**GAO-03-289R**                      Nov 12, 2002                  

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## Highlights

GAO reviewed the Centers for Medicare and Medicaid Services (CMS) final rule on the Medicare Program's hospital outpatient payment system for 2003. GAO noted that (1) the rule would announce changes to the amounts and factors used to determine the payment rates for the system for services furnished on or after January 1, 2003, (2) the rule would allow the Secretary of Health and Human Services to suspend Medicare payments "in whole or in part" if a provider fails to file a timely and acceptable cost report, and (3) CMS complied with applicable requirements in promulgating the rule.

##  Department of Health and Human Services, Centers for Medicare and Medicaid Services: Medicare Program; Changes to the Hospital Outpatient Prospective Payment System and CalendarYear 2003 Payment Rates; and Changes to Payment Suspension for Unfiled Cost Reports, GAO-03-289R, November 12, 2002

B-291645November 12, 2002The Honorable Max Baucus     Chairman     The Honorable Chuck Grassley     Ranking Minority Member     Committee on Finance     United States SenateThe Honorable W.J. Billy Tauzin     Chairman     The Honorable John D. Dingell     Ranking Minority Member     Committee on Energy and Commerce     House of Representatives     The Honorable Bill Thomas     Chairman     The Honorable Charles B. Rangel     Ranking Minority Member     Committee on Ways and Means     House of Representatives     Subject:*Department of Health and Human Services, Centers for Medicare and Medicaid Services: Medicare Program; Changes to the Hospital    Outpatient Prospective Payment System and Calendar Year 2003 Payment Rates; and Changes to Payment Suspension for Unfiled Cost Reports*Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Department of Health and    Human Services, Centers for Medicare and Medicaid Services (CMS), entitled Medicare Program; Changes to the Hospital Outpatient Prospective Payment System and Calendar Year 2003 Payment    Rates; and Changes to Payment Suspension for Unfiled Cost Reports (RIN: 0938-AL19 and 0938-AK59).  We received the rule on November 1, 2002.  It was published in the Federal    Register as a final rule with comment period on November 1, 2002.  67 Fed. Reg. 66718.     The final rule revises the Medicare hospital outpatient prospective payment system to implement applicable statutory requirements and changes arising from CMS's continuing experience with the    system.  It describes changes to the amounts and factors used to determine the payment rates for the system for services furnished on or after January 1, 2003.  The rule also allows the    Secretary of Health and Human Services to suspend Medicare payments in whole or in part if a provider fails to file a timely and acceptable cost report.     Enclosed is our assessment of the CMS's compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule.  Our review indicates that    the CMS complied with the applicable requirements.     If you have any questions about this report, please contact James W. Vickers, Assistant General Counsel, at (202) 512-8210.  The official responsible for GAO evaluation work relating to the    subject matter of the rule is William Scanlon, Managing Director, Health Care.  Mr. Scanlon can be reached at (202) 512-7114.                 signed     Kathleen E. Wannisky     Managing Associate General Counsel     Enclosurecc: Ann Stallion     Regulations Coordinator     Department of Health and       Human Services            ENCLOSURE     ANALYSIS UNDER 5 U.S.C.  801(a)(1)(B)(i)-(iv) OF A MAJOR RULE     ISSUED BY THE     DEPARTMENT OF HEALTH AND HUMAN SERVICES,     CENTERS FOR MEDICARE AND MEDICAID SERVICES     ENTITLED     "MEDICARE PROGRAM; CHANGES TO THE HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT SYSTEM AND CALENDAR YEAR 2003     PAYMENT RATES; AND CHANGES TO PAYMENT SUSPENSION     FOR UNFILED COST REPORTS"     (RIN: 0938-AL19 AND 0938-AK59)(i) Cost-benefit analysis     CMS estimates the total increase (from changes in the final rule as well as enrollment, utilization, and case mix changes) in expenditures under the Outpatient Prospective Payment System for    calendar year 2003 compared to calendar year 2002 to be approximately $1.372 billion.(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C.  603-605, 607, and 609     CMS has determined that approximately 37 percent of hospitals are considered small entities under the Regulatory Flexibility Act and that the final rule will have a significant impact on a    substantial number of these small entities.(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.  1532-1535     As defined in title II, the final rule does not contain either an intergovernmental or private sector mandate of more than $100 million in any one year.(iv) Other relevant information or requirements under acts and executive orders     Administrative Procedure Act, 5 U.S.C.  551 etseq.     The final rule was issued using the notice and comment procedures contained at 5 U.S.C. 553.  On August 9, 2002, CMS published an Notice of Proposed Rulemaking in the Federal    Register.  67 Fed. Reg. 52092.  In response, CMS received approximately 1,000 items of correspondence containing multiple comments, which are discussed in the preamble to the final    rule.     Paperwork Reduction Act, 44 U.S.C.  3501-3520     The final rule does not contain any information collections that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act.     Statutory authorization for the rule     The final rule is promulgated under the authority contained in sections 1102, 1815, 1833, 1833(t), 1842, 1866, 1870, 1871, 1879, and 1892 of the Social Security Act (42 U.S.C. 1302, 1395g,    1395l, 1395(t), 1395u, 1395cc, 1395gg, 1395hh, 1395pp, and 1395ccc) and 31 U.S.C. 3711.     Executive Order No. 12866     The final rule was reviewed by OMB and found to be an economically significant regulatory action under the order.     Executive Order No. 13132 (Federalism)     CMS states that the final rule does not have sufficient federalism implications to warrant the preparation of a federalism assessment.

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