Federal Register / Vol. 78, No. 192 / Thursday, October 3, 2013 / Rules and Regulations 61191 

TABLE 1—APPROVED BUT NOT INCORPORATED BY REFERENCE STATUTES AND REGULATIONS

State citation Title/subject 

State 

effective 

date 

EPA approval date Explanations 

Washington Department of Ecology Regulations 

173–433–200 ............................ Regulatory Actions and Penalties.10/18/90 1/15/93, 58 FR 4578.

Olympic Region Clean Air Agency Regulations 

8.1.6 .......................................... Penalties ................................... 5/22/10 10/3/13 [Insert page number 

where the document begins].

TABLE 2—ATTAINMENT, MAINTENANCE, AND OTHER PLANS

Name of SIP provision Applicable geographic or nonattainment area 

State 

submittal 

date 

EPA approval date Comments 

*******

Attainment and Maintenance Planning—Particulate Matter 

*******

Particulate Matter (PM10) 2nd 

10-year Limited Maintenance 

Plan.

Thurston County ....................... 7/1/13 10/3/13 [Insert page number 

where the document begins].

* * * * * * * 

[FR Doc. 2013–23511 Filed 10–2–13; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 412 

[CMS–1599–IFC] 

RIN 0938–AR53 

Medicare Program; FY 2014 Inpatient 

Prospective Payment Systems: 

Changes to Certain Cost Reporting 

Procedures Related to 

Disproportionate Share Hospital 

Uncompensated Care Payments 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Interim final rule with comment 

period. 

SUMMARY: In the fiscal year (FY) 2014 

inpatient prospective payment systems 

(IPPS)/long-term care hospital (LTCH) 

PPS final rule, we established the 

methodology for determining the 

amount of uncompensated care 

payments made to hospitals eligible for 

the disproportionate share hospital 

(DSH) payment adjustment in FY 2014 

and a process for making interim and 

final payments. This interim final rule 

with comment period revises certain 

operational considerations for hospitals 

with Medicare cost reporting periods 

that span more than one Federal fiscal 

year and also makes changes to the data 

that will be used in the uncompensated 

care payment calculation in order to 

ensure that data from Indian Health 

Service (IHS) hospitals are included in 

Factor 1 and Factor 3 of that calculation. 

DATES: Effective date: These regulations 

are effective on October 1, 2013. 

Comment date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided below, no later than 5 p.m. on 

November 29, 2013. 

ADDRESSES: In commenting, please refer 

to file code CMS–1599–IFC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed). 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS– 

1599–IFC, P.O. Box 8013, Baltimore, 

MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS– 

1599–IFC, Mail Stop C4–26–05, 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 


sroberts on DSK5SPTVN1PROD with RULES
61192 Federal Register / Vol. 78, No. 192 / Thursday, October 3, 2013 / Rules and Regulations 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244– 

1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–9994 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: Tzvi 

Hefter or Ing Jye Cheng, (410) 786–4548. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://regulations.gov. 

Follow the search instructions on that 

Web site to view public comments. 

Comments received timely will be 

also available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

I. Background 

Section 3133 of the Patient Protection 

and Affordable Care Act (PPACA), as 

amended by section 10316 of PPACA 

and section 1104 of the Health Care and 

Education Reconciliation Act (Pub. L. 

111–152), added a new section 1886(r) 

to the Social Security Act (the Act) that 

modifies the methodology for 

computing the Medicare 

disproportionate share hospital (DSH) 

payment adjustment beginning in fiscal 

year (FY) 2014. For the purposes of this 

interim final rule with comment period, 

we refer to these provisions collectively 

as section 3133 of the Affordable Act. 

Currently, hospitals qualify for a DSH 

payment adjustment under a statutory 

formula that considers their Medicare 

utilization due to beneficiaries who also 

receive Supplemental Security Income 

(SSI) benefits and their Medicaid 

utilization. Under section 1886(r) of the 

Act, starting in FY 2014, hospitals that 

are eligible for Medicare DSH payments 

will receive 25 percent of the amount 

they previously would have received 

under the current statutory formula for 

Medicare DSH payments. The remaining 

amount, equal to an estimate of 75 

percent of what otherwise would have 

been paid as Medicare DSH payments, 

reduced for changes in the percentage of 

individuals under age 65 who are 

uninsured will become available to 

make additional payments to each 

hospital that qualifies for Medicare DSH 

payments and that has uncompensated 

care. Each Medicare DSH hospital will 

receive an additional amount based on 

its estimated share of the total amount 

of uncompensated care reported for all 

Medicare DSH hospitals for a given time 

period. In this interim final rule with 

comment period, we are revising certain 

policies and processes described in the 

FY 2014 IPPS/LTCH PPS final rule. 

Specifically, we are revising certain 

operational considerations for hospitals 

with Medicare cost reporting periods 

that span more than one Federal fiscal 

year and also making changes to the 

data that will be used in the 

uncompensated care payment 

calculation in order to ensure that data 

from Indian Health Service (IHS) 

hospitals are included in Factor 1 and 

Factor 3 of that calculation. 

In the final rule titled ‘‘Medicare 

Program; Hospital Inpatient Prospective 

Payment Systems for Acute Care 

Hospitals and the Long-Term Care 

Hospital Prospective Payment System 

and Fiscal Year 2014 Rates; Quality 

Reporting Requirements for Specific 

Providers; Hospital Conditions of 

Participation; Payment Policies Related 

to Patient Status’’ (which appeared in 

the August 19, 2013 Federal Register 

(78 FR 50496)), we made payment and 

policy changes under the Medicare 

inpatient prospective payment systems 

(IPPS) for operating costs of acute care 

hospitals. Section 1886(r) of the Act, as 

added by section 3133 of the Affordable 

Care Act, provides for a reduction to 

disproportionate share payments under 

section 1886(d)(5)(F) of the Act and for 

a new uncompensated care payment to 

eligible hospitals. Specifically, section 

1886(r) of the Act now requires that, for 

‘‘fiscal year 2014 and each subsequent 

fiscal year,’’ ‘‘subsection (d) hospitals’’ 

that would otherwise receive a 

‘‘disproportionate share payment . . . 

made under subsection (d)(5)(F)’’ will 

receive two separate payments: (1) 25 

percent of the amount they previously 

would have received under subsection 

(d)(5)(F) for DSH (‘‘the empirically 

justified amount’’); and (2) an additional 

payment for the DSH hospital’s 

proportion of uncompensated care, 

determined as the product of three 

factors. These three factors are: (1) 75 

percent of the payments that would 

otherwise be made under subsection 

(d)(5)(F); (2) 1 minus the percent change 

in the percent of individuals under the 

age of 65 who are uninsured (minus 0.1 

percentage points for FY 2014, and 

minus 0.2 percentage points for FY 2015 

through FY 2017); and (3) a hospital’s 

uncompensated care amount relative to 

the uncompensated care amount of all 

DSH hospitals expressed as a 

percentage. 

II. Provisions of the Interim Final Rule 

A. Operational Considerations for 

Hospitals With Medicare Cost Reporting 

Periods That Span More Than One 

Federal Fiscal Year 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50645), we finalized ‘‘a 

process to distribute interim 

uncompensated care payments under 

the IPPS on a per-discharge basis 

through our claims processing system, 

with a reconciliation of the hospitals’ 

[uncompensated care] payments at cost 

report settlement to ensure that 

hospitals receive no more than the 

estimated amount included in this final 

rule’’. We described that process as 

follows (78 FR 50646): 

[A]t cost report settlement, the fiscal 

intermediary/MAC will issue a notice of 

program reimbursement that includes a 

determination concerning whether each 

hospital is eligible for empirically justified 

Medicare DSH payments and, therefore, 

eligible for uncompensated care payments in 

FY 2014 and each subsequent year. In the 

case where a hospital received interim 

payments for its empirically justified 

Medicare DSH payments and uncompensated 

care payments for FY 2014 or a subsequent 

year on the basis of estimates prior to the 

payment year, but is determined to be 

ineligible for the empirically justified 

Medicare DSH payment at cost report 

settlement, the hospital would no longer be 

eligible for either payment and CMS would 

recoup those monies. For a hospital that did 

not receive interim payments for its 

empirically justified Medicare DSH payments 

and uncompensated care payments for FY 

2014 or a subsequent year, but at cost report 

settlement is determined to be eligible for 

DSH payments, the uncompensated care 

payment for such a hospital is calculated 

based on the Factor 3 value determined 

prospectively for that fiscal year. . . . The 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 192 / Thursday, October 3, 2013 / Rules and Regulations 61193 

reconciliations at cost report settlement 

would be based on the values for Factor 1, 

Factor 2, and Factor 3 that we have finalized 

prospectively for a Federal fiscal year. 

In the final rule (78 FR 50646), we 

provided an example in which a DSH 

eligible hospital has a cost reporting 

period of January 1, 2014 through 

December 31, 2014. We stated that this 

hospital would receive interim 

payments for its uncompensated care 

payments beginning on October 1, 2013. 

For cost reporting purposes, we stated 

that the uncompensated care payments 

for federal FY 2014 would be assigned 

to cost reporting periods beginning on 

or after October 1, 2013, and would be 

reconciled on those cost reports. Thus, 

in the example of the hospital with a 

cost reporting period beginning on 

January 1, 2014, if the hospital remained 

eligible for empirically justified DSH 

payments at cost report settlement, then 

it would receive its full FY 2014 

uncompensated care payment on its cost 

report for the cost reporting period 

beginning on January 1, 2014. Although 

we acknowledged that it is possible to 

align interim and final payments for the 

uncompensated care payment with an 

individual hospital’s cost reporting 

periods, we believed it would be 

administratively efficient and practical 

to pay the uncompensated care payment 

on the basis of the Federal fiscal year 

because that is how it is determined, 

and to reconcile that amount in the cost 

reporting period that begins in the 

respective Federal fiscal year. We stated 

in the final rule (78 FR 50647) that we 

believed this methodology would not 

delay the full payment of FY 2014 

payments to hospitals with cost 

reporting periods that begin after 

October 1, 2013. 

However, as we prepared to 

implement the FY 2014 IPPS/LTCH PPS 

final rule, several difficulties regarding 

this approach that we had not 

previously considered came to our 

attention. We initially proposed to make 

interim uncompensated care payments 

on a bi-weekly basis, finalizing a 

different process to make interim 

uncompensated care payments on a perdischarge basis in response to 

comments. In addition to proposing and 

finalizing a process for making interim 

uncompensated care payments, we also 

proposed and finalized a reconciliation 

process that would reconcile the 

uncompensated care payment for a 

given fiscal year, such as FY 2014, on 

the cost report for the cost reporting 

period beginning in that fiscal year (that 

is, for FY 2014, the cost report for the 

cost reporting period beginning in FY 

2014). We proposed and finalized this 

approach because we believed it would 

be administratively efficient and 

practical. As indicated previously and 

in the FY 2014 IPPS/LTCH PPS final 

rule, we believed that this policy would 

neither delay nor substantially affect the 

disbursement of final uncompensated 

care payments; but, since the final rule 

was issued, we have come to doubt 

these conclusions. 

We have come to believe that the 

policy we adopted in the FY 2014 IPPS/ 

LTCH PPS final rule is inconsistent with 

longstanding cost reporting 

requirements. As a general rule, 

payments for discharges are reported in 

the cost reporting period in which they 

occur, and all payments made for 

discharges during a cost reporting 

period are reconciled on the cost report 

for that period. (See PRM–I, Section 

2805 and 42 CFR 412.1(a)). We did not 

specifically address or propose to 

change the cost reporting rules in either 

the FY 2014 IPPS/LTCH PPS proposed 

or final rules. However, for hospitals 

with cost reporting periods that are not 

concurrent with the Federal fiscal year, 

the policy adopted in the FY 2014 IPPS/ 

LTCH PPS final rule departs from these 

cost reporting requirements by 

reconciling interim uncompensated care 

payments made for discharges occurring 

during the hospital’s 2013 cost reporting 

period on the hospital’s 2014 cost 

report. Under ordinary cost reporting 

requirements, those payments (having 

been made during the hospital’s 2013 

cost reporting period) would have to be 

treated as an overpayment on the 

hospital’s 2013 cost report and therefore 

recouped. However, as finalized in the 

FY 2014 IPPS/LTCH PPS final rule, if 

the hospital was found to be eligible for 

DSH payments for its cost reporting 

period that begins during FY 2014, we 

would then pay the hospital its full FY 

2014 uncompensated care payment 

during the settlement of the hospital’s 

2014 cost report (that is, we would 

repay the previously recouped 

uncompensated care payments when we 

reconciled the hospital’s 2014 cost 

report). These administrative issues 

would effectively delay uncompensated 

care payments, frustrate our policy of 

making uncompensated care payments 

promptly, and would likely lead to 

serious cash flow difficulties for some 

hospitals. In sum, we do not believe the 

policy we finalized in the FY 2014 

IPPS/LTCH PPS final rule of reconciling 

uncompensated care payments for 

hospitals with cost reporting periods 

that begin after October 1, 2013 would 

work as intended for the large majority 

of IPPS hospitals that have cost 

reporting periods that are not 

concurrent with the Federal fiscal year. 

To effectuate a revised process, we 

intend to align final payments for the 

uncompensated care payment with each 

individual hospital’s cost reporting 

periods and to reconcile interim 

uncompensated care payment amounts 

on the hospital’s cost report for the 

proportion of the cost reporting period 

that overlaps a Federal fiscal year and 

in which the interim payments were 

made or should have been made. Thus, 

the final uncompensated care payment 

amounts that would be included on a 

cost report spanning two Federal fiscal 

years would be the pro rata share of the 

uncompensated care payment 

associated with each Federal fiscal year. 

This pro rata share would be 

determined based on the proportion of 

the applicable Federal fiscal year that is 

included in that cost reporting period. 

Earlier in this interim final rule with 

comment period, we reiterated an 

example from the FY 2014 IPPS/LTCH 

PPS final rule, where a hospital is 

estimated to be eligible for the 

empirically justified DSH payment and 

also an uncompensated care payment in 

FY 2014 and has a cost reporting period 

of January 1, 2014 through December 31, 

2014. Under the revised process we are 

adopting in this interim final rule with 

comment period, in this example, this 

hospital would still begin to receive 

interim payments for its uncompensated 

care on October 1, 2013. However, 

instead of having the entire FY 2014 

payment reconciled on its cost report for 

the cost reporting period beginning on 

January 1, 2014 (which ends on 

December 31, 2014 and would therefore 

require the hospital to pay back monies 

received for the portion of its cost 

reporting period beginning on January 1, 

2013 that occurs in Federal fiscal year 

2014), we will reconcile the interim FY 

2014 uncompensated care payments 

received for discharges from October 1, 

2013 through December 31, 2013 on the 

hospital’s cost report for the cost 

reporting period beginning on January 1, 

2013 against a pro rata share of its FY 

2014 uncompensated care payment. If 

this hospital is eligible for DSH on its 

cost report for the cost reporting period 

ending on December 31, 2013, it will 

receive a pro rata share of its FY 2014 

uncompensated care payment. This pro 

rata share would be approximately 

three-twelfths (that is, the period of time 

from October 1, 2013 through December 

31, 2013, divided by the period of time 

from January 1, 2013 through December 

31, 2013) of the hospital’s FY 2014 

uncompensated care payment. If the 

hospital’s subsequent cost reporting 

period is January 1, 2014 through 

December 31, 2014, we also will 


sroberts on DSK5SPTVN1PROD with RULES
61194 Federal Register / Vol. 78, No. 192 / Thursday, October 3, 2013 / Rules and Regulations 

reconcile the interim FY 2014 

uncompensated care payments received 

for discharges from January 1, 2014 

through September 30, 2014 on the 

hospital’s cost report for the cost 

reporting period beginning on January 1, 

2014 against a pro rata share of its FY 

2014 uncompensated care payment. We 

would also reconcile the interim FY 

2015 uncompensated care payments 

received for discharges from October 1, 

2014 through December 31, 2014 (that 

is, discharges occurring in FY 2015 

during that hospital’s cost reporting 

period) on the hospital’s cost report for 

the cost reporting period beginning on 

January 1, 2014 against a pro rata share 

of its FY 2015 uncompensated care 

payment. Accordingly, for the hospital 

in this example, if it remained eligible 

for Medicare DSH on its cost report for 

the cost reporting period beginning on 

January 1, 2014, it would receive the 

sum of two pro rata shares of 

uncompensated care payments, one pro 

rata share approximately equal to ninetwelfths (that is, the period of time from 

January 1, 2014 through September 30, 

2014 divided by the period of time from 

January 1, 2014 through December 31, 

2014) of the hospital’s FY 2014 

uncompensated care payment and one 

pro rata share equal to approximately 

three-twelfths or (that is, the period of 

time from October 1, 2014 through 

December 31, 2014 divided by the 

period of time from January 1, 2014 

through December 31, 2014) of the 

hospital’s FY 2015 uncompensated care 

payment. 

Under this interim final rule with 

comment period, and in accordance 

with the policies we finalized in the FY 

2014 IPPS/LTCH PPS final rule 

regarding eligibility for the 

uncompensated care payment, hospitals 

with cost reporting periods that span 

more than one Federal fiscal year will 

be eligible for the respective pro rata 

shares of their uncompensated care 

payment if they were eligible for DSH in 

that cost reporting period. If they were 

ineligible for DSH in that cost reporting 

period, they would be ineligible to 

receive the respective pro rata share of 

the uncompensated care payment for 

the respective Federal fiscal year (or 

years). We believe this new approach 

remains fundamentally consistent with 

the policy we finalized in the FY 2014 

IPPS/LTCH PPS final rule (78 FR 50622) 

where we stated that ‘‘our final 

determination on the hospital’s 

eligibility for uncompensated care 

payments would be based on the 

hospital’s actual DSH status on the cost 

report for that payment year.’’ However, 

it avoids the cost reporting difficulties 

that would have arisen from the 

reconciliation process originally 

adopted in the final rule. 

B. Treatment of Indian Health Service 

Hospitals 

In the FY 2014 IPPS/LTCH PPS final 

rule, we discussed the hospitals that are 

eligible to receive the uncompensated 

care payments under section 1886(r)(2) 

of Act. Specifically, we stated (78 FR 

50622) that the ‘‘new payment 

methodology under subsection (r) 

applies to ‘subsection (d) hospitals’ that 

would otherwise receive a 

‘disproportionate share payment . . . 

made under subsection (d)(5)(F).’ ’’ 

Therefore, eligibility for empirically 

justified Medicare DSH payments is 

unchanged under this new provision. 

Consistent with the law, hospitals must 

receive empirically justified Medicare 

DSH payments in FY 2014 or a 

subsequent year to receive an additional 

Medicare uncompensated care payment 

for that year. 

In the FY 2014 IPPS/LTCH PPS final 

rule, we finalized our methodology for 

calculating the new uncompensated 

care payments. As we discussed in the 

final rule, section 1886(r)(2) of the Act 

provides that for each eligible hospital 

in FY 2014 and subsequent years, the 

new uncompensated care payment is 

the product of three factors. Factor 1 of 

that methodology is the ‘‘difference 

between our estimates of: (1) The 

amount that would have been paid in 

Medicare DSH payments for FY 2014 

and subsequent years, in the absence of 

the new payment provision; and (2) the 

amount of empirically justified 

Medicare DSH payments that are made 

for FY 2014 and subsequent years, 

which takes into account the 

requirement to pay 25 percent of what 

would have otherwise been paid under 

section 1886(d)(5)(F) of the Act. In other 

words, this factor represents our 

estimate of 75 percent (100 percent 

minus 25 percent) of our estimate of 

Medicare DSH payments that would 

otherwise be made, in the absence of 

section 1886(r) of the Act, for FY 2014 

and subsequent years.’’ (See 78 FR 

50627). 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50630), we finalized our 

proposal to use the most recently 

available estimates, as calculated by the 

our Office of the Actuary, to determine 

both the aggregate amount of 

empirically justified DSH payments 

under section 1886(r)(1) of the Act and 

the aggregate amount of payments that 

would otherwise have been made under 

section 1886(d)(5)(F) of the Act. In order 

to calculate these estimates, our Office 

of the Actuary used the March 2013 

update of the Medicare Hospital Cost 

Report Information System (HCRIS) and 

the proposed rule’s IPPS Impact file. 

The estimate excluded Maryland 

hospitals, SCHs paid under their 

hospital-specific rate, and hospitals in 

the Rural Community Hospital 

Demonstration Program, as these 

hospitals do not receive a Medicare DSH 

payment. The CMS Office of the 

Actuary’s final estimate for Medicare 

DSH payments for FY 2014 without 

regard to the application of section 

1886(r)(1) of the Act, is approximately 

$12.772 billion. The estimate for 

empirically justified Medicare DSH 

payments for FY 2014, with the 

application of section 1886(r)(1) of the 

Act, is approximately $3.193 billion. 

Factor 1 is the difference of these two 

estimates by our Office of the Actuary; 

therefore, in the FY 2014 IPPS/LTCH 

PPS final rule, we calculated Factor 1 to 

be approximately $9.579 billion. 

IHS hospitals are subsection (d) 

hospitals that can receive empirically 

justified Medicare DSH payments under 

section 1886(r)(1) of the Act if they meet 

the eligibility requirements under 

subsection (d)(5)(F). Therefore, eligible 

IHS hospitals will also receive the new 

uncompensated care payment under 

subsection (r)(2). However, following 

the issuance of the FY 2014 IPPS/LTCH 

PPS final rule, it has come to our 

attention that although IHS hospitals 

can receive Medicare DSH payments, 

they submit Medicare hospital cost 

reports to CMS that are not uploaded in 

the HCRIS database. Therefore, their 

Medicare DSH payments were not 

included in the estimates by our Office 

of the Actuary that were used to 

calculate Factor 1. Because IHS 

hospitals are eligible to receive 

Medicare DSH payments and the new 

uncompensated care payments, we 

believe it is inappropriate to exclude the 

Medicare DSH payments to IHS 

hospitals from the estimates used to 

calculate Factor 1. In addition, we did 

not intend to finalize a policy that 

specifically excludes DSH payments to 

IHS hospitals from our estimate of 

Medicare DSH payments for purposes of 

calculating Factor 1 in the calculation of 

the uncompensated care payment. 

Therefore, in this interim final rule 

with comment period, we are revising 

the policy originally adopted in the FY 

2014 IPPS/LTCH PPS final rule in order 

to change the data that will be 

considered in calculating Factor 1 for 

FY 2014 and subsequent years. 

Specifically, in addition to the March 

2013 update of HCRIS, we will also 

consider, supplemental cost report data 

provided by IHS hospitals to CMS as of 

March 2013. We will also recalculate 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 192 / Thursday, October 3, 2013 / Rules and Regulations 61195 

Factor 1, to reflect the Office of the 

Actuary’s estimate of Medicare DSH 

payments to IHS hospitals, based on this 

supplemental data. With the inclusion 

of the Medicare DSH payments to IHS 

hospitals, our Office of the Actuary’s 

revised estimate of Medicare DSH 

payments for FY 2014 without regard to 

the application of 1886(r)(1) of the Act 

is approximately $12.791 billion (we 

note that this revised estimate also 

includes the correction for Factor 1 

made in the correcting document for the 

FY 2014 IPPS/LTCH PPS final rule that 

appears elsewhere in this issue of the 

Federal Register). The CMS Office of 

the Actuary’s revised estimate of 

empirically justified Medicare DSH 

payments for FY 2014, with the 

application of section 1886(r)(1) of the 

Act, is approximately $3.198 billion (we 

note that this revised estimate also 

includes the correction for Factor 1 

made in the correcting document for the 

FY 2014 IPPS/LTCH PPS final rule that 

appears elsewhere in this issue of the 

Federal Register). Factor 1 is the 

difference of these two estimates of our 

Office of the Actuary; therefore, in this 

interim final rule with comment period, 

we recalculated Factor 1 to be 

approximately $9.593 billion (we note 

that this revised estimate also includes 

the correction for Factor 1 made in the 

correcting document for the FY 2014 

IPPS/LTCH PPS final rule that appears 

elsewhere in this issue of the Federal 

Register). We note that based on the 

recalculation of Factor 1, the amount 

available for uncompensated care 

payments for FY 2014 will be 

approximately $9.046 billion (our Factor 

2 finalized in the FY 2014 IPPS/LTCH 

PPS final rule of 0.943 times our revised 

Factor 1 estimate of $9.593 billion). 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50634 through 50643), we 

discuss the methodology used to 

calculate Factor 3 in the calculation of 

the uncompensated care payment. 

Under the final policy adopted in that 

final rule, for FY 2014 we would 

determine a DSH hospital’s Factor 3 as 

the sum of its Medicaid days and SSI 

days (numerator) relative to the total 

number of Medicaid days and SSI days 

for all DSH hospitals (denominator). 

Under this policy, we would determine 

a hospital’s SSI days based on the most 

recent SSI fraction. As we stated in the 

final rule, the most recent SSI fraction 

for FY 2014 is the FY 2011 SSI fraction. 

The FY 2011 SSI fractions for each 

subsection (d) hospital were published 

on the CMS Web site on June 27, 2013. 

In addition, under the final policy 

adopted in the final rule, we would 

determine a hospital’s Medicaid days 

based on the Medicaid days reported on 

the 2011, or if not available, the 2010 

Medicare Hospital Cost Report, using 

the March 2013 update of HCRIS. 

Because the cost reports submitted by 

IHS hospitals are not uploaded into 

HCRIS, we did not include their 

Medicaid days in our calculation of 

Factor 3. Specifically, Medicaid days for 

IHS hospitals were excluded from the 

numerator of Factor 3 for those IHS 

hospitals and from the denominator of 

Factor 3 for all hospitals. As a result, we 

believe that the Factor 3 that was 

calculated for each IHS hospital under 

the policies adopted in the 2014 IPPS/ 

LTCH PPS final rule, based only on FY 

2011 SSI days, significantly understated 

the actual amount of uncompensated 

care furnished by these hospitals. The 

uncompensated care payment amounts 

calculated for these hospitals were also 

significantly lower than they would 

have been had these days been 

included. We are concerned that under 

the policy originally adopted in the FY 

2014 IPPS/LTCH PPS final rule, IHS 

hospitals, that serve a significant low 

income population, will be subject to 

the 75 percent reduction to their 

Medicare DSH payments under 

subsection (r)(1) but will receive 

reduced uncompensated care payments 

under subsection (r)(2) due to their cost 

reports not being included in the HCRIS 

database. Given that we intended to 

base our estimate of the uncompensated 

care provided by IHS hospitals, in part, 

on the care they provide to Medicaid 

patients, we believe it is appropriate to 

make a change to the data that will be 

considered in determining Factor 3 of 

the new uncompensated care payment 

to allow the Medicaid days for IHS 

hospitals to be included. This change 

will also help to ensure that eligible IHS 

hospitals receive an uncompensated 

care payment that does not significantly 

understate the amount of 

uncompensated care they provide. 

Accordingly, in this interim final rule 

with comment period, we are revising 

the policy adopted in the final rule to 

permit us to consider supplemental cost 

report data submitted to CMS as of 

March 2013 only by IHS hospitals in 

addition to data reflected in the March 

2013 update of HCRIS, in calculating 

Factor 3 of the uncompensated care 

payment. The Medicaid days for IHS 

hospitals that are reflected in the 

supplemental data will be included in 

the numerator of the Factor 3 

calculation for IHS hospitals and will be 

included in the denominator of Factor 3 

for all hospitals eligible to receive the 

uncompensated care payment. 

III. Waiver of Proposed Rulemaking 

and Delay in Effective Date 

We ordinarily publish a notice of 

proposed rulemaking in the Federal 

Register and invite public comment on 

the proposed rule in accordance with 5 

U.S.C. 553(b) of the Administrative 

Procedure Act (APA). The notice of 

proposed rulemaking includes a 

reference to the legal authority under 

which the rule is proposed, and the 

provisions of the proposed rule or a 

description of the subjects and issues 

involved. This procedure can be 

waived, however, if an agency finds 

good cause that a notice-and-comment 

procedure is impracticable, 

unnecessary, or contrary to the public 

interest and incorporates a statement of 

the finding and its reasons in the rule 

issued. 

We believe there is good cause to 

waive notice and comment rulemaking 

to make the revisions to our policy for 

reconciling uncompensated care 

payments for hospitals with Medicare 

cost reporting periods that are not 

concurrent with the Federal fiscal year. 

We believe it would be inequitable and 

contrary to the public interest to require 

the large majority of IPPS hospitals that 

have a cost reporting period that does 

not align with the Federal fiscal year to 

pay back to CMS the monies they 

receive as interim uncompensated care 

payments for Federal FY 2014 during 

their cost reporting period beginning in 

Federal FY 2013. Additionally, these 

hospitals would experience a delay in 

the receipt of their final Federal FY 

2014 uncompensated care payments 

until their next cost reporting period. 

This change will not affect the manner 

in which uncompensated care payments 

are calculated. Rather, it affects only the 

manner in which those payments are 

reconciled for cost reporting purposes. 

As a result, the policy being adopted in 

this interim final rule with comment 

period will benefit those hospitals that 

have cost reporting periods that do not 

align with the Federal fiscal year by 

avoiding administrative issues. These 

administrative issues would effectively 

delay uncompensated care payments, 

frustrate our policy of making 

uncompensated care payments 

promptly, and would likely lead to 

serious cash flow difficulties for some 

hospitals. There will be no impact on 

hospitals that have cost reporting 

periods that align with the Federal fiscal 

year. Therefore, we believe it would be 

contrary to the public interest not to 

change the methodology for reconciling 

uncompensated care payments for 

hospitals that have cost reporting 

periods that are not concurrent with the 


sroberts on DSK5SPTVN1PROD with RULES
61196 Federal Register / Vol. 78, No. 192 / Thursday, October 3, 2013 / Rules and Regulations 

Federal fiscal year. Further, it would be 

impracticable to go through notice-andcomment rulemaking to achieve what 

we believe would be the more equitable 

and efficient result. The methodology 

for reconciling uncompensated care 

payments adopted in the FY 2014 IPPS/ 

LTCH PPS final rule goes into effect on 

October 1, 2013. There is insufficient 

time to undertake notice-and-comment 

rulemaking before that date. As a result, 

absent this interim final rule with 

comment period, it would be impossible 

to avoid the administrative issues 

discussed previously. 

We also believe there is good cause to 

waive notice-and-comment rulemaking 

to make changes to the data that will be 

used in the uncompensated care 

payment calculation in order to ensure 

that data from IHS hospitals are 

included in Factor 1 and Factor 3 of that 

calculation. As discussed previously, 

IHS hospitals are subsection (d) 

hospitals that can receive Medicare DSH 

payments and uncompensated care 

payments. However, IHS hospitals 

submit Medicare Hospital Cost reports 

to CMS that are not uploaded into the 

HCRIS database. As a result, the data for 

these hospitals were excluded from the 

estimates for Factor 1, which were based 

upon data from the March 2013 update 

of HCRIS. In addition, the Medicaid 

days for IHS hospitals were excluded 

from the calculation of Factor 3. 

Specifically, these Medicaid days were 

excluded from the numerator for the 

IHS hospitals and excluded from the 

denominator for all hospitals. As a 

result, the Factor 3 that was calculated 

for each IHS hospital under the policy 

adopted in the FY 2014 IPPS/LTCH PPS 

final rule is understated and will result 

in reduced uncompensated care 

payments to these hospitals. 

We believe it is contrary to the public 

interest not to correct this inadvertent 

oversight by supplementing the data 

used to calculate Factor 1 and Factor 3 

to reflect cost report data submitted to 

CMS by IHS hospitals. As discussed 

previously, IHS hospitals are subsection 

(d) hospitals that may receive DSH 

payments if all other eligibility criteria 

are satisfied. Pursuant to section 

1886(r)(1) of the Act, starting on October 

1, 2013, DSH payments to all hospitals 

that are eligible for DSH, including IHS 

hospitals, will be reduced by 75 percent. 

As a result, we believe it is important 

that Factor 1 of the uncompensated care 

calculation incorporates the amount by 

which DSH payments to IHS hospitals 

will be reduced as a result of the 

implementation of section 1886(r)(1) of 

the Act. Furthermore, we believe it is in 

the public interest to ensure that our 

estimate of the amount of 

uncompensated care for IHS hospitals 

for purposes of determining Factor 3 of 

the uncompensated care payment 

calculation takes into account care 

provided to Medicaid patients. IHS 

hospitals serve a significant low income 

population, including individuals that 

are eligible for Medicaid. It was not our 

intention to exclude the care furnished 

by IHS hospitals to Medicaid eligible 

individuals, and thus to understate the 

amount of Factor 3 for these hospitals. 

Rather, this was an inadvertent error 

that arose from the data that we 

originally elected to use for the 

purposes of determining the 

uncompensated care payments. 

Nevertheless, this omission results in a 

significant reduction in the 

uncompensated care payments received 

by IHS hospitals. We believe it would be 

contrary to the public interest not to 

address that inadvertent omission by 

supplementing the data originally used 

in the FY 2014 IPPS/LTCH PPS final 

rule to include data that reflects the 

Medicaid days for IHS hospitals for a 

time period that is contemporaneous 

with the time period of the data used to 

estimate uncompensated care for other 

subsection (d) hospitals. Further, for the 

same reasons stated previously, it would 

be impracticable to go through noticeand-comment rulemaking to achieve 

what we believe would be the more 

equitable result. The FY 2014 IPPS/

LTCH PPS final rule goes into effect on 

October 1, 2013. There is insufficient 

time to undertake notice-and-comment 

rulemaking before that date. As a result, 

absent this interim final rule with 

comment period, it would not be 

possible to recompute Factor 1 and 

Factor 3 of the uncompensated care 

payment methodology before the start of 

the fiscal year, and uncompensated care 

payments to IHS hospitals would 

significantly understate their relative 

share of the total uncompensated care 

burden. 

For all of these reasons, we find good 

cause to waive the notice-and-comment 

rulemaking procedure for this interim 

final rule with comment period. 

In addition, section 553(d) of the APA 

(5 U.S.C. 553(d)) ordinarily requires a 

30-day delay in the effective date of 

final rules after the date of their 

publication in the Federal Register. 

This 30-day delay in effective date can 

be waived, however, if an agency finds 

for good cause that the delay is 

impracticable, unnecessary, or contrary 

to the public interest, and the agency 

incorporates a statement of the finding 

and its reasons in the rule issued. 

As described previously, the process 

that we adopted in the FY 2014 IPPS/ 

LTCH PPS final rule for reconciling 

uncompensated care payments would 

result in the large majority of IPPS 

hospitals that do not have cost reporting 

periods concurrent with the Federal 

fiscal year being required to pay back to 

CMS the monies they receive as interim 

uncompensated care payments during 

Federal fiscal year 2014 for the portion 

of their cost reporting period beginning 

in Federal FY 2013 and experiencing a 

delay in the receipt of their final FY 

2014 uncompensated care payments 

until their next cost reporting period. If 

we were to provide for a 30-day delay 

in the effective date of this provision, 

hospitals with 2014 cost reporting 

periods that begin after October 1, 2013, 

but before this interim final rule with 

comment period becomes effective 

would be adversely affected as we 

described previously. Therefore, we 

believe it is contrary to the public 

interest to delay the effective date of 

revising this process. 

Similarly, as described previously, the 

data used to calculate Factor 1 and 

Factor 3 did not include data from the 

Medicare Hospital Cost Reports for IHS 

hospitals. This omission resulted in our 

estimate of Factor 1 of the 

uncompensated care payment being 

understated. In addition, Factor 3, 

which is used to determine each 

hospital’s share of uncompensated care 

payment amounts, was understated for 

IHS hospitals because it excluded all 

Medicaid days for those hospitals, 

which are a significant portion of the 

uncompensated care they provide. If we 

were to provide for a 30-day delay in the 

effective date of this interim final rule 

with comment period, we believe the 

exclusion of this data from our 

calculation of uncompensated care 

payments would pose a financial 

hardship for IHS hospitals that serve a 

significant low income patient 

population. Therefore, we believe it is 

contrary to the public interest to delay 

the effective date of this revision to our 

methodology to allow the use of 

supplemental data submitted by IHS 

hospitals. 

For all of these reasons, we find good 

cause to waive the 30-day delay in the 

effective date for this interim final rule 

with comment period. 

IV. Collection of Information 

Requirements 

This document does not impose 

information collection and 

recordkeeping requirements. 

Consequently, it need not be reviewed 

by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995. 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 192 / Thursday, October 3, 2013 / Rules and Regulations 61197 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact Statement 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 

96–354), section 1102(b) of the Social 

Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(March 22, 1995, Pub. L. 104–4), 

Executive Order 13132 on Federalism 

(August 4, 1999) and the Congressional 

Review Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. A 

regulatory impact analysis (RIA) must 

be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). The 

monetary impact of this final rule is 

approximately a $15 million increase in 

payments to hospitals relative to the 

estimates included in the FY 2014 IPPS/ 

LTCH PPS final rule. Therefore, this 

interim final rule with comment period 

does not reach the economic threshold 

and thus is not considered a major rule. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of less than $7.0 million to $35.5 

million in any 1 year. Individuals and 

States are not included in the definition 

of a small entity. For purposes of the 

RFA, all hospitals and other providers 

and suppliers are considered to be small 

entities. Individuals and States are not 

included in the definition of a small 

entity. We believe that this interim final 

rule with comment period will have an 

impact on small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 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 that is located 

outside a metropolitan statistical area 

and has fewer than 100 beds. 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 urban area. Thus, for purposes 

of the IPPS and the LTCH PPS, we 

continue to classify these hospitals as 

urban hospitals. (We refer readers to 

Table I in section I.G. of the Appendix 

for the FY 2014 IPPS/LTCH PPS final 

rule for the quantitative effects of the 

final policy changes under the IPPS for 

operating costs.) 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2013, that threshold is approximately 

$141 million. This interim final rule 

with comment period will have no 

consequential effect on State, local, or 

tribal governments, nor will it affect 

private sector costs. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a final 

rule that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Since this regulation does not impose 

any costs on State or local governments, 

the requirements of Executive Order 

13132 are not applicable. 

In accordance with the provisions of 

Executive Order 12866, this rule was 

not reviewed by the Office of 

Management and Budget. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: September 27, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: September 27, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–24209 Filed 9–30–13; 4:15 pm] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 412, 482, 485, and 489 

[CMS–1599 & 1455–CN2] 

RINs 0938–AR53 and 0938–AR73 

Medicare Program; Hospital Inpatient 

Prospective Payment Systems for 

Acute Care Hospitals and the LongTerm Care Hospital Prospective 

Payment System and Fiscal Year 2014 

Rates; Quality Reporting Requirements 

for Specific Providers; Hospital 

Conditions of Participation; Payment 

Policies Related to Patient Status; 

Corrections 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule; correction. 

SUMMARY: This document corrects 

technical and typographical errors in 

the final rules that appeared in the 

August 19, 2013 Federal Register titled 

‘‘Medicare Program; Hospital Inpatient 

Prospective Payment Systems for Acute 

Care Hospitals and the Long-Term Care 

Hospital Prospective Payment System 

and Fiscal Year 2014 Rates; Quality 

Reporting Requirements for Specific 

Providers; Hospital Conditions of 

Participation; Payment Policies Related 

to Patient Status.’’ 

DATES: This correcting document is 

effective October 1, 2013. 

FOR FURTHER INFORMATION CONTACT: Tzvi 

Hefter, (410) 786–4487. 

SUPPLEMENTARY INFORMATION:

I. Background 

In FR Doc. 2013–18956, which 

appeared in the August 19, 2013 

Federal Register (78 FR 50496), there 

were a number of technical errors that 

are identified and corrected in the 

Correction of Errors section. The 

provisions in this correction document 

are effective as if they had been 

included in the document that appeared 

in the August 19, 2013 Federal Register. 


sroberts on DSK5SPTVN1PROD with RULES