
      Pasco, FL                                                             
      Pinellas, FL                                                          
    8320  Terre Haute, IN...............................    0.8614    0.9029
      Clay, IN                                                              
      Vermillion, IN                                                        
      Vigo, IN                                                              
    8360  Texarkana, AR-Texarkana, TX...................    0.8699    0.9090
      Miller, AR                                                            
      Bowie, TX                                                             
    8400  Toledo, OH....................................    1.0140    1.0096
      Fulton, OH                                                            
      Lucas, OH                                                             
      Wood, OH                                                              
    8440  Topeka, KS....................................    0.9438    0.9612
      Shawnee, KS                                                           
    8480  Trenton, NJ...................................    1.0380    1.0259
      Mercer, NJ                                                            
    8520  Tucson, AZ....................................    0.9180    0.9431
      Pima, AZ                                                              
    8560  Tulsa, OK.....................................    0.8074    0.8637
      Creek, OK                                                             
      Osage, OK                                                             
      Rogers, OK                                                            
      Tulsa, OK                                                             
      Wagoner, OK                                                           
    8600  Tuscaloosa, AL................................    0.8187    0.8720
      Tuscaloosa, AL                                                        
    8640  Tyler, TX.....................................    0.9567    0.9701
      Smith, TX                                                             
    8680  \2\ Utica-Rome, NY............................    0.8401    0.8875
      Herkimer, NY                                                          
      Oneida, NY                                                            
    8720  Vallejo-Fairfield-Napa, CA....................    1.3528    1.2299
      Napa, CA                                                              
      Solano, CA                                                            
    8735  Ventura, CA...................................    1.0544    1.0369
      Ventura, CA                                                           
    8750  Victoria, TX..................................    0.8474    0.8928
      Victoria, TX                                                          
    8760  Vineland-Millville-Bridgeton, NJ..............    1.0110    1.0075
      Cumberland, NJ                                                        
    8780  \2\ Visalia-Tulare-Porterville, CA............    0.9977    0.9984
      Tulare, CA                                                            
    8800  Waco, TX......................................    0.7696    0.8358
      McLennan, TX                                                          
    8840  \1\ Washington, DC-MD-VA-WV...................    1.0780    1.0528
      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, IA......................    0.8643    0.9050
      Black Hawk, IA                                                        
    8940  Wausau, WI....................................    1.0545    1.0370
      Marathon, WI                                                          
    8960  West Palm Beach-Boca Raton, FL................    1.0309    1.0211
      Palm Beach, FL                                                        
    9000  \2\ Wheeling, OH-WV (West Virginia Hospitals).    0.7966    0.8558
      Belmont, OH                                                           
      Marshall, WV                                                          
      Ohio, WV                                                              
    9000  \2\ Wheeling, OH-WV (Ohio Hospitals)..........    0.8434    0.8899
      Belmont, OH                                                           
      Marshall, WV                                                          
      Ohio, WV                                                              
    9040  Wichita, KS...................................    0.9403    0.9587
      Butler, KS                                                            
      Harvey, KS                                                            
      Sedgwick, KS                                                          
    9080  Wichita Falls, TX.............................    0.7646    0.8321
      Archer, TX                                                            
      Wichita, TX                                                           
    9140  Williamsport, PA..............................    0.8548    0.8981
      Lycoming, PA                                                          
    9160  Wilmington-Newark, DE-MD......................    1.1538    1.1029
      New Castle, DE                                                        
      Cecil, MD                                                             
    9200  Wilmington, NC................................    0.9322    0.9531
      New Hanover, NC                                                       
      Brunswick, NC                                                         
    9260  \2\ Yakima, WA................................    1.0221    1.0151
      Yakima, WA                                                            
    9270  Yolo, CA......................................    1.1431    1.0959
      Yolo, CA                                                              
    9280  York, PA......................................    0.9415    0.9596
      York, PA                                                              
    9320  Youngstown-Warren, OH.........................    0.9937    0.9957
      Columbiana, OH                                                        
      Mahoning, OH                                                          
      Trumbull, OH                                                          
    9340  Yuba City, CA.................................    1.0324    1.0221
      Sutter, CA                                                            
      Yuba, CA                                                              
    9360  Yuma, AZ......................................    0.9732    0.9816
      Yuma, AZ                                                              
    ------------------------------------------------------------------------
    \1\ Large Urban Area                                                    
    \2\ Hospitals geographically located in the area are assigned the       
      statewide rural wage index for FY 1998.                               
    
    
    Table 4B.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                                   Rural Areas                              
    ------------------------------------------------------------------------
                                                            Wage            
                        Nonurban area                       index      GAF  
    ------------------------------------------------------------------------
    Alabama.............................................    0.7260    0.8031
    Alaska..............................................    1.2302    1.1524
    Arizona.............................................    0.7989    0.8575
    Arkansas............................................    0.6995    0.7829
    
    [[Page 46077]]
    
                                                                            
    California..........................................    0.9977    0.9984
    Colorado............................................    0.8129    0.8677
    Connecticut.........................................    1.2617    1.1726
    Delaware............................................    0.8925    0.9251
    Florida.............................................    0.8838    0.9189
    Georgia.............................................    0.7761    0.8407
    Hawaii..............................................    1.0229    1.0156
    Idaho...............................................    0.8221    0.8745
    Illinois............................................    0.7644    0.8320
    Indiana.............................................    0.8161    0.8701
    Iowa................................................    0.7391    0.8130
    Kansas..............................................    0.7203    0.7988
    Kentucky............................................    0.7772    0.8415
    Louisiana...........................................    0.7383    0.8124
    Maine...............................................    0.8468    0.8924
    Maryland............................................    0.8617    0.9031
    Massachusetts.......................................    1.0718    1.0486
    Michigan............................................    0.8923    0.9249
    Minnesota...........................................    0.8180    0.8715
    Mississippi.........................................    0.6911    0.7765
    Missouri............................................    0.7207    0.7991
    Montana.............................................    0.8302    0.8804
    Nebraska............................................    0.7401    0.8137
    Nevada..............................................    0.8914    0.9243
    New Hampshire.......................................    0.9724    0.9810
    New Jersey \1\......................................  ........  ........
    New Mexico..........................................    0.8110    0.8664
    New York............................................    0.8401    0.8875
    North Carolina......................................    0.7939    0.8538
    North Dakota........................................    0.7360    0.8107
    Ohio................................................    0.8434    0.8899
    Oklahoma............................................    0.7072    0.7888
    Oregon..............................................    0.9976    0.9984
    Pennsylvania........................................    0.8421    0.8890
    Puerto Rico.........................................    0.4224    0.5542
    Rhode Island \1\....................................  ........  ........
    South Carolina......................................    0.7921    0.8525
    South Dakota........................................    0.6983    0.7820
    Tennessee...........................................    0.7353    0.8101
    Texas...............................................    0.7404    0.8140
    Utah................................................    0.8926    0.9251
    Vermont.............................................    0.9314    0.9525
    Virginia............................................    0.7782    0.8422
    Washington..........................................    1.0221    1.0151
    West Virginia.......................................    0.7966    0.8558
    Wisconsin...........................................    0.8471    0.8926
    Wyoming.............................................    0.8247    0.8764
    ------------------------------------------------------------------------
    \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                    
    ------------------------------------------------------------------------
                                                            Wage            
                         Urban area                         index      GAF  
    ------------------------------------------------------------------------
    Abilene, TX.........................................    0.8287    0.8793
    Albuquerque, NM.....................................    0.9329    0.9535
    Alexandria, LA......................................    0.8269    0.8780
    Amarillo, TX........................................    0.9277    0.9499
    Anchorage, AK.......................................    1.2998    1.1967
    Asheville, NC.......................................    0.9072    0.9355
    Athens, GA..........................................    0.9087    0.9365
    Atlanta, GA.........................................    0.9823    0.9878
    Austin-San Marcos, TX...............................    0.9133    0.9398
    Bangor, ME..........................................    0.9478    0.9640
    Barnstable-Yarmouth, MA.............................    1.3827    1.2484
    Baton Rouge, LA.....................................    0.8382    0.8862
    Benton Harbor, MI...................................    0.8923    0.9249
    Bergen-Passaic, NJ..................................    1.1570    1.1050
    Billings, MT........................................    0.9609    0.9731
    Birmingham, AL......................................    0.9005    0.9307
    Bismarck, ND........................................    0.7859    0.8479
    Boise City, ID......................................    0.8887    0.9224
    Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH....    1.1436    1.0962
    Caguas, PR..........................................    0.4508    0.5795
    Casper, WY..........................................    0.9013    0.9313
    Champaign-Urbana, IL................................    0.8706    0.9095
    Charlotte-Gastonia-Rock Hill, NC-SC.................    0.9710    0.9800
    Charlottesville, VA.................................    0.8885    0.9222
    Chattanooga, TN-GA..................................    0.8658    0.9060
    Chicago, IL.........................................    1.0759    1.0514
    Cincinnati, OH-KY-IN................................    0.9521    0.9669
    Cleveland-Lorain-Elyria, OH.........................    0.9804    0.9865
    Columbia, MO........................................    0.8759    0.9133
    Columbus, OH........................................    0.9793    0.9858
    Dallas, TX..........................................    0.9674    0.9776
    Davenport-Moline-Rock Island, IA-IL.................    0.8405    0.8878
    Denver, CO..........................................    1.0386    1.0263
    Des Moines, IA......................................    0.8837    0.9188
    Detroit, MI.........................................    1.0840    1.0568
    Duluth-Superior, MN-WI..............................    0.9779    0.9848
    Dutchess County, NY.................................    1.0364    1.0248
    Eugene-Springfield, OR..............................    1.1659    1.1108
    Fargo-Moorhead, ND-MN...............................    0.8729    0.9111
    Fayetteville, NC....................................    0.8491    0.8940
    Flint, MI...........................................    1.1171    1.0788
    Florence, AL........................................    0.7716    0.8373
    Florence, SC........................................    0.8711    0.9098
    Ft. Lauderdale, FL..................................    1.0487    1.0331
    Fort Pierce-Port St. Lucie, FL......................    1.0008    1.0005
    Fort Walton Beach, FL...............................    0.8653    0.9057
    Forth Worth-Arlington, TX...........................    0.9997    0.9998
    Gadsden, AL.........................................    0.8815    0.9173
    Gainesville, FL.....................................    0.9616    0.9735
    Gary, IN............................................    0.9114    0.9384
    Grand Forks, ND-MN..................................    0.8815    0.9173
    Grand Junction, CO..................................    0.9491    0.9649
    Great Falls, MT.....................................    0.9306    0.9519
    Greeley, CO.........................................    0.9791    0.9856
    Green Bay, WI.......................................    0.9585    0.9714
    Greensboro-Winston-Salem-High Point, NC.............    0.9351    0.9551
    Harrisburg-Lebanon-Carlisle, PA.....................    1.0076    1.0052
    Honolulu, HI........................................    1.1817    1.1211
    Houma, LA...........................................    0.7854    0.8475
    Houston, TX.........................................    0.9855    0.9900
    Huntington-Ashland, WV-KY-OH........................    0.9160    0.9417
    Huntsville, AL......................................    0.8485    0.8936
    Indianapolis, IN....................................    0.9848    0.9896
    Iowa City, IA.......................................    0.9198    0.9444
    Jackson, MS.........................................    0.7790    0.8428
    Johnson City-Kingsport-Bristol, TN-VA...............    0.9114    0.9384
    Jonesboro, AR.......................................    0.7443    0.8169
    Joplin, MO..........................................    0.7541    0.8243
    Kalamazoo-Battlecreek, MI...........................    1.0668    1.0453
    Kansas City, KS-MO..................................    0.9564    0.9699
    Knoxville, TN.......................................    0.8831    0.9184
    Lafayette, LA.......................................    0.8227    0.8749
    Lafayette, IN.......................................    0.9174    0.9427
    Lansing-East Lansing, MI............................    1.0088    1.0060
    Las Cruces, NM......................................    0.8658    0.9060
    Las Vegas, NV-AZ....................................    1.0592    1.0402
    Lexington, KY.......................................    0.8416    0.8886
    Lima, OH............................................    0.9185    0.9434
    Lincoln, NE.........................................    0.9035    0.9329
    Little Rock-North Little Rock, AR...................    0.8490    0.8940
    Longview-Marshall, TX...............................    0.8509    0.8953
    Los Angeles-Long Beach, CA..........................    1.2268    1.1503
    Louisville, KY-IN...................................    0.9507    0.9660
    Macon, GA...........................................    0.9227    0.9464
    Madison, WI.........................................    1.0055    1.0038
    Mansfield, OH.......................................    0.8639    0.9047
    Medford-Ashland, OR.................................    1.0354    1.0241
    Memphis, TN-AR-MS...................................    0.8589    0.9011
    Milwaukee-Waukesha, WI..............................    0.9819    0.9876
    Minneapolis-St. Paul, MN-WI.........................    1.0733    1.0496
    Monroe, LA..........................................    0.8414    0.8885
    Montgomery, AL......................................    0.7813    0.8445
    Nashville, TN.......................................    0.9182    0.9432
    New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT.    1.2619    1.1727
    New London-Norwich, CT..............................    1.2258    1.1496
    New Orleans, LA.....................................    0.9566    0.9701
    New York, NY........................................    1.3982    1.2580
    Newark, NJ..........................................    1.1111    1.0748
    Newburgh, NY-PA.....................................    1.1283    1.0862
    Oakland, CA.........................................    1.5158    1.3295
    Odessa-Midland, TX..................................    0.8516    0.8958
    Oklahoma City, OK...................................    0.8481    0.8933
    Omaha, NE-IA........................................    0.9421    0.9600
    Orange County, CA...................................    1.1532    1.1025
    Peoria-Pekin, IL....................................    0.8586    0.9009
    Philadelphia, PA-NJ.................................    1.1379    1.0925
    Pittsburgh, PA......................................    0.9583    0.9713
    Pocatello, ID.......................................    0.9000    0.9304
    Portland, ME........................................    0.9627    0.9743
    Portland-Vancouver, OR-WA...........................    1.1344    1.0902
    Provo-Orem, UT......................................    1.0073    1.0050
    Raleigh-Durham-Chapel Hill, NC......................    0.9818    0.9875
    Rapid City, SD......................................    0.8345    0.8835
    Rochester, MN.......................................    1.0502    1.0341
    Rockford, IL........................................    0.9081    0.9361
    Sacramento, CA......................................    1.2202    1.1460
    
    [[Page 46078]]
    
                                                                            
    Saginaw-Bay City-Midland, MI........................    0.9564    0.9699
    St. Cloud, MN.......................................    0.9544    0.9685
    St. Louis, MO-IL....................................    0.9130    0.9396
    Salinas, CA.........................................    1.4299    1.2775
    Salt Lake City-Ogden, UT............................    0.9862    0.9905
    San Diego, CA.......................................    1.2225    1.1475
    San Francisco, CA...................................    1.4091    1.2647
    Santa Fe, NM........................................    1.0007    1.0005
    Santa Rosa, CA......................................    1.2146    1.1424
    Seattle-Bellevue-Everett, WA........................    1.1375    1.0922
    Sherman-Denison, TX.................................    0.8324    0.8819
    Sioux City, IA-NE...................................    0.8031    0.8606
    Sioux Falls, SD.....................................    0.8607    0.9024
    South Bend, IN......................................    0.9880    0.9918
    Spokane, WA.........................................    1.0311    1.0212
    Springfield, IL.....................................    0.8610    0.9026
    Springfield, MO.....................................    0.8036    0.8609
    Stockton-Lodi, CA...................................    1.1518    1.1016
    Syracuse, NY........................................    0.9480    0.9641
    Tampa-St. Petersburg-Clearwater, FL.................    0.9196    0.9442
    Texarkana, AR-Texarkana, TX.........................    0.8699    0.9090
    Topeka, KS..........................................    0.9310    0.9522
    Tucson, AZ..........................................    0.9180    0.9431
    Tulsa, OK...........................................    0.8074    0.8637
    Tyler, TX...........................................    0.9421    0.9600
    Vallejo-Fairfield-Napa, CA..........................    1.3528    1.2299
    Washington, DC-MD-VA-WV.............................    1.0780    1.0528
    Waterloo-Cedar Falls, IA............................    0.8643    0.9050
    Wausau, WI..........................................    0.9845    0.9894
    Wichita, KS.........................................    0.9157    0.9415
    Wichita Falls, TX...................................    0.7646    0.8321
    Rural Florida.......................................    0.8838    0.9189
    Rural Louisiana.....................................    0.7383    0.8124
    Rural Minnesota.....................................    0.8180    0.8715
    Rural Missouri......................................    0.7207    0.7991
    Rural New Hampshire.................................    0.9724    0.9810
    Rural New Mexico....................................    0.8110    0.8664
    Rural North Carolina................................    0.7939    0.8538
    Rural Oregon........................................    0.9976    0.9984
    Rural Washington....................................    1.0221    1.0151
    Rural West Virginia.................................    0.7966    0.8558
    Rural Wyoming.......................................    0.8247    0.8764
    ------------------------------------------------------------------------
    
    
                 Table 4D.--Average Hourly Wage for Urban Areas             
    ------------------------------------------------------------------------
                                                                    Average 
                              Urban area                             hourly 
                                                                      wage  
    ------------------------------------------------------------------------
    Abilene, TX..................................................    16.6537
    Aguadilla, PR................................................     8.4161
    Akron, OH....................................................    19.6368
    Albany, GA...................................................    15.9028
    Albany-Schenectady-Troy, NY..................................    17.0398
    Albuquerque, NM..............................................    18.7069
    Alexandria, LA...............................................    16.4017
    Allentown-Bethlehem-Easton, PA...............................    20.2671
    Altoona, PA..................................................    18.3612
    Amarillo, TX.................................................    18.9399
    Anchorage, AK................................................    25.8065
    Ann Arbor, MI................................................    23.6829
    Anniston, AL.................................................    16.6112
    Appleton-Oshkosh-Neenah, WI..................................    18.0782
    Arecibo, PR..................................................     8.4753
    Asheville, NC................................................    18.2293
    Athens, GA...................................................    18.2596
    Atlanta, GA..................................................    19.7400
    Atlantic-Cape May, NJ........................................    22.4152
    Augusta-Aiken, GA-SC.........................................    18.7555
    Austin-San Marcos, TX........................................    18.3520
    Bakersfield, CA..............................................    20.1222
    Baltimore, MD................................................    19.4693
    Bangor, ME...................................................    19.0461
    Barnstable-Yarmouth, MA......................................    28.7181
    Baton Rouge, LA..............................................    16.8431
    Beaumont-Port Arthur, TX.....................................    17.2676
    Bellingham, WA...............................................    22.5492
    Benton Harbor, MI............................................    17.3503
    Bergen-Passaic, NJ...........................................    24.4277
    Billings, MT.................................................    19.6586
    Biloxi-Gulfport-Pascagoula, MS...............................    16.9110
    Binghamton, NY...............................................    17.9128
    Birmingham, AL...............................................    18.0953
    Bismarck, ND.................................................    15.4640
    Bloomington, IN..............................................    18.3421
    Bloomington-Normal, IL.......................................    17.5497
    Boise City, ID...............................................    17.7955
    Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH.............    22.9992
    Boulder-Longmont, CO.........................................    20.1260
    Brazoria, TX.................................................    18.7704
    Bremerton, WA................................................    22.1033
    Brownsville-Harlingen-San Benito, TX.........................    17.5624
    Bryan-College Station, TX....................................    17.2226
    Buffalo-Niagara Falls, NY....................................    18.6331
    Burlington, VT...............................................    20.3813
    Caguas, PR...................................................     8.9610
    Canton-Massillon, OH.........................................    18.0078
    Casper, WY...................................................    18.1110
    Cedar Rapids, IA.............................................    17.1383
    Champaign-Urbana, IL.........................................    17.7326
    Charleston-North Charleston, SC..............................    17.6972
    Charleston, WV...............................................    18.3703
    Charlotte-Gastonia-Rock Hill, NC-SC..........................    19.5119
    Charlottesville, VA..........................................    18.1882
    Chattanooga, TN-GA...........................................    17.3976
    Cheyenne, WY.................................................    15.1808
    Chicago, IL..................................................    21.8239
    Chico-Paradise, CA...........................................    20.9567
    Cincinnati, OH-KY-IN.........................................    19.0379
    Clarksville-Hopkinsville, TN-KY..............................    15.7785
    Cleveland-Lorain-Elyria, OH..................................    19.7003
    Colorado Springs, CO.........................................    18.7205
    Columbia, MO.................................................    18.0868
    Columbia, SC.................................................    18.4707
    Columbus, GA-AL..............................................    16.6542
    Columbus, OH.................................................    19.6781
    Corpus Christi, TX...........................................    17.9745
    Cumberland, MD-WV............................................    17.7280
    Dallas, TX...................................................    19.4990
    Danville, VA.................................................    16.3692
    Davenport-Moline-Rock Island, IA-IL..........................    16.8903
    Dayton-Springfield, OH.......................................    19.2596
    Daytona Beach, FL............................................    16.8298
    Decatur, AL..................................................    16.6503
    Decatur, IL..................................................    15.9047
    Denver, CO...................................................    20.8698
    Des Moines, IA...............................................    17.7579
    Detroit, MI..................................................    21.7532
    Dothan, AL...................................................    16.2160
    Dover, DE....................................................    18.6953
    Dubuque, IA..................................................    16.2530
    Duluth-Superior, MN-WI.......................................    19.6500
    Dutchess County, NY..........................................    21.3657
    Eau Claire, WI...............................................    17.6122
    El Paso, TX..................................................    20.3430
    Elkhart-Goshen, IN...........................................    18.2474
    Elmira, NY...................................................    16.5714
    Enid, OK.....................................................    16.0002
    Erie, PA.....................................................    17.8087
    Eugene-Springfield, OR.......................................    22.9777
    Evansville, Henderson, IN-KY.................................    17.3648
    Fargo-Moorhead, ND-MN........................................    17.7585
    Fayetteville, NC.............................................    17.5510
    Fayetteville-Springdale-Rogers, AR...........................    14.9924
    Flagstaff, AZ-UT.............................................    18.3168
    Flint, MI....................................................    22.4472
    Florence, AL.................................................    15.1732
    Florence, SC.................................................    17.5055
    Fort Collins-Loveland, CO....................................    20.5933
    Fort Lauderdale, FL..........................................    20.9943
    Fort Myers-Cape Coral, FL....................................    17.6604
    Fort Pierce-Port St. Lucie, FL...............................    20.6112
    Fort Smith, AR-OK............................................    15.6127
    Fort Walton Beach, FL........................................    17.6128
    Fort Wayne, IN...............................................    17.8865
    Fort Worth-Arlington, TX.....................................    20.0524
    Fresno, CA...................................................    21.3156
    Gadsden, AL..................................................    17.7134
    Gainesville, FL..............................................    19.3227
    Galveston-Texas City, TX.....................................    21.2286
    Gary, IN.....................................................    19.3581
    Glens Falls, NY..............................................    16.8524
    Goldsboro, NC................................................    16.9659
    Grand Forks, ND-MN...........................................    17.5737
    Grand Junction, CO...........................................    18.2668
    Grand Rapids-Muskegon-Holland, MI............................    20.3894
    Great Falls, MT..............................................    17.6888
    Greeley, CO..................................................    20.2891
    Green Bay, WI................................................    18.2802
    Greensboro-Winston-Salem-High Point, NC......................    18.7911
    Greenville, NC...............................................    18.2150
    Greenville-Spartanburg-Anderson, SC..........................    18.2047
    Hagerstown, MD...............................................    19.4546
    Hamilton-Middletown, OH......................................    17.6176
    Harrisburg-Lebanon-Carlisle, PA..............................    20.4715
    Hartford, CT.................................................    25.2442
    Hattiesburg, MS..............................................    14.4517
    Hickory-Morganton-Lenoir, NC.................................    17.4555
    Honolulu, HI.................................................    23.7434
    Houma, LA....................................................    15.7820
    Houston, TX..................................................    19.8028
    Huntington-Ashland, WV-KY-OH.................................    18.4061
    Huntsville, AL...............................................    17.0504
    Indianapolis, IN.............................................    19.7891
    Iowa City, IA................................................    18.8914
    Jackson, MI..................................................    18.1893
    Jackson, MS..................................................    15.5941
    
    [[Page 46079]]
    
                                                                            
    Jackson, TN..................................................    17.1259
    Jacksonville, FL.............................................    18.0231
    Jacksonville, NC.............................................    14.0121
    Jamestown, NY................................................    15.1763
    Janesville-Beloit, WI........................................    17.7327
    Jersey City, NJ..............................................    22.9317
    Johnson City-Kingsport-Bristol, TN-VA........................    18.3137
    Johnstown, PA................................................    16.8349
    Jonesboro, AR................................................    14.9575
    Joplin, MO...................................................    15.0911
    Kalamazoo-Battlecreek, MI....................................    21.4383
    Kankakee, IL.................................................    17.3875
    Kansas City, KS-MO...........................................    19.2182
    Kenosha, WI..................................................    18.4799
    Killeen-Temple, TX...........................................    20.6010
    Knoxville, TN................................................    17.7457
    Kokomo, IN...................................................    16.9123
    La Crosse, WI-MN.............................................    17.5812
    Lafayette, LA................................................    16.4896
    Lafayette, IN................................................    18.4349
    Lake Charles, LA.............................................    15.6250
    Lakeland-Winter Haven, FL....................................    17.6957
    Lancaster, PA................................................    19.0528
    Lansing-East Lansing, MI.....................................    20.2720
    Laredo, TX...................................................    14.7188
    Las Cruces, NM...............................................    17.3739
    Las Vegas, NV-AZ.............................................    21.2843
    Lawrence, KS.................................................    17.2986
    Lawton, OK...................................................    18.1767
    Lewiston-Auburn, ME..........................................    19.1630
    Lexington, KY................................................    16.8604
    Lima, OH.....................................................    18.4571
    Lincoln, NE..................................................    18.5501
    Little Rock-North Little Rock, AR............................    17.0606
    Longview-Marshall, TX........................................    17.3073
    Los Angeles-Long Beach, CA...................................    24.5811
    Louisville, KY-IN............................................    19.1041
    Lubbock, TX..................................................    16.8801
    Lynchburg, VA................................................    16.5342
    Macon, GA....................................................    18.5414
    Madison, WI..................................................    20.2048
    Mansfield, OH................................................    17.3603
    Mayaguez, PR.................................................     8.9928
    McAllen-Edinburg-Mission, TX.................................    16.8206
    Medford-Ashland, OR..........................................    20.8059
    Melbourne-Titusville-Palm Bay, FL............................    17.7216
    Memphis, TN-AR-MS............................................    17.2589
    Merced, CA...................................................    21.9978
    Miami, FL....................................................    19.8109
    Middlesex-Somerset-Hunterdon, NJ.............................    22.2234
    Milwaukee-Waukesha, WI.......................................    19.7306
    Minneapolis-St. Paul, MN-WI..................................    21.5680
    Mobile, AL...................................................    16.9905
    Modesto, CA..................................................    21.6914
    Monmouth-Ocean, NJ...........................................    21.9716
    Monroe, LA...................................................    16.9075
    Montgomery, AL...............................................    15.4155
    Muncie, IN...................................................    18.4325
    Myrtle Beach, SC.............................................    16.2206
    Naples, FL...................................................    20.3132
    Nashville, TN................................................    18.4503
    Nassau-Suffolk, NY...........................................    27.7455
    New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT..........    25.3561
    New London-Norwich, CT.......................................    24.1396
    New Orleans, LA..............................................    19.2230
    New York, NY.................................................    28.1700
    Newark, NJ...................................................    24.0742
    Newburgh, NY-PA..............................................    22.6737
    Norfolk-Virginia Beach-Newport News, VA-NC...................    16.7115
    Oakland, CA..................................................    30.2802
    Ocala, FL....................................................    18.1497
    Odessa-Midland, TX...........................................    17.4016
    Oklahoma City, OK............................................    17.0417
    Olympia, WA..................................................    21.9051
    Omaha, NE-IA.................................................    18.9312
    Orange County, CA............................................    23.3199
    Orlando, FL..................................................    18.8833
    Owensboro, KY................................................    15.0313
    Panama City, FL..............................................    16.7539
    Parkersburg-Marietta, WV-OH..................................    16.1677
    Pensacola, FL................................................    16.4635
    Peoria-Pekin, IL.............................................    17.2543
    Philadelphia, PA-NJ..........................................    22.8669
    Phoenix-Mesa, AZ.............................................    19.3025
    Pine Bluff, AR...............................................    15.7267
    Pittsburgh, PA...............................................    19.5430
    Pittsfield, MA...............................................    22.0237
    Pocatello, ID................................................    19.2628
    Ponce, PR....................................................     9.2209
    Portland, ME.................................................    19.3456
    Portland-Vancouver, OR-WA....................................    22.7959
    Providence-Warwick, RI.......................................    22.2031
    Provo-Orem, UT...............................................    20.2420
    Pueblo, CO...................................................    16.9797
    Punta Gorda, FL..............................................    17.5323
    Racine, WI...................................................    17.9536
    Raleigh-Durham-Chapel Hill, NC...............................    19.7297
    Rapid City, SD...............................................    16.7698
    Reading, PA..................................................    19.1233
    Redding, CA..................................................    23.6924
    Reno, NV.....................................................    21.6378
    Richland-Kennewick-Pasco, WA.................................    19.9294
    Richmond-Petersburg, VA......................................    18.3907
    Riverside-San Bernardino, CA.................................    22.7212
    Roanoke, VA..................................................    16.8848
    Rochester, MN................................................    21.1030
    Rochester, NY................................................    19.1384
    Rockford, IL.................................................    18.2476
    Rocky Mount, NC..............................................    18.1440
    Sacramento, CA...............................................    24.5203
    Saginaw-Bay City-Midland, MI.................................    19.2180
    St. Cloud, MN................................................    19.1778
    St. Joseph, MO...............................................    16.8108
    St. Louis, MO-IL.............................................    18.3475
    Salem, OR....................................................    19.9649
    Salinas, CA..................................................    29.1634
    Salt Lake City-Ogden, UT.....................................    19.8077
    San Angelo, TX...............................................    15.6340
    San Antonio, TX..............................................    17.0791
    San Diego, CA................................................    24.5018
    San Francisco, CA............................................    28.4956
    San Jose, CA.................................................    28.8011
    San Juan-Bayamon, PR.........................................     9.2790
    San Luis Obispo-Atascadero-Paso Robles, CA...................    22.8552
    Santa Barbara-Santa Maria-Lompoc, CA.........................    21.4774
    Santa Cruz-Watsonville, CA...................................    28.5090
    Santa Fe, NM.................................................    20.7615
    Santa Rosa, CA...............................................    25.7526
    Sarasota-Bradenton, FL.......................................    19.6072
    Savannah, GA.................................................    17.3582
    Scranton-Wilkes Barre-Hazleton, PA...........................    17.1601
    Seattle-Bellevue-Everett, WA.................................    22.7858
    Sharon, PA...................................................    17.6500
    Sheboygan, WI................................................    15.7984
    Sherman-Denison, TX..........................................    17.0784
    Shreveport-Bossier City, LA..................................    18.8520
    Sioux City, IA-NE............................................    16.1387
    Sioux Falls, SD..............................................    17.5067
    South Bend, IN...............................................    19.8290
    Spokane, WA..................................................    21.0721
    Springfield, IL..............................................    17.5080
    Springfield, MO..............................................    16.0540
    Springfield, MA..............................................    21.4074
    State College, PA............................................    19.3613
    Steubenville-Weirton, OH-WV..................................    17.3728
    Stockton-Lodi, CA............................................    23.1020
    Sumter, SC...................................................    15.7585
    Syracuse, NY.................................................    19.0186
    Tacoma, WA...................................................    22.1357
    Tallahassee, FL..............................................    16.7434
    Tampa-St. Petersburg-Clearwater, FL..........................    18.2926
    Terre Haute, IN..............................................    17.3093
    Texarkana, AR-Texarkana, TX..................................    17.4104
    Toledo, OH...................................................    20.8792
    Topeka, KS...................................................    18.9662
    Trenton, NJ..................................................    20.8592
    Tucson, AZ...................................................    18.4477
    Tulsa, OK....................................................    16.2252
    Tuscaloosa, AL...............................................    16.4520
    Tyler, TX....................................................    19.2259
    Utica-Rome, NY...............................................    16.8763
    Vallejo-Fairfield-Napa, CA...................................    27.6380
    Ventura, CA..................................................    21.9959
    Victoria, TX.................................................    17.0294
    Vineland-Millville-Bridgeton, NJ.............................    20.3170
    Visalia-Tulare-Porterville, CA...............................    19.9417
    Waco, TX.....................................................    15.4645
    Washington, DC-MD-VA-WV......................................    21.6632
    Waterloo-Cedar Falls, IA.....................................    17.3631
    Wausau, WI...................................................    21.1907
    West Palm Beach-Boca Raton, FL...............................    20.8423
    Wheeling, OH-WV..............................................    15.4868
    Wichita, KS..................................................    18.8949
    Wichita Falls, TX............................................    15.3642
    Williamsport, PA.............................................    17.1768
    Wilmington-Newark, DE-MD.....................................    23.1858
    Wilmington, NC...............................................    18.7325
    Yakima, WA...................................................    20.2994
    Yolo, CA.....................................................    22.9704
    York, PA.....................................................    18.9189
    Youngstown-Warren, OH........................................    19.9688
    Yuba City, CA................................................    20.7466
    Yuma, AZ.....................................................    19.5572
    ------------------------------------------------------------------------
    
    
                 Table 4E.--Average Hourly Wage for Rural Areas             
    ------------------------------------------------------------------------
                                                                    Average 
                            Nonurban area                            hourly 
                                                                      wage  
    ------------------------------------------------------------------------
    Alabama......................................................    14.5882
    Alaska.......................................................    24.7201
    Arizona......................................................    16.0545
    Arkansas.....................................................    14.0570
    California...................................................    20.0484
    Colorado.....................................................    16.3349
    Connecticut..................................................    25.3532
    
    [[Page 46080]]
    
                                                                            
    Delaware.....................................................    17.9354
    Florida......................................................    17.7600
    Georgia......................................................    15.5949
    Hawaii.......................................................    20.5550
    Idaho........................................................    16.5193
    Illinois.....................................................    15.3604
    Indiana......................................................    16.3993
    Iowa.........................................................    14.8515
    Kansas.......................................................    14.4750
    Kentucky.....................................................    15.6180
    Louisiana....................................................    14.8369
    Maine........................................................    17.0166
    Maryland.....................................................    17.3152
    Massachusetts................................................    21.5382
    Michigan.....................................................    17.9306
    Minnesota....................................................    16.4358
    Mississippi..................................................    13.8878
    Missouri.....................................................    14.4791
    Montana......................................................    16.6820
    Nebraska.....................................................    14.8733
    Nevada.......................................................    17.9119
    New Hampshire................................................    19.5257
    New Jersey \1\...............................................  .........
    New Mexico...................................................    16.2165
    New York.....................................................    16.8824
    North Carolina...............................................    15.9493
    North Dakota.................................................    14.7904
    Ohio.........................................................    16.9480
    Oklahoma.....................................................    14.2120
    Oregon.......................................................    20.0438
    Pennsylvania.................................................    16.9213
    Puerto Rico..................................................     8.4891
    Rhode Island \1\.............................................  .........
    South Carolina...............................................    15.9167
    South Dakota.................................................    14.0318
    Tennessee....................................................    14.7759
    Texas........................................................    14.8782
    Utah.........................................................    17.9362
    Vermont......................................................    18.7155
    Virginia.....................................................    15.6378
    Washington...................................................    20.5396
    West Virginia................................................    15.9511
    Wisconsin....................................................    17.0229
    Wyoming......................................................    16.5729
    ------------------------------------------------------------------------
    \1\ All counties within the State are classified as urban.              
    
    
                    Table 4F.--Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF)                
    ----------------------------------------------------------------------------------------------------------------
                                                                                        Wage index--                
                             Area                            Wage index      GAF          reclass.     GAF--reclass.
                                                                                         hospitals       hospitals  
    ----------------------------------------------------------------------------------------------------------------
    Aguadilla, PR \1\.....................................       0.9291       0.9509  ...............  .............
    Arecibo, PR \1\.......................................       0.9291       0.9509  ...............  .............
    Caguas, PR............................................       0.9914       0.9941         0.9914          0.9941 
    Mayaguez, PR..........................................       0.9843       0.9892  ...............  .............
    Ponce, PR.............................................       1.0093       1.0064  ...............  .............
    San Juan-Bayamon, PR..................................       1.0156       1.0107  ...............  .............
    Rural Puerto Rico.....................................       0.9291       0.9509  ...............  .............
    ----------------------------------------------------------------------------------------------------------------
    \1\ Hospitals geographically located in the area are assigned the statewide rural wage index for FY 1998.       
    
    
      Table 5.--List of Diagnosis Related Groups (DRGs), Relative Weighting Factors, Geometric and Arithmetic Mean  
                                                     Length of Stay                                                 
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Relative    Geometric  Arithmetic
                                                                                    weights    mean LOS    mean LOS 
    ----------------------------------------------------------------------------------------------------------------
    1...............       01  SURG                  CRANIOTOMY AGE >17 EXCEPT        3.0907         7.2        10.3
                                                      FOR TRAUMA.                                                   
    2...............       01  SURG                  CRANIOTOMY FOR TRAUMA AGE        3.0511         7.9        10.6
                                                      >17.                                                          
    3...............       01  SURG                  * CRANIOTOMY AGE 0-17......      1.9484        12.7        12.7
    4...............       01  SURG                  SPINAL PROCEDURES..........      2.3858         5.5         8.5
    5...............       01  SURG                  EXTRACRANIAL VASCULAR            1.5041         2.9         3.9
                                                      PROCEDURES.                                                   
    6...............       01  SURG                  CARPAL TUNNEL RELEASE......       .7582         2.2         3.3
    7...............       01  SURG                  PERIPH & CRANIAL NERVE &         2.4717         7.3        11.4
                                                      OTHER NERV SYST PROC W CC.                                    
    8...............       01  SURG                  PERIPH & CRANIAL NERVE &         1.2142         2.2         3.2
                                                      OTHER NERV SYST PROC W/O                                      
                                                      CC.                                                           
    9...............       01  MED                   SPINAL DISORDERS & INJURIES      1.2646         5.1         7.2
    10..............       01  MED                   NERVOUS SYSTEM NEOPLASMS W       1.2184         5.3         7.4
                                                      CC.                                                           
    11..............       01  MED                   NERVOUS SYSTEM NEOPLASMS W/       .7879         3.2         4.3
                                                      O CC.                                                         
    12..............       01  MED                   DEGENERATIVE NERVOUS SYSTEM       .9370         5.0         6.8
                                                      DISORDERS.                                                    
    13..............       01  MED                   MULTIPLE SCLEROSIS &              .7832         4.7         5.8
                                                      CEREBELLAR ATAXIA.                                            
    14..............       01  MED                   SPECIFIC CEREBROVASCULAR         1.1889         5.1         6.8
                                                      DISORDERS EXCEPT TIA.                                         
    15..............       01  MED                   TRANSIENT ISCHEMIC ATTACK &       .7241         3.2         4.1
                                                      PRECEREBRAL OCCLUSIONS.                                       
    16..............       01  MED                   NONSPECIFIC CEREBROVASCULAR      1.0452         4.6         6.1
                                                      DISORDERS W CC.                                               
    17..............       01  MED                   NONSPECIFIC CEREBROVASCULAR       .6161         2.8         3.7
                                                      DISORDERS W/O CC.                                             
    18..............       01  MED                   CRANIAL & PERIPHERAL NERVE        .9399         4.5         5.9
                                                      DISORDERS W CC.                                               
    19..............       01  MED                   CRANIAL & PERIPHERAL NERVE        .6293         3.2         4.1
                                                      DISORDERS W/O CC.                                             
    20..............       01  MED                   NERVOUS SYSTEM INFECTION         2.5786         8.0        10.8
                                                      EXCEPT VIRAL MENINGITIS.                                      
    21..............       01  MED                   VIRAL MENINGITIS...........      1.4866         5.4         7.1
    22..............       01  MED                   HYPERTENSIVE ENCEPHALOPATHY       .8594         3.7         4.8
    23..............       01  MED                   NONTRAUMATIC STUPOR & COMA.       .7777         3.3         4.6
    24..............       01  MED                   SEIZURE & HEADACHE AGE >17        .9578         3.9         5.3
                                                      W CC.                                                         
    25..............       01  MED                   SEIZURE & HEADACHE AGE >17        .5821         2.8         3.6
                                                      W/O CC.                                                       
    26..............       01  MED                   SEIZURE & HEADACHE AGE 0-17       .9601         3.6         4.9
    27..............       01  MED                   TRAUMATIC STUPOR & COMA,         1.2670         3.4         5.5
                                                      COMA >1 HR.                                                   
    28..............       01  MED                   TRAUMATIC STUPOR & COMA,         1.1707         4.4         6.4
                                                      COMA <1 hr="" age="">17 W CC.                                      
    29..............       01  MED                   TRAUMATIC STUPOR & COMA,          .6383         2.8         3.7
                                                      COMA <1 hr="" age="">17 W/O CC.                                    
    
    [[Page 46081]]
    
                                                                                                                    
    30..............       01  MED                   * TRAUMATIC STUPOR & COMA,        .3295         2.0         2.0
                                                      COMA <1 hr="" age="" 0-17.="" 31..............="" 01="" med="" concussion="" age="">17 W CC....       .8369         3.4         4.8
    32..............       01  MED                   CONCUSSION AGE >17 W/O CC..       .5109         2.2         3.1
    33..............       01  MED                   * CONCUSSION AGE 0-17......       .2071         1.6         1.6
    34..............       01  MED                   OTHER DISORDERS OF NERVOUS       1.0385         4.2         5.8
                                                      SYSTEM W CC.                                                  
    35..............       01  MED                   OTHER DISORDERS OF NERVOUS        .5941         3.0         3.9
                                                      SYSTEM W/O CC.                                                
    36..............       02  SURG                  RETINAL PROCEDURES.........       .6265         1.3         1.5
    37..............       02  SURG                  ORBITAL PROCEDURES.........       .9725         2.6         3.9
    38..............       02  SURG                  PRIMARY IRIS PROCEDURES....       .4826         1.9         2.7
    39..............       02  SURG                  LENS PROCEDURES WITH OR           .5406         1.5         2.0
                                                      WITHOUT VITRECTOMY.                                           
    40..............       02  SURG                  EXTRAOCULAR PROCEDURES            .7341         2.2         3.3
                                                      EXCEPT ORBIT AGE >17.                                         
    41..............       02  SURG                  * EXTRAOCULAR PROCEDURES          .3354         1.6         1.6
                                                      EXCEPT ORBIT AGE 0-17.                                        
    42..............       02  SURG                  INTRAOCULAR PROCEDURES            .5676         1.5         2.0
                                                      EXCEPT RETINA, IRIS & LENS.                                   
    43..............       02  MED                   HYPHEMA....................       .4119         2.9         4.0
    44..............       02  MED                   ACUTE MAJOR EYE INFECTIONS.       .6072         4.3         5.3
    45..............       02  MED                   NEUROLOGICAL EYE DISORDERS.       .6730         2.9         3.6
    46..............       02  MED                   OTHER DISORDERS OF THE EYE        .7234         3.7         4.9
                                                      AGE >17 W CC.                                                 
    47..............       02  MED                   OTHER DISORDERS OF THE EYE        .4623         2.7         3.6
                                                      AGE >17 W/O CC.                                               
    48..............       02  MED                   * OTHER DISORDERS OF THE          .2955         2.9         2.9
                                                      EYE AGE 0-17.                                                 
    49..............       03  SURG                  MAJOR HEAD & NECK                1.8074         3.9         5.3
                                                      PROCEDURES.                                                   
    50..............       03  SURG                  SIALOADENECTOMY............       .8143         1.7         2.1
    51..............       03  SURG                  SALIVARY GLAND PROCEDURES         .8367         1.9         2.9
                                                      EXCEPT SIALOADENECTOMY.                                       
    52..............       03  SURG                  CLEFT LIP & PALATE REPAIR..      1.2768         2.2         3.2
    53..............       03  SURG                  SINUS & MASTOID PROCEDURES       1.0682         2.3         3.6
                                                      AGE >17.                                                      
    54..............       03  SURG                  * SINUS & MASTOID                 .4790         3.2         3.2
                                                      PROCEDURES AGE 0-17.                                          
    55..............       03  SURG                  MISCELLANEOUS EAR, NOSE,          .8366         2.0         2.9
                                                      MOUTH & THROAT PROCEDURES.                                    
    56..............       03  SURG                  RHINOPLASTY................       .8830         2.1         2.8
    57..............       03  SURG                  T&A PROC, EXCEPT                 1.0182         2.7         4.0
                                                      TONSILLECTOMY &/OR                                            
                                                      ADENOIDECTOMY ONLY, AGE                                       
                                                      >17.                                                          
    58..............       03  SURG                  * T&A PROC, EXCEPT                .2720         1.5         1.5
                                                      TONSILLECTOMY &/OR                                            
                                                      ADENOIDECTOMY ONLY, AGE 0-                                    
                                                      17.                                                           
    59..............       03  SURG                  TONSILLECTOMY &/OR                .8238         2.3         3.3
                                                      ADENOIDECTOMY ONLY, AGE                                       
                                                      >17.                                                          
    60..............       03  SURG                  * TONSILLECTOMY &/OR              .2072         1.5         1.5
                                                      ADENOIDECTOMY ONLY, AGE 0-                                    
                                                      17.                                                           
    61..............       03  SURG                  MYRINGOTOMY W TUBE               1.1181         2.8         4.5
                                                      INSERTION AGE >17.                                            
    62..............       03  SURG                  * MYRINGOTOMY W TUBE              .2933         1.3         1.3
                                                      INSERTION AGE 0-17.                                           
    63..............       03  SURG                  OTHER EAR, NOSE, MOUTH &         1.2444         3.1         4.6
                                                      THROAT O.R. PROCEDURES.                                       
    64..............       03  MED                   EAR, NOSE, MOUTH & THROAT        1.1568         4.4         6.7
                                                      MALIGNANCY.                                                   
    65..............       03  MED                   DYSEQUILIBRIUM.............       .5177         2.5         3.2
    66..............       03  MED                   EPISTAXIS..................       .5605         2.8         3.5
    67..............       03  MED                   EPIGLOTTITIS...............       .7866         3.1         3.8
    68..............       03  MED                   OTITIS MEDIA & URI AGE >17        .6831         3.5         4.3
                                                      W CC.                                                         
    69..............       03  MED                   OTITIS MEDIA & URI AGE >17        .5160         2.9         3.5
                                                      W/O CC.                                                       
    70..............       03  MED                   OTITIS MEDIA & URI AGE 0-17       .3892         2.7         3.3
    71..............       03  MED                   LARYNGOTRACHEITIS..........       .6688         3.0         3.9
    72..............       03  MED                   NASAL TRAUMA & DEFORMITY...       .6364         2.7         3.5
    73..............       03  MED                   OTHER EAR, NOSE, MOUTH &          .7660         3.4         4.7
                                                      THROAT DIAGNOSES AGE >17.                                     
    74..............       03  MED                   * OTHER EAR, NOSE, MOUTH &        .3332         2.1         2.1
                                                      THROAT DIAGNOSES AGE 0-17.                                    
    75..............       04  SURG                  MAJOR CHEST PROCEDURES.....      3.1958         8.3        10.6
    76..............       04  SURG                  OTHER RESP SYSTEM O.R.           2.6427         8.7        11.7
                                                      PROCEDURES W CC.                                              
    77..............       04  SURG                  OTHER RESP SYSTEM O.R.           1.1150         3.5         5.1
                                                      PROCEDURES W/O CC.                                            
    78..............       04  MED                   PULMONARY EMBOLISM.........      1.4264         6.6         7.7
    79..............       04  MED                   RESPIRATORY INFECTIONS &         1.6258         6.8         8.7
                                                      INFLAMMATIONS AGE >17 W CC.                                   
    80..............       04  MED                   RESPIRATORY INFECTIONS &          .9121         4.9         6.1
                                                      INFLAMMATIONS AGE >17 W/O                                     
                                                      CC.                                                           
    81..............       04  MED                   * RESPIRATORY INFECTIONS &       1.5091         6.1         6.1
                                                      INFLAMMATIONS AGE 0-17.                                       
    82..............       04  MED                   RESPIRATORY NEOPLASMS......      1.3329         5.4         7.4
    83..............       04  MED                   MAJOR CHEST TRAUMA W CC....       .9716         4.6         5.9
    84..............       04  MED                   MAJOR CHEST TRAUMA W/O CC..       .5260         2.8         3.5
    85..............       04  MED                   PLEURAL EFFUSION W CC......      1.2212         5.3         6.9
    86..............       04  MED                   PLEURAL EFFUSION W/O CC....       .6715         3.1         4.1
    87..............       04  MED                   PULMONARY EDEMA &                1.3639         4.9         6.5
                                                      RESPIRATORY FAILURE.                                          
    88..............       04  MED                   CHRONIC OBSTRUCTIVE               .9705         4.6         5.7
                                                      PULMONARY DISEASE.                                            
    
    [[Page 46082]]
    
                                                                                                                    
    89..............       04  MED                   SIMPLE PNEUMONIA & PLEURISY      1.1006         5.4         6.6
                                                      AGE >17 W CC.                                                 
    90..............       04  MED                   SIMPLE PNEUMONIA & PLEURISY       .6773         4.0         4.7
                                                      AGE >17 W/O CC.                                               
    91..............       04  MED                   SIMPLE PNEUMONIA & PLEURISY       .7940         3.7         4.4
                                                      AGE 0-17.                                                     
    92..............       04  MED                   INTERSTITIAL LUNG DISEASE W      1.1947         5.3         6.7
                                                      CC.                                                           
    93..............       04  MED                   INTERSTITIAL LUNG DISEASE W/      .7423         3.7         4.7
                                                      O CC.                                                         
    94..............       04  MED                   PNEUMOTHORAX W CC..........      1.1857         5.1         6.7
    95..............       04  MED                   PNEUMOTHORAX W/O CC........       .5974         3.2         4.0
    96..............       04  MED                   BRONCHITIS & ASTHMA AGE >17       .8005         4.2         5.1
                                                      W CC.                                                         
    97..............       04  MED                   BRONCHITIS & ASTHMA AGE >17       .5887         3.3         4.0
                                                      W/O CC.                                                       
    98..............       04  MED                   BRONCHITIS & ASTHMA AGE 0-        .6298         2.3         3.8
                                                      17.                                                           
    99..............       04  MED                   RESPIRATORY SIGNS &               .6710         2.4         3.2
                                                      SYMPTOMS W CC.                                                
    100.............       04  MED                   RESPIRATORY SIGNS &               .5109         1.8         2.2
                                                      SYMPTOMS W/O CC.                                              
    101.............       04  MED                   OTHER RESPIRATORY SYSTEM          .8518         3.5         4.7
                                                      DIAGNOSES W CC.                                               
    102.............       04  MED                   OTHER RESPIRATORY SYSTEM          .5295         2.3         2.9
                                                      DIAGNOSES W/O CC.                                             
    103.............       05  SURG                  HEART TRANSPLANT...........     16.5746        32.1        48.2
    104.............       05  SURG                  CARDIAC VALVE PROCEDURES W       7.3563        10.8        13.3
                                                      CARDIAC CATH.                                                 
    105.............       05  SURG                  CARDIAC VALVE PROCEDURES W/      5.7109         8.3        10.2
                                                      O CARDIAC CATH.                                               
    106.............       05  SURG                  CORONARY BYPASS W CARDIAC        5.5843         9.8        11.1
                                                      CATH.                                                         
    107.............       05  SURG                  CORONARY BYPASS W/O CARDIAC      4.0812         7.3         8.3
                                                      CATH.                                                         
    108.............       05  SURG                  OTHER CARDIOTHORACIC             6.1282         9.4        12.1
                                                      PROCEDURES.                                                   
    109.............  .......                        NO LONGER VALID............       .0000          .0          .0
    110.............       05  SURG                  MAJOR CARDIOVASCULAR             4.1964         7.7        10.2
                                                      PROCEDURES W CC.                                              
    111.............       05  SURG                  MAJOR CARDIOVASCULAR             2.2409         5.4         6.2
                                                      PROCEDURES W/O CC.                                            
    112.............       05  SURG                  PERCUTANEOUS CARDIOVASCULAR      2.0025         3.1         4.2
                                                      PROCEDURES.                                                   
    113.............       05  SURG                  AMPUTATION FOR CIRC SYSTEM       2.6579         9.7        13.2
                                                      DISORDERS EXCEPT UPPER                                        
                                                      LIMB & TOE.                                                   
    114.............       05  SURG                  UPPER LIMB & TOE AMPUTATION      1.5363         6.4         8.8
                                                      FOR CIRC SYSTEM DISORDERS.                                    
    115.............       05  SURG                  PERM PACE IMPLNT W AMI, HRT      3.5476         6.7         9.2
                                                      FAIL OR SHOCK OR AICD LEAD                                    
                                                      OR GEN PROC.                                                  
    116.............       05  SURG                  OTH PERM CARDIAC PACEMAKER       2.5321         3.5         4.7
                                                      IMPLANT OR PTCA W CORONARY                                    
                                                      ART STENT.                                                    
    117.............       05  SURG                  CARDIAC PACEMAKER REVISION       1.1950         2.7         4.0
                                                      EXCEPT DEVICE REPLACEMENT.                                    
    118.............       05  SURG                  CARDIAC PACEMAKER DEVICE         1.5889         2.0         3.0
                                                      REPLACEMENT.                                                  
    119.............       05  SURG                  VEIN LIGATION & STRIPPING..      1.1997         3.1         5.1
    120.............       05  SURG                  OTHER CIRCULATORY SYSTEM         1.9158         5.0         8.5
                                                      O.R. PROCEDURES.                                              
    121.............       05  MED                   CIRCULATORY DISORDERS W AMI      1.6537         6.0         7.3
                                                      & MAJOR COMP DISCH ALIVE.                                     
    122.............       05  MED                   CIRCULATORY DISORDERS W AMI      1.1446         3.9         4.7
                                                      W/O MAJOR COMP DISCH ALIVE.                                   
    123.............       05  MED                   CIRCULATORY DISORDERS W          1.4695         2.7         4.5
                                                      AMI, EXPIRED.                                                 
    124.............       05  MED                   CIRCULATORY DISORDERS            1.3565         3.6         4.6
                                                      EXCEPT AMI, W CARD CATH &                                     
                                                      COMPLEX DIAG.                                                 
    125.............       05  MED                   CIRCULATORY DISORDERS             .9738         2.3         2.9
                                                      EXCEPT AMI, W CARD CATH W/                                    
                                                      O COMPLEX DIAG.                                               
    126.............       05  MED                   ACUTE & SUBACUTE                 2.4879        10.0        13.1
                                                      ENDOCARDITIS.                                                 
    127.............       05  MED                   HEART FAILURE & SHOCK......      1.0199         4.5         5.8
    128.............       05  MED                   DEEP VEIN THROMBOPHLEBITIS.       .7807         5.6         6.4
    129.............       05  MED                   CARDIAC ARREST, UNEXPLAINED      1.1414         1.9         3.2
    130.............       05  MED                   PERIPHERAL VASCULAR               .9410         5.1         6.3
                                                      DISORDERS W CC.                                               
    131.............       05  MED                   PERIPHERAL VASCULAR               .6040         4.1         4.9
                                                      DISORDERS W/O CC.                                             
    132.............       05  MED                   ATHEROSCLEROSIS W CC.......       .6749         2.7         3.3
    133.............       05  MED                   ATHEROSCLEROSIS W/O CC.....       .5360         2.1         2.7
    134.............       05  MED                   HYPERTENSION...............       .5760         2.8         3.6
    135.............       05  MED                   CARDIAC CONGENITAL &              .8336         3.4         4.5
                                                      VALVULAR DISORDERS AGE >17                                    
                                                      W CC.                                                         
    136.............       05  MED                   CARDIAC CONGENITAL &              .5709         2.4         3.1
                                                      VALVULAR DISORDERS AGE >17                                    
                                                      W/O CC.                                                       
    137.............       05  MED                   * CARDIAC CONGENITAL &            .8131         3.3         3.3
                                                      VALVULAR DISORDERS AGE 0-                                     
                                                      17.                                                           
    138.............       05  MED                   CARDIAC ARRHYTHMIA &              .7962         3.2         4.2
                                                      CONDUCTION DISORDERS W CC.                                    
    139.............       05  MED                   CARDIAC ARRHYTHMIA &              .4982         2.2         2.7
                                                      CONDUCTION DISORDERS W/O                                      
                                                      CC.                                                           
    140.............       05  MED                   ANGINA PECTORIS............       .5993         2.6         3.2
    141.............       05  MED                   SYNCOPE & COLLAPSE W CC....       .7005         3.1         4.1
    142.............       05  MED                   SYNCOPE & COLLAPSE W/O CC..       .5231         2.3         2.9
    143.............       05  MED                   CHEST PAIN.................       .5200         1.9         2.4
    144.............       05  MED                   OTHER CIRCULATORY SYSTEM         1.0904         3.9         5.4
                                                      DIAGNOSES W CC.                                               
    145.............       05  MED                   OTHER CIRCULATORY SYSTEM          .6401         2.3         3.0
                                                      DIAGNOSES W/O CC.                                             
    146.............       06  SURG                  RECTAL RESECTION W CC......      2.7356         9.3        10.5
    147.............       06  SURG                  RECTAL RESECTION W/O CC....      1.5885         6.3         6.9
    148.............       06  SURG                  MAJOR SMALL & LARGE BOWEL        3.3883        10.6        12.6
                                                      PROCEDURES W CC.                                              
    149.............       06  SURG                  MAJOR SMALL & LARGE BOWEL        1.5495         6.5         7.1
                                                      PROCEDURES W/O CC.                                            
    150.............       06  SURG                  PERITONEAL ADHESIOLYSIS W        2.7109         9.1        11.1
                                                      CC.                                                           
    151.............       06  SURG                  PERITONEAL ADHESIOLYSIS W/O      1.2645         4.9         6.1
                                                      CC.                                                           
    152.............       06  SURG                  MINOR SMALL & LARGE BOWEL        1.9139         7.2         8.5
                                                      PROCEDURES W CC.                                              
    153.............       06  SURG                  MINOR SMALL & LARGE BOWEL        1.1634         5.2         5.8
                                                      PROCEDURES W/O CC.                                            
    
    [[Page 46083]]
    
                                                                                                                    
    154.............       06  SURG                  STOMACH, ESOPHAGEAL &            4.1851        10.8        14.1
                                                      DUODENAL PROCEDURES AGE                                       
                                                      >17 W CC.                                                     
    155.............       06  SURG                  STOMACH, ESOPHAGEAL &            1.3350         3.9         5.0
                                                      DUODENAL PROCEDURES AGE                                       
                                                      >17 W/O CC.                                                   
    156.............       06  SURG                  * STOMACH, ESOPHAGEAL &           .8374         6.0         6.0
                                                      DUODENAL PROCEDURES AGE 0-                                    
                                                      17.                                                           
    157.............       06  SURG                  ANAL & STOMAL PROCEDURES W       1.1824         4.0         5.6
                                                      CC.                                                           
    158.............       06  SURG                  ANAL & STOMAL PROCEDURES W/       .6272         2.2         2.8
                                                      O CC.                                                         
    159.............       06  SURG                  HERNIA PROCEDURES EXCEPT         1.2548         3.8         5.1
                                                      INGUINAL & FEMORAL AGE >17                                    
                                                      W CC.                                                         
    160.............       06  SURG                  HERNIA PROCEDURES EXCEPT          .7177         2.3         2.8
                                                      INGUINAL & FEMORAL AGE >17                                    
                                                      W/O CC.                                                       
    161.............       06  SURG                  INGUINAL & FEMORAL HERNIA        1.0573         3.0         4.2
                                                      PROCEDURES AGE >17 W CC.                                      
    162.............       06  SURG                  INGUINAL & FEMORAL HERNIA         .5856         1.7         2.1
                                                      PROCEDURES AGE >17 W/O CC.                                    
    163.............       06  SURG                  HERNIA PROCEDURES AGE 0-17.       .8660         3.1         4.7
    164.............       06  SURG                  APPENDECTOMY W COMPLICATED       2.3412         7.5         8.7
                                                      PRINCIPAL DIAG W CC.                                          
    165.............       06  SURG                  APPENDECTOMY W COMPLICATED       1.2270         4.7         5.4
                                                      PRINCIPAL DIAG W/O CC.                                        
    166.............       06  SURG                  APPENDECTOMY W/O                 1.4582         4.3         5.4
                                                      COMPLICATED PRINCIPAL DIAG                                    
                                                      W CC.                                                         
    167.............       06  SURG                  APPENDECTOMY W/O                  .8373         2.5         3.0
                                                      COMPLICATED PRINCIPAL DIAG                                    
                                                      W/O CC.                                                       
    168.............       03  SURG                  MOUTH PROCEDURES W CC......      1.1187         3.2         4.7
    169.............       03  SURG                  MOUTH PROCEDURES W/O CC....       .6903         2.0         2.6
    170.............       06  SURG                  OTHER DIGESTIVE SYSTEM O.R.      2.7587         8.1        11.8
                                                      PROCEDURES W CC.                                              
    171.............       06  SURG                  OTHER DIGESTIVE SYSTEM O.R.      1.1146         3.7         5.1
                                                      PROCEDURES W/O CC.                                            
    172.............       06  MED                   DIGESTIVE MALIGNANCY W CC..      1.2867         5.3         7.4
    173.............       06  MED                   DIGESTIVE MALIGNANCY W/O CC       .6744         2.9         4.0
    174.............       06  MED                   G.I. HEMORRHAGE W CC.......       .9925         4.1         5.2
    175.............       06  MED                   G.I. HEMORRHAGE W/O CC.....       .5366         2.7         3.2
    176.............       06  MED                   COMPLICATED PEPTIC ULCER...      1.1011         4.5         5.8
    177.............       06  MED                   UNCOMPLICATED PEPTIC ULCER        .8556         3.8         4.7
                                                      W CC.                                                         
    178.............       06  MED                   UNCOMPLICATED PEPTIC ULCER        .6241         2.8         3.3
                                                      W/O CC.                                                       
    179.............       06  MED                   INFLAMMATORY BOWEL DISEASE.      1.1100         5.2         6.7
    180.............       06  MED                   G.I. OBSTRUCTION W CC......       .9153         4.4         5.7
    181.............       06  MED                   G.I. OBSTRUCTION W/O CC....       .5204         3.1         3.7
    182.............       06  MED                   ESOPHAGITIS, GASTROENT &          .7664         3.5         4.6
                                                      MISC DIGEST DISORDERS AGE                                     
                                                      >17 W CC.                                                     
    183.............       06  MED                   ESOPHAGITIS, GASTROENT &          .5496         2.6         3.2
                                                      MISC DIGEST DISORDERS AGE                                     
                                                      >17 W/O CC.                                                   
    184.............       06  MED                   ESOPHAGITIS, GASTROENT &          .5930         2.7         3.6
                                                      MISC DIGEST DISORDERS AGE                                     
                                                      0-17.                                                         
    185.............       03  MED                   DENTAL & ORAL DIS EXCEPT          .8424         3.5         4.8
                                                      EXTRACTIONS &                                                 
                                                      RESTORATIONS, AGE >17.                                        
    186.............       03  MED                   * DENTAL & ORAL DIS EXCEPT        .3192         2.9         2.9
                                                      EXTRACTIONS &                                                 
                                                      RESTORATIONS, AGE 0-17.                                       
    187.............       03  MED                   DENTAL EXTRACTIONS &              .7049         3.0         4.0
                                                      RESTORATIONS.                                                 
    188.............       06  MED                   OTHER DIGESTIVE SYSTEM           1.0727         4.3         5.8
                                                      DIAGNOSES AGE >17 W CC.                                       
    189.............       06  MED                   OTHER DIGESTIVE SYSTEM            .5488         2.5         3.4
                                                      DIAGNOSES AGE >17 W/O CC.                                     
    190.............       06  MED                   OTHER DIGESTIVE SYSTEM            .8786         3.3         4.9
                                                      DIAGNOSES AGE 0-17.                                           
    191.............       07  SURG                  PANCREAS, LIVER & SHUNT          4.3490        11.1        14.9
                                                      PROCEDURES W CC.                                              
    192.............       07  SURG                  PANCREAS, LIVER & SHUNT          1.7057         5.6         7.1
                                                      PROCEDURES W/O CC.                                            
    193.............       07  SURG                  BILIARY TRACT PROC EXCEPT        3.2666        10.6        13.0
                                                      ONLY CHOLECYST W OR W/O                                       
                                                      C.D.E. W CC.                                                  
    194.............       07  SURG                  BILIARY TRACT PROC EXCEPT        1.6688         5.9         7.5
                                                      ONLY CHOLECYST W OR W/O                                       
                                                      C.D.E. W/O CC.                                                
    195.............       07  SURG                  CHOLECYSTECTOMY W C.D.E. W       2.7112         8.2         9.8
                                                      CC.                                                           
    196.............       07  SURG                  CHOLECYSTECTOMY W C.D.E. W/      1.6075         5.5         6.3
                                                      O CC.                                                         
    197.............       07  SURG                  CHOLECYSTECTOMY EXCEPT BY        2.3085         7.2         8.7
                                                      LAPAROSCOPE W/O C.D.E. W                                      
                                                      CC.                                                           
    198.............       07  SURG                  CHOLECYSTECTOMY EXCEPT BY        1.1693         4.1         4.7
                                                      LAPAROSCOPE W/O C.D.E. W/O                                    
                                                      CC.                                                           
    199.............       07  SURG                  HEPATOBILIARY DIAGNOSTIC         2.3523         7.9        10.7
                                                      PROCEDURE FOR MALIGNANCY.                                     
    200.............       07  SURG                  HEPATOBILIARY DIAGNOSTIC         3.0210         7.5        11.3
                                                      PROCEDURE FOR NON-                                            
                                                      MALIGNANCY.                                                   
    201.............       07  SURG                  OTHER HEPATOBILIARY OR           3.4752        11.1        15.2
                                                      PANCREAS O.R. PROCEDURES.                                     
    202.............       07  MED                   CIRRHOSIS & ALCOHOLIC            1.3255         5.3         7.2
                                                      HEPATITIS.                                                    
    203.............       07  MED                   MALIGNANCY OF HEPATOBILIARY      1.2605         5.2         7.2
                                                      SYSTEM OR PANCREAS.                                           
    204.............       07  MED                   DISORDERS OF PANCREAS            1.2117         4.9         6.4
                                                      EXCEPT MALIGNANCY.                                            
    205.............       07  MED                   DISORDERS OF LIVER EXCEPT        1.2144         5.0         6.8
                                                      MALIG, CIRR, ALC HEPA W CC.                                   
    206.............       07  MED                   DISORDERS OF LIVER EXCEPT         .6543         3.2         4.2
                                                      MALIG, CIRR, ALC HEPA W/O                                     
                                                      CC.                                                           
    207.............       07  MED                   DISORDERS OF THE BILIARY         1.0507         4.1         5.3
                                                      TRACT W CC.                                                   
    208.............       07  MED                   DISORDERS OF THE BILIARY          .6039         2.4         3.0
                                                      TRACT W/O CC.                                                 
    209.............       08  SURG                  MAJOR JOINT & LIMB               2.2337         5.3         5.9
                                                      REATTACHMENT PROCEDURES OF                                    
                                                      LOWER EXTREMITY.                                              
    210.............       08  SURG                  HIP & FEMUR PROCEDURES           1.8265         6.5         7.6
                                                      EXCEPT MAJOR JOINT AGE >17                                    
                                                      W CC.                                                         
    
    [[Page 46084]]
    
                                                                                                                    
    211.............       08  SURG                  HIP & FEMUR PROCEDURES           1.2541         5.0         5.6
                                                      EXCEPT MAJOR JOINT AGE >17                                    
                                                      W/O CC.                                                       
    212.............       08  SURG                  HIP & FEMUR PROCEDURES           1.1311         3.9         5.2
                                                      EXCEPT MAJOR JOINT AGE 0-                                     
                                                      17.                                                           
    213.............       08  SURG                  AMPUTATION FOR                   1.6513         6.4         8.8
                                                      MUSCULOSKELETAL SYSTEM &                                      
                                                      CONN TISSUE DISORDERS.                                        
    214.............       08  SURG                  NO LONGER VALID............       .0000          .0          .0
    215.............       08  SURG                  NO LONGER VALID............       .0000          .0          .0
    216.............       08  SURG                  BIOPSIES OF MUSCULOSKELETAL      2.1082         7.4        10.3
                                                      SYSTEM & CONNECTIVE TISSUE.                                   
    217.............       08  SURG                  WND DEBRID & SKN GRFT            2.8033         9.2        13.8
                                                      EXCEPT HAND, FOR                                              
                                                      MUSCSKELET & CONN TISS DIS.                                   
    218.............       08  SURG                  LOWER EXTREM & HUMER PROC        1.4576         4.4         5.6
                                                      EXCEPT HIP, FOOT, FEMUR                                       
                                                      AGE >17 W CC.                                                 
    219.............       08  SURG                  LOWER EXTREM & HUMER PROC         .9631         2.9         3.4
                                                      EXCEPT HIP, FOOT, FEMUR                                       
                                                      AGE >17 W/O CC.                                               
    220.............       08  SURG                  * LOWER EXTREM & HUMER PROC       .5800         5.3         5.3
                                                      EXCEPT HIP, FOOT, FEMUR                                       
                                                      AGE 0-17.                                                     
    221.............       08  SURG                  NO LONGER VALID............       .0000          .0          .0
    222.............       08  SURG                  NO LONGER VALID............       .0000          .0          .0
    223.............       08  SURG                  MAJOR SHOULDER/ELBOW PROC,        .9007         2.1         2.7
                                                      OR OTHER UPPER EXTREMITY                                      
                                                      PROC W CC.                                                    
    224.............       08  SURG                  SHOULDER, ELBOW OR FOREARM        .7466         1.8         2.1
                                                      PROC, EXC MAJOR JOINT                                         
                                                      PROC, W/O CC.                                                 
    225.............       08  SURG                  FOOT PROCEDURES............      1.0124         3.1         4.6
    226.............       08  SURG                  SOFT TISSUE PROCEDURES W CC      1.4095         4.1         6.3
    227.............       08  SURG                  SOFT TISSUE PROCEDURES W/O        .7729         2.2         2.9
                                                      CC.                                                           
    228.............       08  SURG                  MAJOR THUMB OR JOINT PROC,        .9542         2.3         3.5
                                                      OR OTH HAND OR WRIST PROC                                     
                                                      W CC.                                                         
    229.............       08  SURG                  HAND OR WRIST PROC, EXCEPT        .6706         1.8         2.4
                                                      MAJOR JOINT PROC, W/O CC.                                     
    230.............       08  SURG                  LOCAL EXCISION & REMOVAL OF      1.1296         3.3         5.0
                                                      INT FIX DEVICES OF HIP &                                      
                                                      FEMUR.                                                        
    231.............       08  SURG                  LOCAL EXCISION & REMOVAL OF      1.2727         3.1         4.8
                                                      INT FIX DEVICES EXCEPT HIP                                    
                                                      & FEMUR.                                                      
    232.............       08  SURG                  ARTHROSCOPY................      1.0629         2.5         4.2
    233.............       08  SURG                  OTHER MUSCULOSKELET SYS &        2.0329         5.7         8.3
                                                      CONN TISS O.R. PROC W CC.                                     
    234.............       08  SURG                  OTHER MUSCULOSKELET SYS &        1.1126         2.9         3.9
                                                      CONN TISS O.R. PROC W/O CC.                                   
    235.............       08  MED                   FRACTURES OF FEMUR.........       .7710         4.2         5.9
    236.............       08  MED                   FRACTURES OF HIP & PELVIS..       .7338         4.3         5.7
    237.............       08  MED                   SPRAINS, STRAINS, &               .5952         3.2         4.2
                                                      DISLOCATIONS OF HIP,                                          
                                                      PELVIS & THIGH.                                               
    238.............       08  MED                   OSTEOMYELITIS..............      1.3250         7.0         9.5
    239.............       08  MED                   PATHOLOGICAL FRACTURES &          .9865         5.3         7.0
                                                      MUSCULOSKELETAL & CONN                                        
                                                      TISS MALIGNANCY.                                              
    240.............       08  MED                   CONNECTIVE TISSUE DISORDERS      1.2098         5.1         7.0
                                                      W CC.                                                         
    241.............       08  MED                   CONNECTIVE TISSUE DISORDERS       .5862         3.3         4.2
                                                      W/O CC.                                                       
    242.............       08  MED                   SEPTIC ARTHRITIS...........      1.0501         5.5         7.2
    243.............       08  MED                   MEDICAL BACK PROBLEMS......       .7158         4.0         5.1
    244.............       08  MED                   BONE DISEASES & SPECIFIC          .7199         4.0         5.4
                                                      ARTHROPATHIES W CC.                                           
    245.............       08  MED                   BONE DISEASES & SPECIFIC          .5002         3.0         4.0
                                                      ARTHROPATHIES W/O CC.                                         
    246.............       08  MED                   NON-SPECIFIC ARTHROPATHIES.       .5713         3.3         4.2
    247.............       08  MED                   SIGNS & SYMPTOMS OF               .5587         2.8         3.7
                                                      MUSCULOSKELETAL SYSTEM &                                      
                                                      CONN TISSUE.                                                  
    248.............       08  MED                   TENDONITIS, MYOSITIS &            .7428         3.7         5.0
                                                      BURSITIS.                                                     
    249.............       08  MED                   AFTERCARE, MUSCULOSKELETAL        .6559         2.7         4.0
                                                      SYSTEM & CONNECTIVE TISSUE.                                   
    250.............       08  MED                   FX, SPRN, STRN & DISL OF          .6995         3.4         4.7
                                                      FOREARM, HAND, FOOT AGE                                       
                                                      >17 W CC.                                                     
    251.............       08  MED                   FX, SPRN, STRN & DISL OF          .4517         2.3         3.0
                                                      FOREARM, HAND, FOOT AGE                                       
                                                      >17 W/O CC.                                                   
    252.............       08  MED                   * FX, SPRN, STRN & DISL OF        .2520         1.8         1.8
                                                      FOREARM, HAND, FOOT AGE 0-                                    
                                                      17.                                                           
    253.............       08  MED                   FX, SPRN, STRN & DISL OF          .7265         3.9         5.3
                                                      UPARM, LOWLEG EX FOOT AGE                                     
                                                      >17 W CC.                                                     
    254.............       08  MED                   FX, SPRN, STRN & DISL OF          .4350         2.8         3.5
                                                      UPARM, LOWLEG EX FOOT AGE                                     
                                                      >17 W/O CC.                                                   
    255.............       08  MED                   * FX, SPRN, STRN & DISL OF        .2934         2.9         2.9
                                                      UPARM, LOWLEG EX FOOT AGE                                     
                                                      0-17.                                                         
    256.............       08  MED                   OTHER MUSCULOSKELETAL             .7826         4.0         5.7
                                                      SYSTEM & CONNECTIVE TISSUE                                    
                                                      DIAGNOSES.                                                    
    257.............       09  SURG                  TOTAL MASTECTOMY FOR              .9276         2.6         3.2
                                                      MALIGNANCY W CC.                                              
    258.............       09  SURG                  TOTAL MASTECTOMY FOR              .7162         2.0         2.3
                                                      MALIGNANCY W/O CC.                                            
    259.............       09  SURG                  SUBTOTAL MASTECTOMY FOR           .8874         2.1         3.2
                                                      MALIGNANCY W CC.                                              
    260.............       09  SURG                  SUBTOTAL MASTECTOMY FOR           .6092         1.4         1.7
                                                      MALIGNANCY W/O CC.                                            
    261.............       09  SURG                  BREAST PROC FOR NON-              .8961         1.8         2.2
                                                      MALIGNANCY EXCEPT BIOPSY &                                    
                                                      LOCAL EXCISION.                                               
    
    [[Page 46085]]
    
                                                                                                                    
    262.............       09  SURG                  BREAST BIOPSY & LOCAL             .7820         2.6         4.0
                                                      EXCISION FOR NON-                                             
                                                      MALIGNANCY.                                                   
    263.............       09  SURG                  SKIN GRAFT &/OR DEBRID FOR       2.0221         8.9        12.6
                                                      SKN ULCER OR CELLULITIS W                                     
                                                      CC.                                                           
    264.............       09  SURG                  SKIN GRAFT &/OR DEBRID FOR       1.0773         5.4         7.3
                                                      SKN ULCER OR CELLULITIS W/                                    
                                                      O CC.                                                         
    265.............       09  SURG                  SKIN GRAFT &/OR DEBRID           1.5166         4.6         7.3
                                                      EXCEPT FOR SKIN ULCER OR                                      
                                                      CELLULITIS W CC.                                              
    266.............       09  SURG                  SKIN GRAFT &/OR DEBRID            .7909         2.6         3.6
                                                      EXCEPT FOR SKIN ULCER OR                                      
                                                      CELLULITIS W/O CC.                                            
    267.............       09  SURG                  PERIANAL & PILONIDAL              .8424         2.7         4.1
                                                      PROCEDURES.                                                   
    268.............       09  SURG                  SKIN, SUBCUTANEOUS TISSUE &      1.0090         2.4         3.5
                                                      BREAST PLASTIC PROCEDURES.                                    
    269.............       09  SURG                  OTHER SKIN, SUBCUT TISS &        1.5733         5.9         8.5
                                                      BREAST PROC W CC.                                             
    270.............       09  SURG                  OTHER SKIN, SUBCUT TISS &         .7061         2.2         3.2
                                                      BREAST PROC W/O CC.                                           
    271.............       09  MED                   SKIN ULCERS................      1.0259         6.0         7.8
    272.............       09  MED                   MAJOR SKIN DISORDERS W CC..       .9950         5.1         6.7
    273.............       09  MED                   MAJOR SKIN DISORDERS W/O CC       .6618         4.0         5.4
    274.............       09  MED                   MALIGNANT BREAST DISORDERS       1.1229         5.0         7.2
                                                      W CC.                                                         
    275.............       09  MED                   MALIGNANT BREAST DISORDERS        .5882         2.5         3.9
                                                      W/O CC.                                                       
    276.............       09  MED                   NON-MALIGANT BREAST               .6122         3.8         4.7
                                                      DISORDERS.                                                    
    277.............       09  MED                   CELLULITIS AGE >17 W CC....       .8322         5.1         6.2
    278.............       09  MED                   CELLULITIS AGE >17 W/O CC..       .5574         4.0         4.8
    279.............       09  MED                   * CELLULITIS AGE 0-17......       .7309         4.2         4.2
    280.............       09  MED                   TRAUMA TO THE SKIN, SUBCUT        .6757         3.4         4.7
                                                      TISS & BREAST AGE >17 W CC.                                   
    281.............       09  MED                   TRAUMA TO THE SKIN, SUBCUT        .4558         2.5         3.4
                                                      TISS & BREAST AGE >17 W/O                                     
                                                      CC.                                                           
    282.............       09  MED                   * TRAUMA TO THE SKIN,             .2551         2.2         2.2
                                                      SUBCUT TISS & BREAST AGE 0-                                   
                                                      17.                                                           
    283.............       09  MED                   MINOR SKIN DISORDERS W CC..       .6936         3.8         5.0
    284.............       09  MED                   MINOR SKIN DISORDERS W/O CC       .4371         2.7         3.6
    285.............       10  SURG                  AMPUTAT OF LOWER LIMB FOR        2.1556         8.8        12.1
                                                      ENDOCRINE, NUTRIT, &                                          
                                                      METABOL DISORDERS.                                            
    286.............       10  SURG                  ADRENAL & PITUITARY              2.2671         5.8         7.3
                                                      PROCEDURES.                                                   
    287.............       10  SURG                  SKIN GRAFTS & WOUND DEBRID       1.8727         8.6        12.1
                                                      FOR ENDOC, NUTRIT & METAB                                     
                                                      DISORDERS.                                                    
    288.............       10  SURG                  O.R. PROCEDURES FOR OBESITY      2.0255         4.9         6.2
    289.............       10  SURG                  PARATHYROID PROCEDURES.....       .9827         2.4         3.5
    290.............       10  SURG                  THYROID PROCEDURES.........       .8970         2.0         2.6
    291.............       10  SURG                  THYROGLOSSAL PROCEDURES....       .7372         1.7         2.2
    292.............       10  SURG                  OTHER ENDOCRINE, NUTRIT &        2.5483         7.6        11.2
                                                      METAB O.R. PROC W CC.                                         
    293.............       10  SURG                  OTHER ENDOCRINE, NUTRIT &        1.2297         3.8         5.6
                                                      METAB O.R. PROC W/O CC.                                       
    294.............       10  MED                   DIABETES AGE >35...........       .7546         4.0         5.3
    295.............       10  MED                   DIABETES AGE 0-35..........       .7359         3.2         4.1
    296.............       10  MED                   NUTRITIONAL & MISC                .8657         4.3         5.8
                                                      METABOLIC DISORDERS AGE                                       
                                                      >17 W CC.                                                     
    297.............       10  MED                   NUTRITIONAL & MISC                .5188         3.0         3.9
                                                      METABOLIC DISORDERS AGE                                       
                                                      >17 W/O CC.                                                   
    298.............       10  MED                   NUTRITIONAL & MISC                .4207         2.0         2.5
                                                      METABOLIC DISORDERS AGE 0-                                    
                                                      17.                                                           
    299.............       10  MED                   INBORN ERRORS OF METABOLISM       .8716         3.9         5.5
    300.............       10  MED                   ENDOCRINE DISORDERS W CC...      1.0810         5.1         6.6
    301.............       10  MED                   ENDOCRINE DISORDERS W/O CC.       .5941         3.1         4.4
    302.............       11  SURG                  KIDNEY TRANSPLANT..........      3.7570         9.2        10.9
    303.............       11  SURG                  KIDNEY, URETER & MAJOR           2.6139         7.8         9.5
                                                      BLADDER PROCEDURES FOR                                        
                                                      NEOPLASM.                                                     
    304.............       11  SURG                  KIDNEY, URETER & MAJOR           2.3982         6.9         9.6
                                                      BLADDER PROC FOR NON-NEOPL                                    
                                                      W CC.                                                         
    305.............       11  SURG                  KIDNEY, URETER & MAJOR           1.1695         3.4         4.3
                                                      BLADDER PROC FOR NON-NEOPL                                    
                                                      W/O CC.                                                       
    306.............       11  SURG                  PROSTATECTOMY W CC.........      1.2168         4.0         5.8
    307.............       11  SURG                  PROSTATECTOMY W/O CC.......       .6455         2.1         2.5
    308.............       11  SURG                  MINOR BLADDER PROCEDURES W       1.5120         4.3         6.4
                                                      CC.                                                           
    309.............       11  SURG                  MINOR BLADDER PROCEDURES W/       .8760         2.1         2.6
                                                      O CC.                                                         
    310.............       11  SURG                  TRANSURETHRAL PROCEDURES W       1.0248         3.0         4.3
                                                      CC.                                                           
    311.............       11  SURG                  TRANSURETHRAL PROCEDURES W/       .5866         1.7         2.1
                                                      O CC.                                                         
    312.............       11  SURG                  URETHRAL PROCEDURES, AGE          .9732         3.1         4.7
                                                      >17 W CC.                                                     
    313.............       11  SURG                  URETHRAL PROCEDURES, AGE          .5783         1.8         2.3
                                                      >17 W/O CC.                                                   
    314.............       11  SURG                  * URETHRAL PROCEDURES, AGE        .4916         2.3         2.3
                                                      0-17.                                                         
    315.............       11  SURG                  OTHER KIDNEY & URINARY           2.0601         4.9         8.5
                                                      TRACT O.R. PROCEDURES.                                        
    316.............       11  MED                   RENAL FAILURE..............      1.3089         5.1         7.1
    317.............       11  MED                   ADMIT FOR RENAL DIALYSIS...       .5489         2.0         2.9
    318.............       11  MED                   KIDNEY & URINARY TRACT           1.1594         4.7         6.7
                                                      NEOPLASMS W CC.                                               
    319.............       11  MED                   KIDNEY & URINARY TRACT            .5808         2.0         2.8
                                                      NEOPLASMS W/O CC.                                             
    320.............       11  MED                   KIDNEY & URINARY TRACT            .8782         4.7         5.9
                                                      INFECTIONS AGE >17 W CC.                                      
    321.............       11  MED                   KIDNEY & URINARY TRACT            .5838         3.6         4.3
                                                      INFECTIONS AGE >17 W/O CC.                                    
    322.............       11  MED                   KIDNEY & URINARY TRACT            .5342         3.4         4.3
                                                      INFECTIONS AGE 0-17.                                          
    323.............       11  MED                   URINARY STONES W CC, &/OR         .7555         2.5         3.4
                                                      ESW LITHOTRIPSY.                                              
    
    [[Page 46086]]
    
                                                                                                                    
    324.............       11  MED                   URINARY STONES W/O CC......       .4298         1.7         2.0
    325.............       11  MED                   KIDNEY & URINARY TRACT            .6207         3.1         4.2
                                                      SIGNS & SYMPTOMS AGE >17 W                                    
                                                      CC.                                                           
    326.............       11  MED                   KIDNEY & URINARY TRACT            .4188         2.3         2.9
                                                      SIGNS & SYMPTOMS AGE >17 W/                                   
                                                      O CC.                                                         
    327.............       11  MED                   KIDNEY & URINARY TRACT            .3516         2.3         3.5
                                                      SIGNS & SYMPTOMS AGE 0-17.                                    
    328.............       11  MED                   URETHRAL STRICTURE AGE >17        .6878         2.9         3.9
                                                      W CC.                                                         
    329.............       11  MED                   URETHRAL STRICTURE AGE >17        .5080         1.9         2.3
                                                      W/O CC.                                                       
    330.............       11  MED                   * URETHRAL STRICTURE AGE 0-       .3167         1.6         1.6
                                                      17.                                                           
    331.............       11  MED                   OTHER KIDNEY & URINARY           1.0009         4.4         5.9
                                                      TRACT DIAGNOSES AGE >17 W                                     
                                                      CC.                                                           
    332.............       11  MED                   OTHER KIDNEY & URINARY            .5964         2.7         3.7
                                                      TRACT DIAGNOSES AGE >17 W/                                    
                                                      O CC.                                                         
    333.............       11  MED                   OTHER KIDNEY & URINARY            .8389         4.0         5.7
                                                      TRACT DIAGNOSES AGE 0-17.                                     
    334.............       12  SURG                  MAJOR MALE PELVIC                1.6359         4.8         5.4
                                                      PROCEDURES W CC.                                              
    335.............       12  SURG                  MAJOR MALE PELVIC                1.2190         3.7         4.1
                                                      PROCEDURES W/O CC.                                            
    336.............       12  SURG                  TRANSURETHRAL PROSTATECTOMY       .8870         2.9         3.8
                                                      W CC.                                                         
    337.............       12  SURG                  TRANSURETHRAL PROSTATECTOMY       .6129         2.1         2.4
                                                      W/O CC.                                                       
    338.............       12  SURG                  TESTES PROCEDURES, FOR           1.0950         3.3         5.1
                                                      MALIGNANCY.                                                   
    339.............       12  SURG                  TESTES PROCEDURES, NON-          1.0038         3.1         4.6
                                                      MALIGNANCY AGE >17.                                           
    340.............       12  SURG                  * TESTES PROCEDURES, NON-         .2815         2.4         2.4
                                                      MALIGNANCY AGE 0-17.                                          
    341.............       12  SURG                  PENIS PROCEDURES...........      1.1089         2.2         3.1
    342.............       12  SURG                  CIRCUMCISION AGE >17.......       .8511         2.9         3.6
    343.............       12  SURG                  * CIRCUMCISION AGE 0-17....       .1529         1.7         1.7
    344.............       12  SURG                  OTHER MALE REPRODUCTIVE          1.0298         2.1         3.1
                                                      SYSTEM O.R. PROCEDURES FOR                                    
                                                      MALIGNANCY.                                                   
    345.............       12  SURG                  OTHER MALE REPRODUCTIVE           .8552         2.7         3.8
                                                      SYSTEM O.R. PROC EXCEPT                                       
                                                      FOR MALIGNANCY.                                               
    346.............       12  MED                   MALIGNANCY, MALE                  .9573         4.5         6.3
                                                      REPRODUCTIVE SYSTEM, W CC.                                    
    347.............       12  MED                   MALIGNANCY, MALE                  .4603         2.2         3.0
                                                      REPRODUCTIVE SYSTEM, W/O                                      
                                                      CC.                                                           
    348.............       12  MED                   BENIGN PROSTATIC                  .6958         3.3         4.5
                                                      HYPERTROPHY W CC.                                             
    349.............       12  MED                   BENIGN PROSTATIC                  .4154         2.1         2.7
                                                      HYPERTROPHY W/O CC.                                           
    350.............       12  MED                   INFLAMMATION OF THE MALE          .6797         3.8         4.6
                                                      REPRODUCTIVE SYSTEM.                                          
    351.............       12  MED                   * STERILIZATION, MALE......       .2347         1.3         1.3
    352.............       12  MED                   OTHER MALE REPRODUCTIVE           .6263         2.9         4.0
                                                      SYSTEM DIAGNOSES.                                             
    353.............       13  SURG                  PELVIC EVISCERATION,             2.1179         6.4         8.3
                                                      RADICAL HYSTERECTOMY &                                        
                                                      RADICAL VULVECTOMY.                                           
    354.............       13  SURG                  UTERINE, ADNEXA PROC FOR         1.4963         5.0         6.0
                                                      NON-OVARIAN/ADNEXAL MALIG                                     
                                                      W CC.                                                         
    355.............       13  SURG                  UTERINE, ADNEXA PROC FOR          .9180         3.4         3.6
                                                      NON-OVARIAN/ADNEXAL MALIG                                     
                                                      W/O CC.                                                       
    356.............       13  SURG                  FEMALE REPRODUCTIVE SYSTEM        .7701         2.5         2.8
                                                      RECONSTRUCTIVE PROCEDURES.                                    
    357.............       13  SURG                  UTERINE & ADNEXA PROC FOR        2.4309         7.6         9.3
                                                      OVARIAN OR ADNEXAL                                            
                                                      MALIGNANCY.                                                   
    358.............       13  SURG                  UTERINE & ADNEXA PROC FOR        1.2021         3.8         4.5
                                                      NON-MALIGNANCY W CC.                                          
    359.............       13  SURG                  UTERINE & ADNEXA PROC FOR         .8452         2.9         3.1
                                                      NON-MALIGNANCY W/O CC.                                        
    360.............       13  SURG                  VAGINA, CERVIX & VULVA            .8708         2.7         3.3
                                                      PROCEDURES.                                                   
    361.............       13  SURG                  LAPAROSCOPY & INCISIONAL         1.1872         2.6         3.7
                                                      TUBAL INTERRUPTION.                                           
    362.............       13  SURG                  * ENDOSCOPIC TUBAL                .3000         1.4         1.4
                                                      INTERRUPTION.                                                 
    363.............       13  SURG                  D&C, CONIZATION & RADIO-          .7485         2.6         3.5
                                                      IMPLANT, FOR MALIGNANCY.                                      
    364.............       13  SURG                  D&C, CONIZATION EXCEPT FOR        .6985         2.5         3.5
                                                      MALIGNANCY.                                                   
    365.............       13  SURG                  OTHER FEMALE REPRODUCTIVE        1.7085         4.7         7.2
                                                      SYSTEM O.R. PROCEDURES.                                       
    366.............       13  MED                   MALIGNANCY, FEMALE               1.1857         4.9         7.1
                                                      REPRODUCTIVE SYSTEM W CC.                                     
    367.............       13  MED                   MALIGNANCY, FEMALE                .5309         2.1         2.9
                                                      REPRODUCTIVE SYSTEM W/O CC.                                   
    368.............       13  MED                   INFECTIONS, FEMALE                .9698         4.9         6.2
                                                      REPRODUCTIVE SYSTEM.                                          
    369.............       13  MED                   MENSTRUAL & OTHER FEMALE          .5367         2.5         3.4
                                                      REPRODUCTIVE SYSTEM                                           
                                                      DISORDERS.                                                    
    370.............       14  SURG                  CESAREAN SECTION W CC......      1.0587         4.3         5.5
    371.............       14  SURG                  CESAREAN SECTION W/O CC....       .7054         3.3         3.6
    372.............       14  MED                   VAGINAL DELIVERY W                .5590         2.4         3.1
                                                      COMPLICATING DIAGNOSES.                                       
    373.............       14  MED                   VAGINAL DELIVERY W/O              .3987         1.7         2.0
                                                      COMPLICATING DIAGNOSES.                                       
    374.............       14  SURG                  VAGINAL DELIVERY W                .7625         2.3         2.9
                                                      STERILIZATION &/OR D&C.                                       
    375.............       14  SURG                  * VAGINAL DELIVERY W O.R.         .6809         4.4         4.4
                                                      PROC EXCEPT STERIL &/OR                                       
                                                      D&C.                                                          
    376.............       14  MED                   POSTPARTUM & POST ABORTION        .4822         2.3         3.2
                                                      DIAGNOSES W/O O.R.                                            
                                                      PROCEDURE.                                                    
    377.............       14  SURG                  POSTPARTUM & POST ABORTION       1.0517         2.5         4.0
                                                      DIAGNOSES W O.R. PROCEDURE.                                   
    378.............       14  MED                   ECTOPIC PREGNANCY..........       .8126         2.3         2.6
    379.............       14  MED                   THREATENED ABORTION........       .4028         2.1         2.9
    380.............       14  MED                   ABORTION W/O D&C...........       .3501         1.5         1.8
    381.............       14  SURG                  ABORTION W D&C, ASPIRATION        .4809         1.7         2.3
                                                      CURETTAGE OR HYSTEROTOMY.                                     
    382.............       14  MED                   FALSE LABOR................       .2086         1.2         1.3
    383.............       14  MED                   OTHER ANTEPARTUM DIAGNOSES        .4636         2.8         3.8
                                                      W MEDICAL COMPLICATIONS.                                      
    
    [[Page 46087]]
    
                                                                                                                    
    384.............       14  MED                   OTHER ANTEPARTUM DIAGNOSES        .3539         2.0         2.8
                                                      W/O MEDICAL COMPLICATIONS.                                    
    385.............       15                        * NEONATES, DIED OR              1.3665         1.8         1.8
                                                      TRANSFERRED TO ANOTHER                                        
                                                      ACUTE CARE FACILITY.                                          
    386.............       15                        * EXTREME IMMATURITY OR          4.5063        17.9        17.9
                                                      RESPIRATORY DISTRESS                                          
                                                      SYNDROME, NEONATE.                                            
    387.............       15                        * PREMATURITY W MAJOR            3.0777        13.3        13.3
                                                      PROBLEMS.                                                     
    388.............       15                        * PREMATURITY W/O MAJOR          1.8570         8.6         8.6
                                                      PROBLEMS.                                                     
    389.............       15                        FULL TERM NEONATE W MAJOR        1.4862         5.1         6.3
                                                      PROBLEMS.                                                     
    390.............       15                        * NEONATE W OTHER                1.3058         3.4         3.4
                                                      SIGNIFICANT PROBLEMS.                                         
    391.............       15                        * NORMAL NEWBORN...........       .1515         3.1         3.1
    392.............       16  SURG                  SPLENECTOMY AGE >17........      3.1695         8.1        10.6
    393.............       16  SURG                  * SPLENECTOMY AGE 0-17.....      1.3386         9.1         9.1
    394.............       16  SURG                  OTHER O.R. PROCEDURES OF         1.6479         4.5         7.5
                                                      THE BLOOD AND BLOOD                                           
                                                      FORMING ORGANS.                                               
    395.............       16  MED                   RED BLOOD CELL DISORDERS          .8181         3.6         5.0
                                                      AGE >17.                                                      
    396.............       16  MED                   RED BLOOD CELL DISORDERS          .6284         2.7         4.0
                                                      AGE 0-17.                                                     
    397.............       16  MED                   COAGULATION DISORDERS......      1.2679         4.2         5.8
    398.............       16  MED                   RETICULOENDOTHELIAL &            1.2242         4.9         6.3
                                                      IMMUNITY DISORDERS W CC.                                      
    399.............       16  MED                   RETICULOENDOTHELIAL &             .6836         3.2         4.0
                                                      IMMUNITY DISORDERS W/O CC.                                    
    400.............       17  SURG                  LYMPHOMA & LEUKEMIA W MAJOR      2.6402         6.3         9.7
                                                      O.R. PROCEDURE.                                               
    401.............       17  SURG                  LYMPHOMA & NON-ACUTE             2.5653         8.1        11.7
                                                      LEUKEMIA W OTHER O.R. PROC                                    
                                                      W CC.                                                         
    402.............       17  SURG                  LYMPHOMA & NON-ACUTE             1.0145         2.9         4.2
                                                      LEUKEMIA W OTHER O.R. PROC                                    
                                                      W/O CC.                                                       
    403.............       17  MED                   LYMPHOMA & NON-ACUTE             1.6964         6.0         8.6
                                                      LEUKEMIA W CC.                                                
    404.............       17  MED                   LYMPHOMA & NON-ACUTE              .7917         3.3         4.6
                                                      LEUKEMIA W/O CC.                                              
    405.............       17                        * ACUTE LEUKEMIA W/O MAJOR       1.8978         4.9         4.9
                                                      O.R. PROCEDURE AGE 0-17.                                      
    406.............       17  SURG                  MYELOPROLIF DISORD OR            2.6147         7.3        10.1
                                                      POORLY DIFF NEOPL W MAJ                                       
                                                      O.R.PROC W CC.                                                
    407.............       17  SURG                  MYELOPROLIF DISORD OR            1.1516         3.5         4.4
                                                      POORLY DIFF NEOPL W MAJ                                       
                                                      O.R. PROC W/O CC.                                             
    408.............       17  SURG                  MYELOPROLIF DISORD OR            1.7294         4.7         7.6
                                                      POORLY DIFF NEOPL W OTHER                                     
                                                      O.R.PROC.                                                     
    409.............       17  MED                   RADIOTHERAPY...............       .9534         4.3         5.9
    410.............       17  MED                   CHEMOTHERAPY W/O ACUTE            .7968         2.6         3.4
                                                      LEUKEMIA AS SECONDARY                                         
                                                      DIAGNOSIS.                                                    
    411.............       17  MED                   HISTORY OF MALIGNANCY W/O         .4214         1.8         2.3
                                                      ENDOSCOPY.                                                    
    412.............       17  MED                   HISTORY OF MALIGNANCY W           .5175         2.4         3.4
                                                      ENDOSCOPY.                                                    
    413.............       17  MED                   OTHER MYELOPROLIF DIS OR         1.3777         5.7         8.1
                                                      POORLY DIFF NEOPL DIAG W                                      
                                                      CC.                                                           
    414.............       17  MED                   OTHER MYELOPROLIF DIS OR          .7041         3.2         4.6
                                                      POORLY DIFF NEOPL DIAG W/O                                    
                                                      CC.                                                           
    415.............       18  SURG                  O.R. PROCEDURE FOR               3.5166        10.8        14.9
                                                      INFECTIOUS & PARASITIC                                        
                                                      DISEASES.                                                     
    416.............       18  MED                   SEPTICEMIA AGE >17.........      1.4797         5.8         7.7
    417.............       18  MED                   SEPTICEMIA AGE 0-17........       .7688         3.3         4.3
    418.............       18  MED                   POSTOPERATIVE & POST-             .9679         5.0         6.3
                                                      TRAUMATIC INFECTIONS.                                         
    419.............       18  MED                   FEVER OF UNKNOWN ORIGIN AGE       .8831         4.1         5.2
                                                      >17 W CC.                                                     
    420.............       18  MED                   FEVER OF UNKNOWN ORIGIN AGE       .6064         3.2         4.0
                                                      >17 W/O CC.                                                   
    421.............       18  MED                   VIRAL ILLNESS AGE >17......       .7069         3.3         4.2
    422.............       18  MED                   VIRAL ILLNESS & FEVER OF          .5347         2.7         3.8
                                                      UNKNOWN ORIGIN AGE 0-17.                                      
    423.............       18  MED                   OTHER INFECTIOUS &               1.5690         5.8         8.0
                                                      PARASITIC DISEASES                                            
                                                      DIAGNOSES.                                                    
    424.............       19  SURG                  O.R. PROCEDURE W PRINCIPAL       2.4581         9.9        16.8
                                                      DIAGNOSES OF MENTAL                                           
                                                      ILLNESS.                                                      
    425.............       19  MED                   ACUTE ADJUST REACT &              .6857         3.2         4.4
                                                      DISTURBANCES OF                                               
                                                      PSYCHOSOCIAL DYSFUNCTION.                                     
    426.............       19  MED                   DEPRESSIVE NEUROSES........       .5648         3.7         5.2
    427.............       19  MED                   NEUROSES EXCEPT DEPRESSIVE.       .5818         3.6         5.3
    428.............       19  MED                   DISORDERS OF PERSONALITY &        .6975         4.9         7.7
                                                      IMPULSE CONTROL.                                              
    429.............       19  MED                   ORGANIC DISTURBANCES &            .8728         5.4         7.9
                                                      MENTAL RETARDATION.                                           
    430.............       19  MED                   PSYCHOSES..................       .8073         6.5         9.1
    431.............       19  MED                   CHILDHOOD MENTAL DISORDERS.       .8371         5.5         8.9
    432.............       19  MED                   OTHER MENTAL DISORDER             .7647         3.7         5.9
                                                      DIAGNOSES.                                                    
    433.............       20                        ALCOHOL/DRUG ABUSE OR             .3053         2.4         3.3
                                                      DEPENDENCE, LEFT AMA.                                         
    434.............       20                        ALC/DRUG ABUSE OR DEPEND,         .6865         4.0         5.3
                                                      DETOX OR OTH SYMPT TREAT W                                    
                                                      CC.                                                           
    435.............       20                        ALC/DRUG ABUSE OR DEPEND,         .4015         3.6         4.5
                                                      DETOX OR OTH SYMPT TREAT W/                                   
                                                      O CC.                                                         
    436.............       20                        ALC/DRUG DEPENDENCE W             .8110        11.5        14.1
                                                      REHABILITATION THERAPY.                                       
    437.............       20                        ALC/DRUG DEPENDENCE,              .7343         8.3         9.9
                                                      COMBINED REHAB & DETOX                                        
                                                      THERAPY.                                                      
    438.............  .......                        NO LONGER VALID............       .0000          .0          .0
    439.............       21  SURG                  SKIN GRAFTS FOR INJURIES...      1.6391         5.4         8.5
    440.............       21  SURG                  WOUND DEBRIDEMENTS FOR           1.8456         6.0         9.6
                                                      INJURIES.                                                     
    441.............       21  SURG                  HAND PROCEDURES FOR               .9298         2.2         3.4
                                                      INJURIES.                                                     
    442.............       21  SURG                  OTHER O.R. PROCEDURES FOR        2.1818         5.4         8.3
                                                      INJURIES W CC.                                                
    
    [[Page 46088]]
    
                                                                                                                    
    443.............       21  SURG                  OTHER O.R. PROCEDURES FOR         .9116         2.5         3.4
                                                      INJURIES W/O CC.                                              
    444.............       21  MED                   TRAUMATIC INJURY AGE >17 W        .7007         3.7         4.8
                                                      CC.                                                           
    445.............       21  MED                   TRAUMATIC INJURY AGE >17 W/       .4842         2.6         3.7
                                                      O CC.                                                         
    446.............       21  MED                   * TRAUMATIC INJURY AGE 0-17       .2942         2.4         2.4
    447.............       21  MED                   ALLERGIC REACTIONS AGE >17.       .4927         2.0         2.6
    448.............       21  MED                   ALLERGIC REACTIONS AGE 0-17       .0968         1.0         1.0
    449.............       21  MED                   POISONING & TOXIC EFFECTS         .7860         2.8         4.1
                                                      OF DRUGS AGE >17 W CC.                                        
    450.............       21  MED                   POISONING & TOXIC EFFECTS         .4406         1.7         2.2
                                                      OF DRUGS AGE >17 W/O CC.                                      
    451.............       21  MED                   * POISONING & TOXIC EFFECTS       .2613         2.1         2.1
                                                      OF DRUGS AGE 0-17.                                            
    452.............       21  MED                   COMPLICATIONS OF TREATMENT        .9476         3.7         5.2
                                                      W CC.                                                         
    453.............       21  MED                   COMPLICATIONS OF TREATMENT        .4960         2.3         3.1
                                                      W/O CC.                                                       
    454.............       21  MED                   OTHER INJURY, POISONING &         .9035         3.3         5.2
                                                      TOXIC EFFECT DIAG W CC.                                       
    455.............       21  MED                   OTHER INJURY, POISONING &         .4453         2.0         2.7
                                                      TOXIC EFFECT DIAG W/O CC.                                     
    456.............       22                        BURNS, TRANSFERRED TO            1.7396         3.7         7.3
                                                      ANOTHER ACUTE CARE                                            
                                                      FACILITY.                                                     
    457.............       22  MED                   EXTENSIVE BURNS W/O O.R.         1.5860         2.5         4.9
                                                      PROCEDURE.                                                    
    458.............       22  SURG                  NON-EXTENSIVE BURNS W SKIN       3.5746        11.1        16.0
                                                      GRAFT.                                                        
    459.............       22  SURG                  NON-EXTENSIVE BURNS W WOUND      1.5588         6.5         9.3
                                                      DEBRIDEMENT OR OTHER O.R.                                     
                                                      PROC.                                                         
    460.............       22  MED                   NON-EXTENSIVE BURNS W/O           .9421         4.4         6.3
                                                      O.R. PROCEDURE.                                               
    461.............       23  SURG                  O.R. PROC W DIAGNOSES OF         1.0123         2.5         4.6
                                                      OTHER CONTACT W HEALTH                                        
                                                      SERVICES.                                                     
    462.............       23  MED                   REHABILITATION.............      1.4041        10.5        13.1
    463.............       23  MED                   SIGNS & SYMPTOMS W CC......       .6907         3.6         4.8
    464.............       23  MED                   SIGNS & SYMPTOMS W/O CC....       .4872         2.7         3.4
    465.............       23  MED                   AFTERCARE W HISTORY OF            .5858         2.2         3.8
                                                      MALIGNANCY AS SECONDARY                                       
                                                      DIAGNOSIS.                                                    
    466.............       23  MED                   AFTERCARE W/O HISTORY OF          .6336         2.6         4.7
                                                      MALIGNANCY AS SECONDARY                                       
                                                      DIAGNOSIS.                                                    
    467.............       23  MED                   OTHER FACTORS INFLUENCING         .4669         2.3         4.2
                                                      HEALTH STATUS.                                                
    468.............  .......                        EXTENSIVE O.R. PROCEDURE         3.6202         9.9        14.2
                                                      UNRELATED TO PRINCIPAL                                        
                                                      DIAGNOSIS.                                                    
    469.............  .......                        ** PRINCIPAL DIAGNOSIS            .0000          .0          .0
                                                      INVALID AS DISCHARGE                                          
                                                      DIAGNOSIS.                                                    
    470.............  .......                        ** UNGROUPABLE.............       .0000          .0          .0
    471.............       08  SURG                  BILATERAL OR MULTIPLE MAJOR      3.4771         5.8         6.7
                                                      JOINT PROCS OF LOWER                                          
                                                      EXTREMITY.                                                    
    472.............       22  SURG                  EXTENSIVE BURNS W O.R.          10.2429        11.8        24.2
                                                      PROCEDURE.                                                    
    473.............       17                        ACUTE LEUKEMIA W/O MAJOR         3.4853         7.9        13.6
                                                      O.R. PROCEDURE AGE >17.                                       
    474.............  .......                        NO LONGER VALID............       .0000          .0          .0
    475.............       04  MED                   RESPIRATORY SYSTEM               3.7291         8.2        11.6
                                                      DIAGNOSIS WITH VENTILATOR                                     
                                                      SUPPORT.                                                      
    476.............  .......  SURG                  PROSTATIC O.R. PROCEDURE         2.2234         9.5        12.7
                                                      UNRELATED TO PRINCIPAL                                        
                                                      DIAGNOSIS.                                                    
    477.............  .......  SURG                  NON-EXTENSIVE O.R.               1.7461         5.5         8.6
                                                      PROCEDURE UNRELATED TO                                        
                                                      PRINCIPAL DIAGNOSIS.                                          
    478.............       05  SURG                  OTHER VASCULAR PROCEDURES W      2.2981         5.2         7.7
                                                      CC.                                                           
    479.............       05  SURG                  OTHER VASCULAR PROCEDURES W/     1.4113         3.2         4.2
                                                      O CC.                                                         
    480.............  .......  SURG                  LIVER TRANSPLANT...........     11.4672        19.0        25.3
    481.............  .......  SURG                  BONE MARROW TRANSPLANT.....     11.2821        26.5        30.2
    482.............  .......  SURG                  TRACHEOSTOMY FOR FACE,           3.5999        10.5        13.5
                                                      MOUTH & NECK DIAGNOSES.                                       
    483.............  .......  SURG                  TRACHEOSTOMY EXCEPT FOR         16.0451        33.8        43.5
                                                      FACE, MOUTH & NECK                                            
                                                      DIAGNOSES.                                                    
    484.............       24  SURG                  CRANIOTOMY FOR MULTIPLE          5.7762        10.6        15.4
                                                      SIGNIFICANT TRAUMA.                                           
    485.............       24  SURG                  LIMB REATTACHMENT, HIP AND       3.1562         8.3        10.6
                                                      FEMUR PROC FOR MULTIPLE                                       
                                                      SIGNIFICANT TR.                                               
    486.............       24  SURG                  OTHER O.R. PROCEDURES FOR        4.8882         8.8        13.5
                                                      MULTIPLE SIGNIFICANT                                          
                                                      TRAUMA.                                                       
    487.............       24  MED                   OTHER MULTIPLE SIGNIFICANT       2.0229         5.9         8.3
                                                      TRAUMA.                                                       
    488.............       25  SURG                  HIV W EXTENSIVE O.R.             4.5078        12.1        18.0
                                                      PROCEDURE.                                                    
    489.............       25  MED                   HIV W MAJOR RELATED              1.8009         6.7         9.8
                                                      CONDITION.                                                    
    490.............       25  MED                   HIV W OR W/O OTHER RELATED        .9952         4.2         6.1
                                                      CONDITION.                                                    
    491.............       08  SURG                  MAJOR JOINT & LIMB               1.6579         3.3         3.9
                                                      REATTACHMENT PROCEDURES OF                                    
                                                      UPPER EXTREMITY.                                              
    492.............       17  MED                   CHEMOTHERAPY W ACUTE             4.6393        11.9        18.0
                                                      LEUKEMIA AS SECONDARY                                         
                                                      DIAGNOSIS.                                                    
    493.............       07  SURG                  LAPAROSCOPIC                     1.7561         4.1         5.7
                                                      CHOLECYSTECTOMY W/O C.D.E.                                    
                                                      W CC.                                                         
    494.............       07  SURG                  LAPAROSCOPIC                      .9400         1.8         2.4
                                                      CHOLECYSTECTOMY W/O C.D.E.                                    
                                                      W/O CC.                                                       
    495.............  .......  SURG                  LUNG TRANSPLANT............      9.5171        14.8        17.9
    496.............       08  SURG                  COMBINED ANTERIOR/POSTERIOR      5.5214         9.2        11.6
                                                      SPINAL FUSION.                                                
    497.............       08  SURG                  SPINAL FUSION W CC.........      2.7692         5.3         6.8
    498.............       08  SURG                  SPINAL FUSION W/O CC.......      1.6171         3.1         3.8
    499.............       08  SURG                  BACK & NECK PROCS EXCEPT         1.4827         4.1         5.3
                                                      SPINAL FUSION W CC.                                           
    500.............       08  SURG                  BACK & NECK PROCS EXCEPT          .9708         2.6         3.1
                                                      SPINAL FUSION W/O CC.                                         
    501.............       08  SURG                  KNEE PROC W PDX OF               2.5660         8.7        11.3
                                                      INFECTION W CC.                                               
    
    [[Page 46089]]
    
                                                                                                                    
    502.............       08  SURG                  KNEE PROC W PDX OF               1.6004         5.9         7.1
                                                      INFECTION W/O CC.                                             
    503.............       08  SURG                  KNEE PROCEDURES W/O PDX OF       1.2380         3.4         4.4
                                                      INFECTION.                                                    
    ----------------------------------------------------------------------------------------------------------------
    * 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 used only to determine payment for outlier cases.                                      
    Note: Relative weights are based on medicare patient data and may not be appropriate for other patients.        
    
    
                                             Table 6A.--New Diagnosis Codes                                         
    ----------------------------------------------------------------------------------------------------------------
      Diagnosis                                                                                                     
        code              Description                 CC              MDC                       DRG                 
    ----------------------------------------------------------------------------------------------------------------
    007.4.......  Other protozoal intestinal  N                            6  182, 183, 184                         
                   diseases,                                                                                        
                   cryptosporidiosis.                                                                               
    031.2.......  Disease due to              N                           18  423                                   
                   disseminated                                           25  489 \1\                               
                   mycobacterium avium-                                                                             
                   intracellulare complex                                                                           
                   (DMAC).                                                                                          
    038.10......  Staphylococcal septicemia,  Y                           15  387, 389 \2\                          
                   unspecified.                                           18  416, 417                              
                                                                          25  489 \1\                               
    038.11......  Staphylococcus aureus       Y                           15  387, 389 \2\                          
                   septicemia.                                            18  416, 417                              
                                                                          25  489 \1\                               
    038.19......  Other staphylococcal        Y                           15  387, 389 \2\                          
                   septicemia.                                            18  416, 417                              
                                                                          25  489 \1\                               
    275.40......  Unspecified disorder of     N                           10  296, 297, 298                         
                   calcium metabolism.                                                                              
    275.41......  Hypocalcemia..............  N                           10  296, 297, 298                         
    275.42......  Hypercalcemia.............  N                           10  296, 297, 298                         
    275.49......  Other disorder of calcium   N                           10  296, 297, 298                         
                   metabolism.                                                                                      
    438.0.......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   cognitive deficits.                                                                              
    438.10......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   speech and language                                                                              
                   deficits, unspecified.                                                                           
    438.11......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   speech and language                                                                              
                   deficits, aphasia.                                                                               
    438.12......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   speech and language                                                                              
                   deficits, dysphasia.                                                                             
    438.19......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   other speech and language                                                                        
                   deficits.                                                                                        
    438.20......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   hemiplegia affecting                                                                             
                   unspecified side.                                                                                
    438.21......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   hemiplegia affecting                                                                             
                   dominant side.                                                                                   
    438.22......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   hemiplegia affecting                                                                             
                   nondominant side.                                                                                
    438.30......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   monoplegia of upper limb                                                                         
                   affecting unspecified                                                                            
                   side.                                                                                            
    438.31......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   monoplegia of upper limb                                                                         
                   affecting dominant side.                                                                         
    438.32......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   monoplegia of upper limb                                                                         
                   affecting nondominant                                                                            
                   side.                                                                                            
    438.40......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   monoplegia of lower limb                                                                         
                   affecting unspecified                                                                            
                   side.                                                                                            
    438.41......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   monoplegia of lower limb                                                                         
                   affecting dominant side.                                                                         
    438.42......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   monoplegia of lower limb                                                                         
                   affecting nondominant                                                                            
                   side.                                                                                            
    438.50......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   other paralytic syndrome                                                                         
                   affecting unspecified                                                                            
                   side.                                                                                            
    438.51......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   other paralytic syndrome                                                                         
                   affecting dominant side.                                                                         
    438.52......  Late effect of              N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   other paralytic syndrome                                                                         
                   affecting nondominant                                                                            
                   side.                                                                                            
    438.81......  Other late effect of        N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   apraxia.                                                                                         
    438.82......  Other late effect of        N                            1  12                                    
                   cerebrovascular disease,                                                                         
                   dysphagia.                                                                                       
    438.89......  Other late effects of       N                            1  12                                    
                   cerebrovascular disease.                                                                         
    438.9.......   Unspecified late effects   N                            1  12                                    
                   of cerebrovascular                                                                               
                   disease.                                                                                         
    458.8.......   Other specified            N                            5  144, 145                              
                   hypotension.                                               121 \3\                               
    
    [[Page 46090]]
    
                                                                                                                    
    474.00......  Chronic tonsillitis.......  N                          pre  482                                   
                                                                           3  68, 69, 70                            
    474.01......  Chronic adenoiditis.......  N                          pre  482                                   
                                                                           3  68, 69, 70                            
    474.02......  Chronic tonsillitis and     N                          pre  482                                   
                   adenoiditis.                                            3  68, 69, 70                            
    482.84......  Legionnaires' disease.....  Y                            4  79, 80, 81                            
    518.6.......  Allergic bronchopulmonary   Y                            4  92, 93                                
                   aspergillosis.                                                                                   
    655.70......  Decreased fetal movements   N                           14  469                                   
                   unspecified as to episode                                                                        
                   of care or not applicable.                                                                       
    655.71......  Decreased fetal movements   N                           14  370, 371, 372, 373, 374, 375          
                   delivered, with or                                                                               
                   without mention of                                                                               
                   antepartum condition.                                                                            
    655.73......  Decreased fetal movements   N                           14  383, 384                              
                   antepartum condition or                                                                          
                   complication.                                                                                    
    686.00......  Other local infection of    N                            9  277, 278, 279                         
                   skin and subcutaneous                                                                            
                   tissue, pyoderma,                                                                                
                   unspecified.                                                                                     
    686.01......  Other local infection of    N                            9  277, 278, 279                         
                   skin and subcutaneous                                                                            
                   tissue, pyoderma                                                                                 
                   gangrenosum.                                                                                     
    686.09......  Other local infection of    N                            9  277, 278, 279                         
                   skin and subcutaneous                                                                            
                   tissue, other pyoderma.                                                                          
    756.70......  Congenital anomaly of       N                            6  188, 189, 190                         
                   abdominal wall,                                                                                  
                   unspecified.                                                                                     
    756.71......  Congenital anomaly of       N                            6  188, 189, 190                         
                   abdominal wall, prune                                                                            
                   belly syndrome.                                                                                  
    756.79......  Other congenital anomalies  N                            6  188, 189, 190                         
                   of abdominal wall.                                                                               
    780.31......  Febrile convulsions.......  Y                            1  24, 25, 26                            
                                                                          15  387, 389 \2\                          
    780.39......  Other convulsions.........  Y                            1  24, 25, 26                            
                                                                          15  387, 389 \2\                          
    790.94......  Other nonspecific findings  N                           23  463, 464                              
                   on examination of blood,                                                                         
                   euthyroid sick syndrome.                                                                         
    796.5.......   Abnormal findings on       N                           14  383, 384                              
                   antenatal screening.                                                                             
    959.01......  Head injury, unspecified..  N                          pre  482                                   
                                                                          21  444, 445, 446                         
                                                                          24  significant trauma list               
    959.09......  Injury of face and neck...  N                          pre  482                                   
                                                                          21  444, 445, 446                         
                                                                          24  significant trauma list               
    V02.60......  Viral hepatitis carrier,    N                            7  205, 206                              
                   unspecified.                                                                                     
    V02.61......  Hepatitis B carrier.......  N                            7  205, 206                              
    V02.62......  Hepatitis C carrier.......  N                            7  205, 206                              
    V02.69......  Other viral hepatitis       N                            7  205, 206                              
                   carrier.                                                                                         
    V12.40......  Personal history of         N                           23  467                                   
                   unspecified disorder of                                                                          
                   nervous system and sense                                                                         
                   organs.                                                                                          
    V12.41......  Personal history of benign  N                           23  467                                   
                   neoplasm of the brain.                                                                           
    V12.49......  Personal history of other   N                           23  467                                   
                   disorder of nervous                                                                              
                   system and sense organs.                                                                         
    V16.40......  Family history of           N                           23  467                                   
                   malignant neoplasm of                                                                            
                   genital organ,                                                                                   
                   unspecified.                                                                                     
    V16.41......  Family history of           N                           23  467                                   
                   malignant neoplasm of                                                                            
                   ovary.                                                                                           
    V16.42......  Family history of           N                           23  467                                   
                   malignant neoplasm of                                                                            
                   prostate.                                                                                        
    V16.43......  Family history of           N                           23  467                                   
                   malignant neoplasm of                                                                            
                   testis.                                                                                          
    V16.49......  Family history of other     N                           23  467                                   
                   malignant neoplasm.                                                                              
    V28.6.......   Antenatal screening for    N                           23  467                                   
                   streptococcus B.                                                                                 
    V42.81......  Organ or tissue replaced    Y                           16  398, 399                              
                   by transplant, bone                                                                              
                   marrow.                                                                                          
    V42.82......  Organ or tissue replaced    Y                           16  398, 399                              
                   by transplant, peripheral                                                                        
                   stem cells.                                                                                      
    V42.83......  Organ or tissue replaced    Y                            7  204                                   
                   by transplant, pancreas.                                                                         
    V42.89......  Other organ or tissue       Y                           23  467                                   
                   replaced by transplant.                                                                          
    V45.61......  Cataract extraction status  N                           23  467                                   
    V45.69......  Other states following      N                           23  467                                   
                   surgery of eye and adnexa.                                                                       
    V45.71......  Acquired absence of breast  N                           23  467                                   
    V45.72......  Acquired absence of         N                           23  467                                   
                   intestine (large) (small).                                                                       
    V45.73......  Acquired absence of kidney  N                           23  467                                   
    V53.01......  Fitting and adjustment of   N                           23  467                                   
                   cerebral ventricular                                                                             
                   (communicating) shunt.                                                                           
    V53.02......  Fitting and adjustment of   N                           23  467                                   
                   neuropacemaker (brain)                                                                           
                   (peripheral nerve)                                                                               
                   (Spinal cord).                                                                                   
    V53.09......  Fitting and adjustment of   N                           23  467                                   
                   other devices related to                                                                         
                   nervous system and                                                                               
                   special senses.                                                                                  
    V64.4.......   Laparoscopic surgical      N                           23  467                                   
                   procedure converted to                                                                           
                   open procedure.                                                                                  
    V76.10......  Screening for malignant     N                           23  467                                   
                   neoplasm, breast                                                                                 
                   screening, unspecified.                                                                          
    V76.11......  Screening mammogram for     N                           23  467                                   
                   high-risk patient,                                                                               
                   malignant neoplasm of                                                                            
                   breast.                                                                                          
    V76.12......  Other screening mammogram   N                           23  467                                   
                   for malignant neoplasm of                                                                        
                   breast.                                                                                          
    V76.19......  Other screening breast      N                           23  467                                   
                   examination for malignant                                                                        
                   neoplasm.                                                                                        
    ----------------------------------------------------------------------------------------------------------------
    \1\ HIV major related condition in this DRG.                                                                    
    \2\ Classified as a ``major problem''in these DRGs.                                                             
    \3\ Classified as a ``major complication'' in this DRG.                                                         
    
    
    [[Page 46091]]
    
    
                                             Table 6B.--New Procedure Codes                                         
    ----------------------------------------------------------------------------------------------------------------
              Procedure code                    Description                 OR                 MDC            DRG   
    ----------------------------------------------------------------------------------------------------------------
    37.35.............................  Partial ventriculectomy...  Y                   5                       108 
    41.05.............................  Allogeneic hematopoietic    Y                   pre                     481 
                                         stem cell transplant.                                                      
    41.06.............................  Cord blood stem cell        Y                   pre                     481 
                                         transplant.                                                                
    ----------------------------------------------------------------------------------------------------------------
    
    
                                           Table 6C.--Invalid Diagnosis Codes                                       
    ----------------------------------------------------------------------------------------------------------------
      Diagnosis                                                                                                     
        code              Description                 CC              MDC                       DRG                 
    ----------------------------------------------------------------------------------------------------------------
    038.1.......  Staphylococcal septicemia.  Y                           15  387, 389 \1\                          
                                                                          18  416, 417                              
                                                                          25  489 \2\                               
    275.4.......  Disorders of calcium        N                           10  296, 297, 298                         
                   metabolism.                                                                                      
    438.........  Late effects of             N                            1  12                                    
                   cerebrovascular disease.                                                                         
    474.0.......  Chronic tonsillitis and     N                          pre  482                                   
                   adenoiditis.                                            3  68, 69, 70                            
    686.0.......  Other local infections of   N                            9  277, 278, 279                         
                   skin and subcutaneous                                                                            
                   tissue, pyoderma.                                                                                
    756.7.......  Other congenital anomalies  N                            6  188, 189, 190                         
                   of abdominal wall.                                                                               
    780.3.......  Convulsions...............  Y                            1  24, 25, 26                            
                                                                          15  387, 389 \1\                          
    959.0.......  Injury, other and           N                          pre  482                                   
                   unspecified of head,                                   21  444, 445, 446                         
                   face, and neck.                                        24  significant trauma list               
    V02.6.......  Carrier or suspected        N                            7  205, 206                              
                   carrier of viral                                                                                 
                   hepatitis.                                                                                       
    V12.4.......  Personal history of         N                           23  467                                   
                   disorders of nervous                                                                             
                   system and sense organs.                                                                         
    V16.4.......  Family history of           N                           23  467                                   
                   malignant neoplasm of                                                                            
                   genital organs.                                                                                  
    V42.8.......  Unspecified organ or        Y                            7  205, 206                              
                   tissue replaced by                                                                               
                   transplant.                                                                                      
    V45.6.......  Other postsurgical state    N                           23  467                                   
                   following surgery of eye                                                                         
                   and adnexa.                                                                                      
    V53.0.......  Fitting and adjustment of   N                           23  467                                   
                   devices related to                                                                               
                   nervous system and                                                                               
                   special senses.                                                                                  
    V76.1.......  Special screening for       N                           23  467                                   
                   malignant neoplasm of the                                                                        
                   breast.                                                                                          
    ----------------------------------------------------------------------------------------------------------------
    \1\ Classified as a ``major problem'' in these DRGs.                                                            
    \2\ HIV major related condition in this DRG.                                                                    
    
    
                                        Table 6D.--Revised Diagnosis Code Titles                                    
    ----------------------------------------------------------------------------------------------------------------
      Diagnosis                                                                                                     
        code              Description                 CC              MDC                       DRG                 
    ----------------------------------------------------------------------------------------------------------------
    041.04......  Streptococcus infection in  N                           18  423                                   
                   conditions classified                                                                            
                   elsewhere and of                                                                                 
                   unspecified site, Group D                                                                        
                   (Enterococcus).                                                                                  
    ----------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46092]]
    
    
                 Table 6E.--Additions to the CC Exclusions List             
                                Page 1 of 5 Pages                           
       CCs that are added to the list are in Table 6E--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.
    ------------------------------------------------------------------------
                                                                            
    ------------------------------------------------------------------------
    *0031       48284     48284    48284    01176    01354    01643    01771
      03810   *01140    *01186   *01795     01180    01355    01644    01772
      03811     48284     48284    48284    01181    01356    01645    01773
      03819   *01141    *01190   *01796     01182    01360    01646    01774
    *0074       48284     48284    48284    01183    01361    01650    01775
      00841   *01142    *01191   *0202      01184    01362    01651    01776
      00842     48284     48284    03810    01185    01363    01652    01780
      00843   *01143    *01192     03811    01186    01364    01653    01781
      00844     48284     48284    03819    01190    01365    01654    01782
      00845   *01144    *01193   *0212      01191    01366    01655    01783
      00846     48284     48284    48284    01192    01380    01656    01784
      00847   *01145    *01194   *0310      01193    01381    01660    01785
      00849     48284     48284    48284    01194    01382    01661    01786
    *01100    *01146    *01195   *0312      01195    01383    01662    01790
      48284     48284     48284    01100    01196    01384    01663    01791
    *01101    *01150    *01196     01101    01200    01385    01664    01792
      48284     48284     48284    01102    01201    01386    01665    01793
    *01102    *01151    *01200     01103    01202    01390    01666    01794
      48284     48284     48284    01104    01203    01391    01670    01795
    *01103    *01152    *01201     01105    01204    01392    01671    01796
      48284     48284     48284    01106    01205    01393    01672    01800
    *01104    *01153    *01202     01110    01206    01394    01673    01801
      48284     48284     48284    01111    01210    01395    01674    01802
    *01105    *01154    *01203     01112    01211    01396    01675    01803
      48284     48284     48284    01113    01212    01400    01676    01804
    *01106    *01155    *01204     01114    01213    01401    01690    01805
      48284     48284     48284    01115    01214    01402    01691    01806
    *01110    *01156    *01205     01116    01215    01403    01692    01880
      48284     48284     48284    01120    01216    01404    01693    01881
    *01111    *01160    *01206     01121    01300    01405    01694    01882
      48284     48284     48284    01122    01301    01406    01695    01883
    *01112    *01161    *01210     01123    01302    01480    01696    01884
      48284     48284     48284    01124    01303    01482    01720    01885
    *01113    *01162    *01211     01125    01304    01483    01721    01886
      48284     48284     48284    01126    01305    01484    01722    01890
    *01114    *01163    *01212     01130    01306    01485    01723    01891
      48284     48284     48284    01131    01310    01486    01724    01892
    *01115    *01164    *01213     01132    01311    01600    01725    01893
      48284     48284     48284    01133    01312    01601    01726    01894
    *01116    *01165    *01214     01134    01313    01602    01730    01895
      48284     48284     48284    01135    01314    01603    01731    01896
    *01120    *01166    *01215     01136    01315    01604    01732    0310 
      48284     48284     48284    01140    01316    01605    01733  *0362  
    *01121    *01170    *01216     01141    01320    01606    01734    03810
      48284     48284     48284    01142    01321    01610    01735    03811
    *01122    *01171    *01280     01143    01322    01611    01736    03819
      48284     48284     48284    01144    01323    01612    01740  *0380  
    *01123    *01172    *01281     01145    01324    01613    01741    03810
      48284     48284     48284    01146    01325    01614    01742    03811
    *01124    *01173    *01282     01150    01326    01615    01743    03819
      48284     48284     48284    01151    01330    01616    01744  *03810 
    *01125    *01174    *01283     01152    01331    01620    01745    0362 
      48284     48284     48284    01153    01332    01621    01746    0380 
    *01126    *01175    *01284     01154    01333    01622    01750    03810
      48284     48284     48284    01155    01334    01623    01751    03811
    *01130    *01176    *01285     01156    01335    01624    01752    03819
      48284     48284     48284    01160    01336    01625    01753    0382 
    *01131    *01180    *01286     01161    01340    01626    01754    0383 
      48284     48284     48284    01162    01341    01630    01755    03840
    *01132    *01181    *01790     01163    01342    01631    01756    03841
      48284     48284     48284    01164    01343    01632    01760    03842
    *01133    *01182    *01791     01165    01344    01633    01761    03843
      48284     48284     48284    01170    01345    01634    01762    03844
    *01134    *01183    *01792     01171    01346    01635    01763    03849
      48284     48284     48284    01172    01350    01636    01764    0388 
    *01135    *01184    *01793     01173    01351    01640    01765    0389 
      48284     48284     48284    01174    01352    01641    01766    0545 
    *01136    *01185    *01794     01175    01353    01642    01770  *03811 
    ------------------------------------------------------------------------
    
    
    [[Page 46093]]
    
    
                                Page 2 of 5 Pages                           
    ------------------------------------------------------------------------
                                                                            
    ------------------------------------------------------------------------
      0362    *0391       03819  *34550     48284    01196  *4838      48284
      0380      48284   *04182     78031  *48283     01200    48284  *5078  
      03810   *04089      03810    78039    48284    01201  *4841      48284
      03811     03810     03811  *34551   *48284     01202    48284  *5080  
      03819     03811     03819    78031    01100    01203  *4843      48284
      0382      03819   *04183     78039    01101    01204    48284  *5081  
      0383    *04100      03810  *34560     01102    01205  *4845      48284
      03840     03810     03811    78031    01103    01206    48284  *5088  
      03841     03811     03819    78039    01104    01210  *4846      48284
      03842     03819   *04184   *34561     01105    01211    48284  *5089  
      03843   *04101      03810    78031    01106    01212  *4847      48284
      03844     03810     03811    78039    01110    01213    48284  *5171  
      03849     03811     03819  *34570     01111    01214  *4848      48284
      0388      03819   *04185     78031    01112    01215    48284  *5178  
      0389    *04102      03810    78039    01113    01216  *485     48284  
      0545      03810     03811  *34571     01114    0310     48284  *5186  
    *03819      03811     03819    78031    01115    11505  *486       5186 
      0362      03819   *04186     78039    01116    11515    48284  *51889 
      0380    *04103      03810  *34580     01120    1304   *4870      48284
      03810     03810     03811    78031    01121    1363     48284  *5198  
      03811     03811     03819    78039    01122    481    *4871      48284
      03819     03819   *04189   *34581     01123    4820     48284    5186 
      0382    *04104      03810    78031    01124    4821   *494     *5199  
      0383      03810     03811    78039    01125    4822     48284    48284
      03840     03811     03819  *34590     01126    48230  *4950      5186 
      03841     03819   *0419      78031    01130    48231    48284  *5990  
      03842   *04105      03810    78039    01131    48232  *4951      99664
      03843     03810     03811  *34591     01132    48239    48284  *65570 
      03844     03811     03819    78031    01133    4824   *4952      66500
      03849     03819   *0545      78039    01134    48281    48284    66501
      0388    *04109      03810  *3488      01135    48282  *4953      66503
      0389      03810     03811    78031    01136    48283    48284    66510
      0545      03811     03819    78039    01140    48284  *4954      66511
    *0382       03819   *11505   *3489      01141    48289    48284  *65571 
      03810   *04110      48284    78031    01142    4829   *4955      66500
      03811     03810   *11515     78039    01143    4830     48284    66501
      03819     03811     48284  *34989     01144    4831   *4956      66503
    *0383       03819   *11595     78031    01145    4838     48284    66510
      03810   *04111      48284    78039    01146    4841   *4957      66511
      03811     03810   *1221    *3499      01150    4843     48284  *65573 
      03819     03811     48284    78031    01151    4845   *4958      66500
    *03840      03819   *1304      78039    01152    4846     48284    66501
      03810   *04119      48284  *4800      01153    4847   *4959      66503
      03811     03810   *1363      48284    01154    4848     48284    66510
      03819     03811     48284  *4801      01155    485    *496       66511
    *03841      03819   *1398      48284    01156    486      48284  *68600 
      03810   *0412       03810  *4802      01160    4870   *500       6800 
      03811     03810     03811    48284    01161    4950     48284    6801 
      03819     03811     03819  *4808      01162    4951   *501       6802 
    *03842      03819   *34500     48284    01163    4952     48284    6803 
      03810   *0413       78031  *4809      01164    4953   *502       6804 
      03811     03810     78039    48284    01165    4954     48284    6805 
      03819     03811   *34501   *481       01166    4955   *503       6806 
    *03843      03819     78031    48284    01170    4956     48284    6807 
      03810   *0414       78039  *4820      01171    4957   *504       6808 
      03811     03810   *34510     48284    01172    4958     48284    6809 
      03819     03811     78031  *4821      01173    4959   *505       6820 
    *03844      03819     78039    48284    01174    5060     48284    6821 
      03810   *0415     *34511   *4822      01175    5061   *5060      6822 
      03811     03810     78031    48284    01176    5070     48284    6823 
      03819     03811     78039  *48230     01180    5071   *5061      6825 
    *03849      03819   *3452      48284    01181    5078     48284    6826 
      03810   *0416       78031  *48231     01182    5080   *5062      6827 
      03811     03810     78039    48284    01183    5081     48284    6828 
      03819     03811   *3453    *48232     01184    5171   *5063      6829 
    *0388       03819     78031    48284    01185  *48289     48284    684  
      03810   *0417       78039  *48239     01186    48284  *5064    *68601 
      03811     03810   *34540     48284    01190  *4829      48284    6800 
      03819     03811     78031  *4824      01191    48284  *5069      6801 
    *0389       03819     78039    48284    01192  *4830      48284    6802 
      03810   *04181    *34541   *48281     01193    48284  *5070      6803 
      03811     03810     78031    48284    01194  *4831      48284    6804 
      03819     03811     78039  *48282     01195    48284  *5071      6805 
    ------------------------------------------------------------------------
    
    
    [[Page 46094]]
    
    
                                Page 3 of 5 Pages                           
    ------------------------------------------------------------------------
                                                                            
    ------------------------------------------------------------------------
      6806      80019     80110    80220    80359    80450    85132    85223
      6807      80020     80111    80221    80360    80451    85133    85224
      6808      80021     80112    80222    80361    80452    85134    85225
      6809      80022     80113    80223    80362    80453    85135    85226
      6820      80023     80114    80224    80363    80454    85136    85229
      6821      80024     80115    80225    80364    80455    85139    85230
      6822      80025     80116    80226    80365    80456    85140    85231
      6823      80026     80119    80227    80366    80459    85141    85232
      6825      80029     80120    80228    80369    80460    85142    85233
      6826      80030     80121    80229    80370    80461    85143    85234
      6827      80031     80122    80230    80371    80462    85144    85235
      6828      80032     80123    80231    80372    80463    85145    85236
      6829      80033     80124    80232    80373    80464    85146    85239
      684       80034     80125    80233    80374    80465    85149    85240
    *68609      80035     80126    80234    80375    80466    85150    85241
      6800      80036     80129    80235    80376    80469    85151    85242
      6801      80039     80130    80236    80379    80470    85152    85243
      6802      80040     80131    80237    80380    80471    85153    85244
      6803      80041     80132    80238    80381    80472    85154    85245
      6804      80042     80133    80239    80382    80473    85155    85246
      6805      80043     80134    8024     80383    80474    85156    85249
      6806      80044     80135    8025     80384    80475    85159    85250
      6807      80045     80136    8026     80385    80476    85160    85251
      6808      80046     80139    8027     80386    80479    85161    85252
      6809      80049     80140    8028     80389    80480    85162    85253
      6820      80050     80141    8029     80390    80481    85163    85254
      6821      80051     80142    80300    80391    80482    85164    85255
      6822      80052     80143    80301    80392    80483    85165    85256
      6823      80053     80144    80302    80393    80484    85166    85259
      6825      80054     80145    80303    80394    80485    85169    85300
      6826      80055     80146    80304    80395    80486    85170    85301
      6827      80056     80149    80305    80396    80489    85171    85302
      6828      80059     80150    80306    80399    80490    85172    85303
      6829      80060     80151    80309    80400    80491    85173    85304
      684       80061     80152    80310    80401    80492    85174    85305
    *74861      80062     80153    80311    80402    80493    85175    85306
      48284     80063     80154    80312    80403    80494    85176    85309
    *7790       80064     80155    80313    80404    80495    85179    85310
      78031     80065     80156    80314    80405    80496    85180    85311
      78039     80066     80159    80315    80406    80499    85181    85312
    *7791       80069     80160    80316    80409    8500     85182    85313
      78031     80070     80161    80319    80410    8501     85183    85314
      78039     80071     80162    80320    80411    8502     85184    85315
    *78031      80072     80163    80321    80412    8503     85185    85316
      78031     80073     80164    80322    80413    8504     85186    85319
      78039     80074     80165    80323    80414    8505     85189    85400
    *78039      80075     80166    80324    80415    8509     85190    85401
      78031     80076     80169    80325    80416    85100    85191    85402
      78039     80079     80170    80326    80419    85101    85192    85403
    *7809       80080     80171    80329    80420    85102    85193    85404
      78031     80081     80172    80330    80421    85103    85194    85405
      78039     80082     80173    80331    80422    85104    85195    85406
    *79094      80083     80174    80332    80423    85105    85196    85409
      7907      80084     80175    80333    80424    85106    85199    85410
    *7998       80085     80176    80334    80425    85109    85200    85411
      78031     80086     80179    80335    80426    85110    85201    85412
      78039     80089     80180    80336    80429    85111    85202    85413
    *95901      80090     80181    80339    80430    85112    85203    85414
      80000     80091     80182    80340    80431    85113    85204    85415
      80001     80092     80183    80341    80432    85114    85205    85416
      80002     80093     80184    80342    80433    85115    85206    85419
      80003     80094     80185    80343    80434    85116    85209    9251 
      80004     80095     80186    80344    80435    85119    85210    9252 
      80005     80096     80189    80345    80436    85120    85211  *95909 
      80006     80099     80190    80346    80439    85121    85212    80000
      80009     80100     80191    80349    80440    85122    85213    80001
      80010     80101     80192    80350    80441    85123    85214    80002
      80011     80102     80193    80351    80442    85124    85215    80003
      80012     80103     80194    80352    80443    85125    85216    80004
      80013     80104     80195    80353    80444    85126    85219    80005
      80014     80105     80196    80354    80445    85129    85220    80006
      80015     80106     80199    80355    80446    85130    85221    80009
      80016     80109     8021     80356    80449    85131    85222    80010
    ------------------------------------------------------------------------
    
    
    [[Page 46095]]
    
    
                                Page 4 of 5 Pages                           
    ------------------------------------------------------------------------
                                                                            
    ------------------------------------------------------------------------
      80011     80102     80193    80351    80442    85124    85215    V4282
      80012     80103     80194    80352    80443    85125    85216    V4283
      80013     80104     80195    80353    80444    85126    85219    V4289
      80014     80105     80196    80354    80445    85129    85220  *99685 
      80015     80106     80199    80355    80446    85130    85221    V4281
      80016     80109     8021     80356    80449    85131    85222  *99686 
      80019     80110     80220    80359    80450    85132    85223    V4283
      80020     80111     80221    80360    80451    85133    85224  *99689 
      80021     80112     80222    80361    80452    85134    85225    V4289
      80022     80113     80223    80362    80453    85135    85226  *V090  
      80023     80114     80224    80363    80454    85136    85229    03810
      80024     80115     80225    80364    80455    85139    85230    03811
      80025     80116     80226    80365    80456    85140    85231    03819
      80026     80119     80227    80366    80459    85141    85232  *V091  
      80029     80120     80228    80369    80460    85142    85233    03810
      80030     80121     80229    80370    80461    85143    85234    03811
      80031     80122     80230    80371    80462    85144    85235    03819
      80032     80123     80231    80372    80463    85145    85236  *V092  
      80033     80124     80232    80373    80464    85146    85239    03810
      80034     80125     80233    80374    80465    85149    85240    03811
      80035     80126     80234    80375    80466    85150    85241    03819
      80036     80129     80235    80376    80469    85151    85242  *V093  
      80039     80130     80236    80379    80470    85152    85243    03810
      80040     80131     80237    80380    80471    85153    85244    03811
      80041     80132     80238    80381    80472    85154    85245    03819
      80042     80133     80239    80382    80473    85155    85246  *V094  
      80043     80134     8024     80383    80474    85156    85249    03810
      80044     80135     8025     80384    80475    85159    85250    03811
      80045     80136     8026     80385    80476    85160    85251    03819
      80046     80139     8027     80386    80479    85161    85252  *V0950 
      80049     80140     8028     80389    80480    85162    85253    03810
      80050     80141     8029     80390    80481    85163    85254    03811
      80051     80142     80300    80391    80482    85164    85255    03819
      80052     80143     80301    80392    80483    85165    85256  *V0951 
      80053     80144     80302    80393    80484    85166    85259    03810
      80054     80145     80303    80394    80485    85169    85300    03811
      80055     80146     80304    80395    80486    85170    85301    03819
      80056     80149     80305    80396    80489    85171    85302  *V096  
      80059     80150     80306    80399    80490    85172    85303    03810
      80060     80151     80309    80400    80491    85173    85304    03811
      80061     80152     80310    80401    80492    85174    85305    03819
      80062     80153     80311    80402    80493    85175    85306  *V0970 
      80063     80154     80312    80403    80494    85176    85309    03810
      80064     80155     80313    80404    80495    85179    85310    03811
      80065     80156     80314    80405    80496    85180    85311    03819
      80066     80159     80315    80406    80499    85181    85312  *V0971 
      80069     80160     80316    80409    8500     85182    85313    03810
      80070     80161     80319    80410    8501     85183    85314    03811
      80071     80162     80320    80411    8502     85184    85315    03819
      80072     80163     80321    80412    8503     85185    85316  *V0980 
      80073     80164     80322    80413    8504     85186    85319    03810
      80074     80165     80323    80414    8505     85189    85400    03811
      80075     80166     80324    80415    8509     85190    85401    03819
      80076     80169     80325    80416    85100    85191    85402  *V0981 
      80079     80170     80326    80419    85101    85192    85403    03810
      80080     80171     80329    80420    85102    85193    85404    03811
      80081     80172     80330    80421    85103    85194    85405    03819
      80082     80173     80331    80422    85104    85195    85406  *V0990 
      80083     80174     80332    80423    85105    85196    85409    03810
      80084     80175     80333    80424    85106    85199    85410    03811
      80085     80176     80334    80425    85109    85200    85411    03819
      80086     80179     80335    80426    85110    85201    85412  *V0991 
      80089     80180     80336    80429    85111    85202    85413    03810
      80090     80181     80339    80430    85112    85203    85414    03811
      80091     80182     80340    80431    85113    85204    85415    03819
      80092     80183     80341    80432    85114    85205    85416  *V4283 
      80093     80184     80342    80433    85115    85206    85419    V4283
      80094     80185     80343    80434    85116    85209    9251   *V4289 
      80095     80186     80344    80435    85119    85210    9252     V420 
      80096     80189     80345    80436    85120    85211  *99664     V421 
      80099     80190     80346    80439    85121    85212    5990     V422 
      80100     80191     80349    80440    85122    85213  *99680     V426 
      80101     80192     80350    80441    85123    85214    V4281    V427 
    ------------------------------------------------------------------------
    
    
    [[Page 46096]]
    
    
                                Page 5 of 5 Pages                           
    ------------------------------------------------------------------------
                                                                            
    ------------------------------------------------------------------------
      V4289                                                                 
    *V429                                                                   
      V4281                                                                 
      V4282                                                                 
      V4283                                                                 
      V4289                                                                 
    ------------------------------------------------------------------------
    
    
    [[Page 46097]]
    
    
                 Table 6F.--Deletions to the CC Exclusions List             
                                Page 1 of 2 Pages                           
     CCs that are deleted from the list are in Table 6F--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.
    ------------------------------------------------------------------------
                                                                            
    ------------------------------------------------------------------------
    *0031       0381      7803     80039    80123    80226    80360    80444
      0381    *0414     *34989     80040    80124    80227    80361    80445
    *0202       0381      7803     80041    80125    80228    80362    80446
      0381    *0415     *3499      80042    80126    80229    80363    80449
    *0362       0381      7803     80043    80129    80230    80364    80450
      0381    *0416     *6860      80044    80130    80231    80365    80451
    *0380       0381      6800     80045    80131    80232    80366    80452
      0381    *0417       6801     80046    80132    80233    80369    80453
    *0381       0381      6802     80049    80133    80234    80370    80454
      0362    *04181      6803     80050    80134    80235    80371    80455
      0380      0381      6804     80051    80135    80236    80372    80456
      0381    *04182      6805     80052    80136    80237    80373    80459
      0382      0381      6806     80053    80139    80238    80374    80460
      0383    *04183      6807     80054    80140    80239    80375    80461
      03840     0381      6808     80055    80141    8024     80376    80462
      03841   *04184      6809     80056    80142    8025     80379    80463
      03842     0381      6820     80059    80143    8026     80380    80464
      03843   *04185      6821     80060    80144    8027     80381    80465
      03844     0381      6822     80061    80145    8028     80382    80466
      03849   *04186      6823     80062    80146    8029     80383    80469
      0388      0381      6825     80063    80149    80300    80384    80470
      0389    *04189      6826     80064    80150    80301    80385    80471
      0545      0381      6827     80065    80151    80302    80386    80472
    *0382     *0419       6828     80066    80152    80303    80389    80473
      0381      0381      6829     80069    80153    80304    80390    80474
    *0383     *0545       684      80070    80154    80305    80391    80475
      0381      0381    *7790      80071    80155    80306    80392    80476
    *03840    *1398       7803     80072    80156    80309    80393    80479
      0381      0381    *7791      80073    80159    80310    80394    80480
    *03841    *34500      7803     80074    80160    80311    80395    80481
      0381      7803    *7803      80075    80161    80312    80396    80482
    *03842    *34501      7803     80076    80162    80313    80399    80483
      0381      7803    *7809      80079    80163    80314    80400    80484
    *03843    *34510      7803     80080    80164    80315    80401    80485
      0381      7803    *7998      80081    80165    80316    80402    80486
    *03844    *34511      7803     80082    80166    80319    80403    80489
      0381      7803    *9590      80083    80169    80320    80404    80490
    *03849    *3452       80000    80084    80170    80321    80405    80491
      0381      7803      80001    80085    80171    80322    80406    80492
    *0388     *3453       80002    80086    80172    80323    80409    80493
      0381      7803      80003    80089    80173    80324    80410    80494
    *0389     *34540      80004    80090    80174    80325    80411    80495
      0381      7803      80005    80091    80175    80326    80412    80496
    *04089    *34541      80006    80092    80176    80329    80413    80499
      0381      7803      80009    80093    80179    80330    80414    8500 
    *04100    *34550      80010    80094    80180    80331    80415    8501 
      0381      7803      80011    80095    80181    80332    80416    8502 
    *04101    *34551      80012    80096    80182    80333    80419    8503 
      0381      7803      80013    80099    80183    80334    80420    8504 
    *04102    *34560      80014    80100    80184    80335    80421    8505 
      0381      7803      80015    80101    80185    80336    80422    8509 
    *04103    *34561      80016    80102    80186    80339    80423    85100
      0381      7803      80019    80103    80189    80340    80424    85101
    *04104    *34570      80020    80104    80190    80341    80425    85102
      0381      7803      80021    80105    80191    80342    80426    85103
    *04105    *34571      80022    80106    80192    80343    80429    85104
      0381      7803      80023    80109    80193    80344    80430    85105
    *04109    *34580      80024    80110    80194    80345    80431    85106
      0381      7803      80025    80111    80195    80346    80432    85109
    *04110    *34581      80026    80112    80196    80349    80433    85110
      0381      7803      80029    80113    80199    80350    80434    85111
    *04111    *34590      80030    80114    8021     80351    80435    85112
      0381      7803      80031    80115    80220    80352    80436    85113
    *04119    *34591      80032    80116    80221    80353    80439    85114
      0381      7803      80033    80119    80222    80354    80440    85115
    *0412     *3488       80034    80120    80223    80355    80441    85116
      0381      7803      80035    80121    80224    80356    80442    85119
    *0413     *3489       80036    80122    80225    80359    80443    85120
    ------------------------------------------------------------------------
    
    
    [[Page 46098]]
    
    
                                Page 2 of 2 Pages                           
    ------------------------------------------------------------------------
                                                                            
    ------------------------------------------------------------------------
      85121     85212     V428                                              
      85122     85213   *99686                                              
      85123     85214     V428                                              
      85124     85215   *99689                                              
      85125     85216     V428                                              
      85126     85219   *V090                                               
      85129     85220     0381                                              
      85130     85221   *V091                                               
      85131     85222     0381                                              
      85132     85223   *V092                                               
      85133     85224     0381                                              
      85134     85225   *V093                                               
      85135     85226     0381                                              
      85136     85229   *V094                                               
      85139     85230     0381                                              
      85140     85231   *V0950                                              
      85141     85232     0381                                              
      85142     85233   *V0951                                              
      85143     85234     0381                                              
      85144     85235   *V096                                               
      85145     85236     0381                                              
      85146     85239   *V0970                                              
      85149     85240     0381                                              
      85150     85241   *V0971                                              
      85151     85242     0381                                              
      85152     85243   *V0980                                              
      85153     85244     0381                                              
      85154     85245   *V0981                                              
      85155     85246     0381                                              
      85156     85249   *V0990                                              
      85159     85250     0381                                              
      85160     85251   *V0991                                              
      85161     85252     0381                                              
      85162     85253   *V428                                               
      85163     85254     V420                                              
      85164     85255     V421                                              
      85165     85256     V422                                              
      85166     85259     V426                                              
      85169     85300     V427                                              
      85170     85301     V428                                              
      85171     85302   *V429                                               
      85172     85303     V428                                              
      85173     85304                                                       
      85174     85305                                                       
      85175     85306                                                       
      85176     85309                                                       
      85179     85310                                                       
      85180     85311                                                       
      85181     85312                                                       
      85182     85313                                                       
      85183     85314                                                       
      85184     85315                                                       
      85185     85316                                                       
      85186     85319                                                       
      85189     85400                                                       
      85190     85401                                                       
      85191     85402                                                       
      85192     85403                                                       
      85193     85404                                                       
      85194     85405                                                       
      85195     85406                                                       
      85196     85409                                                       
      85199     85410                                                       
      85200     85411                                                       
      85201     85412                                                       
      85202     85413                                                       
      85203     85414                                                       
      85204     85415                                                       
      85205     85416                                                       
      85206     85419                                                       
      85209     9251                                                        
      85210     9252                                                        
      85211   *99680                                                        
    ------------------------------------------------------------------------
    
    
    [[Page 46099]]
    
    
                                       Table 7A.--Medicare Prospective Payment System; Selected Percentile Lengths of Stay                                  
                                                            [FY96 MEDPAR Update 06/97 Grouper V14.0]                                                        
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Number        Arithmetic         10th            25th            50th            75th            90th     
                       DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile  
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    1.......................................           36951         10.0648               2               4               7              13              21
    2.......................................            6901         10.5740               3               5               8              13              21
    3.......................................               2         50.5000               1               1             100             100             100
    4.......................................            6300          8.4741               2               3               6              10              18
    5.......................................          103092          3.9356               1               2               3               4               8
    6.......................................             421          3.2470               1               1               2               4               7
    7.......................................           12078         11.7014               3               5               8              13              22
    8.......................................            2117          3.8427               1               1               3               5               8
    9.......................................            1748          7.1070               1               3               5               9              14
    10......................................           20265          7.2705               2               3               5               9              15
    11......................................            2958          4.2559               1               2               3               6               9
    12......................................           26164          6.8367               2               3               5               8              13
    13......................................            6421          5.7728               2               3               5               7              10
    14......................................          377267          6.7453               2               3               5               8              13
    15......................................          145885          4.0663               1               2               3               5               7
    16......................................           14071          6.0968               2               3               5               7              11
    17......................................            3095          3.6927               1               2               3               5               7
    18......................................           24288          5.7924               2               3               4               7              11
    19......................................            6604          4.0893               1               2               3               5               8
    20......................................            8247          9.3961               2               4               7              12              19
    21......................................            1192          7.1032               2               3               5               9              14
    22......................................            2904          4.7600               2               2               4               6               9
    23......................................            6081          4.5469               1               2               3               6               9
    24......................................           58223          5.3289               1               2               4               6              10
    25......................................           22286          3.6092               1               2               3               4               7
    26......................................              42          5.0952               1               2               4               7              11
    27......................................            3845          5.5004               1               1               3               7              13
    28......................................           12715          6.3270               1               2               4               8              13
    29......................................            4005          3.7231               1               2               3               5               7
    30......................................               1          4.0000               4               4               4               4               4
    31......................................            3086          4.7664               1               2               3               6               9
    32......................................            1434          3.0718               1               1               2               3               6
    34......................................           18587          5.8145               1               3               4               7              11
    35......................................            3733          3.9207               1               2               3               5               7
    36......................................            6765          1.5441               1               1               1               2               2
    37......................................            1771          3.9283               1               1               3               5               8
    38......................................             197          2.7411               1               1               2               3               5
    39......................................            2564          2.0035               1               1               1               2               4
    40......................................            2657          3.4159               1               1               2               4               7
    42......................................            5414          1.9762               1               1               1               2               4
    43......................................             111          3.9910               1               2               3               5               7
    44......................................            1477          5.2275               2               3               4               7               9
    45......................................            2356          3.6006               1               2               3               5               7
    46......................................            3021          4.8431               1               2               4               6               9
    47......................................            1182          3.9619               1               1               3               4               7
    49......................................            2389          5.2704               1               2               4               6              10
    50......................................            3294          2.1072               1               1               2               2               3
    51......................................             351          2.8775               1               1               2               3               6
    52......................................              91          3.0000               1               1               2               4               7
    53......................................            3107          3.6028               1               1               2               4               8
    54......................................               2          5.0000               1               1               9               9               9
    55......................................            1907          2.9240               1               1               2               3               6
    56......................................             749          2.8451               1               1               2               3               6
    57......................................             659          3.9484               1               1               2               4               8
    58......................................               1          2.0000               2               2               2               2               2
    59......................................             106          3.3302               1               1               2               4               6
    60......................................               3          1.0000               1               1               1               1               1
    61......................................             243          4.5473               1               1               3               5              11
    63......................................            3794          4.6009               1               2               3               5               9
    64......................................            3378          6.6442               1               2               5               8              14
    65......................................           29490          3.1698               1               2               3               4               6
    66......................................            6602          3.4727               1               2               3               4               6
    67......................................             495          3.8061               1               2               3               5               7
    68......................................           10227          4.3213               2               2               4               5               8
    69......................................            2963          3.4715               1               2               3               4               6
    70......................................              40          3.3000               1               2               3               4               5
    71......................................             128          3.9297               1               2               3               5               7
    72......................................             725          3.4897               1               2               3               4               7
    73......................................            6260          4.6725               1               2               4               6               9
    74......................................               4          3.2500               1               1               2               3               7
    
    [[Page 46100]]
    
                                                                                                                                                            
    75......................................           41372         10.5497               4               5               8              13              20
    76......................................           41405         11.7204               3               6               9              14              22
    77......................................            2204          5.0912               1               2               4               7              10
    78......................................           31193          7.6312               3               5               7               9              13
    79......................................          239360          8.6345               3               4               7              11              16
    80......................................            8157          6.0829               2               3               5               7              11
    81......................................              22         10.2727               1               6               8              11              15
    82......................................           71319          7.3214               2               3               6               9              14
    83......................................            7516          5.8950               2               3               5               7              11
    84......................................            1542          3.4540               1               2               3               4               6
    85......................................           20847          6.8707               2               3               5               9              13
    86......................................            1389          4.0662               1               2               3               5               8
    87......................................           67801          6.4419               1               3               5               8              12
    88......................................          361166          5.6526               2               3               5               7              10
    89......................................          430920          6.5608               3               4               5               8              12
    90......................................           37020          4.6802               2               3               4               6               8
    91......................................              77          5.1818               2               3               4               7               9
    92......................................           13624          6.6358               2               3               5               8              12
    93......................................            1172          4.6860               1               2               4               6               9
    94......................................           13846          6.6439               2               3               5               8              13
    95......................................            1449          3.9786               1               2               3               5               7
    96......................................           59271          5.0562               2               3               4               6               9
    97......................................           24153          3.9977               1               2               3               5               7
    98......................................              29          2.8621               1               1               2               4               6
    99......................................           26718          3.1667               1               1               2               4               6
    100.....................................           10247          2.2335               1               1               2               3               4
    101.....................................           20620          4.7299               1               2               4               6               9
    102.....................................            4570          2.8967               1               1               2               4               5
    103.....................................             538         47.8662               9              15              32              72             105
    104.....................................           26488         13.3264               5               8              11              16              24
    105.....................................           23028         10.2064               5               6               8              12              18
    106.....................................          107702         11.0480               6               7               9              13              18
    107.....................................           68747          8.3098               5               6               7               9              13
    108.....................................            7536         12.0882               4               7              10              15              23
    110.....................................           63731         10.0931               3               6               8              12              19
    111.....................................            5575          6.1189               2               4               6               7               9
    112.....................................          219732          4.2374               1               2               3               6               8
    113.....................................           48124         13.1573               4               6               9              16              26
    114.....................................            9126          8.8386               2               4               7              11              17
    115.....................................           11726         10.2988               4               6               8              13              18
    116.....................................           88158          5.0220               1               2               4               6              10
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    [[Page 46102]]
    
                                                                                                                                                            
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    [[Page 46103]]
    
                                                                                                                                                            
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    [[Page 46105]]
    
                                                                                                                                                            
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    462.....................................           10116         12.9741               4               6              11              17              24
    463.....................................           13488          4.7710               1               2               4               6               9
    464.....................................            3208          3.4439               1               2               3               4               7
    465.....................................             214          3.7477               1               1               2               4               7
    466.....................................            1783          4.6983               1               1               2               5              10
    467.....................................            1616          4.2092               1               1               2               4               8
    468.....................................           63517         13.9982               3               6              11              18              28
    471.....................................           11672          6.7301               3               4               5               8              11
    472.....................................             203         24.2217               1               5              18              34              57
    473.....................................            8739         13.3296               2               4               7              19              34
    475.....................................          101069         11.4529               2               5               9              15              22
    476.....................................            6630         12.6427               3               7              11              16              23
    477.....................................           30337          8.0163               1               2               6              10              16
    478.....................................          127616          7.6905               1               3               6              10              16
    479.....................................           17990          4.1819               1               2               3               5               8
    480.....................................             552         28.5435               9              12              20              36              61
    481.....................................             157         34.0064              19              23              30              41              54
    482.....................................            7059         13.4577               5               7              10              15              24
    483.....................................           40160         43.1397              14              22              34              52              79
    484.....................................             407         15.4496               3               7              11              20              30
    485.....................................            3514         10.5552               4               5               8              12              20
    486.....................................            2589         13.2503               1               6              10              17              26
    487.....................................            4371          8.1078               2               3               6              10              16
    488.....................................            1774         16.5141               4               7              12              20              32
    489.....................................           19038          9.5586               2               4               7              12              20
    490.....................................            5460          6.0205               1               2               4               7              12
    491.....................................           10763          3.9181               2               2               3               4               7
    492.....................................            2229         17.9740               4               5              14              28              37
    493.....................................           56791          5.6668               1               2               4               7              11
    494.....................................           25112          2.3755               1               1               2               3               5
    495.....................................             140         16.9714               8              11              15              20              30
                                             ----------------                                                                                               
                                                    11173210                                                                                                
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
                                       Table 7B.--Medicare Prospective Payment System; Selected Percentile Lengths of Stay                                  
                                                            [FY96 MEDPAR Update 06/97 Grouper V15.0]                                                        
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Number        Arithmetic         10th            25th            50th            75th            90th     
                       DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile  
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    1.......................................           35984         10.2675               2               4               7              13              21
    2.......................................            6901         10.5740               3               5               8              13              21
    
    [[Page 46106]]
    
                                                                                                                                                            
    3.......................................               2         50.5000               1               1             100             100             100
    4.......................................            6301          8.4750               2               3               6              10              18
    5.......................................          103092          3.9356               1               2               3               4               8
    6.......................................             421          3.2470               1               1               2               4               7
    7.......................................           12609         11.3616               2               4               8              13              21
    8.......................................            2940          3.2000               1               1               2               4               7
    9.......................................            1754          7.1249               1               3               5               9              14
    10......................................           20278          7.2768               2               3               5               9              15
    11......................................            2956          4.2534               1               2               3               6               9
    12......................................           26180          6.8448               2               3               5               8              13
    13......................................            6419          5.7747               2               3               5               7              10
    14......................................          377399          6.7458               2               3               5               8              13
    15......................................          145920          4.0669               1               2               3               5               7
    16......................................           14076          6.0979               2               3               5               7              11
    17......................................            3098          3.6927               1               2               3               5               7
    18......................................           25872          5.8632               2               3               4               7              11
    19......................................            7162          4.1086               1               2               3               5               8
    20......................................            6113         10.4880               2               5               8              14              21
    21......................................            1193          7.1073               2               3               5               9              14
    22......................................            2905          4.7621               2               2               4               6               9
    23......................................            6083          4.5463               1               2               3               6               9
    24......................................           58312          5.3301               1               2               4               6              10
    25......................................           22307          3.6053               1               2               3               4               7
    26......................................              47          4.7872               1               2               3               6              10
    27......................................            3910          5.4939               1               1               3               7              13
    28......................................           12971          6.3277               1               2               4               8              13
    29......................................            4104          3.7210               1               2               3               5               7
    31......................................            3167          4.8244               1               2               3               6               9
    32......................................            1486          3.0606               1               1               2               3               6
    34......................................           18601          5.8148               1               3               4               7              11
    35......................................            3728          3.9144               1               2               3               5               7
    36......................................            6766          1.5443               1               1               1               2               2
    37......................................            1771          3.9283               1               1               3               5               8
    38......................................             198          2.7374               1               1               2               3               5
    39......................................            2565          2.0035               1               1               1               2               4
    40......................................            2546          3.3342               1               1               2               4               7
    42......................................            5437          1.9847               1               1               1               2               4
    43......................................             112          3.9643               1               2               3               5               7
    44......................................            1479          5.2427               2               3               4               7               9
    45......................................            2358          3.6014               1               2               3               5               7
    46......................................            3070          4.8485               1               2               4               6               9
    47......................................            1208          3.9305               1               1               3               4               7
    49......................................            2389          5.2704               1               2               4               6              10
    50......................................            3294          2.1072               1               1               2               2               3
    51......................................             351          2.8775               1               1               2               3               6
    52......................................             109          3.2202               1               1               2               4               7
    53......................................            3177          3.6116               1               1               2               4               8
    54......................................               2          5.0000               1               1               9               9               9
    55......................................            1907          2.9240               1               1               2               3               6
    56......................................             749          2.8451               1               1               2               3               6
    57......................................             627          3.9888               1               2               2               5               8
    58......................................               1          2.0000               2               2               2               2               2
    59......................................             106          3.3302               1               1               2               4               6
    60......................................               3          1.0000               1               1               1               1               1
    61......................................             243          4.5473               1               1               3               5              11
    63......................................            3794          4.6009               1               2               3               5               9
    64......................................            3378          6.6442               1               2               5               8              14
    65......................................           29508          3.1713               1               2               3               4               6
    66......................................            6602          3.4727               1               2               3               4               6
    67......................................             495          3.8061               1               2               3               5               7
    68......................................           10234          4.3211               2               2               4               5               8
    69......................................            2957          3.4711               1               2               3               4               6
    70......................................              40          3.3000               1               2               3               4               5
    71......................................             128          3.9297               1               2               3               5               7
    72......................................             754          3.5000               1               2               3               4               7
    73......................................            6264          4.6727               1               2               4               6               9
    74......................................               4          3.2500               1               1               2               3               7
    75......................................           41373         10.5498               4               5               8              13              20
    76......................................           41421         11.7212               3               6               9              14              22
    77......................................            2200          5.0882               1               2               4               7              10
    
    [[Page 46107]]
    
                                                                                                                                                            
    78......................................           31195          7.6312               3               5               7               9              13
    79......................................          239461          8.6355               3               4               7              11              16
    80......................................            8097          6.0569               2               3               5               7              11
    81......................................               8          6.6250               2               3               6               7              10
    82......................................           71327          7.3212               2               3               6               9              14
    83......................................            7548          5.8922               2               3               5               7              11
    84......................................            1550          3.4510               1               2               3               4               6
    85......................................           20846          6.8720               2               3               5               9              13
    86......................................            1392          4.0560               1               2               3               5               8
    87......................................           67808          6.4421               1               3               5               8              12
    88......................................          361207          5.6530               2               3               5               7              10
    89......................................          431130          6.5624               3               4               5               8              12
    90......................................           36919          4.6667               2               3               4               6               8
    91......................................              44          4.3409               2               2               4               5               9
    92......................................           13630          6.6374               2               3               5               8              12
    93......................................            1171          4.6866               1               2               4               6               9
    94......................................           13860          6.6431               2               3               5               8              13
    95......................................            1450          3.9807               1               2               3               5               7
    96......................................           59294          5.0564               2               3               4               6               9
    97......................................           24137          3.9948               1               2               3               5               7
    98......................................              23          3.8261               1               1               2               4              10
    99......................................           26720          3.1667               1               1               2               4               6
    100.....................................           10247          2.2335               1               1               2               3               4
    101.....................................           20640          4.7304               1               2               4               6               9
    102.....................................            4568          2.8956               1               1               2               4               5
    103.....................................             532         48.1579               9              15              32              72             105
    104.....................................           26477         13.3305               5               8              11              16              24
    105.....................................           23042         10.2029               5               6               8              12              18
    106.....................................          107689         11.0481               6               7               9              13              18
    107.....................................           68745          8.3095               5               6               7               9              13
    108.....................................            7570         12.1110               4               7              10              15              23
    110.....................................           63724         10.0893               3               6               8              12              19
    111.....................................            5565          6.1146               2               4               6               7               9
    112.....................................          143226          4.2143               1               2               3               6               8
    113.....................................           48124         13.1573               4               6               9              16              26
    114.....................................            9126          8.8386               2               4               7              11              17
    115.....................................           13920          9.2104               2               4               8              12              17
    116.....................................          163845          4.7278               1               2               4               6               9
    117.....................................            3828          4.0470               1               1               3               5               9
    118.....................................            6772          3.0371               1               1               2               4               7
    119.....................................            1690          5.1065               1               1               3               7              11
    120.....................................           39847          8.4640               1               2               5              11              19
    121.....................................          171781          6.9297               2               4               6               9              12
    122.....................................           86714          4.5006               1               2               4               6               8
    123.....................................           46259          4.4861               1               1               2               6              11
    124.....................................          153509          4.5906               1               2               4               6               9
    125.....................................           61083          2.9375               1               1               2               4               6
    126.....................................            5166         12.8142               4               6              10              16              26
    127.....................................          709301          5.7991               2               3               5               7              11
    128.....................................           18599          6.3459               3               4               6               7              10
    129.....................................            4491          3.1639               1               1               1               3               7
    130.....................................          100064          6.2988               2               4               5               8              11
    131.....................................           25546          4.8443               1               3               5               6               8
    132.....................................          165210          3.3140               1               2               3               4               6
    133.....................................            6158          2.7943               1               1               2               3               5
    134.....................................           29610          3.6023               1               2               3               4               7
    135.....................................            8098          4.4395               1               2               3               5               8
    136.....................................            1153          3.0590               1               1               2               4               6
    137.....................................               3          9.0000               3               3               8              16              16
    138.....................................          208875          4.1968               1               2               3               5               8
    139.....................................           65773          2.7441               1               1               2               3               5
    140.....................................          135217          3.1677               1               2               3               4               6
    141.....................................           78828          4.0833               1               2               3               5               7
    142.....................................           35793          2.9455               1               1               2               4               5
    143.....................................          138166          2.3966               1               1               2               3               4
    144.....................................           76722          5.3753               1               2               4               7              11
    145.....................................            6376          2.9864               1               1               2               4               6
    146.....................................            9883         10.5263               6               7               9              12              17
    147.....................................            1673          6.9050               4               5               7               8              10
    148.....................................          149749         12.6194               6               7              10              15              22
    
    [[Page 46108]]
    
                                                                                                                                                            
    149.....................................           14256          7.1282               4               5               7               8              10
    150.....................................           24565         11.1079               4               6               9              14              20
    151.....................................            4262          6.1100               2               3               6               8              11
    152.....................................            4725          8.4855               4               5               7              10              14
    153.....................................            1641          5.7776               3               4               6               7               9
    154.....................................           35223         14.0521               4               7              11              17              27
    155.....................................            4548          5.0079               1               2               4               7               9
    156.....................................               4         10.7500               3               3               4               5              31
    157.....................................            9475          5.6004               1               2               4               7              11
    158.....................................            4358          2.7838               1               1               2               4               6
    159.....................................           18293          5.0712               1               2               4               6              10
    160.....................................            9550          2.7693               1               1               2               4               5
    161.....................................           14988          4.2188               1               2               3               5               9
    162.....................................            7392          2.0878               1               1               1               3               4
    163.....................................              10          4.7000               1               1               2               8              10
    164.....................................            5382          8.7124               4               5               7              10              15
    165.....................................            1590          5.4094               2               3               5               7               8
    166.....................................            3367          5.4164               2               3               4               7              10
    167.....................................            2276          2.9587               1               2               3               4               5
    168.....................................            1840          4.7288               1               2               3               6               9
    169.....................................             933          2.5638               1               1               2               3               5
    170.....................................           13057         11.7430               2               5               9              15              23
    171.....................................            1059          5.0888               1               2               4               6              10
    172.....................................           33120          7.3970               2               3               5               9              15
    173.....................................            2099          3.9700               1               2               3               5               8
    174.....................................          240349          5.1449               2               3               4               6               9
    175.....................................           21405          3.2299               1               2               3               4               6
    176.....................................           17949          5.7572               2               3               4               7              11
    177.....................................           11857          4.7298               2               3               4               6               8
    178.....................................            3735          3.3414               1               2               3               4               6
    179.....................................           12182          6.7201               2               3               5               8              13
    180.....................................           89279          5.6551               2               3               4               7              11
    181.....................................           21316          3.7131               1               2               3               5               7
    182.....................................          239438          4.5657               1               2               4               6               8
    183.....................................           69818          3.1716               1               2               3               4               6
    184.....................................              88          3.6364               1               2               3               4               7
    185.....................................            4173          4.8174               1               2               4               6              10
    186.....................................               3          3.6667               2               2               4               5               5
    187.....................................             932          3.9635               1               2               3               5               8
    188.....................................           70915          5.7802               1               3               4               7              11
    189.....................................            7922          3.3871               1               1               3               4               7
    190.....................................              99          4.9192               1               2               3               5              11
    191.....................................           11183         14.8821               4               7              11              18              30
    192.....................................             780          7.1308               2               4               6               9              12
    193.....................................            8399         12.9303               5               7              11              16              23
    194.....................................             660          7.4924               2               4               6               9              13
    195.....................................            8782          9.8539               4               6               8              12              17
    196.....................................             629          6.3259               3               4               6               8              10
    197.....................................           27404          8.6998               3               5               7              10              15
    198.....................................            7093          4.7194               2               3               4               6               8
    199.....................................            2178         10.7140               3               5               8              14              22
    200.....................................            1551         11.2863               2               4               8              14              23
    201.....................................            1566         15.0811               4               7              11              19              29
    202.....................................           28611          7.1039               2               3               5               9              14
    203.....................................           29634          7.1581               2               3               6               9              14
    204.....................................           53354          6.3393               2               3               5               8              12
    205.....................................           23176          6.8016               2               3               5               8              14
    206.....................................            1669          4.2109               1               2               3               5               8
    207.....................................           37050          5.2852               1               2               4               7              10
    208.....................................            9948          3.0293               1               1               2               4               6
    209.....................................          358501          5.8935               3               4               5               7               9
    210.....................................          143742          7.6286               4               5               6               9              13
    211.....................................           26310          5.6081               3               4               5               7               9
    212.....................................              10          5.2000               2               3               3               5               6
    213.....................................            7179          8.7551               2               4               7              11              17
    216.....................................            6407         10.2995               2               4               8              13              21
    217.....................................           20940         13.7538               3               5               9              17              29
    218.....................................           24871          5.6287               2               3               4               7              10
    219.....................................           18974          3.4430               1               2               3               4               6
    220.....................................               5          4.2000               1               1               4               4              10
    
    [[Page 46109]]
    
                                                                                                                                                            
    223.....................................           19625          2.6998               1               1               2               3               5
    224.....................................            8139          2.1058               1               1               2               3               4
    225.....................................            5926          4.6232               1               2               3               6              10
    226.....................................            5569          6.2550               1               2               4               7              13
    227.....................................            4377          2.8556               1               1               2               3               5
    228.....................................            2997          3.4525               1               1               2               4               7
    229.....................................            1232          2.3612               1               1               2               3               4
    230.....................................            2492          4.9767               1               2               3               6              10
    231.....................................           11065          4.7605               1               2               3               6              10
    232.....................................             556          4.2248               1               1               2               5               9
    233.....................................            4762          8.2740               2               3               6              10              17
    234.....................................            2194          3.8847               1               2               3               5               8
    235.....................................            5563          5.8068               1               3               4               6              11
    236.....................................           40042          5.5871               2               3               4               7              10
    237.....................................            1673          4.2110               1               2               3               5               8
    238.....................................            7672          9.3749               3               4               7              11              17
    239.....................................           60793          6.9705               2               3               5               8              13
    240.....................................           13396          6.9369               2               3               5               8              14
    241.....................................            3013          4.2273               1               2               3               5               8
    242.....................................            2855          7.1338               2               3               5               9              14
    243.....................................           80990          5.1239               2               3               4               6               9
    244.....................................           12531          5.4307               1               3               4               6              10
    245.....................................            4414          4.0888               1               2               3               5               7
    246.....................................            1275          4.2235               1               2               3               5               8
    247.....................................           11507          3.6954               1               2               3               5               7
    248.....................................            7430          4.9732               1               2               4               6               9
    249.....................................           10425          3.9777               1               1               3               5               8
    250.....................................            3638          4.6564               1               2               3               5               9
    251.....................................            2168          3.0152               1               1               2               4               5
    253.....................................           19268          5.2492               1               3               4               6              10
    254.....................................            9406          3.5232               1               2               3               4               6
    256.....................................            4463          5.6626               1               2               4               7              11
    257.....................................           22791          3.2065               1               2               3               4               6
    258.....................................           17067          2.2797               1               1               2               3               4
    259.....................................            4037          3.1962               1               1               2               3               7
    260.....................................            4576          1.6635               1               1               1               2               3
    261.....................................            2263          2.2391               1               1               2               3               4
    262.....................................             668          3.9790               1               1               3               5               8
    263.....................................           29345         12.5324               3               5               9              15              24
    264.....................................            3371          7.2691               2               3               6               9              14
    265.....................................            4204          7.2552               1               2               5               8              15
    266.....................................            2586          3.5526               1               1               2               5               7
    267.....................................             229          4.1441               1               1               2               5               8
    268.....................................             967          3.5274               1               1               2               4               7
    269.....................................           10146          8.4862               2               3               6              11              17
    270.....................................            3100          3.1906               1               1               2               4               7
    271.....................................           23041          7.7309               3               4               6               9              14
    272.....................................            6024          6.6718               2               3               5               8              13
    273.....................................            1395          5.3677               1               2               4               6              11
    274.....................................            2647          7.1598               1               3               5               9              15
    275.....................................             243          3.8477               1               1               2               5               8
    276.....................................             953          4.7408               1               3               4               6               8
    277.....................................           80718          6.2272               2               3               5               7              11
    278.....................................           24912          4.8206               2               3               4               6               8
    279.....................................               4          4.5000               2               2               2               6               8
    280.....................................           14160          4.6971               1               2               3               6               9
    281.....................................            6013          3.3597               1               1               3               4               6
    282.....................................               1          1.0000               1               1               1               1               1
    283.....................................            5329          5.0197               1               2               4               6              10
    284.....................................            1761          3.5548               1               2               3               5               7
    285.....................................            5653         12.0637               3               5               9              15              23
    286.....................................            2049          7.2674               3               4               5               8              13
    287.....................................            6697         12.1784               3               5               8              14              24
    288.....................................            1289          6.2289               2               4               5               6               9
    289.....................................            5512          3.4799               1               1               2               3               7
    290.....................................            8856          2.5833               1               1               2               3               4
    291.....................................              93          2.1720               1               1               2               3               4
    292.....................................            5255         11.1772               2               4               8              14              22
    293.....................................             292          5.6301               1               2               4               7              11
    294.....................................           84523          5.2489               2               3               4               6              10
    
    [[Page 46110]]
    
                                                                                                                                                            
    295.....................................            3775          4.0919               1               2               3               5               8
    296.....................................          233450          5.7617               2               3               4               7              11
    297.....................................           31861          3.8491               1               2               3               5               7
    298.....................................             104          2.5192               1               1               2               3               5
    299.....................................            1152          5.4852               1               2               4               7              11
    300.....................................           15757          6.6296               2               3               5               8              13
    301.....................................            1988          4.3622               1               2               3               5               8
    302.....................................            8343         10.9475               5               6               8              13              19
    303.....................................           19359          9.4651               4               5               8              11              17
    304.....................................           13176          9.5956               2               4               7              12              19
    305.....................................            2465          4.3209               1               2               4               5               8
    306.....................................           11670          5.7599               1               2               4               7              12
    307.....................................            2492          2.5385               1               1               2               3               4
    308.....................................            9657          6.4205               1               2               4               8              13
    309.....................................            3324          2.5827               1               1               2               3               5
    310.....................................           27618          4.3383               1               2               3               5               9
    311.....................................            8538          2.0546               1               1               2               2               4
    312.....................................            1883          4.6893               1               2               3               6              10
    313.....................................             670          2.2881               1               1               2               3               5
    315.....................................           28828          8.5433               1               2               5              11              19
    316.....................................           85493          6.9922               2               3               5               9              14
    317.....................................             858          2.9231               1               1               2               3               6
    318.....................................            6207          6.6441               1               3               5               8              13
    319.....................................             432          2.7940               1               1               2               4               6
    320.....................................          177076          5.8728               2               3               5               7              10
    321.....................................           23569          4.2659               2               3               4               5               7
    322.....................................              93          4.2796               2               2               3               5               8
    323.....................................           17541          3.3743               1               1               2               4               7
    324.....................................            8048          2.0035               1               1               2               2               4
    325.....................................            7066          4.1930               1               2               3               5               8
    326.....................................            2130          2.8793               1               1               2               3               5
    327.....................................              15          3.4667               1               1               2               3              12
    328.....................................             681          3.9236               1               2               3               5               8
    329.....................................             107          2.3458               1               1               2               3               5
    331.....................................           44033          5.8414               2               3               4               7              11
    332.....................................            4874          3.6574               1               1               3               5               7
    333.....................................             362          5.7127               1               2               4               7              12
    334.....................................           19427          5.4203               3               4               5               6               8
    335.....................................            9804          4.0529               2               3               4               5               6
    336.....................................           58837          3.7630               1               2               3               4               7
    337.....................................           34043          2.4114               1               2               2               3               4
    338.....................................            3738          5.0698               1               2               3               6              11
    339.....................................            2130          4.5873               1               2               3               6              10
    340.....................................               2          1.5000               1               1               2               2               2
    341.....................................            5981          3.1155               1               1               2               3               6
    342.....................................            1004          3.5926               1               2               3               4               7
    344.....................................            3544          3.1168               1               1               2               3               6
    345.....................................            1364          3.8043               1               1               3               5               8
    346.....................................            5207          6.2906               1               3               5               8              12
    347.....................................             382          2.9503               1               1               2               4               6
    348.....................................            3220          4.4969               1               2               3               5               8
    349.....................................             744          2.6788               1               1               2               3               5
    350.....................................            6367          4.6220               2               3               4               6               8
    351.....................................               2          2.5000               2               2               3               3               3
    352.....................................             551          3.9800               1               1               3               5               8
    353.....................................            2722          8.3420               3               4               6               9              16
    354.....................................           10004          5.9826               3               3               5               7              10
    355.....................................            5604          3.6253               2               3               3               4               5
    356.....................................           29892          2.8081               1               2               3               3               4
    357.....................................            6625          9.3250               4               5               7              11              17
    358.....................................           28910          4.4709               2               3               4               5               7
    359.....................................           28337          3.0904               2               2               3               4               4
    360.....................................           18232          3.2826               1               2               3               4               5
    361.....................................             680          3.6721               1               1               2               4               8
    362.....................................               1          1.0000               1               1               1               1               1
    363.....................................            3930          3.4725               1               2               2               3               7
    364.....................................            1869          3.4912               1               1               2               4               7
    365.....................................            2454          7.1520               1               2               4               9              16
    366.....................................            4507          6.9907               1               3               5               9              15
    367.....................................             543          2.9263               1               1               2               4               6
    
    [[Page 46111]]
    
                                                                                                                                                            
    368.....................................            2396          6.2371               2               3               5               8              12
    369.....................................            2424          3.4125               1               1               2               4               7
    370.....................................            1224          5.5074               2               3               4               5               9
    371.....................................            1107          3.5890               2               3               3               4               5
    372.....................................             909          3.1177               1               2               2               3               5
    373.....................................            4166          2.0290               1               1               2               2               3
    374.....................................             170          2.8824               1               2               2               3               4
    375.....................................               7          8.4286               1               2               5               9              15
    376.....................................             219          3.2055               1               1               2               4               7
    377.....................................              51          4.0196               1               1               2               4               9
    378.....................................             195          2.6256               1               2               2               3               4
    379.....................................             374          2.9278               1               1               2               3               5
    380.....................................             101          1.8317               1               1               1               2               4
    381.....................................             184          2.2935               1               1               1               2               5
    382.....................................              48          1.3333               1               1               1               1               2
    383.....................................            1616          3.8342               1               2               3               5               8
    384.....................................             142          2.8380               1               1               2               3               6
    385.....................................               3          6.6667               1               1               4              15              15
    386.....................................               1         49.0000              49              49              49              49              49
    387.....................................               1         62.0000              62              62              62              62              62
    389.....................................              16          6.2500               3               3               5               7              12
    390.....................................               7          5.1429               2               2               3               4               7
    392.....................................            2562         10.5863               4               5               8              13              21
    393.....................................               2         11.0000               7               7              15              15              15
    394.....................................            1814          7.5232               1               2               5               9              16
    395.....................................           68205          4.9806               1               2               4               6              10
    396.....................................              18          4.0000               1               1               2               7               7
    397.....................................           16988          5.7650               1               2               4               7              11
    398.....................................           18434          6.2525               2               3               5               8              12
    399.....................................            1304          4.0107               1               2               3               5               8
    400.....................................            7870          9.7126               2               3               7              12              21
    401.....................................            6799         11.6883               2               5               9              15              24
    402.....................................            1513          4.2412               1               1               3               6               9
    403.....................................           39143          8.5499               2               3               6              11              17
    404.....................................            3818          4.6239               1               2               4               6               9
    406.....................................            3473         10.1005               3               4               7              13              21
    407.....................................             695          4.4460               1               2               4               6               8
    408.....................................            2876          7.6203               1               2               5               9              18
    409.....................................            5607          5.9162               2               3               4               6              12
    410.....................................           74657          3.3553               1               2               3               4               5
    411.....................................              34          2.2941               1               1               1               3               6
    412.....................................              30          3.3667               1               1               2               5               7
    413.....................................            8827          8.0314               2               3               6              10              16
    414.....................................             735          4.5456               1               2               3               6              10
    415.....................................           44947         14.8941               4               7              11              18              29
    416.....................................          220123          7.6840               2               4               6               9              14
    417.....................................              42          4.2857               1               2               3               6               8
    418.....................................           20661          6.3189               2               3               5               8              12
    419.....................................           14969          5.2323               2               3               4               6              10
    420.....................................            2624          3.9737               1               2               3               5               7
    421.....................................           10783          4.2452               1               2               3               5               8
    422.....................................              90          3.7444               1               2               3               4               5
    423.....................................           10953          7.9358               2               3               6               9              16
    424.....................................            1883         16.7642               2               6              10              19              31
    425.....................................           15587          4.3867               1               2               3               5               8
    426.....................................            4759          5.2227               1               2               4               6              11
    427.....................................            1713          5.2668               1               2               4               7              11
    428.....................................             944          7.6684               1               3               5               9              16
    429.....................................           42603          7.8417               2               3               5               9              15
    430.....................................           56355          9.0159               2               4               7              11              18
    431.....................................             222          8.8694               2               3               5               9              17
    432.....................................             412          5.8422               1               2               3               7              12
    433.....................................            8270          3.2895               1               1               2               4               7
    434.....................................           22762          5.2873               2               3               4               6              10
    435.....................................           16653          4.5296               1               2               4               5               8
    436.....................................            3557         13.7641               4               8              13              20              26
    437.....................................           15724          9.9197               4               6               9              13              18
    439.....................................            1050          8.4581               1               3               6              10              18
    440.....................................            4863          9.5690               2               3               6              11              20
    441.....................................             617          3.4376               1               1               2               4               7
    
    [[Page 46112]]
    
                                                                                                                                                            
    442.....................................           15702          8.3069               1               3               6              10              17
    443.....................................            2996          3.3621               1               1               2               4               7
    444.....................................            3390          4.7661               1               2               4               6               9
    445.....................................            1251          3.6843               1               1               3               4               6
    447.....................................            4174          2.6416               1               1               2               3               5
    448.....................................              29          1.0000               1               1               1               1               1
    449.....................................           28988          4.0309               1               1               3               5               8
    450.....................................            6372          2.2461               1               1               1               2               4
    451.....................................               4          3.0000               1               1               1               2               8
    452.....................................           21599          5.1541               1               2               4               6              10
    453.....................................            3633          3.0790               1               1               2               4               6
    454.....................................            3997          5.1711               1               2               3               6              10
    455.....................................             916          2.7424               1               1               2               3               6
    456.....................................             215          7.2930               1               1               3               7              16
    457.....................................             113          4.8938               1               1               2               6              14
    458.....................................            1680         15.9685               3               6              12              21              33
    459.....................................             576          9.3247               2               4               7              12              19
    460.....................................            2332          6.3203               1               3               5               8              13
    461.....................................            3239          4.5952               1               1               2               5              11
    462.....................................           10116         12.9741               4               6              11              17              24
    463.....................................           13497          4.7743               1               2               4               6               9
    464.....................................            3208          3.4286               1               2               3               4               7
    465.....................................             214          3.7477               1               1               2               4               7
    466.....................................            1784          4.6962               1               1               2               5              10
    467.....................................            1617          4.2084               1               1               2               4               8
    468.....................................           60561         14.1162               3               6              11              18              28
    471.....................................           11672          6.7301               3               4               5               8              11
    472.....................................             203         24.2217               1               5              18              34              57
    473.....................................            8739         13.3313               2               4               7              19              34
    475.....................................          101087         11.4533               2               5               9              15              22
    476.....................................            6647         12.6556               3               7              11              16              23
    477.....................................           30187          8.6072               1               3               6              11              18
    478.....................................          126280          7.6802               1               3               6              10              16
    479.....................................           17952          4.1791               1               2               3               5               8
    480.....................................             417         25.2686               8              12              18              30              50
    481.....................................             257         30.2490              17              21              26              36              50
    482.....................................            7059         13.4577               5               7              10              15              24
    483.....................................           40197         43.1598              14              22              34              53              79
    484.....................................             407         15.4496               3               7              11              20              30
    485.....................................            3514         10.5552               4               5               8              12              20
    486.....................................            2518         13.3761               1               6              10              17              27
    487.....................................            4435          8.1150               2               3               6              10              16
    488.....................................             920         17.9750               4               7              13              22              37
    489.....................................           19832          9.7897               2               4               7              12              20
    490.....................................            5520          6.0612               1               2               4               7              12
    491.....................................           10763          3.9181               2               2               3               4               7
    492.....................................            2229         17.9740               4               5              14              28              37
    493.....................................           56802          5.6674               1               2               4               7              11
    494.....................................           25101          2.3728               1               1               2               3               5
    495.....................................              99         17.8081               7              11              15              23              31
    496.....................................             695         11.5885               4               6               9              13              22
    497.....................................           20050          6.8113               2               4               5               8              12
    498.....................................           10596          3.7558               1               2               3               5               7
    499.....................................           37778          5.2993               2               3               4               6              10
    500.....................................           34957          3.1295               1               2               3               4               6
    501.....................................            1652         11.2125               4               6               9              13              20
    502.....................................             424          7.0825               3               4               6               8              12
    503.....................................            6610          4.4082               1               2               4               5               8
                                             ----------------                                                                                               
                                                    11173095                                                                                                
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46113]]
    
    
     Table 8A.--Statewide Average Operating Cost-to-Charge Ratios for Urban 
                 and Rural Hospitals (Case Weighted) August 1997            
    ------------------------------------------------------------------------
                             State                           Urban    Rural 
    ------------------------------------------------------------------------
    ALABAMA...............................................    0.400    0.449
    ALASKA................................................    0.516    0.780
    ARIZONA...............................................    0.397    0.562
    ARKANSAS..............................................    0.542    0.491
    CALIFORNIA............................................    0.382    0.489
    COLORADO..............................................    0.477    0.554
    CONNECTICUT...........................................    0.551    0.555
    DELAWARE..............................................    0.505    0.489
    DISTRICT OF COLUMBIA..................................    0.520  .......
    FLORIDA...............................................    0.398    0.397
    GEORGIA...............................................    0.508    0.510
    HAWAII................................................    0.458    0.531
    IDAHO.................................................    0.557    0.618
    ILLINOIS..............................................    0.474    0.587
    INDIANA...............................................    0.559    0.596
    IOWA..................................................    0.526    0.663
    KANSAS................................................    0.429    0.659
    KENTUCKY..............................................    0.503    0.529
    LOUISIANA.............................................    0.464    0.523
    MAINE.................................................    0.619    0.578
    MARYLAND..............................................    0.764    0.815
    MASSACHUSETTS.........................................    0.557    0.597
    MICHIGAN..............................................    0.484    0.586
    MINNESOTA.............................................    0.553    0.618
    MISSISSIPPI...........................................    0.495    0.514
    MISSOURI..............................................    0.445    0.535
    MONTANA...............................................    0.485    0.599
    NEBRASKA..............................................    0.495    0.660
    NEVADA................................................    0.329    0.522
    NEW HAMPSHIRE.........................................    0.574    0.597
    NEW JERSEY............................................    0.455  .......
    NEW MEXICO............................................    0.461    0.551
    NEW YORK..............................................    0.561    0.647
    NORTH CAROLINA........................................    0.533    0.478
    NORTH DAKOTA..........................................    0.619    0.669
    OHIO..................................................    0.545    0.589
    OKLAHOMA..............................................    0.475    0.549
    OREGON................................................    0.577    0.638
    PENNSYLVANIA..........................................    0.407    0.540
    PUERTO RICO...........................................    0.478    0.522
    RHODE ISLAND..........................................    0.577  .......
    SOUTH CAROLINA........................................    0.474    0.496
    SOUTH DAKOTA..........................................    0.542    0.639
    TENNESSEE.............................................    0.508    0.551
    TEXAS.................................................    0.443    0.546
    UTAH..................................................    0.598    0.641
    VERMONT...............................................    0.610    0.564
    VIRGINIA..............................................    0.493    0.509
    WASHINGTON............................................    0.663    0.666
    WEST VIRGINIA.........................................    0.599    0.544
    WISCONSIN.............................................    0.595    0.653
    WYOMING...............................................    0.514    0.751
    ------------------------------------------------------------------------
    
    
        Table 8B.--Statewide Average Capital Cost-to-Charge Ratios (Case    
                              Weighted) August 1997                         
    ------------------------------------------------------------------------
                                 State                                Ratio 
    ------------------------------------------------------------------------
    ALABAMA........................................................    0.054
    ALASKA.........................................................    0.073
    ARIZONA........................................................    0.047
    ARKANSAS.......................................................    0.055
    CALIFORNIA.....................................................    0.039
    COLORADO.......................................................    0.053
    CONNECTICUT....................................................    0.039
    DELAWARE.......................................................    0.056
    DISTRICT OF COLUMBIA...........................................    0.040
    FLORIDA........................................................    0.047
    GEORGIA........................................................    0.048
    HAWAII.........................................................    0.046
    IDAHO..........................................................    0.054
    ILLINOIS.......................................................    0.044
    INDIANA........................................................    0.059
    IOWA...........................................................    0.055
    KANSAS.........................................................    0.054
    KENTUCKY.......................................................    0.054
    LOUISIANA......................................................    0.067
    MAINE..........................................................    0.040
    MARYLAND.......................................................    0.013
    MASSACHUSETTS..................................................    0.064
    MICHIGAN.......................................................    0.048
    MINNESOTA......................................................    0.058
    MISSISSIPPI....................................................    0.056
    MISSOURI.......................................................    0.051
    MONTANA........................................................    0.057
    NEBRASKA.......................................................    0.057
    NEVADA.........................................................    0.034
    NEW HAMPSHIRE..................................................    0.067
    NEW JERSEY.....................................................    0.043
    NEW MEXICO.....................................................    0.049
    NEW YORK.......................................................    0.053
    NORTH CAROLINA.................................................    0.049
    NORTH DAKOTA...................................................    0.074
    OHIO...........................................................    0.056
    OKLAHOMA.......................................................    0.055
    OREGON.........................................................    0.054
    PENNSYLVANIA...................................................    0.042
    PUERTO RICO....................................................    0.090
    RHODE ISLAND...................................................    0.038
    SOUTH CAROLINA.................................................    0.055
    SOUTH DAKOTA...................................................    0.062
    TENNESSEE......................................................    0.058
    TEXAS..........................................................    0.053
    UTAH...........................................................    0.058
    VERMONT........................................................    0.053
    VIRGINIA.......................................................    0.058
    WASHINGTON.....................................................    0.067
    WEST VIRGINIA..................................................    0.055
    WISCONSIN......................................................    0.048
    WYOMING........................................................    0.065
    ------------------------------------------------------------------------
    
    
               Table 10.--Percentage Difference in Wage Indexes for Areas That Qualify for a Wage Index Exception for Excluded Hospitals and Units          
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    1982-1994    1984-1994    1988-1984    1990-1994    1991-1994    1992-1994    1993-1994 
                                 Area                               difference   difference   difference   difference   difference   difference   difference
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Connecticut..................................................      21.5862      24.0000  ...........  ...........  ...........  ...........  ...........
    Delaware.....................................................  ...........       8.6774  ...........  ...........  ...........  ...........  ...........
    Hawaii.......................................................  ...........      15.7127  ...........  ...........  ...........  ...........  ...........
    Maryland.....................................................  ...........       8.1722  ...........  ...........  ...........  ...........  ...........
    Massachusetts................................................      23.9560      27.9921      11.2140  ...........  ...........  ...........  ...........
    New Hampshire................................................  ...........       9.5243  ...........  ...........  ...........  ...........  ...........
    Oregon.......................................................  ...........  ...........  ...........       8.6010       8.1066  ...........  ...........
    South Carolina...............................................  ...........      10.0774  ...........  ...........  ...........  ...........  ...........
    Vermont......................................................  ...........      10.6667  ...........  ...........  ...........  ...........  ...........
    Washington...................................................  ...........  ...........  ...........       9.9002  ...........  ...........  ...........
    Amarillo, TX.................................................  ...........  ...........  ...........       8.6330       9.8229  ...........  ...........
    Anderson, SC.................................................  ...........  ...........      15.1961      24.3721  ...........       8.9005  ...........
    Arecibo, PR..................................................  ...........  ...........  ...........      13.7540      11.0585  ...........  ...........
    Athens, GA...................................................      10.8688      16.5565       9.5058       9.4259  ...........  ...........  ...........
    Atlantic City, NJ............................................  ...........      13.2602  ...........  ...........  ...........  ...........  ...........
    Augusta, GA-SC...............................................  ...........  ...........  ...........  ...........       8.0453  ...........  ...........
    Benton Harbor, MI............................................  ...........  ...........  ...........       8.8777  ...........  ...........  ...........
    Bergen-Passaic, NJ...........................................      14.0017      15.9481      17.9622  ...........  ...........  ...........  ...........
    Billings, MT.................................................  ...........  ...........  ...........       8.6879      12.2161      12.3837  ...........
    Biloxi-Gulfport, MS..........................................  ...........  ...........  ...........       8.0594  ...........  ...........  ...........
    Bloomington, IN..............................................  ...........  ...........  ...........  ...........  ...........       8.2928  ...........
    Boston-Lowell-Brockton-Lawrence-Salem, MA....................  ...........       8.1568  ...........  ...........  ...........  ...........  ...........
    
    [[Page 46114]]
    
                                                                                                                                                            
    Bremerton, WA................................................      12.9725      14.8961      15.2452      15.3177      13.7318  ...........  ...........
    Bridgeport-Stamford-Norwalk-Danbury, CT......................      10.3293      14.6913  ...........  ...........  ...........  ...........  ...........
    Burlington, NC...............................................      11.6113      14.9594       9.7961  ...........  ...........  ...........  ...........
    Burlington, VT...............................................  ...........       9.3174       9.6092  ...........  ...........      10.8280  ...........
    Caguas, PR...................................................  ...........      12.2326  ...........  ...........  ...........  ...........  ...........
    Charlotte-Gastonia-Rock Hill, NC-SC..........................       9.2601      16.3979  ...........  ...........  ...........  ...........  ...........
    Clarksville-Hopkinsville, TN-KY..............................  ...........       8.0204  ...........      14.9297  ...........  ...........  ...........
    Columbia, SC.................................................  ...........       8.8584  ...........  ...........  ...........  ...........  ...........
    Columbus, GA-AL..............................................  ...........      12.8079      10.6690       9.7894  ...........  ...........  ...........
    Cumberland, MD-WVA...........................................  ...........  ...........  ...........       8.7659       9.2778  ...........  ...........
    Danville, VA.................................................  ...........  ...........       8.4254  ...........  ...........  ...........  ...........
    Decatur, AL..................................................  ...........      12.0335      10.5832  ...........  ...........  ...........  ...........
    El Paso, TX..................................................       8.1286      13.8951      16.0628  ...........      17.4634       9.2489  ...........
    Eugene-Springfield, OR.......................................  ...........      12.1188      12.4054      20.4953       8.0302  ...........  ...........
    Florence, SC.................................................      14.2426      13.0711  ...........  ...........  ...........  ...........  ...........
    Gadsden, AL..................................................  ...........  ...........  ...........      13.8007       9.0695  ...........  ...........
    Gainesville, FL..............................................  ...........       9.7617       8.7895  ...........       8.5675  ...........  ...........
    Galveston-Texas City, TX.....................................  ...........  ...........      11.9186  ...........  ...........  ...........  ...........
    Greeley, CO..................................................  ...........  ...........  ...........      15.7515       8.6166      10.3980  ...........
    Greensboro-Winston-Salem-High Point, NC......................  ...........       9.9322  ...........  ...........  ...........  ...........  ...........
    Hagerstown, MD...............................................  ...........      11.0716  ...........       9.5260       8.2039  ...........  ...........
    Hartford-Middletown-NewBritain, CT...........................      10.4740      14.2519  ...........  ...........  ...........  ...........  ...........
    Houma-Thibodaux, LA..........................................  ...........  ...........       9.3263  ...........  ...........  ...........  ...........
    Jackson, TN..................................................       8.5190      12.7249  ...........  ...........  ...........  ...........  ...........
    Jersey City, NJ..............................................  ...........  ...........       8.3144  ...........  ...........  ...........  ...........
    Killeen-Temple, TX...........................................      16.7787  ...........  ...........  ...........  ...........  ...........  ...........
    Lafayette, IN................................................  ...........  ...........  ...........  ...........       8.7871      10.0572  ...........
    Laredo, TX...................................................  ...........  ...........  ...........      11.5765  ...........       8.5185  ...........
    Las Cruse, NM................................................  ...........  ...........       9.2218  ...........  ...........  ...........  ...........
    Lawton, OK...................................................  ...........  ...........  ...........  ...........  ...........  ...........       8.1162
    Lima, OH.....................................................  ...........  ...........      13.8166       8.6982  ...........  ...........  ...........
    Macon-Warner Robins, GA......................................  ...........      18.2494  ...........  ...........  ...........  ...........  ...........
    Manchester-Nashua, NH........................................      11.5134      12.8915  ...........  ...........  ...........  ...........  ...........
    McAllen-Edinburg-Mission, TX.................................  ...........       9.0116       8.4046  ...........  ...........  ...........  ...........
    Medford, OR..................................................  ...........  ...........  ...........      11.0706  ...........  ...........  ...........
    Merced, CA...................................................  ...........       8.8820  ...........       9.1317      11.0694  ...........  ...........
    Middlesex-Somerset-Hunterdon, NJ.............................  ...........      11.3808  ...........  ...........  ...........  ...........  ...........
    Mobile, AL...................................................  ...........  ...........  ...........       8.2725       9.5491       8.3835  ...........
    Monmouth-Ocean, NJ...........................................      11.0502      16.4802      10.3441  ...........  ...........  ...........  ...........
    Monroe, LA...................................................  ...........  ...........  ...........  ...........       9.9294  ...........  ...........
    Muncie, IN...................................................  ...........  ...........      13.5975  ...........  ...........  ...........  ...........
    Muskegon, MI.................................................      10.1698       9.3800      13.1266      11.0394      10.3157  ...........  ...........
    Nassau-Suffolk, NY...........................................  ...........      14.0415  ...........  ...........  ...........  ...........  ...........
    New Bedford-Fall River-Attleboro, MA.........................      15.8880      18.8100      12.4963  ...........  ...........  ...........  ...........
    New Haven-West Haven-Waterbury, CT...........................      10.3424      14.6360  ...........  ...........  ...........  ...........  ...........
    New London-Norwich, CT.......................................       9.0604      12.5972  ...........  ...........  ...........  ...........  ...........
    Newark, NJ...................................................  ...........      10.9661  ...........  ...........  ...........  ...........  ...........
    Ocala, FL....................................................  ...........      10.9174  ...........  ...........  ...........  ...........  ...........
    Orange County, NY............................................      22.3089      26.7753      16.7892      10.2286      10.6828  ...........  ...........
    Panama City, FL..............................................  ...........  ...........  ...........  ...........      10.5996  ...........  ...........
    Parkersburg-Marietta, WV-OH..................................  ...........  ...........  ...........       8.3806  ...........       8.4505  ...........
    Portsmouth-Dover-Rochester, NH...............................      10.1946       9.0222  ...........  ...........  ...........  ...........  ...........
    Poughkeepsie, NY.............................................  ...........       9.2928  ...........  ...........  ...........  ...........  ...........
    Providence-Pawtucket-Woonsocket, RI..........................  ...........      13.4977  ...........  ...........  ...........  ...........  ...........
    Provo-Orem, UT...............................................  ...........       8.6038  ...........  ...........  ...........  ...........  ...........
    Redding, CA..................................................  ...........      19.0789      11.6583  ...........  ...........  ...........  ...........
    Salinas-Seaside-Monterey, CA.................................      16.3647      15.3473      11.1937  ...........  ...........  ...........  ...........
    San Angelo, TX...............................................  ...........  ...........  ...........  ...........       9.0858  ...........  ...........
    Santa Cruz, CA...............................................      15.0235      15.1075      10.8706      11.2183  ...........  ...........  ...........
    Santa Fe, NM.................................................  ...........       8.8954      12.9551  ...........  ...........  ...........  ...........
    Tacoma, WA...................................................  ...........  ...........  ...........       8.4039  ...........  ...........  ...........
    Texarkana, TX-Texarkana, AR..................................  ...........  ...........       9.6848       8.7486       9.5184  ...........  ...........
    Vallejo-Fairfield-Napa, CA...................................  ...........      12.0671  ...........      10.2260  ...........  ...........  ...........
    Wausau, WI...................................................  ...........       9.6382       8.0763  ...........  ...........  ...........  ...........
    West Palm Beach-Boca Raton-Delray Beach, FL..................  ...........       9.5017  ...........  ...........  ...........  ...........  ...........
    Wilmington, DE-NJ-MD.........................................       8.3587      10.7306  ...........  ...........  ...........  ...........  ...........
    Wilmington, NC...............................................  ...........      15.7476       8.5665  ...........  ...........  ...........  ...........
    
    [[Page 46115]]
    
                                                                                                                                                            
    Worcester-Fitchburg-Leomister, MA............................  ...........      13.3694  ...........  ...........  ...........  ...........  ...........
    Yuma, AZ.....................................................  ...........  ...........       9.4344  ...........      12.1844  ...........  ...........
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    
    Appendix A--Regulatory Impact Analysis
    
    I. Introduction
    
        Section 804(2) of Title 5, United States Code (as added by section 
    251 of Public Law 104-121), specifies that a ``major rule'' is any rule 
    that the Office of Management and Budget finds is likely to result in--
         An annual effect on the economy of $100 million or more;
         A major increase in costs or prices for consumers, 
    individual industries, Federal, State, or local government agencies, or 
    geographic regions; or
         Significant adverse effects on competition, employment, 
    investment, productivity, innovation, or on the ability of United 
    States-based enterprises to compete with foreign-based enterprises in 
    domestic and export markets.
        We estimate that the impact of this final rule with comment period 
    will be to decrease payments to hospitals by approximately $6 billion 
    in FY 1998, compared to the payments that would have been made in FY 
    1998 if Public Law 105-33 had not been enacted. Therefore, this rule is 
    a major rule as defined in Title 5, United States Code, section 804(2).
        We have examined the impacts of this final rule with comment period 
    as required by Executive Order 12866 and the Regulatory Flexibility Act 
    (RFA) (Pub. L. 96-354). Executive Order 12866 directs agencies to 
    assess all costs and benefits of available regulatory alternatives and, 
    when regulation is necessary, to select regulatory approaches that 
    maximize net benefits (including potential economic, environmental, 
    public health and safety effects; distributive impacts; and equity). 
    The RFA requires agencies to analyze options for regulatory relief for 
    small businesses. For purposes of the RFA, most hospitals, and most 
    other providers, physicians, and health care suppliers are small 
    entities, either by nonprofit status or by having revenues of $5 
    million or less annually.
        Also, section 1102(b) of the Social Security Act requires us to 
    prepare a regulatory impact analysis for any final rule with comment 
    period 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 
    (Pub. L. 98-21) designated hospitals in certain New England counties as 
    belonging to the adjacent NECMA. Thus, for purposes of the prospective 
    payment system, we classify these hospitals as urban hospitals.
        It is clear that the changes being made in this document will 
    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 
    final rule with comment period, constitutes a combined regulatory 
    impact analysis and regulatory flexibility analysis.
        In accordance with the provisions of Executive Order 12866, this 
    final rule with comment period was reviewed by the Office of Management 
    and Budget.
    
    II. Changes in the Final Rule With Comment Period
    
        After we published the proposed rule, Public Law 105-33 was 
    enacted. (A summary of the provisions related to the prospective 
    payment system for hospitals appears under section I.D. of this 
    preamble.) Several provisions of Public Law 105-33 make significant 
    changes in inpatient hospital payments for the operating and capital 
    prospective payment systems during FY 1998. The provisions that have 
    significant payment impacts for FY 1998 include the following:
         The update factors for the inpatient operating 
    standardized amounts and the hospital-specific rate for FY 1998 are 0 
    percent. Hospitals that do not receive disproportionate share (DSH) or 
    indirect medial education (IME) payments and are not designated as a 
    Medicare-dependent, small rural hospital (MDH) (referred to hereafter 
    as ``temporary relief'' hospitals) will receive a 0.5 percent update to 
    their applicable standardized amounts if--
         The hospital is in a State in which the aggregate 
    operating prospective payments to these types of hospitals are less 
    than the aggregate allowable operating costs for inpatient services for 
    FY 1995 cost reporting periods (eligible States are identified in 
    section V.D of the preamble), and
         The hospital itself has a negative operating prospective 
    payment margin in the payment year.
         The unadjusted standard Federal capital rate and hospital-
    specific capital rate are reduced by 17.78 percent for FY 1998.
         The additional DSH payments made to eligible hospitals 
    under the operating prospective payment system are reduced by 1 
    percent.
         The IME formula is revised to reduce the IME adjustment 
    factor from approximately a 7.7 percent increase for every 10 percent 
    increase in a hospital's resident-to-bed ratio to a 7.0 percent 
    increase.
         IME and DSH payments will be made only on the base DRG 
    payment rates, not on the sum of base DRG payments and outlier 
    payments. Also, in determining outlier payments, the estimated cost of 
    a case will no longer be adjusted for IME and DSH.
         The national share of the Puerto Rico payment rate is 
    increased from 25 to 50 percent. Thus, these hospitals will be paid 
    based on 50 percent of the national standardized amount (a discharge-
    weighted average of the large urban and other urban national 
    standardized amounts) and 50 percent of the Puerto Rico standardized 
    amount.
         The wage index for an urban hospital may not be lower than 
    the Statewide area rural wage index.
         The special treatment of MDHs is reinstated. If the 
    hospital-specific rate for an eligible MDH is higher than the Federal 
    rate, the hospital receives 50 percent of the difference between the 
    Federal rate and the hospital-specific rate.
         Any hospital classified as a rural referral center (RRC) 
    for FY 1991 must continue to be classified as an RRC for FY 1998 and 
    subsequent fiscal years.
    
    [[Page 46116]]
    
         The update factor for prospective payment system excluded 
    hospitals for FY 1998 is 0 percent.
         The target amounts for psychiatric and rehabilitation 
    hospitals and units, and long-term care hospitals are capped at the 
    75th percentile of target amounts for within the same class.
         The seven State EACH/RPCH program is being replaced by the 
    Critical Access Hospital (CAH) program, a national program that allows 
    States to designate specified rural hospitals as critical access 
    hospitals. Payment to these hospitals is on the basis of reasonable 
    costs.
    
    III. Limitations of Our Analysis
    
        As has been the case in previously published regulatory impact 
    analyses, the following quantitative analysis presents the projected 
    effects of our policy changes, as well as statutory changes effective 
    for FY 1998, 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.
        We received no comments on the methodology used for the impact 
    analysis in the proposed rule.
    
    IV. Hospitals Included in and Excluded From the Prospective Payment 
    System
    
    A. Included and Excluded Hospitals
    
        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 46 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 50 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 August 1997, we have 
    included 5,088 hospitals in our analysis. (This is 41 fewer hospitals 
    than were included in the impact analysis in the FY 1997 final rule (61 
    FR 46305).) This represents about 82 percent of all Medicare-
    participating hospitals. The majority of this impact analysis focuses 
    on this set of hospitals.
        The remaining 18 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.
    
    B. Critical Access Hospitals (CAHs) (established by Pub. L. 105-33)
    
        As explained earlier in this preamble, section 4201 of Public Law 
    105-33 replaced the EACH program with a CAH program. The CAH program is 
    not limited to seven States, but is available to any State that both 
    submits the necessary assurances and complies with the other statutory 
    requirements for designation of hospitals as CAHs. Facilities that 
    participated in Medicare as RPCHs before the date of enactment of 
    Public Law 105-33 (August 5, 1997), and that are otherwise eligible to 
    be designated by the States as CAHs, are deemed to be CAHs. There are 
    currently approximately 38 facilities participating as RPCHs. In 
    addition, the 13 facilities currently operating under the Medical 
    Assistance Facility (MAF) demonstration in Montana are deemed to have 
    been certified by HCFA as CAHs, if otherwise eligible for designation 
    by the State as CAHs.
        Because of the small number of facilities now participating as 
    RPCHs or MAFs, we do not expect the interim final rule to have a 
    significant impact on a substantial number of small rural hospitals. 
    Moreover, in preparing the regulations applicable to CAHs, we have 
    included only those changes that are required to implement the new 
    legislation. Nonetheless, we are informing the public of our 
    projections of the likely effects of the rules, for those hospitals and 
    beneficiaries who may be affected.
        For the currently participating facilities, the primary effect will 
    be greater flexibility, since these facilities will be able to maintain 
    up to 15 inpatient beds, rather than 6, and will be able to keep 
    patients for as long as 96 hours, rather than an average of 72 hours. 
    Patients in these facilities should benefit from this, since there 
    should be fewer cases requiring patient transfer to other facilities 
    due to lack of beds or need for longer periods of care. However, with 
    an expected increase in utilization due to an increase in numbers and 
    lengths of stay, costs to the Medicare program for care in these 
    facilities may be expected to rise. Some or all of this increase may be 
    offset by savings from cases in which the changes make transfer to 
    another hospital unnecessary. Changes in the swing-bed provisions will 
    also increase facility flexibility and patient access to care. These 
    new provisions are less complex than those imposed by prior law, and 
    should simplify program administration.
        The changes in payment methodology may also increase Medicare 
    spending for care in these facilities, since payment will now be based 
    on reasonable costs. Fee schedules and blended rates for outpatient 
    care will not apply. However, the elimination of the EACH designation 
    may avoid many unnecessary costs and offset any added spending for CAH 
    care.
        While the removal of the seven State limitation will undoubtedly 
    lead to greater participation in the program, we are not able to 
    estimate reliably how many additional States will establish limited-
    service hospital programs, or how many hospitals in those States will 
    choose to participate in them. To the extent that there is increased 
    participation, beneficiary convenience and access to care in remote 
    rural areas would increase. Medicare spending, however, would also 
    increase, since additional hospitals would be paid on a basis other 
    than the prospective payment system. As noted above, some or all of 
    these increases may be offset by prompt access to treatment in the 
    local community, thus avoiding the need for care in full-service 
    hospitals.
    
    V. Impact on Excluded Hospitals and Units
    
        As of August 1997, there were 1,102 specialty hospitals excluded 
    from the prospective payment system and instead paid on a reasonable 
    cost basis subject to the rate-of-increase ceiling under Sec. 413.40. 
    This group included 631 psychiatric hospitals, 192 rehabilitation 
    hospitals, 192 long-term care hospitals, 70 children's hospitals and 17 
    Christian Science sanitoria. In addition, there were 1,472 psychiatric 
    units and 880 rehabilitation units in hospitals otherwise subject to 
    the prospective payment system. These excluded units are also paid in 
    accordance with Sec. 413.40.
        The market basket percentage increase for excluded hospitals and 
    units for FY 1998 is 2.7 percent. However, as a result of section 4411 
    of Public Law 105-33 the update factor for FY 1998 is 0 percent.
        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
    
    [[Page 46117]]
    
    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.
        In this context, we note that, under Sec. 413.40(d)(3) as revised, 
    an excluded hospital or unit whose costs exceed 110 percent of the 
    ceiling receives its ceiling plus 50 percent of the difference between 
    its costs and 110 percent of the ceiling, not to exceed 110 percent of 
    the ceiling. In addition, under the various provisions set forth in 
    Sec. 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.
        Section 4414 of Public Law 105-33 establishes a cap at the 75th 
    percentile on the target amounts for psychiatric, rehabilitation, and 
    long-term care hospitals. Because the cap is based on an estimate of 
    the 75th percentile, we estimate that 25 percent of the providers will 
    have target amounts in excess of the cap. We have broken down the 
    estimated impact of that reduction as follows:
    
                         Percent of Providers Above Cap                     
    ------------------------------------------------------------------------
                                                       Free-                
                 Type of hospital/unit                standing    Hospital- 
                                                     hospitals   based units
    ------------------------------------------------------------------------
    Rehabilitation................................         23.2         76.8
    Psychiatric...................................         42.5         57.5
    Long-term care................................         25.0          (1)
    ------------------------------------------------------------------------
    \1\ Not applicable.                                                     
    
    
                           Percent of Total Providers                       
    ------------------------------------------------------------------------
                                                    Large    Other          
                Type of hospital/unit               urban    urban    Rural 
    ------------------------------------------------------------------------
    Rehabilitation...............................     48.8     38.7     12.5
    Psychiatric..................................     49.2     32.2     18.6
    Long-term care...............................     74.3     17.8      7.9
    ------------------------------------------------------------------------
    
    
                       Percent of Providers Above the Cap                   
    ------------------------------------------------------------------------
                                                    Large    Other          
                Type of hospital/unit               urban    urban    Rural 
    ------------------------------------------------------------------------
    Rehabilitation...............................     54.4     35.5     10.1
    Psychiatric..................................     62.6     25.7     11.7
    Long-term care...............................     95.8      4.2      0.0
    ------------------------------------------------------------------------
    
        These tables show, of those hospitals affected by the cap, the 
    estimated percentage of each type of provider affected, and the 
    proportion of these hospitals that are located in urban or rural areas. 
    Although a higher percentage of hospital-based units may be affected by 
    the cap than freestanding hospitals, there are many more units than 
    hospitals. For instance, there are twice as many hospital-based 
    psychiatric units than freestanding hospitals and five times as many 
    hospital-based rehabilitation units as freestanding hospitals. With 
    regard to the geographic impact of the provision on long-term care 
    hospitals, hospitals in large urban areas are affected in greater 
    proportion than hospitals in other areas. This is not unexpected 
    because the target amount cap is not adjusted for differences in area 
    wage levels. We also observed that long-term care hospitals certified 
    before 1990 were less likely to be affected by the 75th percentile 
    provision than older long-term care hospitals. Psychiatric and 
    rehabilitation facilities appear slightly more likely to be affected by 
    the limit on the target amount if they were certified after 1990 or are 
    located in large urban areas. It is important to note that while these 
    hospitals and units will have their target amounts reduced to the 75th 
    percentile, the impact on a specific provider will depend on the level 
    of its operating costs per discharge in relation to its reduced target 
    amount.
        We are extending certain exclusion criteria that currently apply 
    only to long-term care hospitals to all other categories of excluded 
    facilities. These criteria define a minimum level of independence and 
    separate control that a facility must have in order to be excluded as a 
    ``hospital within a hospital.'' We expect that this provision will 
    result in a very small decrease in aggregate payment levels (other 
    things being equal) by, for example, preventing new hospital units from 
    inappropriately qualifying for the exemption from the-rate-of-increase 
    ceiling that is available only to new hospitals. To our knowledge, 
    there are fewer than 50 facilities that would be affected by this 
    proposal.
    
    VI. Quantitative Impact Analysis of the Policy Changes Under the 
    Prospective Payment System for Operating Costs
    
    A. Basis and Methodology of Estimates
    
        In this final rule with comment period, we are announcing policy 
    changes and payment rate updates for the prospective payment systems 
    for operating and capital-related costs. We have prepared separate 
    analyses of the 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 1996 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 create some of the variables by which 
    hospitals are categorized. Our analysis has several qualifications. 
    First, we do not make adjustments for behavioral changes that hospitals 
    may adopt in response to these 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 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 1996 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 the FY 1998 changes to the capital 
    prospective payment system are discussed below in section VII of this 
    Appendix.
        The changes discussed separately below are the following:
         The effects of the changes enacted by Public Law 105-33. 
    Although we are not able to precisely simulate the effect of every 
    provision of this legislation that may influence hospital payment, we 
    have simulated the payment effects of
    
    [[Page 46118]]
    
    each of the significant provisions noted above.
         The effects of the annual reclassification of diagnoses 
    and procedures and the recalibration of the DRG relative weights 
    required by section 1886(d)(4)(C) of the Act.
         The effects of changes in hospitals' wage index values 
    reflecting the FY 1998 wage index update (using FY 1994 data).
         The effects of implementing the Puerto Rico-specific wage 
    index to be applied to the Puerto Rico standardized amounts.
         The effects of completing the phase-out of payments for 
    extraordinarily lengthy cases (day outlier cases) with a corresponding 
    increase in payments for extraordinarily costly cases (cost outliers), 
    in accordance with section 1886(d)(5)(A)(v) of the Act.
         The effects of geographic reclassifications by the MGCRB 
    that will be effective in FY 1998.
         The total change in payments based on FY 1998 policies 
    relative to payments based on FY 1997 policies.
        To illustrate the impacts of the changes resulting from Pub. L. 
    105-33, our analysis begins with a FY 1998 baseline simulation model 
    using the policies as they existed before enactment of Public Law 105-
    33 including a 2.7 percent (full market basket) update to the 
    standardized amounts; the FY 1997 GROUPER (version 14.0); the FY 1997 
    wage index; national wage index values applied to the Puerto Rico 
    standardized amounts; FY 1997 outlier policy (75 percent phase-out of 
    day outlier payments); and no MGCRB reclassifications. Outlier payments 
    are set at 5.1 percent of total DRG payments.
        From this baseline, we move to a simulation model reflecting the 
    policies enacted by Public Law 105-33. For operating payments, these 
    are: zero update to the standardized amounts and the hospital-specific 
    rate, except for temporary relief hospitals which receive a 0.5 percent 
    update; an increase in payments to Puerto Rico by changing the portion 
    of their payments based on the higher national standardized amount from 
    25 percent to 50 percent; reductions in IME and DSH payments; the 
    elimination of IME and DSH payments attributable to outliers and the 
    corresponding change of no longer standardizing charges for IME and DSH 
    when identifying outlier cases; reinstating the MDH provision; and the 
    reinstatement of RRCs that lost their status due to the triennial 
    review or MGCRB reclassification. One change enacted by Public Law 105-
    33 that is not included in this simulation is the floor on the area 
    wage index for urban hospitals. This change is required to be budget 
    neutral so we did not introduce it into the simulation model until we 
    calculated the wage index and DRG budget neutrality factor. Therefore, 
    in our impact analysis, this change is introduced when we bring the new 
    (FY 1994) wage data into the model.
        Each additional policy change is then added incrementally to this 
    baseline model, finally arriving at an FY 1998 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 1997 to FY 1998. Three factors have significant impacts 
    here. First is the changes enacted by Public Law 105-33, with the 
    exception of the impact of the zero updates for FY 1998 (which results 
    in a zero change from FY 1997).
        A second significant factor that has an impact on hospitals' 
    payments per case from FY 1997 to FY 1998 is a change in MGCRB 
    reclassification status from one year to the next. That is, hospitals 
    reclassified for FY 1997 that are no longer reclassified for FY 1998 
    may have a negative payment impact going from FY 1997 to FY 1998; 
    conversely, hospitals not reclassified for FY 1997 that are 
    reclassified for FY 1998 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 increase in payments for the category may be 
    below the national mean.
        A third significant factor is that we currently estimate actual 
    outlier payments during FY 1997 will be 4.8 percent of actual total DRG 
    payments. When the FY 1997 final rule was published, we projected FY 
    1997 outlier payments would be 5.1 percent of total DRG payments, and 
    the standardized amounts were reduced correspondingly. The effects of 
    the slightly lower than expected outlier payments during FY 1997 (as 
    discussed in the Addendum to this proposed rule) are reflected in the 
    analyses below comparing our current estimates of FY 1997 payments per 
    case to estimated FY 1998 payments per case.
        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 
    estimated impact on the 5,088 hospitals included in the analysis.
        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, or rural). There are 2,858 
    hospitals located in urban areas (MSAs or NECMAs) included in our 
    analysis. Among these, there are 1,630 hospitals located in large urban 
    areas (populations over 1 million), and 1,228 hospitals in other urban 
    areas (populations of 1 million or fewer). The analysis includes 49 
    hospitals classified as large urban hospitals that were classified as 
    other urban hospitals in the proposed rule. These hospitals are in four 
    MSAs that have become large urban areas since publication of the 
    proposed rule. There are 2,230 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 1998 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 the 
    numbers of hospitals being paid based on these categorizations (after 
    consideration of geographic reclassifications) are 2,948, 1,776, 1,172, 
    and 2,140, respectively.
        The next three groupings examine the impacts of the proposed 
    changes on hospitals grouped by whether or not they have residency 
    programs (teaching hospitals that receive an IME adjustment), receive 
    DSH payments, or some combination of these two adjustments. There are 
    3,993 nonteaching hospitals in our analysis, 856 teaching hospitals 
    with fewer than 100 residents, and 239 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. (They may, however, have been reclassified 
    for purposes of the wage index.) 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 row separately examines hospitals that available data show 
    may qualify for the provision granting a 0.5 percent update to the 
    standardized amounts for FY 1998 (section 4401(b) of
    
    [[Page 46119]]
    
    Pub. L. 105-33). To be eligible, a hospital must not receive either IME 
    or DSH, nor may it be an MDH. It must also experience a negative margin 
    on its operating prospective payments during FY 1998. We estimated 
    eligible hospitals based on whether they had a negative operating 
    margin on their FY 1995 cost report. Finally, to qualify, a hospital 
    must be located in a State where the aggregate FY 1995 operating 
    prospective payments were less than the aggregate associated costs for 
    all of the non-IME, non-DSH, non-MDH hospitals in the State. There are 
    360 hospitals in this row.
        The next five rows examine the impacts of the proposed changes on 
    rural hospitals by special payment groups (SCHs, RRCs, MDHs, and 
    EACHs), as well as rural hospitals not receiving a special payment 
    designation. The RRCs (158), SCH/EACHs (642), MDHs (368), and SCH/EACH 
    and RRCs (57) shown here were not reclassified for purposes of the 
    standardized amount. Section 4202(b)(1) of Public Law 105-33 allowed 
    for reinstatement of RRCs that lost their status since FY 1991. As a 
    result, there are 63 more hospitals in this row than were included in 
    the proposed rule. Similarly, there are 16 more hospitals in the SCH/
    RRC row than appeared in that row in the proposed rule. There are three 
    SCHs that will be reclassified for the standardized amount in FY 1998 
    that, therefore, are not included in these rows. There are seven EACHs 
    included in our analysis and three EACH/RRCs.
        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 1995 Medicare cost 
    report files, if available (otherwise FY 1994 data are used). Data 
    needed to determine ownership status or Medicare utilization 
    percentages were unavailable for 117 hospitals. For the most part, 
    these are either new hospitals or hospitals filing manual cost reports 
    that are not yet entered into the database.
        The next series of groupings concern the geographic 
    reclassification status of hospitals. The first three groupings display 
    hospitals that were reclassified by the MGCRB for both FY 1997 and FY 
    1998, or for either of those 2 years, by urban/rural status. The next 
    rows illustrate the overall number of FY 1998 reclassifications, as 
    well as the numbers of reclassified hospitals grouped by urban and 
    rural location. 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 1998 Operating Prospective Payment System                                 
                                                             [Percent changes in payments per case]                                                         
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Puerto                                             
                                                     Balanced                                Combined     Rico       Day                                    
                                         Number of    Budget          DRG         New wage    wage &    specific   outlier          MGCRB          All FY 98
                                         hosps.\1\   Act \2\     recalibration    data \4\  recal.\5\     wage    phase-out    reclassification     changes 
                                                                      \3\                              index \6\     \7\             \8\              \9\   
                                               (0)        (1)            (2)           (3)        (4)        (5)        (6)             (7)              (8)
                                                                                                                                                            
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    (BY GEOGRAPHIC LOCATION):                                                                                                                               
        ALL HOSPITALS..................      5,088       -3.9            0.1           0.1        0.0        0.0        0.0             0.0              0.9
        URBAN HOSPITALS................      2,858       -3.9            0.1           0.1        0.0        0.0        0.0            -0.4             -1.0
             LARGE URBAN...............      1,630       -4.0            0.1           0.0       -0.1        0.0       -0.1            -0.4             -1.2
             OTHER URBAN...............      1,228       -3.8            0.2           0.2        0.2        0.0        0.1            -0.3             -0.7
        RURAL HOSPITALS................      2,230       -3.4           -0.3           0.4       -0.1        0.0        0.1             2.2             -0.4
        BED SIZE (URBAN):                                                                                                                                   
            0-99 BEDS..................        724       -3.6           -0.3           0.1       -0.4        0.0        0.1            -0.5             -0.9
            100-199 BEDS...............        954       -3.7           -0.1           0.1       -0.2        0.0        0.1            -0.4             -0.7
            200-299 BEDS...............        570       -3.8            0.1           0.1       -0.1        0.0        0.1            -0.3             -0.8
            300-499 BEDS...............        457       -4.0            0.2           0.2        0.2        0.0        0.0            -0.4             -1.0
            500 OR MORE BEDS...........        153       -4.3            0.4           0.0        0.2        0.0       -0.2            -0.3             -1.3
        BED SIZE (RURAL):                                                                                                                                   
            0-49 BEDS..................      1,170       -3.0           -0.6           0.4       -0.4        0.0        0.1             0.1             -0.3
            50-99 BEDS.................        657       -3.1           -0.4           0.4       -0.2        0.0        0.1             1.1             -0.3
            100-149 BEDS...............        235       -3.4           -0.3           0.4       -0.1        0.0        0.1             3.2             -0.5
            150-199 BEDS...............         93       -3.7           -0.2           0.4        0.0        0.0        0.1             2.6             -0.4
            200 OR MORE BEDS...........         75       -3.6            0.0           0.3        0.1        0.0        0.2             4.2             -0.8
        URBAN BY CENSUS DIVISION:                                                                                                                           
            NEW ENGLAND................        159       -4.2            0.1          -0.3       -0.4        0.0        0.1            -0.3             -1.9
            MIDDLE ATLANTIC............        431       -4.4            0.1           0.3        0.1        0.0       -0.7            -0.4             -2.0
            SOUTH ATLANTIC.............        420       -3.8            0.2          -0.2       -0.2        0.0        0.2            -0.3             -0.8
            EAST NORTH CENTRAL.........        475       -4.0            0.1           0.3        0.2        0.0        0.2            -0.3             -0.7
            EAST SOUTH CENTRAL.........        163       -3.8            0.2           1.0        1.0        0.0        0.2            -0.5              0.2
            WEST NORTH CENTRAL.........        191       -4.0            0.2           0.2        0.2        0.0        0.2            -0.4             -0.6
            WEST SOUTH CENTRAL.........        367       -3.8            0.2           0.2        0.1        0.0        0.2            -0.5             -0.5
            MOUNTAIN...................        129       -3.7            0.3          -0.2       -0.1        0.0        0.2            -0.4             -0.6
            PACIFIC....................        475       -3.6            0.1          -0.3       -0.4        0.0        0.2            -0.3             -0.9
            PUERTO RICO................         48        3.1           -0.2           0.3       -0.1        3.7       -0.1            -0.4             12.2
        RURAL BY CENSUS DIVISION:                                                                                                                           
            NEW ENGLAND................         53       -3.9           -0.2           0.6        0.1        0.0        0.2             2.1             -0.6
            MIDDLE ATLANTIC............         85       -3.3           -0.3          -0.4       -0.9        0.0       -0.1             1.1             -0.9
            SOUTH ATLANTIC.............        297       -3.6           -0.2           0.4        0.0        0.0        0.1             2.4             -1.0
            EAST NORTH CENTRAL.........        302       -3.3           -0.2           0.5        0.0        0.0        0.2             1.4             -0.7
            EAST SOUTH CENTRAL.........        275       -3.4           -0.3           0.6        0.1        0.0        0.2             2.5              0.0
            WEST NORTH CENTRAL.........        512       -3.2           -0.4           0.2       -0.4        0.0        0.1             2.5              0.0
    
    [[Page 46120]]
    
                                                                                                                                                            
            WEST SOUTH CENTRAL.........        347       -3.2           -0.4           0.3       -0.3        0.0        0.1             3.3             -0.3
            MOUNTAIN...................        213       -3.1           -0.2           0.3       -0.2        0.0        0.1             1.6              0.3
            PACIFIC....................        141       -3.3           -0.2           1.1        0.6        0.0        0.1             2.1             -0.1
            PUERTO RICO................          5        4.9           -0.6           2.4        1.5        4.4        0.1             1.5             15.3
    BY PAYMENT CATEGORIES:                                                                                                                                  
        URBAN HOSPITALS................      2,948       -3.9            0.1           0.1        0.0        0.0        0.0            -0.3             -1.0
            LARGE URBAN................      1,776       -4.0            0.1           0.0       -0.1        0.0       -0.1            -0.2             -1.1
            OTHER URBAN................      1,172       -3.8            0.2           0.2        0.2        0.0        0.1            -0.4             -0.6
        RURAL HOSPITALS................      2,140       -3.3           -0.3           0.4       -0.1        0.0        0.1             1.9             -0.5
        TEACHING STATUS:                                                                                                                                    
            NON-TEACHING...............      3,993       -3.6           -0.1           0.2       -0.1        0.0        0.1             0.3             -0.6
            LESS THAN 100 RES..........        856       -3.9            0.2           0.1        0.1        0.0        0.1            -0.3             -0.8
            100+ RESIDENTS.............        239       -4.4            0.3           0.0        0.2        0.0       -0.3            -0.2             -1.6
        DISPROPORTIONATE SHARE                                                                                                                              
         HOSPITALS (DSH):                                                                                                                                   
            NON-DSH....................      3,185       -3.8            0.0           0.2        0.0        0.0        0.1             0.2             -0.8
            URBAN DSH:                                                                                                                                      
                100 BEDS OR MORE.......      1,413       -3.9            0.2           0.1        0.0        0.0       -0.1            -0.3             -1.0
                FEWER THAN 100 BEDS....         89       -3.7           -0.4           0.3       -0.4        0.0        0.2            -0.4             -0.8
            RURAL DSH:                                                                                                                                      
                SOLE COMMUNITY (SCH)...        155       -3.1           -0.5           0.3       -0.4        0.0        0.0             0.2             -0.4
                REFERRAL CENTERS (RRC).         50       -2.8           -0.1           0.5        0.2        0.0        0.1             3.4              0.6
            OTHER RURAL DSH HOSP.:                                                                                                                          
                100 BEDS OR MORE.......         66       -3.6           -0.3           0.7        0.1        0.0        0.2             2.3             -1.4
                FEWER THAN 100 BEDS....        130       -3.4           -0.6           0.7       -0.1        0.0        0.1             0.8             -0.2
        URBAN TEACHING AND DSH:                                                                                                                             
            BOTH TEACHING AND DSH......        708       -4.1            0.2           0.0        0.1        0.0       -0.2            -0.4             -1.2
            TEACHING AND NO DSH........        330       -4.2            0.3           0.3        0.3        0.0        0.1            -0.2             -1.0
            NO TEACHING AND DSH........        794       -3.6            0.0           0.1       -0.1        0.0        0.1            -0.1             -0.5
            NO TEACHING AND NO DSH.....      1,116       -3.7            0.0           0.0       -0.2        0.0        0.2            -0.3             -0.8
        SPECIAL UPDATE HOSPITALS (UNDER                                                                                                                     
         SEC. 4401(b) OF PUBLIC LAW 105-                                                                                                                    
         33)...........................        360       -3.8           -0.1           0.6        0.2        0.1        0.2             0.2             -0.6
        RURAL HOSPITAL TYPES:                                                                                                                               
            NONSPECIAL STATUS HOSPITALS        915       -3.5           -0.4           0.5       -0.1        0.0        0.1             1.5             -0.8
            RRC........................        158       -3.7           -0.1           0.5        0.2        0.0        0.2             4.3             -0.5
            SCH/EACH...................        642       -3.0           -0.4           0.2       -0.5        0.0        0.0             0.6             -0.4
            MDH........................        368       -2.0           -0.5           0.4       -0.3        0.0        0.1             0.5              0.8
            SCH/EACH AND RRC...........         57       -3.2           -0.2           0.2       -0.2        0.0        0.0             0.8             -0.5
        TYPE OF OWNERSHIP:                                                                                                                                  
            VOLUNTARY..................      2,924       -3.9            0.1           0.1        0.0        0.0        0.0            -0.1             -1.0
            PROPRIETARY................        701       -3.6            0.0           0.0       -0.2        0.1        0.2             0.3             -0.6
            GOVERNMENT.................      1,346       -3.7            0.0           0.4        0.2        0.0        0.1             0.2             -0.4
            UNKNOWN....................        117       -4.0            0.0          -0.5       -0.7        0.2       -1.5            -0.5             -2.4
        MEDICARE UTILIZATION AS A                                                                                                                           
         PERCENT OF INPATIENT DAYS:                                                                                                                         
            0-25.......................        266       -3.6            0.1          -0.3       -0.5        0.0       -0.1            -0.3             -1.2
            25-50......................      1,307       -4.0            0.2           0.0        0.0        0.0        0.0            -0.2             -1.0
            50-65......................      1,988       -3.8            0.1           0.3        0.1        0.0        0.1             0.2             -0.8
            OVER 65....................      1,410       -3.7           -0.1           0.2       -0.2        0.0        0.1             0.1             -0.9
    
    [[Page 46121]]
    
                                                                                                                                                            
            UNKNOWN....................        117       -4.0            0.0          -0.5       -0.7        0.2       -1.5            -0.5             -2.4
    HOSPITALS RECLASSIFIED BY THE                                                                                                                           
     MEDICARE GEOGRAPHIC REVIEW BOARD:                                                                                                                      
        RECLASSIFICATION STATUS DURING                                                                                                                      
         FY97 AND FY98:                                                                                                                                     
            RECLASSIFIED DURING BOTH                                                                                                                        
             FY97 AND FY98.............        333       -3.9            0.0           0.5        0.3        0.0        0.2             6.2             -0.9
                URBAN..................         96       -4.2            0.1           0.5        0.4        0.0        0.1             3.6             -1.1
                RURAL..................        237       -3.7           -0.1           0.4        0.1        0.0        0.2             9.0             -0.6
            RECLASSIFIED DURING FY98                                                                                                                        
             ONLY......................         89       -3.6            0.0           0.5        0.3        0.1        0.2             4.0              5.3
                URBAN..................         13       -3.7            0.4           0.7        0.9        0.2        0.2             0.0              2.8
                RURAL..................         76       -3.4           -0.3           0.3       -0.2        0.0        0.2             7.3              7.3
            RECLASSIFIED DURING FY97                                                                                                                        
             ONLY......................        211       -4.0            0.0           0.6        0.3        0.0        0.0            -0.9             -4.2
                URBAN..................         94       -4.2            0.1           0.6        0.5        0.0       -0.1            -1.0             -4.0
                RURAL..................        117       -3.6           -0.2           0.5        0.0        0.0        0.2            -0.2             -4.7
        FY 98 RECLASSIFICATIONS:                                                                                                                            
            ALL RECLASSIFIED HOSP......        423       -3.9            0.0           0.5        0.3        0.0        0.2             5.8             -0.1
                STAND. AMOUNT ONLY.....         94       -4.1            0.0           0.4        0.2        0.0        0.1             1.3             -0.9
                WAGE INDEX ONLY........        282       -3.7            0.0           0.5        0.3        0.0        0.2             7.9              0.2
                BOTH...................         47       -4.2            0.0           0.3        0.1        0.0        0.3             5.5              0.2
                NONRECLASSIFIED........      4,638       -3.9            0.1           0.1        0.0        0.0        0.0            -0.5             -1.0
            ALL URBAN RECLASS..........        109       -4.1            0.1           0.5        0.4        0.0        0.1             3.2             -0.7
                STAND. AMOUNT ONLY.....         45       -4.0            0.1           0.4        0.3        0.0        0.0             0.6             -0.9
                WAGE INDEX ONLY........         31       -4.2            0.3           0.8        0.8        0.0        0.2             6.0             -0.8
                BOTH...................         33       -4.2            0.1           0.4        0.2        0.0        0.2             3.3             -0.1
                NONRECLASSIFIED........      2,749       -3.9            0.1           0.1        0.0        0.0        0.0            -0.5             -1.0
            ALL RURAL RECLASS..........        314       -3.6           -0.1           0.4        0.1        0.0        0.2             8.7              0.6
                STAND. AMOUNT ONLY.....         49       -4.2           -0.3           0.3       -0.2        0.0        0.3             4.3             -1.1
                WAGE INDEX ONLY........        251       -3.5           -0.1           0.4        0.1        0.0        0.2             8.6              0.6
                BOTH...................         14       -4.4           -0.1           0.2       -0.1        0.0        0.4            18.0              2.2
                NONRECLASSIFIED........      1,889       -3.2           -0.3           0.4       -0.2        0.0        0.1            -0.4             -0.9
        OTHER RECLASSIFIED HOSPITALS                                                                                                                        
         (SECTION 1886(d)(8)(B)).......         27       -3.6           -0.3           0.7        0.2        0.0        0.1             0.7             0.1 
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \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 1996, and hospital cost report data are from reporting periods beginning in FY 1994 and FY 1995.           
    \2\ This column displays the impact of the changes enacted by Public Law 105-33. The most significant of those in terms of their impacts here are the   
      zero update, the reduction to the IME adjustment, and no longer paying an IME and DSH adjustment for outliers.                                        
    \3\ This column displays the payment impact of the recalibration of the DRG weights, based on FY 1996 MedPAR data and the DRG classification changes, in
      accordance with section 1886(d)(4)(C) of the Act.                                                                                                     
    \4\ This column shows the payment effects of updating the data used to calculate the wage index with data from the FY 1994 cost reports and the Public  
      Law 105-33 provision establishing a floor on the area wage index for urban hospitals.                                                                 
    \5\ This column displays the combined impact of the reclassification and recalibration of the DRGs, the updated wage data used to calculate the wage    
      index, 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 2 and 3, and the FY 1998 budget neutrality factor of 0.997731.                              
    \6\ This column illustrates the payment impact of the Puerto Rico-specific wage index, applied to the Puerto Rico-specific standardized amounts.        
    \7\ This column illustrates the payment impact of completing the phase-out of day outlier payments, and increasing cost outlier payments, in accordance 
      with section 1886(d)(5) of the Act.                                                                                                                   
    \8\ Shown here are the combined effects of geographic reclassification by the Medicare Geographic Classification Review Board (MGCRB). The effects shown
      here demonstrate the FY 1998 payment impact of going from no reclassifications to the reclassifications scheduled to be in effect for FY 1998.        
      Reclassification for prior years has no bearing on the payment impact shown here.                                                                     
    \9\ This column shows changes in payments from FY 1997 to FY 1998. It incorporates all of the changes displayed in columns 4 through 7 (the changes     
      displayed in columns 2 and 3 are included in column 4). It also displays the impact of the changes shown in column 1, less the 2.7 percent negative   
      impact of the zero update. Finally, it shows the impact of changes in hospitals' reclassification status in FY 1998 compared to FY 1997, and the      
      difference in outlier payments from FY 1997 to FY 1998. The sum of these columns may be different from the percentage changes shown here due to       
      rounding and interactive effects.                                                                                                                     
    
    
    [[Page 46122]]
    
    B. Impact of Changes Enacted by Public Law 105-33 (Column 1)
    
        Public Law 105-33 contained several provisions that significantly 
    impact hospitals' payments under the operating prospective payment 
    system during FY 1998, relative to payments if Public Law 105-33 had 
    not been enacted. Certainly the largest single impact is the zero 
    update for the standardized amounts and the hospital-specific rate. 
    Prior to this change, the law provided that hospitals were to receive 
    the full market basket of 2.7 percent. As indicated above, temporary 
    relief hospitals do receive an update of 0.5 percent. Freezing the 
    standardized amounts and the hospital-specific rates at their FY 1997 
    levels (prior to any budget neutrality calculations) is the largest 
    impact evident in column 1.
        As discussed previously, to illustrate the impacts of the changes 
    resulting from Public Law 105-33, we begin with a FY 1998 baseline 
    payment model using a 2.7 percent update; the FY 1997 GROUPER; the FY 
    1997 wage index; no MGCRB reclassifications; outlier payments based on 
    25 percent day outliers and factoring IME and DSH into DRG payments 
    plus outlier payments; no MDHs; and Puerto Rico hospitals receive 25 
    percent of the national Puerto Rico amount and 75 percent of the Puerto 
    Rico amount. From this baseline we moved to a payment simulation model 
    incorporating all but one of the changes enacted by Public Law 105-33; 
    we did not include the floor on the wage index for urban hospitals 
    because that change was required to be budget neutral. Therefore, this 
    change is included in the new (FY 1994) wage data column.
        The overall impact on hospital operating payments per case due to 
    Public Law 105-33 is a 3.9 percent reduction in payments. As pointed 
    out above, 2.7 percent of this decline relates to the freeze in the 
    update. This negative impact is evident across all hospital categories, 
    although it is offset to a small degree among those hospitals that 
    receive the special 0.5 percent update. However, this update provision 
    has an insignificant impact overall. In fact, the 360 temporary relief 
    hospitals that qualify for this special update have only a slightly 
    smaller decrease in payments (3.8 percent) than the national average. 
    This is largely due to the change that eliminated the IME and DSH 
    adjustments attributable to outlier payments. Although these hospitals 
    by definition do not receive IME or DSH payments, they are negatively 
    impacted by the redistribution of outlier payments that result from the 
    change. Because we no longer standardize the charges of cases by 
    hospitals' IME and DSH factors, the outlier thresholds are higher and 
    there is a substantial redistribution of outlier payments toward 
    hospitals that also receive IME and DSH and away from non-IME, non-DSH 
    hospitals. The negative impact of this change on the latter group of 
    hospitals is approximately 1.8 percent.
        The change in outlier policy also affects overall payments. Because 
    IME and DSH are now based only on the base DRG amount, total payments 
    are less than they would be before this change. The net impact of this 
    change is to reduce the overall average payment per case by 
    approximately 0.6 percent. The reduction in the IME adjustment also 
    reduces payments by approximately 0.6 percent overall. The combined 
    impacts of these changes and the other, less significant changes result 
    in an overall decrease in hospitals' average payment per case due to 
    Public Law 105-33 of 3.9 percent.
        The only hospital categories demonstrating a net increase in 
    payments in column 1 are urban and rural Puerto Rico hospitals (3.1 
    percent and 4.9 percent, respectively). This is due to the change in 
    the formula for calculating payments for Puerto Rico hospitals from 25 
    percent of the national amount and 75 percent of the Puerto Rico 
    amount, to a 50/50 blend of the two amounts. Because the national 
    amount is more than twice the Puerto Rico amount, the change in the 
    blend more than offsets the 2.7 percent decrease in the amounts after 
    Public Law 105-33. The smaller increase among urban Puerto Rico 
    hospitals is explained at least in part by the fact that, because the 
    national Puerto Rico amount is the same for large urban and other area 
    hospitals while the large urban Puerto Rico amount is greater than the 
    other area Puerto Rico amount, large urban Puerto Rico hospitals gain 
    slightly less than other Puerto Rican hospitals from the formula 
    change.
        The hospital category with the smallest negative impact in this 
    column is MDHs. Their payments overall drop by only 2.0 percent. Over 
    30 hospitals in this category have payment increases after being 
    reinstated as an MDH, despite the zero update and the fact that they 
    receive only 50 percent of the difference between their hospital-
    specific rate and the Federal rate.
        The greatest negative impact in this column is a 4.4 percent drop 
    in payments among teaching hospitals with more than 100 residents and 
    urban hospitals in the Middle Atlantic census division (due to the 
    concentration of teaching hospitals in this census division). This 
    effect is due to the reduction in the IME adjustment, although the 
    decrease in the IME adjustment factor is offset for these hospitals to 
    some extent by the outlier changes which result in higher outlier 
    payments to teaching and disproportionate share hospitals. Without the 
    change to remove the IME and DSH adjustments from the outlier 
    calculation, payments to major teaching hospitals would have fallen by 
    approximately 1.0 percent more.
        Finally, the decline in payments shown here among rural hospitals 
    is generally not as great as the decline among urban hospitals. 
    Overall, rural hospitals' payments decline by 3.4 percent, compared to 
    3.9 percent for urban hospitals. This result is attributable to those 
    rural hospitals paid on the basis of their hospital-specific rate, 
    particularly SCHs. Because hospitals receiving their hospital-specific 
    rate do not receive outliers, IME, or DSH, they are unaffected by the 
    policy changes related to these additional payments. Therefore, their 
    net change in payments after Pub. L. 105-33 is generally limited to the 
    2.7 percent reduction in the update for FY 1998 (from full market 
    basket percentage increase to 0).
    
    C. Impact of the Changes to the DRG Classifications and Relative 
    Weights (Column 2)
    
        In column 2 of Table I, we present the combined effects of the DRG 
    reclassifications and recalibration, as discussed in section II of the 
    preamble to this final rule with comment period. Section 
    1886(d)(4)(C)(i) of the Act requires us each year to 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 1997 DRG relative 
    weights (GROUPER version 14) to aggregate payments using the FY 1998 
    DRG relative weights (GROUPER version 15). Overall, payments increase 
    by 0.1 percent due to the DRG changes, although this is prior to 
    applying the budget neutrality factor for DRG and wage index changes 
    (see column 4). Consistent with the minor changes we are implementing 
    for the FY 1998 GROUPER, the redistributional impacts of DRG 
    reclassifications and recalibration across hospital groups are small (a 
    0.1 percent increase for large urban hospitals; a 0.2 percent increase 
    for other urban hospitals; and a 0.3 percent decrease among rural 
    hospitals).
    
    [[Page 46123]]
    
     Within hospital categories, the net effects for urban hospitals are 
    small positive changes for larger hospitals (200 or more beds), and 
    slightly negative changes for urban hospitals with fewer than 200 beds. 
    Among rural hospitals, the smallest rural hospitals (fewer than 50 
    beds) experience a decrease of 0.6 percent. For other rural bed size 
    categories, slight negative impacts prevail. Only the largest rural 
    hospitals (200 or more beds) avoid any negative impact from the 
    changes.
        The breakdowns by urban census division show that the increase 
    among urban hospitals is spread across all census categories except 
    Puerto Rico, with the largest increase (0.3 percent) for hospitals in 
    the Mountain census division. For rural hospitals, the largest decrease 
    is 0.4 percent for hospitals in the West North Central and West South 
    Central census divisions and 0.6 percent for the five rural hospitals 
    in Puerto Rico. Rural hospitals in all other census regions experience 
    decreases of 0.2 or 0.3 percent. This pattern of negative impacts upon 
    small and rural hospitals is also apparent when examining the effects 
    of DRG changes on hospitals according to special payment categories, 
    with the largest decreases (0.5 percent) among MDHs, rural DSH SCHs, 
    and rural DSH hospitals with fewer than 100 beds (0.6 percent 
    decrease).
        Overall, we attribute the changes associated with DRG recalibration 
    to the increasing gap between the relative weights for medical, 
    diagnostic, and less complicated surgical DRGs and the weights for the 
    more complicated surgical DRGs. Since the cases associated with the 
    former DRGs tend to be treated more often in smaller hospitals with 
    fewer resources available, lower relative weights associated with those 
    cases would disproportionately affect these hospitals. In general, 
    small hospitals that serve a disproportionate share of low-income 
    patients fit this definition. In contrast, larger hospitals in both 
    urban and rural areas, which tend to treat the latter group of DRGs, 
    would experience small payment increases. Teaching hospitals, which 
    also treat the more complicated cases, experience similar effects. We 
    note, however, that both the positive and negative impacts are 
    relatively minor, in almost all categories they are 0.5 percent or 
    less.
    
    D. Impact of Updating the Wage Data (Column 3)
    
        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 final wage index for FY 
    1998 is based on data submitted for hospital cost reporting periods 
    beginning on or after October 1, 1993 and before October 1, 1994. As 
    with the previous column, the impact of the new data on hospital 
    payments is isolated by holding the other payment parameters constant 
    in the two simulations. That is, column 3 shows the percentage changes 
    in payments when going from a model using the FY 1997 wage index based 
    on FY 1993 wage data before geographic reclassifications to a model 
    using the FY 1998 prereclassification wage index based on FY 1994 wage 
    data. Also included in the model using the FY 1994 wage data are the 
    effects of the provision of Public Law 105-33 that urban hospitals' 
    wage indexes may not be below the wage index of the rural areas in the 
    State in which the urban hospital is located.
        The results indicate that the impact of the new wage data is a 0.1 
    percent increase overall in hospital payments (prior to applying the 
    budget neutrality factor, see column 4). Rural and other urban 
    hospitals generally appear to benefit from the update with payments 
    increasing 0.4 and 0.2 percent, respectively. The increases for rural 
    hospitals are attributable to relatively large increases in the wage 
    index values for the rural areas of particular States (although none 
    increased by more than 5 percent). The increases for other urban 
    hospitals, 0.2 percent compared to 0.1 percent in FY 1997 and in the FY 
    1998 proposed wage index, appear to be attributable in large part to 
    the requirement that the wage index values for urban hospitals be at 
    least equal to the rural wage index values for the States in which they 
    are located. Hospitals in 32 urban areas experienced increases in their 
    wage index values as a result of that provision. Hospitals in nine of 
    the urban areas experienced increases of more than 5 percent as a 
    result of the provision for a Statewide rural wage index floor for 
    urban hospitals.
        Some of the largest changes in payments are found among both urban 
    and rural hospitals grouped by census division, although in almost all 
    cases payments change by less than 1 percent. Our review of the wage 
    data indicates that the changes are attributable to improved reporting, 
    as well as relative changes in labor costs.
        Among the urban census divisions, payments change by 0.3 percent or 
    less in all census divisions except one. The East South Central census 
    division experiences an increase of 1.0 percent which stems largely 
    from wage index increases of 5.9 and 5.2 percent in the Mobile, Alabama 
    and the Tuscaloosa, Alabama MSAs.
        Among the rural hospitals, all census divisions experience 
    increases except for the Middle Atlantic census division which 
    experiences a slight decrease of 0.4 percent. The largest increase 
    occurs in the Pacific (and Puerto Rico, discussed separately below) 
    census division which experiences an increase of 1.1 percent. Here, 
    Oregon's rural wage index value rises by 3.2 percent, and Washington's 
    rural wage index value increases by 2.9 percent. The next largest 
    increase (0.6 percent) occurs in the rural New England and the East 
    South Central census divisions. In the New England census division, the 
    rural Vermont wage index value increases by 4.4 percent, and the rural 
    Maine wage index value increases by 1.8 percent. In the East South 
    Central census division, the rural Alabama wage index value increases 
    by 1.9 percent, and the rural Mississippi wage index value increases by 
    1.7 percent.
        In Puerto Rico, payments increase by 0.3 percent for the urban 
    hospitals and by 2.4 percent for the five rural hospitals. Although 
    column 5 shows the isolated effects of introducing the Puerto Rico-
    specific wage index, it is also included in the payment simulations 
    here showing the impacts of the new wage data. Of the six urban areas 
    in Puerto Rico, two experience increases in their national wage index 
    values, including the San Juan-Bayamon area (2.5 percent), which 
    contains the majority of the urban Puerto Rico hospitals (29 of 48), 
    and the Mayaguez area (6.2 percent). The rural Puerto Rico area 
    experiences an increase in its national wage index value of 4.9 
    percent. The following chart compares the shifts in wage index values 
    for labor market areas for FY 1998 with those from FY 1997.
        The majority of labor market areas (334) experience less than a 5 
    percent change. A total of 33 labor market areas experience a change 
    between 5 and 10 percent; 24 of those experience increases. Still fewer 
    labor markets experience a change of more than 10 percent; two 
    experience increases, and one experiences a decrease. In two urban 
    labor market areas which include both West Virginia and Ohio hospitals, 
    the Ohio hospitals receive their State's rural wage index value. In one 
    of those labor market areas, the Ohio hospitals experience an increase 
    of more than 10 percent. In the other labor market area, the Ohio 
    hospitals experience an increase between 5 and 10 percent.
        We reviewed the data for any area that experienced a wage index 
    change of 5
    
    [[Page 46124]]
    
    percent or more to determine the reason for the fluctuation.
    
    ------------------------------------------------------------------------
                                                 No. of labor market areas  
      Percentage change in area wage index   -------------------------------
                     values                       FY 1998         FY 1997   
    ------------------------------------------------------------------------
    Increase more than 10 percent...........               2               0
    Increase between 5 and 10 percent                                       
     (inclusive)............................              24              14
    Increase or decrease less than 5 percent             334             341
    Decrease between 5 and 10 percent                                       
     (inclusive)............................               9              11
    Decrease more than 10 percent...........               1               2
    ------------------------------------------------------------------------
    
        Under the FY 1998 wage index, 95.3 percent of urban hospitals and 
    99.9 percent of rural hospitals will experience a change in their wage 
    index value of less than 5 percent. Among urban hospitals, 128 will 
    experience a change of between 5 and 10 percent (97 increasing and 31 
    decreasing), while only 3 rural hospitals fall into this category, all 
    decreasing. Eight urban hospitals and no rural hospitals will 
    experience a change of more than 10 percent. The following chart shows 
    the projected impact for urban and rural hospitals.
    
    ------------------------------------------------------------------------
                                                            No. of hospitals
          Percentage change in area wage index values      -----------------
                                                             Urban    Rural 
    ------------------------------------------------------------------------
    Increase more than 10 percent.........................        4        0
    Increase between 5 and 10 percent (inclusive).........       97        0
    Increase or decrease less than 5 percent..............     2763     2236
    Decrease between 5 and 10 percent (inclusive).........       31        3
    Decrease more than 10 percent.........................        4        0
    ------------------------------------------------------------------------
    
    E. Combined Impact of DRG and Wage Index Changes-- Including Budget 
    Neutrality Adjustment (Column 4)
    
        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. Furthermore, as noted above, section 4410 of Pub. L. 105-33 
    required the implementation of the wage index floor to be budget 
    neutral. We compared aggregate payments using the FY 1997 DRG relative 
    weights and wage index to aggregate payments using the FY 1998 DRG 
    relative weights and wage index, including the wage index floor. Based 
    on this comparison, we computed a wage and recalibration budget 
    neutrality factor of 0.997731. 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 4. 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 2 and 3, minus the approximately 0.2 percent 
    decrease attributable to the budget neutrality factor. There may be 
    some variation of plus or minus 0.1 percent due to rounding.
    
    F. Puerto Rico-Specific Wage Index (Column 5)
    
        As described in section III. of the preamble to this final rule 
    with comment period, we are adopting a Puerto Rico-specific wage index 
    for FY 1998. These wage index values will be applied to the Puerto Rico 
    standardized amounts. Column 5 shows the effect of implementing this 
    change results in no payment impact for all hospitals. In Puerto Rico, 
    payments increase by 3.7 percent among urban hospitals, and 4.4 percent 
    among rural hospitals. As shown in Table 4F of the Addendum, the Puerto 
    Rico-specific wage index values are considerably higher than Puerto 
    Rico's national wage index values (shown in Table 4A of the Addendum). 
    This results in the increases shown in this column.
        However, these increases are less than those shown in the proposed 
    rule as a result of the change to the Puerto Rico payment formula. The 
    amount attributable to the Puerto Rico payment amount (and which is 
    adjusted by the Puerto Rico-specific wage index) is now 50 percent 
    instead of 75 percent.
        As indicated above, this change is shown in isolation here for ease 
    in reading Table I. To actually calculate the national DRG and wage 
    index budget neutrality factors, the Puerto Rico-specific wage index 
    was included. As described in the Addendum, we also computed a DRG 
    reclassification and recalibration budget neutrality adjustment for the 
    Puerto Rico standardized amounts equal to 0.999117.
    
    G. Outlier Changes (Column 6)
    
        Currently, Medicare provides extra payment in addition to the basic 
    DRG payment amount for extremely costly or extraordinarily lengthy 
    cases (cost outliers and day outliers, respectively). Beginning with FY 
    1995, section 1886(d)(5)(A) of the Act requires the Secretary to phase-
    out payments for day outliers. Under the requirements of section 
    1886(d)(5)(A)(v), the proportion of day outlier payments to total 
    outlier payments is reduced from FY 1994 levels as follows: 75 percent 
    of FY 1994 levels in FY 1995, 50 percent of FY 1994 levels in FY 1996, 
    and 25 percent of FY 1994 levels in FY 1997. For discharges occurring 
    after September 30, 1997, the Secretary will no longer pay for day 
    outliers under the provisions of section 1886(d)(5)(A)(I) of the Act. 
    This reduction in day outlier payments will be offset by an increase in 
    cost outlier payments.
        As discussed in the Addendum, for FY 1998, a case would receive 
    cost outlier payments if its costs exceed the DRG payment amount plus 
    any IME and DSH payments by at least $11,050. We are also maintaining 
    the marginal cost factor for cost outliers at 80 percent.
        The payment impacts of these changes are minimal. Hospital 
    categories negatively affected by phasing-out day outliers are 
    consistent with the categories negatively affected in previous years: 
    urban Middle Atlantic census division (0.7 percent decline); urban 
    hospitals with 500 or more beds (0.2 percent decline); teaching 
    hospitals with 100 or more residents (0.3 percent decline); and 
    hospitals for which data were unavailable to calculate Medicare 
    utilization rates (1.5 percent decline). This last category contains a 
    number of New York City public hospitals that file manual cost reports. 
    Because the changes to the outlier policy result in a shift in payments 
    from cases paid as day outliers to cases paid as cost outliers, this 
    indicates that these categories have higher percentages of day 
    outliers.
    
    [[Page 46125]]
    
    H. Impact of MGCRB Reclassifications (Column 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 7 reflect the per case 
    payment impact of moving from this baseline to a simulation 
    incorporating the MGCRB decisions for FY 1998. As noted below, these 
    decisions affect hospitals' standardized amount and wage index area 
    assignments. In addition, rural hospitals reclassified for purposes of 
    the standardized amount qualify to be treated as urban for purposes of 
    the DSH adjustment.
        By March 30 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 FY 1998 wage index values incorporate all of the MGCRB's 
    reclassification decisions for FY 1998 as of the publication of this 
    final rule with comment period. The wage index values also reflect any 
    decisions made by the HCFA Administrator through the appeals and review 
    process for MGCRB decisions for FY 1998. The overall effect of 
    geographic reclassification is required to be budget neutral by section 
    1886(d)(8)(D) of the Act. Therefore, we applied an adjustment of 
    0.994720 to ensure that the effects of reclassification are budget 
    neutral. (See section II.A.4 of the Addendum to this final rule with 
    comment period.)
        As a group, rural hospitals benefit from geographic 
    reclassification. Their payments rise 2.2 percent, while payments to 
    urban hospitals decline 0.4 percent. Large urban hospitals lose 0.4 
    percent because, as a group, they have the smallest percentage of 
    hospitals that are reclassified (fewer than 2 percent of large urban 
    hospitals are reclassified). There are enough hospitals in other urban 
    areas that are reclassified to limit the decrease in payments to urban 
    hospitals stemming from the budget neutrality offset to 0.3 percent. 
    Among urban hospital groups generally (that is, bed size, census 
    division, and special payment status), payments fall by between 0.3 and 
    0.5 percent.
        A positive impact is evident among all rural hospital groups. The 
    smallest effect among the rural census divisions is 1.1 percent for the 
    Middle Atlantic division. The largest impact is for the West South 
    Central division, with an increase of 3.3 percent.
        Among rural hospitals designated as RRCs, 65 hospitals are 
    reclassified for purposes of the wage index only, leading to the 4.3 
    percent increase in payments among RRCs overall. This positive impact 
    on RRCs is also reflected in the category of rural hospitals with 200 
    or more beds, which has a 4.2 percent increase in payments.
        Rural hospitals reclassified for FY 1997 and FY 1998 experience a 
    9.0 percent increase in payments. This may be due to the fact that 
    these hospitals have the most to gain from reclassification and have 
    been reclassified for a period of years. Rural hospitals reclassified 
    for FY 1998 only experience a 7.3 percent increase in payments, while 
    rural hospitals reclassified for FY 1997 only experience a 0.2 decrease 
    in payments. Urban hospitals reclassified for FY 1997 but not FY 1998 
    experience a 1.0 percent decline in payments overall. This appears to 
    be due to the combined impacts of the budget neutrality adjustment, and 
    a number of Bergen-Passaic, New Jersey hospitals in this category that 
    experience a 4.8 percent drop in their wage index after 
    reclassification. Urban hospitals reclassified for FY 1998 but not for 
    FY 1997 experience no overall change in their payments.
        The FY 1998 Reclassification rows of Table I show the changes in 
    payments per case for all FY 1998 reclassified and nonreclassified 
    hospitals in urban and rural locations for each of the three 
    reclassification categories (standardized amount only, wage index only, 
    or both). The table illustrates that the largest impact for 
    reclassified rural hospitals is for those hospitals reclassified for 
    both the standardized amount and the wage index. These hospitals 
    receive an 18.0 percent increase in payments. In addition, rural 
    hospitals reclassified just for the wage index receive an 8.6 percent 
    payment increase. The overall impact on reclassified hospitals is to 
    increase their payments per case by an average of 5.8 percent for FY 
    1998.
        Among the 27 rural hospitals deemed to be urban under section 
    1886(d)(8)(B) of the Act, payments increase 0.7 percent due to MGCRB 
    reclassification. This is because, although these hospitals are treated 
    as being attached to an urban area in our baseline (their redesignation 
    is ongoing, rather than annual like the MGCRB reclassifications), they 
    are eligible for MGCRB reclassification. For FY 1998, one hospital in 
    this category reclassified to a large urban area.
        The reclassification of hospitals primarily affects payment to 
    nonreclassified hospitals through changes in the wage index and the 
    geographic reclassification budget neutrality adjustment required by 
    section 1886(d)(8)(D) of the Act. Among hospitals that are not 
    reclassified, the overall impact of hospital reclassifications is an 
    average decrease in payments per case of about 0.5 percent, which 
    corresponds closely with the geographic reclassification budget 
    neutrality factor. Rural nonreclassified hospitals decrease slightly 
    less, experiencing a 0.4 percent decrease. This occurs because the wage 
    index values in some rural areas increase after reclassified hospitals 
    are excluded from the calculation of those indexes.
        The foregoing analysis was based on MGCRB and HCFA Administrator 
    decisions made by March 29, 1997. In addition, changes to some MGCRB 
    decisions through the appeals, review, and applicant withdrawal process 
    are also included.
    
    I. All Changes (Column 8)
    
        Column 8 compares our estimate of payments per case, incorporating 
    all changes reflected in this final rule with comment period for FY 
    1998 (including statutory changes), to our estimate of payments per 
    case in FY 1997. It includes the effects of the changes enacted by 
    Public Law 105-33, and reflects the 0.3 percentage point difference 
    between the projected outlier payments in FY 1998 (5.1 percent of total 
    DRG payments) and the current estimate of the percentage of actual 
    outlier payments in FY 1997 (4.8 percent), as described in the 
    introduction to this Appendix and the Addendum.
        Column 8 also includes the impacts of FY 1998 MGCRB 
    reclassifications compared to the payment impacts of FY 1997 
    reclassifications. (Column 7 shows the impact of going from no MGCRB 
    reclassifications to the FY 1998 reclassifications.) When comparing FY 
    1998 payments to FY 1997 payments, the percent changes due to FY 1998 
    reclassifications shown in column 7 need to be offset by the effects of 
    reclassification on hospitals' FY 1997 payments (column 4 of Table 1, 
    September 1, 1996 final rule; 61 FR 46306). For example, the impact of 
    MGCRB reclassifications on rural hospitals' FY 1997 payments was 
    approximately a 2.3 percent increase, offsetting the 2.2 percent 
    increase in column 7. Therefore, the net change in FY 1998 payments due 
    to
    
    [[Page 46126]]
    
    reclassification for rural hospitals is actually closer to a decrease 
    of 0.1 percent relative to FY 1997. However, last year's analysis 
    contained a somewhat different set of hospitals, so this might affect 
    the numbers slightly.
        To factor in the effects of the changes from Public Law 105-33 from 
    column 1 into the overall changes shown in this column, it is first 
    necessary to deduct the impact of the zero update included in column 1. 
    Because column 1 compares a FY 1998 baseline after Public Law 105-33 to 
    a FY 1998 baseline before this law was enacted, it includes the impact 
    of going from a FY 1998 update of 2.7 percent to a zero update. Of 
    course, this 2.7 percent update for FY 1998 does not affect FY 1997 
    payments, so it does not show up in column 8. The impacts of the other 
    changes, however, such as reducing the IME factor and eliminating the 
    IME and DSH adjustments from outlier payments, are reflected in this 
    column.
        Finally, 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 8 may not equal the sum of the 
    changes in column 1, minus 2.7, plus the changes in columns 4 through 7 
    (plus the other impacts that we are able to identify).
        The overall payment change from FY 1998 to FY 1997 for all 
    hospitals is a 0.9 percent decrease. This reflects the 0.0 percent net 
    change in total payments due to the proposed changes for FY 1998 shown 
    in columns 4 through 7, the zero update for FY 1998, the 0.3 percent 
    higher outlier payments in FY 1998 compared to FY 1997, as discussed 
    above, and the 1.2 percent decline in payments due to Public Law 105-33 
    (3.9 percent decrease in column 1 minus 2.7 percent for the FY 1998 
    update). This 1.2 percent decline is attributable largely to reducing 
    IME and eliminating IME and DSH from outlier payments.
        Hospitals in urban areas experience a 1.0 percent drop in payments 
    per case from FY 1997. Similar to all hospitals nationally, this is 
    primarily due to the factors discussed above. Urban hospitals' 0.4 
    negative impact in FY 1998 due to reclassification is offset by a 
    similar impact from FY 1997 reclassifications. Hospitals in large and 
    other urban areas experience 1.2 percent and 0.7 percent decreases, 
    respectively. The larger decrease for large urban hospitals is 
    primarily due to the reduction in IME payments. Overall payments per 
    case among this group of hospitals would be approximately 0.8 percent 
    higher without this reduction.
        Hospitals in rural areas generally fare better during FY 1998 than 
    do urban hospitals. Overall, rural hospitals experience a decrease of 
    0.4 percent. This smaller decrease for rural hospitals appears to be 
    primarily attributable to the special category rural hospitals. In 
    particular, the 368 rural hospitals categorized as MDHs experience a 
    0.8 percent average payment increase. As noted previously, hospitals 
    paid on the basis of the hospital-specific rate generally see less 
    negative impact due to the changes in Public Law 105-33 because they do 
    not receive IME, DSH, or outliers.
        Puerto Rico stands out as having large payment increases for FY 
    1998, with urban Puerto Rico hospitals' payments increasing by 12.2 
    percent, and rural Puerto Rico hospitals' payments increasing by 15.3 
    percent. As noted above, this is largely due to the implementation of 
    the Puerto Rico-specific wage index during FY 1998 and the change to 
    the payment formula for Puerto Rico hospitals in Public Law 105-33.
        Among census divisions, East South Central displays the only 
    increase among urban hospitals, 0.2 percent. This is related to the 1.0 
    percent overall increase due to the new wage data. On the other hand, 
    the urban Middle Atlantic and New England hospitals lose 2.0 percent 
    and 1.9 percent per case, respectively. This is largely related to the 
    concentration of teaching hospitals in these census areas. In addition, 
    the Middle Atlantic hospitals lose 0.7 percent due to the elimination 
    of day outlier payments, and the New England hospitals lose 0.3 percent 
    as a result of the new wage data.
        Among rural census divisions, the Mountain division displays an 
    overall increase of 0.3 percent. This positive impact is largely due to 
    hospitals reclassified during FY 1998 that were not reclassified during 
    FY 1997. Hospitals in the South Atlantic are the biggest losers among 
    the rural census divisions, with FY 1998 average payments per case 
    falling by 1.0 percent from FY 1997. Twenty hospitals reclassified here 
    during FY 1997 are no longer reclassified during FY 1998. Rural Middle 
    Atlantic hospitals are negatively impacted by the DRG recalibration, 
    new wage data, and eliminating the day outlier payments, all leading to 
    their 0.9 percent decrease in FY 1998 payments.
        As expected, large teaching hospitals as a group experience the 
    largest payment reductions. Those with more than 100 residents see 
    payments per case decrease by 1.6 percent. Urban hospitals receiving 
    both IME and DSH experience 1.2 percent payment reductions. Hospitals 
    for which we were unable to determine ownership designation or Medicare 
    utilization due to a lack of cost report data, lose 2.4 percent in 
    payments. As indicated previously, this category contains a number of 
    public New York City hospitals, many of which have large teaching 
    programs.
        The largest negative payment impacts from FY 1997 to FY 1998 are 
    among hospitals that were reclassified for FY 1997 and are not 
    reclassified for FY 1998. Overall, these hospitals lose 4.2 percent. On 
    the other hand, hospitals reclassified for FY 1998 that were not 
    reclassified for FY 1997 would experience the greatest payment 
    increases (aside from Puerto Rico hospitals): 7.3 percent for 76 rural 
    hospitals in this category and 2.8 percent for 13 urban hospitals.
    
                 Table II.--Impact Analysis of Changes for FY 1998 Operating Prospective Payment System             
                                                   [Payments per case]                                              
    ----------------------------------------------------------------------------------------------------------------
                                                                                Average FY   Average FY             
                                                                     No. of        1997         1998                
                                                                   hospitals   payment per  payment per  All changes
                                                                                   case         case                
                                                                          (1)      (2) \1\      (3) \1\          (4)
                                                                                                                    
    ----------------------------------------------------------------------------------------------------------------
    (BY GEOGRAPHIC LOCATION):                                                                                       
        ALL HOSPITALS...........................................        5,088        6,771        6,711         -0.9
        URBAN HOSPITALS.........................................        2,858        7,347        7,276         -1.0
        LARGE URBAN AREAS.......................................        1,630        7,899        7,808         -1.2
        OTHER URBAN AREAS.......................................        1,228        6,588        6,545         -0.7
    
    [[Page 46127]]
    
                                                                                                                    
        RURAL AREAS.............................................        2,230        4,451        4,432         -0.4
    BED SIZE (URBAN):                                                                                               
        0-99 BEDS...............................................          724        4,921        4,878         -0.9
        100-199 BEDS............................................          954        6,159        6,115         -0.7
        200-299 BEDS............................................          570        6,926        6,868         -0.8
        300-499 BEDS............................................          457        7,874        7,794         -1.0
        500 OR MORE BEDS........................................          153        9,660        9,535         -1.3
    BED SIZE (RURAL):                                                                                               
        0-49 BEDS...............................................        1,170        3,650        3,639         -0.3
        50-99 BEDS..............................................          657        4,152        4,141         -0.3
        100-149 BEDS............................................          235        4,615        4,594         -0.5
        150-199 BEDS............................................           93        4,794        4,775         -0.4
        200 OR MORE BEDS........................................           75        5,612        5,570         -0.8
    URBAN BY CENSUS DIV.:                                                                                           
         NEW ENGLAND............................................          159        7,913        7,766         -1.9
        MIDDLE ATLANTIC.........................................          431        8,137        7,971         -2.0
        SOUTH ATLANTIC..........................................          420        7,008        6,953         -0.8
        EAST NORTH CENTRAL......................................          475        7,057        7,004         -0.7
        EAST SOUTH CENTRAL......................................          163        6,518        6,530          0.2
        WEST NORTH CENTRAL......................................          191        6,948        6,905         -0.6
        WEST SOUTH CENTRAL......................................          367        6,830        6,797         -0.5
        MOUNTAIN................................................          129        7,084        7,041         -0.6
        PACIFIC.................................................          475        8,422        8,343         -0.9
        PUERTO RICO.............................................           48        2,694        3,022         12.2
    RURAL BY CENSUS DIV.:                                                                                           
        NEW ENGLAND.............................................           53        5,283        5,249         -0.6
        MIDDLE ATLANTIC.........................................           85        4,752        4,708         -0.9
        SOUTH ATLANTIC..........................................          297        4,631        4,582         -1.0
        EAST NORTH CENTRAL......................................          302        4,502        4,470         -0.7
        EAST SOUTH CENTRAL......................................          275        4,115        4,116          0.0
        WEST NORTH CENTRAL......................................          512        4,140        4,138          0.0
        WEST SOUTH CENTRAL......................................          347        4,005        3,994         -0.3
        MOUNTAIN................................................          213        4,772        4,787          0.3
        PACIFIC.................................................          141        5,582        5,578         -0.1
        PUERTO RICO.............................................            5        2,072        2,390         15.3
    (BY PAYMENT CATEGORIES):                                                                                        
        URBAN HOSPITALS.........................................        2,948        7,309        7,239         -1.0
        LARGE URBAN AREAS.......................................        1,776        7,763        7,675         -1.1
        OTHER URBAN AREAS.......................................        1,172        6,590        6,548         -0.6
        RURAL AREAS.............................................        2,140        4,429        4,409         -0.5
    TEACHING STATUS:                                                                                                
        NON-TEACHING............................................        3,993        5,494        5,462         -0.6
        FEWER THAN 100 RESIDENTS................................          856        7,216        7,158         -0.8
        100 OR MORE RESIDENTS...................................          239       11,051       10,869         -1.6
    DISPROPORTIONATE SHARE HOSPITALS (DSH):                                                                         
        NON-DSH.................................................        3,185        5,801        5,755         -0.8
        URBAN DSH--100 BEDS OR MORE.............................        1,413        7,997        7,917         -1.0
        FEWER THAN 100 BEDS.....................................           89        5,081        5,041         -0.8
        RURAL DSH SOLE COMMUNITY (SCH)..........................          155        4,229        4,211         -0.4
        REFERRAL CENTERS (RRC)..................................           50        5,203        5,232          0.6
        OTHER RURAL DSH HOSP.--100 BEDS OR MORE.................           66        4,198        4,138         -1.4
        FEWER THAN 100 BEDS.....................................          130        3,565        3,557         -0.2
    URBAN TEACHING AND DSH:                                                                                         
        BOTH TEACHING AND DSH...................................          708        8,994        8,884         -1.2
        TEACHING AND NO DSH.....................................          330        7,377        7,301         -1.0
        NO TEACHING AND DSH.....................................          794        6,413        6,381         -0.5
        NO TEACHING AND NO DSH..................................        1,116        5,664        5,621         -0.8
    SPECIAL UPDATE HOSPITALS (UNDER SEC. 4401(b) OF PUBLIC LAW                                                      
     105-33.....................................................          360        5,276        5,247         -0.6
    RURAL HOSPITAL TYPES:                                                                                           
        NONSPECIAL STATUS HOSPITALS.............................          915        3,945        3,915         -0.8
        RRC.....................................................          158        5,132        5,107         -0.5
        SCH/EACH................................................          642        4,533        4,514         -0.4
        MDH.....................................................          368        3,511        3,540          0.8
        SCH/EACH AND RRC........................................           57        5,315        5,291         -0.5
    TYPE OF OWNERSHIP:                                                                                              
        VOLUNTARY...............................................        2,924        6,945        6,876         -1.0
    
    [[Page 46128]]
    
                                                                                                                    
        PROPRIETARY.............................................          701        6,154        6,120         -0.6
        GOVERNMENT..............................................        1,346        6,278        6,250         -0.4
        UNKNOWN.................................................          117        8,176        7,979         -2.4
    MEDICARE UTILIZATION AS A PERCENT OF INPATIENT DAYS:                                                            
        0-25....................................................          266        8,955        8,850         -1.2
        25-50...................................................        1,307        8,229        8,148         -1.0
        50-65...................................................        1,988        6,180        6,133         -0.8
        OVER 65.................................................        1,410        5,243        5,196         -0.9
        UNKNOWN.................................................          117        8,176        7,979         -2.4
                                                                                                                    
      HOSPITALS RECLASSIFIED BY THE MEDICARE GEOGRAPHIC REVIEW                                                      
                                BOARD                                                                               
                                                                                                                    
    RECLASSIFICATION STATUS DURING FY97 AND FY98:                                                                   
        RECLASSIFIED DURING BOTH FY97 AND FY98:                           333        6,137        6,083         -0.9
            URBAN...............................................           96        7,297        7,215         -1.1
            RURAL...............................................          237        5,253        5,221         -0.6
        RECLASSIFIED DURING FY98 ONLY                                      89        5,199        5,475          5.3
            URBAN...............................................           13        6,729        6,920          2.8
            RURAL...............................................           76        4,389        4,710          7.3
        RECLASSIFIED DURING FY97 ONLY                                     211        6,047        5,793         -4.2
            URBAN...............................................           94        6,981        6,704         -4.0
            RURAL...............................................          117        4,726        4,504         -4.7
    FY 98 RECLASSIFICATIONS:                                                                                        
        ALL RECLASSIFIED HOSP.:                                           423        5,994        5,990         -0.1
            STAND. AMT. ONLY....................................           94        5,941        5,885         -0.9
            WAGE INDEX ONLY.....................................          282        5,923        5,936          0.2
            BOTH................................................           47        6,333        6,348          0.2
            NONRECLASS..........................................        4,638        6,855        6,788         -1.0
        ALL URBAN RECLASS.:                                               109        7,226        7,178         -0.7
            STAND. AMT. ONLY....................................           45        6,449        6,390         -0.9
            WAGE INDEX ONLY.....................................           31        9,160        9,085         -0.8
            BOTH................................................           33        6,578        6,568         -0.1
            NONRECLASS..........................................        2,749        7,353        7,281         -1.0
        ALL RURAL RECLASS.:                                               314        5,104        5,133          0.6
            STAND. AMT. ONLY....................................           49        4,530        4,480         -1.1
            WAGE INDEX ONLY.....................................          251        5,162        5,195          0.6
            BOTH................................................           14        5,356        5,472          2.2
            NONRECLASS..........................................        1,889        4,212        4,175         -0.9
    OTHER RECLASSIFIED HOSPITALS (SECTION 1886(d)(8)(B))........           27        4,740        4,744          0.1
    ----------------------------------------------------------------------------------------------------------------
    \1\ These payment amounts per case do not reflect any estimates of annual case-mix increase.                    
    
        Table II presents the projected impact of the changes for FY 1998 
    for urban and rural hospitals and for the different categories of 
    hospitals shown in Table I. It compares the projected payments per case 
    for FY 1998 with the average estimated per case payments for FY 1997, 
    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.
    
    VII. Impact of Changes in the Capital Prospective Payment System
    
    A. General Considerations
    
        We now have data that were unavailable in previous impact analyses 
    for the capital prospective payment system. Specifically, we have cost 
    report data for the fourth year of the capital prospective payment 
    system (cost reports beginning in FY 1995) available through the June 
    13, 1997 update of the Health Care Provider Cost Report Information 
    System (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 and its projected old capital costs for 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.
         Moreover, our policy of recognizing certain obligated 
    capital as old capital makes it difficult to project future capital-
    related costs for individual hospitals. Under Sec. 412.302(c), a 
    hospital
    
    [[Page 46129]]
    
    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 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 1998 capital cost 
    projections. We discuss in Appendix B the assumptions and computations 
    we employ to generate the amount of obligated capital commitments for 
    use in the FY 1998 capital cost projections.
        In Table III of this appendix, we present the redistributive 
    effects that are expected to occur between ``hold-harmless'' hospitals 
    and ``fully prospective'' hospitals in FY 1998. In addition, we have 
    integrated sufficient hospital-specific information into our actuarial 
    model to project the impact of the FY 1998 capital payment policies by 
    the standard prospective payment system hospital groupings. We caution 
    that 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 
    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 1998 capital 
    costs for individual hospitals, but with the more recent data on the 
    experience to date under the capital prospective payment system, there 
    is adequate information to estimate the aggregate impact on most 
    hospital groupings.
        We have revised Table III since the publication of the proposed 
    rule to provide some information on the effects of the Balanced Budget 
    Act of 1997. Section 4402 of Public Law 105-33 requires a 17.78 percent 
    reduction to the unadjusted standard Federal rate for discharges 
    occurring on or after October 1, 1997. Specifically, we are presenting 
    separate blocks in Table III to show (1) what the effects on FY 1998 
    payments would have been in the absence of the 17.78 percent reduction 
    to the standard Federal rate, and (2) the effects of all changes, 
    including the 17.78 percent reduction to the standard rate, on payments 
    in FY 1998. In Table III, we used the same outlier effects that we used 
    in conjunction with setting the final rate for FY 1998 (that is, the 
    rate with the effects of the 17.78 percent reduction to the standard 
    rate). If we had recalibrated outliers for the unreduced Federal rate, 
    the estimated rate might have been slightly different. However, the 
    estimates in Table III of the effects without the reduction to the 
    standard Federal rate are adequate for the purpose of evaluating the 
    relative impact of the Balanced Budget Act of 1997.
        We present the transition payment methodology by hospital grouping 
    in Table IV. In Table V we present the results of the cross-sectional 
    analysis using the results of our actuarial model. This table presents 
    the aggregate impact of the FY 1998 payment policies. We have also 
    revised Table V to provide information on the effects of the Balanced 
    Budget Act of 1997. Specifically, we have added two additional columns 
    to Table V. The first additional column presents the average FY 1998 
    payments per case without the effects of the Balanced Budget Act of 
    1997. The second column presents changes attributable solely to the 
    Balanced Budget Act of 1997.
    
    B. Projected Impact Based on the FY 1998 Actuarial Model
    
    1. Assumptions
        In this impact analysis, we model dynamically the impact of the 
    capital prospective payment system from FY 1997 to FY 1998 using a 
    capital cost model. The FY 1998 model, described in Appendix B of this 
    final rule with comment period, 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 1995 
    received through the June 13, 1997 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-specific rate determinations that have been made through 
    July 1, 1997 in the provider-specific file. We used these data to 
    determine the FY 1998 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 
    1995, and we age that capital by a formula described in Appendix B. We 
    therefore need to randomly generate only new capital acquisitions for 
    any year after FY 1995. All Federal rate payment parameters are 
    assigned to the applicable hospital.
        Recently available cost report data indicate that old capital costs 
    are declining faster than we previously projected. Consequently, for FY 
    1998 we are projecting faster declines in old capital. To make up for 
    the larger declines in old capital, we are projecting faster growth in 
    new capital. The combination of these two factors will make the 100-
    percent Federal rate higher than the hold-harmless rate for some hold-
    harmless hospitals. Therefore, we are now projecting that more 
    hospitals will move to the 100-percent Federal rate than previously 
    projected.
        For purposes of this impact analysis, the FY 1998 actuarial model 
    includes the following assumptions:
         Medicare inpatient capital costs per discharge are 
    projected to change at the following rates during these periods:
    
    ------------------------------------------------------------------------
            Average percentage change in capital costs per discharge        
    -------------------------------------------------------------------------
                                                                  Percentage
                            Fiscal year                             change  
    ------------------------------------------------------------------------
    1996.......................................................        -2.84
    1997.......................................................         4.46
    1998.......................................................         4.50
    ------------------------------------------------------------------------
    
         The Medicare case-mix index will increase by 0.5 percent 
    in FY 1997 and by 1.0 in FY 1998.
         Beginning in FY 1996 (with the expiration of budget 
    neutrality), the Federal capital rate and hospital-specific rate were 
    updated 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 final FY 1998 update for inflation is 
    0.90 percent (see section III of the Addendum).
    
    [[Page 46130]]
    
    2. Results
        We have used the actuarial model to estimate the change in payment 
    for capital-related costs from FY 1997 to FY 1998. 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, will be paid under the hold-harmless payment methodology. Based 
    on our actuarial model, the breakdown of hospitals is as follows:
    
    ----------------------------------------------------------------------------------------------------------------
                                         Capital transition payment methodology                                     
    -----------------------------------------------------------------------------------------------------------------
                                                                                              FY 1998      FY 1998  
                                                                   Percent of    FY 1998     percent of   percent of
                          Type of hospital                         hospitals    percent of    capital      capital  
                                                                                discharges     costs       payments 
    ----------------------------------------------------------------------------------------------------------------
    Low Cost Hospital...........................................           66           62           56           58
    High Cost Hospital..........................................           34           38           44           42
    ----------------------------------------------------------------------------------------------------------------
    
        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 
    Sec. 412.302(e) for putting obligated capital in 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 have 
    continued 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 1997 to FY 1998 
    using the above described actuarial model. With the final FY 1998 
    Federal rate, we estimate aggregate Medicare capital payments will 
    decrease by 6.74 percent in FY 1998. The main reason for this decrease 
    is the impact of the 17.78 percent reduction to the Federal rate and 
    the hospital-specific rate.
    
                                            Table III.--Impact of Final Changes for FY 1998 on Payments per Discharge                                       
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                     Percent
                                                                No. of                Adjusted   Average  Hospital    Hold    Exceptions    Total    change 
                                                              hospitals   Discharges   Federal   Federal  specific  harmless    payment    payment   over FY
                                                                                       payment   percent   payment   payment                          1997  
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                 FY 1997 Payments per Discharge                                                                                                             
                                                                                                                                                            
    Low Cost Hospitals......................................      3,331    6,898,994    464.25     63.57    135.71      3.07      11.79     614.82  ........
        Fully Prospective...................................      3,078    6,246,888    436.83     60.00    149.88  ........      12.52     599.23  ........
        100% Federal Rate...................................        235      609,412    752.47    100.00  ........  ........       3.30     755.77  ........
        Hold Harmless.......................................         18       42,693    362.22     48.77  ........    496.62      25.67     884.51  ........
    High Cost Hospitals.....................................      1,684    4,226,709    733.06     97.27  ........     26.00       8.63     767.69  ........
        100% Federal Rate...................................      1,522    3,963,050    757.10    100.00  ........  ........       6.29     763.39  ........
        Hold Harmless.......................................        162      263,659    371.65     52.95  ........    416.84      43.77     832.26  ........
                                                             -----------------------------------------------------------------------------------------------
          Total Hospitals...................................      5,015   11,125,703    566.37     76.62     84.15     11.78      10.59     672.90  ........
                                                             ===============================================================================================
      FY 1998 Payments per Discharge Before Effects of the                                                                                                  
                   Balanced Budget Act of 1997                                                                                                              
                                                                                                                                                            
    Low Cost Hospitals......................................      3,331    7,064,036    568.02     72.69    108.16      2.43      10.80     689.41     12.13
        Fully Prospective...................................      3,078    6,396,330    545.02     70.00    119.46  ........      11.49     675.96     12.81
        100% Federal Rate...................................        241      632,394    806.40    100.00  ........  ........       2.75     809.15      7.06
        Hold Harmless.......................................         12       35,312    464.85     54.94  ........    486.07      30.35     981.26     10.94
    High Cost Hospitals.....................................      1,684    4,327,823    808.62     98.86  ........     11.55      10.34     830.51      8.18
        100% Federal Rate...................................      1,591    4,191,128    819.68    100.00  ........  ........       8.26     827.95      8.46
        Hold Harmless.......................................         93      136,695    469.57     61.33  ........    365.62      73.98     909.17      9.24
                                                             -----------------------------------------------------------------------------------------------
          Total Hospitals...................................      5,015   11,391,859    659.42     82.91     67.07      5.89      10.63     743.02     10.42
                                                             ===============================================================================================
       FY 1998 Payments per Discharge After Effects of the                                                                                                  
                   Balanced Budget Act of 1997                                                                                                              
                                                                                                                                                            
    Low Cost Hospitals......................................      3,331    7,064,036    458.51     72.64     87.16      2.73      22.08     570.48     -7.21
        Fully Prospective...................................      3,078    6,396,330    440.41     70.00     96.25  ........      23.19     559.85     -6.57
        100% Federal Rate...................................        238      626,061    650.85    100.00  ........  ........       7.55     658.40    -12.88
        Hold Harmless.......................................         15       41,645    348.31     53.30  ........    462.72      69.84     880.87     -0.41
    High Cost Hospitals.....................................      1,684    4,327,823    643.55     97.70  ........     20.40      18.16     682.10    -11.15
        100% Federal Rate...................................      1,528    4,070,204    662.07    100.00  ........  ........      15.37     677.44    -11.26
        Hold Harmless.......................................        156      257,620    351.00     57.92  ........    342.67      62.11     755.78     -9.19
                                                             -----------------------------------------------------------------------------------------------
          Total Hospitals...................................      5,015   11,391,859    528.81     82.41     54.04      9.44      20.59     612.88     -8.92
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    
    
    [[Page 46131]]
    
        We project that low capital cost hospitals paid under the fully 
    prospective payment methodology will experience an average decrease in 
    payments per case of 6.57 percent, and that high capital cost hospitals 
    will experience an average decrease of 11.15 percent.
        For hospitals paid under the fully prospective payment methodology, 
    the Federal rate payment percentage will increase from 60 percent to 70 
    percent and the hospital-specific rate payment percentage will decrease 
    from 40 to 30 percent in FY 1998. The Federal rate payment percentage 
    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 will increase from 
    52.95 percent to 57.92 percent. Without the effects of the Balanced 
    Budget Act of 1997, we estimate that this figure would have increased 
    to 61.33 percent. We estimate the percentage of hold-harmless hospitals 
    paid based on 100 percent of the Federal rate will increase from 90.7 
    percent to 91.2 percent. Excluding the effects of the Balanced Budget 
    Act of 1997, we estimate that the percentage of hold-harmless hospitals 
    paid based on 100 percent of the Federal rate would have increased to 
    94.6 percent.
        We expect that the average hospital-specific rate payment per 
    discharge will decrease from $84.15 in FY 1997 to $54.04 in FY 1998. 
    This is partly due to the decrease in the hospital-specific rate 
    payment percentage from 40 percent in FY 1997 to 30 percent in FY 1998. 
    Excluding the effects of the Balanced Budget Act of 1997, we estimate 
    that the average hospital-specific payment per discharge would have 
    decreased less dramatically to $67.07 in FY 1998.
        For FY 1998, the minimum payment levels are:
         90 percent for sole community hospitals;
         80 percent for urban hospitals with 100 or more beds and a 
    disproportionate share patient percentage of 20.2 percent or more; or
         70 percent for all other hospitals.
        We estimate that exceptions payments will increase from 1.57 
    percent of total capital payments in FY 1997 to 3.36 percent of 
    payments in FY 1998. These figures are lower than prior estimates due 
    to refinements to our actuarial model. For a further explanation of 
    these refinements, refer to Section B of this Appendix.
        The projected distribution of the payments is shown in the table 
    below:
    
    ------------------------------------------------------------------------
                      Estimated FY 1998 exceptions payments                 
    -------------------------------------------------------------------------
                                                                  Percent of
                   Type of hospital                    No. of     exceptions
                                                     hospitals     payments 
    ------------------------------------------------------------------------
    Low Capital Cost..............................          314           67
    High Capital Cost.............................          198           33
                                                   -------------------------
          Total...................................          512          100
    ------------------------------------------------------------------------
    
    C. Cross-Sectional Comparison of Capital Prospective Payment 
    Methodologies
    
        Table IV presents a cross-sectional summary of hospital groupings 
    by capital prospective payment methodology. This distribution is 
    generated by our actuarial model.
    
      Table IV.--Distribution by Method of Payment (Hold-Harmless/Fully Prospective) of Hospitals Receiving Capital 
                                                        Payments                                                    
    ----------------------------------------------------------------------------------------------------------------
                                                                                  (2)  Hold-harmless                
                                                                              --------------------------     (3)    
                                                                   (1)  Total   Percentage   Percentage   Percentage
                                                                     No. of     paid hold-   paid fully   paid fully
                                                                   hospitals     harmless     federal    prospective
                                                                                   (A)          (B)          rate   
    ----------------------------------------------------------------------------------------------------------------
    By Geographic Location:                                                                                         
        All hospitals...........................................        5,015          3.4         35.2         61.4
        Large urban areas (populations over 1 million)..........        1,590          3.9         42.7         53.4
        Other urban areas (populations of 1 million or fewer)...        1,209          4.2         43.4         52.4
        Rural areas.............................................        2,216          2.6         25.4         72.0
        Urban hospitals.........................................        2,799          4.0         43.0         52.9
            0-99 beds...........................................          674          4.7         36.8         58.5
            100-199 beds........................................          946          5.6         48.9         45.5
            200-299 beds........................................          569          3.3         43.8         52.9
            300-499 beds........................................          457          1.8         40.3         58.0
            500 or more beds....................................          153          0.7         39.2         60.1
        Rural hospitals.........................................        2,216          2.6         25.4         72.0
            0-49 beds...........................................        1,158          2.2         17.6         80.1
            50-99 beds..........................................          655          3.4         30.1         66.6
            100-149 beds........................................          235          2.1         40.4         57.4
            150-199 beds........................................           93          4.3         31.2         64.5
            200 or more beds....................................           75          1.3         49.3         49.3
    By Region:                                                                                                      
        Urban by Region.........................................        2,799          4.0         43.0         52.9
            New England.........................................          158          0.0         27.8         72.2
            Middle Atlantic.....................................          426          1.6         36.9         61.5
            South Atlantic......................................          414          4.1         55.1         40.8
            East North Central..................................          471          3.8         33.5         62.6
            East South Central..................................          159          5.7         52.8         41.5
            West North Central..................................          188          4.8         38.3         56.9
            West South Central..................................          344         10.2         58.4         31.4
            Mountain............................................          124          3.2         51.6         45.2
            Pacific.............................................          467          2.6         39.4         58.0
            Puerto Rico.........................................           48          4.2         25.0         70.8
        Rural by Region.........................................        2,216          2.6         25.4         72.0
            New England.........................................           53          0.0         22.6         77.4
    
    [[Page 46132]]
    
                                                                                                                    
            Middle Atlantic.....................................           84          2.4         29.8         67.9
            South Atlantic......................................          293          2.0         33.4         64.5
            East North Central..................................          301          1.3         20.9         77.7
            East South Central..................................          273          2.2         34.8         63.0
            West North Central..................................          511          2.7         17.8         79.5
            West South Central..................................          345          2.6         28.7         68.7
            Mountain............................................          211          6.2         19.9         73.9
            Pacific.............................................          140          2.9         25.7         71.4
    Large urban areas (populations over 1 million)..............        1,735          3.6         42.6         53.8
    Other urban areas (populations of 1 million or fewer).......        1,153          4.3         42.8         52.9
    Rural areas.................................................        2,127          2.7         25.1         72.2
    Teaching Status:                                                                                                
        Non-teaching............................................        3,922          3.5         34.9         61.6
        Fewer than 100 Residents................................          855          3.9         37.5         58.6
        100 or more Residents...................................          238          0.4         31.9         67.6
    Disproportionate share hospitals (DSH):                                                                         
        Non-DSH.................................................        3,129          3.6         31.3         65.2
        Urban DSH:                                                                                                  
            100 or more beds....................................        1,408          3.3         45.7         51.0
            Less than 100 beds..................................           81          2.5         34.6         63.0
        Rural DSH:                                                                                                  
            Sole Community (SCH/EACH)...........................          154          4.5         20.8         74.7
            Referral Center (RRC/EACH)..........................           50          2.0         52.0         46.0
            Other Rural:                                                                                            
                100 or more beds................................           66          1.5         39.4         59.1
                Less than 100 beds..............................          127          0.8         26.0         73.2
    Urban teaching and DSH:                                                                                         
        Both teaching and DSH...................................          707          2.3         38.0         59.7
        Teaching and no DSH.....................................          329          4.6         32.8         62.6
        No teaching and DSH.....................................          782          4.2         51.4         44.4
        No teaching and no DSH..................................        1,070          4.6         42.3         53.1
    Rural Hospital Types:                                                                                           
        Non special status hospitals............................          905          1.3         26.5         72.2
        RRC/EACH................................................          158          1.3         41.8         57.0
        SCH/EACH................................................          641          5.8         22.5         71.8
        Medicare-dependent hospitals (MDH)......................          366          0.8         17.8         81.4
        SCH, RRC and EACH.......................................           57          7.0         33.3         59.6
    Type of Ownership:                                                                                              
        Voluntary...............................................        2,912          3.1         34.9         62.1
        Proprietary.............................................          684          8.2         60.4         31.4
        Government..............................................        1,344          1.8         22.8         75.4
    Medicare Utilization as a Percent of Inpatient Days:                                                            
        0-25....................................................          254          3.5         33.5         63.0
        25-50...................................................        1,300          4.4         42.3         53.3
        50-65...................................................        1,982          3.3         35.3         61.5
        Over 65.................................................        1,404          2.8         28.5         68.7
    ----------------------------------------------------------------------------------------------------------------
    
        As we explain in Appendix B, we were not able to determine a 
    hospital-specific rate for 73 of the 5,088 hospitals in our database. 
    Consequently, the payment methodology distribution is based on 5,015 
    hospitals. These data should be fully representative of the payment 
    methodologies that will be applicable to hospitals.
        The cross-sectional distribution of hospital by payment methodology 
    is presented by: (1) Geographic location, (2) region, and (3) payment 
    classification. This provides an indication of the percentage of 
    hospitals within a particular hospital grouping that will be paid under 
    the fully prospective payment methodology and under the hold-harmless 
    methodology. The percentage of hospitals paid fully Federal (100 
    percent of the Federal rate) as hold-harmless hospitals is expected to 
    increase to 35.2 percent in FY 1998.
        Table IV indicates that 61.4 percent of hospitals will be paid 
    under the fully prospective payment methodology. (This figure, unlike 
    the figure of 66 percent for low cost capital hospitals in the previous 
    section, takes account of the effects of redeterminations. In other 
    words, this figure does not include low cost hospitals that, following 
    a hospital-specific rate redetermination, are now paid under the hold-
    harmless methodology.) As expected, a relatively higher percentage of 
    rural and governmental hospitals (72.0 percent and 75.4 percent, 
    respectively by payment classification) are being paid under the fully 
    prospective methodology. This is a reflection of their lower than 
    average capital costs
    
    [[Page 46133]]
    
    per case. In contrast, only 31.4 percent of proprietary hospitals are 
    being paid under the fully prospective methodology. This is a 
    reflection of their higher than average capital costs per case. (We 
    found at the time of the August 30, 1991 final rule (56 FR 43430) that 
    62.7 percent of proprietary hospitals had a capital cost per case above 
    the national average cost per case.)
    
    D. Cross-Sectional Analysis of Changes in Aggregate Payments
    
        We used our FY 1998 actuarial model to estimate the potential 
    impact of changes for FY 1998 on total capital payments per case, using 
    a universe of 5,015 hospitals. The individual hospital payment 
    parameters are taken from the best available data, including: The July 
    1, 1997 update to the provider-specific file, cost report data, and 
    audit information supplied by intermediaries. Table V presents 
    estimates of payments per case under our model for FY 1997 (column 2). 
    For FY 1998, we present estimates of payments per case both before and 
    after the effects of the 17.78 percent reduction to the standard 
    Federal and hospital-specific rates. Column 5 shows the total 
    percentage change in payments from FY 1997 to FY 1998 (after the 
    effects of the Balanced Budget Act of 1997). Column 6 presents the 
    percentage change that can be attributed to the Balanced Budget Act of 
    1997 (the 17.78 percent reduction). Column 7 presents the percentage 
    change in payments that can be attributed to Federal rate changes.
        Federal rate changes represented in Column 7 include the 15.36 
    percent decrease in the Federal rate which includes the Balanced Budget 
    Act reduction, 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 7. Column 5 also reflects 
    the effects of all other changes, including: the change from 60 percent 
    to 70 percent in the portion of the Federal rate for fully prospective 
    hospitals, the hospital-specific rate update, changes in the proportion 
    of new to total capital for hold-harmless hospitals, changes in old 
    capital (for example, obligated capital put in use), hospital-specific 
    rate redeterminations, and exceptions. 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 decrease 8.9 percent in FY 1998. The results 
    show that the effect of the Balanced Budget Act of 1997 is to decrease 
    payments by 17.5 percent. The results show that the effect of the 
    Federal rate changes is to decrease payments by 11.0 percent. (This 
    figure includes the effects of the Balanced Budget Act of 1997, but 
    also includes the other payment adjustments which offset the magnitude 
    of the 17.78 percent reduction.) In addition to the 11.0 percent 
    decrease attributable to the Federal rate changes, a 2.1 percent 
    increase is attributable to the effects of all other changes.
        Our comparison by geographic location shows that capital payments 
    per case to urban and rural hospitals experience similar rates of 
    decrease (8.8 percent and 9.9 percent, respectively). Payments per case 
    for urban hospitals will decrease at about the same rate as payments 
    per case for rural hospitals (11.0 percent and 11.4 percent, 
    respectively) from the Federal rate changes alone. Urban hospitals will 
    gain approximately the same as rural hospitals (2.2 percent and 1.5 
    percent, respectively) from the effects of all other changes.
        By region, there are variations in the change in payments per case. 
    All regions are estimated to receive decreases in total capital 
    payments per case, due to the reduction to the rate and due to the 
    increased share of payments that are based on the Federal rate (from 60 
    to 70 percent). Changes by region vary from the smallest decrease of 
    5.1 percent (rural New England region) to the largest decrease of 11.4 
    percent (urban Puerto Rico hospitals). Overall, Puerto Rico hospitals 
    are affected less by the change to the Federal rate and by the rate 
    reduction due to the Balanced Budget Act of 1997 than other hospitals 
    are nationally. Puerto Rico hospitals are projected to experience a 
    slightly larger decrease in overall payments per case than other 
    regions due to the other factors. We project a reduction in exceptions 
    payments to Puerto Rico hospitals relative to the rest of the nation, 
    which means that Puerto Rico hospitals are receiving a greater share of 
    their capital costs as part of their regular payments. We also project 
    a decrease in hold-harmless payments which is greater than the national 
    average.
        By type of ownership, proprietary hospitals are projected to have 
    the largest rate of decrease (11.0 percent, 11.8 percent due to Federal 
    rate changes and a positive increase of 0.8 percent from the effects of 
    all other changes). Payments to voluntary hospitals will decrease 8.8 
    percent (an 11.0 percent decrease due to Federal rate changes and a 2.2 
    percent increase from the effects of all other changes) and payments to 
    government hospitals will decrease 7.6 percent (a 10.3 percent decrease 
    due to Federal rate changes and a 2.7 percent increase from the effects 
    of all other changes).
        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. 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 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 
    1998 compared to the effects of reclassification for FY 1997, we show 
    the average payment percentage increase for hospitals reclassified in 
    each fiscal year and in total. For FY 1998 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 1998 as a whole are projected to 
    experience a 9.2 percent decrease in payments (a 10.9 percent decrease 
    attributable to Federal rate changes and a 1.7 percent increase 
    attributable to the effects of all other changes). Payments to 
    nonreclassified hospitals will decrease slightly less (8.7 percent) 
    than reclassified hospitals (9.2 percent) overall. Payments to 
    nonreclassified hospitals will decrease slightly less than reclassified 
    hospitals from the Federal rate changes (10.8 percent compared to 10.9 
    percent), but they will gain slightly more from the effects of all 
    other changes (2.1 percent compared to 1.7 percent).
    
    [[Page 46134]]
    
    
    
                                                         Table V.--Comparison of Total Payments Per Case                                                    
                                                         [FY 1997 Payments Compared To FY 1998 Payments]                                                    
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Average FY   Average FY                                        
                                                                                                1998         1998                                           
                                                                                Average FY   payments/    payments/                 Change due     Portion  
                                                                   Number of       1997     case before   case after  All changes  to Balanced  attributable
                                                                   hospitals    payments/     Balanced     Balanced                 Budget Act   to Federal 
                                                                                   case      Budget Act   Budget Act                 of 1997     rate change
                                                                                              of 1997      of 1997                                          
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    By Geographic Location:                                                                                                                                 
        All hospitals...........................................        5,015          673          743          613         -8.9        -17.5         -11.0
        Large urban areas (populations over 1 million)..........        1,590          770          851          703         -8.7        -17.4         -10.9
        Other urban areas (populations of 1 million or fewer)...        1,209          664          733          605         -8.9        -17.5         -11.1
        Rural areas.............................................        2,216          461          507          416         -9.9        -18.0         -11.4
        Urban hospitals.........................................        2,799          725          801          661         -8.8        -17.4         -11.0
            0-99 beds...........................................          674          540          588          485        -10.1        -17.5         -11.6
            100-199 beds........................................          946          649          710          585         -9.8        -17.5         -11.5
            200-299 beds........................................          569          700          771          633         -9.6        -17.9         -11.4
            300-499 beds........................................          457          756          840          693         -8.2        -17.4         -10.9
            500 or more beds....................................          153          883          985          820         -7.2        -16.8          -9.7
        Rural hospitals.........................................        2,216          461          507          416         -9.9        -18.0         -11.4
            0-49 beds...........................................        1,158          367          403          333         -9.3        -17.5         -11.1
            50-99 beds..........................................          655          433          474          390         -9.9        -17.7         -11.3
            100-149 beds........................................          235          480          531          434         -9.7        -18.4         -11.9
            150-199 beds........................................           93          499          548          452         -9.5        -17.6         -10.7
            200 or more beds....................................           75          581          637          518        -10.7        -18.7         -12.0
    By Region:                                                                                                                                              
        Urban by Region.........................................        2,799          725          801          661         -8.8        -17.4         -11.0
            New England.........................................          158          735          815          673         -8.5        -17.4         -11.3
            Middle Atlantic.....................................          426          769          849          698         -9.3        -17.8         -11.1
            South Atlantic......................................          414          719          791          657         -8.6        -17.0         -11.3
            East North Central..................................          471          686          760          625         -8.9        -17.8         -10.6
            East South Central..................................          159          668          746          620         -7.1        -16.9         -10.0
            West North Central..................................          188          709          785          650         -8.3        -17.3         -10.6
            West South Central..................................          344          734          806          668         -9.0        -17.1         -10.8
            Mountain............................................          124          742          811          668         -9.9        -17.6         -11.3
            Pacific.............................................          467          790          877          723         -8.5        -17.5         -11.2
            Puerto Rico.........................................           48          300          319          266        -11.4        -16.7         -10.6
        Rural by Region.........................................        2,216          461          507          416         -9.9        -18.0         -11.4
            New England.........................................           53          531          596          504         -5.1        -15.5         -11.1
            Middle Atlantic.....................................           84          477          518          425        -10.9        -17.9         -12.0
            South Atlantic......................................          293          496          541          448         -9.7        -17.2         -11.8
            East North Central..................................          301          458          505          414         -9.8        -18.0         -11.4
            East South Central..................................          273          425          471          381        -10.4        -19.2         -11.8
            West North Central..................................          511          439          480          395        -10.0        -17.7         -10.6
            West South Central..................................          345          425          467          379        -10.9        -18.9         -11.8
            Mountain............................................          211          486          533          437         -9.9        -17.9         -10.4
            Pacific.............................................          140          523          584          479         -8.4        -17.9         -11.1
    By Payment Classification:                                                                                                                              
        All hospitals...........................................        5,015          673          743          613         -8.9        -17.5         -11.0
        Large urban areas (populations over 1 million)..........        1,735          760          840          693         -8.7        -17.5         -10.9
        Other urban areas (populations of 1 million or fewer)...        1,153          663          732          605         -8.8        -17.4         -11.1
        Rural areas.............................................        2,127          456          500          411        -10.0        -17.9         -11.5
        Teaching Status:                                                                                                                                    
            Non-teaching........................................        3,922          582          638          523        -10.1        -18.0         -11.7
            Fewer than 100 Residents............................          855          711          787          648         -8.8        -17.6         -10.9
            100 or more Residents...............................          238          961        1,075          902         -6.2        -16.2          -9.4
            Urban DSH:                                                                                                                                      
                100 or more beds................................        1,408          764          844          701         -8.2        -16.9         -10.6
                Less than 100 beds..............................           81          528          583          477         -9.7        -18.2         -11.3
            Rural DSH:                                                                                                                                      
                Sole Community (SCH/EACH).......................          154          412          448          381         -7.5        -15.0         -10.6
                Referral Center (RRC/EACH)......................           50          534          587          485         -9.2        -17.4         -11.2
                Other Rural:                                                                                                                                
                    100 or more beds............................           66          438          478          389        -11.3        -18.6         -12.3
                    Less than 100 beds..........................          127          367          405          327        -11.1        -19.3         -11.6
        Urban teaching and DSH:                                                                                                                             
            Both teaching and DSH...............................          707          830          919          767         -7.5        -16.5         -10.1
    
    [[Page 46135]]
    
                                                                                                                                                            
            Teaching and no DSH.................................          329          720          805          659         -8.5        -18.2         -10.9
            No teaching and DSH.................................          782          657          722          594         -9.6        -17.7         -11.5
            No teaching and no DSH..............................        1,070          628          688          562        -10.5        -18.4         -12.1
        Rural Hospital Types:                                                                                                                               
            Non special status hospitals........................          905          412          452          366        -11.1        -19.0         -12.0
            RRC/EACH............................................          158          541          596          481        -11.1        -19.3         -11.7
            SCH/EACH............................................          641          444          484          407         -8.4        -15.9         -11.0
            Medicare-dependent hospitals (MDH)..................          366          367          408          337         -8.4        -17.6         -11.3
            SCH, RRC and EACH...................................           57          537          581          493         -8.1        -15.0         -10.4
        Hospitals Reclassified by the Medicare Geographic                                                                                                   
         Classification Review Board:                                                                                                                       
            Reclassification Status During FY97 and FY98:                                                                                                   
                Reclassified During Both FY97 and FY98..........          333          631          705          569         -9.8        -19.2         -11.6
                Reclassified During FY98 Only...................           89          544          629          515         -5.4        -18.2          -6.8
                Reclassified During FY97 Only...................          178          615          654          529        -13.9        -19.1         -14.4
            FY98 Reclassifications:                                                                                                                         
                All Reclassified Hospitals......................          422          618          693          561         -9.2        -19.1         -10.9
                All Nonreclassified Hospitals...................        4,511          679          750          620         -8.7        -17.3         -10.8
                All Urban Reclassified Hospitals................          109          718          804          648         -9.8        -19.4         -11.3
                Urban Nonreclassified Hospitals.................        2,690          725          801          662         -8.7        -17.3         -10.9
                All Reclassified Rural Hospitals................          313          545          613          498         -8.8        -18.8         -10.6
                Rural Nonreclassified Hospitals.................        1,876          430          467          385        -10.3        -17.5         -11.8
        Other Reclassified Hospitals (Section 1886(D)(8)(B))....           27          508          564          449        -11.7        -20.5         -11.6
        Type of Ownership:                                                                                                                                  
            Voluntary...........................................        2,912          688          760          628         -8.8        -17.5         -11.0
            Proprietary.........................................          684          676          738          602        -11.0        -18.5         -11.8
            Government..........................................        1,344          590          656          545         -7.6        -17.0         -10.3
        Medicare Utilization as a Percent of Inpatient Days:                                                                                                
            0-25................................................          254          756          845          709         -6.2        -16.1         -10.6
            25-50...............................................        1,300          792          876          727         -8.3        -17.0         -10.4
            50-65...............................................        1,982          628          694          570         -9.3        -17.8         -11.3
            Over 65.............................................        1,404          560          616          503        -10.2        -18.2         -12.0
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    
    Appendix B: Technical Appendix on the New 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 have used the capital acquisition model since the start of 
    prospective payments for capital costs. We now have 4 years of cost 
    reports under the capital prospective payment system. Consequently, we 
    have developed a new capital cost model to replace the capital 
    acquisition model. This new model makes use of the data from these cost 
    reports.
        The following cost reports are used in the capital cost model for 
    this final rule: the June 13, 1997 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), and PPS-XII (cost reporting periods beginning in FY 1995). 
    In addition, to model payments, we use the July 1, 1997 update of the 
    provider-specific file, and the March
    
    [[Page 46136]]
    
    1994 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 1997 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:
    
    ------------------------------------------------------------------------
                                                                  Number of 
                               Source                             hospitals 
    ------------------------------------------------------------------------
    Provider-Specific File Only................................          117
    Provider-Specific and Audit File...........................         4971
                                                                ------------
          Total................................................         5088
    ------------------------------------------------------------------------
    
        Ninety-seven of the 5,088 hospitals had unusable or missing data or 
    had no cost reports available. We determined from the cost reports that 
    24 of the 97 hospitals were paid under the hold-harmless methodology. 
    Since the hospital-specific amount is not used to determine payments 
    for these hospitals, we were able to include these 24 hospitals in the 
    analysis. Seventy-three hospitals could not be used in the analysis 
    because of insufficient information. They account for about 0.2 percent 
    of admissions so any effect should be minimal. Therefore, we used data 
    from cost reports from 5,015 hospitals for the analysis.
        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 (greater than 
    20 percent) changes in bed-size. 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 
    only for 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, therefore, 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 greatest proportion of rates 
    being at the low end. We use the gamma distribution to estimate 
    individual hospital rates of increase.
        (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 1996 (the 
    MEDPAR data year) and later, we use the number of discharges from the 
    MEDPAR data. Some hospitals have considerably more discharges in FY 
    1996 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 many discharges. If the projection 
    of capital cost per discharge is not adjusted for increases in 
    discharges, the projection of exceptions would be overstated. We 
    correct 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 every FY 1996 
    discharge, and because some discharges are removed 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.
    
    [[Page 46137]]
    
        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 (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 are 
    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 1996 MedPAR 
    file using the FY 1998 DRG relative weights published in section V. of 
    the Addendum of this final rule. The case-mix index is increased each 
    year after FY 1996 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 0.5 percent in FY 1997 and 1.0 percent in 
    FY 1998. (Since we are using FY 1996 cases for our analysis, the FY 
    1996 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 1997, the budget neutrality adjustment factor was 
    1.00123. To determine the factor for FY 1998, we first determined the 
    portion of the Federal rate that would be paid for each hospital in FY 
    1998 based on its applicable payment methodology. Using our model, we 
    then compared estimated aggregate Federal rate payments based on the FY 
    1997 DRG relative weights and the FY 1997 geographic adjustment factor 
    to estimated aggregate Federal rate payments based on the FY 1998 
    relative weights and the FY 1998 geographic adjustment factor. In 
    making the comparison, we held the FY 1998 Federal rate portion 
    constant and set the other budget neutrality adjustment factor and the 
    exceptions reduction factor to 1.00. We determined that, to achieve 
    budget neutrality for the changes in the geographic adjustment factor 
    and DRG classifications and relative weights, an incremental budget 
    neutrality adjustment of 0.99892 for FY 1998 should be applied to the 
    previous cumulative FY 1997 adjustment of 1.00123, yielding a 
    cumulative adjustment of 1.00015 through FY 1998. The following table 
    summarizes the adjustment factors for each fiscal year:
    
    Budget Neutrality Adjustment for DRG Reclassifications and Recalibration
                      and the Geographic Adjustment Factor                  
    ------------------------------------------------------------------------
                                                     Incremental  Cumulative
                      Fiscal year                     adjustment  adjustment
    ------------------------------------------------------------------------
    1992...........................................  ...........    1.00000 
    1993...........................................     0.99800     0.99800 
    1994...........................................     1.00531     1.00330 
    1995...........................................     0.99980     1.00310 
    1996...........................................     0.99940     1.00250 
    1997...........................................     0.99873     1.00123 
    1998...........................................     0.99892     1.00015 
    ------------------------------------------------------------------------
    
        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 
    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. 
    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. 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. The table below 
    provides the actual factors for fiscal years 1992 through 1998, and the 
    estimated factors that would be applicable through FY 2002. We caution 
    that these are estimates for fiscal years 1999 and later, and are 
    subject to revisions resulting from continued methodological 
    refinements, more recent data, and any payment policy changes that may 
    occur. In this regard, we note that in making these projections we have 
    assumed that the cumulative DRG/GAF budget neutrality adjustment factor 
    will remain at 1.00015 for FY 1998 and later because we do not have 
    sufficient information to estimate the change that will occur in the 
    factor for years after FY 1998.
        The projections are as follows:
    
    [[Page 46138]]
    
    
    
    ----------------------------------------------------------------------------------------------------------------
                                                                                                            Federal 
                                              Exceptions    Budget      DRG/GAF     Outlier     Federal      rate   
             Fiscal year             Update    reduction  neutrality  adjustment  adjustment     rate       (after  
                                     factor     factor      factor    factor \1\    factor    adjustment   outlier) 
                                                                                                          reduction)
    ----------------------------------------------------------------------------------------------------------------
    1992.........................        N/A      0.9813      0.9602  ..........       .9497  ..........      415.59
    1993.........................       6.07       .9756       .9162       .9980       .9496  ..........      417.29
    1994.........................       3.04       .9485       .8947      1.0053       .9454    \2\.9260      378.34
    1995.........................       3.44       .9734       .8432       .9998       .9414  ..........      376.83
    1996.........................       1.20       .9849         N/A       .9994       .9536    \3\.9972      461.96
    1997.........................       0.70       .9358         N/A       .9987       .9481  ..........      438.92
    1998.........................       0.90       .9659         N/A       .9989       .9382    \4\.8222      371.51
    1999.........................       1.20       .9518         N/A  \5\ 1.0000    \5\.9382  ..........      370.48
    2000.........................       1.20       .9409         N/A      1.0000       .9382  ..........      370.63
    2001.........................       1.30       .9324         N/A      1.0000       .9382  ..........      372.06
    2002.........................       1.30  \6\ 1.0000         N/A      1.0000       .9382  ..........     404.22 
    ----------------------------------------------------------------------------------------------------------------
    \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: Future adjustments are, for purposes of this projection, assumed to remain at the same level.         
    \6\ Note: We are unable to estimate exceptions payments for the year under the special exceptions provision     
      (Sec.   412.348(g) of the regulations) because the regular exceptions provision (Sec.  412.348(e)) expires.   
    
    Appendix C: Revised Hospital Market Basket Data Sources
    
    I. Introduction: Market Basket Relative Weights and Choice of Price 
    Proxy Variables for the Operating Hospital Input Price Indexes
    
        In the August 30, 1996 final rule (61 FR 46323), we discussed in 
    detail the current 1992-based hospital market baskets, and noted that 
    we would revise the hospital market baskets when new cost data for 1992 
    became available. This appendix describes the technical features of the 
    revisions to the 1992-based indexes that we set forth in this final 
    rule with comment period in section IV of the preamble. For both the 
    prospective payment and excluded hospital market baskets, the 
    differences between the revised market basket and the current market 
    basket are noted.
        We present this description of the hospital operating market 
    baskets in three steps:
         A synopsis of the differences between the current 1992-
    based market baskets and the revisions to those market baskets.
         A description of the methodology used to develop the cost 
    category weights in the revised market baskets, making note of the 
    differences from the methodology used to develop the 1992-based current 
    market baskets.
         A description of the data sources used to measure price 
    change for each component of the revised market baskets, making note of 
    the differences from the price proxies used in the 1992-based current 
    hospital market baskets.
    
    II. Synopsis of Differences
    
        Two major differences exist between the 1992-based current hospital 
    market baskets and the hospital market baskets. The first major change 
    is that the revised hospital market baskets are based on additional 
    hospital expenditure data--data not available until after the 
    publication of the August 30, 1996 final rule. The 1992-based current 
    market baskets were derived from hospital cost reports for cost 
    reporting periods beginning on or after October 1, 1991 and before 
    October 1, 1992, augmented by information from the latest available 
    (1987) Input-Output Table for the hospital industry, produced by the 
    Bureau of Economic Analysis, U.S. Department of Commerce. In addition 
    to the data sources cited above, the revised hospital market baskets 
    use data from the 1992 Asset and Expenditure Survey, produced by the 
    U.S. Department of Commerce, Economic and Statistics Administration, 
    Bureau of the Census. These are more recent data made available after 
    the publication of the August 30, 1996 final rule.
        The second major difference is that some cost categories have been 
    combined with other cost categories to better reflect the new data 
    sources. Specifically, the Transportation Services category has been 
    combined with All Other Nonlabor-Intensive Services; Business Services 
    and Computer and Data Processing Services with All Other Labor-
    Intensive Services; and part of Fuel Oil, Coal, etc. was combined with 
    Natural Gas into Fuels, Nonhighway. The remainder of the Fuel Oil, 
    Coal, etc. was combined with Miscellaneous Products. These category 
    mergers reflect the Bureau of the Census categories in the Asset and 
    Expenditure Survey and its information on services.
    
    III. Methodology for Developing the Revised Cost Category Weights
    
        Cost category weights for the revised market baskets were developed 
    in three stages. First, base weights for the six main categories (Wages 
    and Salaries, Employee Benefits, Pharmaceuticals, Nonmedical 
    Professional Fees, Professional Liability Insurance, and All Other 
    Expenses) were obtained from the 1992-based hospital market baskets. As 
    the base year is not changing, these weights, developed last year from 
    HCRIS data and the American Hospital Association (AHA) Annual Survey 
    information, will not change. The weight for All Other Expenses was 
    divided into subcategories using cost shares from the 1992 Asset and 
    Expenditure Survey for Hospitals, U.S. Department of Commerce, 
    Economics and Statistics Administration, Bureau of the Census. These 
    subcategories were further divided using cost shares from the 1987 
    Input-Output Table for the hospital industry, produced by the U.S. 
    Department of Commerce, Bureau of Economic Analysis (BEA), aged to 1992 
    using price changes.
        A description of the source of the six main category weights is 
    found in the August 30, 1996 final rule (61 FR 46323). The weight for 
    the Utilities category, as well as those for the Electricity, Fuels 
    Nonhighway, and Water and Sewerage Maintenance cost categories, was 
    derived from the 1992 Asset and Expenditure Survey. The All Other Goods 
    and Services category has more subcategories than any other market 
    basket category. Goods found in this category include: direct service 
    food, contract service food, pharmaceuticals, chemicals, medical 
    instruments, photo supplies, rubber and plastics, paper products, 
    apparel,
    
    [[Page 46139]]
    
    machinery and equipment and miscellaneous products. Services found in 
    this category include telephone services, postage, other labor-
    intensive services, and other nonlabor-intensive services. The share 
    for pharmaceuticals was derived from the 1992 Medicare cost reports. 
    Relative shares for the other subcategories were derived from the 1992 
    Asset and Expenditure Survey, augmented by data from the 1987 Input-
    Output Table produced by BEA for the hospital industry, aged forward to 
    1992 using price changes, and then standardized to be consistent with 
    data from the Asset and Expenditure Survey.
    
    IV. Price Proxies Used to Measure Cost Category Growth
    
        Descriptions of the price proxies used to measure cost category 
    price growth in the current hospital market baskets are found in the 
    August 30, 1996 final rule (61 FR 46324). The price proxies used for 
    the revised hospital market baskets are the same as those for the 
    current market baskets. Four cost categories in the current hospital 
    market baskets have been combined with other cost categories to better 
    reflect new data sources.
        For further discussion of the rationale for choosing specific price 
    proxies, we refer the reader to the September 3, 1986 final rule (51 FR 
    31582).
    
    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 1998 by hospitals subject to the 
    prospective payment system and those excluded from the prospective 
    payment system. Section 1886(b)(3)(B)(i)(XIII) of the Act, as amended 
    by section 4401(a)(2) of Pub. L. 105-33, sets the percentage change in 
    the operating cost standardized amounts equal to 0 percent for FY 1998. 
    Section 1886(b)(3)(B)(iv) of the Act sets the FY 1998 percentage 
    increase in the hospital-specific rates applicable to sole community 
    and Medicare-dependent, small rural hospitals 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 0 percent. (As discussed in section V.D. of this preamble, 
    section 4401(b) of Pub. L. 105-33 provides for an increase in the 
    operating cost standardized amounts of 0.5 percentage points for 
    certain hospitals that do not receive disproportionate share or 
    indirect medical education payments and are not designated as Medicare-
    dependent, small rural hospitals.) Section 1886(b)(3)(B)(ii) of the 
    Act, as amended by section 4411(a) of Pub. L 105-33, sets the FY 1998 
    percentage increase in the rate-of-increase limits for hospitals 
    excluded from the prospective payment system equal to 0 percent. 
    Therefore, in accordance with section 1886(d)(3)(A) of the Act, we are 
    updating the standardized amounts, the hospital-specific rates, and the 
    rate-of-increase limits for hospitals excluded from the prospective 
    payment system by 0 percent.
        Sections 1886(e) (2)(A) and (3)(A) of the Act require that the 
    Prospective Payment Assessment Commission (ProPAC) recommend to the 
    Congress by March 1, 1997 an update factor that takes into account 
    changes in the market basket rate of increase index, hospital 
    productivity, technological and scientific advances, the quality of 
    health care provided in hospitals, and long-term cost effectiveness in 
    the provision of inpatient hospital services. In Recommendation 2 of 
    its March 1, 1997 report, ProPAC recommended update factors to the 
    standardized amounts equal to 0 percentage points for hospitals in both 
    large urban and other areas. ProPAC did not make a separate 
    recommendation for the hospital-specific rates applicable to sole 
    community and Medicare-dependent, small rural hospitals.
        Section 1886(e)(4) of the Act requires that the Secretary, taking 
    into consideration the recommendations of ProPAC, 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. As required by section 
    1886(e)(5) of the Act, we published the FY 1998 update factors 
    recommended under section 1886(e)(4) of the Act as Appendix E of the 
    June 2, 1997 proposed rule (62 FR 30034).
    
    II. Secretary's Final Recommendations for Updating the Prospective 
    Payment System Standardized Amounts
    
        We received several public comments concerning our proposed 
    recommendation. After consideration of the arguments presented, we have 
    decided that our final recommendation will be the same as our proposed 
    recommendation. That is, we are recommending an update of 0 percentage 
    points for hospitals located in large urban and other areas. We are 
    also recommending an update of 0 percentage points to the hospital-
    specific rate for sole community and Medicare-dependent, small rural 
    hospitals. We continue to believe these recommended update factors 
    would ensure that Medicare acts as a prudent purchaser and would 
    provide incentives to hospitals for increased efficiency, thereby 
    contributing to the solvency of the Medicare Part A Trust Fund.
        We are also recommending an update of 0 percentage points for 
    hospitals and hospital units excluded from the prospective payment 
    system. This update is consistent with the updates provided to the 
    prospective payment hospitals.
        Comment: Several commenters opposed the Secretary's recommendation 
    that prospective payment hospitals receive a 0 percent update for FY 
    1998. The commenters observed that HCFA's update framework analysis 
    supports a recommendation of not less than the market basket percentage 
    increase minus 1.6 percentage points and asked why we had not relied on 
    the results of the update framework in determining the recommended 
    update. The commenters further stated that our recommendation ignores 
    the variation in financial condition among hospitals and that the lack 
    of an increase in the standardized amount will have an adverse impact 
    on a significant number of hospitals.
        ProPAC supported our recommendation for an update of 0 percentage 
    points, noting that the average Medicare inpatient operating costs per 
    case and lengths of stay in prospective payment hospitals are both 
    continuing to decrease, while total operating margins for hospitals 
    have increased sharply. ProPAC believes that a 0 update will not harm 
    either the hospital industry or Medicare beneficiaries.
        Response: In developing our update recommendation, we took into 
    account the results of our update framework analysis in combination 
    with several other factors. As stated in the proposed rule, these 
    factors included the relative decrease in the use of hospital inpatient 
    services and the corresponding increase in the use of hospital 
    outpatient and postacute care services. We also considered the factors 
    cited by ProPAC, particularly the decrease in costs per case. Thus, 
    although we recognize that there is variation in financial condition 
    among hospitals, we believe that a 0 percentage point update will 
    result in payment rates that adequately compensate hospitals for the 
    costs of efficient and effective treatment of Medicare beneficiaries.
        Comment: Several commenters stated that the Secretary's 
    recommendation of
    
    [[Page 46140]]
    
    a 0 percentage point update, notwithstanding the results of HCFA's 
    update framework analysis, could lower the confidence of hospitals in 
    HCFA's objectivity. They indicated that the discrepancy between the 
    results of the update framework and the recommended update casts doubts 
    on HCFA's ability to administer the prospective payment system fairly.
        Response: We strongly object to the suggestion that the difference 
    between the results of HCFA's update framework analysis and the 
    Secretary's recommended update indicates any lack of objectivity in our 
    analysis process or reflects on our ability to administer the Medicare 
    program impartially. The update framework analysis is a largely 
    empirical process carried out by HCFA that quantifies changes in 
    hospital productivity, scientific and technological advances, practice 
    pattern changes, and hospital case mix. In recommending an update, the 
    Secretary takes these factors into account, as well as other factors 
    such as the recommendations of ProPAC and the long-term solvency of the 
    Medicare trust fund. Thus, the difference between the results of HCFA's 
    update framework and the update recommended by the Secretary is 
    reflective of the integrity of the update framework analysis process, 
    which has not been compromised to produce an artificial congruence with 
    the Secretary's recommendation. We continue to believe that the 
    recommended update of 0 percentage points appropriately adjusts for 
    overall changes occurring in the health care delivery system.
    
    III. Secretary's Final Recommendation for Updating the Rate-of-
    Increase Limits for Excluded Hospitals
    
        Our final recommendation is that hospitals and hospital units 
    excluded from the prospective payment system also receive an update of 
    0 percentage points. This update is consistent with the updates 
    provided to the prospective payment hospitals. We note that we carry 
    out a separate update framework analysis for excluded hospitals and 
    units, but the analysis indicates the same findings regarding changes 
    in productivity, scientific and technological advances, practice 
    patterns, and case mix for FY 1998 for excluded hospitals and for 
    prospective payment system hospitals. We believe these updates will 
    ensure that Medicare acts as a prudent purchaser and will provide 
    incentives to hospitals for increased efficiency, thereby contributing 
    to the solvency of the Medicare Part A Trust Fund.
    
    [FR Doc. 97-22890 Filed 8-28-97; 8:45 am]
    BILLING CODE 4160-01-P
    
    
    

Document Information

Published:
08/29/1997
Department:
Health Care Finance Administration
Entry Type:
Rule
Action:
Final rule with comment period.
Document Number:
97-22890
Pages:
45966-46140 (175 pages)
Docket Numbers:
BPD-878-FC
RINs:
0938-AH55: Changes to the Hospital Inpatient Prospective Payment System and Fiscal Year 1998 Rates (HCFA-1878-F)
RIN Links:
https://www.federalregister.gov/regulations/0938-AH55/changes-to-the-hospital-inpatient-prospective-payment-system-and-fiscal-year-1998-rates-hcfa-1878-f-
PDF File:
97-22890.pdf
CFR: (152)
42 CFR 412.63)
42 CFR 412.30(a))
42 CFR 413.40(a))
42 CFR 413.40(a))
42 CFR 405.1801(a)
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