[Federal Register Volume 65, Number 88 (Friday, May 5, 2000)]
[Proposed Rules]
[Pages 26282-26436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-10874]



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Part II





Department of Health and Human Services





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Health Care Financing Administration



42 CFR Parts 412, 413, and 485



Medicare Program; Changes to the Hospital Inpatient Prospective Payment 
Systems and Fiscal Year 2001 Rates; Proposed Rule

Federal Register / Vol. 65, No. 88 / Friday, May 5, 2000 / Proposed 
Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 412, 413, and 485

[HCFA-1118-P]
RIN 0938-AK09


Medicare Program; Changes to the Hospital Inpatient Prospective 
Payment Systems and Fiscal Year 2001 Rates

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed rule.

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SUMMARY: We are proposing to revise the Medicare hospital inpatient 
prospective payment system for operating costs to: implement applicable 
statutory requirements, including a number of provisions of the 
Medicare, Medicaid, and State Children's Health Insurance Program 
Balanced Budget Refinement Act of 1999 (Public Law 106-113); and 
implement changes arising from our continuing experience with the 
system. In addition, in the Addendum to this proposed rule, we are 
describing proposed changes to the amounts and factors used to 
determine the rates for Medicare hospital inpatient services for 
operating costs and capital-related costs. These changes would be 
applicable to discharges occurring on or after October 1, 2000. We also 
are setting forth proposed rate-of-increase limits as well as proposed 
policy changes for hospitals and hospital units excluded from the 
prospective payment systems.
    We are proposing changes to the policies governing payments to 
hospitals for the direct costs of graduate medical education and 
payments to disproportionate share hospitals, sole community hospitals, 
and critical access hospitals to implement changes made by Public Law 
106-113.
    Finally, we are proposing a new condition of participation on 
organ, tissue, and eye procurement for critical access hospitals that 
parallels the condition of participation that we previously published 
for all other Medicare-participating hospitals.

DATES: Comments will be considered if received at the appropriate 
address, as provided below, no later than 5 p.m. on July 5, 2000.

ADDRESSES: Mail written comments (an original and three copies) to the 
following address only: Health Care Financing Administration, 
Department of Health and Human Services, Attention: HCFA-1118-P, P.O. 
Box 8010, Baltimore, MD 21244-1850.
    If you prefer, you may deliver by courier your written comments (an 
original and three copies) to one of the following addresses:

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW, 
Washington, DC 20201, or
Room C5-14-03, Central Building, 7500 Security Boulevard, Baltimore, MD 
21244-1850.

Comments mailed to those addresses may be delayed and could be 
considered late.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code HCFA-1118-P.
    Comments received timely will be available for public inspection as 
they are received, generally beginning approximately 3 weeks after 
publication of a document, in Room 443-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 the following addresses:

Health Care Financing Administration, Office of Information Services, 
Security and Standards Group, Division of HCFA Enterprise Standards, 
Room N2-14-26, 7500 Security Boulevard, Baltimore, Maryland 21244-1850. 
Attn: John Burke HCFA-1118-P; and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 3001, New Executive Office Building, Washington, DC 20503, 
Attn: Allison Herron Eydt, HCFA Desk Officer.

FOR FURTHER INFORMATION CONTACT:   
Steve Phillips, (410) 786-4531, Operating Prospective Payment, DRG, 
Wage Index, Reclassifications, and Sole Community Hospital Issues.
Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded 
Hospitals, Graduate Medical Education and Critical Access Hospital 
Issues.

SUPPLEMENTARY INFORMATION:

Availability of Copies and Electronic Access

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I. Background

A. Summary

    Section 1886(d) of the Social Security Act (the Act) sets forth a 
system of payment for the operating costs of acute care hospital 
inpatient stays under Medicare Part A (Hospital Insurance) based on 
prospectively set rates. Section 1886(g) of the Act requires the 
Secretary to pay for the capital-related costs of hospital inpatient 
stays under a prospective payment system. Under these prospective 
payment systems, Medicare payment for hospital inpatient operating and 
capital-related costs is made at predetermined, specific rates for each 
hospital discharge. Discharges are classified according to a list of 
diagnosis-related groups (DRGs).
    Certain specialty hospitals are excluded from the prospective 
payment systems. Under section 1886(d)(1)(B) of the Act, the following 
hospitals and hospital units are excluded from the prospective payment 
systems: psychiatric hospitals and units, rehabilitation hospitals and 
units, children's hospitals, long-term care hospitals, and cancer 
hospitals. For these hospitals and units, Medicare payment for 
operating costs is based on reasonable costs subject to a hospital-
specific annual limit.
    Under sections 1820 and 1834(g) of the Act, payments are made to 
critical

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access hospitals (CAHs) (that is, rural nonprofit hospitals or 
facilities that meet certain statutory requirements) for outpatient 
services on a reasonable cost basis. Reasonable cost is determined 
under the provisions of section 1861(v)(1)(A) of the Act and existing 
regulations under parts 413 and 415.
    Under section 1886(a)(4) of the Act, costs of approved educational 
activities are excluded from the operating costs of inpatient hospital 
services. Hospitals with approved graduate medical education (GME) 
programs are paid for the direct costs of GME in accordance with 
section 1886(h) of the Act; the amount of payment for direct GME costs 
for a cost reporting period is based on the hospital's number of 
residents in that period and the hospital's costs per resident in a 
base year.
    The regulations governing the hospital inpatient prospective 
payment system are located in 42 CFR part 412. The regulations 
governing excluded hospitals and hospital units are located in parts 
412 and 413, and the GME regulations are located in part 413.
    On July 30, 1999, we published a final rule in the Federal Register 
(64 FR 41490) that implemented both statutory requirements and other 
changes to the Medicare hospital inpatient prospective payment systems 
for both operating costs and capital-related costs, as well as changes 
addressing payment for excluded hospitals and payments for GME costs. 
Generally, these changes were effective for discharges occurring on or 
after October 1, 1999. Correction notices for the July 30, 1999 final 
rule relating to the wage index and geographic adjustment factor were 
issued in the Federal Register on January 12, 2000 (65 FR 1817) and 
February 7, 2000 (65 FR 5933).
    On November 29, 1999, the Medicare, Medicaid, and State Children's 
Health Insurance Program (SCHIP) Balanced Budget Refinement Act of 
1999, Public Law 106-113, was enacted. Public Law 106-113 made a number 
of changes to the Act relating to prospective payments to hospitals for 
inpatient services and payments to excluded hospitals. This proposed 
rule would implement amendments enacted by Public Law 106-113 relating 
to FY 2001 payments for GME costs and FY 2001 payments to 
disproportionate share hospitals (DSHs), sole community hospitals 
(SCHs), and CAHs. These changes are addressed in sections IV. and VI. 
of this preamble.
    Other provisions of Public Law 106-113 that relate to Medicare 
payments to hospitals effective prior to October 1, 2000, will be 
addressed in a separate interim final rule with comment period. The 
provisions that will be included in the interim final rule are 
summarized in section I.C. of this preamble.
    Public Law 106-113 also amended section 1886(j) of the Act, which 
was added by section 4421 of the Balanced Budget Act of 1997 (Public 
Law 105-33). Section 1886(j) of the Act provides for a fully 
implemented prospective payment system for inpatient rehabilitation 
hospitals and rehabilitation units, effective for cost reporting 
periods beginning on or after October 1, 2002, with provisions for 
payments during a transitional period of October 1, 2000 to October 1, 
2002, based on target amounts specified in section 1886(b) of the Act. 
In section VI of this preamble, we describe the impact of this 
provision on the proposed changes applicable to excluded hospitals and 
units in this proposed rule. We are issuing a separate notice of 
proposed rulemaking to implement the prospective payment system for 
inpatient rehabilitation hospitals and units.

B. Major Contents of This Proposed Rule

    In this proposed rule, we are setting forth proposed changes to the 
Medicare hospital inpatient prospective payment system for operating 
costs. We are not proposing any policy changes relating to payments for 
capital-related costs under the hospital inpatient prospective payment 
system in FY 2001. Our proposed changes relating to capital-related 
costs include only changes to the amounts and factors for determining 
the rates for capital-related costs for FY 2001. We also are proposing 
changes relating to payments for GME costs and payments to excluded 
hospitals and units, DSHs, SCHs, and CAHs. This proposed rule would be 
effective for discharges occurring on or after October 1, 2000.
    The following is a summary of the major changes that we are 
proposing to make:
1. Proposed Changes to the DRG Reclassifications and Recalibrations of 
Relative Weights
    As required by section 1886(d)(4)(C) of the Act, we adjust the DRG 
classifications and relative weights annually. Our proposed changes for 
FY 2001 are set forth in section II. of this preamble.
2. Proposed Changes to the Hospital Wage Index
    In section III. of this preamble, we discuss proposed revisions to 
the wage index and the annual update of the wage data. Specific issues 
addressed in this section include the following:
    <bullet> The FY 2001 wage index update, using FY 1997 wage data.
    <bullet> The transition to excluding from the wage index Part A 
physician wage costs that are teaching-related, as well as resident and 
Part A certified registered nurse anesthetist (CRNA) costs.
    <bullet>  Revisions to the wage index based on hospital 
redesignations and reclassifications.
3. Other Decisions and Proposed Changes to the Prospective Payment 
System for Inpatient Operating and Graduate Medical Education Costs
    In section IV. of this preamble, we discuss several provisions of 
the regulations in 42 CFR Parts 412 and 413 and set forth certain 
proposed changes concerning the following:
    <bullet>  Postacute care transfers.
    <bullet>  Sole community hospitals.
    <bullet>  Rural referral centers.
    <bullet> Changes relating to the indirect medical education 
adjustment.
    <bullet> Changes relating to the DSH adjustment and collection of 
data on uncompensated costs for services furnished in hospitals under 
the prospective payment system.
    <bullet> Medicare Geographic Classification Review Board (MGCRB) 
classifications.
    <bullet> Payment for the direct costs of GME.
4. Last Year of Transition Period for the Prospective Payment System 
for Capital-Related Costs
    In section V. of this preamble, we discuss FY 2001 as the last year 
of a 10-year transition period established to phase-in the prospective 
payment system for capital-related costs for inpatient hospital 
services.
5. Proposed Changes for Hospitals and Hospital Units Excluded from the 
Prospective Payment Systems
    In section VI. of this preamble, we discuss the following proposals 
concerning excluded hospital and hospital units and CAHs:
    <bullet> Limits on and adjustments to the proposed target amounts 
for FY 2001.
    <bullet> Development of prospective payment system for inpatient 
rehabilitation hospitals and units.
    <bullet> Continuous improvement bonus payments.
    <bullet> Clarification that the 5-percent threshold used in 
calculating an excluded hospital's cost per discharge is based only on 
Medicare inpatients discharged from the hospital-within-a-hospital.
    <bullet> All-inclusive payment rate option for CAHs.
    <bullet> Condition of participation for CAHs relating to organ, 
tissue, and eye procurement.

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6. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits
    In the Addendum to this proposed rule, we set forth proposed 
changes to the amounts and factors for determining the FY 2001 
prospective payment rates for operating costs and capital-related 
costs. We also address update factors for determining the rate-of-
increase limits for cost reporting periods beginning in FY 2001 for 
hospitals and hospital units excluded from the prospective payment 
system.
7. Impact Analysis
    In Appendix A, we set forth an analysis of the impact that the 
proposed changes described in this proposed rule would have on affected 
entities.
8. Capital Acquisition Model
    Appendix B contains the technical appendix on the proposed FY 2001 
capital cost model.
9. Report to Congress on the Update Factor for Hospitals under the 
Prospective Payment System and Hospitals and Units Excluded from the 
Prospective Payment System
    Section 1886(e)(3) of the Act requires the Secretary to report to 
Congress on our initial estimate of a recommended update factor for FY 
2001 for payments to hospitals included in the prospective payment 
systems, and hospitals excluded from the prospective payment systems. 
This report is included as Appendix C to this proposed rule.
10. Proposed Recommendation of Update Factor for Hospital Inpatient 
Operating Costs
    As required by sections 1886(e)(4) and (e)(5) of the Act, Appendix 
D provides our recommendation of the appropriate percentage change for 
FY 2001 for the following:
    <bullet> Large urban area and other area average standardized 
amounts (and hospital-specific rates applicable to sole community and 
Medicare-dependent, small rural hospitals) for hospital inpatient 
services paid for under the prospective payment system for operating 
costs.
    <bullet>  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.
11. Discussion of Medicare Payment Advisory Commission Recommendations
    Under section 1805(b) of the Act, the Medicare Payment Advisory 
Commission (MedPAC) is required to submit a report to Congress, not 
later than March 1 of each year, that reviews and makes recommendations 
on Medicare payment policies. This annual report makes recommendations 
concerning hospital inpatient payment policies. In section VII. of this 
preamble, we discuss the MedPAC recommendations and any actions we are 
proposing to take with regard to them (when an action is recommended). 
For further information relating specifically to the MedPAC March 1 
report or to obtain a copy of the report, contact MedPAC at (202) 653-
7220.

C. Provisions of Public Law 106-113 To Be Included in Interim Final 
Rule With Comment Period

    As we have indicated under section I.A. of this preamble, we are 
planning to publish an interim final rule with comment period to 
address provisions of Public Law 106-113 that are effective prior to 
October 1, 2000. This interim final rule with comment period will be 
issued prior to the publication of the hospital inpatient prospective 
payment system final rule by August 1. A summary of the provisions of 
Public Law 106-113 that will be addressed in the interim final rule 
with comment period follows:
    <bullet> Section 111(b), which provides for an additional payment 
to teaching hospitals equal to the additional amount the hospital would 
have been paid for FY 2000 if the IME adjustment formula under section 
1886(d)(5)(B) of the Act (which reflects the higher indirect operating 
costs associated with GME) for FY 2000 had remained the same as for FY 
1999. (Section 111(a) also changed the IME adjustment formula for 
discharges occurring during FY 2001 and for discharges occurring on or 
after October 1, 2001, which is addressed in section IV.D. of this 
preamble.)
    <bullet> Section 121, which amended section 1886(b)(3)(H) of the 
Act to provide for an appropriate wage adjustment to the cap on the 
target amounts for psychiatric hospitals and units, rehabilitation 
hospitals and units, and long-term care hospitals, effective for cost 
reporting periods beginning on or after October 1, 1999, through 
September 30, 2002. We will address the wage adjustment to the FY 2000 
caps in the interim final rule. (The wage adjustment to the FY 2001 
caps is discussed in section VI. of this preamble.)
    <bullet> Section 312, which amended section 1886(h)(5) of the Act 
to provide that, effective July 1, 2000, in determining the cap on the 
number of residents for GME and IME costs, the period of board 
eligibility and the initial residency period for child neurology is the 
period of board eligibility for pediatrics plus 2 years. This provision 
applies on and after July 1, 2000, to residency programs that began 
before, on, or after November 29, 1999.
    <bullet> Section 401(a), which amended section 1886(d)(8) of the 
Act to direct the Secretary to treat certain hospitals located in urban 
areas as being located in rural areas of their State if the hospital 
meets statutory criteria and files an application with HCFA. This 
provision is effective on January 1, 2000.
    <bullet> Section 401(b), which contains conforming changes to 
incorporate the reclassifications under the amendments made by section 
401(a) of Public Law 106-113 to outpatient hospital services (section 
1833(t) of the Act) and the CAH statute (section 1820(c)(2)(B)(i) of 
the Act). This provision is effective on January 1, 2000.
    <bullet> Section 403(a), which amended section 1820(c)(2)(B)(iii) 
of the Act to delete the 96-hour length of stay restriction on 
inpatient care in a CAH and to authorize a period of stay that does not 
exceed, on an annual basis, 96 hours per patient. This provision is 
effective on November 29, 1999.
    <bullet> Section 403(b), which amended section 1820(c)(2)(B)(i) of 
the Act to allow for-profit hospitals to qualify for CAH status. This 
provision is effective on November 29, 1999.
    <bullet> Section 403(c), which amended section 1820(c) of the Act 
to allow hospitals that have closed within 10 years prior to November 
29, 1999, or hospitals that downsized to a health clinic or health 
center, to be designated as CAHs if they meet the established criteria 
for designation.
    <bullet> Section 403(e), which amended sections 1833(a)(1)(D)(i) 
and 1833(a)(2)(D)(i) the Act to eliminate the Medicare Part B 
deductible and coinsurance for clinical diagnostic laboratory tests 
furnished by a CAH on an outpatient basis. This provision is effective 
with respect to services furnished on or after November 29, 1999.
    <bullet> Section 403(f), which amended section 1883 of the Act to 
reinstate the right of CAHs that meet applicable requirements to enter 
into ``swing-bed'' agreements.
    <bullet> Section 404, which amended section 1886(d)(5)(G) of the 
Act to extend the Medicare-dependent, small rural hospital program for 
5 years, from FY 2001 through FY 2005. Section 404 also amended section 
1886(b)(3)(D) of the Act as a conforming change to make the 5-year 
extension applicable to the

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target amounts for Medicare-dependent, small rural hospitals.
    <bullet> Section 407(a)(1), which amended section 1886(h)(4)(F) of 
the Act to direct the Secretary, for purposes of determining a 
hospital's FTE cap for direct GME payments, to count an individual to 
the extent that the individual would have been counted as a primary 
care resident for purposes of the FTE cap but for the fact that the 
individual was on maternity or disability leave or a similar approved 
leave of absence. Section 407(a)(2) made a corresponding amendment to 
section 1886(d)(5)(B)(v) of the Act relating to the IME adjustment. The 
provision relating to direct GME is effective with cost reporting 
periods beginning on or after November 29, 1999. The provision relating 
to the IME adjustment applies to discharges occurring in cost reporting 
periods beginning on or after November 29, 1999.
    <bullet> Section 407(b)(1), which amended section 1886(h)(4)(F)(i) 
of the Act to provide that a rural hospital's direct FTE count for 
direct GME may not exceed 130 percent of the number of unweighted 
residents that the rural hospital counted in its most recent cost 
reporting period ending on or before December 31, 1996. Section 
407(b)(2) made a similar change to section 1886(d)(5)(B)(v) of the Act 
relating to the IME adjustment. The provision relating to direct GME 
applies to cost reporting periods beginning on or after April 1, 2000. 
The provision relating to the IME adjustment applies to discharges 
occurring on or after April 1, 2000.
    <bullet> Section 407(c), which amended sections 1886(h)(4)(H) and 
1886(d)(5)(B)(v) of the Act to allow a non-rural hospital that 
establishes separately accredited approved medical residency training 
programs (or rural training tracks) in a rural area or has an 
accredited training program with an integrated rural track, to receive 
an FTE cap adjustment for purposes of direct GME and IME. The provision 
is effective with cost reporting periods beginning on or after April 1, 
2000 for direct GME, and with discharges occurring on or after April 1, 
2000 for IME.
    <bullet> Section 407(d) addresses the situation where residents 
were training in a residency training program at a Veterans Affairs 
hospital and then were transferred on or after January 1, 1997 and on 
or before July 30, 1998, to a non-Veterans Affairs hospital because the 
program in which the residents were training would lose its 
accreditation by the Accreditation Council on Graduate Medical 
Education (ACGME) if the residents continued to train at the facility. 
In this scenario, the non-Veterans Affairs hospital may receive a 
temporary adjustment to its 1996 FTE cap to include in its FTE count 
those residents who were transferred from the Veterans Affairs 
hospital. This provision applies as if it was included in the enactment 
of Public Law 105-33, that is, for GME with cost reporting periods 
beginning on or after October 1, 1997, and for IME, discharges 
occurring on or after October 1, 1997. If a hospital is owed payments 
as a result of this provision, payments must be made immediately.
    <bullet> Section 541, which amended section 1886 of the Act to 
provide an additional payment to hospitals that receive payments under 
section 1861(v) of the Act for approved nursing and allied health 
education programs to reflect utilization of Medicare+Choice enrollees. 
This provision is effective for portions of cost reporting periods in a 
year beginning with calendar year 2000.

II. Proposed Changes to DRG Classifications and Relative Weights

A. Background

    Under the prospective payment system, we pay for inpatient hospital 
services on a rate per discharge basis that varies according to the DRG 
to which a beneficiary's stay is assigned. The formula used to 
calculate payment for a specific case takes an individual hospital's 
payment rate per case and multiplies it by the weight of the DRG to 
which the case is assigned. Each DRG weight represents the average 
resources required to care for cases in that particular DRG relative to 
the average resources used to treat cases in all DRGs.
    Congress recognized that it would be necessary to recalculate the 
DRG relative weights periodically to account for changes in resource 
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires 
that the Secretary adjust the DRG classifications and relative weights 
at least annually. These adjustments are made to reflect changes in 
treatment patterns, technology, and any other factors that may change 
the relative use of hospital resources. The proposed changes to the DRG 
classification system, and the proposed recalibration of the DRG 
weights for discharges occurring on or after October 1, 2000, are 
discussed below.

B. DRG Reclassification

1. General
    Cases are classified into DRGs for payment under the prospective 
payment system based on the principal diagnosis, up to eight additional 
diagnoses, and up to six procedures performed during the stay, as well 
as age, sex, and discharge status of the patient. The diagnosis and 
procedure information is reported by the hospital using codes from the 
International Classification of Diseases, Ninth Revision, Clinical 
Modification (ICD-9-CM). Medicare fiscal intermediaries enter the 
information into their claims processing systems and subject it to a 
series of automated screens called the Medicare Code Editor (MCE). 
These screens are designed to identify cases that require further 
review before classification into a DRG.
    After screening through the MCE and any further development of the 
claims, cases are classified into the appropriate DRG by the Medicare 
GROUPER software program. The GROUPER program was developed as a means 
of classifying each case into a DRG on the basis of the diagnosis and 
procedure codes and demographic information (that is, sex, age, and 
discharge status). It is used both to classify past cases in order to 
measure relative hospital resource consumption to establish the DRG 
weights and to classify current cases for purposes of determining 
payment. The records for all Medicare hospital inpatient discharges are 
maintained in the Medicare Provider Analysis and Review (MedPAR) file. 
The data in this file are used to evaluate possible DRG classification 
changes and to recalibrate the DRG weights.
    In the July 30, 1999 final rule (64 FR 41500), we discussed a 
process for considering non-MedPAR data in the recalibration process. 
In order for the use of particular data to be feasible, we must have 
sufficient time to evaluate and test the data. The time necessary to do 
so depends upon the nature and quality of the data submitted. 
Generally, however, a significant sample of the data should be 
submitted by August 1, approximately 8 months prior to the publication 
of the proposed rule, so that we can test the data and make a 
preliminary assessment as to the feasibility of using the data. 
Subsequently, a complete database should be submitted no later than 
December 1 for consideration in conjunction with the next year's 
proposed rule.
    Currently, cases are assigned to one of 501 DRGs (including one DRG 
for a diagnosis that is invalid as a discharge diagnosis and one DRG 
for ungroupable diagnoses) in 25 major diagnostic categories (MDCs). 
Most MDCs are based on a particular organ system of the body (for 
example, MDC 6 (Diseases and Disorders of the Digestive System)); 
however, some MDCs are not constructed on this basis since they

[[Page 26286]]

involve multiple organ systems (for example, MDC 22 (Burns)).
    In general, cases are assigned to an MDC based on the principal 
diagnosis, before assignment to a DRG. However, there are five DRGs to 
which cases are directly assigned on the basis of procedure codes. 
These are the DRGs for liver, bone marrow, and lung transplants (DRGs 
480, 481, and 495, respectively) and the two DRGs for tracheostomies 
(DRGs 482 and 483). Cases are assigned to these DRGs before 
classification to an MDC.
    Within most MDCs, cases are then divided into surgical DRGs (based 
on a surgical hierarchy that orders individual procedures or groups of 
procedures by resource intensity) and medical DRGs. Medical DRGs 
generally are differentiated on the basis of diagnosis and age. Some 
surgical and medical DRGs are further differentiated based on the 
presence or absence of complications or comorbidities (CC).
    Generally, the GROUPER does not consider other procedures; that is, 
nonsurgical procedures or minor surgical procedures generally not 
performed in an operating room are not listed as operating room (OR) 
procedures in the GROUPER decision tables. However, there are a few 
non-OR procedures that do affect DRG assignment for certain principal 
diagnoses, such as extracorporeal shock wave lithotripsy for patients 
with a principal diagnosis of urinary stones.
    The changes we are proposing to make to the DRG classification 
system for FY 2001 and other issues concerning DRGs are set forth 
below. Unless otherwise noted, our DRG analysis is based on the full 
(100 percent) FY 1999 MedPAR file (bills received through December 31, 
1999 for discharges in FY 1999).

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

    In the August 29, 1997 final rule with comment period (62 FR 
45974), we noted that, because of the many recent changes in heart 
surgery, we were considering conducting a comprehensive review of the 
MDC 5 surgical DRGs. In the July 31, 1998 final rule with comment 
period (63 FR 40956), we did adopt some changes to the MDC 5 surgical 
DRGs. Since that time, we have received inquiries on a continuing basis 
regarding these DRGs. We have continued to review Medicare claims data 
and, based on our analysis, we are proposing the following DRG changes 
in MDC 5:
a. Heart Transplant (DRG 103)
    As previously stated, cases are generally assigned to an MDC based 
on principal diagnosis and subsequently assigned to surgical or medical 
DRGs included in that MDC. However, cases involving liver, bone marrow, 
and lung transplants (DRGs 480, 481, and 495, respectively) and the two 
DRGs for tracheostomies (DRGs 482 and 483) are directly assigned on the 
basis of procedure codes. Cases assigned to these DRGs before 
classification to an MDC are referred to as pre-MDC. However, cases 
involving heart transplants are currently assigned first to MDC 5 and 
then to DRG 103.
    Currently, when a bone marrow transplant and a heart transplant are 
performed during the same admission, the case is assigned to DRG 481 
(Bone Marrow Transplant). Because bone marrow transplant cases are 
first classified to pre-MDC, while heart transplants are first assigned 
to MDC 5, the bone marrow transplant assumes precedence in the 
assignment of the case to a DRG. However, payment for DRG 481 is 
substantially less than DRG 103. For FY 2000, the relative weight for 
DRG 103 is 19.5100, while the relative weight for DRG 481 is 8.7285.
    We reviewed the FY 1999 MedPAR file containing bills through 
December 31, 1999 and found no cases in which a bone marrow transplant 
and a heart transplant were performed in the same admission. However, 
to ensure appropriate DRG assignment of these cases, we are proposing 
that the heart transplant DRG, which encompasses combined heart-lung 
transplantation (ICD-9-CM procedure code 33.6) and heart 
transplantation (ICD-9-CM procedure code 37.5) be assigned to pre-MDC. 
In this way, cases involving a bone marrow transplant and a heart 
transplant would be assigned to DRG 103 (DRG 103 would be reordered 
higher in the pre-MDC surgical hierarchy, as discussed in section 
II.B.5. of this preamble).
b. Heart Assist Devices
    We continue to review data in MDC 5 (Diseases and Disorders of the 
Circulatory System) to determine if cases are being assigned to the 
most appropriate DRG based on clinical coherence and similar resource 
consumption. At the December 1, 1994 ICD-9-CM Coordination and 
Maintenance Committee meeting, we recommended creation of new codes to 
capture single and bi-ventricular heart assist systems. These codes, 
37.65 (Implant of an external, pulsatile heart assist system) and 37.66 
(Implant of an implantable, pulsatile heart assist system), were 
adopted for use for discharges occurring on or after October 1, 1995. 
However, code 37.66 was deemed investigational and was not considered a 
covered procedure. Effective May 5, 1997, we revised Medicare coverage 
of heart assist devices to allow coverage of a ventricular assist 
device (code 37.66) used for support of blood circulation 
postcardiotomy if certain conditions were met.
    Due to some residual misunderstanding regarding this coverage 
policy, we would like to emphasize that this device was and will 
continue to be listed as a noncovered procedure in the Medicare Code 
Editor (MCE), the front-end software product in the GROUPER program 
that detects and reports errors in the coding of claims data. The 
reason that this device is listed in the MCE, in spite of the fact that 
its implantation is covered, is because of the stringent conditions 
that must be met by hospitals in order to receive payment.
    In the August 29, 1997 final rule (62 FR 45973), we moved procedure 
code 37.66 from DRGs 110 and 111 \1\ (Major Cardiovascular Procedures 
with and without CCs, respectively) to DRG 108 (Other Cardiothoracic 
Procedures). As stated in the July 31, 1998 final rule (63 FR 40956), 
we moved procedure code 37.66 to DRGs 104 and 105 (Cardiac Valve and 
Other Major Cardiothoracic Procedures with and without CCs, 
respectively) for FY 1999.
---------------------------------------------------------------------------

    \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 with patients who are age 0-17. Occasionally, a 
pair of DRGs is split between age <gr-thn-eq>17 and age 0-17.
---------------------------------------------------------------------------

    In the July 30, 1999 final rule (64 FR 41498), we responded to a 
comment suggesting that heart assist devices be assigned to DRG 103. In 
further consideration of this issue, we have reviewed the 100 percent 
FY 1999 MedPAR file containing bills through December 31, 1999, and 
found that there were a total of 47 implantable heart assist system 
procedures performed on Medicare beneficiaries. Of these cases, 13 
(approximately 28 percent) were assigned to DRG 103 (Heart Transplant) 
and four (approximately 9 percent) were assigned to DRG 483 
(Tracheostomy Except for Face, Mouth and Neck Diagnoses), and, 
therefore, were paid at significantly higher rates than the remaining 
30 cases. All of the procedure code 37.66 cases have extremely high 
charges, which is consistent with past

[[Page 26287]]

analysis, and all of these cases are subject to payment as cost 
outliers.
    Our data analysis indicates that the most cases in any one hospital 
is 5, while 17 hospitals performed only one heart assist system implant 
each. We reiterate that only heart transplant cases can be properly 
assigned to the transplant DRG (August 29, 1997 final rule (62 FR 
45974)). Since heart assist devices are used across DRGs, many not 
involving a transplant, we are not proposing to assign procedure code 
37.66 to DRG 103.
    In addition to the review of 37.66, we also looked at procedure 
codes 37.62 (Implant of other heart assist system), 37.63 (Replacement 
and repair of heart assist system), and 37.65 (Implant of an external, 
pulsatile heart assist system). These cases are currently assigned to 
DRGs 110 and 111 (Major Cardiovascular Procedures). We believe that 
these procedures are similar both clinically and in terms of resource 
utilization to procedure code 37.66, which is already assigned to DRGs 
104 and 105. Therefore, we propose to move codes 37.62, 37.63, and 
37.65 from DRGs 110 and 111 to DRGs 104 and 105.
c. Platelet Inhibitors
    Effective October 1, 1998, procedure code 99.20 (Injection or 
infusion of platelet inhibitor) was created. The use of platelet 
inhibitors have been shown to significantly decrease the rate of acute 
vessel closure, as well as the rate of cardiac complications and death. 
Platelet inhibitors are frequently administered to patients undergoing 
percutaneous transluminal coronary angioplasty (PTCA). In addition, 
patients admitted with unstable angina may also benefit from platelet 
inhibitors. This procedure code is designated as a non-OR procedure 
that does not affect DRG assignment (platelet inhibitors are 
administered either through intravenous injection or infusion).
    For the past 2 years, a manufacturer of platelet inhibitors has 
submitted data to support its position that cases involving platelet 
inhibitor therapy receiving angioplasty should be reclassified from DRG 
112 (Percutaneous Cardiovascular Procedures) to DRG 116 (Other 
Permanent Cardiac Pacemaker Implant or PTCA with Coronary Artery Stent 
Implant). In the July 30, 1999 final rule (64 FR 41503), we noted that 
we had received a new set of data from the platelet inhibitor 
manufacturer containing 27,673 cases from 164 hospitals in which 
Medicare patients underwent an angioplasty.
    Included with the data were tables summarizing the results of the 
commenter's analysis of the data, showing that angioplasty cases 
receiving platelet inhibitor therapy are more expensive than those not 
receiving platelet inhibitors. According to the commenter, the 
approximate average standardized charges for the different classes of 
patients are as follows:
    <bullet> No drug, no stent: $19,877.
    <bullet> No drug, with stent: $22,968.
    <bullet> Drug, no stent: $26,389.
    <bullet> Drug, stent: $30,139.
    Using the 100 percent FY 1999 MedPAR file that contains discharges 
through September 30, 1999, we performed analysis of the cases for 
which procedure code 99.20 was reported. There were a total of 37,222 
cases spread across 123 DRGs.
    The majority of the platelet inhibitor cases, 28,022 (75 percent of 
all platelet inhibitor cases), are already assigned to DRG 116. The 
average standardized charges for these cases are approximately $26,683, 
compared to approximately $25,251 for DRG 116 overall. In DRG 112, 
there were 4,310 platelet inhibitor cases (12 percent of all platelet 
inhibitor cases) assigned. The average standardized charge for these 
cases is approximately $22,786, compared to approximately $20,224 for 
DRG 112 overall. Although the platelet inhibitor therapy cases that are 
classified to DRG 112 do have somewhat higher charges than the average 
case assigned to this DRG (11 percent, or $2,563), we found several 
procedures in DRG 112 with average standardized charges higher than the 
platelet inhibitor cases. For example, there were 1,560 cases in which 
a single vessel PTCA or coronary atherectomy with thrombolytic agent 
(procedure code 36.02) was performed with an average standardized 
charge of approximately $25,181, and there were 4,951 cases in which a 
multiple vessel PTCA or coronary atherectomy was performed, with or 
without a thrombolytic agent (procedure code 36.05) with an average 
standardized charge of approximately $23,608.
    We also noted that there are several procedures assigned to DRG 112 
that have average standardized charges lower than the average charges 
for all cases in the DRG. For example, average charges for cases with 
procedure code 37.34 (Catheter ablation of lesion or tissues of heart) 
were $18,429. The following chart illustrates the variation among the 
average charges for DRG 112. This chart shows that the average charges 
for cases with procedure code 99.20 are well within the normal 
variation of other procedures.

------------------------------------------------------------------------
                                                            Average
              DRG 112                     Cases           standardized
                                                            charges
------------------------------------------------------------------------
Catheter ablation of lesion or                  6,972            $18,429
 tissues of heart (code 37.34)....
All cases within DRG 112..........             60,842             20,224
Injection or infusion of platelet               4,310             22,786
 inhibitor (code 99.20)...........
Multiple vessel PTCA or coronary                4,951             23,608
 atherectomy with or without
 mention of thrombolytic agent
 (code 36.05).....................
Single vessel PTCA or coronary                  1,560             25,181
 atherectomy with mention of
 thrombolytic agent (code 36.02)..
------------------------------------------------------------------------

    These examples indicate that there is always some variation in 
charges within a DRG. This difference in variations of charges is 
within the normal range of charge variations.
    Clinical homogeneity within DRGs has always been a fundamental 
principle considered when assigning codes to appropriate DRGs. 
Currently, DRG 116 includes cases involving the insertion of a 
pacemaker as well as the insertion of coronary artery stents with PTCA. 
On the other hand, cases assigned to DRG 112 involve less invasive 
operating room and, in some cases, nonoperating room procedures.
    The basis for DRG assignment has generally been the diagnosis of 
the patient or the procedures performed. To the extent the use of a 
particular technology becomes prevalent in the treatment of a 
particular type of case, the DRG system is designed to account for any 
increases or decreases in costs through recalibration. Hospitals 
frequently benefit from this process while efficiency-enhancing 
technology is being introduced. We believe that the update factors 
established in section 1886(b)(3)(B)(i) of the Act, combined with the 
potential for continuing improvements in hospital productivity, and 
annual recalibration of the DRG

[[Page 26288]]

weights, are adequate to finance appropriate care of Medicare patients.
    We also received a comment from another manufacturer of platelet 
inhibitors whose therapy is targeted on acute coronary syndrome 
patients without coronary intervention. These cases are assigned to DRG 
124 (Circulatory Disorders Except Acute Myocardial Infarction with 
Cardiac Catheterization and Complex Diagnosis) or DRG 140 (Angina 
Pectoris). The manufacturer's concern is that both types of cases, 
those performed in conjunction with coronary intervention and those 
without, be given an equal focus in this evaluation.
    Based on our analysis, we found 410 platelet inhibitor cases (1 
percent) assigned to DRG 124. This is a small percentage of cases in 
comparison to the overall total of 134,759 cases assigned to this DRG. 
The platelet inhibitor cases had an average standardized charge of 
approximately $17,378 compared to approximately $14,730 for DRG 124 
overall. As we have illustrated above, there is always some variation 
in charges within a DRG and this difference is within normal variation.
    There were 66 platelet inhibitor cases (0.2 percent) assigned to 
DRG 140. The average standardized charge for these cases is higher than 
the overall DRG charge, approximately $8,992 and $5,657, respectively. 
However, it represents a small percentage of the total (76,913) cases 
assigned to DRG 140.
    In summary, currently 75 percent of cases where code 99.20 is 
present are assigned to DRG 116. The next most common DRG where these 
cases are assigned is DRG 112 (12 percent). Cases assigned to DRG 116 
generally involve implantation of a pacemaker or artery stent, while 
cases assigned to DRG 112 involve percutaneous cardiovascular 
procedures. Our analysis found a $3,897 difference between cases 
involving platelet inhibitor therapy that were assigned to DRG 116 and 
cases assigned to DRG 112, indicating a clinical distinction between 
the cases grouping to the two DRGs. Finally, among platelet inhibitor 
therapy cases that are assigned to DRG 112, our analysis found that the 
average charges are well within the normal variation around the overall 
average charges within the DRG. Based on these findings, we do not 
believe it would be appropriate to assign all cases where procedure 
code 99.20 is present to DRG 116. Therefore, we are not proposing to 
change to our current policy which specifies that assignment of cases 
to this code does not affect the DRG assignment.
d. Extracorporeal Membrane Oxygenation
    Extracorporeal Membrane Oxygenation (ECMO) is a cardiopulmonary 
bypass technique that provides long-term cardiopulmonary support to 
patients who have reversible cardiopulmonary insufficiency that has not 
responded to conventional management. It involves passing a patient's 
blood through an extracorporeal membrane oxygenator which adds oxygen 
and removes carbon dioxide. The oxygenated blood then is passed through 
a heat exchanger to warm it to body temperature prior to returning it 
to the patient. The process and equipment are similar to those used in 
open heart surgery, but are continued over prolonged periods of time. 
ECMO attempts to provide the patient with artificial cardiopulmonary 
function while his or her own cardiopulmonary functions are incapable 
of sustaining life.
    Since ECMO involves the use of a device that sustains 
cardiopulmonary function while the underlying condition is being 
treated, it is important to identify and treat underlying conditions 
leading to cardiopulmonary failure if the patient is to return to 
normal cardiopulmonary function.
    ECMO is assigned to procedure code 39.65 (Extracorporeal membrane 
oxygenation (ECMO)). This code is not recognized as an OR procedure 
within the DRG system and, therefore, does not affect payment. To 
evaluate the appropriateness of payment under the current DRG 
assignment, we have reviewed a 10-percent sample of Medicare claims in 
the FY 1999 MedPAR file and found only 4 cases in which ECMO was used. 
The charges for these cases ranged from $16,006 to $198,014. Since 
medical literature indicates that ECMO is predominately used on 
newborns and pediatric cases, this low number of claims is not 
surprising. Only in recent years have some hospitals started to use 
ECMO on adults. It is reserved for cases facing almost certain 
mortality.
    Because ECMO is a procedure clinically similar to a heart assist 
device, we are proposing that procedure code 39.65 be classified as an 
OR procedure and be classified in DRGs 104 and 105 along with the heart 
assist system procedures (as discussed in section II.B.2.b. of this 
preamble). Those cases in which ECMO was provided, but for which the 
principal diagnosis is not classified to MDC 5, would then be assigned 
to DRG 468 (Extensive OR Procedure Unrelated to Principal Diagnosis). 
This would be appropriate since it is possible that secondary 
conditions or complications may arise during hospitalization that would 
require the use of ECMO. The relatively high weight of DRG 468 would be 
appropriate for these cases.
3. MDC 15 (Newborns and Other Neonates With Conditions Originating in 
the Perinatal Period)
a. V05.8 (Vaccination for Disease, NEC)
    DRG 390 (Neonate with Other Significant Problems) contains newborn 
or neonate cases with other significant problems, not assigned to DRGs 
385 through 389, DRG 391, or DRG 469. In order to be classified into 
DRG 391 (Normal Newborn), the neonate must have a principal diagnosis 
as listed under DRG 391 and either no secondary diagnosis or a 
secondary diagnosis as listed under DRG 391. Neonates with a secondary 
diagnosis of V05.8 (Vaccination for disease, NEC) are currently 
classified to DRG 390. Although it would seem that healthy newborns who 
receive vaccinations and have no other problems should be classified to 
DRG 391, code V05.8 was not included as one of the secondary diagnoses 
under DRG 391, and therefore the case would not be classified as a 
normal newborn (DRG 391). Code V05.8 is assigned to DRG 390 as a 
default, since it is not included under another complicated neonate DRG 
or the normal newborn DRG.
    Based on inquiries we have received, we reviewed the 
appropriateness of including diagnosis code V05.8 on the list of 
acceptable secondary diagnoses under DRG 390. It was pointed out that 
by including V05.8 on the acceptable secondary diagnosis list for DRG 
390, newborns who receive vaccinations are classified as having 
significant health problems. The inquirers believed this incorrectly 
labels an otherwise healthy newborn as having a significant medical 
condition. Providing a vaccination to a newborn is performed to prevent 
the infant from contracting a disease.
    We agree with the inquirers that, absent any evidence of disease, a 
newborn should not be considered as having a significant problem simply 
because a preventative vaccination was provided. Therefore, we are 
proposing that V05.8 be removed from the list of acceptable secondary 
diagnoses under DRG 390 and assigned as a secondary diagnosis under DRG 
39l. In doing so, these cases would no longer be classified to DRG 390.

[[Page 26289]]

b. Diagnosis Code 666.02 (Third-stage Postpartum Hemorrhage, Delivered 
With Postpartum Complication)
    Diagnosis code 666.02 is assigned to DRG 373 (Vaginal Delivery 
without Complicating Diagnosis). This DRG was created for uncomplicated 
vaginal deliveries. However, code 666.22 (Delayed and secondary 
postpartum hemorrhage, delivered with postpartum complication) is 
assigned to DRG 372 (Vaginal Delivery with Complicating Diagnoses). 
This means that mothers who had a delayed and secondary postpartum 
hemorrhage would be assigned to DRG 372, while mothers who had a third-
stage postpartum hemorrhage would not be considered as a complicated 
delivery.
    We believe a third-stage postpartum hemorrhage should be considered 
a complicating diagnosis and, in order to more appropriately categorize 
these cases, we are proposing that diagnosis code 666.02 be removed 
from DRG 373 and assigned as a complicating diagnosis under DRG 372.
c. Diagnosis Code 759.89 (Specified Congenital Anomalies, NEC) 
(Alport's Syndrome)
    Alport's Syndrome (also referred to as hereditary nephritis) is an 
inherited disorder involving damage to the kidney, blood in the urine, 
and, in some cases, loss of hearing. It may also include loss of 
vision. Patients who are not treated early enough or who do not respond 
to treatment may progress to renal failure. A kidney transplant is one 
treatment option for these cases. As with many of the congenital 
anomalies, there is no unique ICD-9-CM code for this condition. 
Alport's Syndrome, along with many other rare and diverse congenital 
anomalies, is assigned to the rather nonspecific diagnosis code 759.89 
(Specific congenital anomalies, NEC). Examples include William 
Syndrome, Brachio-Oto-Renal Syndrome, and Costello's Syndrome. Each of 
these is a unique hereditary disorder affecting a variety of body 
systems.
    Patients can be diagnosed and treated for congenital anomalies 
throughout their lives; treatment is not restricted to the neonatal 
period. In our GROUPER, however, each diagnosis code is assigned to 
just one MDC. In this case, diagnosis code 759.89 is assigned to MDC 15 
(Newborns and Other Neonates with Conditions Originating in the 
Perinatal Period) even though the patient may be an adult.
    We have received a request from a physician concerning renal 
transplants for patients with Alport's Syndrome. The physician pointed 
out that when a patient with Alport's Syndrome is admitted for a kidney 
transplant, the case is assigned to DRG 390 (Neonate with Other 
Significant Problems). In these instances, when the principal diagnosis 
is code 759.89, the case is classified to MDC 15 even though the 
patient may no longer be a newborn. The physician believed that these 
cases should be assigned to DRG 302 (Kidney Transplant).
    The inquirer suggested moving diagnosis code 759.89 to MDC 11 
(Diseases and Disorders of the Kidney and Urinary Tract) so that when a 
kidney transplant is performed, it will be assigned to DRG 302. 
Although this seems quite appropriate for patients with Alport's 
Syndrome found in diagnosis code 759.89, it does not work well for the 
wide variety of patients also described by this code. Many others would 
be inappropriately classified to MDC 11.
    Alport's Syndrome cases with code 759.89 as a principal diagnosis 
who receive a kidney transplant are assigned to DRG 468 (Extensive OR 
Procedure Unrelated to Principal Diagnosis). This DRG has a FY 2000 
relative weight of 3.6400. Also for FY 2000, DRG 302 (Kidney 
Transplant) has a relative weight of 3.5669. Therefore, the payment 
amounts are in fact comparable.
    There are several options for resolving this issue:
    (1) If the case is assigned a principal diagnosis code of renal 
failure with Alport's Syndrome as a secondary diagnosis, the case could 
be assigned to DRG 302. As this option would represent a change in the 
sequencing of congenital anomaly codes and related complications, it 
would have to be evaluated and subsequently approved by the Editorial 
Advisory Board for Coding Clinic for ICD-9-CM. This Editorial Advisory 
Board contains representatives from the physician, coding, and hospital 
industry. Final decisions on coding policy issues are made by the 
representatives from the American Hospital Association, the American 
Health Information Management Association, the National Center for 
Health Statistics, and HCFA.
    Since a change in sequencing of congenital anomaly codes and their 
manifestations and complications would require a change of coding 
policy, this issue was brought to the Editorial Advisory Board, which 
is currently evaluating it. A final decision on any proposed policy 
change would not be finalized and published in time for either this 
proposed rule or the final rule. Therefore, this option would not 
assist in immediately addressing the issue at hand.
    (2) A unique ICD-9-CM diagnosis code could be created for Alport's 
Syndrome that could then be evaluated for possible assignment within 
MDC 11. This issue has been referred to the National Center for Health 
Statistics for consideration as a future coding modification.
    One difficulty with this option is the large number of congenital 
anomalies and the limited number of unused codes in this section of 
ICD-9-CM. Each new code must be carefully evaluated for 
appropriateness.
    (3) A third option, which was already addressed, involves moving 
diagnosis code 759.89 to MDC 11. The problem with this approach is that 
many cases would then be misassigned to MDC 11 because the congenital 
anomaly would not involve diseases of the kidney and urinary tract.
    (4) A fourth option would be to leave the coding and DRG assignment 
as they currently exist. Since few cases exist, the overall impact may 
be minimal.
    To evaluate the impact of leaving the DRG assignment as it 
currently exists, we examined data from a 10-percent sample of Medicare 
cases in the FY 1999 MedPAR file. There were 95 cases assigned to a 
wide range of DRGs with code 759.89 as a secondary diagnosis. There was 
only one case assigned to MDC 15 with a principal diagnosis of code 
759.89.
    We are recommending that diagnosis code 759.89 remain in MDC 15, 
since it encompasses such a wide variety of conditions. In addition, we 
are not proposing a change in the DRG assignment because the payment 
impact would be minimal and the cases few. We will continue to pursue 
the possibility of modifying the ICD-9-CM code as well as evaluating 
the coding rules.
4. MDC 17 (Myeloproliferative Diseases and Disorders and Poorly 
Differentiated Neoplasm)
    Diagnosis code 273.8 (Disorders of plasma protein metabolism, NEC) 
is assigned to DRG 403 (Lymphoma and Nonacute Leukemia with CC) and DRG 
404 (Lymphoma and Nonacute Leukemia without CC). A disorder of plasma 
protein metabolism does not mean one has a lymphoma with nonacute 
leukemia. An individual can have a disorder of plasma protein 
metabolism without having a lymphoma or leukemia.
    We have received an inquiry on the appropriateness of including 
diagnosis code 273.8 in DRGs 403 and 404. The inquirer pointed out that 
disorders of

[[Page 26290]]

plasma protein metabolism are not lymphomas or leukemia. We agree that 
diagnosis code 273.8 is not a lymphoma or leukemia and is more closely 
related to DRG 413 (Other Myeloproliferative Disorders or Poorly 
Differentiated Neoplasm Diagnoses with CC) and DRG 414 (Other 
Myeloproliferative Disorders or Poorly Differentiated Neoplasm 
Diagnoses without CC).
    We examined charge data drawn from cases assigned to diagnosis code 
273.8 in a 10-percent sample of Medicare cases in the FY 1999 MedPAR 
file and found that the average charges for these cases were also more 
closely related to DRGs 413 and 414 than to DRGs 403 and 404, as 
demonstrated in the following chart.

----------------------------------------------------------------------------------------------------------------
          DRGs 403/404 all cases in 10-percent sample              DRGs 413/414 all cases in 10-percent sample
----------------------------------------------------------------------------------------------------------------
                                                     Average                                           Average
                DRG                     Count        charge               DRG              Count        charge
----------------------------------------------------------------------------------------------------------------
403................................        2,107      $17,617   413...................          387      $12,278
404................................          296        8,063   414...................           47        5,906
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                               Average                                                 Average
    Code            DRG           Count        charge         Code           DRG           Count        charge
----------------------------------------------------------------------------------------------------------------
      273.8  403.............           17       $8,573         273.8  404............            3       $6,644
----------------------------------------------------------------------------------------------------------------

    Therefore, we are proposing to move diagnosis code 273.8 from DRGs 
403 and 404 to DRGs 413 and 414.
    Diagnosis code 273.8 is also included in the following surgical 
DRGs that are performed on patients with lymphoma or leukemia:
    <bullet> DRG 400 (Lymphoma and Leukemia with Major OR Procedure).
    <bullet> DRG 401 (Lymphoma and Nonacute Leukemia with Other OR 
Procedure with CC).
    <bullet> DRG 402 (Lymphoma and Nonacute Leukemia with Other OR 
Procedure without CC).
    The same clinical issue would apply to these surgical DRGS 
performed on patients with lymphoma and leukemia. Code 273.8 should be 
assigned to the surgical DRGs for myeloproliferative disorders since 
the cases are clinically similar and, as stated before, code 273.8 is 
not clinically similar to lymphomas and leukemias. Therefore, we are 
also proposing that code 273.8 be removed from the surgical DRGs 
related to lymphoma and leukemia (DRGS 400, 401, and 402) and assigned 
to the following myeloproliferative surgical DRGS, based on the 
procedure performed:
    <bullet> DRG 406 (Myeloproliferative Disorders or Poorly 
Differentiated Neoplasms with Major OR Procedures with CC).
    <bullet> DRG 407 (Myeloproliferative Disorders Or Poorly 
Differentiated Neoplasms with Major OR Procedures without CC).
    <bullet> DRG 408 (Myeloproliferative Disorders or Poorly 
Differentiated Neoplasms with Other OR Procedures).
5. Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different DRG within the MDC to which the principal diagnosis is 
assigned. Therefore, it is necessary to have a decision rule by which 
these cases are assigned to a single DRG. The surgical hierarchy, an 
ordering of surgical classes from 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 11, the surgical class ``kidney transplant'' consists of a 
single DRG (DRG 302) and the class ``kidney, ureter and major bladder 
procedures'' consists of three DRGs (DRGs 303, 304, and 305). 
Consequently, in many cases, the surgical hierarchy has an impact on 
more than one DRG. The methodology for determining the most resource-
intensive surgical class involves weighting each DRG for frequency to 
determine the average resources for each surgical class. For example, 
assume surgical class A includes DRGs 1 and 2 and surgical class B 
includes DRGs 3, 4, and 5. Assume also that the average charge of DRG 1 
is higher than that of DRG 3, but the average charges of DRGs 4 and 5 
are higher than the average charge of DRG 2. To determine whether 
surgical class A should be higher or lower than surgical class B in the 
surgical hierarchy, we would weight the average charge of each DRG by 
frequency (that is, by the number of cases in the DRG) to determine 
average resource consumption for the surgical class. The surgical 
classes would then be ordered from the class with the highest average 
resource utilization to that with the lowest, with the exception of 
``other OR procedures'' as discussed below.
    This methodology may occasionally result in a case involving 
multiple procedures being assigned to the lower-weighted DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER searches for the procedure in the 
most resource-intensive surgical class, this result is unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average relative 
weight is ordered above a surgical class with a higher average relative 
weight. For example, the ``other OR procedures'' surgical class is 
uniformly ordered last in the surgical hierarchy of each MDC in which 
it occurs, regardless of the fact that the relative weight for the DRG 
or 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.

[[Page 26291]]

We have found that small differences generally do not warrant 
reordering of the hierarchy since, by virtue of the hierarchy change, 
the relative weights are likely to shift such that the higher-ordered 
surgical class has a lower average weight than the class ordered below 
it.
    Based on the preliminary recalibration of the DRGs, we are 
proposing to modify the surgical hierarchy as set forth below. As we 
stated in the September 1, 1989 final rule (54 FR 36457), we are unable 
to test the effects of proposed revisions to the surgical hierarchy and 
to reflect these changes in the proposed relative weights due to the 
unavailability of the revised GROUPER software at the time the proposed 
rule is prepared. Rather, we simulate most major classification changes 
to approximate the placement of cases under the proposed 
reclassification and then determine the average charge for each DRG. 
These average charges then serve as our best estimate of relative 
resource use for each surgical class. We test the proposed surgical 
hierarchy changes after the revised GROUPER is received and reflect the 
final changes in the DRG relative weights in the final rule. Further, 
as discussed in section II.C of this preamble, we anticipate that the 
final recalibrated weights will be somewhat different from those 
proposed, since they will be based on more complete data. Consequently, 
further revision of the hierarchy, using the above principles, may be 
necessary in the final rule.
    At this time, we are proposing to revise the surgical hierarchy for 
the pre-MDC DRGs, MDC 8 (Diseases and Disorders of the Musculoskeletal 
System and Connective Tissue), and MDC 10 (Endocrine, Nutritional, and 
Metabolic Diseases and Disorders) as follows:
    <bullet> In the pre-MDC DRGs, as we stated previously, we are 
proposing to move DRG 103 (Heart Transplant) from MDC 5 to pre-MDC. We 
are proposing to reorder DRG 103 (Heart Transplant) above DRG 483 
(Tracheostomy Except for Face, Mouth, and Neck Diagnoses).
    <bullet> In the pre-MDC DRGs, we are proposing to reorder DRG 481 
(Bone Marrow Transplant) above DRG 495 (Lung Transplant).
    <bullet> In MDC 8, we are proposing to reorder DRG 230 (Local 
Excision and Removal of Internal Fixation Devices of Hip and Femur) 
above DRG 226 (Soft Tissue Procedures with CC) and DRG 227 (Soft Tissue 
Procedures without CC).
    <bullet> In MDC 10, we are proposing to reorder DRG 288 (OR 
Procedures for Obesity) above DRG 285 (Amputation of Lower Limb for 
Endocrine, Nutritional, and Metabolic Disorders).
6. Refinement of Complications and Comorbidities (CC) List
    In the September 1, 1987 final notice (52 FR 33143) concerning 
changes to the DRG classification system, we modified the GROUPER logic 
so that certain diagnoses included on the standard list of CCs would 
not be considered a valid CC in combination with a particular principal 
diagnosis. Thus, we created the CC Exclusions List. We made these 
changes for the following reasons: (1) To preclude coding of CCs for 
closely related conditions; (2) to preclude duplicative coding or 
inconsistent coding from being treated as CCs; and (3) to ensure that 
cases are appropriately classified between the complicated and 
uncomplicated DRGs in a pair. We developed this standard list of 
diagnoses using physician panels to include those diagnoses that, when 
present as a secondary condition, would be considered a substantial 
complication or comorbidity. In previous years, we have made changes to 
the standard list of CCs, either by adding new CCs or deleting CCs 
already on the list. At this time, we do not propose to delete any of 
the diagnosis codes on the CC list.
    In the May 19, 1987 proposed notice (52 FR 18877) concerning 
changes to the DRG classification system, we explained that the 
excluded secondary diagnoses were established using the following five 
principles:
    <bullet> 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)).
    <bullet> Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for a condition should not be considered CCs for 
one another.
    <bullet> Conditions that may not coexist, such as partial/total, 
unilateral/bilateral, obstructed/unobstructed, and benign/malignant, 
should not be considered CCs for one another.
    <bullet> The same condition in anatomically proximal sites should 
not be considered CCs for one another.
    <bullet> Closely related conditions should not be considered CCs 
for one another.
    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. The FY 1988 revisions were intended only 
as a first step toward refinement of the CC list in that the criteria 
used for eliminating certain diagnoses from consideration as CCs were 
intended to identify only the most obvious diagnoses that should not be 
considered complications or comorbidities of another diagnosis. For 
that reason, and in light of comments and questions on the CC list, we 
have continued to review the remaining CCs to identify additional 
exclusions and to remove diagnoses from the master list that have been 
shown not to meet the definition of a CC. (See the September 30, 1988 
final rule (53 FR 38485) for the revision made for the discharges 
occurring in FY 1989; the September 1, 1989 final rule (54 FR 36552) 
for the FY 1990 revision; the September 4, 1990 final rule (55 FR 
36126) for the FY 1991 revision; the August 30, 1991 final rule (56 FR 
43209) for the FY 1992 revision; the September 1, 1992 final rule (57 
FR 39753) for the FY 1993 revision; the September 1, 1993 final rule 
(58 FR 46278) for the FY 1994 revisions; the September 1, 1994 final 
rule (59 FR 45334) for the FY 1995 revisions; the September 1, 1995 
final rule (60 FR 45782) for the FY 1996 revisions; the August 30, 1996 
final rule (61 FR 46171) for the FY 1997 revisions; the August 29, 1997 
final rule (62 FR 45966) for the FY 1998 revisions; and the July 31, 
1998 final rule (63 FR 40954) for the FY 1999 revisions. In the July 
30, 1999 final rule (64 FR 41490) we did not modify the CC Exclusions 
List for FY 2000 because we did not make any changes to the ICD-9-CM 
codes for FY 2000.
    We are proposing a limited revision of the CC Exclusions List to 
take into account the changes that will be made in the ICD-9-CM 
diagnosis coding system effective October 1, 2000. (See section II.B.8. 
below, for a discussion of ICD-9-CM changes.) These proposed changes 
are being made in accordance with the principles established when we 
created the CC Exclusions List in 1987.
    Tables 6F and 6G in section V. of the Addendum to this proposed 
rule contain the proposed revisions to the CC Exclusions List that 
would be effective for discharges occurring on or after October 1, 
2000. Each table shows the principal diagnoses with proposed changes to 
the excluded CCs. Each of these principal diagnoses is shown with an 
asterisk and the additions or deletions to the CC Exclusions List are 
provided in an indented column immediately following the affected 
principal diagnosis.
    CCs that are added to the list are in Table 6F--Additions to the CC 
Exclusions List. Beginning with discharges on or after October 1, 2000, 
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 6G--Deletions from 
the CC

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Exclusions List. Beginning with discharges on or after October 1, 2000, 
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, 
1997, 1998, and 1999) and those in Tables 6F and 6G of this document 
must be incorporated into the list purchased from NTIS in order to 
obtain the CC Exclusions List applicable for discharges occurring on or 
after October 1, 2000. (Note: There was no CC Exclusions List in FY 
2000 because we did not make changes to the ICD-9-CM codes for FY 
2000.)
    Alternatively, the complete documentation of the GROUPER logic, 
including the current CC Exclusions List, is available from 3M/Health 
Information Systems (HIS), which, under contract with HCFA, is 
responsible for updating and maintaining the GROUPER program. The 
current DRG Definitions Manual, Version 17.0, is available for $225.00, 
which includes $15.00 for shipping and handling. Version 18.0 of this 
manual, which includes the final FY 2001 DRG changes, will be available 
in October 2000 for $225.00. 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.
7. Review of Procedure Codes in DRGs 468, 476, and 477
    Each year, we review cases assigned to DRG 468 (Extensive OR 
Procedure Unrelated to Principal Diagnosis), DRG 476 (Prostatic OR 
Procedure Unrelated to Principal Diagnosis), and DRG 477 (Nonextensive 
OR Procedure Unrelated to Principal Diagnosis) to determine whether it 
would be appropriate to change the procedures assigned among these 
DRGs.
    DRGs 468, 476, and 477 are reserved for those cases in which none 
of the OR procedures performed is related to the principal diagnosis. 
These DRGs are intended to capture atypical cases, that is, those cases 
not occurring with sufficient frequency to represent a distinct, 
recognizable clinical group. DRG 476 is assigned to those discharges in 
which one or more of the following prostatic procedures are performed 
and are unrelated to the principal diagnosis:

60.0   Incision of prostate
60.12  Open biopsy of prostate
60.15  Biopsy of periprostatic tissue
60.18  Other diagnostic procedures on prostate and periprostatic tissue
60.21  Transurethral prostatectomy
60.29  Other transurethral prostatectomy
60.61  Local excision of lesion of prostate
60.69  Prostatectomy NEC
60.81  Incision of periprostatic tissue
60.82  Excision of periprostatic tissue
60.93  Repair of prostate
60.94  Control of (postoperative) hemorrhage of prostate
60.95  Transurethral balloon dilation of the prostatic urethra
60.99  Other operations on prostate

    All remaining OR procedures are assigned to DRGs 468 and 477, with 
DRG 477 assigned to those discharges in which the only procedures 
performed are nonextensive procedures that are unrelated to the 
principal diagnosis. The original list of the ICD-9-CM procedure codes 
for the procedures we consider nonextensive procedures, if performed 
with an unrelated principal diagnosis, was published in Table 6C in 
section IV. of the Addendum to the September 30, 1988 final rule (53 FR 
38591). As part of the final rules published on September 4, 1990 (55 
FR 36135), August 30, 1991 (56 FR 43212), September 1, 1992 (57 FR 
23625), September 1, 1993 (58 FR 46279), September 1, 1994 (59 FR 
45336), September 1, 1995 (60 FR 45783), August 30, 1996 (61 FR 46173), 
and August 29, 1997 (62 FR 45981), we moved several other procedures 
from DRG 468 to 477, and some procedures from DRG 477 to 468. No 
procedures were moved in FY 1999, as noted in the July 31, 1998 final 
rule (63 FR 40962), or in FY 2000, as noted in the July 30, 1999 final 
rule (64 FR 41496).
a. Moving Procedure Codes From DRGs 468 or 477 to MDCs
    We annually conduct a review of procedures producing assignment to 
DRG 468 or DRG 477 on the basis of volume, by procedure, to see if it 
would be appropriate to move procedure codes out of these DRGs into one 
of the surgical DRGs for the MDC into which the principal diagnosis 
falls. The data are arrayed two ways for comparison purposes. We look 
at a frequency count of each major operative procedure code. We also 
compare procedures across MDCs by volume of procedure codes within each 
MDC. That is, using procedure code 57.49 (Other transurethral excision 
or destruction of lesion or tissue of bladder) as an example, we 
determined that this particular code accounted for the highest number 
of major operative procedures (162 cases, or 9.8 percent of all cases) 
reported in the sample of DRG 477. In addition, we determined that 
procedure code 57.49 appeared in MDC 4 (Diseases and Disorders of the 
Respiratory System) 28 times as well as in 9 other MDCs.
    Using a 10-percent sample of the FY 1999 MedPAR file, we determined 
that the quantity of cases in DRG 477 totaled 1,650. There were 106 
instances where the major operative procedure appeared only once (6.4 
percent of the time), resulting in assignment to DRG 477.
    Using the same 10-percent sample of the FY 1999 MedPAR file, we 
reviewed DRG 468. There were a total of 3,858 cases, with one major 
operative code causing the DRG assignment 311 times (or 8 percent) and 
230 instances where the major operative procedure appeared only once 
(or 6 percent of the time).
    Our medical consultants then identified those procedures occurring 
in conjunction with certain principal diagnoses with sufficient 
frequency to justify adding them to one of the surgical DRGs for the 
MDC in which the diagnosis falls. Based on this year's review, we did 
not identify any necessary changes in procedures under either DRG 468 
or 477 and, therefore, are not proposing to move any procedures from 
either DRG 468 or DRG 477 to one of the surgical DRGs.
b. Reassignment of Procedures Among DRGs 468, 476, and 477
    We also annually review the list of ICD-9-CM procedures that, when 
in combination with their principal diagnosis code, result in 
assignment to DRGs 468, 476, and 477, to ascertain if any of those 
procedures should be moved from one of these DRGs to another of these 
DRGs based on average charges and length of stay. We look at the data 
for trends such as shifts in treatment practice or reporting practice 
that would make the resulting DRG assignment illogical. If our medical 
consultants were to find these shifts, we

[[Page 26293]]

would propose moving cases to keep the DRGs clinically similar or to 
provide payment for the cases in a similar manner. Generally, we move 
only those procedures for which we have an adequate number of 
discharges to analyze the data. Based on our review this year, we are 
not proposing to move any procedures from DRG 468 to DRGs 476 or 477, 
from DRG 476 to DRGs 468 or 477, or from DRG 477 to DRGs 468 or 476.
c. Adding Diagnosis Codes to MDCs
    It has been brought to our attention that an ICD-9-CM diagnosis 
code should be added to DRG 482 (Tracheostomy for Face, Mouth and Neck 
Diagnoses) to preserve clinical coherence and homogeneity of the 
system. In the case of a patient who has a facial infection (diagnosis 
code 682.0 (Other cellulitis and abscess, Face)), the face may become 
extremely swollen and the patient's ability to breathe might be 
impaired. It might be deemed medically necessary to perform a temporary 
tracheostomy (procedure code 31.1) on the patient until the swelling 
subsides enough for the patient to once again breathe on his or her 
own.
    The combination of diagnosis code 682.0 and procedure code 31.1 
results in assignment to DRG 483 (Tracheostomy Except for Face, Mouth 
and Neck Diagnoses). The absence of diagnosis code 682.0 in DRG 483 
forces the GROUPER algorithm to assign the case based solely on the 
procedure code, without taking this diagnosis into account. Clearly 
this was not the intent, as diagnosis code 682.0 should be included 
with other face, mouth and neck diagnosis. We believe that cases such 
as these would appropriately be assigned to DRG 482. Therefore, we are 
proposing to add diagnosis code 682.0 to the list of other face, mouth 
and neck diagnoses already in the principal diagnosis list in DRG 482.
8. Changes to the ICD-9-CM Coding System
    As described in section II.B.1 of this preamble, the ICD-9-CM is a 
coding system that is used for the reporting of diagnoses and 
procedures performed on a patient. In September 1985, the ICD-9-CM 
Coordination and Maintenance Committee was formed. This is a Federal 
interdepartmental committee, co-chaired by the National Center for 
Health Statistics (NCHS) and HCFA, charged with maintaining and 
updating the ICD-9-CM system. The Committee is jointly responsible for 
approving coding changes, and developing errata, addenda, and other 
modifications to the ICD-9-CM to reflect newly developed procedures and 
technologies and newly identified diseases. The Committee is also 
responsible for promoting the use of Federal and non-Federal 
educational programs and other communication techniques with a view 
toward standardizing coding applications and upgrading the quality of 
the classification system.
    The NCHS has lead responsibility for the ICD-9-CM diagnosis codes 
included in the Tabular List and Alphabetic Index for Diseases, while 
HCFA has lead responsibility for the ICD-9-CM procedure codes included 
in the Tabular List and Alphabetic Index for Procedures.
    The Committee encourages participation in the above process by 
health-related organizations. In this regard, the Committee holds 
public meetings for discussion of educational issues and proposed 
coding changes. These meetings provide an opportunity for 
representatives of recognized organizations in the coding field, such 
as the American Health Information Management Association (AHIMA) 
(formerly American Medical Record Association (AMRA)), the American 
Hospital Association (AHA), and various physician specialty groups as 
well as physicians, medical record administrators, health information 
management professionals, and other members of the public to contribute 
ideas on coding matters. After considering the opinions expressed at 
the public meetings and in writing, the Committee formulates 
recommendations, which then must be approved by the agencies.
    The Committee presented proposals for coding changes for FY 2000 at 
public meetings held on June 4, 1998 and November 2, 1998. Even though 
the Committee conducted public meetings and considered approval of 
coding changes for FY 2000 implementation, we did not implement any 
changes to ICD-9-CM codes for FY 2000 because of our major efforts to 
ensure that all of the Medicare computer systems were compliant with 
the year 2000. Therefore, the code proposals presented at the public 
meetings held on June 4, 1998 and November 2, 1998, that (if approved) 
ordinarily would have been included as new codes for October 1, 1999, 
were held for consideration for inclusion in this proposed annual 
update for FY 2001.
    The Committee also presented proposals for coding changes for 
implementation in FY 2001 at public meetings held on May 13, 1999 and 
November 12, 1999, and finalized the coding changes after consideration 
of comments received at the meetings and in writing by January 7, 2000.
    Copies of the Coordination and Maintenance Committee minutes of the 
1999 meetings can be obtained from the HCFA Home Page by typing http://www.hcfa.gov/medicare/icd9cm.htm. Paper copies of these minutes are no 
longer available and the mailing list has been discontinued. We 
encourage commenters to address suggestions on coding issues involving 
diagnosis codes to: Donna Pickett, Co-Chairperson; ICD-9-CM 
Coordination and Maintenance Committee; NCHS; Room 1100; 6525 Belcrest 
Road; Hyattsville, Maryland 20782. Comments may be sent by E-mail to: 
<a href="/cdn-cgi/l/email-protection#6105071155210205024f060e17"><span class="__cf_email__" data-cfemail="1b7f7d6b2f5b787f78357c746d">[email protected]</span></a>.
    Questions and comments concerning the procedure codes should be 
addressed to: Patricia E. Brooks, Co-Chairperson; ICD-9-CM Coordination 
and Maintenance Committee; HCFA, Center for Health Plans and Providers, 
Purchasing Policy Group, Division of Acute Care; C4-07-07; 7500 
Security Boulevard; Baltimore, Maryland 21244-1850. Comments may be 
sent by E-mail to: <a href="/cdn-cgi/l/email-protection#c5b5a7b7aaaaaeb685ada6a3a4eba2aab3"><span class="__cf_email__" data-cfemail="6f1f0d1d0000041c2f070c090e41080019">[email protected]</span></a>.
    The ICD-9-CM code changes that have been approved will become 
effective October 1, 2000. The new ICD-9-CM codes are listed, along 
with their proposed DRG classifications, in Tables 6A and 6B (New 
Diagnosis Codes and New Procedure Codes, respectively) in section VI. 
of the Addendum to this proposed rule. As we stated above, the code 
numbers and their titles were presented for public comment at the ICD-
9-CM Coordination and Maintenance Committee meetings. Both oral and 
written comments were considered before the codes were approved. 
Therefore, we are soliciting comments only on the proposed DRG 
classification of these new codes.
    Further, the Committee has approved the expansion of certain ICD-9-
CM codes to require an additional digit for valid code assignment. 
Diagnosis codes that have been replaced by expanded codes or other 
codes, or have been deleted are in Table 6C (Invalid Diagnosis Codes). 
These invalid diagnosis codes will not be recognized by the GROUPER 
beginning with discharges occurring on or after October 1, 2000. For 
codes that have been replaced by new or expanded codes, the 
corresponding new or expanded diagnosis codes are included in Table 6A 
(New Diagnosis Codes). There were no procedure codes that were replaced 
by expanded codes or other codes, or were deleted. Revisions to 
diagnosis code titles are in Table 6D (Revised Diagnosis Code Titles), 
which also include the proposed DRG assignments

[[Page 26294]]

for these revised codes. Revisions to procedure code titles are in 
Table 6E (Revised Procedure Codes Titles).
9. Other Issues
a. Immunotherapy
    Effective October 1, 1994, procedure code 99.28 (Injection or 
infusion of biologic response modifier (BRM) as an antineoplastic 
agent) was created and designated as a non-OR procedure that does not 
affect DRG assignment. This cancer treatment involving biological 
response modifiers is also known as BRM therapy or immunotherapy.
    In response to a comment on the May 7, 1999 proposed rule, for the 
FY 2000 final rule we performed analysis of cases for which procedure 
code 99.28 was reported using the 100 percent FY 1998 MedPAR file. The 
commenter requested that we create a new DRG for BRM therapy or assign 
cases in which BRM therapy is performed to an existing DRG with a high 
relative weight. The commenter suggested that DRG 403 (Lymphoma and 
Nonacute Leukemia with CC) would be an appropriate DRG.
    Based on the commenter's request, we examined cases only for 
hospitals that use the particular drug manufactured by the commenter. 
We concluded that due to the variation of charges across the cases and 
the limited number of cases distributed across 19 different DRGs, it 
would be inappropriate to classify these cases to a single DRG. For 
example, it would be inappropriate to classify these cases into DRG 403 
because only a few cases were coded with a principal diagnosis assigned 
to MDC 17 (Myeloproliferative Diseases and Disorders, and Poorly 
Differentiated Neoplasm), the MDC that includes DRG 403. We stated in 
the July 30, 1999 final rule (64 FR 41497) that we would perform a full 
analysis of immunotherapy cases using the FY 1999 MedPAR data to 
determine if changes are needed.
    Using 100 percent of the data in the FY 1999 MedPAR file, we 
performed an analysis of all cases for which procedure code 99.28 was 
reported. We identified 1,179 cases in 136 DRGs in 22 MDCs. No more 
than 141 cases were assigned to any one particular DRG.
    Of the 1,179 cases, 141 cases (approximately 12 percent) were 
assigned to DRG 403 in MDC 17. We found approximately one-half of these 
cases had other procedures performed in addition to receiving 
immunotherapy, such as chemotherapy, bone marrow biopsy, insertion of 
totally implantable vascular access device, thoracentesis, or 
percutaneous abdominal drainage, which may account for the increased 
charges. There were 123 immunotherapy cases assigned to DRG 82 
(Respiratory Neoplasms) in MDC 4 (Diseases and Disorders of the 
Respiratory System). We noted that, in some cases, in addition to 
immunotherapy, other procedures were performed, such as insertion of an 
intercostal catheter for drainage, thoracentesis, or chemotherapy.
    There were 84 cases assigned to DRG 416 (Septicemia, Age >17) in 
MDC 18 (Infectious and Parasitic Diseases (Systemic or Unspecified 
Sites)). The principal diagnosis for this DRG is septicemia and, in 
addition to receiving treatment for septicemia, immunotherapy was also 
given. There were 79 cases assigned to DRG 410 (Chemotherapy without 
Acute Leukemia as Secondary Diagnosis) in MDC 17.
    The cost of immunotherapy is averaged into the weight for these 
DRGS and, based on our analysis, we do not believe a reclassification 
of these cases is warranted. Due to the limited number of cases that 
were distributed throughout 136 DRGs in 22 MDCs and the variation of 
charges, we concluded that it would be inappropriate to classify these 
cases into a single DRG.
    Although there were 141 cases assigned to DRG 403, it would be 
inappropriate to place all immunotherapy cases, regardless of 
diagnosis, into a DRG that is designated for lymphoma and nonacute 
leukemia. We establish DRGs based on clinical coherence and resource 
utilization. Each DRG encompasses a variety of cases, reflecting a 
range of services and a range of resources. Generally, then, each DRG 
reflects some higher cost cases and some lower cost cases. To the 
extent a new technology is extremely costly relative to the cases 
reflected in the DRG relative weight, the hospital might qualify for 
outlier payments, that is, additional payments over and above the 
standard prospective payment rate. We have not received any comments 
from hospitals regarding payment for immunotherapy cases.
b. Pancreas Transplant
    Effective July 1, 1999, Medicare covers whole organ pancreas 
transplantation if the transplantation is performed simultaneously with 
or after a kidney transplant (procedure codes 55.69, Other kidney 
transplantation, and V42.0, Organ or tissue replaced by transplant, 
Kidney) (Transmittal No. 115, April 1999). We note that when we 
published the notification of this coverage in the July 30, 1999 final 
rule (64 FR 41497), we inadvertently made an error in announcing the 
covered codes. We cited the incorrect codes for pancreas 
transplantation as procedure code 52.80 (Pancreatic transplant, not 
otherwise specified) and 52.83 (Heterotransplant of pancreas). The 
correct procedure codes for pancreas transplantation are 52.80 
(Pancreatic transplant, not otherwise specified) and 52.82 
(Homotransplant of pancreas). We will revise the Coverage Issues Manual 
to reflect this correction.
    Pancreas transplantation is generally limited to those patients 
with severe secondary complications of diabetes, including kidney 
failure. However, pancreas transplantation is sometimes performed on 
patients with labile diabetes and hypoglycemic unawareness. Pancreas 
transplantation for diabetic patients who have not experienced end-
stage renal failure secondary to diabetes is excluded from coverage. 
Medicare also excludes coverage of transplantation of partial 
pancreatic tissue or islet cells.
    In the July 30, 1999 final rule (64 FR 41497), we indicated that we 
planned to review discharge data to determine whether a new DRG should 
be created, or existing DRGs modified, to further classify pancreas 
transplantation in combination with kidney transplantation.
    Under the current DRG classification, if a kidney transplant and a 
pancreas transplant are performed simultaneously on a patient with 
chronic renal failure secondary to diabetes with renal manifestations 
(diagnosis codes 250.40 through 250.43), the case is assigned to DRG 
302 (Kidney Transplant) in MDC 11 (Diseases and Disorders of the Kidney 
and Urinary Tract). If a pancreas transplant is performed following a 
kidney transplant (that is, during a different hospital admission) on a 
patient with chronic renal failure secondary to diabetes with renal 
manifestations, the case is assigned to DRG 468 (Extensive OR Procedure 
Unrelated to Principal Diagnosis). This is because pancreas transplant 
is not assigned to MDC 11, the MDC to which a principal diagnosis of 
chronic renal failure secondary to diabetes is assigned.
    Using 100 percent of the data in the FY 1999 MedPAR file (which 
contains hospital bills through December 31, 1999), we performed an 
analysis of the cases for which procedure codes 52.80 and 52.83 were 
reported. We identified a total of 79 cases in 8 DRGs, in 3 MDCs, and 
in 1 pre-MDC. Of the 79 cases identified, 49 cases were assigned to DRG 
302, 14 cases were assigned to DRG 468, and 8 cases were assigned to 
DRG 191 (Pancreas, Liver and Shunt

[[Page 26295]]

Procedures with CC). The additional 8 cases were distributed over 5 
other assorted DRGs, and due to their disparity, were not considered in 
our evaluation.
    We examined our data to determine whether we should propose a new 
kidney and pancreas transplant DRG at this time. We identified 49 such 
dual transplant cases in the FY 1999 MedPAR file. We do not believe 
this is a sufficient sample size to warrant the creation of a new DRG. 
Furthermore, we would note that nearly half of these cases occurred at 
a hospital in Maryland, which is not paid under the prospective payment 
system. The rest of the cases are spread across multiple hospitals, 
with no single hospital having more than 5 cases in the FY 1999 MedPAR.

C. Recalibration of DRG Weights.

    We are proposing to use the same basic methodology for the FY 2001 
recalibration as we did for FY 2000 (July 30, 1999 final rule (64 FR 
41498)). That is, we would recalibrate the weights based on charge data 
for Medicare discharges. However, we propose to use the most current 
charge information available, the FY 1999 MedPAR file. (For the FY 2000 
recalibration, we used the FY 1998 MedPAR file.) The MedPAR file is 
based on fully coded diagnostic and procedure data for all Medicare 
inpatient hospital bills.
    The proposed recalibrated DRG relative weights are constructed from 
FY 1999 MedPAR data (discharges occurring between October 1, 1998 and 
September 30, 1999), based on bills received by HCFA through December 
31, 1999, from all hospitals subject to the prospective payment system 
and short-term acute care hospitals in waiver States. The FY 1999 
MedPAR file includes data for approximately 11,059,625 Medicare 
discharges.
    The methodology used to calculate the proposed DRG relative weights 
from the FY 1999 MedPAR file is as follows:
    <bullet> To the extent possible, all the claims were regrouped 
using the proposed DRG classification revisions discussed in section 
II.B of this preamble. As noted in section II.B.5, due to the 
unavailability of the revised GROUPER software, we simulated most major 
classification changes to approximate the placement of cases under the 
proposed reclassification. However, there are some changes that cannot 
be modeled.
    <bullet> Charges were standardized to remove the effects of 
differences in area wage levels, indirect medical education and 
disproportionate share payments, and, for hospitals in Alaska and 
Hawaii, the applicable cost-of-living adjustment.
    <bullet> 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.
    <bullet> We then eliminated statistical outliers, using the same 
criteria used in computing the current weights. That is, all cases that 
are outside of 3.0 standard deviations from the mean of the log 
distribution of both the charges per case and the charges per day for 
each DRG are eliminated.
    <bullet> The average charge for each DRG was then recomputed 
(excluding the statistical outliers) and divided by the national 
average standardized charge per case to determine the relative weight. 
A transfer case is counted as a fraction of a case based on the ratio 
of its transfer payment under the per diem payment methodology to the 
full DRG payment for nontransfer cases. That is, transfer cases paid 
under the transfer methodology equal to half of what the case would 
receive as a nontransfer would be counted as 0.5 of a total case.
    <bullet> We established the relative weight for heart and heart-
lung, liver, and lung transplants (DRGs 103, 480, and 495) in a manner 
consistent with the methodology for all other DRGs except that the 
transplant cases that were used to establish the weights were limited 
to those Medicare-approved heart, heart-lung, liver, and lung 
transplant centers that have cases in the FY 1999 MedPAR file. 
(Medicare coverage for heart, heart-lung, liver, and lung transplants 
is limited to those facilities that have received approval from HCFA as 
transplant centers.)
    <bullet> 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); 
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 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 propose to use that same case threshold 
in recalibrating the DRG weights for FY 2001. Using the FY 1999 MedPAR 
data set, there are 40 DRGs that contain fewer than 10 cases. We 
computed the weights for these 40 low-volume DRGs by adjusting the FY 
2000 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 (1.45431) 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.b. of the Addendum to this proposed rule, we are 
proposing to make a budget neutrality adjustment to assure that the 
requirement of section 1886(d)(4)(C)(iii) of the Act is met.

III. Proposed Changes to the Hospital Wage Index

A. Background

    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary must adjust the standardized amounts ``for area differences 
in hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level.'' In 
accordance with the broad discretion conferred under the Act, we 
currently define hospital labor market areas based on the definitions 
of Metropolitan

[[Page 26296]]

Statistical Areas (MSAs), Primary MSAs (PMSAs), and New England County 
Metropolitan Areas (NECMAs) issued by the Office of Management and 
Budget (OMB). The OMB also designates Consolidated MSAs (CMSAs). A CMSA 
is a metropolitan area with a population of one million or more, 
comprising two or more PMSAs (identified by their separate economic and 
social character). For purposes of the hospital wage index, we use the 
PMSAs rather than CMSAs since they allow a more precise breakdown of 
labor costs. If a metropolitan area is not designated as part of a 
PMSA, we use the applicable MSA. Rural areas are areas outside a 
designated MSA, PMSA, or NECMA. For purposes of the wage index, we 
combine all of the rural counties in a State to calculate a rural wage 
index for that State.
    We note that effective April 1, 1990, the term Metropolitan Area 
(MA) replaced the term MSA (which had been used since June 30, 1983) to 
describe the set of metropolitan areas consisting of MSAs, PMSAs, and 
CMSAs. The terminology was changed by OMB in the March 30, 1990 Federal 
Register to distinguish between the individual metropolitan areas known 
as MSAs and the set of all metropolitan areas (MSAs, PMSAs, and CMSAs) 
(55 FR 12154). For purposes of the prospective payment system, we will 
continue to refer to these areas as MSAs.
    Beginning October 1, 1993, section 1886(d)(3)(E) of the Act 
requires that we update the wage index annually. Furthermore, this 
section provides that the Secretary base the update on a survey of 
wages and wage-related costs of short-term, acute care hospitals. The 
survey should measure, to the extent feasible, the earnings and paid 
hours of employment by occupational category, and must exclude the 
wages and wage-related costs incurred in furnishing skilled nursing 
services. As discussed below in section III.F of this preamble, we also 
take into account the geographic reclassification of hospitals in 
accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when 
calculating the wage index.

B. FY 2001 Wage Index Update

    The proposed FY 2001 wage index values in section VI of the 
Addendum to this proposed rule (effective for hospital discharges 
occurring on or after October 1, 2000 and before October 1, 2001) are 
based on the data collected from the Medicare cost reports submitted by 
hospitals for cost reporting periods beginning in FY 1997 (the FY 2000 
wage index was based on FY 1996 wage data).
    The proposed FY 2001 wage index includes the following categories 
of data associated with costs paid under the hospital inpatient 
prospective payment system (as well as outpatient costs), which were 
also included in the FY 2000 wage index:
    <bullet> Salaries and hours from short-term, acute care hospitals.
    <bullet> Home office costs and hours.
    <bullet> Certain contract labor costs and hours.
    <bullet> Wage-related costs.
    Consistent with the wage index methodology for FY 2000, the 
proposed wage index for FY 2001 also continues to exclude the direct 
and overhead salaries and hours for services not paid through the 
inpatient prospective payment system such as skilled nursing facility 
services, home health services, or other subprovider components that 
are not subject to the prospective payment system.
    We calculate a separate Puerto Rico-specific wage index and apply 
it to the Puerto Rico standardized amount. (See 62 FR 45984 and 46041.) 
This wage index is based solely on Puerto Rico's data. Finally, section 
4410 of Public Law 105-33 provides that, for discharges on or after 
October 1, 1997, the area wage index applicable to any hospital that is 
not located in a rural area may not be less than the area wage index 
applicable to hospitals located in rural areas in that State.

C. FY 2001 Wage Index Proposal

    Because it is used to adjust payments to hospitals under the 
prospective payment system, the hospital wage index should, to the 
extent possible, reflect the wage costs associated with the areas of 
the hospital included under the hospital inpatient prospective payment 
system. In response to concerns within the hospital community related 
to the removal from the wage index calculation costs related to 
graduate medical education (GME) (teaching physicians and residents), 
and certified registered nurse anesthetists (CRNAs), which are paid by 
Medicare separately from the prospective payment system, the American 
Hospital Association (AHA) convened a workgroup to develop a consensus 
recommendation on this issue. The workgroup recommended that costs 
related to GME and CRNAs be phased out of the wage index calculation 
over a 5-year period. Based upon our analysis of hospitals' FY 1996 
wage data, and consistent with the AHA workgroup's recommendation, we 
specified in the July 30, 1999 final rule (64 FR 41505) that we would 
phase-out these costs from the calculation of the wage index over a 5-
year period, beginning in FY 2000. In keeping with the decision to 
phase-out costs related to GME and CRNAs, the proposed FY 2001 wage 
index is based on a blend of 60 percent of an average hourly wage 
including these costs, and 40 percent of an average hourly wage 
excluding these costs.
1. Teaching Physician Costs and Hours Survey
    As discussed in the July 30, 1999 final rule, because the FY 1996 
cost reporting data did not separate teaching physician costs from 
other physician Part A costs, we instructed our fiscal intermediaries 
to survey teaching hospitals to collect data on teaching physician 
costs and hours payable under the per resident amounts (Sec. 413.86) 
and reported on Worksheet A, Line 23 of the hospitals' cost report.
    The FY 1997 cost reports also do not separately report teaching 
physician costs. Therefore, we once again conducted a special survey to 
collect data on these costs. (For the FY 1998 cost reports, we have 
revised the Worksheet S-3, Part II so that hospitals can separately 
report teaching physician Part A costs. Therefore, after this year, it 
will no longer be necessary for us to conduct this special survey.)
    The survey data collected as of mid-January 2000 were included in 
the preliminary public use data file made available on the Internet in 
February 2000 at HCFA's home page (http://www.hcfa.gov). At that time, 
we had received teaching physician data for 459 out of 770 teaching 
hospitals reporting physician Part A costs on their Worksheet S-3, Part 
II. Also, in some cases, intermediaries reported that teaching 
hospitals did not incur teaching physician costs. In early January 
2000, we instructed intermediaries to review the survey data for 
consistency with the Supplemental Worksheet A-8-2 of the hospitals' 
cost reports. Supplemental Worksheet A-8-2 is used to apply the 
reasonable compensation equivalency limits to the costs of provider-
based physicians, itemizing these costs by the corresponding line 
number on Worksheet A.
    When we notified the hospitals, through our fiscal intermediaries, 
that they could review the survey data on the Internet, we also 
notified hospitals that requests for changes to the teaching survey 
data must be submitted by March 6, 2000. We instructed fiscal 
intermediaries to review the requests for changes received from 
hospitals and submit necessary data revisions to HCFA by April 3, 2000.

[[Page 26297]]

    We removed from the wage data the physician Part A teaching costs 
and hours reported on the survey form for every hospital that completed 
the survey. These data had been verified by the fiscal intermediary 
before submission to HCFA. We have identified 42 teaching hospitals in 
our database that reported physician Part A costs on Line 4 of their 
Worksheet S-3 and teaching-related costs on Line 23 of Worksheet A, 
Column 1, but for which we do not have teaching physician costs from 
the survey because the hospitals failed to complete the survey. As we 
did in the case of such hospitals in calculating the FY 2000 wage 
index, for purposes of calculating the FY 2001 wage index, we propose 
to subtract the costs reported on Line 23 of the Worksheet A, Column 1 
(GME Other Program Costs) from Line 1 of the Worksheet S-3. These costs 
(from Line 23, Column 1 of Worksheet A) are included in Line 1 of the 
Worksheet 
S-3, which is the sum of Column 1, Worksheet A. They also represent 
costs for which the hospital is paid through the per resident amount 
under the direct GME payment. To determine the hours to be removed, the 
costs reported on Line 23 of the Worksheet A, Column 1 would be divided 
by the national average hourly wage for teaching physicians based upon 
the survey of $65.62.
    For the FY 2000 wage index, the AHA workgroup recommended that, if 
reliable teaching physician data were not available for removing 
teaching costs from hospitals' total physician Part A costs, HCFA 
should remove 80 percent of the costs and hours reported by hospitals 
attributable to physicians' Part A services. In calculating the FY 2000 
wage index, if we did not receive survey data for a teaching hospital, 
we removed 80 percent of the hospital's reported total physician Part A 
costs and hours from the calculation. For the FY 2001 wage index, we 
are proposing a different approach. In some instances, fiscal 
intermediaries have verified that teaching hospitals do not have 
teaching physician costs; for these hospitals, it is not necessary to 
adjust the hospitals' physician Part A costs. We are actively 
conferring with the fiscal intermediaries to distinguish teaching 
hospitals that do not have teaching physician costs from teaching 
hospitals that have not identified the portion of their physician Part 
A costs associated with teaching physicians (that is, hospitals that 
did not complete the teaching survey and did not report teaching-
related costs on Worksheet A, Line 23). We propose to remove 100 
percent of the physician Part A costs and hours (reported on Worksheet 
S-3, Lines 4, 10, 12, and 18) in the FY 2001 wage index calculation for 
those hospitals where the fiscal intermediary verifies that the 
hospital has otherwise unidentified teaching physician costs included 
in physician Part A costs and hours.
    It should be noted that Line 23 of Worksheet A, Column 1, flows 
directly into hospitals' total salaries on Worksheet S-3, Part II. Line 
23 contains GME costs not directly attributable to residents' salaries 
or fringe benefits. Therefore, these costs tend to be costs associated 
with teaching physicians. To the extent a hospital fails to separately 
identify the proportion of its Line 23 Worksheet A costs associated 
with teaching physicians, we believe it is reasonable to remove all of 
these costs under the presumption that they are all associated with 
teaching physicians.
    Thus, for the proposed wage index, we are either using the data 
submitted on the teaching physician survey or, in the absence of such 
data, removing the amount reported on Line 23 of Worksheet A, Column 1 
or removing 100 percent of physician Part A costs reported on Worksheet 
S-3.
2. Nurse Practitioner and Clinical Nurse Specialist Costs
    The current wage index includes salaries and wage-related costs for 
nurse practitioners (NPs) and clinical nurse specialists (CNSs) who, 
similar to physician assistants and CRNAs (unless at hospitals under 
the rural pass-through exception for CRNAs), are paid under the 
physician fee schedule. Over the past year, we have received several 
inquiries from hospitals and fiscal intermediaries regarding NP costs 
and how they should be handled for purposes of the hospital wage index. 
Because Medicare generally pays for NP and CNS costs under Part B 
outside the hospital prospective payment system, removing NP and CNS 
Part B costs from the wage index calculation would be consistent with 
our general policy to exclude, to the extent possible, costs that are 
not paid through the hospital prospective payment system. Because NP 
and CNS costs are not separately reported on the Worksheet S-3 for FYs 
1997, 1998, and 1999, the FY 2000 Worksheet S-3 and cost reporting 
instructions will be revised to allow for separate reporting of NP and 
CNS Part A and Part B costs. We will exclude the Part B costs beginning 
with the FY 2004 wage index. These services are pervasive in both rural 
and urban settings. As such, we believe there will be no significant 
overall impact resulting from the removal of Part B costs for NPs and 
CNSs.
3. Severance and Bonus Pay Costs
    On October 6, 1999, we issued a memorandum to hospitals and 
intermediaries regarding our policy on treatment of severance and bonus 
pay costs in developing the wage index, effective beginning with the FY 
2001 wage index. (The hospital cost report instructions also will be 
amended to reflect our policy on these costs.) We stated that severance 
pay costs may be included on Worksheet S-3 as salaries on Part II, Line 
1, only if the associated hours are included. If the hospital has no 
accounting of the hours, or if the costs are not based on hours, the 
severance pay costs may not be included in the wage index. On the other 
hand, bonus pay costs may be included in the cost report on Line 1 of 
Worksheet S-3 with no corresponding hours. Due to the inquiries we 
continue to receive from hospitals regarding the inclusion of severance 
pay costs on cost reports, we are clarifying our policy in this 
proposed rule.
    Hospitals vary in their accounting of severance pay costs. Some 
hospitals base the amounts to be paid on hours, for example, 80 hours 
worth of pay. Others do not; for example, a 15-year employee may be 
offered a $25,000 buyout package. Some hospitals record associated 
hours; others do not. The Wage Index Workgroup has suggested that we 
not include any severance pay costs in the wage index calculation, that 
these costs are for terminated employees, and, therefore, they should 
be considered an administrative rather than a salary expense.
    Severance pay costs can be substantial amounts, particularly in 
periods of downsizing. We believe that, if severance pay costs are 
included with no associated hours, the wage index, which is a relative 
measure of wage costs across labor market areas, would be distorted.
    Severance pay costs are included in the proposed FY 2001 wage index 
as a salary cost to the extent that associated hours are also reported. 
However, we are soliciting public comments on this issue.
4. Health Insurance and Health-Related Costs
    In the September 1, 1994 final rule (59 FR 45356), we stated that 
health insurance, purchased or self-insurance, is a core wage-related 
cost. Over the past year, we have received several inquiries from 
hospitals and hospital associations requesting that we define 
``purchased health insurance costs.'' In response, in

[[Page 26298]]

this proposed rule, we are clarifying that, for wage index purposes, we 
define ``purchased health insurance costs'' as the premiums and 
administrative costs a hospital pays on behalf of its employees for 
health insurance coverage. ``Self-insurance'' includes the hospital's 
costs (not charges) for covered services delivered to its employees, 
less any amounts paid by the employees, and less the personnel costs 
for hospital staff who delivered the services (these costs are already 
included in the wage index). For purchased health insurance and self-
health insurance, the included costs must be for services covered in a 
health insurance plan.
    Also, in the September 1, 1994 final rule (59 FR 45357), we 
addressed a comment about the inclusion of health-related costs in the 
calculation of the wage index. Such health-related costs include 
employee physical examinations, flu shots, and clinic visits, and other 
services that are not covered by employees' health insurance plans but 
are provided at no cost or at discounted rates to employees of the 
hospital. We are clarifying that the costs for these services may be 
included as an ``other'' wage-related cost if (among other criteria), 
when all such health-related costs are combined, the total of such 
costs is greater than 1 percent of the hospital's total salaries (less 
excluded area salaries). As discussed in the September 1, 1994 final 
rule (59 FR 45357), a cost may be allowable as an ``other wage-related 
cost'' if it meets certain criteria. Under one criterion, the wage-
related cost must be greater than 1 percent of total salaries (less 
excluded area salaries). For purposes of applying this 1-percent test 
with respect to the health-related costs at issue here, we look at the 
combined total of the health-related costs (not charges) for services 
delivered to its employees, less any amounts employees paid, and less 
the personnel costs for hospital staff who delivered the services (as 
these costs are already included in the wage index).
5. Elimination of Wage Costs Associated With Rural Health Clinics and 
Federally Qualified Health Centers
    The current hospital wage index includes the salaries and wage-
related costs of hospital-based rural health clinics (RHCs) and 
federally qualified health centers (FQHCs). However, Medicare pays for 
these costs outside the hospital inpatient prospective payment system. 
Effective January 1, 1998, under section 1833(f) of the Act, as amended 
by section 4205 of Public Law 105-33, Medicare pays both hospital-based 
and freestanding RHCs and FQHCs on a cost-per-visit basis. Medicare 
cost reporting forms for RHCs and FQHCs were revised to reflect this 
legislative change, beginning with cost reporting periods ending on or 
after September 30, 1998 (the FY 1998 cost report). Other cost-
reimbursed outpatient departments, such as ambulatory surgical centers, 
community mental health centers, and comprehensive outpatient 
rehabilitation facilities, are presently excluded from the wage index. 
Therefore, consistent with our wage index refinements that exclude, to 
the extent possible, costs associated with services not paid under the 
hospital inpatient prospective payment system, we believe it would be 
appropriate to exclude all salary costs associated with RHCs and FQHCs 
from the wage index calculation if we had feasible, reliable data for 
such exclusion.
    Because RHC and FQHC costs are not separately reported on the 
Worksheet S-3 for FYs 1997, 1998, and 1999, we cannot exclude these 
costs from the FY 2001, FY 2002, or FY 2003 wage indexes. Therefore, we 
will revise the FY 2000 Worksheet S-3 to begin providing for the 
separate reporting of RHC and FQHC salaries, wage-related costs, and 
hours. We will evaluate the wage data for RHCs and FQHCs in developing 
the FY 2004 wage index.

D. Verification of Wage Data From the Medicare Cost Report

    The data for the proposed FY 2001 wage index were obtained from 
Worksheet S-3, Parts II and III of the FY 1997 Medicare cost reports. 
The data file used to construct the proposed wage index includes FY 
1997 data submitted to HCFA as of mid-February 2000. As in past years, 
we performed an intensive review of the wage data, mostly through the 
use of edits designed to identify aberrant data.
    We asked our fiscal intermediaries to revise or verify data 
elements that resulted in specific edit failures. Some unresolved data 
elements are included in the calculation of the proposed FY 2001 wage 
index pending their resolution before calculation of the final FY 2001 
wage index. We have instructed the intermediaries to complete their 
verification of questionable data elements and to transmit any changes 
to the wage data (through HCRIS) no later than April 3, 2000. We expect 
that all unresolved data elements will be resolved by that date. The 
revised data will be reflected in the final rule.
    Also, as part of our editing process, we removed data for 19 
hospitals that failed edits. For two of these hospitals, we were unable 
to obtain sufficient documentation to verify or revise the data because 
the hospitals are no longer participating in the Medicare program or 
are in bankruptcy status. Four hospitals had negative average hourly 
wages after allocating overhead to their excluded areas and, therefore, 
were removed from the calculation. The data from the remaining 13 
hospitals also failed the edits and were removed. The data for these 
hospitals will be included in the final wage index if we receive 
corrected data that pass our edits. As a result, the proposed FY 2001 
wage index is calculated based on FY 1997 wage data for 4,926 
hospitals.

E. Computation of the Proposed FY 2001 Wage Index

    The method used to compute the proposed FY 2001 wage index is as 
follows:
    Step 1--As noted above, we are proposing to base the FY 2001 wage 
index on wage data reported on the FY 1997 Medicare cost reports. We 
gathered data from each of the non-Federal, short-term, acute care 
hospitals for which data were reported on the Worksheet S-3, Parts II 
and III of the Medicare cost report for the hospital's cost reporting 
period beginning on or after October 1, 1996 and before October 1, 
1997. In addition, we included data from a few hospitals that had cost 
reporting periods beginning in September 1996 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 because particular labor market 
areas might be affected due to the omission of these hospitals. 
However, we generally describe these wage data as FY 1997 data. We note 
that, if a hospital had more than one cost reporting period beginning 
during FY 1997 (for example, a hospital had two short cost reporting 
periods beginning on or after October 1, 1996 and before October 1, 
1997), we included wage data from only one of the cost reporting 
periods, the longest, in the wage index calculation. If there was more 
than one cost reporting period and the periods were equal in length, we 
included the wage data from the latest period in the wage index 
calculation.
    Step 2--Salaries--The method used to compute a hospital's average 
hourly wage is a blend of 60 percent of the hospital's average hourly 
wage including all GME and CRNA costs, and 40 percent of the hospital's 
average hourly wage after eliminating all GME and CRNA costs.
    In calculating a hospital's average salaries plus wage-related 
costs,

[[Page 26299]]

including all GME and CRNA costs, we subtracted from Line 1 (total 
salaries) the Part B salaries reported on Lines 3 and 5, home office 
salaries reported on Line 7, and excluded salaries reported on Lines 8 
and 8.01 (that is, direct salaries attributable to skilled nursing 
facility services, home health services, and other subprovider 
components not subject to the prospective payment system). We also 
subtracted from Line 1 the salaries for which no hours were reported on 
Lines 2, 4, and 6. To determine total salaries plus wage-related costs, 
we added to the net hospital salaries the costs of contract labor for 
direct patient care, certain top management, and physician Part A 
services (Lines 9 and 10), home office salaries and wage-related costs 
reported by the hospital on Lines 11 and 12, and nonexcluded area wage-
related costs (Lines 13, 14, 16, 18, and 20).
    We note that contract labor and home office salaries for which no 
corresponding hours are reported were not included. In addition, wage-
related costs for specific categories of employees (Lines 16, 18, and 
20) are excluded if no corresponding salaries are reported for those 
employees (Lines 2, 4, and 6, respectively).
    We then calculated a hospital's salaries plus wage-related costs by 
subtracting from total salaries the salaries plus wage-related costs 
for teaching physicians, Part A CRNAs (Lines 2 and 16), and residents 
(Lines 6 and 20).
    Step 3--Hours--With the exception of wage-related costs, for which 
there are no associated hours, we computed total hours using the same 
methods as described for salaries in Step 2.
    Step 4--For each hospital reporting both total overhead salaries 
and total overhead hours greater than zero, we then allocated overhead 
costs. First, we determined the ratio of excluded area hours (sum of 
Lines 8 and 8.01 of Worksheet S-3, Part II) to revised total hours 
(Line 1 minus the sum of Part II, Lines 3, 5, and 7 and Part III, Line 
13 of Worksheet S-3). We then computed the amounts of overhead salaries 
and hours to be allocated to excluded areas by multiplying the above 
ratio by the total overhead salaries and hours reported on Line 13 of 
Worksheet S-3, Part III. Finally, we subtracted the computed overhead 
salaries and hours associated with excluded areas from the total 
salaries and hours derived in Steps 2 and 3.
    Step 5--For each hospital, we adjusted the total salaries plus 
wage-related costs to a common period to determine total adjusted 
salaries plus wage-related costs. To make the wage adjustment, we 
estimated the percentage change in the employment cost index (ECI) for 
compensation for each 30-day increment from October 14, 1996 through 
April 15, 1998 for private industry hospital workers from the Bureau of 
Labor Statistics' Compensation and Working Conditions. We use the ECI 
because it reflects the price increase associated with total 
compensation (salaries plus fringes) rather than just the increase in 
salaries. In addition, the ECI includes managers as well as other 
hospital workers. This methodology to compute the monthly update 
factors uses actual quarterly ECI data and assures that the update 
factors match the actual quarterly and annual percent changes. The 
factors used to adjust the hospital's data were based on the midpoint 
of the cost reporting period, as indicated below.

                    Midpoint of Cost Reporting Period
------------------------------------------------------------------------
                                                             Adjustment
               After                         Before            factor
------------------------------------------------------------------------
10/14/96...........................  11/15/96.............       1.02848
11/14/96...........................  12/15/96.............       1.02748
12/14/96...........................  01/15/97.............       1.02641
01/14/97...........................  02/15/97.............       1.02521
02/14/97...........................  03/15/97.............       1.02387
03/14/97...........................  04/15/97.............       1.02236
04/14/97...........................  05/15/97.............       1.02068
05/14/97...........................  06/15/97.............       1.01883
06/14/97...........................  07/15/97.............       1.01695
07/14/97...........................  08/15/97.............       1.01520
08/14/97...........................  09/15/97.............       1.01357
09/14/97...........................  10/15/97.............       1.01182
10/14/97...........................  11/15/97.............       1.00966
11/14/97...........................  12/15/97.............       1.00712
12/14/97...........................  01/15/98.............       1.00451
01/14/98...........................  02/15/98.............       1.00213
02/14/98...........................  03/15/98.............       1.00000
03/14/98...........................  04/15/98.............       0.99798
------------------------------------------------------------------------

    For example, the midpoint of a cost reporting period beginning 
January 1, 1997 and ending December 31, 1997 is June 30, 1997. An 
adjustment factor of 1.01695 would be applied to the wages of a 
hospital with such a cost reporting period. In addition, for the data 
for any cost reporting period that began in FY 1997 and covers a period 
of less than 360 days or more than 370 days, we annualized the data to 
reflect a 1-year cost report. Annualization is accomplished by dividing 
the data by the number of days in the cost report and then multiplying 
the results by 365.
    Step 6--Each hospital was assigned to its appropriate urban or 
rural labor market area before any reclassifications under section 
1886(d)(8)(B) or section 1886(d)(10) of the Act. Within each urban or 
rural labor market area, we added the total adjusted salaries plus 
wage-related costs obtained in Step 5 (with and without GME and CRNA 
costs) for all hospitals in that area to determine the total adjusted 
salaries plus wage-related costs for the labor market area.
    Step 7--We divided the total adjusted salaries plus wage-related 
costs obtained under both methods in Step 6 by the sum of the 
corresponding total hours (from Step 4) for all hospitals in each labor 
market area to determine an average hourly wage for the area.
    Because the proposed FY 2001 wage index is based on a blend of 
average hourly wages, we then added 60 percent of the average hourly 
wage calculated without removing GME and CRNA costs, and 40 percent of 
the average hourly wage calculated with these costs excluded.
    Step 8--We added the total adjusted salaries plus wage-related 
costs obtained in Step 5 for all hospitals in the nation and then 
divided the sum by the national sum of total hours from Step 4 to 
arrive at a national average hourly wage (using the same blending 
methodology described in Step 7). Using the data as described above, 
the national average hourly wage is $21.6988.
    Step 9--For each urban or rural labor market area, we calculated 
the hospital wage index value by dividing the area average hourly wage 
obtained in Step 7 by the national average hourly wage computed in Step 
8.
    Step 10--Following the process set forth above, we developed a 
separate Puerto Rico-specific wage index for purposes of adjusting the 
Puerto Rico standardized amounts. (The national Puerto Rico 
standardized amount is adjusted by a wage index calculated for all 
Puerto Rico labor market areas based on the national average hourly 
wage as described above.) We added the total adjusted salaries plus 
wage-related costs (as calculated in Step 5) for all hospitals in 
Puerto Rico and divided the sum by the total hours for Puerto Rico (as 
calculated in Step 4) to arrive at an overall average hourly wage of 
$9.9667 for Puerto Rico. For each labor market area in Puerto Rico, we 
calculated the Puerto Rico-specific wage index value by dividing the 
area average hourly wage (as calculated in Step 7) by the overall 
Puerto Rico average hourly wage.
    Step 11--Section 4410 of Public Law 105-33 provides that, for 
discharges on or after October 1, 1997, the area wage index applicable 
to any hospital that is located in an urban area may not be less than 
the area wage index applicable to hospitals located in rural areas in 
that State. Furthermore, this wage index floor is to be implemented in 
such a manner as to assure that aggregate

[[Page 26300]]

prospective payment system payments are not greater or less than those 
that would have been made in the year if this section did not apply. 
For FY 2001, this change affects 241 hospitals in 41 MSAs. The MSAs 
affected by this provision are identified in Table 4A by a footnote.

F. Revisions to the Wage Index Based on Hospital Redesignation

    Under section 1886(d)(8)(B) of the Act, hospitals in certain rural 
counties adjacent to one or more MSAs are considered to be located in 
one of the adjacent MSAs if certain standards are met. Under section 
1886(d)(10) of the Act, the Medicare Geographic Classification Review 
Board (MGCRB) considers applications by hospitals for geographic 
reclassification for purposes of payment under the prospective payment 
system.
    Under section 152 of Public Law 106-113, hospitals in certain 
counties are deemed to be located in specified areas for purposes of 
payment under the hospital inpatient prospective payment system, for 
discharges occurring on or after October 1, 2000. For payment purposes, 
these hospitals are to be treated as though they were reclassified for 
purposes of both the standardized amount and the wage index. We are 
proposing to calculate FY 2001 wage indexes for hospitals in the 
affected counties as if they were reclassified to the specified area.
    For purposes of making payments under section 1886(d) of the Act 
for FY 2001, section 152 provides the following:
    <bullet> Iredell County, North Carolina is deemed to be located in 
the Charlotte-Gastonia-Rock Hill, North Carolina-South Carolina MSA;
    <bullet> Orange County, New York is deemed to be located in the New 
York, New York MSA;
    <bullet> Lake County, Indiana and Lee County, Illinois are deemed 
to be located in the Chicago, Illinois MSA;
    <bullet> Hamilton-Middletown, Ohio is deemed to be located in the 
Cincinnati, Ohio-Kentucky-Indiana MSA;
    <bullet>  Brazoria County, Texas is deemed to be located in the 
Houston, Texas MSA;
    <bullet> Chittenden County, Vermont is deemed to be located in the 
Boston-Worcester-Lawrence-Lowell-Brockton, Massachusetts-New Hampshire 
MSA.
    Section 152 also requires that these reclassifications be treated 
for FY 2001 as though they are reclassification decisions by the MGCRB. 
Therefore, the proposed wage indexes for the areas to which these 
hospitals are reclassifying, as well as the wage indexes for the areas 
in which they are located, are subject to all of the normal rules for 
calculating wage indexes for hospitals affected by reclassification 
decisions by the MGCRB, as described below.
    In addition, we would note that the reclassifications enacted by 
section 152 pertain only to the hospitals located in the specified 
counties, not to hospitals in other counties within the MSA or 
hospitals reclassified into the MSA by the MGCRB.
    Under section 154 of Public Law 106-113, the Allentown-Bethlehem-
Easton, Pennsylvania MSA wage index will be calculated including the 
wage data for Lehigh Valley Hospital. Section 154 states that, for FY 
2001, ``[n]otwithstanding any other provision of section 1886(d) of the 
Social Security Act (42 U.S.C. 1395ww(d)), in calculating and applying 
the wage indices under that section for discharges occurring during 
fiscal year 2001, Lehigh Valley Hospital shall be treated as being 
classified in the Allentown-Bethlehem-Easton Metropolitan Statistical 
Area.'' This statutory language directs us to include Lehigh Valley 
Hospital's wage data in the wage index calculation for the Allentown-
Bethlehem-Easton MSA for FY 2000 and FY 2001, and to apply the 
Allentown-Bethlehem-Easton MSA wage index to Lehigh Valley Hospital for 
discharges occurring during FY 2001.
    Section 1886(d)(8)(B) of the Act established that a hospital 
located in a rural county adjacent to one or more urban areas is 
treated as being located in the MSA to which the greatest number of 
workers in the county commute, if the rural county would otherwise be 
considered part of an MSA (or NECMAs), if the commuting rates used in 
determining outlying counties were determined on the basis of the 
aggregate number of resident workers who commute to (and, if applicable 
under the standards, from) the central county or counties of all 
contiguous MSAs. Through FY 2000, hospitals are required to use 
standards published in the Federal Register on January 3, 1980, by the 
Office of Management and Budget. For FY 2000, there were 26 hospitals 
affected by this provision.
    Section 402 of Public Law 106-113 amended section 1886(d)(8)(B) of 
the Act to allow hospitals to elect to use the standards published in 
the Federal Register on January 3, 1980 (1980 decennial census data) or 
March 30, 1990 (1990 decennial census data) during FY 2001 and FY 2002. 
As of FY 2003, hospitals will be required to use the standards 
published in the Federal Register by the Director of the Office of 
Management and Budget based on the most recent available decennial 
population data.
    We are in the process of working with the Office of Management and 
Budget to identify the hospitals that would be affected by this 
amendment. We refer the reader to the September 30, 1988 final rule (53 
FR 38499) for a complete discussion of our approach to identify the 
outlying counties using the standards published in the January 3, 1980 
Federal Register.
    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:
    <bullet> 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.
    <bullet> 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 redesignated 
hospitals are subject to that combined wage index value.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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

[[Page 26301]]

their wage index values calculated exclusive of the wage data of the 
redesignated hospitals.
    <bullet> 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 in which 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 proposed wage index values for FY 2001 are shown in Tables 4A, 
4B, 4C, and 4F in the Addendum to this proposed rule. Hospitals that 
are redesignated should use the wage index values shown in Table 4C. 
Areas in Table 4C may have more than one wage index value because the 
wage index value for a redesignated urban or rural hospital cannot be 
reduced below the wage index value for the rural areas of the State in 
which the hospital is located. When the wage index value of the area to 
which a hospital is redesignated is lower than the wage index value for 
the rural areas of the State in which the hospital is located, the 
redesignated hospital receives the higher wage index value; that is, 
the wage index value for the rural areas of the State in which it is 
located, rather than the wage index value otherwise applicable to the 
redesignated hospitals.
    Tables 4D and 4E list the average hourly wage for each labor market 
area, before the redesignation of hospitals, based on the FY 1997 wage 
data. In addition, Table 3C in the Addendum to this proposed rule 
includes the adjusted average hourly wage for each hospital based on 
the preliminary FY 1997 data as of February 25, 2000 (reflecting the 
phase-out of GME and CRNA wages as described at section III.C of this 
preamble). The MGCRB will use the average hourly wage published in the 
final rule to evaluate a hospital's application for reclassification 
for FY 2002 (unless that average hourly wage is later revised in 
accordance with the wage data correction policy described in 
Sec. 412.63(w)(2)). We note that in adjudicating these wage index 
reclassifications the MGCRB will use the average hourly wages for each 
hospital and labor market area that are reflected in the final FY 2001 
wage index.
    At the time this proposed wage index was constructed, the MGCRB had 
completed its review of FY 2001 reclassification requests. The proposed 
FY 2001 wage index values incorporate all 586 hospitals redesignated 
for purposes of the wage index (hospitals redesignated under section 
1886(d)(8)(B) or 1886(d)(10) of the Act, and section 152 Public Law 
106-113) for FY 2001. The final number of reclassifications may vary 
because some MGCRB decisions are still under review by the 
Administrator and because some hospitals may withdraw their requests 
for reclassification.
    Any changes to the wage index that result from withdrawals of 
requests for reclassification, wage index corrections, appeals, and the 
Administrator's review process will be incorporated into the wage index 
values published in the final rule following this proposed rule. The 
changes may affect not only the wage index value for specific 
geographic areas, but also the wage index value redesignated hospitals 
receive; that is, whether they receive the wage index value for the 
area to which they are redesignated, or a wage index value that 
includes the data for both the hospitals already in the area and the 
redesignated hospitals. Further, the wage index value for the area from 
which the hospitals are redesignated may be affected.
    Under Sec. 412.273, hospitals that have been reclassified by the 
MGCRB are permitted to withdraw their applications within 45 days of 
the publication of this proposed rule in the Federal Register. The 
request for withdrawal of an application for reclassification that 
would be effective in FY 2001 must be received by the MGCRB by June 19, 
2000. A hospital that requests to withdraw its application may not 
later request that the MGCRB decision be reinstated.

G. Requests for Wage Data Corrections

    To allow hospitals time to evaluate the wage data used to construct 
the proposed FY 2001 hospital wage index, we made available to the 
public a data file containing the FY 1997 hospital wage data. As stated 
in section II.D of this preamble, the data file used to construct the 
proposed wage index includes FY 1997 data submitted to HCFA as of mid-
February 2000. In a memorandum dated January 28, 2000, we instructed 
all Medicare intermediaries to inform the prospective payment hospitals 
that they service of the availability of the wage data file and the 
process and timeframe for requesting revisions. The wage data file was 
made available on February 7, 2000 through the Internet at HCFA's home 
page (http://www.hcfa.gov). We also instructed the intermediaries to 
advise hospitals of the availability of these data either through their 
representative hospital organizations or directly from HCFA. Additional 
details on ordering this data file are discussed in section IX.A of 
this preamble, ``Requests for Data from the Public.''
    In addition, Table 3C in the Addendum to this proposed rule 
contains each hospital's adjusted average hourly wage used to construct 
the proposed wage index values. It should be noted that the hospital 
average hourly wages shown in Table 3C may not reflect any changes made 
to a hospital's data after February 7, 2000. Changes approved by a 
hospital's fiscal intermediary and forwarded to HCFA by April 3, 2000 
will be reflected on the final public use wage data file scheduled to 
be made available on May 5, 2000.
    We believe hospitals have sufficient time to ensure the accuracy of 
their FY 1997 wage data. Moreover, the ultimate responsibility for 
accurately completing the cost report rests with the hospital, which 
must attest to the accuracy of the data at the time the cost report is 
filed. However, if, after review of the wage data file released 
February 4, 2000, a hospital believed that its FY 1997 wage data were 
incorrectly reported, the hospital was to submit corrections along with 
complete, detailed supporting documentation to its intermediary by 
March 6, 2000. Hospitals were notified of this deadline, and of all 
other possible deadlines and requirements, through written 
communications from their fiscal intermediaries in late January 2000.
    After reviewing requested changes submitted by hospitals, 
intermediaries transmitted any revised cost reports to HCFA and 
forwarded a copy of the revised Worksheet S-3, Parts II and III to the 
hospitals. In addition, fiscal intermediaries were to notify hospitals 
of the changes or the reasons that changes were not accepted. This 
procedure ensures that hospitals have every opportunity to verify the 
data that will be used to construct their wage index values. We believe 
that fiscal intermediaries are generally in the best position to make 
evaluations regarding the appropriateness of a particular cost and 
whether it should be included in the wage index data. However, if a

[[Page 26302]]

hospital disagrees with the intermediary's resolution of a requested 
change, the hospital may contact HCFA in an effort to resolve policy 
disputes. We note that the April 3, 2000 deadline also applies to these 
requested changes. We will not consider factual determinations at this 
time, as these should have been resolved earlier in the process.
    Any wage data corrections to be reflected in the final wage index 
must have been reviewed and verified by the intermediary and 
transmitted to HCFA on or before April 3, 2000. (The deadline for 
hospitals to request changes from their fiscal intermediaries was March 
6, 2000.) These deadlines are necessary to allow sufficient time to 
review and process the data so that the final wage index calculation 
can be completed for development of the final prospective payment rates 
to be published by August 1, 2000.
    We have created the process described above to resolve all 
substantive wage data correction disputes before we finalize the wage 
data for the FY 2001 payment rates. Accordingly, hospitals that do not 
meet the procedural deadlines set forth above will not be afforded a 
later opportunity to submit wage data corrections or to dispute the 
intermediary's decision with respect to requested changes.
    The final wage data public use file will be released by May 5, 
2000. Hospitals should examine both Table 3C of this proposed rule and 
the May 5 final public use wage data file (which reflects revisions to 
the data used to calculate the values in Table 3C) to verify the data 
HCFA is using to calculate the wage index. Hospitals will have until 
June 5, 2000, to submit requests to correct errors in the final wage 
data due to data entry or tabulation errors by the intermediary or 
HCFA. The correction requests that will be considered at that time will 
be limited to errors in the entry or tabulation of the final wage data 
that the hospital could not have known about before the release of the 
final wage data public use file.
    As noted above in section III.C of this preamble, the final wage 
data file released on May 5, 2000 will include hospitals' teaching 
survey data as well as cost report data. As with the file made 
available in February 2000, HCFA will make the final wage data file 
released in May 2000 available to hospital associations and the public 
on the Internet. However, this file is being made available solely for 
the limited purpose of identifying any potential errors made by HCFA or 
the intermediary in the entry of the final wage data that result from 
the correction process described above (with the March 6 deadline). 
Hospitals are encouraged to review their hospital wage data promptly 
after the release of the final file because data presented at this time 
cannot be used by hospitals to initiate new wage data correction 
requests.
    If, after reviewing the final file, a hospital believes that its 
wage data are incorrect due to a fiscal intermediary or HCFA error in 
the entry or tabulation of the final wage data, it should send a letter 
to both its fiscal intermediary and HCFA. The letters should outline 
why the hospital believes an error exists and provide all supporting 
information, including dates. These requests must be received by HCFA 
and the intermediaries no later than June 5, 2000. Requests mailed to 
HCFA should be sent to: Health Care Financing Administration; Center 
for Health Plans and Providers; Attention: Wage Index Team, Division of 
Acute Care; C4-07-07; 7500 Security Boulevard; Baltimore, MD 21244-
1850. Each request must also be sent to the hospital's fiscal 
intermediary. The intermediary will review requests upon receipt and 
contact HCFA immediately to discuss its findings.
    At this point in the process, changes to the hospital wage data 
will only be made in those very limited situations involving an error 
by the intermediary or HCFA that the hospital could not have known 
about before its review of the final wage data file. Specifically, 
neither the intermediary nor HCFA will accept the following types of 
requests at this stage of the process:
    <bullet> Requests for wage data corrections that were submitted too 
late to be included in the data transmitted to HCFA on or before April 
3, 2000.
    <bullet> Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the February 2000 
wage data file.
    <bullet> Requests to revisit factual determinations or policy 
interpretations made by the intermediary or HCFA during the wage data 
correction process.
    Verified corrections to the wage index received timely (that is, by 
June 5, 2000) will be incorporated into the final wage index to be 
published by August 1, 2000 and effective October 1, 2000.
    Again, we believe the wage data correction process described above 
provides hospitals with sufficient opportunity to bring errors in their 
wage data to the intermediary's attention. Moreover, because hospitals 
will have access to the final wage data by early May 2000, they will 
have the opportunity to detect any data entry or tabulation errors made 
by the intermediary or HCFA before the development and publication of 
the FY 2001 wage index by August 1, 2000 and the implementation of the 
FY 2001 wage index on October 1, 2000. If hospitals avail themselves of 
this opportunity, the wage index implemented on October 1, should be 
virtually error free. Nevertheless, in the unlikely event that errors 
should occur after that date, we retain the right to make midyear 
changes to the wage index under very limited circumstances.
    Specifically, in accordance with Sec. 412.63(w)(2), we may make 
midyear corrections to the wage index only in those limited 
circumstances in which a hospital can show (1) that the intermediary or 
HCFA made an error in tabulating its data; and (2) that the hospital 
could not have known about the error, or did not have an opportunity to 
correct the error, before the beginning of FY 2001 (that is, by the 
June 5, 2000 deadline). As indicated earlier, since a hospital will 
have the opportunity to verify its data, and the intermediary will 
notify the hospital of any changes, we do not foresee any specific 
circumstances under which midyear corrections would be necessary. 
However, should a midyear correction be necessary, the wage index 
change for the affected area will be effective prospectively from the 
date the correction is made.

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

A. Expanding the Transfer Definition to Include Postacute Care 
Discharges (Sec. 412.4)

    In accordance with section 1886(d)(5)(I) of the Act, the 
prospective payment system distinguishes between ``discharges,'' 
situations in which a patient leaves an acute care (prospective 
payment) hospital after receiving complete acute care treatment, and 
``transfers,'' situations in which the patient is transferred to 
another acute care hospital for related care. Our policy, as set forth 
in the regulations at Sec. 412.4, provides that, in a transfer 
situation, full payment is made to the final discharging hospital and 
each transferring hospital is paid a per diem rate for each day of the 
stay, not to exceed the full DRG payment that would have been made if 
the patient had been discharged without being transferred.
    Effective with discharges on or after October 1, 1998, section 
1886(d)(5)(J) of the Act required the Secretary to define

[[Page 26303]]

and pay as transfers all cases assigned to one of 10 DRGs (identified 
below) selected by the Secretary if the individuals are discharged to 
one of the following settings:
    <bullet> A hospital or hospital unit that is not a subsection 
1886(d) hospital. (Section 1886(d)(1)(B) of the Act identifies the 
hospitals and hospital units that are excluded from the term 
``subsection(d) hospital'' as psychiatric hospitals and units, 
rehabilitation hospitals and units, children's hospitals, long-term 
care hospitals, and cancer hospitals.)
    <bullet> A skilled nursing facility (as defined at section 1819(a) 
of the Act).
    <bullet> Home health services provided by a home health agency, if 
the services relate to the condition or diagnosis for which the 
individual received inpatient hospital services, and if the home health 
services are provided within an appropriate period (as determined by 
the Secretary).
    Therefore, any discharge from a prospective payment hospital from 
one of the selected 10 DRGs that is admitted to a hospital excluded 
from the prospective payment system on the date of discharge from the 
acute care hospital, on or after October 1, 1998, would be considered a 
transfer and paid accordingly under the prospective payment systems 
(operating and capital) for inpatient hospital services. Similarly, a 
discharge from an acute care inpatient hospital paid under the 
prospective payment system to a skilled nursing facility on the same 
date would be defined as a transfer and paid as such. This would 
include cases discharged from one of the 10 selected DRGs to a 
designated swing bed for skilled nursing care. We consider situations 
in which home health services related to the condition or diagnosis of 
the inpatient admission are received within 3 days after the discharge 
as a transfer.
    The statute specifies that the Secretary select 10 DRGs based upon 
a high volume of discharges to postacute care and a disproportionate 
use of postacute care services. We identified the following DRGs with 
the highest percentage of postacute care:
    <bullet> DRG 14 (Specific Cerebrovascular Disorders Except 
Transient Ischemic Attack (Medical)).
    <bullet> DRG 113 (Amputation for Circulatory System Disorders 
Except Upper Limb and Toe (Surgical)).
    <bullet> DRG 209 (Major Joint Limb Reattachment Procedures of Lower 
Extremity (Surgical)).
    <bullet> DRG 210 (Hip and Femur Procedures Except Major Joint 
Procedures Age >17 with CC (Surgical)).
    <bullet> DRG 211 (Hip and Femur Procedures Except Major Joint 
Procedures Age >17 without CC (Surgical)).
    <bullet> DRG 236 (Fractures of Hip and Pelvis (Medical)).
    <bullet> DRG 263 (Skin Graft and/or Debridement for Skin Ulcer or 
Cellulitis with CC (Surgical))
    <bullet> DRG 264 (Skin Graft and/or Debridement for Skin Ulcer or 
Cellulitis without CC (Surgical))
    <bullet> DRG 429 (Organic Disturbances and Mental Retardation 
(Medical))
    <bullet> DRG 483 (Tracheostomy Except for Face, Mouth and Neck 
Diagnoses (Surgical)).
    Generally, we pay for transfers based on a per diem payment, 
determined by dividing the DRG payment by the average length of stay 
for that DRG. The transferring hospital receives twice the per diem 
rate the first day and the per diem rate for each following day, up to 
the full DRG payment. Of the 10 selected DRGs, 7 are paid under this 
method. However, three DRGs exhibit a disproportionate share of costs 
very early in the hospital stay. For these three DRGs, hospitals 
receive one-half of the DRG payment for the first day of the stay and 
one-half of the payment they would receive under the current transfer 
payment method, up to the full DRG payment.
    Section 1886(d)(5)(J)(iv) of the Act requires the Secretary to 
include in the FY 2001 proposed rule a description of the effect of the 
provision to treat as transfers cases that are assigned to one of the 
10 selected DRGs and receive postacute care upon their discharge from 
the hospital. Under contract with HCFA (Contract No. 500-95-0006), 
Health Economics Research, Inc. (HER) conducted an analysis of the 
impact on hospitals and hospital payments of the postacute transfer 
provision. The analysis sought to obtain information on four primary 
areas: how hospitals responded in terms of their transfer practices; a 
comparison of payments and costs for these cases; whether hospitals are 
attempting to circumvent the policy by delaying postacute care or 
coding the patient's discharge status as something other than a 
transfer; and what the next possible step is for expanding the transfer 
payment policy beyond the current 10 selected DRGs or the current 
postacute destinations.
    Section 1886(d)(5)(J)(iv)(I) authorizes the Secretary to include in 
the proposed rule for FY 2001 a description of other post-discharge 
services that should be added to this postacute care transfer 
provision. Since FY 1999 was the first year this policy was effective 
and because of pending changes to payment policies for other postacute 
care settings such as hospital outpatient departments, we have limited 
data to assess whether additional postacute care settings should be 
included. We will continue to closely monitor this issue as more data 
become available.
    In its analysis, HER relied on HCFA's Standard Analytic Files 
containing claims submission data through September 1999. However, the 
second and third quarter submissions for calendar year 1999 were not 
complete. It was decided that transfer cases would be identified by 
linking acute hospital discharges with postacute records based on 
Medicare beneficiary numbers and dates of discharge from the acute 
hospital with dates of admission or provision of service by the 
postacute provider. This method was used rather than selecting cases 
based on the discharge status code on the claim even though this code 
is being used for payment to these cases because we wanted to also 
assess how accurately hospitals are coding this status. However, the 
need to link acute and postacute episodes further limited the analytic 
data, due to the greater time lag for collecting postacute records. 
Therefore, much of HER's analysis focused on only the first two 
quarters of FY 1998. The two preceding fiscal years served as a 
baseline for purposes of comparison.
    HER looked at the 10 DRGs included under the transfer payment 
policy and identified a slight decrease in the percentage of short-stay 
postacute transfers. Short-stay transfers were defined as those with a 
length of stay at least one day below the geometric mean length of stay 
for the DRG. Comparing the share of short-stay postacute transfers to 
total discharges shows that during the first two quarters of FY 1998, 
the resulting percentage was 34 percent. The same comparison during the 
first two quarters of FY 1999 yielded 33 percent. When HER examined the 
share of short-stay postacute transfers relative to all short-stay 
cases, it found that the percentage fell from 59 percent in FY 1998 to 
58 percent in FY 1999. According to HER, ``[t]hese figures suggest that 
the policy change resulted in a moderate decline in the number of 
postacute care transfers paid for under the lower per diem 
methodology.''
    Evidence also suggests that hospitals are keeping patients in these 
10 DRGs longer prior to transfer. The mean length of stay of short-stay 
postacute transfers remained fairly constant prior to the change and 
after the change, declining less than one-half percent. On the other 
hand, the mean length of stay of nontransfer short-stay patients fell 
by

[[Page 26304]]

1.8 percent. By comparison, the mean length of stay of long-stay 
postacute transfers fell by 3.4 percent, while it fell only 2.1 percent 
for long-stay nontransfers. The report suggests ``[t]he relative 
decline in the length of stay of transfers among all long-stay cases 
suggests that (prospective payment system) hospitals may have responded 
to the policy change by holding such patients until they exceeded the 
geometric mean minus one day threshold prior to post-discharge 
referral.''
    We believe these marginal reactions by hospitals to the postacute 
transfer policy suggest that the increase in the rate of postacute 
transfers over the past several years has been due to a number of 
factors, of which Medicare payment policy has been only one. As 
indicated in the Conference report accompanying Public Law 105-33 (H.R. 
Conf. Rept. No. 105-217, 105th Cong., 1st Sess., at 740 (1997)), 
Congress' intent was to ``continue to provide hospitals with strong 
incentives to treat patients in the most effective and efficient 
manner, while at the same time, adjust PPS payments in a manner that 
accounts for reduced hospital lengths of stay because of a discharge to 
another setting.'' The preliminary results of HER's report suggest that 
the policy resulting from Public Law 105-33 has not had a disruptive 
impact on existing clinical practices.
    To assess the adequacy of payments under the new policy, HER 
examined average profits per case prior to and after the policy change. 
Prior to the policy change, HER found average profits for short-stay 
transfers in the 10 DRGs to be $2,454 per case. Across the 10 DRGs the 
average profits ranged from $32,007 per case for DRG 483 to minus $26 
per case for DRG 211 (the only one of the 10 DRGs with a negative 
profit margin prior to implementing the policy). After the policy 
change, the average profit per case was $1,180 per case. However, 3 of 
the 10 DRGs had negative average profits after implementation of the 
policy. The average margin for DRG 483 declined to $16,672 per case.
    The study also attempted to ascertain whether there was any 
concerted effort to circumvent the policy by delaying transfers to 
avoid having a case defined as a transfer, or by not coding the case 
correctly on the discharge status indicator on the bill. To assess 
whether postacute care was being delayed, HER considered, for the 
periods preceding and subsequent to the policy change, the number and 
percent of cases admitted to either a hospital or distinct-part unit of 
a hospital excluded from the prospective payment system or to a skilled 
nursing facility 2 or 3 days following the discharge, and the number 
and percent of patients who received services from a home health agency 
4 or 5 days after discharge from an acute care hospital. The 
percentages are based on the share of transferred patients falling into 
the time windows described above relative to all such transfers.
    The analysis identified 699 patients transferred to an excluded 
hospital or unit 2 or 3 days following discharge from an acute care 
hospital during the first two quarters of FY 1998, and 660 such cases 
during the first two quarters of FY 1999. Similarly, there were 2,219 
transfers to skilled nursing facilities 2 or 3 days after discharge 
during the first two quarters of FY 1998, and 1,759 during the first 
two quarters of FY 1999. The percentage of such transfers was constant 
for both excluded hospitals and units and for skilled nursing 
facilities. The analysis found that home health referral on the 4th or 
5th day following discharge fell from 17.5 percent to 16.5 percent 
between the two study periods, from 12,667 cases to 9,745 cases. On the 
basis of these findings, HER believes ``[t]hese results do not support 
the contention that (prospective payment system) hospitals (would) 
circumvent the lower per diem payments by delaying the date of 
postacute care admission or visit.''
    The study also examined the discharge destination codes as reported 
on the acute care hospital claims against postacute care transfers 
identified on the basis of a postacute care claim indicating the 
patient qualifies as a transfer. This analysis found that in 1998, only 
74 percent of transfer cases had discharge destination codes on the 
acute care hospital claim that were consistent with whether there was a 
postacute care claim for the case matching the date of discharge. In FY 
1999, the year the postacute care transfer policy went into effect, 
this rate rose to 79 percent. This indicates that hospitals are 
improving the accuracy of coding transfer cases.
    Transfers to hospitals or units excluded from the prospective 
payment system must have a discharge destination code (Patient Status) 
of 05. Transfers to a skilled nursing facility must have a discharge 
destination code of 03. Transfers to a home health agency must have a 
discharge destination code of 06. If the hospital's continuing care 
plan for the patient is not related to the purpose of the inpatient 
hospital admission, a condition code 42 must be entered on the claim. 
If the continuing care plan is related to the purpose of the inpatient 
hospital admission, but care did not start within 3 days after the date 
of discharge, a condition code 43 must be entered on the claim. The 
presence of either of these condition codes in conjunction with 
discharge destination code 06 will result in full payment rather than 
the transfer payment amount. We intend to closely monitor the accuracy 
of hospitals' discharge destination coding in this regard and take 
whatever steps are necessary to ensure that accurate payment is made 
under this policy.
    Section 1886(d)(5)(J)(iv)(II) of the Act authorized but did not 
require the Secretary to include as part of this proposed rule 
additional DRGs to include under the postacute care transfer provision. 
As part of ``The President's Plan to Modernize and Strengthen Medicare 
for the 21st Century'' (July 2, 1999), the Administration committed to 
not expanding the number of DRGs included in the policy until FY 2003. 
Therefore, we are not proposing any change to the postacute care 
settings or the 10 DRGs.
    HER did undertake an analysis of how additional DRGs might be 
considered for inclusion under the policy. The analysis supports the 
initial 10 DRGs selected as being consistent with the nature of the 
Congressional mandate. According to HER, ``[t]he top 10 DRGs chosen 
initially by HCFA exhibit very large PAC [postacute care] levels and 
PAC discharge rates (except for DRG 264, Skin Graft and/or Debridement 
for Skin Ulcer or Cellulitis without CC, which was paired with DRG 
263). All 10 appear to be excellent choices based on the other criteria 
as well. Most have fairly high short-stay PAC rates (except possibly 
for Strokes, DRG 14, and Mental Retardation, DRG 429).''
    Extending the policy beyond these initial DRGs, however, may well 
require more extensive analysis and grouping of like-DRGs. One concern 
raised in the analysis relates to single DRGs including multiple 
procedures with varying lengths of stay. Because the transfer payment 
methodology only considers the DRG overall geometric mean length of 
stay for a DRG, certain procedures with short lengths of stay relative 
to other procedures in the same DRG may be more likely to be treated as 
transfers. The analysis also considers pairs of DRGs, such as DRGs 263 
and 264, as well as larger bundles of DRGs (grouped by common elements 
such as trauma, infections, and major organ procedures). According to 
HER, ``[i]n extending the PAC transfer policy, it is necessary to go 
beyond the flawed concept of a single DRG to discover multiple DRGs 
with a common link that

[[Page 26305]]

exhibit similar PAC statistics. Aggregation of this sort provides a 
logical bridge in expanding the PAC transfer policy that is easily 
justified to Congress and that avoids unintended inequities in the way 
DRGs--and potentially hospitals--are treated under this policy. 
Hospitals can be inadvertently penalized or not under the current 
implementation criteria due to systematic differences in the DRG mix.''
    Finally, the HER report concludes with a discussion of the issues 
related to potentially expanding the postacute care transfer policy to 
all DRGs. On the positive side, HER points to the benefits of expanding 
the policy to include all DRGs:
    <bullet> A simple, uniform formula-driven policy;
    <bullet> Same policy rationale exists for all DRGs--the statutory 
provision requiring the Secretary to select only 10 DRGs was a 
political compromise;
    <bullet> DRGs with little utilization of short-stay postacute care 
would not be harmed by the policy;
    <bullet> Less confusion in discharge destination coding; and
    <bullet> Hospitals that happen to be disproportionately treating 
the current 10 DRGs may be harmed more than hospitals with an 
aggressive short-stay postacute care transfer policy for other DRGs.
    According to HER, the negative implications of expanding the policy 
to all DRGs include:
    <bullet> The postacute care transfer policy is irrelevant for many 
DRGs;
    <bullet> Added burden for the fiscal intermediaries to verify 
discharge destination codes;
    <bullet> Diluted program savings beyond the initial 10 DRGs;
    <bullet> Difficult to identify ongoing postacute care that resumes 
after discharge; and
    <bullet> Heterogeneous procedures within single DRGs having varying 
lengths of stay.
    At the time we developed this proposed rule, HER's report was not 
yet in final format. We anticipate that, by the time the final FY 2001 
rule is published, this report will be available in final format. We 
will announce in that rule how to attain copies of the complete report.

B. Sole Community Hospitals (SCHs) (412.63, 412.73, and 413.75, 
Proposed New Sec. 412.77, and Sec. 412.92)

    Under the hospital inpatient prospective payment system, special 
payment protections are provided to sole community hospitals (SCHs). 
Section 1886(d)(5)(D)(iii) of the Act defines an SCH as, among other 
things, a hospital that, by reason of factors such as isolated 
location, weather conditions, travel conditions, or absence of other 
hospitals (as determined by the Secretary), is the sole source of 
inpatient hospital services reasonably available to Medicare 
beneficiaries. The regulations that set forth the criteria a hospital 
must meet to be classified as an SCH are located at Sec. 412.92(a).
    Currently SCHs are paid based on whichever of the following rates 
yields the greatest aggregate payment to the hospital for the cost 
reporting period: the Federal national rate applicable to the hospital; 
or the hospital's ``target amount'';--that is, either the updated 
hospital-specific rate based on FY 1982 costs per discharge, or the 
updated hospital-specific rate based on FY 1987 costs per discharge.
    Section 405 of Public Law 106-113, which amended section 1886(b)(3) 
of the Act, provides that an SCH that was paid for its cost reporting 
period beginning during 1999 on the basis of either its FY 1982 or FY 
1987 target amount (the hospital-specific rate as opposed to the 
Federal rate) may elect to receive payment under a methodology using a 
third hospital-specific rate based on the hospital's FY 1996 costs per 
discharge. This amendment to the statute means that, for discharges 
occurring in FY 2001, eligible SCHs can elect to use the allowable FY 
1996 operating costs for inpatient hospital services as the basis for 
their target amount, rather than either their FY 1982 or FY 1987 costs.
    We are aware that language in the Conference Report accompanying 
Public Law 106-113 indicates that the House bill (H.R. 3075) would have 
permitted SCHs that were being paid the Federal rate to rebase, not 
SCHs that were paid on the basis of either their FY 1982 or FY 1987 
target amount (H.R. Conf. Rep. No. 106-479, 106th Cong., 1st Sess. at 
890 (1999)). The language of the section 405 amendment to section 
1886(b)(3) (which added new subparagraph (I)(ii)) clearly limits the 
option to substitute the FY 1996 base year to SCHs that were paid for 
their cost reporting periods beginning during 1999 on the basis of the 
target amount applicable to the hospital under section 1886(b)(3)(C).
    When calculating an eligible SCH's FY 1996 hospital-specific rate, 
we propose to utilize the same basic methodology used to calculate FY 
1982 and FY 1987 bases. That methodology is set forth in Secs. 412.71 
through 412.75 of the regulations and discussed in detail in several 
prospective payment system documents published in the Federal Register 
on September 1, 1983 (48 FR 3977); January 3, 1984 (49 FR 256); June 1, 
1984 (49 FR 23010); and April 20, 1990 (55 FR 15150).
    Since we anticipate that eligible hospitals will elect the option 
to rebase using their FY 1996 cost reporting periods, we are 
instructing our fiscal intermediaries to identify those SCHs that were 
paid for their cost reporting periods beginning during 1999 on the 
basis of their target amounts. For these hospitals, fiscal 
intermediaries will calculate the FY 1996 hospital-specific rate as 
described below in this section IV.B. If this rate exceeds a hospital's 
current target amount based on the greater of the FY 1982 or FY 1987 
hospital-specific rate, the hospital will receive payment based on the 
FY 1996 hospital-specific rate (based on the blended amounts described 
at section 1886(b)(3)(I)(i) of the Act) unless the hospital notifies 
its fiscal intermediary in writing prior to the end of the cost 
reporting period that it does not wish to be paid on the basis of the 
FY 1996 hospital-specific rate. Thus, if a hospital does not notify its 
fiscal intermediary before the end of the cost reporting period that it 
declines the rebasing option, we will deem the lack of such 
notification as an election to have section 1886(b)(3)(I) of the Act 
apply to the hospital.
    An SCH's decision to decline this option for a cost reporting 
period will remain in effect for subsequent periods until such time as 
the hospital notifies its fiscal intermediary otherwise.
    The FY 1996 hospital-specific rate will be based on FY 1996 cost 
reporting periods beginning on or after October 1, 1995 and before 
October 1, 1996, that are 12 months or longer. If the hospital's last 
cost reporting period ending on or before September 30, 1996 is less 
than 12 months, the hospital's most recent 12-month or longer cost 
reporting period ending before the short period report would be 
utilized in the computations. If a hospital has no cost reporting 
period beginning in FY 1996, it would not have a hospital-specific rate 
based on FY 1996.
    For each hospital eligible for FY 1996 rebasing, the fiscal 
intermediary would calculate a hospital-specific rate based on the 
hospital's FY 1996 cost report as follows:
    <bullet> Determine the hospital's total allowable Medicare 
inpatient operating cost, as stated on the FY 1996 cost report.
    <bullet> Divide the total Medicare operating cost by the number of 
Medicare discharges in the cost reporting period to determine the FY 
1996 base period cost per case. For this purpose, transfers are 
considered to be discharges.

[[Page 26306]]

    <bullet> In order to take into consideration the hospital's 
individual case-mix, divide the base year cost per case by the 
hospital's case-mix index applicable to the FY 1996 cost reporting 
period. This step is necessary to standardize the hospital's base 
period cost for case-mix and is consistent with our treatment of both 
FY 1982 and FY 1987 base-period costs per case. A hospital's case-mix 
is computed based on its Medicare patient discharges subject to DRG-
based payment.
    The fiscal intermediary will notify eligible hospitals of their FY 
1996 hospital-specific rate prior to October 1, 2000. Consistent with 
our policies relating to FY 1982 and FY 1987 hospital-specific rates, 
we propose to permit hospitals to appeal a fiscal intermediary's 
determination of the FY 1996 hospital-specific rate under the 
procedures set forth in 42 CFR part 405, subpart R, which concern 
provider payment determinations and appeals. In the event of a 
modification of base period costs for FY 1996 rebasing due to a final 
nonappealable court judgment or certain administrative actions (as 
defined in Sec. 412.72(a)(3)(i)), the adjustment would be retroactive 
to the time of the intermediary's initial calculation of the base 
period costs, consistent with the policy for rates based on FY 1982 and 
FY 1987 costs.
    Section 405 prescribes the following formula to determine the 
payment for SCHs that elect rebasing:
    For discharges during FY 2001:
    <bullet> 75 percent of the updated FY 1982 or FY 1987 former target 
(identified in the statute as the ``subparagraph (C) target amount''), 
plus
    <bullet> 25 percent of the updated FY 1996 amount (identified in 
the statute as the ``''rebased target amount'').
    For discharges during FY 2002:
    <bullet> 50 percent of the updated FY 1982 or FY 1987 former 
target, plus
    <bullet> 50 percent of the updated FY 1996 amount.
    For discharges during FY 2003:
    <bullet> 25 percent of the updated FY 1982 or FY 1987 former 
target, plus
    <bullet> 75 percent of the updated FY 1996 amount.
    For discharges during FY 2004 or any subsequent fiscal year, the 
hospital-specific rate would be determined based on 100 percent of the 
updated FY 1996 amount.
    We are proposing to add a new Sec. 412.77 and amend Sec. 412.92(d) 
to incorporate the provisions of section 1886(b)(3)(I) of the Act, as 
added by section 405 of Public Law 106-113.
    Section 406 of Public Law 106-113 amended section 
1886(b)(3)(B)(i)(XVI) of the Act to provide, for fiscal year 2001, for 
full market basket updates to both the Federal and hospital-specific 
payment rates applicable to sole community hospitals. We are proposing 
to amend Sec. Sec. 412.63, 412.73, and 412.75 to incorporate the 
amendment made by section 406 of Public Law 106-113.

C. Rural Referral Centers (Sec. 412.96)

    Under the authority of section 1886(d)(5)(C)(i) of the Act, the 
regulations at Sec. 412.96 set forth the criteria a hospital must meet 
in order to receive special treatment under the prospective payment 
system as a rural referral center. For discharges occurring before 
October 1, 1994, rural referral centers received the benefit of payment 
based on the other urban amount rather than the rural standardized 
amount. Although the other urban and rural standardized amounts were 
the same for discharges beginning with that date, rural referral 
centers would continue to receive special treatment under both the 
disproportionate share hospital (DSH) payment adjustment and the 
criteria for geographic reclassification.
    As discussed in 62 FR 45999 and 63 FR 26317, under section 4202 of 
Public Law 105-33, a hospital that was classified as a rural referral 
center for FY 1991 is to be classified as a rural referral center for 
FY 1998 and later years so long as that hospital continued to be 
located in a rural area and did not voluntarily terminate its rural 
referral center status. Otherwise, a hospital seeking rural referral 
center status must satisfy applicable criteria. One of the criteria 
under which a hospital may qualify as a rural referral center is to 
have 275 or more beds available for use. A rural hospital that does not 
meet the bed size requirement can qualify as a rural referral center if 
the hospital meets two mandatory prerequisites (specifying a minimum 
case-mix index and a minimum number of discharges) and at least one of 
three optional criteria (relating to specialty composition of medical 
staff, source of inpatients, or referral volume). With respect to the 
two mandatory prerequisites, a hospital may be classified as a rural 
referral center if its--
    <bullet> 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
    <bullet> Number of discharges is at least 5,000 per year, or if 
fewer, the median number of discharges for urban hospitals in the 
census region in which the hospital is located. (The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year.)
1. Case-Mix Index
    Section 412.96(c)(1) provides that HCFA will establish updated 
national and regional case-mix index values in each year's annual 
notice of prospective payment rates for purposes of determining rural 
referral center status. The methodology we use to determine the 
proposed national and regional case-mix index values is set forth in 
regulations at Sec. 412.96(c)(1)(ii). The proposed national case-mix 
index value includes all urban hospitals nationwide, and the proposed 
regional values are the median values of urban hospitals within each 
census region, excluding those 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 1999 (October 1, 1998 through September 30, 1999) 
and include bills posted to HCFA's records through December 1999.
    We are proposing that, in addition to meeting other criteria, 
hospitals with fewer than 275 beds, if they are to qualify for initial 
rural referral center status for cost reporting periods beginning on or 
after October 1, 2000, must have a case-mix index value for FY 1999 
that is at least--
    <bullet> 1.3401; or
    <bullet> 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.
    The median case-mix values by region are set forth in the following 
table:

------------------------------------------------------------------------
                                                               Case-mix
                           Region                            index value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)....................       1.2291
2. Middle Atlantic (PA, NJ, NY)............................       1.2387
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).....       1.3116
4. East North Central (IL, IN, MI, OH, WI).................       1.2602
5. East South Central (AL, KY, MS, TN).....................       1.2692
6. West North Central (IA, KS, MN, MO, NE, ND, SD).........       1.1881
7. West South Central (AR, LA, OK, TX).....................       1.2800
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)...............       1.3302
9. Pacific (AK, CA, HI, OR, WA)............................       1.3076
------------------------------------------------------------------------

    The preceding numbers will be revised in the final rule to the 
extent required to reflect the updated FY 1999 MedPAR file, which will 
contain data

[[Page 26307]]

from additional bills received through March 31, 2000.
    For the benefit of hospitals seeking to qualify as rural referral 
centers or those wishing to know how their case-mix index value 
compares to the criteria, we are publishing each hospital's FY 1999 
case-mix index value in Table 3C in section VI. of the Addendum to this 
proposed rule. In keeping with our policy on discharges, these case-mix 
index values are computed based on all Medicare patient discharges 
subject to DRG-based payment.
2. Discharges
    Section 412.96(c)(2)(i) provides that HCFA will set forth the 
national and regional numbers of discharges in each year's annual 
notice of prospective payment rates for purposes of determining rural 
referral center status. As specified in section 1886(d)(5)(C)(ii) of 
the Act, the national standard is set at 5,000 discharges. We are 
proposing to update the regional standards based on discharges for 
urban hospitals' cost reporting periods that began during FY 1998 (that 
is, October 1, 1997 through September 30, 1998). That is the latest 
year for which we have complete discharge data available.
    Therefore, we are proposing that, in addition to meeting other 
criteria, a hospital, if it is to qualify for initial rural referral 
center status for cost reporting periods beginning on or after October 
1, 2000, must have as the number of discharges for its cost reporting 
period that began during FY 1999 a figure that is at least--
    <bullet> 5,000; or
    <bullet> The median number of discharges for urban hospitals in the 
census region in which the hospital is located, as indicated in the 
following table:

------------------------------------------------------------------------
                                                              Number of
                           Region                             discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)....................        6,733
2. Middle Atlantic (PA, NJ, NY)............................        8,681
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).....        7,845
4. East North Central (IL, IN, MI, OH, WI).................        7,526
5. East South Central (AL, KY, MS, TN).....................        6,852
6. West North Central (IA, KS, MN, MO, NE, ND, SD).........        5,346
7. West South Central (AR, LA, OK, TX).....................        5,380
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)...............        8,026
9. Pacific (AK, CA, HI, OR, WA)............................        6,160
------------------------------------------------------------------------

    We note that the number of discharges for hospitals in each census 
region is greater than the national standard of 5,000 discharges. 
Therefore, 5,000 discharges is the minimum criterion for all hospitals. 
These numbers will be revised in the final rule based on the latest FY 
1998 cost report data.
    We reiterate that an osteopathic hospital, if it is to qualify for 
rural referral center status for cost reporting periods beginning on or 
after October 1, 2000, must have at least 3,000 discharges for its cost 
reporting period that began during FY 1999.

D. Indirect Medical Education (IME) Adjustment (Sec. 412.105)

    Section 1886(d)(5)(B) of the Act provides that prospective payment 
hospitals that have residents in an approved graduate medical education 
(GME) program receive an additional payment to reflect the higher 
indirect operating costs associated with GME. The regulations regarding 
the calculation of this additional payment, known as the indirect 
medical education (IME) adjustment, are located at Sec. 412.105.
    Section 111 of Public Law 106-113 modified the transition for the 
IME adjustment that was established by Public Law 105-33. We will 
publish these changes in a separate interim final rule with comment 
period. However, for discharges occurring during FY 2001, the 
adjustment formula equation used to calculate the IME adjustment factor 
is 1.54  x  [(1 + r) \.405\ -1]. (The variable r represents the 
hospital's resident-to-bed ratio.)
    In the July 30, 1999 final rule (64 FR 41517), we set forth certain 
policies that affected payment for both direct and indirect GME. These 
policies related to adjustments to full-time equivalent (FTE) resident 
caps for new medical residency programs affecting both direct and 
indirect GME programs; the adjustment to GME caps for certain hospitals 
under construction prior to August 5, 1997 (the enactment date of 
Public Law 105-33) to account for residents in new medical residency 
training programs; and the temporary adjustment to FTE caps to reflect 
residents affected by hospital closures. When we amended the 
regulations under Sec. 413.86 for direct GME, we inadvertently did not 
make the corresponding changes in Sec. 412.105 for IME. We are 
proposing to make the following conforming changes:
    <bullet> To amend Sec. 412.105(f)(1)(vii) to provide for an 
adjustment to the FTE caps for new medical residency programs as 
specified under Sec. 413.86(g)(6).
    <bullet> To add a new Sec. 412.105(f)(1)(viii) related to the 
adjustment to the FTE caps for newly constructed hospitals that sponsor 
new residency programs in effect on or after January 1, 1995, and on or 
before August 5, 1997, that either received initial accreditation by 
the appropriate accrediting body or temporarily trained residents at 
another hospital(s) until the facility was completed, to conform to the 
provisions of Sec. 413.86(g)(7).
    <bullet> To add a new Sec. 412.105(f)(1)(ix) to specify that a 
hospital may receive a temporary adjustment to its FTE cap to take into 
account residents added because of another hospital's closure if the 
hospital meets the criteria listed under Sec. 413.86(g)(8).
    In addition, we are proposing to add a cross-reference to 
``Sec. 413.86(d)(3)(i) through (v)'' in Sec. 412.105(g), and to correct 
the applicable period in both Secs. 412.105(g) and 413.86(d)(3) by 
revising the phrase ``For portions of cost reporting periods beginning 
on or after January 1, 1998'' to read ``For portions of cost reporting 
periods occurring on or after January 1, 1998''.

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 (as defined in section 1886(d)(5)(F) of the Act) receive 
additional payments through the DSH adjustment. Section 4403(a) of 
Public Law 105-33 amended section 1886(d)(5)(F) of the Act to reduce 
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 
2002, and 0 percent for FY 2003 and each subsequent fiscal year. 
Subsequently, section 112 of Public Law 106-113 modified the amount of 
the reductions under Public Law 105-33 by changing the reduction to 3 
percent for FY 2001 and 4 percent for FY 2002. The reduction continues 
to be 0 percent for FY 2003 and each subsequent fiscal year. We are 
proposing to revise Sec. 412.106(e) to reflect the changes in the 
statute made by Public Law 106-113.
    Section 112 of Public Law 106-113 also directs the Secretary to 
require prospective payment system hospitals to submit data on the 
costs incurred by the hospitals for providing inpatient and outpatient 
hospital services for which the hospitals are not compensated, 
including non-Medicare bad debt, charity care, and charges for medical 
and indigent care to the Secretary as part of hospitals' cost reports. 
These data are required for cost reporting periods beginning on or 
after October 1,

[[Page 26308]]

2001. We will be revising our instructions to hospitals for cost 
reports for FY 2002 to capture these data.

F. Medicare Geographic Classification Review Board (Secs. 412.256 and 
412.276)

    With the creation of the Medicare Geographic Classification Review 
Board (MGCRB), beginning in FY 1991, under section 1886(d)(10) of the 
Act, hospitals could request reclassification from one geographic 
location to another for the purpose of using the other area's 
standardized amount for inpatient operating costs or the wage index 
value, or both (September 6, 1990 interim final rule with comment 
period (55 FR 36754), June 4, 1991 final rule with comment period (56 
FR 25458), and June 4, 1992 proposed rule (57 FR 23631)). Implementing 
regulations in Subpart L of Part 412 (412.230 et seq.) set forth 
criteria and conditions for redesignations from rural to urban, rural 
to rural, or from an urban area to another urban area with special 
rules for SCHs and rural referral centers.
1. Provisions of Public Law 106-113
    Section 401 of Public Law 106-113 amended section 1886(d)(8) of the 
Act by adding subparagraph (E), which creates a mechanism, separate and 
apart from the MGCRB, permitting an urban hospital to apply to the 
Secretary to be treated as being located in the rural area of the State 
in which the hospital is located. The statute directs the Secretary to 
treat a qualifying hospital as being located in a rural area for 
purposes of provisions under section 1886(d) of the Act. In addition, 
section 401 of Public Law 106-113 went on to incorporate the effects of 
such reclassifications from urban to rural for purposes of Medicare 
payments to outpatient departments and to hospitals that would qualify 
to become critical access hospitals.
    Regulations implementing section 1886(d)(8)(E) of the Act are 
currently under development and will be published in a separate 
document. However, we note that the statutory language of section 
1886(d)(8)(E) of the Act does not address the issue of interactions 
between changes in classification under section 1886(d)(8)(E) of the 
Act and the MGCRB reclassification process under section 1886(d)(10) of 
the Act. The Secretary has extremely broad authority under section 
1886(d)(10) of the Act to establish criteria for reclassification under 
the MGCRB process. Section 401 of Public Law 106-113 does not amend 
section 1886(d)(10) of the Act to limit the agency's discretion under 
the provision in any way, nor does section 1886(d)(8)(E) of the Act (as 
added by section 401) refer to section 1886(d)(10) of the Act. However, 
we note that in the Conference Report accompanying Public Law 106-113, 
the language discussing the House bill (H.R. 3075, as passed) indicated 
that: ``[H]ospitals qualifying under this section shall be eligible to 
qualify for all categories and designations available to rural 
hospitals, including sole community, Medicare dependent, critical 
access, and referral centers. Additionally, qualifying hospitals shall 
be eligible to apply to the Medicare Geographic Reclassification Review 
Board for geographic reclassification to another area''.
    We are concerned that section 1886(d)(8)(E) might create an 
opportunity for some urban hospitals to take advantage of the MGCRB 
process by first seeking to be reclassified as rural under section 
1886(d)(8)(E) (and receiving the benefits afforded to rural hospitals) 
and in turn seek reclassification through the MGCRB back to the urban 
area for purposes of their standardized amount and wage index (and thus 
also receive the higher payments that might result from being treated 
as being located in an urban area). That is, we are concerned that some 
hospitals might inappropriately seek to be treated as being located in 
a rural area for some purposes and as being located in an urban area 
for other purposes. In light of the Conference Report language noted 
above discussing the House bill on the one hand, and the potential for 
inappropriately inconsistent treatment of the same hospital on the 
other hand, we are seeking public comment on this issue, and indicating 
our position that we may impose a limitation on such MGCRB 
reclassifications in the final rule for FY 2001, if such action appears 
warranted. We also are seeking specific comments on how such a 
limitation, if any, should be imposed.
    For example, it could be argued that if a hospital has applied to 
be treated as being located in a rural area under section 1886(d)(8)(E) 
of the Act, then the hospital should be treated as rural for all 
purposes under section 1886(d), and it would be inappropriate to permit 
the hospital to be reclassified back to an urban area for any purpose. 
Under this approach, hospitals seeking reclassification under section 
1886(d)(8)(E) of the Act would be treated as rural for all purposes 
under section 1886(d) and would be able to benefit from special 
provisions that apply to rural hospitals. They would not, however, be 
eligible for reclassification back to an urban area for either the wage 
index or the standardized amount. This would apply to hospitals seeking 
to reclassify either to their original MSA or to another MSA.
    Under an alternative approach, hospitals reclassifying from urban 
to rural under section 1886(d)(8)(E) of the Act would be eligible to 
apply and be reclassified by the MGCRB like any other rural hospital 
(as long as applicable regulations governing MGCRB are met). This might 
allow hospitals to effectively pick from an array of urban and rural 
payment policies to maximize their Medicare payments. It could be 
argued that this would be the policy most consistent with the 
Conference Report language but we believe that it might lead to 
inappropriate, inconsistent classifications.
    We are very concerned that the effect of unlimited MGCRB 
reclassifications back to the area from which a hospital was 
reclassified under section 1886(d)(8)(E) of the Act could have 
implications beyond those envisioned by Congress when it passed Public 
Law 106-113. However, in light of the Conference Report language, we 
are seeking comments on this issue. In the final rule, we might adopt 
one of the approaches discussed above or some other approach for 
addressing this issue.
    Under section 152 of Public Law 106-113, certain counties are 
deemed to be located in specified areas for purposes of payment under 
the hospital inpatient prospective payment system, effective for 
discharges occurring on or after October 1, 2000. For payment purposes, 
these hospitals are to be treated as though they were reclassified for 
purposes of both the standardized amount and the wage index. These 
provisions are addressed in section III.B. of this preamble, as they 
relate to calculation of the FY 2001 wage indexes for hospitals in the 
affected counties as if they were reclassified to the specified area; 
and in the Addendum to this preamble as they relate to the standardized 
amounts.
2. Revised Thresholds Applicable to Rural Hospitals for Wage Index 
Reclassifications
    Existing Secs. 412.230(e)(1)(iii) and (e)(1)(iv) provide that 
hospitals may obtain reclassification to another area for purposes of 
calculating and applying the wage index if the hospital's average 
hourly wages are at least 108 percent of the average hourly wages in 
the area where it is physically located, and at least 84 percent of the 
average hourly wages in a proximate area to which the hospital seeks 
reclassification. These thresholds apply equally to urban and rural 
hospitals seeking reclassification.

[[Page 26309]]

    Historically, the financial performance of rural hospitals under 
the prospective payment system has lagged behind that of urban 
hospitals. Despite an overall increase in recent years of Medicare 
inpatient operating profit margins, some rural hospitals continue to 
struggle financially (as measured by Medicare inpatient operating 
prospective payment system payments minus costs, divided by payments). 
For example, during FY 1997, while the national average hospital margin 
was 15.1 percent, it was 8.9 percent for rural hospitals. In addition, 
approximately one-third of rural hospitals continue to experience 
negative Medicare inpatient margins despite this relatively high 
average margin.
    In response to the lower margins of rural hospitals and the 
potential for a negative impact on beneficiaries' access to care if 
these hospitals were to close, we considered potential administrative 
changes that could help improve payments for rural hospitals. One 
approach in that regard would be to make it easier for rural hospitals 
to reclassify for purposes of receiving a higher wage index. The 
current thresholds for applying for wage index reclassification are 
based on our previous analysis showing the average hospital wage as a 
percentage of its area wage was 96 percent, and one standard deviation 
from that average was equal to 12 percentage points (see the June 4, 
1992 proposed rule (57 FR 23635) and the September 1, 1992 final rule 
(57 FR 39770)). Because rural hospitals' financial performance has 
consistently remained below that of urban hospitals, we now believe 
that rural hospitals merit special dispensation with respect to 
qualifying for reclassification for purposes of the wage index. 
Therefore, we are proposing to change those average wage threshold 
percentages so more rural hospitals can be reclassified. Specifically, 
we are proposing to lower the upper threshold for rural hospitals to 
106 percent and the lower threshold to 82 percent. The thresholds for 
urban hospitals seeking reclassification for purposes of the wage index 
would be unchanged. We would note that rural hospitals comprised nearly 
90 percent of FY 2000 wage index reclassifications. Under this 
proposal, beginning October 1, 2000, rural hospitals would be able to 
reclassify for the wage index if, among other things, their average 
hourly wages are at least 106 percent of the area in which they are 
physically located, and at least 82 percent of the average hourly wages 
in the proximate area to which it seeks reclassification.
    Although it is difficult to estimate precisely how many additional 
hospitals might qualify by lowering the thresholds because we do not 
have data indicating which hospitals meet all of the other 
reclassification criteria (e.g., proximity), our analysis indicates 
that, if we were to raise the 108 percent threshold to 109 percent, 
approximately 20 rural hospitals would no longer qualify. If the upper 
threshold were to be raised to 110 percent, another 16 hospitals would 
not qualify. On the other hand, increasing the lower threshold from 84 
percent to 85 percent would result in only 2 rural hospitals becoming 
ineligible to reclassify. Only 1 additional hospital would be affected 
by raising the threshold to 86 percent. Based on this analysis, we 
anticipate approximately 50 rural hospitals are likely to benefit from 
this proposed change.
    We believe this proposal achieves an appropriate balance between 
allowing certain hospitals that are currently just below the thresholds 
to become eligible for reclassification, while not liberalizing the 
criteria so much that an excessive number of hospitals begin to 
reclassify. Because these reclassifications are budget neutral, 
nonreclassified hospitals' payments are negatively impacted by 
reclassification.
    We believe there are many factors associated with lower margins 
among rural hospitals. We would note that section 410 of Public Law 
106-113 requires the Comptroller General of the United States to 
``conduct a study of the current laws and regulations for geographic 
reclassification of hospitals to determine whether such 
reclassification is appropriate for purposes of applying wage 
indices.'' In addition, section 411 of Public Law 106-113 requires 
MedPAC to conduct a study on the adequacy and appropriateness of the 
special payment categories and methodologies established for rural 
hospitals. We anticipate that the results of these studies will help 
identify other areas to help improve payments for rural hospitals, 
either through reclassifications or other means.

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

1. Background
    Under section 1886(h) of the Act, Medicare pays hospitals for the 
direct costs of graduate medical education (GME). The payments are 
based on the number of residents trained by the hospital. Section 
1886(h) of the Act, as amended by section 4623 of Public Law 105-33, 
caps the number of residents that hospitals may count for direct GME.
    Section 9202 of the Consolidated Omnibus Reconciliation Act (COBRA) 
of 1985 (Public Law 99-272) established a methodology for determining 
payments to hospitals for the costs of approved GME programs at section 
1886(h)(2) of the Act. Section 1886(h)(2) of the Act, as implemented in 
regulations at Sec. 413.86(e), sets forth a payment methodology for the 
determination of a hospital-specific, base-period per resident amount 
(PRA) that is calculated by dividing a hospital's allowable costs of 
GME for a base period by its number of residents in the base period. 
The base period is, for most hospitals, the hospital's cost reporting 
period beginning in FY 1984 (that is, the period of October 1, 1983 
through September 30, 1984). The PRA is multiplied by the number of 
full-time equivalent (FTE) residents working in all areas of the 
hospital complex (or non-hospital sites, when applicable), and the 
hospital's Medicare share of total inpatient days to determine 
Medicare's direct GME payments. In addition, as specified in section 
1886(h)(2)(D)(ii) of the Act, for cost reporting periods beginning on 
or after October 1, 1993, through September 30, 1995, each hospital's 
PRA for the previous cost reporting period is not adjusted for any FTE 
residents who are not either a primary care or an obstetrics and 
gynecology resident. As a result, hospitals with both primary care/
obstetrics and gynecology residents and non-primary care residents have 
two separate PRAs for FY 1994 and, thereafter, one for primary care and 
one for non-primary care. (Thus, for purposes of this proposed rule, 
when we refer to a hospital's PRA, this amount is inclusive of any CPI-
U adjustments the hospital may have received since the hospital's base-
year, including any CPI-U adjustments the hospital may have received 
because the hospital trains primary care/non-primary care residents, as 
specified under existing Sec. 413.86(e)(3)(ii)).
2. Use of National Average Per Resident Amount Methodology in Computing 
Direct GME Payments
    Section 311 of Public Law 106-113 amended section 1886(h)(2) of the 
Act to establish a methodology for the use of a national average PRA in 
computing direct GME payments for cost reporting periods beginning on 
or after October 1, 2000 and on or before September 30, 2005. 
Generally, section 311 establishes a ``floor'' and a ``ceiling'' based 
on a locality-adjusted, updated, weighted average PRA. Each hospital's 
PRA is compared to the floor and ceiling to determine whether its PRA 
should be

[[Page 26310]]

revised. Accordingly, we are proposing to implement section 311 by 
setting forth the prescribed methodology for calculation of the 
weighted average PRA. We then discuss the proposed steps for 
determining whether a hospital's PRA will be adjusted based upon the 
proposed calculated weighted average PRA, in accordance with the 
methodology specified under section 311 of Public Law 106-113.
    We propose to calculate the weighted average PRA based upon data 
from hospitals' cost reporting periods ending during FY 1997 (October 
1, 1996 through September 30, 1997), as directed by section 311 of 
Public Law 106-113. We accessed these FY 1997 cost reporting data from 
the Hospital Cost Report Information System (HCRIS) and also obtained 
the necessary data for those hospitals that are not included in HCRIS 
(because they file manual cost reports), from those hospitals' fiscal 
intermediaries. If a hospital had more than one cost reporting period 
ending in FY 1997, we propose to include all of its cost reports ending 
in FY 1997 in our calculations. However, if a hospital did not have a 
cost reporting period ending in FY 1997, such as a hospital with a long 
cost reporting period beginning in FY 1996 and ending in FY 1998, the 
hospital is excluded from our calculations. One hospital is excluded 
from our calculation even though it did have a cost reporting period 
ending during FY 1997 because, at that time, it was a new teaching 
hospital with no established PRA (the first year of training for a new 
teaching hospital is paid for by Medicare on a cost basis; a PRA is 
applied in calculating a hospital's payment beginning with the 
hospital's second year of residency training). The total number of 
hospitals that we include in our calculation is 1,235. Thirty-five of 
these hospitals are hospitals with more than one cost report.
    In accordance with section 311 of Public Law 106-113, we propose to 
calculate the weighted average PRA in the following manner:
    Step 1: We determine each hospital's single PRA by adding each 
hospital's primary care and non-primary care PRAs, weighted by its 
respective FTEs, and dividing by the sum of the FTEs for primary care 
and non-primary care residents.
    Step 2: We standardize each hospital's single PRA by dividing it by 
the 1999 geographic adjustment factor (GAF) (which is an average of the 
three geographic index values (weighted by the national average weight 
for the work component, practice expense component, and malpractice 
component)) in accordance with section 1848(e) of the Act and 42 CFR 
414.26 (which is used to adjust physician payments for the different 
wage areas), for the physician fee schedule area in which the hospital 
is located.
    Step 3: We add all the standardized hospital PRAs (as calculated in 
Step 2), each weighted by hospitals' respective FTEs, and then divide 
by the total number of FTEs.
    Based upon this three-step calculation, we have determined the 
proposed weighted average PRA (for cost reporting periods ending during 
FY 1997) to be $68,487.
    For cost reporting periods beginning on or after October 1, 2000 
and on or before September 30, 2005 (FY 2001 through FY 2005), the 
national average PRA is applied using the following three steps:
    Step 1: Update the weighted average PRA for inflation. Under 
section 1886(h)(2) of the Act, as amended by section 311 of Public Law 
106-113, the weighted average PRA is updated by the estimated 
percentage increase in the consumer price index for all urban consumers 
(CPI-U) during the period beginning with the month that represents the 
midpoint of the cost reporting periods ending during FY 1997 and ending 
with the midpoint of the hospital's cost reporting period that begins 
in FY 2001. Therefore, the weighted average standardized PRA ($68,487) 
would be updated by the increase in CPI-U for the period beginning with 
the midpoint of all cost reporting periods for hospitals with cost 
reporting periods ending during FY 1997 (October 1, 1996), and ending 
with the midpoint of the individual hospital's cost reporting period 
that begins during FY 2001.
    For example, Hospital A has a calendar year cost reporting period. 
Thus, for Hospital A, the weighted average PRA is updated from October 
1, 1996 to July 1, 2001, because July 1 is the midpoint of its cost 
reporting period beginning on or after October 1, 2000. Or, for 
example, if Hospital B has a cost reporting period starting October 1, 
the weighted average PRA is updated from October 1, 1996 to April 1, 
2001, the midpoint of the cost reporting period for Hospital B. 
Therefore, the starting point for updating the weighted average PRA is 
the same date for all hospitals (October 1, 1996), but the ending date 
is different because it is dependent upon the cost reporting period for 
each hospital.
    Step 2: Adjust for locality. In accordance with section 1886(h)(2) 
of the Act, as amended by section 311 of Public Law 106-113, once the 
weighted average PRA is updated according to each hospital's cost 
reporting period, the updated weighted average PRA (the national 
average PRA) would be further adjusted to calculate a locality-adjusted 
national average PRA for each hospital. This is done by multiplying the 
updated national average PRA by the 1999 GAF (as specified in the 
October 31, 1997 Federal Register (62 FR 59257)) for the fee schedule 
area in which the hospital is located.
    Step 3: Determine possible revisions to the PRA. For cost reporting 
periods beginning on or after October 1, 2000 and on or before 
September 30, 2005, the locality-adjusted national average PRA, as 
calculated in Step 2, is then compared to the hospital's individual 
PRA. Based upon the provisions of section 1886(h)(2) of the Act, as 
amended by section 311 of Public Law 106-113, a hospital's PRA would be 
revised, if appropriate, according to the following:
    <bullet> Floor--For cost reporting periods beginning in FY 2001, to 
determine which PRAs (primary care and non-primary care separately) are 
below the 70 percent floor, a hospital's locality-adjusted national 
average PRA is multiplied by 70 percent. This resulting number is then 
compared to the hospital's PRA that is updated for inflation to the 
current cost reporting period. If the hospital's PRA would be less than 
70 percent of the locality-adjusted national average PRA, the 
individual PRA is replaced by 70 percent of the locality-adjusted 
national average PRA for that cost reporting period and would be 
updated for inflation in future years by the CPI-U.
    We note that there may be some hospitals with primary care and non-
primary care PRAs where both PRAs are replaced by 70 percent of the 
locality-adjusted national average PRA. In these situations, the 
hospital would receive identical PRAs; no distinction in PRAs would be 
made for differences in inflation (because a hospital has both primary 
care and non-primary care PRAs, each of which is updated as described 
in Sec. 413.86(e)(3)(ii)) as of cost reporting periods beginning on or 
after October 1, 2000.
    For example, if the FY 2001 locality-adjusted national average PRA 
for Area X is $100,000, then 70 percent of that amount is $70,000. If, 
in Area X, Hospital A has a primary care FY 2001 PRA of $69,000 and a 
non-primary care FY 2001 PRA of $67,000, both of Hospital A's FY 2001 
PRAs are replaced by the $70,000 floor. Thus, $70,000 is the amount 
that would be used to determine Hospital A's direct GME payments for 
both primary care and

[[Page 26311]]

non-primary care FTEs in its cost reporting period beginning in FY 
2001, and the $70,000 PRA would be updated for inflation by the CPI-U 
in subsequent years.
    <bullet> Ceiling--For cost reporting periods beginning on or after 
October 1, 2000 and on or before September 30, 2005 (FY 2001 through FY 
2005), a ceiling that is equal to 140 percent of each locality-adjusted 
national average PRA would be calculated and compared to each 
individual hospital's PRA. If the hospital's PRA is greater than 140 
percent of the locality-adjusted national average PRA, the PRA would be 
adjusted depending on the fiscal year as follows:
a. FY 2001
    For cost reporting periods beginning in FY 2001, each hospital's 
PRA from the preceding cost reporting period (that is, FY 2000) is 
compared to the FY 2001 locality-adjusted national average PRA. If the 
individual hospital's FY 2000 PRA exceeds 140 percent of the FY 2001 
locality-adjusted national average PRA, the PRA is frozen at the FY 
2000 PRA, and is not updated in FY 2001 by the CPI-U factor, subject to 
the limitation in section IV.G.2.d. of this preamble.
    For example, if the FY 2001 locality-adjusted national average PRA 
``ceiling'' for Area Y is $140,000 (that is, 140 percent of $100,000, 
the hypothetical locality-adjusted national average PRA), and if, in 
this area, Hospital B has a FY 2000 PRA of $140,001, then for FY 2001, 
Hospital B's PRA is frozen at $140,001 and is not updated by the CPI-U 
for FY 2001.
b. FY 2002
    For cost reporting periods beginning in FY 2002, the methodology 
used to calculate each hospital's individual PRA would be the same as 
described in section IV.G.2.a. above for FY 2001. Each hospital's PRA 
from the preceding cost reporting period (that is, FY 2001) is compared 
to the FY 2002 locality-adjusted national average PRA. If the 
individual hospital's FY 2001 PRA exceeds 140 percent of the FY 2002 
locality-adjusted national average PRA, the PRA is frozen at the FY 
2001 PRA, and is not updated in FY 2002 by the CPI-U factor, subject to 
the limitation in section IV.G.2.d. of this preamble.
c. FY 2003, FY 2004, and FY 2005
    For cost reporting periods beginning in FY 2003, FY 2004, and FY 
2005, if the hospital's PRA for the previous cost reporting period is 
greater than 140 percent of the locality-adjusted national average PRA 
for that same previous cost reporting period (for example, for the cost 
reporting period beginning in FY 2003, compare the hospital's PRA from 
the FY 2002 cost reporting period to the locality-adjusted national 
average PRA from FY 2002), then, subject to the limitation in section 
IV.G.2.d. of this preamble, the hospital's PRA is updated in accordance 
with section 1886(h)(2)(D)(i) of the Act, except that the CPI-U applied 
is reduced (but not below zero) by 2 percentage points.
    For example, for purposes of Hospital A's FY 2003 cost report, 
Hospital A's PRA for FY 2002 is compared to Hospital A's locality-
adjusted national average PRA ceiling for FY 2002. If, in FY 2002, 
Hospital A's PRA is $100,001 and the FY 2002 locality-adjusted national 
average PRA ceiling is $100,000, then for FY 2003, Hospital A's PRA is 
updated with the FY 2003 CPI-U minus 2 percent. If, in this scenario, 
the CPI-U for FY 2003 is 1.024, Hospital A would update its PRA in FY 
2003 by 1.004 (the CPI-U minus 2 percentage points). However, if the 
CPI-U factor for FY 2003 is 1.01 and subtracting 2 percentage points of 
1.01 yields 0.99, the PRA for FY 2003 would not be updated, and would 
remain $100,001.
    We note that, while the language in section 1886(h)(2)(D)(iv)(I) 
and in section 1886(h)(2)(D)(iv)(II) of the Act (the sections that 
describe the adjustments to PRAs for hospitals that exceed 140 percent 
of the locality-adjusted national average PRA) is very similar, the 
language does differ. Section 1886(h)(2)(D)(iv)(I) of the Act states 
that for a cost reporting period beginning during FY 2000 or FY 2001, 
``if the approved FTE resident amount for a hospital for the preceding 
cost reporting period exceeds 140 percent of the locality-adjusted 
national average per resident amount * * * for that hospital and period 
* * *, the approved FTE resident amount for the period involved shall 
be the same as the approved FTE resident amount for such preceding cost 
reporting period.'' (Emphasis added.) Section 1886(h)(2)(D)(iv)(II) of 
the Act states that for a cost reporting period beginning during FY 
2003, FY 2004, or FY 2005, ``if the approved FTE resident amount for a 
hospital for the preceding cost reporting period exceeds 140 percent of 
the locality-adjusted national average per resident amount * * * for 
that hospital and preceding period, the approved FTE resident amount 
for the period involved shall be updated * * . *.'' (Emphasis added.) 
Accordingly, for FYs 2001 and 2002, a hospital's PRA from the previous 
cost reporting period is compared to the locality-adjusted national 
average PRA of the current cost reporting period. For FY 2003, FY 2004, 
or FY 2005, a hospital's PRA from the previous cost reporting period is 
compared to the locality-adjusted national average PRA from the 
previous cost reporting period.
d. General Rule for Hospitals That Exceed the Ceiling
    For cost reporting periods beginning in FY 2001 through FY 2005, if 
a hospital's PRA exceeds 140 percent of the locality-adjusted national 
average PRA and it is adjusted under any of the above criteria, the 
current year PRA cannot be reduced below 140 percent of the locality-
adjusted national average PRA.
    For example, to determine the PRA of Hospital A, in FY 2003, 
Hospital A had a FY 2002 PRA of $100,001 and the FY 2002 locality-
adjusted national average PRA ceiling is $100,000. For FY 2003, 
applying an update of the CPI-U factor minus 2 percentage points (for 
example, 1.024 - .02 = 1.004 would yield an updated PRA of $100,401) 
while the locality-adjusted national average PRA (before calculation of 
the ceiling) is updated for FY 2003 with the full CPI-U factor (1.024) 
so that the ceiling of $100,000 is now increased to $102,400 (that is, 
$100,000  x  1.024 = $102,400). Therefore, applying the adjustment 
would result in a PRA of $100,401, which is under the ceiling of 
$102,400 for FY 2003. In this situation, for purposes of the FY 2003 
cost report, Hospital A's PRA equals $102,400.
    We note that if the hospital's PRA does not exceed 140 percent of 
the locality-adjusted national average PRA, the PRA is updated by the 
CPI-U for the respective fiscal year. If a hospital's PRA is updated by 
the CPI-U because it is less than 140 percent of the locality-adjusted 
national average PRA for a respective fiscal year, and once updated, 
the PRA exceeds the 140 percent ceiling for the respective fiscal year, 
the updated PRA would still be used to calculate the hospital's direct 
GME payments. Whether a hospital's PRA exceeds the ceiling is 
determined before the application of the update factors; if a 
hospital's PRA exceeds the ceiling only because of the application of 
the update factors, the hospital's PRA would retain the CPI-U factors.
    For example, if, in FY 2001, the locality-adjusted national average 
PRA ceiling for Area Y is $140,000, and if, in this area, Hospital B 
has a FY 2000 PRA of $139,000, then for FY 2001, Hospital B's PRA is 
updated for inflation for FY 2001 because the PRA is below the ceiling. 
However, once the update factors are applied, Hospital B's PRA is now 
$142,000 (that is, above the $140,000 ceiling). In this scenario,

[[Page 26312]]

Hospital B's inflated PRA would be used to calculate its direct GME 
payments because Hospital B has only exceeded the ceiling after the 
application of the inflation factors.
    <bullet> PRAs greater than or equal to the floor and less than or 
equal to the ceiling. For cost reporting periods beginning in FY 2001 
through FY 2005, if a hospital's PRA is greater than or equal to 70 
percent and less than or equal to 140 percent of the locality-adjusted 
national average PRA, the hospital's PRA is updated using the existing 
methodology specified in Sec. 413.86(e)(3)(i).
    For cost reporting periods beginning in FY 2006 and thereafter, a 
hospital's PRA for its preceding cost reporting period would be updated 
using the existing methodology specified in Sec. 413.86(e)(3)(i).
    We are proposing to redesignate the existing Sec. 413.86(e)(4) as 
Sec. 413.86(e)(5) and add the rules implementing section 1886(h)(2) of 
the Act, as amended by section 311 of Public Law 106-113, in the 
vacated Sec. 413.86(e)(4). Because we are proposing to apply the 
methodology for updating the PRA for inflation that is described in 
existing Sec. 413.86(e)(3), we also are proposing to amend 
Sec. 413.86(e)(3) to make those rules applicable to the cost reporting 
periods (FY 2001 through FY 2005) specified in the proposed 
Sec. 413.86(e)(4), and in subsequent cost reporting periods.
    In addition, we are proposing to make a conforming change by 
amending proposed redesignated Sec. 413.86(e)(5) to account for 
situations in which hospitals do not have a 1984 base period and 
establish a PRA in a cost reporting period beginning on or after 
October 1, 2000. We believe there are two factors to consider when a 
new teaching hospital establishes its PRA under proposed redesignated 
Sec. 413.86(e)(5). First, for example, when calculating the weighted 
mean value of PRAs of hospitals located in the same geographic area or 
the weighted mean of the PRAs in the hospital's census region (as 
specified in Sec. 412.62(f)(1)(i)), the hospitals' PRAs used to 
calculate the weighted mean values are subject to the provisions of 
proposed Sec. 413.86(e)(4), the national average PRA methodology. 
Second, the resulting PRA established under proposed redesignated 
Sec. 413.86(e)(5) also would be subject to the national average PRA 
methodology specified in proposed Sec. 413.86(e)(4).
    We also are making a clarifying amendment to the proposed 
redesignated Sec. 413.86(e)(5)(i)(B) to account for an oversight in the 
regulations text when we amended our regulations on August 29, 1997 (62 
FR 46004). In the preamble of the August 29, 1997 final rule, in 
setting forth our policy on the determination of per resident amounts 
for hospitals that did not have residents in the 1984 GME base period, 
we stated that we would use a ``weighted'' average of the per resident 
amounts for hospitals located in the same geographic area. However, we 
inadvertently did not include a specific reference to ``weighted'' in 
the language of the regulation text. Therefore, we are proposing to 
specify that the ``weighted mean value'' of per resident amounts of 
hospitals located in the same geographic wage area is used for 
determining the base period for certain hospitals for cost reporting 
periods beginning in the same fiscal years.

H. Outliers: Miscellaneous Change

    Under the provisions of section 1886(d)(5)(A)(i) of the Act, the 
Secretary does not pay for day outliers for discharges from hospitals 
paid under the prospective payment systems that occur after September 
30, 1997. We are proposing to make a conforming change to Sec. 412.2(a) 
by deleting the reference to an additional payment for both inpatient 
operating and inpatient capital-related costs for cases that have an 
atypically long length of stay.

V. The Prospective Payment System for Capital-Related Costs: The 
Last Year of the Transition Period

    Since FY 2001 is the last year of the 10-year transition period 
established to phase in the prospective payment system for hospital 
capital-related costs, for the readers' benefit, we are providing a 
summary of the statutory basis for the system, the development and 
evolution of the system, the methodology used to determine capital-
related payments to hospitals, and the policy for providing exceptions 
payments during the transition period.
    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient hospital services ``in accordance 
with a prospective payment system established by the Secretary.'' Under 
the statute, the Secretary has broad authority in establishing and 
implementing the capital prospective payment system. We initially 
implemented the capital prospective payment system in the August 30, 
1991 final rule (56 FR 43409), in which we established a 10-year 
transition period to change the payment methodology for Medicare 
inpatient capital-related costs from a reasonable cost-based 
methodology to a prospective methodology (based fully on the Federal 
rate).
    The 10-year transition period established to phase in the 
prospective payment system for capital-related costs is effective for 
discharges occurring on or after October 1, 1991 (FY 1992) through 
discharges occurring on or before September 30, 2001. For FY 2001, 
hospitals paid under the fully prospective transition period 
methodology will be paid 100 percent of the Federal rate and zero 
percent of their hospital-specific rate, while hospitals paid under the 
hold-harmless transition period methodology will be paid 85 percent of 
their allowable old capital costs (100 percent for sole community 
hospitals) plus a payment for new capital costs based on the Federal 
rate. Fiscal year 2001 is the final year of the capital transition 
period and, therefore, the last fiscal year for which a portion of a 
hold-harmless hospital's capital costs per discharge will be paid on a 
cost basis (except for new hospitals). Also, since fully prospective 
hospitals will be paid based on 100 percent of the Federal rate and 
zero percent of their hospital-specific rate, we will not determine a 
hospital-specific rate update for FY 2001 in section IV of the Addendum 
of this proposed rule. Beginning with discharges occurring on or after 
October 1, 2001 (FY 2002), payment for capital-related costs will be 
determined based solely on the capital standard Federal rate. Hospitals 
that were defined as ``Anew'' for the purposes of capital payments 
during the transition period (Sec. 412.30(b)) will continue to be paid 
according to the applicable payment methodology outlined in 
Sec. 412.324.
    Generally, during the transition period, inpatient capital-related 
costs are paid on a per discharge basis, and the amount of payment 
depends on the relationship between the hospital-specific rate and the 
Federal rate during the hospital's base year. A hospital with a base 
year hospital-specific rate lower than the Federal rate is paid under 
the fully prospective payment methodology during the transition period. 
This method is based on a dynamic blend percentage of the hospital's 
hospital-specific rate and the applicable Federal rate for each year 
during the transition period. A hospital with a base period hospital-
specific rate greater than the Federal rate is paid under the hold-
harmless payment methodology during the transition period. A hospital 
paid under the hold-harmless payment methodology receives the higher of 
(1) a blended payment of 85 percent of reasonable cost for old capital 
plus an amount for new capital based on a portion of the Federal rate 
or (2) a

[[Page 26313]]

payment based on 100 percent of the adjusted Federal rate. The amount 
recognized as old capital is generally limited to the allowable 
Medicare capital-related costs that were in use for patient care as of 
December 31, 1990. Under limited circumstances, capital-related costs 
for assets obligated as of December 31, 1990, but put in use for 
patient care after December 31, 1990, also may be recognized as old 
capital if certain conditions are met. These costs are known as 
obligated capital costs. New capital costs are generally defined as 
allowable Medicare capital-related costs for assets put in use for 
patient care after December 31, 1990. Beginning in FY 2001, at the 
conclusion of the transition period for the capital prospective payment 
system, capital payments will be based solely on the Federal rate for 
the vast majority of hospitals.
    During the transition period, new hospitals are exempt from the 
prospective payment system for capital-related costs for their first 2 
years of operation and are paid 85 percent of their reasonable cost 
during that period. The hospital's first 12-month cost reporting period 
(or combination of cost reporting periods covering at least 12 months) 
beginning at least 1 year after the hospital accepts its first patient 
serves as the hospital's base period. Those base year costs qualify as 
old capital and are used to establish its hospital-specific rate used 
to determine its payment methodology under the capital prospective 
payment system. Effective with the third year of operation, the 
hospital is paid under either the fully prospective methodology or the 
hold-harmless methodology. If the fully prospective methodology is 
applicable, the hospital is paid using the appropriate transition blend 
of its hospital-specific rate and the Federal rate for that fiscal year 
until the conclusion of the transition period, at which time the 
hospital will be paid based on 100 percent of the Federal rate. If the 
hold-harmless methodology is applicable, the hospital will receive 
hold-harmless payment for assets in use during the base period for 8 
years, which may extend beyond the transition period.
    The basic methodology for determining capital prospective payments 
based on the Federal rate is set forth in Sec. 412.312. For the purpose 
of calculating payments for each discharge, 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 + DSH Adjustment Factor + IME Adjustment 
Factor).

    Hospitals may also receive outlier payments for those cases that 
qualify under the thresholds established for each fiscal year. Section 
412.312(c) provides for a single set of thresholds to identify outlier 
cases for both inpatient operating and inpatient capital-related 
payments.
    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 for qualifying classes of hospitals. For up to 10 years after the 
conclusion of the transition period, a hospital may also receive an 
additional payment under a special exceptions process if certain 
qualifying criteria are met and its total inpatient capital-related 
payments are less than the 70 percent minimum percentage of its 
allowable Medicare inpatient capital-related costs.
    In accordance with section 1886(d)(9)(A) of the Act, under the 
prospective payment system for inpatient operating costs, hospitals 
located in Puerto Rico are paid for operating costs under a special 
payment formula. Prior to FY 1998, hospitals in Puerto Rico were paid a 
blended rate that consisted of 75 percent of the applicable 
standardized amount specific to Puerto Rico hospitals and 25 percent of 
the applicable national average standardized amount. However, effective 
October 1, 1997, under amendments to the Act enacted by section 4406 of 
Public Law 105-33, operating payments to hospitals in Puerto Rico are 
based on a blend of 50 percent of the applicable standardized amount 
specific to Puerto Rico hospitals and 50 percent of the applicable 
national average standardized amount. In conjunction with this change 
to the operating blend percentage, effective with discharges on or 
after October 1, 1997, we compute capital payments to hospitals in 
Puerto Rico based on a blend of 50 percent of the Puerto Rico rate and 
50 percent of the Federal rate. Section 412.374 provides for the use of 
this blended payment system for payments to Puerto Rico hospitals under 
the prospective payment system for inpatient capital-related costs. 
Accordingly, for capital-related costs, we compute a separate payment 
rate specific to Puerto Rico hospitals using the same methodology used 
to compute the national Federal rate for capital-related costs.
    In the August 30, 1991 final rule, we established a capital 
exceptions policy, which provides for exceptions payments during the 
transition period (Sec. 412.348). Section 412.348 provides that, during 
the transition period, a hospital may receive additional payment under 
an exceptions process when its regular payments are less than a minimum 
percentage, established by class of hospital, of the hospital's 
reasonable capital-related costs. The amount of the exceptions payment 
is the difference between the hospital's minimum payment level and the 
payments the hospital would receive under the capital prospective 
payment system in the absence of an exceptions payment. The comparison 
is made on a cumulative basis for all cost reporting periods during 
which the hospital is subject to the capital prospective payment 
transition rules. The minimum payment percentages for regular capital 
exceptions payments by class of hospitals for FY 2001 are:
    <bullet> For sole community hospitals, 90 percent;
    <bullet> For urban hospitals with at least 100 beds that have a 
disproportionate share patient percentage of at least 20.2 percent or 
that received more than 30 percent of their net inpatient care revenues 
from State or local governments for indigent care, 80 percent;
    <bullet> For all other hospitals, 70 percent of the hospital's 
reasonable inpatient capital-related costs.
    The provision for regular exceptions payments will expire at the 
end of the transition period. Payments will no longer be adjusted to 
reflect regular exceptions payments at Sec. 412.348. Accordingly, for 
cost reporting periods beginning on or after October 1, 2001, hospitals 
will receive only the per discharge payment based on the Federal rate 
for capital costs (plus any applicable DSH or IME and outlier 
adjustments) unless a hospital qualifies for a special exceptions 
payment under Sec. 412.348(g).
    Under the special exceptions provision at Sec. 412.348(g), an 
additional payment may be made for up to 10 years beyond the end of the 
capital prospective payment system transition period for eligible 
hospitals. The capital special exceptions process is budget neutral; 
that is, even after the end of the capital prospective payment system 
transition, we will continue to make an adjustment to the capital 
Federal rate in a budget neutral manner to pay for exceptions, as long 
as an exceptions policy is in force. Currently, the limited

[[Page 26314]]

special exceptions policy will allow for exceptions payments for 10 
years beyond the conclusion of the 10-year capital transition period or 
through September 30, 2011.

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

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

1. Updated Caps
    Section 1886(b)(3) of the Act (as amended by section 4414 of Public 
Law 105-33) establishes caps on the target amounts for certain existing 
excluded hospitals and 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 classes of excluded 
hospitals: Psychiatric hospitals and units, rehabilitation hospitals 
and units, and long-term care hospitals.
    A discussion of how the caps on the target amounts were calculated 
can be found in the August 29, 1997 final rule with comment period (62 
FR 46018); the May 12, 1998 final rule (63 FR 26344); the July 31, 1998 
final rule (63 FR 41000), and the July 30, 1999 final rule (64 FR 
41529). For purposes of calculating the caps on existing facilities, 
the statute required us to calculate the national 75th percentile of 
the target amounts for each class of hospital (psychiatric, 
rehabilitation, or long-term care) for cost reporting periods ending 
during FY 1996. Under section 1886(b)(3)(H)(iii) of the Act, the 
resulting amounts are updated by the market basket percentage to the 
applicable fiscal year. However, section 121 of Public Law 106-113 
amended section 1886(b)(3)(H) of the Act to provide for an appropriate 
wage adjustment to the caps on the target amounts for psychiatric 
hospitals and units, rehabilitation hospitals and units, and long-term 
care hospitals, effective for cost reporting periods beginning on or 
after October 1, 1999, through September 30, 2002. We intend to publish 
an interim final rule with comment period implementing this provision 
for cost reporting periods beginning on or after October 1, 1999 and 
before October 1, 2000. This proposed rule addresses the wage 
adjustment to the caps for cost reporting periods beginning on or after 
October 1, 2000.
    For purposes of calculating the caps, section 1886(b)(3)(H)(ii) of 
the Act requires the Secretary to first ``estimate the 75th percentile 
of the target amounts for such hospitals within such class for cost 
reporting periods ending during fiscal year 1996.'' Furthermore, 
section 1886(b)(3)(H)(iii), as added by Public Law 106-113, requires 
the Secretary to provide for ``an appropriate adjustment to the labor-
related portion of the amount determined under such subparagraph to 
take into account the differences between average wage-related costs in 
the area of the hospital and the national average of such costs within 
the same class of hospital.''
    Consistent with the broad authority conferred on the Secretary by 
section 1886(b)(3)(H)(iii) of the Act to determine the appropriate wage 
adjustment, we propose to account for differences in wage-related costs 
by adjusting the caps to account for the following:
    First, we would adjust each hospital's target amount to account for 
area differences in wage-related costs. For each class of hospitals 
(psychiatric, rehabilitation, and long-term care), we would determine 
the labor-related portion of each hospital's FY 1996 target amount by 
multiplying its target amount by the actuarial estimate of the labor-
related portion of costs (or 0.71553). Similarly, we would determine 
the nonlabor-related portion of each hospital's FY 1996 target amount 
by multiplying its target amount by the actuarial estimate of the 
nonlabor-related portion of costs (or 0.28447).
    Next, we would account for wage differences among hospitals within 
each class by dividing the labor-related portion of each hospital's 
target amount by the hospital's FY 1998 hospital wage index under the 
hospital inpatient prospective payment system (see Sec. 412.63), as 
shown in Tables 4A and 4B of the August 29, 1997 final rule (62 FR 
46070). Within each class, each hospital's wage-adjusted target amount 
would be calculated by adding the wage-adjusted labor-related portion 
of its target amount and the nonlabor-related portion of its target 
amount. Then, the wage-adjusted target amounts for hospitals within 
each class would be arrayed in order to determine the national 75th 
percentile caps on the target amounts for each class.
    This adjustment methodology for the national 75th percentile of the 
target amounts is identical to the methodology we utilized for the wage 
index adjustment described in the August 29, 1997 final rule (62 FR 
46020) to calculate the wage-adjusted 110 percent of the national 
median target amounts for new excluded hospitals and units. Again, we 
recognize that wages may differ for prospective payment hospitals and 
excluded hospitals, but we believe that the wage data reflect area 
differences in wage-related costs. Moreover, in light of the short 
timeframe for implementing this provision, we would use the wage data 
for acute hospitals since they are the most feasible data source.
    In the July 30, 1999 final rule (64 FR 41529), we established the 
FY 2000 caps on the target amounts as follows:
    <bullet> Psychiatric hospitals and units: $11,110.
    <bullet> Rehabilitation hospitals and units: $20,129.
    <bullet> Long-term care hospitals: $39,712.

Therefore, based on these previously calculated caps on the target 
amounts and consistent with the broad authority conferred on the 
Secretary by section 1886(b)(3)(H)(iii) of the Act to determine the 
appropriate wage adjustment to the caps, we have determined the labor-
related and nonlabor-related portions of the proposed caps on the 
target amounts for FY 2001 using the methodology outlined above.

------------------------------------------------------------------------
                                                   Labor-     Nonlabor-
      Class of excluded hospital or unit          related      related
                                                   share        share
------------------------------------------------------------------------
Psychiatric...................................       $8,106       $3,223
Rehabilitation................................       15,108        6,007
Long-Term Care................................       29,312       11,654
------------------------------------------------------------------------

    These labor-related and nonlabor-related portions of the proposed 
caps on the target amounts for FY 2001 are based on the current 
estimate of the market basket increase for excluded hospitals and units 
for FY 2001 of 3.1 percent.
    In the interim final rule with comment period that we plan to 
publish, we will revise Secs. 413.40(c)(4)(i) and (c)(4)(ii) to 
incorporate the changes in the formula used to determine the limitation 
on the target amounts for excluded hospitals and units, as provided for 
by section 121 of Public Law 106-113.
    Finally, to determine payments described in Sec. 413.40(c), the cap 
on the hospital's target amount per discharge is determined by adding 
the hospital's nonlabor-related portion of the national 75th percentile 
cap to its wage-adjusted, labor-related portion of the national 75th 
percentile cap. A hospital's wage-adjusted, labor-related portion of 
the target amount is calculated by multiplying the labor-related 
portion of the national 75th percentile cap for the hospital's class by 
the hospital's applicable wage index. For FY 2001, a hospital's 
applicable wage index is the wage index under the hospital inpatient 
prospective payment system (see Sec. 412.63), for cost reporting 
periods beginning on or after October 1, 2000 and ending on or before 
September 30,

[[Page 26315]]

2001 as shown in Tables 4A and 4B of this proposed rule. A hospital's 
applicable wage index corresponds to the area in which the hospital or 
unit is physically located (MSA or rural area) and is not subject to 
prospective payment system hospital reclassification under section 
1886(d)(10) of the Act.
2. Updated Caps for New Excluded Hospitals and Units (Sec. 413.40(f))
    Section 1886(b)(7) of the Act establishes a payment methodology for 
new 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 that first receives payments as a hospital or unit excluded 
from the prospective payment system on or after October 1, 1997, the 
amount of payment will be determined as follows: For the first two 12-
month cost reporting periods, the amount of payment is the lesser of 
(1) the operating costs per case; or (2) 110 percent of the national 
median of target amounts for the same class of hospitals for cost 
reporting periods ending during FY 1996, updated to the first cost 
reporting period in which the hospital receives payments and adjusted 
for differences in area wage levels.
    The proposed amounts included in the following table reflect the 
updated 110 percent of the wage neutral national median target amounts 
for each class of excluded hospitals and units for cost reporting 
periods beginning during FY 2001. These figures are updated to reflect 
the projected market basket increase of 3.1 percent. For a new 
provider, the labor-related share of the target amount is multiplied by 
the appropriate geographic area wage index and added to the nonlabor-
related share in order to determine the per case limit on payment under 
the statutory payment methodology for new providers.

------------------------------------------------------------------------
                                                   Labor-     Nonlabor-
      Class of excluded hospital or unit          related      related
                                                   share        share
------------------------------------------------------------------------
Psychiatric...................................       $6,592       $2,623
Rehabilitation................................       12,964        5,154
Long-Term Care................................       16,708        6,643
------------------------------------------------------------------------

3. Development of Prospective Payment System for Inpatient 
Rehabilitation Hospitals and Units
    Section 4421 of Public Law 105-33 added section 1886(j) to the Act. 
Section 1886(j) of the Act mandates the phase-in of a case-mix adjusted 
prospective payment system for inpatient rehabilitation services 
(freestanding hospitals and units) for cost reporting periods beginning 
on or after October 1, 2000 and before October 1, 2002. The prospective 
payment system will be fully implemented for cost reporting periods 
beginning on or after October 1, 2002. Section 1886(j) was amended by 
section 125 of Public Law 106-113 to require the Secretary to use the 
discharge as the payment unit under the prospective payment system for 
inpatient rehabilitation services and to establish classes of patient 
discharges by functional-related groups.
    We will issue a separate notice of proposed rulemaking in the 
Federal Register on the prospective payment system for inpatient 
rehabilitation facilities. That document will discuss the requirements 
in section 1886(j)(1)(A)(i) of the Act for a transition phase covering 
the first two cost reporting periods under the prospective payment 
system. During this transition phase, inpatient rehabilitation 
facilities will receive a payment rate comprised of a blend of the 
facility specific rate (the TEFRA percentage) based on the amount that 
would have been paid under Part A with respect to these costs if the 
prospective payment system would not be implemented and the inpatient 
rehabilitation facility prospective payment rate (prospective payment 
percentage). As set forth in sections 1886(j)(1)(C)(i) and (ii) of the 
Act, the TEFRA percentage for a cost reporting period beginning on or 
after October 1, 2000, and before October 1, 2001, is 66\2/3\ percent; 
the prospective payment percentage is 33\1/3\ percent. For cost 
reporting periods beginning on or after October 1, 2001 and before 
October 1, 2002, the TEFRA percentage is 33\1/3\ percent and the 
prospective payment percentage is 66\2/3\ percent.
    As provided in section 1886(j)(3)(A) of the Act, the prospective 
payment rates will be based on the average inpatient operating and 
capital costs of rehabilitation facilities and units. Payments will be 
adjusted for case-mix using patient classification groups, area wages, 
inflation, outlier status and any other factors the Secretary 
determines necessary. We will propose to set prospective payment 
amounts in effect during FY 2001 so that total payments under the 
system are projected to equal 98 percent of the amount of payments that 
would have been made under the current payment system. Outlier payments 
in a fiscal year may not be projected or estimated to exceed 5 percent 
of the total payments based on the rates for that fiscal year.
4. Continuous Improvement Bonus Payment
    Under Sec. 413.40(d)(4), for cost reporting periods beginning on or 
after October 1, 1997, an ``eligible'' hospital may receive continuous 
improvement bonus payments in addition to its payment for inpatient 
operating costs plus a percentage of the hospital's rate-of-increase 
ceiling (as specified in Sec. 413.40(d)(2)). An eligible hospital is a 
hospital that has been a provider excluded from the prospective payment 
system for at least three full cost reporting periods prior to the 
applicable period and the hospital's operating costs per discharge for 
the applicable period are below the lowest of its target amount, 
trended costs, or expected costs for the applicable period. Prior to 
enactment of Public Law 106-113, the amount of the continuous 
improvement bonus payment was equal to the lesser of--
    (a) 50 percent of the amount by which operating costs were less 
than the expected costs for the period; or
    (b) 1 percent of the ceiling.
    Section 122 of Public Law 106-113 amended section 1886(b)(2) of the 
Act to provide, for cost reporting periods beginning on or after 
October 1, 2000, and before September 30, 2001, for an increase in the 
continuous improvement bonus payment for long-term care and psychiatric 
hospitals and units. Under section 1886(b)(2) of the Act, as amended, a 
hospital that is within one of these two classes of hospitals 
(psychiatric hospitals or units and long-term-care hospitals) will 
receive the lesser of 50 percent of the amount by which the operating 
costs are less than the expected costs for the period, or the increased 
percentages mandated by statute as follows:
    (a) For a cost reporting period beginning on or after October 1, 
2000 and before September 30, 2001, 1.5 percent of the ceiling; and
    (b) For a cost reporting period beginning on or after October 1, 
2001, and before September 30, 2002, 2 percent of the ceiling.
    We are proposing to revise Sec. 413.40(d)(4) to incorporate this 
provision of the statute.

B. Responsibility for Care of Patients in Hospitals-Within-Hospitals 
(Sec. 413.40(a)(3))

    Effective October 1, 1999, for hospitals-within-hospitals, we 
implemented a policy that allows for a 5-percent threshold for cases in 
which a patient discharged from an excluded hospital-within-a-hospital 
and admitted to the host hospital was subsequently

[[Page 26316]]

readmitted to the excluded hospital-within-a-hospital. With respect to 
these cases, if the excluded hospital exceeds the 5-percent threshold, 
we do not include any previous discharges to the prospective payment 
hospital in calculating the excluded hospital's cost per discharge. 
That is, the entire stay is considered one Medicare ``discharge'' for 
purposes of payments to the excluded hospital. The effect of this rule, 
as explained more fully in the May 7, 1999 proposed rule (64 FR 24716) 
and in the July 30, 1999 final rule (64 FR 41490), is to prevent 
inappropriate Medicare payment to hospitals having a large number of 
such stays.
    In the existing regulations at Sec. 413.40(a)(3), we state that the 
5-percent threshold is determined based on the total number of 
discharges from the hospital-within-a-hospital. We have received 
questions as to whether, in determining whether the threshold is met, 
we consider Medicare patients only or all patients (Medicare and non-
Medicare). To avoid any further misunderstanding, we are clarifying the 
definition of ``ceiling'' in Sec. 413.40(a)(3) by specifying that the 
5-percent threshold is based on the Medicare inpatients discharged from 
the hospital-within-a-hospital in a particular cost reporting period, 
not on total Medicare and non-Medicare inpatient discharges.

C. Critical Access Hospitals (CAHs)

1. Election of Payment Method (Sec. 413.70)
    Section 1834(g) of the Act, as in effect before enactment of Public 
Law 106-113, provided that the amount of payment for outpatient CAH 
services is the reasonable costs of the CAH in providing such services. 
However, the reasonable costs of the CAH's services to outpatients 
included only the CAH's costs of providing facility services, and did 
not include any payment for professional services. Physicians and other 
practitioners who furnished professional services to CAH outpatients 
billed the Part B carrier for these services and were paid under the 
physician fee schedule in accordance with the provisions of section 
1848 of the Act.
    Section 403(d) of Public Law 106-113 amended section 1834(g) of the 
Act to permit the CAH to elect to be paid for its outpatient services 
under another option. CAHs making this election would be paid amounts 
equal to the sum of the following, less the amount that the hospital 
may charge as described in section 1866(a)(2)(A) of the Act (that is, 
Part A and Part B deductibles and coinsurance):
    (1) For facility services, not including any services for which 
payment may be made as outpatient professional services, the reasonable 
costs of the CAH in providing the services; and
    (2) For professional services otherwise included within outpatient 
CAH services, the amounts that would otherwise be paid under Medicare 
if the services were not included in outpatient CAH services.
    Section 403(d) of Public Law 106-113 added section 1834(g)(3) to 
the Act to further specify that payment amounts under this election are 
be determined without regard to the amount of the customary or other 
charge.
    The amendment made by section 403(d) is effective for cost 
reporting periods beginning on or after October 1, 2000.
    We are proposing to revise Sec. 413.70 to incorporate the 
provisions of section 403(d) of Public Law 106-113. The existing 
Sec. 413.70 specifies a single set of reasonable cost basis payment 
rules applicable to both inpatient and outpatient services furnished by 
CAHs. As section 403(d) of Public Law 106-113 provides that CAHs may 
elect to be paid on a reasonable cost basis for facility services and 
on a fee schedule basis for professional services, we are proposing to 
revise the section to allow for separate payment rules for CAH 
inpatient and outpatient services.
    We are proposing to place the provisions of existing Sec. 413.70(a) 
and (b) that relate to payment on a reasonable cost basis for inpatient 
services furnished by a CAH under proposed Sec. 413.70(a). Proposed 
Sec. 413.70(a)(2) would also state that payment to a CAH for inpatient 
services does not include professional services to CAH inpatients and 
is subject to the Part A hospital deductible and coinsurance determined 
under 42 CFR part 409, Subpart G.
    We are proposing to include under Sec. 413.70(b) the payment rules 
for outpatient services furnished by CAHs, including the option for 
CAHs to elect to be paid on the basis of reasonable costs for facility 
services and on the basis of the physician fee schedule for 
professional services. Under proposed Sec. 413.70(b)(2), we would 
retain the existing provision that unless the CAH elects the option 
provided for under section 403 of Public Law 106-113, payment for 
outpatient CAH services is on a reasonable cost basis, as determined in 
accordance with section 1861(v)(1)(A) of the Act and the applicable 
principles of cost reimbursement in Parts 413 and 415 (except for 
certain payment principles that do not apply; that is, the lesser of 
costs or charges, RCE limits, any type of reduction to operating or 
capital costs under Sec. 413.124 or Sec. 413.130(j)(7), and blended 
payment amounts for ambulatory surgical center services, radiology 
services, and other diagnostic services.
    Under proposed Sec. 413.70(b)(3), we would specify that any CAH 
that elects to be paid under the optional method must make an annual 
request in writing, and deliver the request for the election to the 
fiscal intermediary at least 60 days before the start of the affected 
cost reporting period. In addition, proposed Sec. 413.70(b)(3) states 
that if a CAH elects payment under this method, payment to the CAH for 
each outpatient visit will be the sum of the following two amounts:
    <bullet> For facility services, not including any outpatient 
professional services for which payment may be made on a fee schedule 
basis, the amount would be the reasonable costs of the services as 
determined in accordance with applicable principles of cost 
reimbursement in 42 CFR Parts 413 and 415, except for certain payment 
principles that would not apply as specified above; and
    <bullet> For professional services, otherwise payable to the 
physician or other practitioner on a fee schedule basis, the amounts 
would be those amounts that would otherwise be paid for the services if 
the CAH had not elected payment under this method.
    We would also specify that payment to a CAH for outpatient services 
would be subject to the Part B deductible and coinsurance amounts, as 
determined under Secs. 410.152, 410.160, and 410.161. Final payment to 
the CAH for its facility services to inpatients and outpatients 
furnished during a cost reporting would be based on a cost report for 
that period, as required under Sec. 413.20(b).
2. Condition of Participation: Organ, Tissue, and Eye Procurement 
(Sec. 485.643)
    Sections 1820(c)(2)(B) and 1861(mm) of the Act set forth the 
criteria for designating a CAH. Under this authority, the Secretary has 
established in regulations the minimum requirements a CAH must meet to 
participate in Medicare (42 CFR part 485, Subpart F).
    Section 1905(a) of the Act provides that Medicaid payments may be 
made for any other medical care, and any other type of remedial care 
recognized under State law, specified by the Secretary. The Secretary 
has specified CAH services as Medicaid services in regulations, 
specifically, the regulations at 42 CFR 440.170(g)(1)(i), and defined 
CAH services under Medicaid as those services furnished by a provider

[[Page 26317]]

meeting the Medicare conditions of participation (CoP).
    Section 1138 of the Act provides that a CAH participating in 
Medicare must establish written protocols to identify potential organ 
donors that: (1) Assures that potential donors and their families are 
made aware of the full range of options for organ or tissue donation as 
well as their rights to decline donation; (2) encourage discretion and 
sensitivity with respect to the circumstances, views, and beliefs of 
those families; and (3) require that an organ procurement agency 
designated by the Secretary be notified of potential organ donors.
    On June 22, 1998, as part of the Medicare hospital conditions of 
participation under Part 482, subpart C, we added to the regulations at 
Sec. 482.45, a condition that specifically addressed organ, tissue, and 
eye procurement. However, Part 482 does not apply to CAHs, as CAHs are 
a distinct type of provider with separate CoP under Part 485. 
Therefore, we are proposing to add a CoP for organ, tissue, and eye 
procurement for CAHs at a new Sec. 485.643 that generally parallels the 
CoP at Sec. 482.45 for all Medicare hospitals with respect to the 
statutory requirement in section 1138 of the Act concerning organ 
donation. CAHs are not full service hospitals and therefore are not 
equipped to perform organ transplantations. Therefore, we are not 
including the standard applicable to Medicare hospitals that CAHs must 
be a member of the Organ Procurement and Transplantation Network 
(OPTN), abide by its rules and provide organ transplant-related data to 
the OPTN, the Scientific Registry, organ procurement agencies, or 
directly to the Department on request of the Secretary.
    The proposed CoP for CAHs includes several requirements designed to 
increase organ donation. One of these requirements is that a CAH must 
have an agreement with the Organ Procurement Organization (OPO) 
designated by the Secretary, under which the CAH will contact the OPO 
in a timely manner about individuals who die or whose death is 
imminent. The OPO will then determine the individual's medical 
suitability for donation. In addition, the CAH must have an agreement 
with at least one tissue bank and at least one eye bank to cooperate in 
the retrieval, processing, preservation, storage, and distribution of 
tissues and eyes, as long as the agreement does not interfere with 
organ donation. The proposed CoP would require a CAH to ensure, in 
collaboration with the OPO with which it has an agreement, that the 
family of every potential donor is informed of its option to either 
donate or not donate organs, tissues, or eyes. The CAH may choose to 
have OPO staff perform this function, have CAH and OPO staff jointly 
perform this function, or rely exclusively on CAH staff. Research 
indicates that consent to organ donation is highest when the formal 
request is made by OPO staff or by OPO staff and hospital staff 
together. While we require collaboration, we also recognize that CAH 
staff may wish to perform this function and may do so when properly 
trained. Moreover, the CoP would require the CAH to ensure that CAH 
employees who initiate a request for donation to the family of a 
potential donor have been trained as designated requestors.
    Finally, the CoP would require the CAH to work with the OPO and at 
least one tissue bank and one eye bank in educating staff on donation 
issues, reviewing death records to improve identification of potential 
donors, and maintaining potential donors while necessary testing and 
placement of organs and tissues is underway.
    We are sensitive to the possible burden this proposed CoP may place 
on CAHs. Therefore, we are particularly interested in comments and 
information concerning the following requirements: (1) Developing 
written protocols for donations; (2) developing agreements with OPOs, 
tissue banks, and eye banks; (3) referring all deaths to the OPO; (4) 
working cooperatively with the designated OPO, tissue bank, and eye 
bank in educating staff on donation issues, reviewing death records, 
and maintaining potential donors. We note that the proposed requirement 
allow some degree of flexibility for the CAH. For example, the CAH 
would have the option of using an OPO-approved education program to 
train its own employees as routine requestors or deferring requesting 
services to the OPO, the tissue bank, or the eye bank to provide 
requestors.

VII. MedPAC Recommendations

    We have reviewed the March 1, 2000 report submitted by MedPAC to 
Congress and have given it careful consideration in conjunction with 
the proposals set forth in this document. MedPAC's recommendations and 
our responses are set forth below.
    We note that MedPAC's March 1, 2000 report did not contain a 
recommendation concerning the update factors for inpatient hospital 
operating costs under the prospective payment system or for hospitals 
and hospital units excluded from the prospective payment system. 
However, at its April 13, 2000 public meeting, MedPAC announced that it 
was recommending a combined update of between 3.5 percent and 4.0 
percent for operating and capital-related payments for FY 2001. This 
recommendation is higher than the current law amount as prescribed by 
Public Law 105-33 and proposed in this rule. Because of the timing of 
MedPAC's announcement in relation to the publication of this proposed 
rule, we intend to respond to MedPAC's recommendation in the FY 2001 
final rule to be issued in August 2000 when we will have had the 
opportunity to review the data analyses that substantiate MedPAC's 
recommendation.

A. Combined Operating and Capital Prospective Payment Systems 
(Recommendation 3J)

    Recommendation: The Congress should combine prospective payment 
system operating and capital payment rates to create a single 
prospective rate for hospital inpatient care. This change would require 
a single set of payment adjustments--in particular, for indirect 
medical education and disproportionate share hospital payments--and a 
single payment update.
    Response: We responded to a similar comment in the July 30, 1999 
final rule (64 FR 41552), the July 31, 1998 final rule (63 FR 41013), 
and the September 1, 1995 final rule (60 FR 45816). In those rules, we 
stated that our long-term goal was to develop a single update framework 
for operating and capital prospective payments and that we would begin 
development of a unified framework. However, we have not yet developed 
such a single framework as the actual operating system update has been 
determined by Congress through FY 2002. In the meantime, we intend to 
maintain as much consistency as possible with the current operating 
framework in order to facilitate the eventual development of a unified 
framework. We maintain our goal of combining the update frameworks at 
the end of the 10-year capital transition period (the end of FY 2001) 
and may examine combining the payment systems post-transition. Because 
of the similarity of the update frameworks, we believe that they could 
be combined with little difficulty.
    In the discussion of its recommendation, MedPAC notes that it ``is 
examining broad reforms to the prospective payment system, including 
DRG refinement and modifications of the graduate medical education 
payment and the IME and DSH adjustments. The Commission believes that a 
combined hospital prospective payment rate should be established

[[Page 26318]]

whether or not broader reforms are undertaken. However, if the Congress 
acts on any or all of the Commission's recommendations, it should 
consider combining operating and capital payments as part of a larger 
package.''
    We agree that ultimately the operating and capital prospective 
payment systems should be combined into a single system. However, we 
believe that, because of MedPAC's ongoing analysis and the 
Administration's pending DSH report to Congress, any such unification 
should occur within the context of other system refinements.

B. Continuing Postacute Transfer Payment Policy (Recommendation 3K)

    Recommendation: The Commission recommends continuing the existing 
policy of adjusting per case payments through an expanded transfer 
policy when a short length of stay results from a portion of the 
patient's care being provided in another setting.
    Response: As noted in section IV.A. of this preamble, we have 
undertaken (through a contract with HER) an analysis of the impact on 
hospitals and hospital payments of the postacute transfer provision. 
That analysis (based on preliminary data covering only approximately 6 
months of discharge data) showed a minimal impact on the rate of short-
stay postacute transfers after implementation of the policy. However, 
average profit margins as measured by HER declined from $2,454 prior to 
implementation of the policy to $1,180 after implementation. We believe 
these preliminary findings demonstrate that the postacute transfer 
provision has had only marginal impact on existing practice patterns 
while more closely aligning the payments to hospitals for these cases 
with the costs incurred. Therefore, we agree with MedPAC's 
recommendation that the policy should be continued.

C. Disproportionate Share Hospitals (DSH) (Recommendations 3L and 3M)

    Recommendation: To address longstanding problems and current legal 
and regulatory developments, Congress should reform the 
disproportionate share adjustment to: include the costs of all poor 
patients in calculating low-income shares used to distribute 
disproportionate share payments, and use the same formula to distribute 
payments to all hospitals covered by prospective payment.
    Response: As we noted in section IV.E. of this preamble, Public Law 
106-113 directed the Secretary to require subsection (d) hospitals (as 
defined in section 1886(d)(1)(B) of the Act) to submit data on costs 
incurred for providing inpatient and outpatient hospital services for 
which the hospital is not compensated, including non-Medicare bad debt, 
charity care, and charges for Medicaid and indigent care. These data 
must be reported on the hospital's cost reports for cost reporting 
periods beginning on or after October 1, 2001, and will provide 
information that will enable MedPAC and us to evaluate potential 
refinements to the DSH formula to address issues referred to by MedPAC.
    Medicare fiscal intermediaries will audit these data to ensure 
their accuracy and consistency. Our experience with administering the 
current DSH formula leads us to believe that this auditing function 
would necessarily be extensive, because the non-Medicare data that 
would be collected have never before been collected and reviewed by 
Medicare's fiscal intermediaries. The data would have to be determined 
to be accurate and usable, and corrected if necessary.
    We agree that the current statutory payment formula could be 
improved, largely because of different threshold levels and different 
formula parameters applicable to different groups of hospitals. We are 
in the process of preparing a report to Congress on the Medicare DSH 
adjustment that includes several options for amending the statutory 
formula.
    Recommendation: To provide further protection for the primarily 
voluntary hospitals with mid-level low-income shares, the minimum 
value, or threshold, for the low-income share that a hospital must have 
before payment is made should be set to make 60 percent of hospitals 
eligible to receive disproportionate share payments.
    Response: Currently, approximately less than 40 percent of all 
prospective payment system hospitals receive DSH payments. Therefore, 
this recommendation would entail significant redistributions of 
existing DSH payments if implemented in a budget neutral manner. We are 
particularly concerned about the effect of this recommendation on 
hospitals receiving substantial DSH payments currently, including major 
teaching hospitals and public hospitals. The analysis by MedPAC 
demonstrates that these hospitals would be negatively impacted if more 
hospitals were made eligible for DSH payments.

VIII. Other Required Information

A. Requests for Data From the Public

    In order to respond promptly to public requests for data related to 
the prospective payment system, we have 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 or cartridge format; 
however, some files are available on diskette as well as on the 
Internet at http://www.hcfa.gov/stats/pubfiles.html. Data files are 
listed below with the cost of each. Anyone wishing to purchase data 
tapes, cartridges, or diskettes should submit a written request along 
with a company check or money order (payable to HCFA-PUF) to cover the 
cost to the following address: Health Care Financing Administration, 
Public Use Files, Accounting Division, P.O. Box 7520, Baltimore, 
Maryland 21207-0520, (410) 786-3691. Files on the Internet may be 
downloaded without charge.
1. Expanded Modified MedPAR-Hospital (National)
    The Medicare Provider Analysis and Review (MedPAR) file contains 
records for 100 percent of Medicare beneficiaries using hospital 
inpatient services in the United States. (The file is a Federal fiscal 
year file, that is, discharges occurring October 1 through September 30 
of the requested year.) The records are stripped of most data elements 
that would permit identification of beneficiaries. The hospital is 
identified by the 6-position Medicare billing number. The file is 
available to persons qualifying under the terms of the Notice of 
Proposed New Routine Uses for an Existing System of Records published 
in the Federal Register on December 24, 1984 (49 FR 49941), and amended 
by the July 2, 1985 notice (50 FR 27361). The national file consists of 
approximately 11 million records. Under the requirements of these 
notices, an agreement for use of HCFA Beneficiary Encrypted Files must 
be signed by the purchaser before release of these data. For all files 
requiring a signed agreement, please write or call to obtain a blank 
agreement form before placing an order. Two versions of this file are 
created each year. They support the following:
    <bullet> Notice of Proposed Rulemaking (NPRM) published in the 
Federal Register. This file, scheduled to be available by the end of 
April, is derived from the MedPAR file with a cutoff of 3 months after 
the end of the fiscal year (December file).
    <bullet> Final Rule published in the Federal Register. The FY 1999 
MedPAR file used for the FY 2001 final rule will be cut off 6 months 
after the end of the fiscal year (March file) and is scheduled to be 
available by the end of April.

Media: Tape/Cartridge
File Cost: $3,655.00 per fiscal year

[[Page 26319]]

Periods Available: FY 1988 through FY 1999
2. Expanded Modified MedPAR-Hospital (State)
    The State MedPAR file contains records for 100 percent of Medicare 
beneficiaries using hospital inpatient services in a particular State. 
The records are stripped of most data elements that will permit 
identification of beneficiaries. The hospital is identified by the 6-
position Medicare billing number. The file is available to persons 
qualifying under the terms of the Notice of Proposed New Routine Uses 
for an Existing System of Records published in the December 24, 1984 
Federal Register notice, and amended by the July 2, 1985 notice. This 
file is a subset of the Expanded Modified MedPAR-Hospital (National) as 
described above. Under the requirements of these notices, an agreement 
for use of HCFA Beneficiary Encrypted Files must be signed by the 
purchaser before release of these data. Two versions of this file are 
created each year. They support the following:
    <bullet> NPRM published in the Federal Register. This file, 
scheduled to be available by the end of April, is derived from the 
MedPAR file with a cutoff of 3 months after the end of the fiscal year 
(December file).
    <bullet> Final Rule published in the Federal Register. The FY 1999 
MedPAR file used for the FY 2001 final rule will be cut off 6 months 
after the end of the fiscal year (March file) and is scheduled to be 
available by the end of April.

Media: Tape/Cartridge
File Cost: $1,130.00 per State per year
Periods Available: FY 1988 through FY 1999
3. HCFA Wage Data
    This file contains the hospital hours and salaries for FY 1997 used 
to create the proposed FY 2001 prospective payment system wage index. 
The file will be available by the beginning of February for the NPRM 
and the beginning of May for the final rule.

------------------------------------------------------------------------
    Processing year           Wage data year          PPS fiscal year
------------------------------------------------------------------------
             2000                     1997                    2001
             1999                     1996                    2000
             1998                     1995                    1999
             1997                     1994                    1998
             1996                     1993                    1997
             1995                     1992                    1996
             1994                     1991                    1995
             1993                     1990                    1994
             1992                     1989                    1993
             1991                     1988                    1992
------------------------------------------------------------------------

    These files support the following:
    <bullet>  NPRM published in the Federal Register.
    <bullet> Final Rule published in the Federal Register.

Media: Diskette/most recent year on the Internet
File Cost: $165.00 per year
Periods Available: FY 2001 PPS Update
4. HCFA Hospital Wages Indices (Formerly: Urban and Rural Wage Index 
Values Only)
    This file contains a history of all wage indices since October 1, 
1983.

Media: Diskette/most recent year on the Internet
File Cost: $165.00 per year
Periods Available: FY 2001 PPS Update
5. PPS SSA/FIPS MSA State and County Crosswalk
    This file contains a crosswalk of State and county codes used by 
the Social Security Administration (SSA) and the Federal Information 
Processing Standards (FIPS), county name, and a historical list of 
Metropolitan Statistical Area (MSA).

Media: Diskette/Internet
File Cost: $165.00 per year
Periods Available: FY 2001 PPS Update
6. Reclassified Hospitals New Wage Index (Formerly: Reclassified 
Hospitals by Provider Only)
    This file contains a list of hospitals that were reclassified for 
the purpose of assigning a new wage index. Two versions of these files 
are created each year. They support the following:
    <bullet> NPRM published in the Federal Register.
    <bullet> Final Rule published in the Federal Register.

Media: Diskette/Internet
File Cost: $165.00 per year
Periods Available: FY 2001 PPS Update
7. PPS-IV to PPS-XII Minimum Data Set
    The Minimum Data Set contains cost, statistical, financial, and 
other information from Medicare hospital cost reports. The data set 
includes only the most current cost report (as submitted, final 
settled, or reopened) submitted for a Medicare participating hospital 
by the Medicare fiscal intermediary to HCFA. This data set is updated 
at the end of each calendar quarter and is available on the last day of 
the following month.

                          Media: Tape/Cartridge
------------------------------------------------------------------------
                                                  Periods
                                                 beginning    and before
                                                on or after
------------------------------------------------------------------------
PPS-IV........................................     10/01/86     10/01/87
PPS-V.........................................     10/01/87     10/01/88
PPS-VI........................................     10/01/88     10/01/89
PPS-VII.......................................     10/01/89     10/01/90
PPS-VIII......................................     10/01/90     10/01/91
PPS-IX........................................     10/01/91     10/01/92
PPS-X.........................................     10/01/92     10/01/93
PPS-XI........................................     10/01/93     10/01/94
PPS-XIII......................................     10/01/94    10/01/95
------------------------------------------------------------------------
(Note: The PPS-XIII, PPS-XIV, and PPS-XV Minimum Data Sets are part of
  the PPS-XIII, PPS-XIV, and PPS-XV Hospital Date Set Files).

File Cost: $770.00 per year
8. PPS-IX to PPS-XII Capital Data Set
    The Capital Data Set contains selected data for capital-related 
costs, interest expense and related information and complete balance 
sheet data from the Medicare hospital cost report. The data set 
includes only the most current cost report (as submitted, final settled 
or reopened) submitted for a Medicare certified hospital by the 
Medicare fiscal intermediary to HCFA. This data set is updated at the 
end of each calendar quarter and is available on the last day of the 
following month.

                          Media: Tape/Cartridge
------------------------------------------------------------------------
                                                  Periods
                                                 beginning    and before
                                                on or after
------------------------------------------------------------------------
PPS-IX........................................     10/01/91     10/01/92
PPS-X.........................................     10/01/92     10/01/93
PPS-XI........................................     10/01/93     10/01/94
PPS-XII.......................................     10/01/94    10/01/95
------------------------------------------------------------------------
(Note: The PPS-XIII, PPS-XIV, and PPS-XV Capital Data Sets are part of
  the PPS-XIII, PPS-XIV, PPS-XV Hospital Data Set files.)

File Cost: $770.00 per year
9. PPS-XIII to PPS-XV Hospital Data Set
    The file contains cost, statistical, financial, and other data from 
the Medicare Hospital Cost Report. The data set includes only the most 
current cost report (as submitted, final settled, or reopened) 
submitted for a Medicare-certified hospital by the Medicare fiscal 
intermediary to HCFA. The data set are updated at the end of each 
calendar quarter and is available on the last day of the following 
month.

Media: Diskette/Internet
File Cost: $2,500.00

[[Page 26320]]



------------------------------------------------------------------------
                                                  Periods
                                                 beginning    and before
                                                on or after
------------------------------------------------------------------------
PPS-XIII......................................     10/01/95     10/01/96
PPS-XIV.......................................     10/01/96     10/01/97
PPS-XV........................................     10/01/97     10/01/98
------------------------------------------------------------------------

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

Media: Diskette/Internet
File Cost: $265.00
Periods Available: FY 2001 PPS Update
11. HCFA Medicare Case-Mix Index File
    This file contains the Medicare case-mix index by provider number 
as published in each year's update of the Medicare hospital inpatient 
prospective payment system. The case-mix index is a measure of the 
costliness of cases treated by a hospital relative to the cost of the 
national average of all Medicare hospital cases, using DRG weights as a 
measure of relative costliness of cases. Two versions of this file are 
created each year. They support the following:
    <bullet> NPRM published in the Federal Register.
    <bullet> Final rule published in the Federal Register.

Media: Diskette/most recent year on Internet
Price: $165.00 per year/per file
Periods Available: FY 1985 through FY 1999
    12. DRG Relative Weights (Formerly Table 5 DRG)
    This file contains a listing of DRGs, DRG narrative description, 
relative weights, and geometric and arithmetic mean lengths of stay as 
published in the Federal Register. The hard copy image has been copied 
to diskette. There are two versions of this file as published in the 
Federal Register:
    <bullet> NPRM.
    <bullet> Final rule.

Media: Diskette/Internet
File Cost: $165.00
Periods Available: FY 2001 PPS Update
13. PPS Payment Impact File
    This file contains data used to estimate payments under Medicare's 
hospital inpatient prospective payment systems for operating and 
capital-related costs. The data are taken from various sources, 
including the Provider-Specific File, Minimum Data Sets, and prior 
impact files. The data set is abstracted from an internal file used for 
the impact analysis of the changes to the prospective payment systems 
published in the Federal Register. This file is available for release 1 
month after the proposed and final rules are published in the Federal 
Register.

Media: Diskette/Internet
File Cost: $165.00
Periods Available: FY 2001 PPS Update
14. AOR/BOR Tables
    This file contains data used to develop the DRG relative weights. 
It contains mean, maximum, minimum, standard deviation, and coefficient 
of variation statistics by DRG for length of stay and standardized 
charges. The BOR tables are ``Before Outliers Removed'' and the AOR is 
``After Outliers Removed.'' (Outliers refers to statistical outliers, 
not payment outliers.) Two versions of this file are created each year. 
They support the following:
    <bullet> NPRM published in the Federal Register.
    <bullet> Final rule published in the Federal Register.

Media: Diskette/Internet
File Cost: $165.00
Periods Available: FY 2001 PPS Update
    For further information concerning these data tapes, contact The 
HCFA Public Use Files Hotline at (410) 786-3691.
    Commenters interested in obtaining or discussing any other data 
used in constructing this rule should contact Stephen Phillips at (410) 
786-4531.

B. Information Collection Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
    <bullet> The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    <bullet> The accuracy of our estimate of the information collection 
burden.
    <bullet> The quality, utility, and clarity of the information to be 
collected.
    <bullet> Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    <bullet> We are soliciting public comment on each of these issues 
for the sections that contain information collection requirements.

Section 412.77, Determination of the Hospital-Specific Rate for 
Inpatient Operating Costs for Certain Sole Community Hospitals Based on 
a Federal Fiscal Year 1996 Base Period, and 412.92, Special Treatment: 
Sole Community Hospitals

    Sections 412.77(a)(2) and 412.92(d)(1)(ii) state that an otherwise 
eligible hospital that elects not to receive payment based on its 
hospital-specific rate as determined under Sec. 412.77 must notify its 
fiscal intermediary of its decision prior to the beginning of its cost 
reporting period beginning on or after October 1, 2000.
    We estimate that it will take each hospital that notifies its 
intermediary of its election not to receive payments based on its 
hospital-specific rate as determined under Sec. 412.77 an hour to draft 
and send its notice. However, we are unable at this time to determine 
how many hospitals will make this election and, therefore, will need to 
notify their intermediaries of their decision.

Section 485.643, Condition of Participation: Organ, Tissue, and Eye 
Procurement

    It is important to note that because of the inherent flexibility of 
this proposed regulation, the extent of the information collection 
requirements is dependent upon decisions that will be made either by 
the CAH or by the CAH in conjunction with the OPO or the tissue and eye 
banks, or both. Thus, the paperwork burden on individual CAHs will vary 
and is subject, in large part, to their decisionmaking.
    The burden associated with the requirements of this section 
include: (1) The requirement to maintain protocol documentation 
demonstrating that the five requirements of this section have been met; 
(2) the requirement for a CAH to notify an OPO, a tissue bank, or an 
eye bank of any imminent or actual death; and (3) the time required for 
a hospital to document and maintain OPO referral information.
    We estimate that, on average, the requirement to maintain protocol 
documentation demonstrating that the requirements of this section have 
been met will impose one hour of burden on each CAH (on 161 CAHs) on an 
annual basis (a total of 161 annual burden hours).
    The CoP in this section would require CAHs to notify the OPO about 
every

[[Page 26321]]

death that occurs in the CAH. The average Medicare hospital has 
approximately 165 beds and 200 deaths per year. However, by statute and 
regulation, CAHs may use no more than 15 beds for acute care services. 
Assuming that the number of deaths in a hospital is related to the 
number of acute care beds, there should be approximately 18 deaths per 
year in the average CAH. We estimated that the average notification 
telephone call to the OPO takes 5 minutes. Based on this estimate, a 
CAH would need approximately 90 minutes per year to notify the OPO 
about all deaths and imminent deaths.
    Under the proposed CoP, a CAH may agree to have the OPO determine 
medical suitability for tissue and eye donation or may have alternative 
arrangements with a tissue bank and an eye bank. These alternative 
arrangements could include the CAH's direct notification of the tissue 
and eye bank of potential tissue and eye donors or direct notification 
of all deaths. If a CAH chose to contact both a tissue bank and an eye 
bank directly on all deaths, it would need an additional 6 hours per 
year (that is, 5 minutes per call) in order to call both the tissue and 
eye bank directly. Again, the impact is small, and the proposed 
regulation permits the CAH to decide how this process will take place. 
Note that many communities already have a one-phone call system in 
place. In addition, some OPOs are also tissue banks or eye banks, or 
both. A CAH that chose to use the OPO's tissue and eye bank services in 
these localities would need to make only one telephone call on every 
death.
    We estimate that additional time would be needed by the CAH to 
annotate the patient record or fill out a form regarding the 
disposition of a call to the OPO or the tissue bank or the eye bank, or 
both. This recordkeeping should take no more than 5 minutes per call. 
Therefore, the paperwork burden associated with the call(s) would add 
up to an additional 270 minutes per year per CAH.
    In summary, the information collection requirements of this section 
would be a range of from 3 to 9 hours per CAH, or 483 to 1,449 hours 
annually nationally.
    If you comment on these information collection and recordkeeping 
requirements, please mail copies directly to the following addresses:

Health Care Financing Administration, Office of Information Services, 
Security and Standards Group, Division of HCFA Enterprise Standards, 
Room N2-14-26, 7500 Security Boulevard, Baltimore, Maryland 21244-1850. 
Attn: John Burke HCFA-1118-P; and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 3001, New Executive Office Building, Washington, DC 20503. 
Attn: Allison Herron Eydt, HCFA Desk Officer.

    These new information collection and recordkeeping requirements 
have been submitted to the Office of Management and Budget (OMB) for 
review under the authority of PRA. We have submitted a copy of the 
proposed rule to OMB for its review of the information collection 
requirements. These requirements will not be effective until they have 
been approved by OMB.
    The requirements associated with a hospital's application for a 
geographic redesignation, codified in Part 412, are currently approved 
by OMB under OMB approval number 0938-0573, with an expiration date of 
September 30, 2002.

C. Public Comments

    Because of the large number of items of correspondence we normally 
receive on a proposed rule, we are not able to acknowledge or respond 
to them individually. However, in preparing the final rule, we will 
consider all comments concerning the provisions of this proposed rule 
that we receive by the date and time specified in the DATES section of 
this preamble and respond to those comments in the preamble to that 
rule. We emphasize that section 1886(e)(5) of the Act requires the 
final rule for FY 2001 to be published by August 1, 2000, and we will 
consider only those comments that deal specifically with the matters 
discussed in this proposed rule.

List of Subjects

42 CFR Part 412

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

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

42 CFR Part 485

    Grant programs--health, Health facilities, Medicaid, Medicare, 
Reporting and recordkeeping requirements.
    42 CFR Chapter IV is proposed to be amended as set forth below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

    A. Part 412 is amended as follows:
    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).

    2. Section 412.2 is amended by revising the last sentence of 
paragraph (a) to read as follows:


Sec. 412.2  Basis of payment.

    (a) Payment on a per discharge basis. * * * An additional payment 
is made for both inpatient operating and inpatient capital-related 
costs, in accordance with subpart F of this part, for cases that are 
extraordinarily costly to treat.
* * * * *


Sec. 412.4  [Amended]

    3. In Sec. 412.4(f)(3), the reference to ``Sec. 412.2(e)'' is 
removed and `` 412.2(b)'' is added in its place.
    4. Section 412.63 is amended by:
    a. Revising paragraph (s);
    b. Redesignating paragraphs (t), (u), (v), and (w) as paragraphs 
(u), (v), (w), and (x) respectively; and
    c. Adding a new paragraph (t), to read as follows:


Sec. 412.63  Federal rates for inpatient operating costs for fiscal 
years after Federal fiscal year 1984.

* * * * *
    (s) Applicable percentage change for fiscal year 2001. The 
applicable percentage change for fiscal year 2001 is the percentage 
increase in the market basket index for prospective payment hospitals 
(as defined in Sec. 413.40(a) of this subchapter) for sole community 
hospitals and the increase in the market basket index minus 1.1 
percentage points for other hospitals in all areas.
    (t) Applicable percentage change for fiscal year 2002. The 
applicable percentage change for fiscal year 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.
* * * * *
    5. Section 412.73 is amended by revising paragraph (c)(12) and 
adding paragraphs (c)(13), (c)(14), and (c)(15), to read as follows:


Sec. 412.73  Determination of the hospital-specific rate based on a 
Federal fiscal year 1982 base period.

* * * * *
    (c) Updating base-year costs * * *
    (12) For Federal fiscal years 1996 through 2000. For Federal fiscal 
years

[[Page 26322]]

1996 through 2000, the update factor is the applicable percentage 
change for other prospective payment hospitals in each respective year 
as set forth in Secs. 412.63(n) through (r).
    (13) For Federal fiscal year 2001. For Federal fiscal year 2001, 
the update factor is the percentage increase in the market basket index 
for prospective payment hospitals (as defined in Sec. 413.40(a) of this 
chapter).
    (14) For Federal fiscal year 2002. For Federal fiscal year 2002, 
the update factor is the percentage increase in the market basket index 
for prospective payment hospitals (as defined in Sec. 413.40(a) of this 
chapter) minus 1.1 percentage points.
    (15) For Federal fiscal year 2003 and for subsequent years. For 
Federal fiscal year 2003 and subsequent years, the update factor is the 
percentage increase in the market basket index for prospective payment 
hospitals (as defined in Sec. 413.40(a) of this chapter).
* * * * *


Sec. 412.75  [Amended]

    6. In Sec. 412.75(d), the cross reference ``Sec. 412.73 (c)(5) 
through (c)(12)'' is removed and ``Sec. 412.75(c)(15)'' is added in its 
place.


Sec. 412.76  [Redesignated]

    7. Section 412.76 is redesignated as a new Sec. 412.78.
    8. A new Sec. 412.77 is added to read as follows:


Sec. 412.77  Determination of the hospital-specific rate for inpatient 
operating costs for certain sole community hospitals based on a Federal 
fiscal year 1996 base period.

    (a) Applicability. (1) This section applies to a hospital that has 
been designated as a sole community hospital, as described in 
Sec. 412.72, that received payment for its cost reporting period 
beginning during 1999 based on its hospital-specific rate for either 
fiscal year 1982 under Sec. 412.73 or fiscal year 1987 under 
Sec. 412.75, and that elects under paragraph (a)(2) of this section to 
be paid based on a fiscal year 1996 base period.
    (2) Hospitals that are otherwise eligible for but elect not to 
receive payment on the basis of their Federal fiscal year 1996 updated 
costs per case must notify their fiscal intermediary of this decision 
prior to the beginning of their cost reporting period beginning on or 
after October 1, 2000, for which such payments would otherwise be made. 
If a hospital does not make the notification to its fiscal intermediary 
before the end of the cost reporting period, the hospital is deemed to 
have elected to have section 1886(b)(3)(I) of the Act apply to the 
hospital.
    (3) This section applies only to cost reporting periods beginning 
on or after October 1, 2000.
    (4) The formula for determining the hospital-specific costs for 
hospitals described under paragraph (a)(1) of this section is set forth 
in paragraph (f) of this section.
    (b) Base-period costs for hospitals subject to fiscal year 1996 
rebasing. (1) General rule. Except as provided in paragraph (b)(2) of 
this section, for each hospital eligible under paragraph (a) of this 
section, the intermediary determines the hospital's Medicare Part A 
allowable inpatient operating costs, as described in Sec. 412.2(c), for 
the 12-month or longer cost reporting period ending on or after 
September 30, 1996 and before September 30, 1997, and computes the 
hospital-specific rate for purposes of determining prospective payment 
rates for inpatient operating costs as determined under Sec. 412.92(d).
    (2) Exceptions. (i) If the hospital's last cost reporting period 
ending before September 30, 1997 is for less than 12 months, the base 
period is the hospital's most recent 12-month or longer cost reporting 
period ending before the short period report.
    (ii) If the hospital does not have a cost reporting period ending 
on or after September 30, 1996 and before September 30, 1997, and does 
have a cost reporting period beginning on or after October 1, 1995 and 
before October 1, 1996, that cost reporting period is the base period 
unless the cost reporting period is for less than 12 months. If that 
cost reporting period is for less than 12 months, the base period is 
the hospital's most recent 12-month or longer cost reporting period 
ending before the short cost reporting period. If a hospital has no 
cost reporting period beginning in fiscal year 1996, the hospital will 
not have a hospital-specific rate based on fiscal year 1996.
    (c) Costs on a per discharge basis. The intermediary determines the 
hospital's average base-period operating cost per discharge by dividing 
the total operating costs by the number of discharges in the base 
period. For purposes of this section, a transfer as defined in 
Sec. 412.4(b) is considered to be a discharge.
    (d) Case-mix adjustment. The intermediary divides the average base-
period cost per discharge by the hospital's case-mix index for the base 
period.
    (e) Updating base-period costs. For purposes of determining the 
updated base-period costs for cost reporting periods beginning in 
Federal fiscal year 1996, the update factor is determined using the 
methodology set forth in Sec. 412.73(c)(12) through (c)(15).
    (f) DRG adjustment. The applicable hospital-specific cost per 
discharge is multiplied by the appropriate DRG weighting factor to 
determine the hospital-specific base payment amount (target amount) for 
a particular covered discharge.
    (g) Phase-in of fiscal year 1996 base-period rate. The intermediary 
calculates the hospital-specific rates determined on the basis of the 
fiscal year 1996 base period rate as follows:
    (1) For Federal fiscal year 2001, the hospital-specific rate is the 
sum of 75 percent of the hospital-specific rate for fiscal year 1982 or 
fiscal year 1987 (the Sec. 412.73 or Sec. 412.75 target amount), plus 
25 percent of the hospital-specific rate for fiscal year 1996 (the 
Sec. 412.77 target amount).
    (2) For Federal fiscal year 2002, the hospital-specific rate is the 
sum of 50 percent of the Sec. 412.73 or Sec. 412.75 target amount and 
50 percent of the Sec. 412.77 target amount.
    (3) For Federal fiscal year 2003, the hospital-specific rate is the 
sum of 25 percent of the Sec. 412.73 or Sec. 412.75 target amount and 
75 percent of the Sec. 412.77 target amount.
    (4) For Federal fiscal year 2004 and any subsequent fiscal years, 
the hospital-specific rate is 100 percent of the Sec. 412.77 target 
amount.
    (h) Notice of hospital-specific rates. The intermediary furnishes a 
hospital eligible for rebasing a notice of the hospital-specific rate 
as computed in accordance with this section. The notice will contain a 
statement of the hospital's Medicare Part A allowable inpatient 
operating costs, the number of Medicare discharges, and the case-mix 
index adjustment factor used to determine the hospital's cost per 
discharge for the Federal fiscal year 1996 base period.
    (i) Right to administrative and judicial review. An intermediary's 
determination of the hospital-specific rate for a hospital is subject 
to administrative and judicial review. Review is available to a 
hospital upon receipt of the notice of the hospital-specific rate. This 
notice is treated as a final intermediary determination of the amount 
of program reimbursement for purposes of subpart R of part 405 of this 
chapter.
    (j) Modification of hospital-specific rate. (1) The intermediary 
recalculates the hospital-specific rate to reflect the following:
    (i) Any modifications that are determined as a result of 
administrative or judicial review of the hospital-specific rate 
determinations; or
    (ii) Any additional costs that are recognized as allowable costs 
for the

[[Page 26323]]

hospital's base period as a result of administrative or judicial review 
of the base-period notice of amount of program reimbursement.
    (2) With respect to either the hospital-specific rate determination 
or the amount of program reimbursement determination, the actions taken 
on administrative or judicial review that provide a basis for the 
recalculations of the hospital-specific rate include the following:
    (i) A reopening and revision of the hospital's base-period notice 
of amount of program reimbursement under Secs. 405.1885 through 
405.1889 of this chapter.
    (ii) A prehearing order or finding issued during the provider 
payment appeals process by the appropriate reviewing authority under 
Sec. 405.1821 or Sec. 405.1853 of this chapter that resolved a matter 
at issue in the hospital's base-period notice of amount of program 
reimbursement.
    (iii) An affirmation, modification, or reversal of a Provider 
Reimbursement Review Board decision by the Administrator of HCFA 
underSec. 405.1875 of this chapter that resolved a matter at issue in 
the hospital's base-period notice of amount of program reimbursement.
    (iv) An administrative or judicial review decision under 
Sec. 405.1831, Sec. 405.1871, or Sec. 405.1877 of this chapter that is 
final and no longer subject to review under applicable law or 
regulations by a higher reviewing authority, and that resolved a matter 
at issue in the hospital's base-period notice of amount of program 
reimbursement.
    (v) A final, nonappealable court judgment relating to the base-
period costs.
    (3) The adjustments to the hospital-specific rate made under 
paragraphs (i)(1) and (i)(2) of this section are effective 
retroactively to the time of the intermediary's initial determination 
of the rate.
    9. Section 412.92 is amended by revising paragraph (d)(1) to read 
as follows:


Sec. 412.92  Special treatment: sole community hospitals.

* * * * *
    (d) Determining prospective payment rates for inpatient operating 
costs for sole community hospitals. (1) General rules. (i) Except as 
provided in paragraph (d)(1)(ii) of this section, for cost reporting 
periods beginning on or after April 1, 1990, a sole community hospital 
is paid based on whichever of the following amounts yields the greatest 
aggregate payment for the cost reporting period:
    (A) The Federal payment rate applicable to the hospitals as 
determined under Sec. 412.63.
    (B) The hospital-specific rate as determined under Sec. 412.73.
    (C) The hospital-specific rate as determined under Sec. 412.75.
    (ii) For cost reporting periods beginning on or after October 1, 
2000, a sole community hospital that was paid for its cost reporting 
period beginning during 1999 on the basis of the hospital-specific rate 
specified in paragraph (d)(1)(i)(B) or (d)(1)(i)(C) of this section, 
may elect to use the hospital-specific rate as determined under 
Sec. 412.77.
* * * * *
    10. Section 412.105 is amended by:
    a. Revising paragraph (d)(3)(v);
    b. Republishing paragraph (f)(1) introductory text and revising 
paragraph (f)(1)(vii);
    c. Adding new paragraphs (f)(1)(viii) and (f)(1)(ix); and
    d. Revising paragraph (g), to read as follows:


Sec. 412.105  Special treatment: Hospitals that incur indirect costs 
for graduate medical education programs.

* * * * *
    (d) Determination of education adjustment factor * * *
    (3) * * *
    (v) For discharges occurring during fiscal year 2001, 1.54.
* * * * *
    (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:
* * * * *
    (vii) If a hospital establishes a new medical residency training 
program, as defined in Sec. 413.86(g)(9) of this subchapter, the 
hospital's full-time equivalent cap may be adjusted in accordance with 
the provisions of Secs. 413.86(g)(6) (i) through (iv) of this 
subchapter.
    (viii) A hospital that began construction of its facility prior to 
August 5, 1997, and sponsored new medical residency training programs 
on or after January 1, 1995 and on or before August 5, 1997, that 
either received initial accreditation by the appropriate accrediting 
body or temporarily trained residents at another hospital(s) until the 
facility was completed, may receive an adjustment to its full-time 
equivalent cap in accordance with the provisions of Sec. 413.86(g)(7) 
of this subchapter.
    (ix) A hospital may receive a temporary adjustment to its full-time 
equivalent cap to reflect residents added because of another hospital's 
closure if the hospital meets the criteria specified in 
Sec. 413.86(g)(8) of this subchapter.
* * * * *
    (g) Indirect medical education payment for managed care enrollees. 
For portions of cost reporting periods occurring 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, according to the applicable payment 
percentages described in Secs. 413.86(d)(3)(i) through (d)(3)(v) of 
this subchapter.
    11. In Sec. 412.106, the introductory text of paragraph (e) is 
republished and paragraphs (e)(4) and (e)(5) are revised to read as 
follows:


Sec. 412.106  Special treatment: Hospitals that serve a 
disproportionate share of low-income patients.

* * * * *
    (e) Reduction in payment for FYs 1998 through 2002. The amounts 
otherwise payable to a hospital under paragraph (d) of this section are 
reduced by the following:
* * * * *
    (4) For FY 2001, 3 percent.
    (5) For FY 2002, 4 percent.
* * * * *
    12. Section 412.230 is amended by:
    a. Republishing the introductory text of paragraph (e)(1); and
    b. Revising paragraph (e)(1)(iii) and (e)(1)(iv)(A), to read as 
follows:


Sec. 412.230  Criteria for an individual hospital seeking redesignation 
to another rural area or an urban area.

* * * * *
    (e) Use of urban or other rural area's wage index--(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:
* * * * *
    (iii) The hospital's average hourly wage is, in the case of a 
hospital located in a rural area, at least 106 percent, and, in the 
case of a hospital located in an urban area, at least 108 percent of 
the average hourly wage of hospitals in the

[[Page 26324]]

area in which the hospital is located; and
    (iv) * * *
    (A) The hospital's average hourly wage is equal to, in the case of 
a hospital located in a rural area, at least 82 percent, and in the 
case of a hospital located in an urban area, at least 84 percent of the 
average hourly wage of hospitals in the area to which it seeks 
redesignation.
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

    B. Part 413 is amended as follows:
    1. The authority citation for Part 413 is revised to read as 
follows:

    Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and 
(n), 1871, 1881, 1883, and 1886 of the Social Security Act (42 
U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 
1395hh, 1395rr, 1395tt, and 1395ww).

    2. In Sec. 413.40, paragraph (a)(3) is amended by revising 
paragraph (B) in the definition of ``ceiling'' and paragraph (d)(4) is 
revised, to read as follows:


Sec. 413.40  Ceiling on the rate of increase in hospital inpatient 
costs.

    (a) Introduction. * * *
    (3) Definitions. * * *
    Ceiling. * * *
    (B) The hospital-within-a-hospital has discharged to the other 
hospital and subsequently readmitted more than 5 percent (that is, in 
excess of 5.0 percent) of the total number of Medicare inpatients 
discharged from the hospital-within-a-hospital in that cost reporting 
period.
* * * * *
    (d) Application of the target amount in determining the amount of 
payment. * * *
    (4) Continuous improvement bonus payments. (i) For cost reporting 
periods beginning on or after October 1, 1997 and ending before October 
1, 2000, 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--
    (A) 50 percent of the amount by which the operating costs are less 
than the expected costs for the period; or
    (B) 1 percent of the ceiling.
    (ii) For cost reporting periods beginning on or after October 1, 
2000, and ending before October 1, 2001, eligible psychiatric hospitals 
and units and long-term care 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--
    (A) 50 percent of the amount by which the operating costs are less 
than the expected costs for the period; or
    (B) 1.5 percent of the ceiling.
    (iii) For cost reporting periods beginning on or after October 1, 
2001, and ending before October 1, 2002, eligible psychiatric hospitals 
and units and long-term care hospitals receive payments in addition to 
those in paragraph (d)(5) of this section, as applicable. These 
payments are equal to the lesser of--
    (A) 50 percent of the amount by which the operating costs are less 
than the expected costs for the periods; or
    (B) 2 percent of the ceiling.
* * * * *
    3. Section 413.70 is revised to read as follows:


Sec. 413.70  Payment for services of a CAH.

    (a) Payment for inpatient services furnished by a CAH. (1) Payment 
for inpatient services of a CAH is the reasonable costs of the CAH in 
providing CAH services to its inpatients, as determined in accordance 
with section 1861(v)(1)(A) of the Act and the applicable principles of 
cost reimbursement in this part and in Part 415 of this chapter, except 
that the following payment principles are excluded when determining 
payment for CAH inpatient services:
    (i) Lesser of cost or charges;
    (ii) Ceilings on hospital operating costs; and
    (iii) Reasonable compensation equivalent (RCE) limits for physician 
services to providers.
    (2) Payment to a CAH for inpatient services does not include any 
costs of physician services or other professional services to CAH 
inpatients, and is subject to the Part A hospital deductible and 
coinsurance, as determined under subpart G of part 409 of this chapter.
    (b) Payment for outpatient services furnished by a CAH. (1) 
General. Unless the CAH elects to be paid for services to its 
outpatients under the method specified in paragraph (b)(3) of this 
section, the amount of payment for outpatient services of a CAH is the 
amount determined under paragraph (b)(2) of this section.
    (2) Reasonable costs for facility services. (i) Payment for 
outpatient services of a CAH is the reasonable costs of the CAH in 
providing CAH services to its outpatients, as determined in accordance 
with section 1861(v)(1)(A) of the Act and the applicable principles of 
cost reimbursement in this part and in Part 415 of this chapter, except 
that the following payment principles are excluded when determining 
payment for CAH outpatient services:
    (A) Lesser of costs or charges;
    (B) RCE limits;
    (C) Any type of reduction to operating or capital costs under 
Sec. 413.124 or Sec. 413.130(j)(7); and
    (D) Blended payment amounts for ambulatory surgical services, 
radiology services, and other diagnostic services;
    (ii) Payment to a CAH under paragraph (b)(2) of this section does 
not include any costs of physician services or other professional 
services to CAH outpatients, and is subject to the Part B deductible 
and coinsurance amounts, as determined under Secs. 410.152(k), 410.160, 
and 410.161 of this chapter.
    (3) Election to be paid reasonable costs for facility services plus 
fee schedule for professional services. (i) A CAH may elect to be paid 
for outpatient services in any cost reporting period under the method 
described in paragraphs (b)(3)(ii) and (b)(3)(iii) of this section. 
This election must be made in writing, made on an annual basis, and 
delivered to the intermediary at least 60 days before the start of each 
affected cost reporting period. An election of this payment method, 
once made for a cost reporting period, remains in effect for all of 
that period and applies to all services furnished to outpatients during 
that period.
    (ii) If the CAH elects payment under this method, payment to the 
CAH for each outpatient visit will be the sum of the following amounts:
    (A) For facility services, not including any services for which 
payment may be made under paragraph (b)(3)(ii)(B) of this section, the 
reasonable costs of the services as determined under paragraph 
(b)(2)(i) of this section; and
    (B) For professional services otherwise payable to the physician or 
other practitioner on a fee schedule basis, the amounts that otherwise 
would be paid for the services if the CAH had not elected payment under 
this method.
    (iii) Payment to a CAH is subject to the Part B deductible and 
coinsurance amounts, as determined under Secs. 410.152, 410.160, and 
410.161 of this chapter.
    (c) Final payment based on cost report. Final payment to the CAH 
for CAH facility services to inpatients and outpatients furnished 
during a cost reporting is based on a cost report for that period, as 
required under Sec. 413.20(b).

[[Page 26325]]

    4. Section 413.86 is amended by:
    a. Revising the first sentence of paragraph (d)(3);
    b. Revising the introductory text of paragraph (e)(3);
    c. Redesignating paragraph (e)(4) as paragraph (e)(5);
    d. Adding a new paragraph (e)(4);
    e. Revising newly designated paragraph (e)(5)(i)(B); and
    f. Adding a new paragraph (e)(5)(iv), to read as follows:


Sec. 413.86  Direct graduate medical education payments.

* * * * *
    (d) Calculating payment for graduate medical education costs. * * *
    (3) Step Three. For portions of cost reporting periods occurring 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. * * *
* * * * *
    (e) Determining per resident amounts for the base period. * * *
    (3) For cost reporting periods beginning on or after July 1, 1986. 
Subject to the provisions of paragraph (e)(4) of this section, for cost 
reporting periods beginning on or after July 1, 1986, a hospital's 
base-period per resident amount is adjusted as follows:
* * * * *
    (4) For cost reporting periods beginning on or after October 1, 
2000 and ending on or before September 30, 2005. For cost reporting 
periods beginning on or after October 1, 2000 and ending on or before 
September 30, 2005, a hospital's per resident amount for each fiscal 
year is adjusted in accordance with the following provisions:
    (i) General provisions. For purposes of Sec. 413.86(e)(4)--
    (A) Weighted average per resident amount. The weighted average per 
resident amount is established as follows:
    (1) Using data from hospitals' cost reporting periods ending during 
FY 1997, HCFA calculates each hospital's single per resident amount by 
adding each hospital's primary care and non-primary care per resident 
amounts, weighted by its respective FTEs, and dividing by the sum of 
the FTEs for primary care and non-primary care residents.
    (2) Each hospital's single per resident amount calculated under 
paragraph (e)(4)(i)(A)(1) of this section is standardized by the 1999 
geographic adjustment factor for the physician fee schedule area (as 
determined under Sec. 414.26 of this chapter) in which the hospital is 
located.
    (3) HCFA calculates an average of all hospitals' standardized per 
resident amounts that are determined under paragraph (e)(4)(i)(A)(2) of 
this section. The resulting amount is the weighted average per resident 
amount.
    (B) Primary care/obstetrics and gynecology and non-primary care per 
resident amounts. A hospital's per resident amount is an amount 
inclusive of any CPI-U adjustments that the hospital may have received 
since the hospital's base year, including any CPI-U adjustments the 
hospital may have received because the hospital trains primary care/
obstetrics and gynecology residents and non-primary care residents as 
specified under paragraph (e)(3)(ii) of this section.
    (ii) Adjustment beginning in FY 2001 and ending in FY 2005. For 
cost reporting periods beginning on or after October 1, 2000 and ending 
on or before September 30, 2005, a hospital's per resident amount is 
adjusted in accordance with paragraphs (e)(4)(ii)(A) through 
(e)(4)(ii)(C) of this section, in that order:
    (A) Updating the weighted average per resident amount for 
inflation. The weighted average per resident amount (as determined 
under paragraph (e)(4)(i)(A) of this section) is updated by the 
estimated percentage increase in the CPI-U during the period beginning 
with the month that represents the midpoint of the cost reporting 
periods ending during FY 1997 (that is, October 1, 1996) and ending 
with the midpoint of the hospital's cost reporting period that begins 
in FY 2001.
    (B) Adjusting for locality. The updated weighted average per 
resident amount determined under paragraph (e)(4)(ii)(A) of this 
section (the national average per resident amount) is adjusted for the 
locality of each hospital by multiplying the national average per 
resident amount by the 1999 geographic adjustment factor for the 
physician fee schedule area in which each hospital is located, 
established in accordance with Sec. 414.26 of this subchapter.
    (C) Determining necessary revisions to the per resident amount. The 
locality-adjusted national average per resident amount, as calculated 
in accordance with paragraph (e)(4)(ii)(B) of this section, is compared 
to the hospital's per resident amount. Each hospital's per resident 
amount is revised, if appropriate, according to the following three 
categories:
    (1) Floor. For cost reporting periods beginning on or after October 
1, 2000 and on or before September 30, 2001, if the hospital's per 
resident amount would otherwise be less than 70 percent of the 
locality-adjusted national average per resident amount for FY 2001 (as 
determined under paragraph (e)(4)(ii)(B) of this section), the per 
resident amount is equal to 70 percent of the locality-adjusted 
national average per resident amount for FY 2001. For subsequent cost 
reporting periods, the hospital's per resident amount is updated using 
the methodology specified under paragraph (e)(3)(i) of this section.
    (2) Ceiling. If the hospital's per resident amount is greater than 
140 percent of the locality-adjusted national average per resident 
amount, the per resident amount is adjusted as follows for FY 2001 
through FY 2005:
    (i) FY 2001. For cost reporting periods beginning on or after 
October 1, 2000 and on or before September 30, 2001, if the hospital's 
FY 2000 per resident amount exceeds 140 percent of the FY 2001 
locality-adjusted national average per resident amount (as calculated 
under paragraph (e)(4)(ii)(B) of this section), then, subject to the 
provision stated in paragraph (e)(4)(ii)(C)(2)(iv) of this section, the 
hospital's per resident amount is frozen at the FY 2000 per resident 
amount and is not updated for FY 2001 by the CPI-U factor.
    (ii) FY 2002. For cost reporting periods beginning on or after 
October 1, 2001 and on or before September 30, 2002, if the hospital's 
FY 2001 per resident amount exceeds 140 percent of the FY 2002 
locality-adjusted national average per resident amount, then, subject 
to the provision stated in paragraph (e)(4)(ii)(C)(2)(iv) of this 
section, the hospital's per resident amount is frozen at the FY 2001 
per resident amount and is not updated for FY 2002 by the CPI-U factor.
    (iii) FY 2003 through FY 2005. For cost reporting periods beginning 
on or after October 1, 2002 and on or before September 30, 2005, if the 
hospital's per resident amount for the previous cost reporting period 
is greater than 140 percent of the locality-adjusted national average 
per resident amount for that same previous cost reporting period (for 
example, for cost reporting periods beginning in FY 2003, compare the 
hospital's per resident amount from the FY 2002 cost report to the 
hospital's locality-adjusted national average per resident amount from 
FY 2002), then, subject to the provision stated in paragraph 
(e)(4)(ii)(C)(2)(iv) of this section, the hospital's per resident 
amount is adjusted using the methodology specified in paragraph

[[Page 26326]]

(e)(3)(i) of this section, except that the CPI-U applied for a 12-month 
period is reduced (but not below zero) by 2 percentage points.
    (iv) General rule for hospitals that exceed the ceiling. For cost 
reporting periods beginning on or after October 1, 2000 and on or 
before September 30, 2005, if a hospital's per resident amount exceeds 
140 percent of the hospital's locality-adjusted national average per 
resident amount and it is adjusted under any of the criteria under 
paragraphs (e)(4)(ii)(C)(2)(i) through (iii) of this section, the 
current year per resident amount resident amount cannot be reduced 
below 140 percent of the locality-adjusted national average per 
resident amount.
    (3) Per resident amounts greater than or equal to the floor and 
less than or equal to the ceiling. For cost reporting periods beginning 
on or after October 1, 2000 and on or before September 30, 2005, if a 
hospital's per resident amount is greater than or equal to 70 percent 
and less than or equal to 140 percent of the hospital's locality-
adjusted national average per resident amount for each respective 
fiscal year, the hospital's per resident amount is updated using the 
methodology specified in paragraph (e)(3)(i) of this section.
    (5) Exceptions--(i) Base period for certain hospitals. * * *
    (B) The weighted 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 weighted 
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) of this chapter.
* * * * *
    (iv) Effective October 1, 2000, the per resident amounts 
established under paragraphs (e)(5)(i) through (iii) of this section 
are subject to the provisions of paragraph (e)(4) of this section.
* * * * *

PART 485B--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

    C. Part 485 is amended as follows:
    1. The authority citation for part 485 continues to read as 
follows:

    Authority: Sec. 1820 of the Act (42 U.S.C. 1395i-4), unless 
otherwise noted.

    2. A new Sec. 485.643 is added to subpart F to read as follows:


Sec. 485.643  Condition of participation: Organ, tissue, and eye 
procurement.

    The CAH must have and implement written protocols that:
    (a) Incorporate an agreement with an OPO designated under part 486 
of this chapter, under which it must notify, in a timely manner, the 
OPO or a third party designated by the OPO of individuals whose death 
is imminent or who have died in the CAH. The OPO determines medical 
suitability for organ donation and, in the absence of alternative 
arrangements by the CAH, the OPO determines medical suitability for 
tissue and eye donation, using the definition of potential tissue and 
eye donor and the notification protocol developed in consultation with 
the tissue and eye banks identified by the CAH for this purpose;
    (b) Incorporate an agreement with at least one tissue bank and at 
least one eye bank to cooperate in the retrieval, processing, 
preservation, storage and distribution of tissues and eyes, as may be 
appropriate to assure that all usable tissues and eyes are obtained 
from potential donors, insofar as such an agreement does not interfere 
with organ procurement;
    (c) Ensure, in collaboration with the designated OPO, that the 
family of each potential donor is informed of its option to either 
donate or not donate organs, tissues, or eyes. The individual 
designated by the CAH to initiate the request to the family must be a 
designated requestor. A designated requestor is an individual who has 
completed a course offered or approved by the OPO and designed in 
conjunction with the tissue and eye bank community in the methodology 
for approaching potential donor families and requesting organ or tissue 
donation;
    (d) Encourage discretion and sensitivity with respect to the 
circumstances, views, and beliefs of the families of potential donors;
    (e) Ensure that the CAH works cooperatively with the designated 
OPO, tissue bank and eye bank in educating staff on donation issues, 
reviewing death records to improve identification of potential donors, 
and maintaining potential donors while necessary testing and placement 
of potential donated organs, tissues, and eyes take place.
    (f) For purposes of these standards, the term ``Organ'' means a 
human kidney, liver, heart, lung, or pancreas.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance)

    Dated: April 14, 2000.
Nancy Ann Min DeParle,
Administrator, Health Care Financing Administration
    Dated: April 28, 2000.
Donna E. Shalala,
Secretary.

    [Editorial Note: The following Addendum and appendixes will not 
appear in the Code of Federal Regulations.]

Addendum--Proposed Schedule of Standardized Amounts Effective With 
Discharges Occurring On or After October 1, 2000 and Update Factors 
and Rate-of-Increase Percentages Effective With Cost Reporting 
Periods Beginning On or After October 1, 2000

I. Summary and Background

    In this Addendum, we are setting forth the proposed amounts and 
factors for determining prospective payment rates for Medicare 
inpatient operating costs and Medicare inpatient capital-related costs. 
We are also setting forth proposed rate-of-increase percentages for 
updating the target amounts for hospitals and hospital units excluded 
from the prospective payment system.
    For discharges occurring on or after October 1, 2000, except for 
sole community hospitals, Medicare-dependent, small rural hospitals, 
and hospitals located in Puerto Rico, each hospital's payment per 
discharge under the prospective payment system will be based on 100 
percent of the Federal national rate.
    Sole community hospitals are paid based on whichever of the 
following rates yields the greatest aggregate payment: the Federal 
national rate, the updated hospital-specific rate based on FY 1982 cost 
per discharge, the updated hospital-specific rate based on FY 1987 cost 
per discharge, or, if qualified, 25 percent of the updated hospital-
specific rate based on FY 1996 cost per discharge, plus 75 percent of 
the updated FY 1982 or FY 1987 hospital-specific rate. Section 405 of 
Public Law 106-113 amended section 1886(b)(3) of the Act to allow a 
sole community hospital that was paid for its cost reporting period 
beginning during FY 1999 on the basis of either its FY 1982 or FY 1987 
hospital-specific rate to elect to rebase its hospital-specific rate 
based on its FY 1996 cost per discharge.
    Section 404 of Public Law 106-113 amended section 1886(d)(5)(G) of 
the Act to extend the special treatment for Medicare-dependent, small 
rural hospitals. Therefore, 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

[[Page 26327]]

between the Federal national rate and the updated hospital-specific 
rate based on FY 1982 or FY 1987 cost per discharge, whichever is 
higher.
    For hospitals in Puerto Rico, the payment per discharge is based on 
the sum of 50 percent of a Puerto Rico rate and 50 percent of a Federal 
national rate.
    As discussed below in section II of this Addendum, we are proposing 
to make changes in the determination of the prospective payment rates 
for Medicare inpatient operating costs for FY 2001. The changes, to be 
applied prospectively, would affect the calculation of the Federal 
rates. In section III of this Addendum, we discuss updates to the 
payments per unit for blood clotting factor provided to hospital 
inpatients who have hemophilia. In section IV of this Addendum, we 
discuss our proposed changes for determining the prospective payment 
rates for Medicare inpatient capital-related costs for FY 2001. Section 
V of this Addendum sets forth our proposed changes for determining the 
rate-of-increase limits for hospitals excluded from the prospective 
payment system for FY 2001. The tables to which we refer in the 
preamble to this proposed rule are presented at the end of this 
Addendum in section VI.

II. Proposed Changes to Prospective Payment Rates for Inpatient 
Operating Costs for FY 2001

    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. Below, we discuss the proposed factors used for determining 
the prospective payment rates. The Federal and Puerto Rico rate 
changes, once issued as final, will be effective with discharges 
occurring on or after October 1, 2000. 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 2001.
    In summary, the proposed standardized amounts set forth in Tables 
1A and 1C of section VI of this Addendum reflect--
    <bullet> Updates of 2.0 percent for all areas (that is, the market 
basket percentage increase of 3.1 percent minus 1.1 percentage points);
    <bullet> 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;
    <bullet> An adjustment to ensure budget neutrality as provided for 
in section 1886(d)(8)(D) of the Act by removing the FY 2000 budget 
neutrality factor and applying a revised factor;
    <bullet> An adjustment to apply the revised outlier offset by 
removing the FY 2000 outlier offsets and applying a new offset; and
    <bullet> 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 table 1E of section VI of 
this Addendum, which apply to sole community hospitals, reflect updates 
of 3.1 percent (that is, the full market basket percentage increase) as 
provided for in section 406 of Public Law 106-113, 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 us to determine the 
Medicare target amounts for each hospital located in Puerto Rico for 
its cost reporting period beginning in FY 1987. The September 1, 1987 
final rule (52 FR 33043, 33066) contains a detailed explanation of how 
the target amounts were determined and how they are used in computing 
the Puerto Rico rates.
    The standardized amounts are based on per discharge averages of 
adjusted hospital costs from a base period or, for Puerto Rico, 
adjusted target amounts from a base period, updated and otherwise 
adjusted in accordance with the provisions of section 1886(d) of the 
Act. Sections 1886(d)(2)(B) and (d)(2)(C) of the Act required us to 
update base-year per discharge costs for FY 1984 and then standardize 
the cost data in order to remove the effects of certain sources of cost 
variations among hospitals. These effects include case-mix, differences 
in area wage levels, cost-of-living adjustments for Alaska and Hawaii, 
indirect medical education costs, and payments to hospitals serving a 
disproportionate share of low-income patients.
    Under sections 1886(d)(2)(H) and (d)(3)(E) of the Act, in making 
payments under the prospective payment system, the Secretary estimates 
from time to time the proportion of costs that are wages and wage-
related costs. Since October 1, 1997, when the market basket was last 
revised, we have considered 71.1 percent of costs to be labor-related 
for purposes of the prospective payment system. The average labor share 
in Puerto Rico is 71.3 percent. We are proposing to revise the 
discharge-weighted national standardized amount for Puerto Rico to 
reflect the proportion of discharges in large urban and other areas 
from the FY 1999 MedPAR file.
2. Computing Large Urban and Other Area Averages
    Sections 1886(d)(2)(D) and (d)(3) of the Act require the Secretary 
to compute two average standardized amounts for discharges occurring in 
a fiscal year: one for hospitals located in large urban areas and one 
for hospitals located in other areas. In addition, under sections 
1886(d)(9)(B)(iii) and (d)(9)(C)(i) of the Act, the average 
standardized amount per discharge must be determined for hospitals 
located in urban and other areas in Puerto Rico. Hospitals in Puerto 
Rico are paid a blend of 50 percent of the applicable Puerto Rico 
standardized amount and 50 percent of a national standardized payment 
amount.
    Section 1886(d)(2)(D) of the Act defines ``urban area'' as those 
areas within a Metropolitan Statistical Area (MSA). A ``large urban 
area'' is defined as an urban area with a population of more than 1 
million. In addition, section 4009(i) of Public Law 100-203 provides 
that a New England County Metropolitan Area (NECMA) with a population 
of more than 970,000 is classified as a large urban area. As required 
by section 1886(d)(2)(D) of the Act, population size is determined by 
the Secretary based on the latest population data published by the 
Bureau of the Census. Urban areas that do not meet the definition of a 
``large urban area'' are referred to as ``other urban areas.'' Areas 
that are not included in MSAs are considered ``rural areas'' under 
section 1886(d)(2)(D) of the Act. Payment for discharges from hospitals 
located in large urban areas will be based on the large urban 
standardized amount. Payment for discharges from hospitals located in 
other urban and rural areas will be

[[Page 26328]]

based on the other standardized amount.
    Based on 1997 population estimates published by the Bureau of the 
Census, 61 areas meet the criteria to be defined as large urban areas 
for FY 2001. These areas are identified by a footnote in Table 4A.
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 proposing to update the large 
urban areas' and the other areas' average standardized amounts for FY 
2001 using the applicable percentage increases specified in section 
1886(b)(3)(B)(i) of the Act. Section 1886(b)(3)(B)(i)(XVI) of the Act 
specifies that the update factor for the standardized amounts for FY 
2001 is equal to the market basket percentage increase minus 1.1 
percentage points for hospitals, except sole community hospitals, in 
all areas. The Act, as amended by section 406 of Public Law 106-113, 
specifies an update factor equal to the market basket percentage 
increase for sole community hospitals.
    The percentage change in the market basket reflects the average 
change in the price of goods and services purchased by hospitals to 
furnish inpatient care. The most recent forecast of the hospital market 
basket increase for FY 2001 is 3.1 percent. Thus, for FY 2001, the 
proposed update to the average standardized amounts equals 3.1 percent 
for sole community hospitals and 2.0 percent for other hospitals.
    As in the past, we are adjusting the FY 2000 standardized amounts 
to remove the effects of the FY 2000 geographic reclassifications and 
outlier payments before applying the FY 2001 updates. That is, we are 
increasing the standardized amounts to restore the reductions that were 
made for the effects of geographic reclassification and outliers. We 
then apply the new offsets to the standardized amounts for outliers and 
geographic reclassifications for FY 2001.
    Although the update factors for FY 2001 are set by law, we are 
required by section 1886(e)(3) of the Act to report to the Congress our 
initial recommendation of update factors for FY 2001 for both 
prospective payment hospitals and hospitals excluded from the 
prospective payment system. For general information purposes, we have 
included the report to Congress as Appendix C to this proposed rule. 
Our proposed recommendation on the update factors (which is required by 
sections 1886(e)(4)(A) and (e)(5)(A) of the Act) is set forth as 
Appendix D to this proposed rule.
4. Other Adjustments to the Average Standardized Amounts
a. Recalibration of DRG Weights and Updated Wage Index--Budget 
Neutrality Adjustment
    Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in 
FY 1991, the annual DRG reclassification and recalibration of the 
relative weights must be made in a manner that ensures that aggregate 
payments to hospitals are not affected. As discussed in section II of 
the preamble, we normalized the recalibrated DRG weights by an 
adjustment factor, so that the average case weight after recalibration 
is equal to the average case weight prior to recalibration.
    Section 1886(d)(3)(E) of the Act requires us to update the hospital 
wage index on an annual basis beginning October 1, 1993. This provision 
also requires us to make any updates or adjustments to the wage index 
in a manner that ensures that aggregate payments to hospitals are not 
affected by the change in the wage index.
    To comply with the requirement of section 1886(d)(4)(C)(iii) of the 
Act that DRG reclassification and recalibration of the relative weights 
be budget neutral, and the requirement in section 1886(d)(3)(E) of the 
Act that the updated wage index be budget neutral, we used historical 
discharge data to simulate payments and compared aggregate payments 
using the FY 2000 relative weights and wage index to aggregate payments 
using the proposed FY 2001 relative weights and wage index. The same 
methodology was used for the FY 2000 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 0.996506. We also adjust the Puerto Rico-specific 
standardized amounts for the effect of DRG reclassification and 
recalibration. We computed a budget neutrality adjustment factor for 
Puerto Rico-specific standardized amounts equal to 0.999753. These 
budget neutrality adjustment factors are applied to the standardized 
amounts without removing the effects of the FY 2000 budget neutrality 
adjustments. We do not remove the prior budget neutrality adjustment 
because estimated aggregate payments after the changes in the DRG 
relative weights and wage index should equal estimated aggregate 
payments prior to the changes. If we removed the prior year adjustment, 
we would not satisfy this condition.
    In addition, we are proposing to apply these same adjustment 
factors to the hospital-specific rates that are effective for cost 
reporting periods beginning on or after October 1, 2000. (See the 
discussion in the September 4, 1990 final rule (55 FR 36073).)
b. Reclassified Hospitals--Budget Neutrality Adjustment
    Section 1886(d)(8)(B) of the Act provides that, effective with 
discharges occurring on or after October 1, 1988, certain rural 
hospitals are deemed urban. In addition, section 1886(d)(10) of the Act 
provides for the reclassification of hospitals based on determinations 
by the Medicare Geographic Classification Review Board (MGCRB). Under 
section 1886(d)(10) of the Act, a hospital may be reclassified for 
purposes of the standardized amount or the wage index, or both.
    Under section 1886(d)(8)(D) of the Act, the Secretary is required 
to adjust the standardized amounts so as to ensure that aggregate 
payments under the prospective payment system after implementation of 
the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the 
Act are equal to the aggregate prospective payments that would have 
been made absent these provisions. Section 152(b) of Public Law 106-113 
requires reclassifications under that subsection to be treated as 
reclassifications under section 1886(d)(10) of the Act. 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. Based on these 
simulations, we are applying an adjustment factor of 0.994270 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 2000 budget neutrality adjustment 
factor. We note that the proposed FY 2001 adjustment reflects wage 
index and standardized amount reclassifications approved by the MGCRB 
or the Administrator as of February 29, 2000. The effects of any 
additional reclassification changes resulting from appeals and reviews 
of the MGCRB decisions for FY 2001 or from a hospital's request for the 
withdrawal of a reclassification request will be reflected in the final 
budget neutrality adjustment published in the final rule for FY 2001.

[[Page 26329]]

c. Outliers
    Section 1886(d)(5)(A) of the Act provides for payments in addition 
to the basic prospective payments for ``outlier'' cases, cases 
involving extraordinarily high costs (cost outliers). Section 
1886(d)(3)(B) of the Act requires the Secretary to adjust both the 
large urban and other area national standardized amounts by the same 
factor to account for the estimated proportion of total DRG payments 
made to outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act 
requires the Secretary to adjust the large urban and other standardized 
amounts applicable to hospitals in Puerto Rico to account for the 
estimated proportion of total DRG payments made to outlier cases. 
Furthermore, under section 1886(d)(5)(A)(iv) of the Act, outlier 
payments for any year must be projected to be not less than 5 percent 
nor more than 6 percent of total payments based on DRG prospective 
payment rates.
    i. FY 2001 outlier thresholds. For FY 2000, the fixed loss cost 
outlier threshold was equal to the prospective payment for the DRG plus 
$14,050 ($12,827 for hospitals that have not yet entered the 
prospective payment system for capital-related costs). The marginal 
cost factor for cost outliers (the percent of costs paid after costs 
for the case exceed the threshold) was 80 percent. We applied an 
outlier adjustment to the FY 2000 standardized amounts of 0.948859 for 
the large urban and other areas rates and 0.9402 for the capital 
Federal rate.
    For FY 2001, we propose to establish a fixed loss cost outlier 
threshold equal to the prospective payment rate for the DRG plus the 
IME and DSH payments plus $17,250 ($15,763 for hospitals that have not 
yet entered the prospective payment system for capital-related costs). 
In addition, we propose to maintain the marginal cost factor for cost 
outliers at 80 percent.
    To calculate FY 2001 outlier thresholds, we simulated payments by 
applying FY 2001 rates and policies to the December 1999 update of the 
FY 1999 MedPAR file and the December 1999 update of the provider-
specific file. As we have explained in the past, to calculate outlier 
thresholds, we apply a cost inflation factor to update costs for the 
cases used to simulate payments. For FY 1999, we used a cost inflation 
factor of minus 1.724 percent. For FY 2000, we used a cost inflation 
factor (or cost adjustment factor) of zero percent. To set the proposed 
FY 2001 outlier thresholds, we are using a cost inflation factor of 1.0 
percent. This factor reflects our analysis of the best available cost 
report data as well as calculations (using the best available data) 
indicating that the percentage of actual outlier payments for FY 1999 
is higher than we projected before the beginning of FY 1999, and that 
the percentage of actual outlier payments for FY 2000 will likely be 
higher than we projected before the beginning of FY 2000. The 
calculations of ``actual'' outlier payments are discussed further 
below.
    ii. Other changes concerning outliers. In accordance with section 
1886(d)(5)(A)(iv) of the Act, we calculated proposed outlier thresholds 
so that outlier payments are projected to equal 5.1 percent of total 
payments based on DRG prospective payment rates. In accordance with 
section 1886(d)(3)(E), we reduced the proposed FY 2001 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 2001 will result in outlier 
payments equal to 5.1 percent of operating DRG payments and 5.8 percent 
of capital payments based on the Federal rate.
    The proposed outlier adjustment factors to be applied to the 
standardized amounts for FY 2001 are as follows:

------------------------------------------------------------------------
                                                Operating       Capital
                                               standardized     federal
                                                 amounts         rate
------------------------------------------------------------------------
National...................................         0.948865      0.9416
Puerto Rico................................         0.975408      0.9709
------------------------------------------------------------------------

    We apply the proposed outlier adjustment factors after removing the 
effects of the FY 2000 outlier adjustment factors on the standardized 
amounts.
    Table 8A in section VI of this Addendum contains the updated 
Statewide average operating cost-to-charge ratios for urban hospitals 
and for rural hospitals to be used in calculating cost outlier payments 
for those hospitals for which the fiscal intermediary is unable to 
compute a reasonable hospital-specific cost-to-charge ratio. These 
Statewide average ratios would replace the ratios published in the July 
30, 1999 final rule (64 FR 41620). Table 8B contains comparable 
Statewide average capital cost-to-charge ratios. These average ratios 
would be used to calculate cost outlier payments for those hospitals 
for which the fiscal intermediary computes operating cost-to-charge 
ratios lower than 0.201132 or greater than 1.308495 and capital cost-
to-charge ratios lower than 0.01266 or greater than 0.16901. This range 
represents 3.0 standard deviations (plus or minus) from the mean of the 
log distribution of cost-to-charge ratios for all hospitals. We note 
that the cost-to-charge ratios in Tables 8A and 8B would be used during 
FY 2001 when hospital-specific cost-to-charge ratios based on the 
latest settled cost report are either not available or outside the 
three standard deviations range.
    iii. FY 1999 and FY 2000 outlier payments. In the July 30, 1999 
final rule (64 FR 41547), we stated that, based on available data, we 
estimated that actual FY 1999 outlier payments would be approximately 
6.3 percent of actual total DRG payments. This was computed by 
simulating payments using the March 1998 bill data available at the 
time. That is, the estimate of actual outlier payments did not reflect 
actual FY 1999 bills but instead reflected the application of FY 1999 
rates and policies to available FY 1998 bills. Our current estimate, 
using available FY 1999 bills, is that actual outlier payments for FY 
1999 were approximately 7.5 percent of actual total DRG payments. We 
note that the MedPAR file for FY 1999 discharges continues to be 
updated. Thus, the data indicate that, for FY 1999, the percentage of 
actual outlier payments relative to actual total payments is higher 
than we projected before FY 1999 (and thus exceeds the percentage by 
which we reduced the standardized amounts for FY 1999). In fact, the 
data indicate that the proportion of actual outlier payments for FY 
1999 exceeds 6 percent. Nevertheless, consistent with the policy and 
statutory interpretation we have maintained since the inception of the 
prospective payment system, we do not plan to recoup money and make 
retroactive adjustments to outlier payments for FY 1999.
    We currently estimate that actual outlier payments for FY 2000 will 
be approximately 6.1 percent of actual total DRG payments, higher than 
the 5.1 percent we projected in setting outlier policies for FY 2000. 
This estimate is based on simulations using the December 1999 update of 
the provider-specific file and the December 1999 update of the FY 1999 
MedPAR file (discharge data for FY 1999 bills). We used these data to 
calculate an estimate of the actual outlier percentage for FY 2000 by 
applying FY 2000 rates and policies to available FY 1999 bills.

[[Page 26330]]

    5. FY 2001 Standardized Amounts
    The adjusted standardized amounts are divided into labor and 
nonlabor portions. Table 1A (Table 1E for sole community hospitals) 
contains the two national standardized amounts that we are proposing to 
be applicable to all hospitals, except hospitals in Puerto Rico. Under 
section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto 
Rico payment rate is based on the discharge-weighted average of the 
national large urban standardized amount and the national other 
standardized amount (as set forth in Table 1A). The labor and nonlabor 
portions of the national average standardized amounts for Puerto Rico 
hospitals are set forth in Table 1C. This table also includes the 
Puerto Rico standardized amounts.

B. Adjustments for Area Wage Levels and Cost of Living

    Tables 1A, 1C and 1E, as set forth in this Addendum, contain the 
proposed labor-related and nonlabor-related shares that would be used 
to calculate the prospective payment rates for hospitals located in the 
50 States, the District of Columbia, and Puerto Rico. This section 
addresses two types of adjustments to the standardized amounts that are 
made in determining the prospective payment rates as described in this 
Addendum.
1. Adjustment for Area Wage Levels
    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that we make an adjustment to the labor-related portion of the 
prospective payment rates to account for area differences in hospital 
wage levels. This adjustment is made by multiplying the labor-related 
portion of the adjusted standardized amounts by the appropriate wage 
index for the area in which the hospital is located. In section III of 
this preamble, we discuss the data and methodology for the proposed FY 
2001 wage index. The proposed 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 2001, 
we propose to adjust the payments for hospitals in Alaska and Hawaii by 
multiplying the nonlabor portion of the standardized amounts by the 
appropriate adjustment factor contained in the table below. If the 
Office of Personnel Management releases revised cost-of-living 
adjustment factors before July 1, 2000, we will publish them in the 
final rule and use them in determining FY 2001 payments.

 Table of Cost-of-Living Adjustment Factors, Alaska and Hawaii Hospitals
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Alaska--All areas................................................  1.25
Hawaii:
    County of Honolulu...........................................  1.25
    County of Hawaii.............................................  1.15
    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 VI of this Addendum contains the 
relative weights that we are proposing to use for discharges occurring 
in FY 2001. These factors have been recalibrated as explained in 
section II of the preamble.

D. Calculation of Prospective Payment Rates for FY 2001

General Formula for Calculation of Prospective Payment Rates for FY 
2001

    Prospective payment rate for all hospitals located outside of 
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: the 
Federal national rate, the updated hospital-specific rate based on FY 
1982 cost per discharge, the updated hospital-specific rate based on FY 
1987 cost per discharge, or, if the sole community hospital was paid 
for its cost reporting period beginning during FY 1999 on the basis of 
either its FY 1982 or FY 1987 hospital-specific rate and elects 
rebasing, 25 percent of its updated hospital-specific rate based on FY 
1996 cost per discharge plus 75 percent of its updated FY 1982 or FY 
1987 hospital-specific rate.
    Prospective payment rate for Medicare-dependent, small rural 
hospitals = 100 percent of the Federal rate, or, if the greater of the 
updated FY 1982 hospital-specific rate or the updated FY 1987 hospital-
specific rate is higher than the Federal rate, 100 percent of the 
Federal rate plus 50 percent of the difference between the applicable 
hospital-specific rate and the Federal rate.
    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 Federal national other 
standardized amount.
1. Federal Rate
    For discharges occurring on or after October 1, 2000 and before 
October 1, 2001, 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.
    The payment amount is determined as follows:
    Step 1--Select the appropriate national standardized amount 
considering the type of hospital and designation of the hospital as 
large urban or other (see Table 1A or 1E in section VI 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 VI 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 VI 
of this Addendum).
2. Hospital-Specific Rate (Applicable Only to Sole Community Hospitals 
and Medicare-Dependent, Small Rural Hospitals)
    Section 1886(b)(3)(C) of the Act, as amended by section 405 of 
Public Law 106-113, provides that sole community hospitals are paid 
based on whichever of the following rates yields the greatest aggregate 
payment: the Federal national rate, the updated hospital-specific rate 
based on FY 1982 cost per discharge, the updated hospital-specific rate 
based on FY 1987 cost per discharge, or, if the sole community hospital 
was paid for its cost reporting period beginning during FY 1999 on the 
basis of either its FY 1982 or FY 1987 hospital-specific

[[Page 26331]]

rate and elects rebasing, 25 percent of its updated hospital-specific 
rate based on FY 1996 cost per discharge plus 75 percent of the updated 
FY 1982 or FY 1987 hospital-specific rate.
    Section 1886(d)(5)(G) of the Act, as amended by section 404 of 
Public Law 106-113, provides that Medicare-dependent, small rural 
hospitals are paid based on whichever of the following rates yields the 
greatest aggregate payment: the Federal rate or the Federal rate plus 
50 percent of the difference between the Federal rate and the greater 
of the updated hospital-specific rate based on FY 1982 and FY 1987 cost 
per discharge.
    Hospital-specific rates have been determined for each of these 
hospitals based on either the FY 1982 cost per discharge, the FY 1987 
cost per discharge or, for qualifying sole community hospitals, the FY 
1996 cost per discharge. For a more detailed discussion of the 
calculation of the hospital-specific rates, we refer the reader to the 
September 1, 1983 interim final rule (48 FR 39772); the April 20, 1990 
final rule with comment (55 FR 15150); and the September 4, 1990 final 
rule (55 FR 35994).
a. Updating the FY 1982 and FY 1987 Hospital-Specific Rates for FY 2001
    We are proposing to increase the hospital-specific rates by 3.1 
percent (the hospital market basket rate of increase) for sole 
community hospitals and by 2.0 percent (the hospital market basket 
percentage increase minus 1.1 percentage points) for Medicare-
dependent, small rural hospitals for FY 2001. Section 1886(b)(3)(C)(iv) 
of the Act provides that the update factor applicable to the hospital-
specific rates for sole community hospitals equal the update factor 
provided under section 1886(b)(3)(B)(iv) of the Act, which, for sole 
community hospitals in FY 2001, is the market basket rate of increase. 
Section 1886(b)(3)(D) of the Act provides that the update factor 
applicable to the hospital-specific rates for Medicare-dependent, small 
rural hospitals equal the update factor provided under section 
1886(b)(3)(B)(iv) of the Act, which, for FY 2001, is the market basket 
rate of increase minus 1.1 percentage points.
b. Calculation of Hospital-Specific Rate
    For sole community hospitals, the applicable FY 2001 hospital-
specific rate would be the greater of the following: the hospital-
specific rate for the preceding fiscal year, increased by the 
applicable update factor (3.1 percent); or, if the hospital qualifies 
to rebase its hospital-specific rate based on cost per case in FY 1996 
and elects rebasing, 75 percent of the hospital-specific rate for the 
preceding fiscal year, increased by the applicable update factor, plus 
25 percent of its rebased FY 1996 hospital-specific rate updated 
through FY 2001. For Medicare-dependent, small rural hospitals, the 
applicable FY 2001 hospital-specific rate would be calculated by 
increasing the hospital's hospital-specific rate for the preceding 
fiscal year by the applicable update factor (2.0 percent), which is the 
same as the update for all prospective payment hospitals, except sole 
community hospitals. In addition, the hospital-specific rate would be 
adjusted by the budget neutrality adjustment factor (that is, 0.996506) 
as discussed in section II.A.4.a. of this Addendum. The resulting rate 
is 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, 2000, based on the formula set forth 
above.
3. General Formula for Calculation of Prospective Payment Rates for 
Hospitals Located in Puerto Rico Beginning On or After October 1, 2000 
and Before October 1, 2001
a. Puerto Rico Rate
    The Puerto Rico prospective payment rate is determined as follows:
    Step 1--Select the appropriate adjusted average standardized amount 
considering the large urban or other designation of the hospital (see 
Table 1C of section VI 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 VI 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 VI of the Addendum).
b. National Rate
    The national prospective payment rate is determined as follows:
    Step 1--Multiply the labor-related portion of the national average 
standardized amount (see Table 1C of section VI of the Addendum) by the 
appropriate national wage index (see Tables 4A and 4B of section VI 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 VI 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 the Payment Rates for Blood Clotting Factor for 
Hemophilia Inpatients

    For the past 2 years in the Federal Register (63 FR 41010 and 64 FR 
41549), we have discussed section 4452 of Public Law 105-33, which 
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. In 
these prior rules, we have described the payment policy and 
specifically listed the updated add-on payment amounts for each 
clotting factor, as described by HCFA's Common Procedure Coding System 
(HCPCS). Because we are not changing the policy established 2 years 
ago, we are proposing to discontinue listing these amounts in the 
annual proposed and final rules. Instead, the program manuals will 
instruct fiscal intermediaries to follow this policy and obtain the 
average wholesale price (AWP) for each relevant HCPCS from either their 
corresponding local carrier or the Medicare durable medical equipment 
regional carrier (DMERC) that has jurisdiction in their area. Carriers 
already calculate the AWP based on the median AWP of the several 
products available in each category of factor. The payment amount for 
clotting factors covered by this inpatient benefit is equal to 85 
percent of the AWP, subject to the Part A deductible and coinsurance 
requirements.
    The payment amounts will be determined using the most recent AWP 
data available to the carrier at the time the intermediary performs 
these annual update calculations. These amounts are updated annually 
and are effective for discharges beginning on or after October 1 of the 
current year through September 30 of the following year. Payment will 
be made for blood clotting factor only if there is an ICD-9-CM 
diagnosis code for hemophilia included on the bill.

[[Page 26332]]

IV. Proposed Changes to Payment Rates for Inpatient Capital-Related 
Costs for FY 2001

    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 proposed Federal rate and the 
hospital-specific rates for FY 2001. The rates will be effective for 
discharges occurring on or after October 1, 2000.
    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. Section 412.308(b)(2) describes the 7.4 percent reduction to 
the rate that 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 the FY 1998 final rule with 
comment period (62 FR 45966), we implemented section 4402 of Public Law 
105-33, which requires that for discharges occurring on or after 
October 1, 1997, and before October 1, 2002, the unadjusted standard 
Federal rate is reduced by 17.78 percent. A small part of that 
reduction will be restored effective October 1, 2002.
    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 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. For 
discharges occurring on or after October 1, 1997, and before October 1, 
2002, the unadjusted hospital-specific rate is reduced by 17.78 
percent. A small part of this 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 of this proposed rule.
    In accordance with section 1886(d)(9)(A) of the Act, under the 
prospective payment system for inpatient operating costs, hospitals 
located in Puerto Rico are paid for operating costs under a special 
payment formula. Prior to FY 1998, hospitals in Puerto Rico were paid a 
blended rate that consisted of 75 percent of the applicable 
standardized amount specific to Puerto Rico hospitals and 25 percent of 
the applicable national average standardized amount. However, effective 
October 1, 1997, as a result of section 4406 of Public Law 105-33, 
operating payments to hospitals in Puerto Rico are based on a blend of 
50 percent of the applicable standardized amount specific to Puerto 
Rico hospitals and 50 percent of the applicable national average 
standardized amount. In conjunction with this change to the operating 
blend percentage, effective with discharges on or after October 1, 
1997, we compute capital payments to hospitals in Puerto Rico based on 
a blend of 50 percent of the Puerto Rico rate and 50 percent of the 
Federal rate.
    Section 412.374 provides for the use of this blended payment system 
for payments to Puerto Rico hospitals under the prospective payment 
system for inpatient capital-related costs. Accordingly, for capital-
related costs, we compute a separate payment rate specific to Puerto 
Rico hospitals using the same methodology used to compute the national 
Federal rate for capital.

A. Determination of Federal Inpatient Capital-Related Prospective 
Payment Rate Update

    In the July 30, 1999 final rule (64 FR 41551), we established a 
Federal rate of $377.03 for FY 2000. As a result of the changes we are 
proposing to the factors used to establish the Federal rate in this 
addendum, the proposed FY 2001 Federal rate is $383.06.
    In the discussion that follows, we explain the factors that were 
used to determine the proposed FY 2001 Federal rate. In particular, we 
explain why the proposed FY 2001 Federal rate has increased 1.60 
percent compared to the FY 2000 Federal rate. We also estimate 
aggregate capital payments will increase by 5.89 percent during this 
same period. This increase is primarily due to the increase in the 
number of hospital admissions, the increase in case-mix, and the 
increase in the Federal blend percentage from 90 to 100 percent for 
fully prospective payment hospitals.
    Total payments to hospitals under the prospective payment system 
are relatively unaffected by changes in the capital prospective 
payments. Since capital payments constitute about 10 percent of 
hospital payments, a 1 percent change in the capital Federal rate 
yields only about 0.1 percent change in actual payments to hospitals. 
Aggregate payments under the capital prospective payment transition 
system are estimated to increase in FY 2001 compared to FY 2000.
1. Standard Federal Rate Update
a. Description of the Update Framework
    Under Sec. 412.308(c)(1), the standard Federal rate is updated on 
the basis of

[[Page 26333]]

an analytical framework that takes into account changes in a capital 
input price index and other factors. The update framework consists of a 
capital input price index (CIPI) and several policy adjustment factors. 
Specifically, we have adjusted the projected CIPI rate of increase as 
appropriate each year for case-mix index-related changes, for 
intensity, and for errors in previous CIPI forecasts. The proposed 
update factor for FY 2001 under that framework is 0.9 percent. This 
proposal is based on a projected 0.9 percent increase in the CIPI, a 
0.0 percent adjustment for intensity, a 0.0 percent adjustment for 
case-mix, a 0.0 percent adjustment for the FY 1999 DRG reclassification 
and recalibration, and a forecast error correction of 0.0 percent. We 
explain the basis for the FY 2001 CIPI projection in section II.D of 
this Addendum. In this section IV of the Addendum, 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:
    <bullet> The average resource use of Medicare patients changes 
(``real'' case-mix change);
    <bullet> Changes in hospital coding of patient records result in 
higher weight DRG assignments (``coding effects''); and
    <bullet> 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 1999 DRG 
reclassification and recalibration as part of our FY 2001 update 
recommendation.) We have adopted this case-mix index adjustment in the 
capital update framework as well.
    For FY 2001, we are projecting a 0.5 percent increase in the case-
mix index. We estimate that real case-mix increase will equal 0.5 
percent in FY 2001. Therefore, the proposed net adjustment for case-mix 
change in FY 2001 is 0.0 percentage points.
    We estimate that FY 1999 DRG reclassification and recalibration 
will result in a 0.0 percent change in the case-mix when compared with 
the case-mix index that would have resulted if we had not made the 
reclassification and recalibration changes to the DRGs. Therefore, we 
are making a 0.0 percent adjustment for DRG reclassification and 
recalibration in the update recommendation for FY 2001.
    The capital update framework contains an adjustment for forecast 
error. The input price index forecast is based on historical trends and 
relationships ascertainable at the time the update factor is 
established for the upcoming year. In any given year there may be 
unanticipated price fluctuations that may result in differences between 
the actual increase in prices and the forecast used in calculating the 
update factors. In setting a prospective payment rate under the 
framework, we make an adjustment for forecast error only if our 
estimate of the change in the capital input price index for any year is 
off by 0.25 percentage points or more. There is a 2-year lag between 
the forecast and the measurement of the forecast error. A forecast 
error of 0.0 percentage points was calculated for the FY 1999 update. 
That is, current historical data indicate that the FY 1999 CIPI used in 
calculating the forecasted FY 1999 update factor did not overstate or 
understate realized price increases. Therefore, we are making a 0.0 
percent adjustment for forecast error in the update for FY 2001.
    Under the capital prospective payment system framework, we also 
make an adjustment for changes in intensity. We calculate this 
adjustment using the same methodology and data as in the framework for 
the operating prospective payment system. The intensity factor for the 
operating update framework reflects how hospital services are utilized 
to produce the final product, that is, the discharge. This component 
accounts for changes in the use of quality-enhancing services, changes 
in within-DRG severity, and expected modification of practice patterns 
to remove cost-ineffective services.
    We calculate case-mix constant intensity as the change in total 
charges per admission, adjusted for price level changes (the CPI for 
hospital and related services), and changes in real case-mix. The use 
of total charges in the calculation of the proposed intensity factor 
makes it a total intensity factor, that is, charges for capital 
services are already built into the calculation of the factor. 
Therefore, we have incorporated the intensity adjustment from the 
operating update framework into the capital update framework. Without 
reliable estimates of the proportions of the overall annual intensity 
increases that are due, respectively, to ineffective practice patterns 
and to the combination of quality-enhancing new technologies and 
within-DRG complexity, we assume, as in the revised operating update 
framework, that one-half of the annual increase is due to each of these 
factors. The capital update framework thus provides an add-on to the 
input price index rate of increase of one-half of the estimated annual 
increase in intensity to allow for within-DRG severity increases and 
the adoption of quality-enhancing technology.
    For FY 2001, we have developed a Medicare-specific intensity 
measure based on a 5-year average using FY 1995 through 1999 data. In 
determining case-mix constant intensity, we found that observed case-
mix increase was 1.7 percent in FY 1995, 1.6 percent in FY 1996, 0.3 
percent in FY 1997,-0.4 percent in FY 1998, and -0.3 in FY 1999. For 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 usually 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 
1995 through FY 1999. Based on this analysis, we believe that all of 
the observed case-mix increase for FY 1997, FY 1998, and FY 1999 is 
real. The increases for FY 1995 and FY 1996 were in excess of our 
estimate of real case-mix increase.
    We calculate case-mix constant intensity as the change in total 
charges per admission, adjusted for price level

[[Page 26334]]

changes (the CPI for hospital and related services), and changes in 
real case-mix. Given estimates of real case-mix of 1.0 percent for FY 
1995, 1.0 percent for FY 1996, 0.3 percent for FY 1997, -0.4 for FY 
1998, and -0.3 for FY 1999, we estimate that case-mix constant 
intensity declined by an average 0.7 percent during FYs 1995 through 
1999, for a cumulative decrease of 3.6 percent. If we assume that real 
case-mix increase was 1.4 percent for FY 1995, 1.4 percent for FY 1996, 
0.3 percent for FY 1997, -0.4 for FY 1998, and -0.3 for FY 1999, we 
estimate that case-mix constant intensity declined by an average 0.9 
percent during FYs 1995 through 1999, for a cumulative decrease of 4.5 
percent. Since we estimate that intensity has declined during that 
period, we are recommending a 0.0 percent intensity adjustment for FY 
2001. We note that the operating recommendation addressed in Appendix D 
of this proposed rule reflects the possible range that a negative 
adjustment could span (-0.6 percent to 0.0 percent adjustment) based on 
our analyses that intensity has declined during that 5-year period. 
While the calculation of the adjustment for intensity is identical in 
both the capital and the operating update frameworks, consistent with 
past capital update recommendations and the FY 2001 proposed operating 
recommendation, we are not making a negative adjustment for intensity 
in the FY 2001 proposed capital update.
b. Comparison of HCFA and MedPAC Update Recommendations
    MedPAC's FY 2001 update recommendation for capital prospective 
payments was not included in its March 2000 Report to Congress. 
However, MedPAC did announce at its April 13, 2000 public meeting that 
it was recommending a combined update of between 3.5 percent and 4.0 
percent for operating and capital-related payments for FY 2001. This 
recommendation is higher than the current law amount as prescribed by 
Public Law 105-33. Because of the timing of the announcement and our 
need for ample time to perform a proper analysis of the recommendation, 
we will address the comparison of HCFA's update recommendation and 
MedPAC's update recommendation in the FY 2001 final rule in August 2000 
when we will have had the opportunity to review the data analyses that 
substantiate MedPAC's recommendation.
    In section IV.A.l.a. of this Addendum, we describe the basis of the 
components used to develop our proposed 0.9 percent FY 2001 capital 
update factor as shown in Table 1 below.

         Table 1.--HCFA's Proposed FY 2001 Capital Update Factor
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Capital Input Price Index....................................        0.9
Intensity....................................................        0.0
Case-Mix Adjustment Factors:
    Projected Case-Mix Change................................       -0.5
    Real Across DRG Change...................................        0.5
                                                              ----------
        Subtotal.............................................        0.0
Effect of FY 1999 Reclassification and Recalibration.........        0.0
Forecast Error Correction....................................        0.0
Total Update.................................................        0.9
------------------------------------------------------------------------

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. 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, 100 
percent for cost reporting periods beginning in FY 2001 for hospitals 
paid under the fully prospective payment 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 payments that would be made if all 
hospitals were paid 100 percent of the Federal rate. For purposes of 
calculating the outlier thresholds and the outlier reduction factor, we 
model payments as if all hospitals 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 July 30, 1999 final rule, we estimated that outlier payments 
for capital in FY 2000 would equal 5.98 percent of inpatient capital-
related payments based on the Federal rate (64 FR 41553). Accordingly, 
we applied an outlier adjustment factor of 0.9402 to the Federal rate. 
Based on the thresholds as set forth in section II.A.4.d. of this 
Addendum, we estimate that outlier payments for capital will equal 5.84 
percent of inpatient capital-related payments based on the Federal rate 
in FY 2001. Therefore, we are proposing an outlier adjustment factor of 
0.9416 to the Federal rate. Thus, the projected percentage of capital 
outlier payments to total capital standard payments for FY 2001 is 
lower than the percentage for FY 2000.
    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 proposed net change in the outlier 
adjustment to the Federal rate for FY 2001 is 1.0015 (0.9416/0.9402). 
The outlier adjustment increases the FY 2001 Federal rate by 0.15 
percent compared with the FY 2000 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 GAF are projected 
to equal aggregate payments that would have been made on the basis of 
the Federal rate without such changes. We use the actuarial model, 
described in Appendix B of this proposed rule, to estimate the 
aggregate payments that would have been made on the basis of the 
Federal rate without changes in the DRG classifications and weights and 
in the GAF. We also use the model to estimate aggregate payments that 
would be made on the basis of the Federal rate as a result of those 
changes. We then use these figures to compute the adjustment required 
to maintain budget neutrality for changes in DRG weights and in the 
GAF.
    For FY 2000, we calculated a GAF/DRG budget neutrality factor of 
0.9985. For FY 2001, we are proposing a GAF/DRG budget neutrality 
factor of 0.9986. The GAF/DRG budget neutrality factors are built 
permanently into the rates; that is, they are applied cumulatively in 
determining the Federal rate. This follows from the requirement that 
estimated aggregate payments each year be no more than they would have 
been in the absence of the annual DRG reclassification and 
recalibration and changes in the GAF. The proposed incremental change 
in the adjustment from FY 2000 to FY 2001 is 0.9986. The proposed 
cumulative change in the rate due to this adjustment is 1.0060 (the 
product of the incremental factors for FY 1993, FY 1994, FY 1995, FY 
1996,

[[Page 26335]]

FY 1997, FY 1998, FY 1999, FY 2000, and the proposed incremental factor 
for FY 2001:
0.9980  x  1.0053  x  0.9998
 x  0.9994  x  0.9987  x  0.9989
 x  1.0028  x  0.9985  x  0.9986 = 1.0000).
    This proposed factor accounts for DRG reclassifications and 
recalibration and for changes in the GAF. It also incorporates the 
effects on the GAF of FY 2001 geographic reclassification decisions 
made by the MGCRB compared to FY 2000 decisions. However, it does not 
account for changes in payments due to changes in the DSH and IME 
adjustment factors or in the large urban add-on.
4. Exceptions Payment Adjustment Factor
    Section 412.308(c)(3) requires that the standard Federal rate for 
inpatient capital-related costs be reduced by an adjustment factor 
equal to the estimated proportion of additional payments for exceptions 
under Sec. 412.348 relative to total payments under the hospital-
specific rate and Federal rate. We use the model originally developed 
for determining the budget neutrality adjustment factor to determine 
the exceptions payment adjustment factor. We describe that model in 
Appendix B to this proposed rule.
    For FY 2000, we estimated that exceptions payments would equal 2.70 
percent of aggregate payments based on the Federal rate and the 
hospital-specific rate. Therefore, we applied an exceptions reduction 
factor of 0.9730 (1-0.0270) in determining the Federal rate. For this 
proposed rule, we estimate that exceptions payments for FY 2001 will 
equal 2.04 percent of aggregate payments based on the Federal rate and 
the hospital-specific rate. Therefore, we are proposing an exceptions 
payment reduction factor of 0.9796 to the Federal rate for FY 2001. The 
proposed exceptions reduction factor for FY 2001 is 0.68 percent higher 
than the factor for FY 2000.
    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 proposed net adjustment to the FY 2001 
Federal rate is 0.9796/0.9730, or 1.0068.
5. Standard Capital Federal Rate for FY 2001
    For FY 2000, the capital Federal rate was $377.03. As a result of 
changes we are proposing to the factors used to establish the Federal 
rate, the proposed FY 2001 Federal rate is $383.06. The proposed 
Federal rate for FY 2001 was calculated as follows:
    <bullet> The proposed FY 2001 update factor is 1.0090; that is, the 
proposed update is 0.90 percent.
    <bullet> The proposed FY 2001 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 0.9986.
    <bullet> The proposed FY 2001 outlier adjustment factor is 0.9416.
    <bullet> The proposed FY 2001 exceptions payments adjustment factor 
is 0.9796.
    Since the Federal rate has already been adjusted for differences in 
case-mix, wages, cost-of-living, indirect medical education costs, and 
payments to hospitals serving a disproportionate share of low-income 
patients, we propose to make no additional adjustments in the standard 
Federal rate for these factors other than the budget neutrality factor 
for changes in the DRG relative weights and the GAF.
    We are providing a chart that shows how each of the factors and 
adjustments for FY 2001 affected the computation of the proposed FY 
2001 Federal rate in comparison to the FY 2000 Federal rate. The 
proposed FY 2001 update factor has the effect of increasing the Federal 
rate by 0.90 percent compared to the rate in FY 2000, while the 
proposed geographic and DRG budget neutrality factor has the effect of 
decreasing the Federal rate by 0.14 percent. The proposed FY 2001 
outlier adjustment factor has the effect of increasing the Federal rate 
by 0.15 percent compared to FY 2000. The proposed FY 2001 exceptions 
reduction factor has the effect of increasing the Federal rate by 0.68 
percent compared to the exceptions reduction for FY 2000. The combined 
effect of all the proposed changes is to increase the proposed Federal 
rate by 1.60 percent compared to the Federal rate for FY 2000.

          Comparison of Factors and Adjustments: FY 2000 Federal Rate and Proposed FY 2001 Federal Rate
----------------------------------------------------------------------------------------------------------------
                                                                   Proposed  FY                       Percent
                                                      FY 2000          2001           Change          change
----------------------------------------------------------------------------------------------------------------
Update factor \1\...............................          1.0030          1.0090          1.0090            0.90
GAF/DRG Adjustment Factor\1\....................          0.9985          0.9986          0.9986           -0.14
Outlier Adjustment Factor\2\....................          0.9402          0.9416          1.0015            0.15
Exceptions Adjustment Factor\2\.................          0.9730          0.9796          1.0068            0.68
Federal Rate....................................         $377.03         $383.06          1.0160           1.60
----------------------------------------------------------------------------------------------------------------
\1\ The update factor and the GAF/DRG budget neutrality factors are built permanently into the rates. Thus, for
  example, the incremental change from FY 2000 to FY 2001 resulting from the application of the 0.9986 GAF/DRG
  budget neutrality factor for FY 2001 is 0.9986.
\2\ The outlier reduction factor and the exceptions reduction factor are not built permanently into the rates;
  that is, these factors are not applied cumulatively in determining the rates. Thus, for example, the net
  change resulting from the application of the FY 2001 outlier reduction factor is 0.9416/0.9402, or 1.0015.

    6. Special Rate for Puerto Rico Hospitals
    As explained at the beginning of section IV of this Addendum, 
hospitals in Puerto Rico are paid based on 50 percent of the Puerto 
Rico rate and 50 percent of the Federal rate. The Puerto Rico rate is 
derived from the costs of Puerto Rico hospitals only, while the Federal 
rate is derived from the costs of all acute care hospitals 
participating in the prospective payment system (including Puerto 
Rico). To adjust hospitals' capital payments for geographic variations 
in capital costs, we apply a geographic adjustment factor (GAF) to both 
portions of the blended rate. The GAF is calculated using the operating 
prospective payment system wage index and varies depending on the MSA 
or rural area in which the hospital is located. We use the Puerto Rico 
wage index to determine the GAF for the Puerto Rico part of the 
capital-blended rate and the national wage index to determine the GAF 
for the national part of the blended rate.
    Since we implemented a separate GAF for Puerto Rico in FY 1998, we 
also apply separate budget neutrality adjustments for the national GAF 
and for the Puerto Rico GAF. However, we apply the same budget 
neutrality factor for DRG reclassifications and recalibration 
nationally and for Puerto Rico. The Puerto Rico GAF budget

[[Page 26336]]

neutrality factor is 1.0031, while the DRG adjustment is 1.0002, for a 
combined cumulative adjustment of 1.0033.
    In computing the payment for a particular Puerto Rico hospital, the 
Puerto Rico portion of the rate (50 percent) is multiplied by the 
Puerto Rico-specific GAF for the MSA in which the hospital is located, 
and the national portion of the rate (50 percent) is multiplied by the 
national GAF for the MSA in which the hospital is located (which is 
computed from national data for all hospitals in the United States and 
Puerto Rico). In FY 1998, we implemented a 17.78 percent reduction to 
the Puerto Rico rate as a result of Public Law 105-33.
    For FY 2000, before application of the GAF, the special rate for 
Puerto Rico hospitals was $174.81. With the changes we are proposing to 
the factors used to determine the rate, the proposed FY 2001 special 
rate for Puerto Rico is $185.38.

B. Calculation of Inpatient Capital-Related Prospective Payments for FY 
2001

    During the capital prospective payment system transition period, a 
hospital is paid for the inpatient capital-related costs under one of 
two 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:
    <bullet> For outliers, by dividing the standard Federal rate by the 
outlier reduction factor for that fiscal year; and
    <bullet> For the payment adjustments applicable to the hospital, by 
multiplying the hospital's GAF, disproportionate share adjustment 
factor, and IME 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 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 the 
following:
    <bullet> 100 percent of the adjusted Federal rate for each 
discharge; or
    <bullet> 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 based on the applicable transition blend percentage of the hospital-
specific rate and the adjusted Federal rate.
    Thus, for FY 2001 payments under the fully prospective methodology 
will be based on 100 percent of the adjusted Federal rate and zero 
percent of the hospital-specific rate.
    Hospitals also may receive outlier payments for those cases that 
qualify under the thresholds established for each fiscal year. Section 
412.312(c) provides for a single set of thresholds to identify outlier 
cases for both inpatient operating and inpatient capital-related 
payments. 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 100 percent 
of the Federal rate for discharges occurring in cost reporting periods 
beginning during FY 2001. Thus, a fully prospective hospital will 
receive 100 percent of the capital-related outlier payment calculated 
for the case for discharges occurring in cost reporting periods 
beginning in FY 2001. For hold-harmless hospitals that are 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 proposed outlier thresholds for FY 2001 are in section 
II.A.4.c. of this Addendum. For FY 2001, a case qualifies as a cost 
outlier if the cost for the case (after standardization for the 
indirect teaching adjustment and disproportionate share adjustment) is 
greater than the prospective payment rate for the DRG plus $17,250.
    During the capital prospective payment system transition period, a 
hospital also may 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 proposed minimum payment levels for portions of 
cost reporting periods occurring in FY 2001 are:
    <bullet> Sole community hospitals (located in either an urban or 
rural area), 90 percent;
    <bullet> Urban hospitals with at least 100 beds and a 
disproportionate share patient percentage of at least 20.2 percent or 
that receive more than 30 percent of their net inpatient care revenues 
from State or local governments for indigent care, 80 percent; and
    <bullet> 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

[[Page 26337]]

31, 1990, or the last day of the hospital's base year cost reporting 
period, and are subject to the rules pertaining to old capital and 
obligated capital as of the applicable date. Effective with the third 
year of operation, we will pay the hospital under either the fully 
prospective methodology, using the appropriate transition blend in that 
Federal fiscal year, or the hold-harmless methodology. If the hold-
harmless methodology is applicable, the hold-harmless payment for 
assets in use during the base period would extend for 8 years, even if 
the hold-harmless payments extend beyond the normal transition period.

C. Capital Input Price Index

1. Background
    Like the operating input price index, the capital input price index 
(CIPI) is a fixed-weight price index that measures the price changes 
associated with costs during a given year. The CIPI differs from the 
operating input price index in one important aspect--the CIPI reflects 
the vintage nature of capital, which is the acquisition and use of 
capital over time. Capital expenses in any given year are determined by 
the stock of capital in that year (that is, capital that remains on 
hand from all current and prior capital acquisitions). An index 
measuring capital price changes needs to reflect this vintage nature of 
capital. Therefore, the CIPI was developed to capture the vintage 
nature of capital by using a weighted-average of past capital purchase 
prices up to and including the current year.
    Using Medicare cost reports, American Hospital Association (AHA) 
data, and Securities Data Company data, a vintage-weighted price index 
was developed to measure price increases associated with capital 
expenses. We periodically update the base year for the operating and 
capital input prices to reflect the changing composition of inputs for 
operating and capital expenses. Currently, the CIPI is based to FY 1992 
and was last rebased in 1997. The most recent explanation of the CIPI 
was discussed in the final rule with comment period for FY 1998 
published on August 29, 1997 (62 FR 46050).
2. Forecast of the CIPI for Federal Fiscal Year 2001
    We are forecasting the CIPI to increase 0.9 percent for FY 2001. 
This reflects a projected 1.5 percent increase in vintage-weighted 
depreciation prices (building and fixed equipment, and movable 
equipment) and a 3.5 percent increase in other capital expense prices 
in FY 2001, partially offset by a 1.3 percent decline in vintage-
weighted interest rates in FY 2001. The weighted average of these three 
factors produces the 0.9 percent increase for the CIPI as a whole.

V. Proposed Changes to Payment Rates for Excluded Hospitals and 
Hospital Units: Rate-of-Increase Percentages

    The inpatient operating costs of hospitals and hospital units 
excluded from the prospective payment system are subject to rate-of-
increase limits established under the authority of section 1886(b) of 
the Act, which is implemented in regulations at Sec. 413.40. Under 
these limits, a hospital-specific target amount (expressed in terms of 
the inpatient operating cost per discharge) is set for each hospital, 
based on the hospital's own historical cost experience trended forward 
by the applicable rate-of-increase percentages (update factors). In the 
case of a psychiatric hospital or hospital unit, a rehabilitation 
hospital or hospital unit, or a long-term care hospital, the target 
amount may not exceed the updated figure for the 75th percentile of 
target amounts adjusted to take into account differences between 
average wage-related costs in the area of the hospital and the national 
average of such costs within the same class of hospital for hospitals 
and units in the same class (psychiatric, rehabilitation, and long-term 
care) for cost reporting periods ending during FY 1996. The target 
amount is multiplied by the number of Medicare discharges in a 
hospital's cost reporting period, yielding the ceiling on aggregate 
Medicare inpatient operating costs for the cost reporting period.
    Each hospital-specific target amount is adjusted annually, at the 
beginning of each hospital's cost reporting period, by an applicable 
update factor.
    Section 1886(b)(3)(B) of the Act, which is implemented in 
regulations at Sec. 413.40(c)(3)(vii), provides that for cost reporting 
periods beginning on or after October 1, 1998 and before October 1, 
2002, the update factor for a hospital or unit depends on the 
hospital's or hospital unit's costs in relation to the ceiling for the 
most recent cost reporting period for which information is available. 
For hospitals with costs exceeding the ceiling by 10 percent or more, 
the update factor is the market basket increase. For hospitals with 
costs exceeding the ceiling by less than 10 percent, the update factor 
is the market basket minus .25 percent for each percentage point by 
which costs are less than 10 percent over the ceiling. For hospitals 
with costs equal to or less than the ceiling but greater than 66.7 
percent of the ceiling, the update factor is the greater of 0 percent 
or the market basket minus 2.5 percent. For hospitals with costs that 
do not exceed 66.7 percent of the ceiling, the update factor is 0.
    The most recent forecast of the market basket increase for FY 2001 
for hospitals and hospital units excluded from the prospective payment 
system is 3.1 percent. Therefore, the update to a hospital's target 
amount for its cost reporting period beginning in FY 2001 would be 
between 0.6 and 3.1 percent, or 0 percent, depending on the hospital's 
or unit's costs in relation to its rate-of-increase limit.
    In addition, Sec. 413.40(c)(4)(iii) requires that for cost 
reporting periods beginning on or after October 1, 1998 and before 
October 1, 2002, the target amount for each psychiatric hospital or 
hospital unit, rehabilitation hospital or hospital unit, and long-term 
care hospital cannot exceed a cap on the target amounts for hospitals 
in the same class.
    Section 121 of Public Law 106-113 amended section 1886(b)(3)(H) of 
the Act to provide for an appropriate wage adjustment to the caps on 
the target amounts for psychiatric hospitals and units, rehabilitation 
hospitals and units, and long-term care hospitals, effective for cost 
reporting periods beginning on or after October 1, 1999, through 
September 30, 2002. We intend to publish an interim final rule with 
comment period implementing this provision for cost reporting periods 
beginning on or after October 1, 1999 and before October 1, 2000. This 
proposed rule addresses the wage adjustment to the caps for cost 
reporting periods beginning on or after October 1, 2000.
    As discussed in section VI. of the preamble of this proposed rule, 
under section 121 of Public Law 106-113, the cap on the target amount 
per discharge is determined by adding the hospital's nonlabor-related 
portion of the national 75th percentile cap to its wage-adjusted, 
labor-related portion of the national 75th percentile cap (the labor-
related portion of costs equals 0.71553 and the nonlabor-related 
portion of costs equals 0.28447). A hospital's wage-adjusted, labor-
related portion of the target amount is calculated by multiplying the 
labor-related portion of the national 75th percentile cap for the 
hospital's class by the wage index under the hospital inpatient 
prospective payment system (see Sec. 412.63), without taking into 
account reclassifications under sections 1886(a)(10) and (d)(8)(B) of 
the Act.
    For cost reporting periods beginning in FY 2001, the proposed caps 
are as follows:

[[Page 26338]]



------------------------------------------------------------------------
                                                   Labor-     Nonlabor-
      Class of excluded hospital or unit          related      related
                                                   share        share
------------------------------------------------------------------------
Psychiatric...................................       $8,106       $3,223
Rehabilitation................................       15,108        6,007
Long-Term Care................................       29,312       11,654
------------------------------------------------------------------------

    Regulations at Sec. 413.40(d) specify the formulas for determining 
bonus and relief payments for excluded hospitals and specify 
established criteria for an additional bonus payment for continuous 
improvement. Regulations at Sec. 413.40(f)(2)(ii) specify the payment 
methodology for new hospitals and hospital units (psychiatric, 
rehabilitation, and long-term care) effective October 1, 1997.

VI. Tables

    This section contains the tables referred to throughout the 
preamble to this proposed rule and in this Addendum. For purposes of 
this proposed rule, and to avoid confusion, we have retained the 
designations of Tables 1 through 5 that were first used in the 
September 1, 1983 initial prospective payment final rule (48 FR 39844). 
Tables 1A, 1C, 1D, 1E (a new table, as described in section II of this 
Addendum), 3C, 4A, 4B, 4C, 4D, 4E, 4F, 5, 6A, 6B, 6C, 6D, 6E, 6F, 6G, 
7A, 7B, 8A, and 8B 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 Sole 
Community Hospitals, Labor/Nonlabor
Table 3C--Hospital Case Mix Indexes for Discharges Occurring in Federal 
Fiscal Year 1999 and Hospital Average Hourly Wage for Federal Fiscal 
Year 2001 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--Revised Procedure Codes
Table 6F--Additions to the CC Exclusions List
Table 6G--Deletions to the CC Exclusions List
Table 7A--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay FY 99 MEDPAR Update 12/99 GROUPER V17.0
Table 7B--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay FY 99 MEDPAR Update 12/99 GROUPER V18.0
Table 8A--Statewide Average Operating Cost-to-Charge Ratios for Urban 
and Rural Hospitals (Case Weighted) March 2000
Table 8B--Statewide Average Capital Cost-to-Charge Ratios (Case 
Weighted) March 2000

                   Table 1A.--National Adjusted Operating Standardized Amounts, Labor/Nonlabor
----------------------------------------------------------------------------------------------------------------
                    Large urban areas                                           Other areas
----------------------------------------------------------------------------------------------------------------
       Labor-related               Nonlabor-related              Labor-related             Nonlabor related
----------------------------------------------------------------------------------------------------------------
             $2,856.71                    $1,161.17                   $2,811.49                   $1,142.79
----------------------------------------------------------------------------------------------------------------


               Table 1C.--Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor
----------------------------------------------------------------------------------------------------------------
                                                         Large urban areas                  Other areas
                                                 ---------------------------------------------------------------
                                                       Labor         Nonlabor          Labor         Nonlabor
----------------------------------------------------------------------------------------------------------------
National........................................       $2,832.11       $1,151.16       $2,832.11       $1,151.16
Puerto Rico.....................................        1,373.19          552.74        1,351.45          543.99
----------------------------------------------------------------------------------------------------------------


            Table 1D.--Capital Standard Federal Payment Rate
------------------------------------------------------------------------
                                                                 Rate
------------------------------------------------------------------------
National...................................................      $383.06
Puerto Rico................................................       185.38
------------------------------------------------------------------------


    Table 1E.--National Adjusted Operating Standardized Amounts for Sole Community Hospitals, Labor/Nonlabor
----------------------------------------------------------------------------------------------------------------
                    Large urban areas                                           Other areas
----------------------------------------------------------------------------------------------------------------
       Labor-related               Nonlabor-related              Labor-related             Nonlabor-related
----------------------------------------------------------------------------------------------------------------
             $2,887.52                    $1,173.69                   $2,841.81                   $1,155.11
----------------------------------------------------------------------------------------------------------------


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[[Page 26362]]


Table 4A.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                               Urban Areas
------------------------------------------------------------------------
                                                        Wage
         Urban area  (constituent counties)             index      GAF
------------------------------------------------------------------------
0040  Abilene, TX...................................    0.8318    0.8815
  Taylor, TX
0060  Aguadilla, PR.................................    0.4826    0.6072
  Aguada, PR
  Aguadilla, PR
  Moca, PR
0080  Akron, OH.....................................    1.0557    1.0378
  Portage, OH
  Summit, OH
0120  Albany, GA....................................    1.1854    1.1235
  Dougherty, GA
  Lee, GA
0160  Albany-Schenectady-Troy, NY...................    0.8563    0.8992
  Albany, NY
  Montgomery, NY
  Rensselaer, NY
  Saratoga, NY
  Schenectady, NY
  Schoharie, NY
0200  Albuquerque, NM...............................    0.9365    0.9561
  Bernalillo, NM
  Sandoval, NM
  Valencia, NM
0220  Alexandria, LA................................    0.8262    0.8774
  Rapides, LA
0240  Allentown-Bethlehem-Easton, PA................    0.9849    0.9896
  Carbon, PA
  Lehigh, PA
  Northampton, PA
0280  Altoona, PA...................................    0.9262    0.9489
  Blair, PA
0320  Amarillo, TX Potter, TX.......................    0.8663    0.9064
  Randall, TX
0380  Anchorage, AK.................................    1.2967    1.1947
  Anchorage, AK
0440  Ann Arbor, MI.................................    1.1283    1.0862
  Lenawee, MI
  Livingston, MI
  Washtenaw, MI
0450  Anniston, AL..................................    0.8331    0.8825
  Calhoun, AL
0460  Appleton-Oshkosh-Neenah, WI...................    0.9101    0.9375
  Calumet, WI
  Outagamie, WI
  Winnebago, WI
0470  Arecibo, PR...................................    0.4540    0.5823
  Arecibo, PR
  Camuy, PR
  Hatillo, PR
0480  Asheville, NC.................................    0.9527    0.9674
  Buncombe, NC
  Madison, NC
0500  Athens, GA....................................    0.9829    0.9883
  Clarke, GA
  Madison, GA
  Oconee, GA
0520  \1\ Atlanta, GA...............................    0.9945    0.9962
  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.........................    1.1220    1.0820
  Atlantic, NJ
  Cape May, NJ
0580  Auburn-Opelika, AL............................    0.8170    0.8707
  Lee, AL
0600  Augusta-Aiken, GA-SC..........................    0.9226    0.9463
  Columbia, GA
  McDuffie, GA
  Richmond, GA
  Aiken, SC
  Edgefield, SC
0640  \1\ Austin-San Marcos, TX.....................    0.9436    0.9610
  Bastrop, TX
  Caldwell, TX
  Hays, TX
  Travis, TX
  Williamson, TX
0680  \2\ Bakersfield, CA...........................    0.9966    0.9977
  Kern, CA
0720  \1\ Baltimore, MD.............................    0.9485    0.9644
  Anne Arundel, MD
  Baltimore, MD
  Baltimore City, MD
  Carroll, MD
  Harford, MD
  Howard, MD
  Queen Anne's, MD
0733  Bangor, ME....................................    0.9613    0.9733
  Penobscot, ME
0743  Barnstable-Yarmouth, MA.......................    1.3938    1.2553
  Barnstable, MA
0760  Baton Rouge, LA...............................    0.8964    0.9278
  Ascension, LA
  East Baton Rouge, LA
  Livingston, LA
  West Baton Rouge, LA
0840  Beaumont-Port Arthur, TX......................    0.8361    0.8846
  Hardin, TX
  Jefferson, TX
  Orange, TX
0860  Bellingham, WA................................    1.1491    1.0998
  Whatcom, WA
0870  \2\ Benton Harbor, MI.........................    0.9133    0.9398
  Berrien, MI
0875  \1\ Bergen-Passaic, NJ........................    1.1727    1.1153
  Bergen, NJ
  Passaic, NJ
0880  Billings, MT..................................    0.9577    0.9708
  Yellowstone, MT
0920  Biloxi-Gulfport-Pascagoula, MS................    0.8282    0.8789
  Hancock, MS
  Harrison, MS
  Jackson, MS
0960  Binghamton, NY................................    0.8723    0.9107
  Broome, NY
  Tioga, NY
1000  Birmingham, AL................................    0.8574    0.9000
  Blount, AL
  Jefferson, AL
  St. Clair, AL
  Shelby, AL
1010  Bismarck, ND..................................    0.8016    0.8595
  Burleigh, ND
  Morton, ND
1020  Bloomington-Normal, IL........................    0.8854    0.9200
  Monroe, IN
1040  Bloomington-Normal, IL........................    0.9294    0.9511
  McLean, IL
1080  Boise City, ID................................    0.9133    0.9398
  Ada, ID
  Canyon, ID
1123  \1\ \2\ Boston-Worcester-Lawrence-Lowell-         1.1348    1.0905
 Brockton, MA-NH (MA Hospitals).....................
  Bristol, MA
  Essex, MA
  Middlesex, MA
  Norfolk, MA
  Plymouth, MA
  Suffolk, MA
  Worcester, MA
  Hillsborough, NH
  Merrimack, NH
  Rockingham, NH
  Strafford, NH
1123  \1\ Boston-Worcester-Lawrence-Lowell-Brockton,    1.1239    1.0833
 MA-NH (NH Hospitals)...............................
  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..........................    0.9798    0.9861
  Boulder, CO
1145  Brazoria, TX..................................    0.8751    0.9127
  Brazoria, TX
1150  Bremerton, WA.................................    1.1069    1.0720
  Kitsap, WA
1240  Brownsville-Harlingen-San Benito, TX..........    0.8794    0.9158

[[Page 26363]]

 
  Cameron, TX
1260  Bryan-College Station, TX.....................    0.8306    0.8806
  Brazos, TX
1280  \1\ Buffalo-Niagara Falls, NY.................    0.9566    0.9701
  Erie, NY
  Niagara, NY
1303  Burlington, VT................................    0.9624    0.9741
  Chittenden, VT
  Franklin, VT
  Grand Isle, VT
1310  Caguas, PR....................................    0.4591    0.5868
  Caguas, PR
  Cayey, PR
  Cidra, PR
  Gurabo, PR
  San Lorenzo, PR
1320  \2\ Canton-Massillon, OH......................    0.8778    0.9146
  Carroll, OH
  Stark, OH
1350  \2\ Casper, WY................................    0.9046    0.9336
  Natrona, WY
1360  Cedar Rapids, IA..............................    0.8396    0.8872
  Linn, IA
1400  Champaign-Urbana, IL..........................    0.9353    0.9552
  Champaign, IL
1440  Charleston-North Charleston, SC...............    0.9094    0.9370
  Berkeley, SC
  Charleston, SC
  Dorchester, SC
1480  Charleston, WV................................    0.9324    0.9532
  Kanawha, WV
  Putnam, WV
1520  \1\ Charlotte-Gastonia-Rock Hill, NC-SC.......    0.9307    0.9520
  Cabarrus, NC
  Gaston, NC
  Lincoln, NC
  Mecklenburg, NC
  Rowan, NC
  Stanly, NC
  Union, NC
  York, SC
1540  Charlottesville, VA...........................    1.0744    1.0504
  Albemarle, VA
  Charlottesville City, VA
  Fluvanna, VA
  Greene, VA
1560  Chattanooga, TN-GA............................    1.0083    1.0057
  Catoosa, GA
  Dade, GA
  Walker, GA
  Hamilton, TN
  Marion, TN
1580  \2\ Cheyenne, WY..............................    0.9046    0.9336
  Laramie, WY
1600  \1\ Chicago, IL...............................    1.1027    1.0692
  Cook, IL
  DeKalb, IL
  DuPage, IL
  Grundy, IL
  Kane, IL
  Kendall, IL
  Lake, IL
  McHenry, IL
  Will, IL
1620  Chico-Paradise, CA............................    1.0684    1.0464
  Butte, CA
1640  1Cincinnati, OH-KY-IN.........................    0.9330    0.9536
  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...............    0.8393    0.8869
  Christian, KY
  Montgomery, TN
1680  \1\ Cleveland-Lorain-Elyria, OH...............    0.9649    0.9758
  Ashtabula, OH
  Cuyahoga, OH
  Geauga, OH
  Lake, OH
  Lorain, OH
  Medina, OH
1720  Colorado Springs, CO..........................    0.9770    0.9842
  El Paso, CO
1740  Columbia, MO..................................    0.8600    0.9019
  Boone, MO
1760  Columbia, SC..................................    0.9641    0.9753
  Lexington, SC
  Richland, SC
1800  Columbus, GA-AL...............................    0.8607    0.9024
  Russell, AL
  Chattahoochee, GA
  Harris, GA
  Muscogee, GA
1840  \1\ Columbus, OH..............................    0.9741    0.9822
  Delaware, OH
  Fairfield, OH
  Franklin, OH
  Licking, OH
  Madison, OH
  Pickaway, OH
1880  Corpus Christi, TX............................    0.8496    0.8944
  Nueces, TX
  San Patricio, TX
1890  Corvallis, OR.................................    1.1439    1.0964
  Benton, OR
1900  \2\ Cumberland, MD-WV (MD Hospitals)..........    0.8717    0.9103
  Allegany, MD
  Mineral, WV
1900  Cumberland, MD-WV (WV Hospital)...............    0.8437    0.8901
  Allegany, MD
  Mineral, WV
1920  \1\ Dallas, TX................................    0.9220    0.9459
  Collin, TX
  Dallas, TX
  Denton, TX
  Ellis, TX
  Henderson, TX
  Hunt, TX
  Kaufman, TX
  Rockwall, TX
1950  Danville, VA..................................    0.8527    0.8966
  Danville City, VA
  Pittsylvania, VA
1960  Davenport-Moline-Rock Island, IA-IL...........    0.9021    0.9319
  Scott, IA
  Henry, IL
  Rock Island, IL
2000  Dayton-Springfield, OH........................    0.9519    0.9668
  Clark, OH
  Greene, OH
  Miami, OH
  Montgomery, OH
2020  Daytona Beach, FL.............................    0.9179    0.9430
  Flagler, FL
  Volusia, FL
2030  Decatur, AL...................................    0.8627    0.9038
  Lawrence, AL
  Morgan, AL
2040  Decatur, IL...................................    0.8601    0.9019
  Macon, IL
2080  \1\ Denver, CO................................    1.0032    1.0022
  Adams, CO
  Arapahoe, CO
  Denver, CO
  Douglas, CO
  Jefferson, CO
2120  Des Moines, IA................................    0.9211    0.9453
  Dallas, IA
  Polk, IA
  Warren, IA
2160  \1\ Detroit, MI...............................    1.0057    1.0039
  Lapeer, MI
  Macomb, MI
  Monroe, MI
  Oakland, MI
  St. Clair, MI
  Wayne, MI
2180  Dothan, AL....................................    0.8105    0.8660
  Dale, AL
  Houston, AL
2190  Dover, DE.....................................    1.1032    1.0696
  Kent, DE
2200  Dubuque, IA...................................    0.8928    0.9253
  Dubuque, IA
2240  Duluth-Superior, MN-WI........................    1.0201    1.0137
  St. Louis, MN
  Douglas, WI

[[Page 26364]]

 
2281  Dutchess County, NY...........................    0.9599    0.9724
  Dutchess, NY
2290  \2\ Eau Claire, WI............................    0.9073    0.9356
  Chippewa, WI
  Eau Claire, WI
2320  El Paso, TX...................................    0.9215    0.9456
  El Paso, TX
2330  Elkhart-Goshen, IN............................    0.9549    0.9689
  Elkhart, IN
2335  Elmira, NY....................................    0.8645    0.9051
  Chemung, NY
2340  Enid, OK......................................    0.8781    0.9148
  Garfield, OK
2360  Erie, PA......................................    0.9021    0.9319
  Erie, PA
2400  Eugene-Springfield, OR........................    1.1026    1.0692
  Lane, OR
2440  \2\ Evansville-Henderson, IN-KY (IN Hospitals)    0.8807    0.9167
  Posey, IN
  Vanderburgh, IN
  Warrick, IN
  Henderson, KY
2440  Evansville-Henderson, IN-KY (KY Hospitals)....    0.8018    0.8596
  Posey, IN
  Vanderburgh, IN
  Warrick, IN
  Henderson, KY
2520  Fargo-Moorhead, ND-MN.........................    0.8830    0.9183
  Clay, MN
  Cass, ND
2560  Fayetteville, NC..............................    0.8638    0.9046
  Cumberland, NC
2580  Fayetteville-Springdale-Rogers, AR............    0.7999    0.8582
  Benton, AR
  Washington, AR
2620  Flagstaff, AZ-UT..............................    1.0844    1.0571
  Coconino, AZ
  Kane, UT
2640  Flint, MI.....................................    1.1189    1.0800
  Genesee, MI
2650  Florence, AL..................................    0.7621    0.8302
  Colbert, AL
  Lauderdale, AL
2655  Florence, SC..................................    0.8838    0.9189
  Florence, SC
2670  Fort Collins-Loveland, CO.....................    1.1005    1.0678
  Larimer, CO
2680  \1\ Ft. Lauderdale, FL........................    1.0228    1.0156
  Broward, FL
2700  Fort Myers-Cape Coral, FL.....................    0.9112    0.9383
  Lee, FL
2710  Fort Pierce-Port St. Lucie, FL................    0.9672    0.9774
  Martin, FL
  St. Lucie, FL
2720  Fort Smith, AR-OK.............................    0.8858    0.9203
  Crawford, AR
  Sebastian, AR
  Sequoyah, OK
2750  Fort Walton Beach, FL.........................    0.9351    0.9551
  Okaloosa, FL
2760  \2\ Fort Wayne, IN............................    0.8807    0.9167
  Adams, IN
  Allen, IN
  De Kalb, IN
  Huntington, IN
  Wells, IN
  Whitley, IN
2800  \1\ Forth Worth-Arlington, TX.................    0.9442    0.9614
  Hood, TX
  Johnson, TX
  Parker, TX
  Tarrant, TX
2840  Fresno, CA....................................    1.0184    1.0126
  Fresno, CA
  Madera, CA
2880  Gadsden, AL...................................    0.8491    0.8940
  Etowah, AL
2900  Gainesville, FL...............................    1.0286    1.0195
  Alachua, FL
2920  Galveston-Texas City, TX......................    1.0284    1.0194
  Galveston, TX
2960  Gary, IN......................................    0.9454    0.9623
  Lake, IN
  Porter, IN
2975  \2\ Glens Falls, NY...........................    0.8558    0.8989
  Warren, NY
  Washington, NY
2980  \2\ Goldsboro, NC.............................    0.8553    0.8985
  Wayne, NC
2985  Grand Forks, ND-MN............................    1.0207    1.0141
  Polk, MN
  Grand Forks, ND
2995  Grand Junction, CO............................    0.9601    0.9725
  Mesa, CO
3000  \1\ Grand Rapids-Muskegon-Holland, MI.........    1.0256    1.0175
  Allegan, MI
  Kent, MI
  Muskegon, MI
  Ottawa, MI
3040  Great Falls, MT...............................    0.9447    0.9618
  Cascade, MT
3060  Greeley, CO...................................    0.9908    0.9937
  Weld, CO
3080  Green Bay, WI.................................    0.9359    0.9556
  Brown, WI
3120  \1\ Greensboro-Winston-Salem-High Point, NC...    0.9187    0.9436
  Alamance, NC
  Davidson, NC
  Davie, NC
  Forsyth, NC
  Guilford, NC
  Randolph, NC
  Stokes, NC
  Yadkin, NC
3150  Greenville, NC................................    0.9454    0.9623
  Pitt, NC
3160  Greenville-Spartanburg-Anderson, SC...........    0.9160    0.9417
  Anderson, SC
  Cherokee, SC
  Greenville, SC
  Pickens, SC
  Spartanburg, SC
3180  Hagerstown, MD................................    0.9647    0.9757
  Washington, MD
3200  Hamilton-Middletown, OH.......................    0.8892    0.9227
  Butler, OH
3240  Harrisburg-Lebanon-Carlisle, PA...............    0.9467    0.9632
  Cumberland, PA
  Dauphin, PA
  Lebanon, PA
  Perry, PA
3283  \1\ \2\ Hartford, CT..........................    1.1798    1.1199
  Hartford, CT
  Litchfield, CT
  Middlesex, CT
  Tolland, CT
3285  \2\ Hattiesburg, MS...........................    0.7608    0.8293
  Forrest, MS
  Lamar, MS
3290  Hickory-Morganton-Lenoir, NC..................    0.8989    0.9296
  Alexander, NC
  Burke, NC
  Caldwell, NC
  Catawba, NC
3320  Honolulu, HI..................................    1.1905    1.1268
  Honolulu, HI
3350  Houma, LA.....................................    0.8218    0.8742
  Lafourche, LA
  Terrebonne, LA
3360  \1\ Houston, TX...............................    0.9661    0.9767
  Chambers, TX
  Fort Bend, TX
  Harris, TX
  Liberty, TX
  Montgomery, TX
  Waller, TX
3400  Huntington-Ashland, WV-KY-OH..................    0.9961    0.9973
  Boyd, KY
  Carter, KY
  Greenup, KY
  Lawrence, OH
  Cabell, WV
  Wayne, WV
3440  Huntsville, AL................................    0.9089    0.9367
  Limestone, AL
  Madison, AL
3480  \1\ Indianapolis, IN..........................    0.9314    0.9525
  Boone, IN
  Hamilton, IN
  Hancock, IN

[[Page 26365]]

 
  Hendricks, IN
  Johnson, IN
  Madison, IN
  Marion, IN
  Morgan, IN
  Shelby, IN
3500  Iowa City, IA.................................    0.9749    0.9827
  Johnson, IA
3520  \2\ Jackson, MI...............................    0.9133    0.9398
  Jackson, MI
3560  Jackson, MS...................................    0.8890    0.9226
  Hinds, MS
  Madison, MS
  Rankin, MS
3580  Jackson, TN...................................    0.8939    0.9261
  Madison, TN
  Chester, TN
3600  \1\ Jacksonville, FL..........................    0.8995    0.9300
  Clay, FL
  Duval, FL
  Nassau, FL
  St. Johns, FL
3605  \2\ Jacksonville, NC..........................    0.8553    0.8985
  Onslow, NC
3610  \2\ Jamestown, NY.............................    0.8558    0.8989
  Chautauqua, NY
3620  Janesville-Beloit, WI.........................    0.9856    0.9901
  Rock, WI
3640  Jersey City, NJ...............................    1.0985    1.0664
  Hudson, NJ
3660  Johnson City-Kingsport-Bristol, TN-VA.........    0.8412    0.8883
  Carter, TN
  Hawkins, TN
  Sullivan, TN
  Unicoi, TN
  Washington, TN
  Bristol City, VA
  Scott, VA
  Washington, VA
3680  Johnstown, PA.................................    0.8686    0.9080
  Cambria, PA
  Somerset, PA
3700  Jonesboro, AR.................................    0.8587    0.9009
  Craighead, AR
3710  Joplin, MO....................................    0.7924    0.8527
  Jasper, MO
  Newton, MO
3720  Kalamazoo-Battlecreek, MI.....................    1.0247    1.0168
  Calhoun, MI
  Kalamazoo, MI
  Van Buren, MI
3740  Kankakee, IL..................................    0.8954    0.9271
  Kankakee, IL
3760  \1\ Kansas City, KS-MO........................    0.9629    0.9744
  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...................................    0.9703    0.9796
  Kenosha, WI
3810  Killeen-Temple, TX............................    1.0321    1.0219
  Bell, TX
  Coryell, TX
3840  Knoxville, TN.................................    0.8422    0.8890
  Anderson, TN
  Blount, TN
  Knox, TN
  Loudon, TN
  Sevier, TN
  Union, TN
3850  Kokomo, IN....................................    0.9190    0.9438
  Howard, IN
  Tipton, IN
3870  La Crosse, WI-MN..............................    0.9442    0.9614
  Houston, MN
  La Crosse, WI
3880  Lafayette, LA.................................    0.8852    0.9199
  Acadia, LA
  Lafayette, LA
  St. Landry, LA
  St. Martin, LA
3920  Lafayette, IN.................................    0.9091    0.9368
  Clinton, IN
  Tippecanoe, IN
3960  \2\ Lake Charles, LA..........................    0.7921    0.8525
  Calcasieu, LA
3980  Lakeland-Winter Haven, FL.....................    0.8904    0.9236
  Polk, FL
4000  Lancaster, PA.................................    0.9274    0.9497
  Lancaster, PA
4040  Lansing-East Lansing, MI......................    0.9873    0.9913
  Clinton, MI
  Eaton, MI
  Ingham, MI
4080  Laredo, TX....................................    0.7637    0.8314
  Webb, TX
4100  Las Cruces, NM................................    0.8744    0.9122
  Dona Ana, NM
4120  \1\ Las Vegas, NV-AZ..........................    1.0876    1.0592
  Mohave, AZ
  Clark, NV
  Nye, NV
4150  Lawrence, KS..................................    0.8272    0.8782
  Douglas, KS
4200  Lawton, OK....................................    0.9156    0.9414
  Comanche, OK
4243  Lewiston-Auburn, ME...........................    0.9064    0.9349
  Androscoggin, ME
4280  Lexington, KY.................................    0.8921    0.9248
  Bourbon, KY
  Clark, KY
  Fayette, KY
  Jessamine, KY
  Madison, KY
  Scott, KY
  Woodford, KY
4320  Lima, OH......................................    0.9634    0.9748
  Allen, OH
  Auglaize, OH
4360  Lincoln, NE...................................    0.9808    0.9868
  Lancaster, NE
4400  Little Rock-North Little Rock, AR.............    0.8959    0.9275
  Faulkner, AR
  Lonoke, AR
  Pulaski, AR
  Saline, AR
4420  Longview-Marshall, TX.........................    0.8816    0.9173
  Gregg, TX
  Harrison, TX
  Upshur, TX
4480  \1\ Los Angeles-Long Beach, CA................    1.1955    1.1301
  Los Angeles, CA
4520  Louisville, KY-IN.............................    0.9395    0.9582
  Clark, IN
  Floyd, IN
  Harrison, IN
  Scott, IN
  Bullitt, KY
  Jefferson, KY
  Oldham, KY
4600  Lubbock, TX...................................    0.8828    0.9182
  Lubbock, TX
4640  Lynchburg, VA.................................    0.9218    0.9458
  Amherst, VA
  Bedford, VA
  Bedford City, VA
  Campbell, VA
  Lynchburg City, VA
4680  Macon, GA.....................................    0.9046    0.9336
  Bibb, GA
  Houston, GA
  Jones, GA
  Peach, GA
  Twiggs, GA
4720  Madison, WI...................................    1.0354    1.0241
  Dane, WI
4800  \2\ Mansfield, OH.............................    0.8778    0.9146
  Crawford, OH
  Richland, OH
4840  Mayaguez, PR..................................    0.4617    0.5891
  Anasco, PR
  Cabo Rojo, PR
  Hormigueros, PR
  Mayaguez, PR
  Sabana Grande, PR
  San German, PR
4880  McAllen-Edinburg-Mission, TX..................    0.8403    0.8877
  Hidalgo, TX
4890  Medford-Ashland, OR...........................    1.0438    1.0298
  Jackson, OR
4900  Melbourne-Titusville-Palm Bay, FL.............    0.9713    0.9803
  Brevard, Fl

[[Page 26366]]

 
4920  \1\ \2\ Memphis, TN-AR-MS (TN Hospitals)......    0.7980    0.8568
  Crittenden, AR
  DeSoto, MS
  Fayette, TN
  Shelby, TN
  Tipton, TN
4920  \1\ \2\ Memphis, TN-AR-MS (AR Hospitals)......    0.7538    0.8240
  Crittenden, AR
  DeSoto, MS
  Fayette, TN
  Shelby, TN
  Tipton, TN
4920  \1\ \2\ Memphis, TN-AR-MS (MS Hospitals)......    0.7608    0.8293
  Crittenden, AR
  DeSoto, MS
  Fayette, TN
  Shelby, TN
  Tipton, TN
4940  \2\ Merced, CA................................    0.9966    0.9977
  Merced, CA
5000  \1\ Miami, FL.................................    1.0148    1.0101
  Dade, FL
5015  \1\ Middlesex-Somerset-Hunterdon, NJ..........    1.0342    1.0233
  Hunterdon, NJ
  Middlesex, NJ
  Somerset, NJ
5080  \1\ Milwaukee-Waukesha, WI....................    0.9803    0.9865
  Milwaukee, WI
  Ozaukee, WI
  Washington, WI
  Waukesha, WI
5120  \1\ Minneapolis-St. Paul, MN-WI...............    1.1118    1.0753
  Anoka, MN
  Carver, MN
  Chisago, MN
  Dakota, MN
  Hennepin, MN
  Isanti, MN
  Ramsey, MN
  Scott, MN
  Sherburne, MN
  Washington, MN
  Wright, MN
  Pierce, WI
  St. Croix, WI
5140  Missoula, MT..................................    0.9462    0.9628
  Missoula, MT
5160  Mobile, AL....................................    0.8205    0.8733
  Baldwin, AL
  Mobile, AL
5170  Modesto, CA...................................    1.0481    1.0327
  Stanislaus, CA
5190  \1\ Monmouth-Ocean, NJ........................    1.1552    1.1038
  Monmouth, NJ
  Ocean, NJ
5200  Monroe, LA....................................    0.8467    0.8923
  Ouachita, LA
5240  \2\ Montgomery, AL............................    0.7610    0.8294
  Autauga, AL
  Elmore, AL
  Montgomery, AL
5280  Muncie, IN....................................    1.0734    1.0497
  Delaware, IN
5330  Myrtle Beach, SC..............................    0.8658    0.9060
  Horry, SC
5345  Naples, FL....................................    0.9396    0.9582
  Collier, FL
5360  \1\ Nashville, TN.............................    0.9201    0.9446
  Cheatham, TN
  Davidson, TN
  Dickson, TN
  Robertson, TN
  Rutherford TN
  Sumner, TN
  Williamson, TN
  Wilson, TN
5380  \1\ Nassau-Suffolk, NY........................    1.3089    1.2024
  Nassau, NY
  Suffolk, NY
5483  \1\ New Haven-Bridgeport-Stamford-Waterbury-      1.2135    1.1417
 Danbury, CT........................................
  Fairfield, CT
  New Haven, CT
5523  New London-Norwich, CT........................    1.1984    1.1319
  New London, CT
5560  \1\ New Orleans, LA...........................    0.9283    0.9503
  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..............................    1.4445    1.2864
  Bronx, NY
  Kings, NY
  New York, NY
  Putnam, NY
  Queens, NY
  Richmond, NY
  Rockland, NY
  Westchester, NY
5640  \1\ Newark, NJ................................    1.0717    1.0486
  Essex, NJ
  Morris, NJ
  Sussex, NJ
  Union, NJ
  Warren, NJ
5660  Newburgh, NY-PA...............................    1.0946    1.0639
  Orange, NY
  Pike, PA
5720  \1\ Norfolk-Virginia Beach-Newport News, VA-NC    0.8429    0.8896
  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...............................    1.5051    1.3231
  Alameda, CA
  Contra Costa, CA
5790  Ocala, FL.....................................    0.8904    0.9236
  Marion, FL
5800  Odessa-Midland, TX............................    0.9168    0.9422
  Ector, TX
  Midland, TX
5880  \1\ Oklahoma City, OK.........................    0.8910    0.9240
  Canadian, OK
  Cleveland, OK
  Logan, OK
  McClain, OK
  Oklahoma, OK
  Pottawatomie, OK
5910  Olympia, WA...................................    1.0787    1.0532
  Thurston, WA
5920  Omaha, NE-IA..................................    0.9707    0.9798
  Pottawattamie, IA
  Cass, NE
  Douglas, NE
  Sarpy, NE
  Washington, NE
5945  \1\ Orange County, CA.........................    1.1560    1.1044
  Orange, CA
5960  \1\ Orlando, FL...............................    0.9959    0.9972
  Lake, FL
  Orange, FL
  Osceola, FL
  Seminole, FL
5990  \2\ Owensboro, KY.............................    0.8017    0.8595
  Daviess, KY
6015  Panama City, FL...............................    0.9129    0.9395
  Bay, FL
6020  \2\ Parkersburg-Marietta, WV-OH (WV Hospitals)    0.8321    0.8817
  Washington, OH
  Wood, WV
6020  \2\ Parkersburg-Marietta, WV-OH (OH Hospitals)    0.8778    0.9146
  Washington, OH
  Wood, WV
6080  \2\ Pensacola, FL.............................    0.8904    0.9236
  Escambia, FL
  Santa Rosa, FL

[[Page 26367]]

 
6120  Peoria-Pekin, IL..............................    0.8687    0.9081
  Peoria, IL
  Tazewell, IL
  Woodford, IL
6160  \1\ Philadelphia, PA-NJ.......................    1.0660    1.0447
  Burlington, NJ
  Camden, NJ
  Gloucester, NJ
  Salem, NJ
  Bucks, PA
  Chester, PA
  Delaware, PA
  Montgomery, PA
  Philadelphia, PA
6200  \1\ Phoenix-Mesa, AZ..........................    0.9532    0.9677
  Maricopa, AZ
  Pinal, AZ
6240  Pine Bluff, AR................................    0.7866    0.8484
  Jefferson, AR
6280  \1\ Pittsburgh, PA............................    0.9818    0.9875
  Allegheny, PA
  Beaver, PA
  Butler, PA
  Fayette, PA
  Washington, PA
  Westmoreland, PA
6323  \2\ Pittsfield, MA............................    1.1348    1.0905
  Berkshire, MA
6340  Pocatello, ID.................................    1.0819    1.0554
  Bannock, ID
6360  Ponce, PR.....................................    0.4347    0.5652
  Guayanilla, PR
  Juana Diaz, PR
  Penuelas, PR
  Ponce, PR
  Villalba, PR
  Yauco, PR
6403  Portland, ME..................................    0.9779    0.9848
  Cumberland, ME
  Sagadahoc, ME
  York, ME
6440  \1\ Portland-Vancouver, OR-WA.................    1.0928    1.0627
  Clackamas, OR
  Columbia, OR
  Multnomah, OR
  Washington, OR
  Yamhill, OR
  Clark, WA
6483  \1\ Providence-Warwick-Pawtucket, RI..........    1.0955    1.0645
  Bristol, RI
  Kent, RI
  Newport, RI
  Providence, RI
  Washington, RI
6520  Provo-Orem, UT................................    0.9972    0.9981
  Utah, UT
6560  \2\ Pueblo, CO................................    0.9179    0.9430
  Pueblo, CO
6580  Punta Gorda, FL...............................    0.9565    0.9700
  Charlotte, FL
6600  Racine, WI....................................    0.9298    0.9514
  Racine, WI
6640  \1\ Raleigh-Durham-Chapel Hill, NC............    0.9749    0.9827
  Chatham, NC
  Durham, NC
  Franklin, NC
  Johnston, NC
  Orange, NC
  Wake, NC
6660  Rapid City, SD................................    0.8463    0.8920
  Pennington, SD
6680  Reading, PA...................................    0.9203    0.9447
  Berks, PA
6690  Redding, CA...................................    1.1795    1.1197
  Shasta, CA
6720  Reno, NV......................................    1.0508    1.0345
  Washoe, NV
6740  Richland-Kennewick-Pasco, WA..................    1.1564    1.1046
  Benton, WA
  Franklin, WA
6760  Richmond-Petersburg, VA.......................    0.9679    0.9779
  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..............    1.1159    1.0780
  Riverside, CA
  San Bernardino, CA
6800  Roanoke, VA...................................    0.9543    0.9685
  Botetourt, VA
  Roanoke, VA
  Roanoke City, VA
  Salem City, VA
6820  Rochester, MN.................................    1.1361    1.0913
  Olmsted, MN
6840  \1\ Rochester, NY.............................    0.8846    0.9195
  Genesee, NY
  Livingston, NY
  Monroe, NY
  Ontario, NY
  Orleans, NY
  Wayne, NY
6880  Rockford, IL..................................    0.8904    0.9236
  Boone, IL
  Ogle, IL
  Winnebago, IL
6895  Rocky Mount, NC...............................    0.8875    0.9215
  Edgecombe, NC
  Nash, NC
6920  \1\ Sacramento, CA............................    1.2003    1.1332
  El Dorado, CA
  Placer, CA
  Sacramento, CA
6960  Saginaw-Bay City-Midland, MI..................    0.9475    0.9637
  Bay, MI
  Midland, MI
  Saginaw, MI
6980  St. Cloud, MN.................................    1.0164    1.0112
  Benton, MN
  Stearns, MN
7000  St. Joseph, MO................................    0.9245    0.9477
  Andrew, MO
  Buchanan, MO
7040  \1\ St. Louis, MO-IL..........................    0.9114    0.9384
  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.................................    1.0300    1.0204
  Marion, OR
  Polk, OR
7120  Salinas, CA...................................    1.4649    1.2988
  Monterey, CA
7160  \1\ Salt Lake City-Ogden, UT..................    0.9661    0.9767
  Davis, UT
  Salt Lake, UT
  Weber, UT
7200  San Angelo, TX................................    0.7747    0.8396
  Tom Green, TX
7240  \1\ San Antonio, TX...........................    0.8087    0.8647
  Bexar, TX
  Comal, TX
  Guadalupe, TX
  Wilson, TX
7320  \1\ San Diego, CA.............................    1.1901    1.1266
  San Diego, CA
7360  \1\ San Francisco, CA.........................    1.4433    1.2857
  Marin, CA
  San Francisco, CA
  San Mateo, CA
7400  \1\ San Jose, CA..............................    1.4376    1.2822
  Santa Clara, CA
7440  \1\ San Juan-Bayamon, PR......................    0.4691    0.5955
  Aguas Buenas, PR
  Barceloneta, PR
  Bayamon, PR
  Canovanas, PR
  Carolina, PR
  Catano, PR
  Ceiba, PR
  Comerio, PR
  Corozal, PR
  Dorado, PR
  Fajardo, PR

[[Page 26368]]

 
  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....    1.0755    1.0511
  San Luis Obispo, CA
7480  Santa Barbara-Santa Maria-Lompoc, CA..........    1.0728    1.0493
  Santa Barbara, CA
7485  Santa Cruz-Watsonville, CA....................    1.4736    1.3041
  Santa Cruz, CA
7490  Santa Fe, NM..................................    0.9383    0.9573
  Los Alamos, NM
  Santa Fe, NM
7500  Santa Rosa, CA................................    1.3182    1.2083
  Sonoma, CA
7510  Sarasota-Bradenton, FL........................    0.9670    0.9773
  Manatee, FL
  Sarasota, FL
7520  Savannah, GA..................................    0.8689    0.9083
  Bryan, GA
  Chatham, GA
  Effingham, GA
7560  \2\ Scranton-Wilkes-Barre-Hazleton, PA........    0.8686    0.9080
  Columbia, PA
  Lackawanna, PA
  Luzerne, PA
  Wyoming, PA
7600  \1\ Seattle-Bellevue-Everett, WA..............    1.1134    1.0763
  Island, WA
  King, WA
  Snohomish, WA
7610  \2\ Sharon, PA................................    0.8686    0.9080
  Mercer, PA
7620  \2\ Sheboygan, WI.............................    0.9073    0.9356
  Sheboygan, WI
7640  Sherman-Denison, TX...........................    0.8619    0.9032
  Grayson, TX
7680  Shreveport-Bossier City, LA...................    0.8853    0.9200
  Bossier, LA
  Caddo, LA
  Webster, LA
7720  Sioux City, IA-NE.............................    0.8571    0.8998
  Woodbury, IA
  Dakota, NE
7760  Sioux Falls, SD...............................    0.8890    0.9226
  Lincoln, SD
  Minnehaha, SD
7800  South Bend, IN................................    1.0233    1.0159
  St. Joseph, IN
7840  Spokane, WA...................................    1.1979    1.1316
  Spokane, WA
7880  Springfield, IL...............................    0.8744    0.9122
  Menard, IL
  Sangamon, IL
7920  Springfield, MO...............................    0.8357    0.8843
  Christian, MO
  Greene, MO
  Webster, MO
8003  \2\ Springfield, MA...........................    1.1348    1.0905
  Hampden, MA
  Hampshire, MA
8050  State College, PA.............................    0.9114    0.9384
  Centre, PA
8080  \2\ Steubenville-Weirton, OH-WV (OH Hospitals)    0.8778    0.9146
  Jefferson, OH
  Brooke, WV
  Hancock, WV
8080  Steubenville-Weirton, OH-WV (WV Hospitals)....    0.8658    0.9060
  Jefferson, OH
  Brooke, WV
  Hancock, WV
8120  Stockton-Lodi, CA.............................    1.0711    1.0482
  San Joaquin, CA
8140  \2\ Sumter, SC................................    0.8445    0.8907
  Sumter, SC
8160  Syracuse, NY..................................    0.9662    0.9767
  Cayuga, NY
  Madison, NY
  Onondaga, NY
  Oswego, NY
8200  Tacoma, WA....................................    1.1658    1.1108
  Pierce, WA
8240  \2\ Tallahassee, FL...........................    0.8904    0.9236
  Gadsden, FL
  Leon, FL
8280  \1\ Tampa-St. Petersburg-Clearwater, FL.......    0.9111    0.9382
  Hernando, FL
  Hillsborough, FL
  Pasco, FL
  Pinellas, FL
8320  \2\ Terre Haute, IN...........................    0.8807    0.9167
  Clay, IN
  Vermillion, IN
  Vigo, IN
8360  Texarkana, AR-Texarkana, TX...................    0.7962    0.8555
  Miller, AR
  Bowie, TX
8400  Toledo, OH....................................    0.9705    0.9797
  Fulton, OH
  Lucas, OH
  Wood, OH
8440  Topeka, KS....................................    0.9134    0.9399
  Shawnee, KS
8480  Trenton, NJ...................................    0.9919    0.9944
  Mercer, NJ
8520  Tucson, AZ....................................    0.8826    0.9180
  Pima, AZ
8560  Tulsa, OK.....................................    0.8698    0.9089
  Creek, OK
  Osage, OK
  Rogers, OK
  Tulsa, OK
  Wagoner, OK
8600  Tuscaloosa, AL................................    0.8081    0.8642
  Tuscaloosa, AL
8640  Tyler, TX.....................................    0.9270    0.9494
  Smith, TX
8680  \2\ Utica-Rome, NY............................    0.8558    0.8989
  Herkimer, NY
  Oneida, NY
8720  Vallejo-Fairfield-Napa, CA....................    1.2672    1.1761
  Napa, CA
  Solano, CA
8735  Ventura, CA...................................    1.0586    1.0398
  Ventura, CA
8750  Victoria, TX..................................    0.8133    0.8680
  Victoria, TX
8760  Vineland-Millville-Bridgeton, NJ..............    1.0462    1.0314
  Cumberland, NJ
8780  \2\ Visalia-Tulare-Porterville, CA............    0.9966    0.9977
  Tulare, CA
8800  Waco, TX......................................    0.8402    0.8876
  McLennan, TX
8840  \1\ Washington, DC-MD-VA-WV...................    1.0832    1.0563
  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

[[Page 26369]]

 
  Warren, VA
  Berkeley, WV
  Jefferson, WV
8920  Waterloo-Cedar Falls, IA......................    0.8932    0.9256
  Black Hawk, IA
8940  Wausau, WI....................................    0.9511    0.9663
  Marathon, WI
8960  \1\ West Palm Beach-Boca Raton, FL............    0.9658    0.9765
  Palm Beach, FL
9000  \2\ Wheeling, WV-OH (WV Hospitals)............    0.8321    0.8817
  Belmont, OH
  Marshall, WV
  Ohio, WV
9000  \2\ Wheeling, WV-OH (OH Hospitals)............    0.8778    0.9146
  Belmont, OH
  Marshall, WV
  Ohio, WV
9040  Wichita, KS...................................    0.9574    0.9706
  Butler, KS
  Harvey, KS
  Sedgwick, KS
9080  Wichita Falls, TX.............................    0.7668    0.8337
  Archer, TX
  Wichita, TX
9140  \2\ Williamsport, PA..........................    0.8686    0.9080
  Lycoming, PA
9160  Wilmington-Newark, DE-MD......................    1.1281    1.0860
  New Castle, DE
  Cecil, MD
9200  Wilmington, NC................................    0.9474    0.9637
  New Hanover, NC
  Brunswick, NC
9260  \2\ Yakima, WA................................    1.0763    1.0516
  Yakima, WA
9270  Yolo, CA......................................    1.0261    1.0178
  Yolo, CA
9280  York, PA......................................    0.9427    0.9604
  York, PA
9320  Youngstown-Warren, OH.........................    0.9604    0.9727
  Columbiana, OH
  Mahoning, OH
  Trumbull, OH
9340  Yuba City, CA.................................    1.0820    1.0555
  Sutter, CA
  Yuba, CA
9360  Yuma, AZ......................................    0.9605    0.9728
  Yuma, AZ
------------------------------------------------------------------------
\1\ Large Urban Area
\2\ Hospitals geographically located in the area are assigned the
  statewide rural wage index for FY 2000.


Table 4B.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                               Rural Areas
------------------------------------------------------------------------
                                                        Wage
                    Nonurban Area                       Index      GAF
------------------------------------------------------------------------
Alabama.............................................    0.7610    0.8294
Alaska..............................................    1.2681    1.1766
Arizona.............................................    0.8400    0.8875
Arkansas............................................    0.7538    0.8240
California..........................................    0.9966    0.9977
Colorado............................................    0.9179    0.9430
Connecticut.........................................    1.1798    1.1199
Delaware............................................    0.9349    0.9549
Florida.............................................    0.8904    0.9236
Georgia.............................................    0.8510    0.8954
Hawaii..............................................    1.1438    1.0964
Idaho...............................................    0.8831    0.9184
Illinois............................................    0.8320    0.8817
Indiana.............................................    0.8807    0.9167
Iowa................................................    0.8196    0.8726
Kansas..............................................    0.7710    0.8369
Kentucky............................................    0.8017    0.8595
Louisiana...........................................    0.7921    0.8525
Maine...............................................    0.8813    0.9171
Maryland............................................    0.8717    0.9103
Massachusetts.......................................    1.1348    1.0905
Michigan............................................    0.9133    0.9398
Minnesota...........................................    0.9116    0.9386
Mississippi.........................................    0.7608    0.8293
Missouri............................................    0.7766    0.8410
Montana.............................................    0.9017    0.9316
Nebraska............................................    0.8265    0.8777
Nevada..............................................    0.9354    0.9553
New Hampshire.......................................    0.9995    0.9997
New Jersey \1\......................................    0.0000  ........
New Mexico..........................................    0.8425    0.8893
New York............................................    0.8558    0.8989
North Carolina......................................    0.8553    0.8985
North Dakota........................................    0.7698    0.8360
Ohio................................................    0.8778    0.9146
Oklahoma............................................    0.7622    0.8303
Oregon..............................................    1.0300    1.0204
Pennsylvania........................................    0.8686    0.9080
Puerto Rico.........................................    0.4232    0.5550
Rhode Island \1\....................................    0.0000  ........
South Carolina......................................    0.8445    0.8907
South Dakota........................................    0.7786    0.8425
Tennessee...........................................    0.7980    0.8568
Texas...............................................    0.7523    0.8229
Utah................................................    0.9182    0.9432
Vermont.............................................    0.9538    0.9681
Virginia............................................    0.8361    0.8846
Washington..........................................    1.0763    1.0516
West Virginia.......................................    0.8321    0.8817
Wisconsin...........................................    0.9073    0.9356
Wyoming.............................................    0.9046   0.9336
------------------------------------------------------------------------
\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
                        Area                            index      GAF
------------------------------------------------------------------------
Abilene, TX.........................................    0.8318    0.8815
Akron, OH...........................................    1.0181    1.0124
Albany, GA..........................................    1.0783    1.0530
Alexandria, LA......................................    0.8262    0.8774
Amarillo, TX........................................    0.8663    0.9064
Anchorage, AK.......................................    1.2967    1.1947
Ann Arbor, MI.......................................    1.1177    1.0792
Atlanta, GA.........................................    0.9945    0.9962
Atlantic-Cape May, NJ...............................    1.0998    1.0673
Augusta-Aiken, GA-SC................................    0.9226    0.9463
Baltimore, MD.......................................    0.9485    0.9644
Barnstable-Yarmouth, MA.............................    1.3694    1.2402
Baton Rouge, LA.....................................    0.8856    0.9202
Benton Harbor, MI...................................    0.9133    0.9398
Bergen-Passaic, NJ..................................    1.1727    1.1153
Billings, MT........................................    0.9577    0.9708
Binghamton, NY......................................    0.8723    0.9107
Birmingham, AL......................................    0.8574    0.9000
Bismarck, ND........................................    0.8016    0.8595
Bloomington, IN.....................................    0.9294    0.9511
Boise City, ID......................................    0.9133    0.9398
Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH        1.1239    1.0833
 (NH, RI, and VT Hospitals).........................
Bryan-College Station, TX...........................    0.8306    0.8806
Burlington, VT (VT Hospitals).......................    0.9538    0.9681
Burlington, VT (NY Hospital)........................    0.9238    0.9472
Casper, WY..........................................    0.9046    0.9336
Champaign-Urbana, IL................................    0.9353    0.9552
Charleston-North Charleston, SC.....................    0.9094    0.9370
Charleston, WV......................................    0.9003    0.9306
Charlotte-Gastonia-Rock Hill, NC-SC.................    0.9307    0.9520
Chattanooga, TN-GA..................................    0.9795    0.9859
Chicago, IL.........................................    1.0902    1.0609
Cincinnati, OH-KY-IN................................    0.9330    0.9536
Clarksville-Hopkinsville, TN-KY.....................    0.8393    0.8869
Cleveland-Lorain-Elyria, OH.........................    0.9649    0.9758
Columbia, MO........................................    0.8600    0.9019
Columbia, SC........................................    0.9517    0.9667
Columbus, OH........................................    0.9741    0.9822
Dallas, TX..........................................    0.9220    0.9459
Danville, VA........................................    0.8361    0.8846
Davenport-Moline--Rock Island, IA-IL................    0.9021    0.9319
Dayton-Springfield, OH..............................    0.9519    0.9668
Denver, CO..........................................    1.0032    1.0022
Des Moines, IA......................................    0.9087    0.9365
Dothan, AL..........................................    0.8105    0.8660
Dover, DE...........................................    0.9349    0.9549
Duluth-Superior, MN-WI..............................    1.0201    1.0137
Eau Claire, WI......................................    0.9073    0.9356
Erie, PA............................................    0.9021    0.9319
Eugene-Springfield, OR..............................    1.1026    1.0692
Fargo-Moorhead, ND-MN (ND and SD Hospitals).........    0.8597    0.9017
Fayetteville, NC....................................    0.8553    0.8985
Flagstaff, AZ-UT....................................    1.0678    1.0459
Flint, MI...........................................    1.1189    1.0800
Florence, AL........................................    0.7621    0.8302
Florence, SC........................................    0.8838    0.9189

[[Page 26370]]

 
Fort Collins-Loveland, CO...........................    1.1005    1.0678
Ft. Lauderdale, FL..................................    1.0228    1.0156
Fort Pierce-Port St. Lucie, FL......................    0.9672    0.9774
Fort Smith, AR-OK...................................    0.8634    0.9043
Fort Wayne, IN......................................    0.8807    0.9167
Forth Worth-Arlington, TX...........................    0.9442    0.9614
Gadsden, AL.........................................    0.8491    0.8940
Grand Forks, ND-MN..................................    1.0042    1.0029
Grand Junction, CO..................................    0.9601    0.9725
Grand Rapids-Muskegon-Holland, MI...................    1.0150    1.0102
Great Falls, MT.....................................    0.9447    0.9618
Greeley, CO.........................................    0.9642    0.9753
Green Bay, WI.......................................    0.9359    0.9556
Greensboro-Winston-Salem-High Point, NC.............    0.9187    0.9436
Greenville, NC......................................    0.9244    0.9476
Greenville-Spartanburg-Anderson, SC.................    0.9160    0.9417
Harrisburg-Lebanon-Carlisle, PA.....................    0.9360    0.9557
Hartford, CT (MA Hospital)..........................    1.1530    1.1024
Hattiesburg, MS.....................................    0.7608    0.8293
Hickory-Morganton-Lenoir, NC........................    0.8766    0.9138
Honolulu, HI........................................    1.1905    1.1268
Houston, TX.........................................    0.9661    0.9767
Huntington-Ashland, WV-KY-OH........................    0.9721    0.9808
Huntsville, AL......................................    0.8882    0.9220
Indianapolis, IN....................................    0.9314    0.9525
Jackson, MS.........................................    0.8776    0.9145
Jackson, TN.........................................    0.8939    0.9261
Jacksonville, FL....................................    0.8995    0.9300
Jersey City, NJ.....................................    1.0985    1.0664
Johnson City-Kingsport-Bristol, TN-VA...............    0.8412    0.8883
Joplin, MO..........................................    0.7924    0.8527
Kalamazoo-Battlecreek, MI...........................    1.0144    1.0098
Kansas City, KS-MO..................................    0.9629    0.9744
Knoxville, TN.......................................    0.8422    0.8890
Kokomo, IN..........................................    0.9190    0.9438
Lafayette, LA.......................................    0.8852    0.9199
Lansing-East Lansing, MI............................    0.9873    0.9913
Las Cruces, NM......................................    0.8623    0.9035
Las Vegas, NV-AZ....................................    1.0876    1.0592
Lexington, KY.......................................    0.8769    0.9140
Lima, OH............................................    0.9497    0.9653
Lincoln, NE.........................................    0.9808    0.9868
Little Rock-North Little Rock, AR...................    0.8841    0.9191
Longview-Marshall, TX...............................    0.8403    0.8877
Los Angeles-Long Beach, CA..........................    1.1955    1.1301
Louisville, KY-IN...................................    0.9395    0.9582
Lynchburg, VA.......................................    0.9090    0.9368
Macon, GA...........................................    0.9046    0.9336
Madison, WI.........................................    1.0354    1.0241
Mansfield, OH.......................................    0.8778    0.9146
Memphis, TN-AR-MS (AR Hospital).....................    0.7538    0.8240
Memphis, TN-AR-MS (MS Hospital).....................    0.7608    0.8293
Milwaukee-Waukesha, WI..............................    0.9803    0.9865
Minneapolis-St. Paul, MN-WI.........................    1.1118    1.0753
Missoula, MT........................................    0.9462    0.9628
Mobile, AL..........................................    0.8205    0.8733
Monmouth-Ocean, NJ..................................    1.1552    1.1038
Montgomery, AL......................................    0.7610    0.8294
Myrtle Beach, SC (NC Hospital)......................    0.8553    0.8985
Nashville, TN.......................................    0.9078    0.9359
New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT.    1.2135    1.1417
New London-Norwich, CT..............................    1.1861    1.1240
New Orleans, LA.....................................    0.9283    0.9503
New York, NY........................................    1.4445    1.2864
Newburgh, NY-PA.....................................    0.9919    0.9944
Norfolk-Virginia Beach-Newport News, VA-NC (NC          0.8553    0.8985
 Hospital)..........................................
Oakland, CA.........................................    1.5051    1.3231
Ocala, FL...........................................    0.8904    0.9236
Odessa-Midland, TX..................................    0.9058    0.9345
Oklahoma City, OK...................................    0.8910    0.9240
Omaha, NE-IA........................................    0.9707    0.9798
Orange County, CA...................................    1.1560    1.1044
Orlando, FL.........................................    0.9856    0.9901
Peoria-Pekin, IL....................................    0.8687    0.9081
Pine Bluff, AR......................................    0.7762    0.8407
Pittsburgh, PA......................................    0.9713    0.9803
Pittsfield, MA (VT Hospital)........................    1.0032    1.0022
Pocatello, ID.......................................    0.9265    0.9491
Portland, ME........................................    0.9622    0.9740
Portland-Vancouver, ORWA............................    1.0928    1.0627
Provo-Orem, UT......................................    0.9972    0.9981
Raleigh-Durham-Chapel Hill, NC......................    0.9749    0.9827
Rapid City, SD......................................    0.8463    0.8920
Redding, CA.........................................    1.1795    1.1197
Reno, NV............................................    1.0508    1.0345
Richland-Kennewick-Pasco, WA........................    1.1267    1.0851
Roanoke, VA.........................................    0.9543    0.9685
Rochester, MN.......................................    1.1361    1.0913
Rockford, IL........................................    0.8904    0.9236
Sacramento, CA......................................    1.2003    1.1332
Saginaw-Bay City-Midland, MI........................    0.9475    0.9637
St. Cloud, MN.......................................    1.0164    1.0112
St. Joseph, MO......................................    0.9036    0.9329
St. Louis, MO-IL....................................    0.9114    0.9384
Salinas, CA.........................................    1.4649    1.2988
Salt Lake City-Ogden, UT............................    0.9661    0.9767
San Diego, CA.......................................    1.1901    1.1266
Santa Cruz-Watsonville, CA..........................    1.2834    1.1863
Santa Fe, NM........................................    0.9383    0.9573
Santa Rosa, CA......................................    1.2832    1.1862
Seattle-Bellevue-Everett, WA........................    1.1134    1.0763
Sherman-Denison, TX.................................    0.8619    0.9032
Sioux City, IA-NE...................................    0.8571    0.8998
South Bend, IN......................................    1.0233    1.0159
Spokane, WA.........................................    1.1608    1.1075
Springfield, IL.....................................    0.8744    0.9122
Springfield, MO.....................................    0.8089    0.8648
Syracuse, NY........................................    0.9662    0.9767
Tampa-St. Petersburg-Clearwater, FL.................    0.9111    0.9382
Texarkana, AR-Texarkana, TX.........................    0.7962    0.8555
Toledo, OH..........................................    0.9705    0.9797
Topeka, KS..........................................    0.9134    0.9399
Tucson, AZ..........................................    0.8826    0.9180
Tulsa, OK...........................................    0.8698    0.9089
Tuscaloosa, AL......................................    0.8081    0.8642
Tyler, TX...........................................    0.9077    0.9358
Victoria, TX........................................    0.8133    0.8680
Washington, DC-MD-VA-WV.............................    1.0832    1.0563
Waterloo-Cedar Falls, IA............................    0.8932    0.9256
Wausau, WI..........................................    0.9511    0.9663
Wichita, KS.........................................    0.9290    0.9508
Rural Alabama.......................................    0.7610    0.8294
Rural Florida.......................................    0.8904    0.9236
Rural Illinois......................................    0.8320    0.8817
Rural Louisiana.....................................    0.7921    0.8525
Rural Michigan......................................    0.9133    0.9398
Rural Minnesota.....................................    0.9116    0.9386
Rural Missouri......................................    0.7766    0.8410
Rural Montana.......................................    0.9017    0.9316
Rural Oregon........................................    1.0300    1.0204
Rural Texas (OK Hospital)...........................    0.7622    0.8303
Rural Washington....................................    1.0763    1.0516
Rural West Virginia.................................    0.8321    0.8817
Rural Wisconsin.....................................    0.9073    0.9356
Rural Wyoming.......................................    0.8905    0.9237
------------------------------------------------------------------------


             Table 4D.--Average Hourly Wage for Urban Areas
------------------------------------------------------------------------
                                                                Average
                          Urban area                             hourly
                                                                  wage
------------------------------------------------------------------------
Abilene, TX..................................................    18.0486
Aguadilla, PR................................................    10.4725
Akron, OH....................................................    22.9067
Albany, GA...................................................    25.7222
Albany-Schenectady-Troy, NY..................................    18.5809
Albuquerque, NM..............................................    20.3203
Alexandria, LA...............................................    17.8813
Allentown-Bethlehem-Easton, PA...............................    21.3707
Altoona, PA..................................................    20.0974
Amarillo, TX.................................................    18.7968
Anchorage, AK................................................    27.9780
Ann Arbor, MI................................................    24.4830
Anniston, AL.................................................    18.0781
Appleton-Oshkosh-Neenah, WI..................................    19.7485
Arecibo, PR..................................................     9.8505

[[Page 26371]]

 
Asheville, NC................................................    20.6721
Athens, GA...................................................    21.3273
Atlanta, GA..................................................    21.5792
Atlantic-Cape May, NJ........................................    24.3464
Auburn-Opelika, AL...........................................    17.7284
Augusta-Aiken, GA-SC.........................................    20.0184
Austin-San Marcos, TX........................................    20.4753
Bakersfield, CA..............................................    21.1738
Baltimore, MD................................................    20.4985
Bangor, ME...................................................    20.8595
Barnstable-Yarmouth, MA......................................    30.2448
Baton Rouge, LA..............................................    19.4498
Beaumont-Port Arthur, TX.....................................    18.1415
Bellingham, WA...............................................    24.9338
Benton Harbor, MI............................................    19.0728
Bergen-Passaic, NJ...........................................    25.6998
Billings, MT.................................................    20.6821
Biloxi-Gulfport-Pascagoula, MS...............................    17.9703
Binghamton, NY...............................................    18.9273
Birmingham, AL...............................................    18.5525
Bismarck, ND.................................................    17.1607
Bloomington,IN...............................................    19.2118
Bloomington-Normal, IL.......................................    20.0254
Boise City, ID...............................................    19.7312
Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH.............    24.3877
Boulder-Longmont, CO.........................................    21.2598
Brazoria, TX.................................................    18.9889
Bremerton, WA................................................    24.0180
Brownsville-Harlingen-San Benito, TX.........................    19.0812
Bryan-College Station, TX....................................    17.9622
Buffalo-Niagara Falls, NY....................................    20.7580
Burlington, VT...............................................    23.6135
Caguas, PR...................................................     9.9614
Canton-Massillon, OH.........................................    18.8702
Casper, WY...................................................    19.0746
Cedar Rapids, IA.............................................    18.2191
Champaign-Urbana, IL.........................................    20.1555
Charleston-North Charleston, SC..............................    19.7335
Charleston, WV...............................................    20.2316
Charlotte-Gastonia-Rock Hill, NC-SC..........................    20.1566
Charlottesville, VA..........................................    23.3140
Chattanooga, TN-GA...........................................    21.8793
Cheyenne, WY.................................................    18.3270
Chicago, IL..................................................    23.9273
Chico-Paradise, CA...........................................    23.1834
Cincinnati, OH-KY-IN.........................................    20.2453
Clarksville-Hopkinsville, TN-KY..............................    17.9692
Cleveland-Lorain-Elyria, OH..................................    20.9457
Colorado Springs, CO.........................................    21.1998
Columbia, MO.................................................    18.6606
Columbia, SC.................................................    20.9200
Columbus, GA-AL..............................................    18.6769
Columbus, OH.................................................    21.1363
Corpus Christi, TX...........................................    18.4356
Corvallis, OR................................................    24.8210
Cumberland, MD-WV............................................    18.3080
Dallas, TX...................................................    20.0063
Danville, VA.................................................    18.5023
Davenport-Moline-Rock Island,
   IA-IL.....................................................    19.5749
Dayton-Springfield, OH.......................................    20.6558
Daytona Beach, FL............................................    20.0411
Decatur, AL..................................................    18.7206
Decatur, IL..................................................    18.6640
Denver, CO...................................................    21.7676
Des Moines, IA...............................................    19.9873
Detroit, MI..................................................    21.8228
Dothan, AL...................................................    17.4329
Dover, DE....................................................    23.9388
Dubuque, IA..................................................    19.3729
Duluth-Superior, MN-WI.......................................    22.0638
Dutchess County, NY..........................................    22.3565
Eau Claire, WI...............................................    17.5107
El Paso, TX..................................................    19.9962
Elkhart-Goshen, IN...........................................    20.7202
Elmira, NY...................................................    18.7582
Enid, OK.....................................................    19.0534
Erie, PA.....................................................    19.5749
Eugene-Springfield, OR.......................................    23.9117
Evansville, Henderson, IN-KY.................................    17.3973
Fargo-Moorhead, ND-MN........................................    19.1596
Fayetteville, NC.............................................    18.7438
Fayetteville-Springdale-Rogers, AR...........................    17.3575
Flagstaff, AZ-UT.............................................    23.5301
Flint, MI....................................................    24.1126
Florence, AL.................................................    16.4548
Florence, SC.................................................    19.1780
Fort Collins-Loveland, CO....................................    23.3920
Fort Lauderdale, FL..........................................    22.1262
Fort Myers-Cape Coral, FL....................................    19.7718
Fort Pierce-Port St. Lucie, FL...............................    20.7352
Fort Smith, AR-OK............................................    19.2209
Fort Walton Beach, FL........................................    20.2902
Fort Wayne, IN...............................................    18.9774
Fort Worth-Arlington, TX.....................................    20.4871
Fresno, CA...................................................    22.0987
Gadsden, AL..................................................    18.4245
Gainesville, FL..............................................    22.3195
Galveston-Texas City, TX.....................................    22.3151
Gary, IN.....................................................    20.4033
Glens Falls, NY..............................................    18.2226
Goldsboro, NC................................................    18.4077
Grand Forks, ND-MN...........................................    22.1477
Grand Junction, CO...........................................    20.0924
Grand Rapids-Muskegon-Holland, MI............................    22.2552
Great Falls, MT..............................................    19.9908
Greeley, CO..................................................    21.4997
Green Bay, WI................................................    20.3069
Greensboro-Winston-Salem-High Point, NC......................    19.9482
Greenville, NC...............................................    20.5145
Greenville-Spartanburg-Anderson, SC..........................    19.8759
Hagerstown, MD...............................................    20.9333
Hamilton-Middletown, OH......................................    19.2938
Harrisburg-Lebanon-Carlisle, PA..............................    20.5425
Hartford, CT.................................................    24.8641
Hattiesburg, MS..............................................    16.4489
Hickory-Morganton-Lenoir, NC.................................    19.9965
Honolulu, HI.................................................    25.7981
Houma, LA....................................................    17.8310
Houston, TX..................................................    20.9625
Huntington-Ashland, WV-KY-OH.................................    21.6140
Huntsville, AL...............................................    19.7211
Indianapolis, IN.............................................    20.2095
Iowa City, IA................................................    21.1537
Jackson, MI..................................................    19.4234
Jackson, MS..................................................    19.2901
Jackson, TN..................................................    19.3964
Jacksonville, FL.............................................    19.5189
Jacksonville, NC.............................................    17.0264
Jamestown, NY................................................    17.1320
Janesville-Beloit, WI........................................    21.3868
Jersey City, NJ..............................................    23.7469
Johnson City-Kingsport-Bristol,
  TN-VA......................................................    18.0944
Johnstown, PA................................................    20.7614
Jonesboro, AR................................................    18.6323
Joplin, MO...................................................    17.0944
Kalamazoo-Battlecreek, MI....................................    22.2348
Kankakee, IL.................................................    19.4290
Kansas City, KS-MO...........................................    20.8941
Kenosha, WI..................................................    21.0547
Killeen-Temple, TX...........................................    22.3946
Knoxville, TN................................................    18.1724
Kokomo, IN...................................................    19.8136
La Crosse, WI-MN.............................................    20.4875
Lafayette, LA................................................    19.1482
Lafayette, IN................................................    19.7271
Lake Charles, LA.............................................    16.2042
Lakeland-Winter Haven, FL....................................    20.7380
Lancaster, PA................................................    20.1227
Lansing-East Lansing, MI.....................................    21.4235
Laredo, TX...................................................    16.5720
Las Cruces, NM...............................................    18.9734
Las Vegas, NV-AZ.............................................    23.6000
Lawrence, KS.................................................    17.9498
Lawton, OK...................................................    19.8665
Lewiston-Auburn, ME..........................................    19.6684
Lexington, KY................................................    19.3574
Lima, OH.....................................................    20.9055
Lincoln, NE..................................................    21.1236
Little Rock-North Little Rock, AR............................    19.4396
Longview-Marshall, TX........................................    19.1300
Los Angeles-Long Beach, CA...................................    25.8459
Louisville, KY-IN............................................    20.3861
Lubbock, TX..................................................    19.1566
Lynchburg, VA................................................    20.0013
Macon, GA....................................................    19.6297
Madison, WI..................................................    22.4673
Mansfield, OH................................................    19.0435
Mayaguez, PR.................................................    10.0185
McAllen-Edinburg-Mission, TX.................................    18.2331
Medford-Ashland, OR..........................................    22.6499
Melbourne-Titusville-Palm Bay, FL............................    21.0752
Memphis, TN-AR-MS............................................    15.8781
Merced, CA...................................................    21.1426
Miami, FL....................................................    22.0202
Middlesex-Somerset-Hunterdon, NJ.............................    24.8629
Milwaukee-Waukesha, WI.......................................    21.2711
Minneapolis-St. Paul, MN-WI..................................    24.1246
Missoula, MT.................................................    20.4135
Mobile, AL...................................................    17.8029
Modesto, CA..................................................    22.7416
Monmouth-Ocean, NJ...........................................    24.6814
Monroe, LA...................................................    18.3733
Montgomery, AL...............................................    16.4427
Muncie, IN...................................................    23.2904
Myrtle Beach, SC.............................................    18.7864
Naples, FL...................................................    20.3889
Nashville, TN................................................    19.9647
Nassau-Suffolk, NY...........................................    30.5221
New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT..........    26.9488
New London-Norwich, CT.......................................    26.0037
New Orleans, LA..............................................    20.1432
New York, NY.................................................    31.3439
Newark, NJ...................................................    25.6220
Newburgh, NY-PA..............................................    23.7525
Norfolk-Virginia Beach-Newport
  News, VA-NC................................................    18.2637

[[Page 26372]]

 
Oakland, CA..................................................    32.6592
Ocala, FL....................................................    19.2230
Odessa-Midland, TX...........................................    19.8941
Oklahoma City, OK............................................    19.3346
Olympia, WA..................................................    23.4064
Omaha, NE-IA.................................................    21.0639
Orange County, CA............................................    25.1808
Orlando, FL..................................................    21.6103
Owensboro, KY................................................    16.7178
Panama City, FL..............................................    19.8085
Parkersburg-Marietta, WV-OH..................................    17.5453
Pensacola, FL................................................    17.8738
Peoria-Pekin, IL.............................................    18.7922
Philadelphia, PA-NJ..........................................    23.1316
Phoenix-Mesa, AZ.............................................    20.6836
Pine Bluff, AR...............................................    17.0672
Pittsburgh, PA...............................................    21.3039
Pittsfield, MA...............................................    22.6239
Pocatello, ID................................................    23.4749
Ponce, PR....................................................     9.4317
Portland, ME.................................................    21.2189
Portland-Vancouver, OR-WA....................................    23.7092
Providence-Warwick, RI.......................................    23.7714
Provo-Orem, UT...............................................    21.5911
Pueblo, CO...................................................    18.5332
Punta Gorda, FL..............................................    20.7540
Racine, WI...................................................    20.1753
Raleigh-Durham-Chapel Hill, NC...............................    21.1552
Rapid City, SD...............................................    18.3452
Reading, PA..................................................    19.9691
Redding, CA..................................................    25.5947
Reno, NV.....................................................    22.8021
Richland-Kennewick-Pasco, WA.................................    25.0933
Richmond-Petersburg, VA......................................    21.0026
Riverside-San Bernardino, CA.................................    24.4131
Roanoke, VA..................................................    20.7061
Rochester, MN................................................    24.6529
Rochester, NY................................................    19.1942
Rockford, IL.................................................    19.3204
Rocky Mount, NC..............................................    19.2567
Sacramento, CA...............................................    26.0102
Saginaw-Bay City-Midland, MI.................................    20.5596
St. Cloud, MN................................................    22.0551
St. Joseph, MO...............................................    20.0604
St. Louis, MO-IL.............................................    19.7758
Salem, OR....................................................    22.3396
Salinas, CA..................................................    31.7057
Salt Lake City-Ogden, UT.....................................    20.9541
San Angelo, TX...............................................    16.8092
San Antonio, TX..............................................    17.5486
San Diego, CA................................................    25.8245
San Francisco, CA............................................    31.2006
San Jose, CA.................................................    31.3127
San Juan-Bayamon, PR.........................................    10.1790
San Luis Obispo-Atascadero-
  Paso Robles, CA............................................    23.3363
Santa Barbara-Santa Maria-
  Lompoc, CA.................................................    23.2791
Santa Cruz-Watsonville, CA...................................    31.9763
Santa Fe, NM.................................................    20.3593
Santa Rosa, CA...............................................    28.6042
Sarasota-Bradenton, FL.......................................    20.9819
Savannah, GA.................................................    18.8537
Scranton-Wilkes Barre-Hazleton,
   PA........................................................    18.1723
Seattle-Bellevue-Everett, WA.................................    24.0236
Sharon, PA...................................................    17.3633
Sheboygan, WI................................................    18.3680
Sherman-Denison, TX..........................................    18.3921
Shreveport-Bossier City, LA..................................    19.2092
Sioux City, IA-NE............................................    18.5977
Sioux Falls, SD..............................................    19.2902
South Bend, IN...............................................    22.2041
Spokane, WA..................................................    25.9937
Springfield, IL..............................................    18.9742
Springfield, MO..............................................    18.1326
Springfield, MA..............................................    23.4382
State College, PA............................................    19.7770
Steubenville-Weirton, OH-WV..................................    18.7875
Stockton-Lodi, CA............................................    23.2417
Sumter, SC...................................................    15.4277
Syracuse, NY.................................................    20.8181
Tacoma, WA...................................................    25.2962
Tallahassee, FL..............................................    18.6152
Tampa-St. Petersburg-Clearwater, FL..........................    19.5050
Terre Haute, IN..............................................    15.3117
Texarkana, AR-Texarkana, TX..................................    17.0551
Toledo, OH...................................................    21.4500
Topeka, KS...................................................    19.8204
Trenton, NJ..................................................    21.5233
Tucson, AZ...................................................    19.0859
Tulsa, OK....................................................    18.8729
Tuscaloosa, AL...............................................    17.5354
Tyler, TX....................................................    20.1140
Utica-Rome, NY...............................................    18.2490
Vallejo-Fairfield-Napa, CA...................................    28.7082
Ventura, CA..................................................    24.1637
Victoria, TX.................................................    17.6229
Vineland-Millville-Bridgeton, NJ.............................    22.7012
Visalia-Tulare-Porterville, CA...............................    21.2165
Waco, TX.....................................................    18.2321
Washington, DC-MD-VA-WV......................................    23.5031
Waterloo-Cedar Falls, IA.....................................    18.4528
Wausau, WI...................................................    20.5783
West Palm Beach-Boca Raton, FL...............................    21.1018
Wheeling, OH-WV..............................................    16.9649
Wichita, KS..................................................    20.7737
Wichita Falls, TX............................................    16.6396
Williamsport, PA.............................................    18.2295
Wilmington-Newark, DE-MD.....................................    24.4776
Wilmington, NC...............................................    20.5573
Yakima, WA...................................................    21.7819
Yolo, CA.....................................................    22.2646
York, PA.....................................................    20.4558
Youngstown-Warren, OH........................................    20.8393
Yuba City, CA................................................    23.4776
Yuma, AZ.....................................................    20.8420
------------------------------------------------------------------------


             Table 4E.--Average Hourly Wage for Rural Areas
------------------------------------------------------------------------
                                                                Average
                        Nonurban area                            hourly
                                                                  wage
------------------------------------------------------------------------
Alabama......................................................    16.4226
Alaska.......................................................    27.5158
Arizona......................................................    18.2279
Arkansas.....................................................    16.3570
California...................................................    21.6246
Colorado.....................................................    19.9177
Connecticut..................................................    25.5994
Delaware.....................................................    20.2855
Florida......................................................    19.2234
Georgia......................................................    18.4650
Hawaii.......................................................    24.8190
Idaho........................................................    19.1619
Illinois.....................................................    18.0540
Indiana......................................................    19.1101
Iowa.........................................................    17.7834
Kansas.......................................................    16.7288
Kentucky.....................................................    17.3951
Louisiana....................................................    17.1441
Maine........................................................    19.1234
Maryland.....................................................    18.9146
Massachusetts................................................    24.6234
Michigan.....................................................    19.7353
Minnesota....................................................    19.7808
Mississippi..................................................    16.5082
Missouri.....................................................    16.8219
Montana......................................................    19.5658
Nebraska.....................................................    17.9331
Nevada.......................................................    20.2962
New Hampshire................................................    21.6890
New Jersey \1\...............................................  .........
New Mexico...................................................    18.2818
New York.....................................................    18.5706
North Carolina...............................................    18.5592
North Dakota.................................................    16.7027
Ohio.........................................................    19.0464
Oklahoma.....................................................    16.5386
Oregon.......................................................    22.3491
Pennsylvania.................................................    18.8470
Puerto Rico..................................................     9.1823
Rhode Island \1\.............................................  .........
South Carolina...............................................    18.3244
South Dakota.................................................    16.8938
Tennessee....................................................    17.3149
Texas........................................................    16.3108
Utah.........................................................    19.9234
Vermont......................................................    20.3374
Virginia.....................................................    18.1413
Washington...................................................    23.3538
West Virginia................................................    18.0536
Wisconsin....................................................    19.6848
Wyoming......................................................   19.6292
------------------------------------------------------------------------
\1\ All counties within the State are classified as urban.


[[Page 26373]]


                Table 4F.--Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF)
----------------------------------------------------------------------------------------------------------------
                                                                                   Wage  index--       GAF--
                      Area                          Wage  index         GAF          reclass.        reclass.
                                                                                     hospitals       hospitals
----------------------------------------------------------------------------------------------------------------
Aguadilla, PR...................................          1.0507          1.0344  ..............  ..............
Arecibo, PR.....................................          0.9883          0.9920  ..............  ..............
Caguas, PR......................................          0.9995          0.9997  ..............  ..............
Mayaguez, PR....................................          1.0052          1.0036  ..............  ..............
Ponce, PR.......................................          0.9463          0.9629  ..............  ..............
San Juan-Bayamon, PR............................          1.0213          1.0145  ..............  ..............
Rural Puerto Rico...............................          0.9213          0.9454  ..............  ..............
----------------------------------------------------------------------------------------------------------------


  Table 5.--List of Diagnosis Related Groups (DRGs), Relative Weighting Factors, Geometric and Arithmetic Mean
                                                 Length of Stay
----------------------------------------------------------------------------------------------------------------
                                                                             Relative    Geometric    Arithmetic
      DRG          MDC            Type                  DRG title            weights      mean LOS     mean LOS
----------------------------------------------------------------------------------------------------------------
1..............       01  SURG                 CRANIOTOMY AGE >17 EXCEPT        3.1023          6.3          9.1
                                                FOR TRAUMA.
2..............       01  SURG                 CRANIOTOMY FOR TRAUMA AGE        3.1157          7.3          9.7
                                                >17.
3..............       01  SURG                 * CRANIOTOMY AGE 0-17.....       1.9575         12.7         12.7
4..............       01  SURG                 SPINAL PROCEDURES.........       2.2879          4.8          7.3
5..............       01  SURG                 EXTRACRANIAL VASCULAR            1.4334          2.3          3.3
                                                PROCEDURES.
6..............       01  SURG                 CARPAL TUNNEL RELEASE.....        .8265          2.2          3.2
7..............       01  SURG                 PERIPH & CRANIAL NERVE &         2.5918          6.9         10.3
                                                OTHER NERV SYST PROC W CC.
8..............       01  SURG                 PERIPH & CRANIAL NERVE &         1.3987          2.1          3.0
                                                OTHER NERV SYST PROC W/O
                                                CC.
9..............       01  MED                  SPINAL DISORDERS &               1.3176          4.8          6.7
                                                INJURIES.
10.............       01  MED                  NERVOUS SYSTEM NEOPLASMS W       1.2276          4.9          6.7
                                                CC.
11.............       01  MED                  NERVOUS SYSTEM NEOPLASMS W/       .8343          3.1          4.2
                                                O CC.
12.............       01  MED                  DEGENERATIVE NERVOUS              .8916          4.5          6.1
                                                SYSTEM DISORDERS.
13.............       01  MED                  MULTIPLE SCLEROSIS &              .7675          4.1          5.1
                                                CEREBELLAR ATAXIA.
14.............       01  MED                  SPECIFIC CEREBROVASCULAR         1.2205          4.8          6.2
                                                DISORDERS EXCEPT TIA.
15.............       01  MED                  TRANSIENT ISCHEMIC ATTACK         .7486          2.9          3.6
                                                & PRECEREBRAL OCCLUSIONS.
16.............       01  MED                  NONSPECIFIC                      1.1670          4.6          6.1
                                                CEREBROVASCULAR DISORDERS
                                                W CC.
17.............       01  MED                  NONSPECIFIC                       .6563          2.7          3.4
                                                CEREBROVASCULAR DISORDERS
                                                W/O CC.
18.............       01  MED                  CRANIAL & PERIPHERAL NERVE        .9616          4.3          5.6
                                                DISORDERS W CC.
19.............       01  MED                  CRANIAL & PERIPHERAL NERVE        .6975          2.9          3.7
                                                DISORDERS W/O CC.
20.............       01  MED                  NERVOUS SYSTEM INFECTION         2.7645          7.9         10.5
                                                EXCEPT VIRAL MENINGITIS.
21.............       01  MED                  VIRAL MENINGITIS..........       1.5003          5.2          6.9
22.............       01  MED                  HYPERTENSIVE                     1.0084          3.8          5.0
                                                ENCEPHALOPATHY.
23.............       01  MED                  NONTRAUMATIC STUPOR & COMA        .8021          3.2          4.2
24.............       01  MED                  SEIZURE & HEADACHE AGE >17        .9925          3.7          5.0
                                                W CC.
25.............       01  MED                  SEIZURE & HEADACHE AGE >17        .6045          2.6          3.3
                                                W/O CC.
26.............       01  MED                  SEIZURE & HEADACHE AGE 0-         .6453          2.4          3.2
                                                17.
27.............       01  MED                  TRAUMATIC STUPOR & COMA,         1.2871          3.2          5.1
                                                COMA >1 HR.
28.............       01  MED                  TRAUMATIC STUPOR & COMA,         1.3124          4.5          6.3
                                                COMA 1 HR AGE 17 <gr-thn-
                                                eq> W CC.
29.............       01  MED                  TRAUMATIC STUPOR & COMA,          .7037          2.8          3.7
                                                COMA 1 HR AGE 17 <gr-thn-
                                                eq> W/O CC.
30.............       01  MED                  * TRAUMATIC STUPOR & COMA,        .3311          2.0          2.0
                                                COMA  1 HR AGE 0-17.
31.............       01  MED                  CONCUSSION AGE >17 W CC...        .8655          3.1          4.2
32.............       01  MED                  CONCUSSION AGE >17 W/O CC.        .5374          2.1          2.7
33.............       01  MED                  * CONCUSSION AGE 0-17.....        .2080          1.6          1.6
34.............       01  MED                  OTHER DISORDERS OF NERVOUS       1.0108          3.8          5.2
                                                SYSTEM W CC.
35.............       01  MED                  OTHER DISORDERS OF NERVOUS        .6051          2.7          3.4
                                                SYSTEM W/O CC.
36.............       02  SURG                 RETINAL PROCEDURES........        .6636          1.2          1.4
37.............       02  SURG                 ORBITAL PROCEDURES........       1.0020          2.6          3.7
38.............       02  SURG                 PRIMARY IRIS PROCEDURES...        .4832          1.8          2.5
39.............       02  SURG                 LENS PROCEDURES WITH OR           .5803          1.5          1.9
                                                WITHOUT VITRECTOMY.
40.............       02  SURG                 EXTRAOCULAR PROCEDURES            .8625          2.3          3.6
                                                EXCEPT ORBIT AGE >17.
41.............       02  SURG                 * EXTRAOCULAR PROCEDURES          .3370          1.6          1.6
                                                EXCEPT ORBIT AGE 0-17.
42.............       02  SURG                 INTRAOCULAR PROCEDURES            .6472          1.6          2.2
                                                EXCEPT RETINA, IRIS &
                                                LENS.
43.............       02  MED                  HYPHEMA...................        .5008          2.6          3.3
44.............       02  MED                  ACUTE MAJOR EYE INFECTIONS        .6293          4.0          5.0
45.............       02  MED                  NEUROLOGICAL EYE DISORDERS        .7031          2.7          3.3
46.............       02  MED                  OTHER DISORDERS OF THE EYE        .7767          3.5          4.6
                                                AGE >17 W CC.
47.............       02  MED                  OTHER DISORDERS OF THE EYE        .4921          2.5          3.3
                                                AGE >17 W/O CC.
48.............       02  MED                  * OTHER DISORDERS OF THE          .2968          2.9          2.9
                                                EYE AGE 0-17.
49.............       03  SURG                 MAJOR HEAD & NECK                1.8368          3.5          5.0
                                                PROCEDURES.
50.............       03  SURG                 SIALOADENECTOMY...........        .8531          1.6          2.0
51.............       03  SURG                 SALIVARY GLAND PROCEDURES         .7986          1.8          2.6
                                                EXCEPT SIALOADENECTOMY.
52.............       03  SURG                 CLEFT LIP & PALATE REPAIR.        .8428          1.6          2.1
53.............       03  SURG                 SINUS & MASTOID PROCEDURES       1.2137          2.3          3.7
                                                AGE >17.

[[Page 26374]]

 
54.............       03  SURG                 * SINUS & MASTOID                 .4812          3.2          3.2
                                                PROCEDURES AGE 0-17.
55.............       03  SURG                 MISCELLANEOUS EAR, NOSE,          .9049          1.9          2.9
                                                MOUTH & THROAT PROCEDURES.
56.............       03  SURG                 RHINOPLASTY...............        .9487          2.1          3.1
57.............       03  SURG                 T & A PROC, EXCEPT               1.0775          2.6          4.0
                                                TONSILLECTOMY & /OR
                                                ADENOIDECTOMY ONLY, AGE
                                                >17.
58.............       03  SURG                 * T & A PROC, EXCEPT              .2733          1.5          1.5
                                                TONSILLECTOMY & /OR
                                                ADENOIDECTOMY ONLY, AGE 0-
                                                17.
59.............       03  SURG                 TONSILLECTOMY & /OR               .6824          1.8          2.4
                                                ADENOIDECTOMY ONLY, AGE
                                                >17.
60.............       03  SURG                 * TONSILLECTOMY & /OR             .2081          1.5          1.5
                                                ADENOIDECTOMY ONLY, AGE 0-
                                                17.
61.............       03  SURG                 MYRINGOTOMY W TUBE               1.2708          2.8          4.9
                                                INSERTION AGE >17.
62.............       03  SURG                 * MYRINGOTOMY W TUBE              .2946          1.3          1.3
                                                INSERTION AGE 0-17.
63.............       03  SURG                 OTHER EAR, NOSE, MOUTH &         1.3393          3.0          4.3
                                                THROAT O.R. PROCEDURES.
64.............       03  MED                  EAR, NOSE, MOUTH & THROAT        1.2285          4.2          6.5
                                                MALIGNANCY.
65.............       03  MED                  DYSEQUILIBRIUM............        .5383          2.3          2.9
66.............       03  MED                  EPISTAXIS.................        .5580          2.5          3.2
67.............       03  MED                  EPIGLOTTITIS..............        .8088          2.8          3.5
68.............       03  MED                  OTITIS MEDIA & URI AGE >17        .6744          3.4          4.2
                                                W CC.
69.............       03  MED                  OTITIS MEDIA & URI AGE >17        .5114          2.7          3.3
                                                W/O CC.
70.............       03  MED                  OTITIS MEDIA & URI AGE 0-         .4666          2.4          2.9
                                                17.
71.............       03  MED                  LARYNGOTRACHEITIS.........        .7730          3.0          3.9
72.............       03  MED                  NASAL TRAUMA & DEFORMITY..        .6409          2.6          3.3
73.............       03  MED                  OTHER EAR, NOSE, MOUTH &          .7763          3.3          4.3
                                                THROAT DIAGNOSES AGE >17.
74.............       03  MED                  * OTHER EAR, NOSE, MOUTH &        .3348          2.1          2.1
                                                THROAT DIAGNOSES AGE 0-17.
75.............       04  SURG                 MAJOR CHEST PROCEDURES....       3.1338          7.8         10.0
76.............       04  SURG                 OTHER RESP SYSTEM O.R.           2.7905          8.4         11.3
                                                PROCEDURES W CC.
77.............       04  SURG                 OTHER RESP SYSTEM O.R.           1.1793          3.4          4.9
                                                PROCEDURES W/O CC.
78.............       04  MED                  PULMONARY EMBOLISM........       1.3703          6.0          7.0
79.............       04  MED                  RESPIRATORY INFECTIONS &         1.6471          6.6          8.5
                                                INFLAMMATIONS AGE >17 W
                                                CC.
80.............       04  MED                  RESPIRATORY INFECTIONS &          .9168          4.6          5.7
                                                INFLAMMATIONS AGE >17 W/O
                                                CC.
81.............       04  MED                  * RESPIRATORY INFECTIONS &       1.5162          6.1          6.1
                                                INFLAMMATIONS AGE 0-17.
82.............       04  MED                  RESPIRATORY NEOPLASMS.....       1.3810          5.2          7.0
83.............       04  MED                  MAJOR CHEST TRAUMA W CC...        .9752          4.4          5.6
84.............       04  MED                  MAJOR CHEST TRAUMA W/O CC.        .5492          2.8          3.4
85.............       04  MED                  PLEURAL EFFUSION W CC.....       1.2201          4.9          6.4
86.............       04  MED                  PLEURAL EFFUSION W/O CC...        .6990          2.9          3.8
87.............       04  MED                  PULMONARY EDEMA &                1.3746          4.8          6.3
                                                RESPIRATORY FAILURE.
88.............       04  MED                  CHRONIC OBSTRUCTIVE               .9314          4.2          5.2
                                                PULMONARY DISEASE.
89.............       04  MED                  SIMPLE PNEUMONIA &               1.0638          5.0          6.0
                                                PLEURISY AGE >17 W CC.
90.............       04  MED                  SIMPLE PNEUMONIA &                .6540          3.6          4.2
                                                PLEURISY AGE >17 W/O CC.
91.............       04  MED                  SIMPLE PNEUMONIA &                .6702          2.8          3.3
                                                PLEURISY AGE 0-17.
92.............       04  MED                  INTERSTITIAL LUNG DISEASE        1.1852          5.0          6.3
                                                W CC.
93.............       04  MED                  INTERSTITIAL LUNG DISEASE         .7211          3.3          4.0
                                                W/O CC.
94.............       04  MED                  PNEUMOTHORAX W CC.........       1.1694          4.8          6.3
95.............       04  MED                  PNEUMOTHORAX W/O CC.......        .6072          3.0          3.7
96.............       04  MED                  BRONCHITIS & ASTHMA AGE           .7873          3.9          4.7
                                                >17 W CC.
97.............       04  MED                  BRONCHITIS & ASTHMA AGE           .5871          3.1          3.7
                                                >17 W/O CC.
98.............       04  MED                  BRONCHITIS & ASTHMA AGE 0-        .9098          3.0          4.7
                                                17.
99.............       04  MED                  RESPIRATORY SIGNS &               .7104          2.5          3.2
                                                SYMPTOMS W CC.
100............       04  MED                  RESPIRATORY SIGNS &               .5415          1.8          2.2
                                                SYMPTOMS W/O CC.
101............       04  MED                  OTHER RESPIRATORY SYSTEM          .8535          3.3          4.4
                                                DIAGNOSES W CC.
102............       04  MED                  OTHER RESPIRATORY SYSTEM          .5522          2.1          2.7
                                                DIAGNOSES W/O CC.
103............      PRE  SURG                 HEART TRANSPLANT..........      17.3527         28.8         48.6
104............       05  SURG                 CARDIAC VALVE & OTHER            7.2014          8.9         11.7
                                                MAJOR CARDIOTHORACIC PROC
                                                W CARDIAC CATH.
105............       05  SURG                 CARDIAC VALVE & OTHER            5.6515          7.4          9.3
                                                MAJOR CARDIOTHORACIC PROC
                                                W/O CARDIAC CATH.
106............       05  SURG                 CORONARY BYPASS W PTCA....       7.5379          9.4         11.2
107............       05  SURG                 CORONARY BYPASS W CARDIAC        5.3870          9.2         10.4
                                                CATH.
108............       05  SURG                 OTHER CARDIOTHORACIC             5.6650          8.0         10.6
                                                PROCEDURES.
109............       05  SURG                 CORONARY BYPASS W/O PTCA         4.0244          6.8          7.7
                                                OR CARDIAC CATH.
110............       05  SURG                 MAJOR CARDIOVASCULAR             4.1440          7.1          9.5
                                                PROCEDURES W CC.
111............       05  SURG                 MAJOR CARDIOVASCULAR             2.2427          4.7          5.5
                                                PROCEDURES W/O CC.
112............       05  SURG                 PERCUTANEOUS                     1.8729          2.6          3.8
                                                CARDIOVASCULAR PROCEDURES.
113............       05  SURG                 AMPUTATION FOR CIRC SYSTEM       2.7595          9.7         12.7
                                                DISORDERS EXCEPT UPPER
                                                LIMB & TOE.
114............       05  SURG                 UPPER LIMB & TOE                 1.5650          6.0          8.3
                                                AMPUTATION FOR CIRC
                                                SYSTEM DISORDERS.

[[Page 26375]]

 
115............       05  SURG                 PRM CARD PACEM IMPL W            3.4763          6.0          8.4
                                                AMI,HRT FAIL OR SHK,OR
                                                AICD LEAD OR GNRTR PR.
116............       05  SURG                 OTH PERM CARD PACEMAK IMPL       2.4225          2.6          3.7
                                                OR PTCA W CORONARY ARTERY
                                                STENT IMPLNT.
117............       05  SURG                 CARDIAC PACEMAKER REVISION       1.2983          2.6          4.1
                                                EXCEPT DEVICE REPLACEMENT.
118............       05  SURG                 CARDIAC PACEMAKER DEVICE         1.4952          1.9          2.8
                                                REPLACEMENT.
119............       05  SURG                 VEIN LIGATION & STRIPPING.       1.2627          2.9          4.8
120............       05  SURG                 OTHER CIRCULATORY SYSTEM         2.0394          4.9          8.1
                                                O.R. PROCEDURES.
121............       05  MED                  CIRCULATORY DISORDERS W          1.6191          5.5          6.7
                                                AMI & MAJOR COMP,
                                                DISCHARGED ALIVE.
122............       05  MED                  CIRCULATORY DISORDERS W          1.0872          3.3          4.0
                                                AMI W/O MAJOR COMP,
                                                DISCHARGED ALIVE.
123............       05  MED                  CIRCULATORY DISORDERS W          1.5531          2.8          4.6
                                                AMI, EXPIRED.
124............       05  MED                  CIRCULATORY DISORDERS            1.4152          3.3          4.4
                                                EXCEPT AMI, W CARD CATH &
                                                COMPLEX DIAG.
125............       05  MED                  CIRCULATORY DISORDERS            1.0624          2.2          2.8
                                                EXCEPT AMI, W CARD CATH W/
                                                O COMPLEX DIAG.
126............       05  MED                  ACUTE & SUBACUTE                 2.5352          9.2         12.0
                                                ENDOCARDITIS.
127............       05  MED                  HEART FAILURE & SHOCK.....       1.0135          4.2          5.4
128............       05  MED                  DEEP VEIN THROMBOPHLEBITIS        .7644          5.0          5.8
129............       05  MED                  CARDIAC ARREST,                  1.0936          1.8          2.8
                                                UNEXPLAINED.
130............       05  MED                  PERIPHERAL VASCULAR               .9474          4.7          5.9
                                                DISORDERS W CC.
131............       05  MED                  PERIPHERAL VASCULAR               .5891          3.6          4.4
                                                DISORDERS W/O CC.
132............       05  MED                  ATHEROSCLEROSIS W CC......        .6703          2.4          3.1
133............       05  MED                  ATHEROSCLEROSIS W/O CC....        .5656          1.9          2.4
134............       05  MED                  HYPERTENSION..............        .5921          2.6          3.3
135............       05  MED                  CARDIAC CONGENITAL &              .9085          3.3          4.5
                                                VALVULAR DISORDERS AGE
                                                >17 W CC.
136............       05  MED                  CARDIAC CONGENITAL &              .6074          2.3          2.9
                                                VALVULAR DISORDERS AGE
                                                >17 W/O CC.
137............       05  MED                  * CARDIAC CONGENITAL &            .8170          3.3          3.3
                                                VALVULAR DISORDERS AGE 0-
                                                17.
138............       05  MED                  CARDIAC ARRHYTHMIA &              .8288          3.1          4.0
                                                CONDUCTION DISORDERS W CC.
139............       05  MED                  CARDIAC ARRHYTHMIA &              .5139          2.0          2.5
                                                CONDUCTION DISORDERS W/O
                                                CC.
140............       05  MED                  ANGINA PECTORIS...........        .5737          2.2          2.7
141............       05  MED                  SYNCOPE & COLLAPSE W CC...        .7225          2.9          3.7
142............       05  MED                  SYNCOPE & COLLAPSE W/O CC.        .5556          2.2          2.7
143............       05  MED                  CHEST PAIN................        .5403          1.8          2.2
144............       05  MED                  OTHER CIRCULATORY SYSTEM         1.1676          3.8          5.4
                                                DIAGNOSES W CC.
145............       05  MED                  OTHER CIRCULATORY SYSTEM          .6308          2.2          2.8
                                                DIAGNOSES W/O CC.
146............       06  SURG                 RECTAL RESECTION W CC.....       2.7439          8.9         10.2
147............       06  SURG                 RECTAL RESECTION W/O CC...       1.6272          6.0          6.6
148............       06  SURG                 MAJOR SMALL & LARGE BOWEL        3.4317         10.1         12.1
                                                PROCEDURES W CC.
149............       06  SURG                 MAJOR SMALL & LARGE BOWEL        1.5645          6.1          6.6
                                                PROCEDURES W/O CC.
150............       06  SURG                 PERITONEAL ADHESIOLYSIS W        2.8508          9.1         11.2
                                                CC.
151............       06  SURG                 PERITONEAL ADHESIOLYSIS W/       1.3404          4.8          5.9
                                                O CC.
152............       06  SURG                 MINOR SMALL & LARGE BOWEL        1.9422          6.8          8.2
                                                PROCEDURES W CC.
153............       06  SURG                 MINOR SMALL & LARGE BOWEL        1.2045          4.9          5.5
                                                PROCEDURES W/O CC.
154............       06  SURG                 STOMACH, ESOPHAGEAL &            4.1504         10.1         13.3
                                                DUODENAL PROCEDURES AGE
                                                >17 W CC.
155............       06  SURG                 STOMACH, ESOPHAGEAL &            1.3691          3.3          4.3
                                                DUODENAL PROCEDURES AGE
                                                >17 W/O CC.
156............       06  SURG                 * STOMACH, ESOPHAGEAL &           .8413          6.0          6.0
                                                DUODENAL PROCEDURES AGE 0-
                                                17.
157............       06  SURG                 ANAL & STOMAL PROCEDURES W       1.2381          3.9          5.5
                                                CC.
158............       06  SURG                 ANAL & STOMAL PROCEDURES W/       .6630          2.1          2.6
                                                O CC.
159............       06  SURG                 HERNIA PROCEDURES EXCEPT         1.3341          3.8          5.0
                                                INGUINAL & FEMORAL AGE
                                                >17 W CC.
160............       06  SURG                 HERNIA PROCEDURES EXCEPT          .7828          2.2          2.7
                                                INGUINAL & FEMORAL AGE
                                                >17 W/O CC.
161............       06  SURG                 INGUINAL & FEMORAL HERNIA        1.1022          2.9          4.2
                                                PROCEDURES AGE >17 W CC.
162............       06  SURG                 INGUINAL & FEMORAL HERNIA         .6236          1.6          2.0
                                                PROCEDURES AGE >17 W/O CC.
163............       06  SURG                 * HERNIA PROCEDURES AGE 0-        .8701          2.1          2.1
                                                17.
164............       06  SURG                 APPENDECTOMY W COMPLICATED       2.3776          7.1          8.4
                                                PRINCIPAL DIAG W CC.
165............       06  SURG                 APPENDECTOMY W COMPLICATED       1.2823          4.3          4.9
                                                PRINCIPAL DIAG W/O CC.
166............       06  SURG                 APPENDECTOMY W/O                 1.4813          4.0          5.1
                                                COMPLICATED PRINCIPAL
                                                DIAG W CC.
167............       06  SURG                 APPENDECTOMY W/O                  .8936          2.3          2.7
                                                COMPLICATED PRINCIPAL
                                                DIAG W/O CC.
168............       03  SURG                 MOUTH PROCEDURES W CC.....       1.2069          3.2          4.6
169............       03  SURG                 MOUTH PROCEDURES W/O CC...        .7475          1.9          2.4
170............       06  SURG                 OTHER DIGESTIVE SYSTEM           2.8739          7.7         11.2
                                                O.R. PROCEDURES W CC.

[[Page 26376]]

 
171............       06  SURG                 OTHER DIGESTIVE SYSTEM           1.1951          3.6          4.8
                                                O.R. PROCEDURES W/O CC.
172............       06  MED                  DIGESTIVE MALIGNANCY W CC.       1.3502          5.1          7.0
173............       06  MED                  DIGESTIVE MALIGNANCY W/O          .7641          2.8          3.9
                                                CC.
174............       06  MED                  G.I. HEMORRHAGE W CC......        .9981          3.9          4.8
175............       06  MED                  G.I. HEMORRHAGE W/O CC....        .5495          2.5          2.9
176............       06  MED                  COMPLICATED PEPTIC ULCER..       1.1057          4.1          5.3
177............       06  MED                  UNCOMPLICATED PEPTIC ULCER        .8997          3.7          4.6
                                                W CC.
178............       06  MED                  UNCOMPLICATED PEPTIC ULCER        .6593          2.6          3.1
                                                W/O CC.
179............       06  MED                  INFLAMMATORY BOWEL DISEASE       1.0583          4.7          6.0
180............       06  MED                  G.I. OBSTRUCTION W CC.....        .9426          4.2          5.4
181............       06  MED                  G.I. OBSTRUCTION W/O CC...        .5309          2.8          3.4
182............       06  MED                  ESOPHAGITIS, GASTROENT &          .7922          3.4          4.4
                                                MISC DIGEST DISORDERS AGE
                                                >17 W CC.
183............       06  MED                  ESOPHAGITIS, GASTROENT &          .5713          2.4          3.0
                                                MISC DIGEST DISORDERS AGE
                                                >17 W/O CC.
184............       06  MED                  ESOPHAGITIS, GASTROENT &          .5137          2.5          3.3
                                                MISC DIGEST DISORDERS AGE
                                                0-17.
185............       03  MED                  DENTAL & ORAL DIS EXCEPT          .8624          3.3          4.5
                                                EXTRACTIONS &
                                                RESTORATIONS, AGE >17.
186............       03  MED                  * DENTAL & ORAL DIS EXCEPT        .3207          2.9          2.9
                                                EXTRACTIONS &
                                                RESTORATIONS, AGE 0-17.
187............       03  MED                  DENTAL EXTRACTIONS &              .7687          2.9          3.8
                                                RESTORATIONS.
188............       06  MED                  OTHER DIGESTIVE SYSTEM           1.1005          4.1          5.6
                                                DIAGNOSES AGE >17 W CC.
189............       06  MED                  OTHER DIGESTIVE SYSTEM            .5799          2.4          3.1
                                                DIAGNOSES AGE >17 W/O CC.
190............       06  MED                  OTHER DIGESTIVE SYSTEM            .9912          4.1          6.0
                                                DIAGNOSES AGE 0-17.
191............       07  SURG                 PANCREAS, LIVER & SHUNT          4.3818         10.5         14.1
                                                PROCEDURES W CC.
192............       07  SURG                 PANCREAS, LIVER & SHUNT          1.7866          5.3          6.6
                                                PROCEDURES W/O CC.
193............       07  SURG                 BILIARY TRACT PROC EXCEPT        3.3954         10.3         12.6
                                                ONLY CHOLECYST W OR W/O
                                                C.D.E. W CC.
194............       07  SURG                 BILIARY TRACT PROC EXCEPT        1.6141          5.6          6.8
                                                ONLY CHOLECYST W OR W/O
                                                C.D.E. W/O CC.
195............       07  SURG                 CHOLECYSTECTOMY W C.D.E. W       2.9025          8.3          9.9
                                                CC.
196............       07  SURG                 CHOLECYSTECTOMY W C.D.E. W/      1.6543          4.9          5.7
                                                O CC.
197............       07  SURG                 CHOLECYSTECTOMY EXCEPT BY        2.4551          7.2          8.7
                                                LAPAROSCOPE W/O C.D.E. W
                                                CC.
198............       07  SURG                 CHOLECYSTECTOMY EXCEPT BY        1.2323          3.9          4.5
                                                LAPAROSCOPE W/O C.D.E. W/
                                                O CC.
199............       07  SURG                 HEPATOBILIARY DIAGNOSTIC         2.3610          7.2          9.7
                                                PROCEDURE FOR MALIGNANCY.
200............       07  SURG                 HEPATOBILIARY DIAGNOSTIC         3.1765          7.0         10.8
                                                PROCEDURE FOR NON-
                                                MALIGNANCY.
201............       07  SURG                 OTHER HEPATOBILIARY OR           3.4002         10.2         13.9
                                                PANCREAS O.R. PROCEDURES.
202............       07  MED                  CIRRHOSIS & ALCOHOLIC            1.3035          4.9          6.5
                                                HEPATITIS.
203............       07  MED                  MALIGNANCY OF                    1.3284          5.0          6.7
                                                HEPATOBILIARY SYSTEM OR
                                                PANCREAS.
204............       07  MED                  DISORDERS OF PANCREAS            1.2030          4.5          5.9
                                                EXCEPT MALIGNANCY.
205............       07  MED                  DISORDERS OF LIVER EXCEPT        1.2072          4.7          6.3
                                                MALIG,CIRR,ALC HEPA W CC.
206............       07  MED                  DISORDERS OF LIVER EXCEPT         .6759          3.0          3.9
                                                MALIG,CIRR,ALC HEPA W/O
                                                CC.
207............       07  MED                  DISORDERS OF THE BILIARY         1.1037          4.0          5.2
                                                TRACT W CC.
208............       07  MED                  DISORDERS OF THE BILIARY          .6532          2.3          2.9
                                                TRACT W/O CC.
209............       08  SURG                 MAJOR JOINT & LIMB               2.0902          4.6          5.2
                                                REATTACHMENT PROCEDURES
                                                OF LOWER EXTREMITY.
210............       08  SURG                 HIP & FEMUR PROCEDURES           1.8074          6.0          6.9
                                                EXCEPT MAJOR JOINT AGE
                                                >17 W CC.
211............       08  SURG                 HIP & FEMUR PROCEDURES           1.2663          4.6          5.0
                                                EXCEPT MAJOR JOINT AGE
                                                >17 W/O CC.
212............       08  SURG                 * HIP & FEMUR PROCEDURES          .8449         11.1         11.1
                                                EXCEPT MAJOR JOINT AGE 0-
                                                17.
213............       08  SURG                 AMPUTATION FOR                   1.7751          6.4          8.7
                                                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                      2.1983          7.1          9.8
                                                MUSCULOSKELETAL SYSTEM &
                                                CONNECTIVE TISSUE.
217............       08  SURG                 WND DEBRID & SKN GRFT            2.9142          8.9         13.1
                                                EXCEPT HAND, FOR
                                                MUSCSKELET & CONN TISS
                                                DIS.
218............       08  SURG                 LOWER EXTREM & HUMER PROC        1.5309          4.2          5.4
                                                EXCEPT HIP, FOOT, FEMUR
                                                AGE >17 W CC.
219............       08  SURG                 LOWER EXTREM & HUMER PROC        1.0219          2.7          3.2
                                                EXCEPT HIP, FOOT, FEMUR
                                                AGE >17 W/O CC.
220............       08  SURG                 * LOWER EXTREM & HUMER            .5828          5.3          5.3
                                                PROC EXCEPT HIP, FOOT,
                                                FEMUR AGE 0-17.
221............       08  SURG                 NO LONGER VALID...........        .0000           .0           .0

[[Page 26377]]

 
222............       08  SURG                 NO LONGER VALID...........        .0000           .0           .0
223............       08  SURG                 MAJOR SHOULDER/ELBOW PROC,        .9560          2.0          2.6
                                                OR OTHER UPPER EXTREMITY
                                                PROC W CC.
224............       08  SURG                 SHOULDER,ELBOW OR FOREARM         .7986          1.7          2.0
                                                PROC,EXC MAJOR JOINT
                                                PROC, W/O CC.
225............       08  SURG                 FOOT PROCEDURES...........       1.0864          3.3          4.7
226............       08  SURG                 SOFT TISSUE PROCEDURES W         1.4749          4.3          6.3
                                                CC.
227............       08  SURG                 SOFT TISSUE PROCEDURES W/O        .8025          2.1          2.7
                                                CC.
228............       08  SURG                 MAJOR THUMB OR JOINT             1.0648          2.4          3.6
                                                PROC,OR OTH HAND OR WRIST
                                                PROC W CC.
229............       08  SURG                 HAND OR WRIST PROC, EXCEPT        .7157          1.8          2.4
                                                MAJOR JOINT PROC, W/O CC.
230............       08  SURG                 LOCAL EXCISION & REMOVAL         1.2592          3.4          5.1
                                                OF INT FIX DEVICES OF HIP
                                                & FEMUR.
231............       08  SURG                 LOCAL EXCISION & REMOVAL         1.3813          3.2          4.8
                                                OF INT FIX DEVICES EXCEPT
                                                HIP & FEMUR.
232............       08  SURG                 ARTHROSCOPY...............       1.0833          2.3          3.6
233............       08  SURG                 OTHER MUSCULOSKELET SYS &        2.0825          5.3          7.7
                                                CONN TISS O.R. PROC W CC.
234............       08  SURG                 OTHER MUSCULOSKELET SYS &        1.2661          2.7          3.6
                                                CONN TISS O.R. PROC W/O
                                                CC.
235............       08  MED                  FRACTURES OF FEMUR........        .7584          3.8          5.2
236............       08  MED                  FRACTURES OF HIP & PELVIS.        .7218          4.0          5.0
237............       08  MED                  SPRAINS, STRAINS, &               .5668          3.0          3.7
                                                DISLOCATIONS OF HIP,
                                                PELVIS & THIGH.
238............       08  MED                  OSTEOMYELITIS.............       1.3520          6.4          8.6
239............       08  MED                  PATHOLOGICAL FRACTURES &          .9749          4.9          6.2
                                                MUSCULOSKELETAL & CONN
                                                TISS MALIGNANCY.
240............       08  MED                  CONNECTIVE TISSUE                1.2671          4.9          6.6
                                                DISORDERS W CC.
241............       08  MED                  CONNECTIVE TISSUE                 .6166          3.1          3.9
                                                DISORDERS W/O CC.
242............       08  MED                  SEPTIC ARTHRITIS..........       1.0690          5.1          6.6
243............       08  MED                  MEDICAL BACK PROBLEMS.....        .7261          3.7          4.7
244............       08  MED                  BONE DISEASES & SPECIFIC          .7170          3.7          4.8
                                                ARTHROPATHIES W CC.
245............       08  MED                  BONE DISEASES & SPECIFIC          .4842          2.8          3.6
                                                ARTHROPATHIES W/O CC.
246............       08  MED                  NON-SPECIFIC ARTHROPATHIES        .5572          3.0          3.6
247............       08  MED                  SIGNS & SYMPTOMS OF               .5698          2.6          3.4
                                                MUSCULOSKELETAL SYSTEM &
                                                CONN TISSUE.
248............       08  MED                  TENDONITIS, MYOSITIS &            .7854          3.7          4.7
                                                BURSITIS.
249............       08  MED                  AFTERCARE, MUSCULOSKELETAL        .6919          2.6          3.8
                                                SYSTEM & CONNECTIVE
                                                TISSUE.
250............       08  MED                  FX, SPRN, STRN & DISL OF          .6912          3.3          4.3
                                                FOREARM, HAND, FOOT AGE
                                                >17 W CC.
251............       08  MED                  FX, SPRN, STRN & DISL OF          .4993          2.4          3.0
                                                FOREARM, HAND, FOOT AGE
                                                >17 W/O CC.
252............       08  MED                  * FX, SPRN, STRN & DISL OF        .2531          1.8          1.8
                                                FOREARM, HAND, FOOT AGE 0-
                                                17.
253............       08  MED                  FX, SPRN, STRN & DISL OF          .7239          3.7          4.7
                                                UPARM, LOWLEG EX FOOT AGE
                                                >17 W CC.
254............       08  MED                  FX, SPRN, STRN & DISL OF          .4403          2.6          3.2
                                                UPARM, LOWLEG EX FOOT AGE
                                                >17 W/O CC.
255............       08  MED                  * FX, SPRN, STRN & DISL OF        .2947          2.9          2.9
                                                UPARM, LOWLEG EX FOOT AGE
                                                0-17.
256............       08  MED                  OTHER MUSCULOSKELETAL             .7950          3.8          5.1
                                                SYSTEM & CONNECTIVE
                                                TISSUE DIAGNOSES.
257............       09  SURG                 TOTAL MASTECTOMY FOR              .9100          2.3          2.8
                                                MALIGNANCY W CC.
258............       09  SURG                 TOTAL MASTECTOMY FOR              .7223          1.8          2.0
                                                MALIGNANCY W/O CC.
259............       09  SURG                 SUBTOTAL MASTECTOMY FOR           .9083          1.8          2.8
                                                MALIGNANCY W CC.
260............       09  SURG                 SUBTOTAL MASTECTOMY FOR           .6521          1.3          1.4
                                                MALIGNANCY W/O CC.
261............       09  SURG                 BREAST PROC FOR NON-              .9307          1.7          2.2
                                                MALIGNANCY EXCEPT BIOPSY
                                                & LOCAL EXCISION.
262............       09  SURG                 BREAST BIOPSY & LOCAL             .8768          2.7          3.8
                                                EXCISION FOR NON-
                                                MALIGNANCY.
263............       09  SURG                 SKIN GRAFT & /OR DEBRID          2.1112          8.9         12.1
                                                FOR SKN ULCER OR
                                                CELLULITIS W CC.
264............       09  SURG                 SKIN GRAFT & /OR DEBRID          1.1515          5.4          7.2
                                                FOR SKN ULCER OR
                                                CELLULITIS W/O CC.
265............       09  SURG                 SKIN GRAFT & /OR DEBRID          1.5284          4.2          6.6
                                                EXCEPT FOR SKIN ULCER OR
                                                CELLULITIS W CC.
266............       09  SURG                 SKIN GRAFT & /OR DEBRID           .8726          2.4          3.3
                                                EXCEPT FOR SKIN ULCER OR
                                                CELLULITIS W/O CC.
267............       09  SURG                 PERIANAL & PILONIDAL             1.0827          3.1          5.2
                                                PROCEDURES.
268............       09  SURG                 SKIN, SUBCUTANEOUS TISSUE        1.1382          2.4          3.7
                                                & BREAST PLASTIC
                                                PROCEDURES.
269............       09  SURG                 OTHER SKIN, SUBCUT TISS &        1.7023          5.8          8.3
                                                BREAST PROC W CC.
270............       09  SURG                 OTHER SKIN, SUBCUT TISS &         .7657          2.3          3.3
                                                BREAST PROC W/O CC.

[[Page 26378]]

 
271............       09  MED                  SKIN ULCERS...............       1.0093          5.5          7.1
272............       09  MED                  MAJOR SKIN DISORDERS W CC.       1.0005          4.8          6.4
273............       09  MED                  MAJOR SKIN DISORDERS W/O          .6162          3.2          4.2
                                                CC.
274............       09  MED                  MALIGNANT BREAST DISORDERS       1.2100          4.9          7.0
                                                W CC.
275............       09  MED                  MALIGNANT BREAST DISORDERS        .5316          2.4          3.3
                                                W/O CC.
276............       09  MED                  NON-MALIGANT BREAST               .6919          3.6          4.7
                                                DISORDERS.
277............       09  MED                  CELLULITIS AGE >17 W CC...        .8398          4.7          5.7
278............       09  MED                  CELLULITIS AGE >17 W/O CC.        .5526          3.6          4.3
279............       09  MED                  * CELLULITIS AGE 0-17.....        .6626          4.2          4.2
280............       09  MED                  TRAUMA TO THE SKIN, SUBCUT        .6769          3.2          4.2
                                                TISS & BREAST AGE >17 W
                                                CC.
281............       09  MED                  TRAUMA TO THE SKIN, SUBCUT        .4720          2.4          3.1
                                                TISS & BREAST AGE >17 W/O
                                                CC.
282............       09  MED                  * TRAUMA TO THE SKIN,             .2563          2.2          2.2
                                                SUBCUT TISS & BREAST AGE
                                                0-17.
283............       09  MED                  MINOR SKIN DISORDERS W CC.        .6924          3.5          4.6
284............       09  MED                  MINOR SKIN DISORDERS W/O          .4348          2.5          3.2
                                                CC.
285............       10  SURG                 AMPUTAT OF LOWER LIMB FOR        1.9923          7.7         10.4
                                                ENDOCRINE, NUTRIT, &
                                                METABOL DISORDERS.
286............       10  SURG                 ADRENAL & PITUITARY              2.1300          4.9          6.2
                                                PROCEDURES.
287............       10  SURG                 SKIN GRAFTS & WOUND DEBRID       1.8336          7.8         10.5
                                                FOR ENDOC, NUTRIT & METAB
                                                DISORDERS.
288............       10  SURG                 O.R. PROCEDURES FOR              2.1764          4.6          5.7
                                                OBESITY.
289............       10  SURG                 PARATHYROID PROCEDURES....        .9892          2.0          3.1
290............       10  SURG                 THYROID PROCEDURES........        .9207          1.8          2.4
291............       10  SURG                 THYROGLOSSAL PROCEDURES...        .5503          1.4          1.6
292............       10  SURG                 OTHER ENDOCRINE, NUTRIT &        2.4548          6.9         10.0
                                                METAB O.R. PROC W CC.
293............       10  SURG                 OTHER ENDOCRINE, NUTRIT &        1.2190          3.5          4.9
                                                METAB O.R. PROC W/O CC.
294............       10  MED                  DIABETES AGE >35..........        .7596          3.6          4.7
295............       10  MED                  DIABETES AGE 0-35.........        .7555          2.9          3.9
296............       10  MED                  NUTRITIONAL & MISC                .8594          4.0          5.2
                                                METABOLIC DISORDERS AGE
                                                >17 W CC.
297............       10  MED                  NUTRITIONAL & MISC                .5170          2.8          3.5
                                                METABOLIC DISORDERS AGE
                                                >17 W/O CC.
298............       10  MED                  NUTRITIONAL & MISC                .5309          2.5          3.2
                                                METABOLIC DISORDERS AGE 0-
                                                17.
299............       10  MED                  INBORN ERRORS OF                  .9442          4.0          5.6
                                                METABOLISM.
300............       10  MED                  ENDOCRINE DISORDERS W CC..       1.0836          4.7          6.1
301............       10  MED                  ENDOCRINE DISORDERS W/O CC        .6108          2.9          3.7
302............       11  SURG                 KIDNEY TRANSPLANT.........       3.4495          7.9          9.4
303............       11  SURG                 KIDNEY, URETER & MAJOR           2.4639          7.0          8.5
                                                BLADDER PROCEDURES FOR
                                                NEOPLASM.
304............       11  SURG                 KIDNEY, URETER & MAJOR           2.3371          6.4          8.9
                                                BLADDER PROC FOR NON-
                                                NEOPL W CC.
305............       11  SURG                 KIDNEY, URETER & MAJOR           1.1844          3.1          3.8
                                                BLADDER PROC FOR NON-
                                                NEOPL W/O CC.
306............       11  SURG                 PROSTATECTOMY W CC........       1.2483          3.7          5.5
307............       11  SURG                 PROSTATECTOMY W/O CC......        .6424          1.9          2.3
308............       11  SURG                 MINOR BLADDER PROCEDURES W       1.6345          4.2          6.4
                                                CC.
309............       11  SURG                 MINOR BLADDER PROCEDURES W/       .9332          2.0          2.5
                                                O CC.
310............       11  SURG                 TRANSURETHRAL PROCEDURES W       1.1174          3.0          4.4
                                                CC.
311............       11  SURG                 TRANSURETHRAL PROCEDURES W/       .6165          1.6          1.9
                                                O CC.
312............       11  SURG                 URETHRAL PROCEDURES, AGE         1.0197          3.0          4.5
                                                >17 W CC.
313............       11  SURG                 URETHRAL PROCEDURES, AGE          .6464          1.7          2.1
                                                >17 W/O CC.
314............       11  SURG                 * URETHRAL PROCEDURES, AGE        .4939          2.3          2.3
                                                0-17.
315............       11  SURG                 OTHER KIDNEY & URINARY           2.0511          4.2          7.5
                                                TRACT O.R. PROCEDURES.
316............       11  MED                  RENAL FAILURE.............       1.3444          4.9          6.7
317............       11  MED                  ADMIT FOR RENAL DIALYSIS..        .7439          2.1          3.2
318............       11  MED                  KIDNEY & URINARY TRACT           1.1316          4.3          6.0
                                                NEOPLASMS W CC.
319............       11  MED                  KIDNEY & URINARY TRACT            .6045          2.1          2.9
                                                NEOPLASMS W/O CC.
320............       11  MED                  KIDNEY & URINARY TRACT            .8625          4.3          5.4
                                                INFECTIONS AGE >17 W CC.
321............       11  MED                  KIDNEY & URINARY TRACT            .5686          3.2          3.8
                                                INFECTIONS AGE >17 W/O CC.
322............       11  MED                  KIDNEY & URINARY TRACT            .4946          3.3          4.1
                                                INFECTIONS AGE 0-17.
323............       11  MED                  URINARY STONES W CC, & /OR        .7992          2.4          3.2
                                                ESW LITHOTRIPSY.
324............       11  MED                  URINARY STONES W/O CC.....        .4502          1.6          1.9
325............       11  MED                  KIDNEY & URINARY TRACT            .6468          3.0          3.9
                                                SIGNS & SYMPTOMS AGE >17
                                                W CC.
326............       11  MED                  KIDNEY & URINARY TRACT            .4302          2.1          2.7
                                                SIGNS & SYMPTOMS AGE >17
                                                W/O CC.
327............       11  MED                  * KIDNEY & URINARY TRACT          .3533          3.1          3.1
                                                SIGNS & SYMPTOMS AGE 0-17.
328............       11  MED                  URETHRAL STRICTURE AGE >17        .7487          2.8          3.9
                                                W CC.
329............       11  MED                  URETHRAL STRICTURE AGE >17        .5283          1.7          2.0
                                                W/O CC.
330............       11  MED                  * URETHRAL STRICTURE AGE 0-       .3182          1.6          1.6
                                                17.
331............       11  MED                  OTHER KIDNEY & URINARY           1.0226          4.1          5.6
                                                TRACT DIAGNOSES AGE >17 W
                                                CC.

[[Page 26379]]

 
332............       11  MED                  OTHER KIDNEY & URINARY            .5994          2.5          3.3
                                                TRACT DIAGNOSES AGE >17 W/
                                                O CC.
333............       11  MED                  OTHER KIDNEY & URINARY            .8248          3.5          5.1
                                                TRACT DIAGNOSES AGE 0-17.
334............       12  SURG                 MAJOR MALE PELVIC                1.5582          4.2          4.9
                                                PROCEDURES W CC.
335............       12  SURG                 MAJOR MALE PELVIC                1.1706          3.2          3.4
                                                PROCEDURES W/O CC.
336............       12  SURG                 TRANSURETHRAL                     .8873          2.7          3.5
                                                PROSTATECTOMY W CC.
337............       12  SURG                 TRANSURETHRAL                     .6147          1.9          2.2
                                                PROSTATECTOMY W/O CC.
338............       12  SURG                 TESTES PROCEDURES, FOR           1.1903          3.5          5.3
                                                MALIGNANCY.
339............       12  SURG                 TESTES PROCEDURES, NON-          1.0710          3.0          4.5
                                                MALIGNANCY AGE >17.
340............       12  SURG                 * TESTES PROCEDURES, NON-         .2828          2.4          2.4
                                                MALIGNANCY AGE 0-17.
341............       12  SURG                 PENIS PROCEDURES..........       1.1668          2.1          3.2
342............       12  SURG                 CIRCUMCISION AGE >17......        .8214          2.5          3.1
343............       12  SURG                 * CIRCUMCISION AGE 0-17...        .1537          1.7          1.7
344............       12  SURG                 OTHER MALE REPRODUCTIVE          1.1489          1.6          2.3
                                                SYSTEM O.R. PROCEDURES
                                                FOR MALIGNANCY.
345............       12  SURG                 OTHER MALE REPRODUCTIVE           .8813          2.6          3.8
                                                SYSTEM O.R. PROC EXCEPT
                                                FOR MALIGNANCY.
346............       12  MED                  MALIGNANCY, MALE                  .9783          4.3          5.8
                                                REPRODUCTIVE SYSTEM, W CC.
347............       12  MED                  MALIGNANCY, MALE                  .5905          2.4          3.4
                                                REPRODUCTIVE SYSTEM, W/O
                                                CC.
348............       12  MED                  BENIGN PROSTATIC                  .7170          3.2          4.2
                                                HYPERTROPHY W CC.
349............       12  MED                  BENIGN PROSTATIC                  .4420          2.0          2.6
                                                HYPERTROPHY W/O CC.
350............       12  MED                  INFLAMMATION OF THE MALE          .6987          3.6          4.4
                                                REPRODUCTIVE SYSTEM.
351............       12  MED                  * STERILIZATION, MALE.....        .2358          1.3          1.3
352............       12  MED                  OTHER MALE REPRODUCTIVE           .6875          2.8          3.9
                                                SYSTEM DIAGNOSES.
353............       13  SURG                 PELVIC EVISCERATION,             1.9232          5.3          6.7
                                                RADICAL HYSTERECTOMY &
                                                RADICAL VULVECTOMY.
354............       13  SURG                 UTERINE, ADNEXA PROC FOR         1.5267          4.9          5.9
                                                NON-OVARIAN/ADNEXAL MALIG
                                                W CC.
355............       13  SURG                 UTERINE, ADNEXA PROC FOR          .9265          3.1          3.3
                                                NON-OVARIAN/ADNEXAL MALIG
                                                W/O CC.
356............       13  SURG                 FEMALE REPRODUCTIVE SYSTEM        .7838          2.1          2.4
                                                RECONSTRUCTIVE PROCEDURES.
357............       13  SURG                 UTERINE & ADNEXA PROC FOR        2.3601          6.9          8.5
                                                OVARIAN OR ADNEXAL
                                                MALIGNANCY.
358............       13  SURG                 UTERINE & ADNEXA PROC FOR        1.2247          3.7          4.4
                                                NON-MALIGNANCY W CC.
359............       13  SURG                 UTERINE & ADNEXA PROC FOR         .8582          2.6          2.8
                                                NON-MALIGNANCY W/O CC.
360............       13  SURG                 VAGINA, CERVIX & VULVA            .8859          2.4          3.0
                                                PROCEDURES.
361............       13  SURG                 LAPAROSCOPY & INCISIONAL         1.2248          2.2          3.5
                                                TUBAL INTERRUPTION.
362............       13  SURG                 * ENDOSCOPIC TUBAL                .3013          1.4          1.4
                                                INTERRUPTION.
363............       13  SURG                 D & C, CONIZATION & RADIO-        .8178          2.6          3.5
                                                IMPLANT, FOR MALIGNANCY.
364............       13  SURG                 D & C, CONIZATION EXCEPT          .7559          2.6          3.6
                                                FOR MALIGNANCY.
365............       13  SURG                 OTHER FEMALE REPRODUCTIVE        1.8502          5.0          7.3
                                                SYSTEM O.R. PROCEDURES.
366............       13  MED                  MALIGNANCY, FEMALE               1.2498          4.8          6.8
                                                REPRODUCTIVE SYSTEM W CC.
367............       13  MED                  MALIGNANCY, FEMALE                .5675          2.4          3.2
                                                REPRODUCTIVE SYSTEM W/O
                                                CC.
368............       13  MED                  INFECTIONS, FEMALE               1.1249          5.0          6.7
                                                REPRODUCTIVE SYSTEM.
369............       13  MED                  MENSTRUAL & OTHER FEMALE          .5721          2.4          3.2
                                                REPRODUCTIVE SYSTEM
                                                DISORDERS.
370............       14  SURG                 CESAREAN SECTION W CC.....       1.0631          4.4          5.7
371............       14  SURG                 CESAREAN SECTION W/O CC...        .7157          3.3          3.7
372............       14  MED                  VAGINAL DELIVERY W                .6069          2.7          3.5
                                                COMPLICATING DIAGNOSES.
373............       14  MED                  VAGINAL DELIVERY W/O              .4172          2.0          2.3
                                                COMPLICATING DIAGNOSES.
374............       14  SURG                 VAGINAL DELIVERY W                .7698          2.7          3.5
                                                STERILIZATION & /OR D & C.
375............       14  SURG                 * VAGINAL DELIVERY W O.R.         .6841          4.4          4.4
                                                PROC EXCEPT STERIL & /OR
                                                D & C.
376............       14  MED                  POSTPARTUM & POST ABORTION        .5314          2.6          3.5
                                                DIAGNOSES W/O O.R.
                                                PROCEDURE.
377............       14  SURG                 POSTPARTUM & POST ABORTION        .8870          2.6          3.9
                                                DIAGNOSES W O.R.
                                                PROCEDURE.
378............       14  MED                  ECTOPIC PREGNANCY.........        .7543          2.1          2.3
379............       14  MED                  THREATENED ABORTION.......        .3981          2.0          3.1
380............       14  MED                  ABORTION W/O D & C........        .4867          1.8          2.2
381............       14  SURG                 ABORTION W D & C,                 .5323          1.5          2.0
                                                ASPIRATION CURETTAGE OR
                                                HYSTEROTOMY.
382............       14  MED                  FALSE LABOR...............        .1845          1.2          1.3
383............       14  MED                  OTHER ANTEPARTUM DIAGNOSES        .5082          2.7          3.9
                                                W MEDICAL COMPLICATIONS.
384............       14  MED                  OTHER ANTEPARTUM DIAGNOSES        .3232          1.7          2.3
                                                W/O MEDICAL COMPLICATIONS.
385............       15  MED                  * NEONATES, DIED OR              1.3729          1.8          1.8
                                                TRANSFERRED TO ANOTHER
                                                ACUTE CARE FACILITY.

[[Page 26380]]

 
386............       15  MED                  * EXTREME IMMATURITY OR          4.5275         17.9         17.9
                                                RESPIRATORY DISTRESS
                                                SYNDROME, NEONATE.
387............       15  MED                  * PREMATURITY W MAJOR            3.0922         13.3         13.3
                                                PROBLEMS.
388............       15  MED                  * PREMATURITY W/O MAJOR          1.8657          8.6          8.6
                                                PROBLEMS.
389............       15  MED                  * FULL TERM NEONATE W            1.8357          4.7          4.7
                                                MAJOR PROBLEMS.
390............       15  MED                  NEONATE W OTHER                   .8865          2.9          3.7
                                                SIGNIFICANT PROBLEMS.
391............       15  MED                  * NORMAL NEWBORN..........        .1523          3.1          3.1
392............       16  SURG                 SPLENECTOMY AGE >17.......       3.1818          7.1          9.5
393............       16  SURG                 * SPLENECTOMY AGE 0-17....       1.3449          9.1          9.1
394............       16  SURG                 OTHER O.R. PROCEDURES OF         1.5946          4.1          6.7
                                                THE BLOOD AND BLOOD
                                                FORMING ORGANS.
395............       16  MED                  RED BLOOD CELL DISORDERS          .8262          3.3          4.5
                                                AGE >17.
396............       16  MED                  RED BLOOD CELL DISORDERS         1.2128          2.4          3.7
                                                AGE 0-17.
397............       16  MED                  COAGULATION DISORDERS.....       1.2290          3.8          5.2
398............       16  MED                  RETICULOENDOTHELIAL &            1.2765          4.7          6.0
                                                IMMUNITY DISORDERS W CC.
399............       16  MED                  RETICULOENDOTHELIAL &             .6899          2.8          3.6
                                                IMMUNITY DISORDERS W/O CC.
400............       17  SURG                 LYMPHOMA & LEUKEMIA W            2.6272          5.8          9.1
                                                MAJOR O.R. PROCEDURE.
401............       17  SURG                 LYMPHOMA & NON-ACUTE             2.7311          7.8         11.2
                                                LEUKEMIA W OTHER O.R.
                                                PROC W CC.
402............       17  SURG                 LYMPHOMA & NON-ACUTE             1.1002          2.8          3.9
                                                LEUKEMIA W OTHER O.R.
                                                PROC W/O CC.
403............       17  MED                  LYMPHOMA & NON-ACUTE             1.7607          5.7          8.1
                                                LEUKEMIA W CC.
404............       17  MED                  LYMPHOMA & NON-ACUTE              .8495          3.1          4.2
                                                LEUKEMIA W/O CC.
405............       17  MED                  * ACUTE LEUKEMIA W/O MAJOR       1.9067          4.9          4.9
                                                O.R. PROCEDURE AGE 0-17.
406............       17  SURG                 MYELOPROLIF DISORD OR            2.8109          7.5         10.3
                                                POORLY DIFF NEOPL W MAJ
                                                O.R.PROC W CC.
407............       17  SURG                 MYELOPROLIF DISORD OR            1.3138          3.6          4.4
                                                POORLY DIFF NEOPL W MAJ
                                                O.R.PROC W/O CC.
408............       17  SURG                 MYELOPROLIF DISORD OR            1.9991          4.7          7.7
                                                POORLY DIFF NEOPL W OTHER
                                                O.R.PROC.
409............       17  MED                  RADIOTHERAPY..............       1.1226          4.4          5.9
410............       17  MED                  CHEMOTHERAPY W/O ACUTE            .9493          2.9          3.7
                                                LEUKEMIA AS SECONDARY
                                                DIAGNOSIS.
411............       17  MED                  HISTORY OF MALIGNANCY W/O         .3288          2.0          2.3
                                                ENDOSCOPY.
412............       17  MED                  HISTORY OF MALIGNANCY W           .4877          2.0          2.7
                                                ENDOSCOPY.
413............       17  MED                  OTHER MYELOPROLIF DIS OR         1.3665          5.3          7.3
                                                POORLY DIFF NEOPL DIAG W
                                                CC.
414............       17  MED                  OTHER MYELOPROLIF DIS OR          .7522          3.0          4.1
                                                POORLY DIFF NEOPL DIAG W/
                                                O CC.
415............       18  SURG                 O.R. PROCEDURE FOR               3.5919         10.3         14.2
                                                INFECTIOUS & PARASITIC
                                                DISEASES.
416............       18  MED                  SEPTICEMIA AGE >17........       1.5287          5.5          7.4
417............       18  MED                  SEPTICEMIA AGE 0-17.......       1.2437          3.9          6.3
418............       18  MED                  POSTOPERATIVE & POST-            1.0076          4.8          6.2
                                                TRAUMATIC INFECTIONS.
419............       18  MED                  FEVER OF UNKNOWN ORIGIN           .8724          3.7          4.8
                                                AGE >17 W CC.
420............       18  MED                  FEVER OF UNKNOWN ORIGIN           .6053          2.9          3.6
                                                AGE >17 W/O CC.
421............       18  MED                  VIRAL ILLNESS AGE >17.....        .6760          3.1          3.9
422............       18  MED                  VIRAL ILLNESS & FEVER OF          .7893          2.8          5.1
                                                UNKNOWN ORIGIN AGE 0-17.
423............       18  MED                  OTHER INFECTIOUS &               1.7317          5.9          8.2
                                                PARASITIC DISEASES
                                                DIAGNOSES.
424............       19  SURG                 O.R. PROCEDURE W PRINCIPAL       2.2742          8.7         13.5
                                                DIAGNOSES OF MENTAL
                                                ILLNESS.
425............       19  MED                  ACUTE ADJUSTMENT REACTION         .7022          3.0          4.1
                                                & PSYCHOLOGICAL
                                                DYSFUNCTION.
426............       19  MED                  DEPRESSIVE NEUROSES.......        .5303          3.3          4.6
427............       19  MED                  NEUROSES EXCEPT DEPRESSIVE        .5673          3.3          5.0
428............       19  MED                  DISORDERS OF PERSONALITY &        .7360          4.4          7.1
                                                IMPULSE CONTROL.
429............       19  MED                  ORGANIC DISTURBANCES &            .8567          4.9          6.6
                                                MENTAL RETARDATION.
430............       19  MED                  PSYCHOSES.................        .7659          5.9          8.3
431............       19  MED                  CHILDHOOD MENTAL DISORDERS        .6434          4.7          6.6
432............       19  MED                  OTHER MENTAL DISORDER             .6488          3.2          4.8
                                                DIAGNOSES.
433............       20  MED                  ALCOHOL/DRUG ABUSE OR             .2829          2.2          3.0
                                                DEPENDENCE, LEFT AMA.
434............       20  MED                  ALC/DRUG ABUSE OR DEPEND,         .7239          3.9          5.1
                                                DETOX OR OTH SYMPT TREAT
                                                W CC.
435............       20  MED                  ALC/DRUG ABUSE OR DEPEND,         .4167          3.5          4.3
                                                DETOX OR OTH SYMPT TREAT
                                                W/O CC.
436............       20  MED                  ALC/DRUG DEPENDENCE W             .7433         10.3         12.9
                                                REHABILITATION THERAPY.
437............       20  MED                  ALC/DRUG DEPENDENCE,              .6576          7.6          9.0
                                                COMBINED REHAB & DETOX
                                                THERAPY.
438............  .......  ...................  NO LONGER VALID...........        .0000           .0           .0
439............       21  SURG                 SKIN GRAFTS FOR INJURIES..       1.7255          5.3          8.2
440............       21  SURG                 WOUND DEBRIDEMENTS FOR           1.9063          5.8          8.9
                                                INJURIES.

[[Page 26381]]

 
441............       21  SURG                 HAND PROCEDURES FOR               .9443          2.2          3.2
                                                INJURIES.
442............       21  SURG                 OTHER O.R. PROCEDURES FOR        2.3391          5.4          8.2
                                                INJURIES W CC.
443............       21  SURG                 OTHER O.R. PROCEDURES FOR         .9979          2.5          3.4
                                                INJURIES W/O CC.
444............       21  MED                  TRAUMATIC INJURY AGE >17 W        .7225          3.2          4.2
                                                CC.
445............       21  MED                  TRAUMATIC INJURY AGE >17 W/       .5054          2.4          3.0
                                                O CC.
446............       21  MED                  * TRAUMATIC INJURY AGE 0-         .2955          2.4          2.4
                                                17.
447............       21  MED                  ALLERGIC REACTIONS AGE >17        .5160          1.9          2.5
448............       21  MED                  * ALLERGIC REACTIONS AGE 0-       .0972          2.9          2.9
                                                17.
449............       21  MED                  POISONING & TOXIC EFFECTS         .8073          2.6          3.7
                                                OF DRUGS AGE >17 W CC.
450............       21  MED                  POISONING & TOXIC EFFECTS         .4409          1.6          2.1
                                                OF DRUGS AGE >17 W/O CC.
451............       21  MED                  * POISONING & TOXIC               .2625          2.1          2.1
                                                EFFECTS OF DRUGS AGE 0-17.
452............       21  MED                  COMPLICATIONS OF TREATMENT       1.0135          3.5          5.0
                                                W CC.
453............       21  MED                  COMPLICATIONS OF TREATMENT        .4998          2.2          2.8
                                                W/O CC.
454............       21  MED                  OTHER INJURY, POISONING &         .8586          3.2          4.6
                                                TOXIC EFFECT DIAG W CC.
455............       21  MED                  OTHER INJURY, POISONING &         .4661          2.0          2.6
                                                TOXIC EFFECT DIAG W/O CC.
456............           ...................  NO LONGER VALID...........        .0000           .0           .0
457............           ...................  NO LONGER VALID...........        .0000           .0           .0
458............           ...................  NO LONGER VALID...........        .0000           .0           .0
459............           ...................  NO LONGER VALID...........        .0000           .0           .0
460............           ...................  NO LONGER VALID...........        .0000           .0           .0
461............       23  SURG                 O.R. PROC W DIAGNOSES OF         1.2045          2.4          4.6
                                                OTHER CONTACT W HEALTH
                                                SERVICES.
462............       23  MED                  REHABILITATION............       1.2426          9.3         11.7
463............       23  MED                  SIGNS & SYMPTOMS W CC.....        .6922          3.3          4.3
464............       23  MED                  SIGNS & SYMPTOMS W/O CC...        .4771          2.4          3.1
465............       23  MED                  AFTERCARE W HISTORY OF            .5777          2.1          3.4
                                                MALIGNANCY AS SECONDARY
                                                DIAGNOSIS.
466............       23  MED                  AFTERCARE W/O HISTORY OF          .6777          2.2          3.9
                                                MALIGNANCY AS SECONDARY
                                                DIAGNOSIS.
467............       23  MED                  OTHER FACTORS INFLUENCING         .5112          2.3          4.1
                                                HEALTH STATUS.
468............           ...................  EXTENSIVE O.R. PROCEDURE         3.6423          9.2         13.0
                                                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            3.1978          5.0          5.7
                                                MAJOR JOINT PROCS OF
                                                LOWER EXTREMITY.
472............           ...................  NO LONGER VALID...........        .0000           .0           .0
473............       17  SURG                 ACUTE LEUKEMIA W/O MAJOR         3.5861          7.6         13.1
                                                O.R. PROCEDURE AGE >17.
474............           ...................  NO LONGER VALID...........        .0000           .0           .0
475............       04  MED                  RESPIRATORY SYSTEM               3.6949          8.1         11.3
                                                DIAGNOSIS WITH VENTILATOR
                                                SUPPORT.
476............           SURG                 PROSTATIC O.R. PROCEDURE         2.2633          8.4         11.6
                                                UNRELATED TO PRINCIPAL
                                                DIAGNOSIS.
477............           SURG                 NON-EXTENSIVE O.R.               1.8270          5.4          8.2
                                                PROCEDURE UNRELATED TO
                                                PRINCIPAL DIAGNOSIS.
478............       05  SURG                 OTHER VASCULAR PROCEDURES        2.3372          5.0          7.3
                                                W CC.
479............       05  SURG                 OTHER VASCULAR PROCEDURES        1.4333          2.8          3.6
                                                W/O CC.
480............      PRE  SURG                 LIVER TRANSPLANT..........       9.5064         14.6         19.2
481............      PRE  SURG                 BONE MARROW TRANSPLANT....       8.7719         24.1         27.1
482............      PRE  SURG                 TRACHEOSTOMY FOR FACE,           3.5738          9.9         12.8
                                                MOUTH & NECK DIAGNOSES.
483............      PRE  SURG                 TRACHEOSTOMY EXCEPT FOR         15.8415         33.4         40.7
                                                FACE, MOUTH & NECK
                                                DIAGNOSES.
484............       24  SURG                 CRANIOTOMY FOR MULTIPLE          5.6100          9.0         13.3
                                                SIGNIFICANT TRAUMA.
485............       24  SURG                 LIMB REATTACHMENT, HIP AND       3.0519          7.6          9.4
                                                FEMUR PROC FOR MULTIPLE
                                                SIGNIFICANT TRA.
486............       24  SURG                 OTHER O.R. PROCEDURES FOR        4.9156          8.1         12.2
                                                MULTIPLE SIGNIFICANT
                                                TRAUMA.
487............       24  MED                  OTHER MULTIPLE SIGNIFICANT       2.0199          5.5          7.7
                                                TRAUMA.
488............       25  SURG                 HIV W EXTENSIVE O.R.             4.5503         11.6         17.0
                                                PROCEDURE.
489............       25  MED                  HIV W MAJOR RELATED              1.7496          6.0          8.6
                                                CONDITION.
490............       25  MED                  HIV W OR W/O OTHER RELATED        .9715          3.7          5.1
                                                CONDITION.
491............       08  SURG                 MAJOR JOINT & LIMB               1.6661          2.9          3.5
                                                REATTACHMENT PROCEDURES
                                                OF UPPER EXTREMITY.
492............       17  MED                  CHEMOTHERAPY W ACUTE             4.2524         10.9         16.1
                                                LEUKEMIA AS SECONDARY
                                                DIAGNOSIS.
493............       07  SURG                 LAPAROSCOPIC                     1.8180          4.3          5.7
                                                CHOLECYSTECTOMY W/O
                                                C.D.E. W CC.
494............       07  SURG                 LAPAROSCOPIC                     1.0374          2.0          2.5
                                                CHOLECYSTECTOMY W/O
                                                C.D.E. W/O CC.
495............      PRE  SURG                 LUNG TRANSPLANT...........       8.5947         13.1         20.3
496............       08  SURG                 COMBINED ANTERIOR/               5.5796          7.8         10.0
                                                POSTERIOR SPINAL FUSION.
497............       08  SURG                 SPINAL FUSION W CC........       2.9469          4.9          6.2

[[Page 26382]]

 
498............       08  SURG                 SPINAL FUSION W/O CC......       1.9077          2.8          3.4
499............       08  SURG                 BACK & NECK PROCEDURES           1.4590          3.6          4.8
                                                EXCEPT SPINAL FUSION W CC.
500............       08  SURG                 BACK & NECK PROCEDURES            .9811          2.2          2.7
                                                EXCEPT SPINAL FUSION W/O
                                                CC.
501............       08  SURG                 KNEE PROCEDURES W PDX OF         2.6350          8.4         10.6
                                                INFECTION W CC.
502............       08  SURG                 KNEE PROCEDURES W PDX OF         1.4327          4.9          6.0
                                                INFECTION W/O CC.
503............       08  SURG                 KNEE PROCEDURES W/O PDX OF       1.2151          3.1          4.0
                                                INFECTION.
504............       22  SURG                 EXTENSIVE 3RD DEGREE BURNS      12.4664         23.9         30.1
                                                W SKIN GRAFT.
505............       22  MED                  EXTENSIVE 3RD DEGREE BURNS       2.0389          2.5          4.7
                                                W/O SKIN GRAFT.
506............       22  SURG                 FULL THICKNESS BURN W SKIN       4.4971         13.0         17.6
                                                GRAFT OR INHAL INJ W CC
                                                OR SIG TRAUMA.
507............       22  SURG                 FULL THICKNESS BURN W SKIN       1.8438          6.6          9.2
                                                GRFT OR INHAL INJ W/O CC
                                                OR SIG TRAUMA.
508............       22  MED                  FULL THICKNESS BURN W/O          1.3119          5.1          7.2
                                                SKIN GRFT OR INHAL INJ W
                                                CC OR SIG TRAUMA.
509............       22  MED                  FULL THICKNESS BURN W/O           .8154          4.1          6.2
                                                SKIN GRFT OR INH INJ W/O
                                                CC OR SIG TRAUMA.
510............       22  MED                  NON-EXTENSIVE BURNS W CC         1.4130          5.2          7.9
                                                OR SIGNIFICANT TRAUMA.
511............       22  MED                  NON-EXTENSIVE BURNS W/O CC        .6568          3.1         4.5
                                                OR SIGNIFICANT TRAUMA.
----------------------------------------------------------------------------------------------------------------
* MEDICARE DATA HAVE BEEN SUPPLEMENTED BY DATA FROM 19 STATES FOR LOW VOLUME DRGS.
** DRGS 469 AND 470 CONTAIN CASES WHICH COULD NOT BE ASSIGNED TO VALID DRGS.
NOTE: GEOMETRIC MEAN IS USED ONLY TO DETERMINE PAYMENT FOR TRANSFER CASES.
NOTE: ARITHMETIC MEAN IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY.
NOTE: RELATIVE WEIGHTS ARE BASED ON MEDICARE PATIENT DATA AND MAY NOT BE APPROPRIATE FOR OTHER PATIENTS.


                                         Table 6A.--New Diagnosis Codes
----------------------------------------------------------------------------------------------------------------
  Diagnosis
    code               Description                   CC               MDC                     DRG
----------------------------------------------------------------------------------------------------------------
      007.5   Cyclosporiasis..............  N                              6  182, 183, 184
      082.40  Unspecified ehrlichiosis....  N                             18  423
      082.41  Ehrlichiosis Chafiensis (E.   N                             18  423
               Chafiensis).
      082.49  Other ehrlichiosis..........  N                             18  423
      285.21  Anemia in end-stage renal     N                             16  395, 396
               disease.
      285.22  Anemia in neoplastic disease  N                             16  395, 396
      285.29  Anemia of other chronic       N                             16  395, 396
               illness.
      294.10  Dementia in conditions        N                             19  429
               classified elsewhere
               without behavioral
               disturbance.
      294.11  Dementia in conditions        N                             19  429
               classified elsewhere with
               behavioral disturbance.
      372.81  Conjunctivochalasis.........  N                              2  46, 47, 48
      372.89  Other disorders of            N                              2  46, 47, 48
               conjunctiva.
      477.1   Allergic rhinitis, due to     N                              3  68, 69, 70
               food.
      493.02  Extrinsic asthma, with acute  Y                              4  96, 97, 98
               exacerbation.
      493.12  Intrinsic asthma, with acute  Y                              4  96, 97, 98
               exacerbation.
      493.22  Chronic obstructive asthma,   Y                              4  88
               with acute exacerbation.
      493.92  Unspecified asthma, with      Y                              4  96, 97, 98
               acute exacerbation.
      494.0   Bronchiectasis without acute  N                              4  88
               exacerbation.
      494.1   Bronchiectasis with acute     Y                              4  88
               exacerbation.
      558.3   Allergic gastroenteritis and  N                              6  182, 183, 184
               colitis.
      600.0   Hypertrophy (benign) of       N                             12  348, 349
               prostate.
      600.1   Nodular prostate............  N                             12  348, 349
      600.2   Benign localized hyperplasia  N                             12  348, 349
               of prostate.
      600.3   Cyst of prostate............  N                             12  348, 349
      600.9   Unspecified hyperplasia of    N                             12  348, 349
               prostate.
      645.10  Post term pregnancy,          N                             14  469
               unspecified as to episode
               of care or not applicable.
      645.11  Post term pregnancy,          N                             14  370, 371, 372, 373, 374, 375
               delivered, with or without
               mention of antepartum
               condition.
      645.13  Post term pregnancy,          N                             14  383, 384
               antepartum condition or
               complication.
      645.20  Prolonged pregnancy,          N                             14  469
               unspecified as to episode
               of care or not applicable.
      645.21  Prolonged pregnancy,          N                             14  370, 371, 372, 373, 374, 375
               delivered, with or without
               mention of antepartum
               condition.
      645.23  Prolonged pregnancy,          N                             14  383, 384
               antepartum condition or
               complication.
      692.75  Disseminated superficial      N                              9  283, 284
               actinic porokeratosis
               (DSAP).
      707.10  Unspecified ulcer of lower    Y                              9  263, 264, 271
               limb.
      707.11  Ulcer of thigh..............  Y                              9  263, 264, 271
      707.12  Ulcer of calf...............  Y                              9  263, 264, 271
      707.13  Ulcer of ankle..............  Y                              9  263, 264, 271
      707.14  Ulcer of heel and midfoot...  Y                              9  263, 264, 271
      707.15  Ulcer of other part of foot.  Y                              9  263, 264, 271
      707.19  Ulcer of other part of lower  Y                              9  263, 264, 271
               limb.

[[Page 26383]]

 
      727.83  Plica syndrome..............  N                              8  248
      781.91  Loss of height..............  N                              1  34, 35
      781.92  Abnormal posture............  N                              1  34, 35
      781.99  Other symptoms involving      N                              1  34, 35
               nervous and musculoskeletal
               systems.
      783.21  Loss of weight..............  N                             10  296, 297, 298
      783.22  Underweight.................  N                             10  296, 297, 298
      783.40  Unspecified lack of normal    N                             10  296, 297, 298
               physiological development.
      783.41  Failure to thrive...........  N                             10  296, 297, 298
      783.42  Delayed milestones..........  N                             10  296, 297, 298
      783.43  Short stature...............  N                             10  296, 297, 298
      783.7   Adult failure to thrive.....  N                             10  296, 297, 298
      790.01  Precipitous drop in           N                             16  395, 396
               hematocrit.
      790.09  Other abnormality of red      N                             16  395, 396
               blood cells.
      792.5   Cloudy (hemodialysis)         N                             23  463, 464
               (peritoneal) dialysis
               effluent.
      995.7   Other adverse food            N                             21  454, 455
               reactions, not elsewhere
               classified.
      996.87  Complications of              Y                             21  452, 453
               transplanted organ,
               intestine.
      V15.01  Allergy to peanuts..........  N                             23  467
      V15.02  Allergy to milk products....  N                             23  467
      V15.03  Allergy to eggs.............  N                             23  467
      V15.04  Allergy to seafood..........  N                             23  467
      V15.05  Allergy to other foods......  N                             23  467
      V15.06  Allergy to insects..........  N                             23  467
      V15.07  Allergy to latex............  N                             23  467
      V15.08  Allergy to radiographic dye.  N                             23  467
      V15.09  Other allergy, other than to  N                             23  467
               medicinal agents.
      V21.30  Unspecified low birth weight  N                             23  467
               status.
      V21.31  Low birth weight status,      N                             23  467
               less than 500 grams.
      V21.32  Low birth weight status, 500- N                             23  467
               999 grams.
      V21.33  Low birth weight status,      N                             23  467
               1000-1499 grams.
      V21.34  Low birth weight status,      N                             23  467
               1500-1999 grams.
      V21.35  Low birth weight status,      N                             23  467
               2000-2500 grams.
      V26.21  Fertility testing...........  N                             23  467
      V26.22  Aftercare following           N                             23  467
               sterilization reversal.
      V26.29  Other investigation and       N                             23  467
               testing.
      V42.84  Organ or tissue replaced by   Y                             23  467
               transplant, intestines.
      V45.74  Acquired absence of organ,    N                             23  467
               other parts of urinary
               tract.
      V45.75  Acquired absence of organ,    N                             23  467
               stomach.
      V45.76  Acquired absence of organ,    N                             23  467
               lung.
      V45.77  Acquired absence of organ,    N                             23  467
               genital organs.
      V45.78  Acquired absence of organ,    N                             23  467
               eye.
      V45.79  Other acquired absence of     N                             23  467
               organ.
      V49.81  Postmenopausal status (age-   N                             23  467
               related) (natural).
      V49.89  Other specified conditions    N                             23  467
               influencing health status.
      V56.31  Encounter for adequacy        N                             11  317
               testing for hemodialysis.
      V56.32  Encounter for adequacy        N                             11  317
               testing for peritoneal
               dialysis.
      V58.83  Encounter for therapeutic     N                             23  465, 466
               drug monitoring.
      V67.00  Follow-up examination,        N                             23  465, 466
               following unspecified
               surgery.
      V67.01  Following surgery, follow-up  N                             23  465, 466
               vaginal pap smear.
      V67.09  Follow-up examination,        N                             23  465, 466
               following other surgery.
      V71.81  Observation for suspected     N                             23  467
               abuse and neglect.
      V71.89  Observation for other         N                             23  467
               specified suspected
               conditions.
      V76.46  Special screening for         N                             23  467
               malignant neoplasms, ovary.
      V76.47  Special screening for         N                             23  467
               malignant neoplasms, Vagina.
      V76.50  Special screening for         N                             23  467
               malignant neoplasms,
               unspecified intestine.
      V76.51  Special screening for         N                             23  467
               malignant neoplasms, colon.
      V76.52  Special screening for         N                             23  467
               malignant neoplasms, small
               intestine.
      V76.81  Special screening for         N                             23  467
               malignant neoplasms,
               nervous system.
      V76.89  Special screening for other   N                             23  467
               malignant neoplasm.
      V77.91  Screening for lipoid          N                             23  467
               disorders.
      V77.99  Other and unspecified         N                             23  467
               endocrine, nutritional,
               metabolic, and immunity
               disorders.
      V82.81  Special screening for         N                             23  467
               osteoporosis.
      V82.89  Special screening for other   N                             23  467
               specified conditions.
----------------------------------------------------------------------------------------------------------------


[[Page 26384]]


                                         Table 6B.--New Procedure Codes
----------------------------------------------------------------------------------------------------------------
  Procedure
    code               Description                   OR               MDC                     DRG
----------------------------------------------------------------------------------------------------------------
       39.71  Endovascular implantation of  Y                              5  110, 111
               graph in abdominal aorta.                                  11  315
                                                                          21  442, 443
                                                                          24  486
       39.79  Other endovascular graft      Y                              1  1, 2, 3
               repair of aneurysm.                                         5  110, 111
                                                                          11  315
                                                                          21  442, 443
                                                                          24  486
       41.07  Autologous hematopoietic      Y                            PRE  481
               stem cell transplant with
               purging.
       41.08  Allogeneic hematopoietic      Y                            PRE  481
               stem cell transplant with
               purging.
       41.09  Autologous bone marrow        Y                            PRE  481
               transplant with purging.
       46.97  Transplant of intestine.....  Y                              6  148, 149
                                                                           7  201
                                                                          17  400, 406, 407
                                                                          21  442, 443
                                                                          24  486
       60.96  Transurethral destruction of  Y                             11  306, 307
               prostate tissue by                                         12  336, 337
               microwave thermotherapy.                                  UNR  476
       60.97  Other transurethral           Y                             11  306, 307
               destruction of prostate                                    12  336, 337
               tissue by other                                           UNR  476
               thermotherapy.
       99.75  Administration of             N
               neuroprotective agent.
----------------------------------------------------------------------------------------------------------------


                                       Table 6C.--Invalid Diagnosis Codes
----------------------------------------------------------------------------------------------------------------
  Diagnosis
    code               Description                   CC               MDC                     DRG
----------------------------------------------------------------------------------------------------------------
      294.1   Dementia in conditions        N                             19  429
               classified elsewhere.
      372.8   Other disorders of            N                              2  46, 47, 48
               conjunctiva.
      494     Bronchiectasis..............  Y                              4  88
      600     Hyperplasia of prostate.....  N                             12  348, 349
      645.00  Prolonged pregnancy,          N                             14  469
               unspecified as to episode
               of care or not applicable.
      645.01  Prolonged pregnancy,          N                             14  370, 371, 372, 373, 374, 375
               delivered, with or without
               mention of antepartum
               condition.
      645.03  Prolonged pregnancy,          N                             14  383, 384
               antepartum condition or
               complication.
      707.1   Ulcer of lower limb, except   Y                              9  263, 264, 271
               decubitus.
      781.9   Other symptoms involving      N                              1  34, 35
               nervous and musculoskeletal
               systems.
      783.2   Abnormal loss of weight.....  N                             10  296, 297, 298
      783.4   Lack of expected normal       N                             10  296, 297, 298
               physiological development.
      790.0   Abnormality of red blood      N                             16  395, 396
               cells.
      V15.0   Allergy, other than to        N                             23  467
               medicinal agents.
      V26.2   Investigation and testing...  N                             23  467
      V49.8   Other specified problems      N                             23  467
               influencing health status.
      V67.0   Follow-up examination         N                             23  465, 466
               following surgery.
      V71.8   Observation for other         N                             23  467
               specified suspected
               conditions.
      V76.8   Special screening for         N                             23  467
               malignant neoplasms, other
               neoplasm.
      V77.9   Other and unspecified         N                             23  467
               endocrine, nutritional,
               metabolic, and immunity
               disorders.
      V82.8   Special screening for other   N                             23  467
               specified conditions.
----------------------------------------------------------------------------------------------------------------


[[Page 26385]]


                                    Table 6D.--Revised Diagnosis Code Titles
----------------------------------------------------------------------------------------------------------------
  Diagnosis
    code               Description                   CC               MDC                     DRG
----------------------------------------------------------------------------------------------------------------
      564.1   Irritable bowel syndrome....  N                              6  182, 183, 184
      V26.3   Genetic counseling and        N                             23  467
               testing.
      V76.49  Special screening for         N                             23  467
               malignant, other sites.
----------------------------------------------------------------------------------------------------------------


                                       Table 6E.--Revised Procedure Codes
----------------------------------------------------------------------------------------------------------------
  Procedure
    code               Description                   OR               MDC                     DRG
----------------------------------------------------------------------------------------------------------------
       41.01  Autologous bone marrow        Y                            PRE  481
               transplant without purging.
       41.04  Autologous hematopoietic      Y                            PRE  481
               stem cell transplant
               without purging.
       41.05  Allogeneic hematopoietic      Y                            PRE  481
               stem cell transplant
               without purging.
       86.59  Closure of skin and           N
               subcutaneous tissue other
               sites.
----------------------------------------------------------------------------------------------------------------


[[Page 26386]]


             Table 6F.--Additions to the CC Exclusions List
   CCs that are added to the list are in Table 6F--Additions to the CC
    Exclusions List. Each of the principal diagnoses is shown with an
asterisk, and the revisions to the CC Exclusions List are provided in an
 indented column immediately following the affected principal diagnosis.
------------------------------------------------------------------------
 
------------------------------------------------------------------------
*0075       2818      70713    49312    01170    4870     01152    4829
  00841     2824      70714    49322    01171    4950     01153    4830
  00842     28260     70715    49392    01172    4951     01154    4831
  00843     28261     70719  *49391     01173    4952     01155    4838
  00844     28262   *4871      49302    01174    4953     01156    4841
  00845     28263     4941     49312    01175    4954     01160    4843
  00846     28269   *49300     49322    01176    4955     01161    4845
  00847     2830      49302    49392    01180    4956     01162    4846
  00849     28310     49312  *49392     01181    4957     01163    4847
*01790      28311     49322    49301    01182    4958     01164    4848
  4941      28319     49392    49302    01183    4959     01165    485
*01791      2832    *49301     49311    01184    496      01166    486
  4941      2839      49302    49312    01185    5060     01170    4870
*01792      2840      49312    49320    01186    5061     01171    4941
  4941      2848      49322    49321    01190    5070     01172    4950
*01793      2849      49392    49322    01191    5071     01173    4951
  4941      2850    *49302     49391    01192    5078     01174    4952
*01794      2851      49301    49392    01193    5080     01175    4953
  4941    *29410      49302  *4940      01194    5081     01176    4954
*01795      2910      49311    01100    01195    515      01180    4955
  4941      2911      49312    01101    01196    5160     01181    4956
*01796      2912      49320    01102    01200    5161     01182    4957
  4941      2913      49321    01103    01201    5162     01183    4958
*28521      2914      49322    01104    01202    5163     01184    4959
  2800      29181     49391    01105    01203    5168     01185    496
  2814      29189     49392    01106    01204    5169     01186    5060
  2818      2919    *49310     01110    01205    5171     01190    5061
  2824      2920      49302    01111    01206    5172     01191    5070
  28260     29211     49312    01112    01210    5178     01192    5071
  28261     29212     49322    01113    01211    74861    01193    5078
  28262     2922      49392    01114    01212  *4941      01194    5080
  28263     29281   *49311     01115    01213    01100    01195    5081
  28269     29282     49302    01116    01214    01101    01196    515
  2830      29283     49312    01120    01215    01102    01200    5160
  28310     29284     49322    01121    01216    01103    01201    5161
  28311     29289     49392    01122    0310     01104    01202    5162
  28319     2929    *49312     01123    11505    01105    01203    5163
  2832      29381     49301    01124    11515    01106    01204    5168
  2839      29382     49302    01125    1304     01110    01205    5169
  2840      29383     49311    01126    1363     01111    01206    5171
  2848      29384     49312    01130    481      01112    01210    5172
  2849    *29411      49320    01131    4820     01113    01211    5178
  2850      2910      49321    01132    4821     01114    01212    74861
  2851      2911      49322    01133    4822     01115    01213  *496
*28522      2912      49391    01134    48230    01116    01214    4941
  2800      2913      49392    01135    48231    01120    01215  *5061
  2814      2914    *49320     01136    48232    01121    01216    4941
  2818      29181     49302    01140    48239    01122    0310   *5064
  2824      29189     49312    01141    48240    01123    11505    4941
  28260     2919      49322    01142    48241    01124    11515  *5069
  28261     2920      49392    01143    48249    01125    1304     4941
  28262     29211   *49321     01144    48281    01126    1363   *5178
  28263     29212     49302    01145    48282    01130    481      49302
  28269     2922      49312    01146    48283    01131    4820     49312
  2830      29281     49322    01150    48284    01132    4821     49322
  28310     29282     49392    01151    48289    01133    4822     49392
  28311     29283   *49322     01152    4829     01134    48230  *51889
  28319     29284     49301    01153    4830     01135    48231    49302
  2832      29289     49302    01154    4831     01136    48232    49312
  2839      2929      49311    01155    4838     01140    48239    49322
  2840      29381     49312    01156    4841     01141    48240    49392
  2848      29382     49320    01160    4843     01142    48241  *5198
  2849      29383     49321    01161    4845     01143    48249    49302
  2850      29384     49322    01162    4846     01144    48281    49312
  2851    *44023      49391    01163    4847     01145    48282    49322
*28529      70710     49392    01164    4848     01146    48283    49392
  2800      70711   *49390     01165    485      01150    48284  *5199
  2814      70712     49302    01166    486      01151    48289    49302
------------------------------------------------------------------------


[[Page 26387]]


        Table 6F.--Additions to the CC Exclusions List--Continued
   CCs that are added to the list are in Table 6F--Additions to the CC
    Exclusions List. Each of the principal diagnoses is shown with an
asterisk, and the revisions to the CC Exclusions List are provided in an
 indented column immediately following the affected principal diagnosis.
------------------------------------------------------------------------
 
------------------------------------------------------------------------
  49312   *70712      V421
  49322     70710     V426
  49392     70711     V427
*5583       70712     V4281
  00841     70713     V4282
  00842     70714     V4283
  00843     70715     V4289
  00844     70719     V432
  00845   *70713    *99689
  00846     70710     V4284
  00847     70711   *99791
  00849     70712     99687
*6000       70713   *99799
  5960      70714     99687
  5996      70715   *V4284
  6010      70719     V4284
  6012    *70714    *V4289
  6013      70710     V4284
  6021      70711   *V429
  78820     70712     V4284
  78829     70713
*6001       70714
  5960      70715
  5996      70719
  6010    *70715
  6012      70710
  6013      70711
  6021      70712
  78820     70713
  78829     70714
*6002       70715
  5960      70719
  5996    *70719
  6010      70710
  6012      70711
  6013      70712
  6021      70713
  78820     70714
  78829     70715
*6003       70719
  5960    *7078
  5996      70710
  6010      70711
  6012      70712
  6013      70713
  6021      70714
  78820     70715
  78829     70719
*6009     *7079
  5960      70710
  5996      70711
  6010      70712
  6012      70713
  6013      70714
  6021      70715
  78820     70719
  78829   *7098
*70710      70710
  70710     70711
  70711     70712
  70712     70713
  70713     70714
  70714     70715
  70715     70719
  70719   *74861
*70711      4941
  70710   *99680
  70711     99687
  70712     V4284
  70713   *99687
  70714     99680
  70715     99687
  70719     V420
------------------------------------------------------------------------


[[Page 26388]]


             Table 6G.--Delections to the CC Exclusions List
 CCs that are deleted from the list are in Table 6G--Deletions to the CC
    Exclusions List. Each of the principal diagnoses is shown with an
asterisk, and the revisions to the CC Exclusions List are provided in an
 indented column immediately following the affected principal diagnosis.
------------------------------------------------------------------------
 
------------------------------------------------------------------------
*01790      01135     48231    6021
  494       01136     48232    78820
*01791      01140     48239    78829
  494       01141     48240  *7071
*01792      01142     48241    7071
  494       01143     48249  *7078
*01793      01144     48281    7071
  494       01145     48282  *7079
*01794      01146     48283    7071
  494       01150     48284  *7098
  01795     01151     48289    7071
  494       01152     4829   *74861
*01796      01153     4830     494
  494       01154     4831
*2941       01155     4838
  2910      01156     4841
  2911      01160     4843
  2912      01161     4845
  2913      01162     4846
  2914      01163     4847
  29181     01164     4848
  29189     01165     485
  2919      01166     486
  2920      01170     4870
  29211     01171     494
  29212     01172     4950
  2922      01173     4951
  29281     01174     4952
  29282     01175     4953
  29283     01176     4954
  29284     01180     4955
  29289     01181     4956
  2929      01182     4957
  29381     01183     4958
  29382     01184     4959
  29383     01185     496
  29384     01186     5060
*44023      01190     5061
  7071      01191     5070
*4871       01192     5071
  494       01193     5078
*494        01194     5080
  01100     01195     5081
  01101     01196     515
  01102     01200     5160
  01103     01201     5161
  01104     01202     5162
  01105     01203     5163
  01106     01204     5168
  01110     01205     5169
  01111     01206     5171
  01112     01210     5172
  01113     01211     5178
  01114     01212     74861
  01115     01213   *496
  01116     01214     494
  01120     01215   *5061
  01121     01216     494
  01122     0310    *5064
  01123     11505     494
  01124     11515   *5069
  01125     1304      494
  01126     1363    *600
  01130     481       5960
  01131     4820      5996
  01132     4821      6010
  01133     4822      6012
  01134     48230     6013
------------------------------------------------------------------------


[[Page 26389]]


                                   Table 7A.--Medicare Prospective Payment System, Selected Percentile Lengths of Stay
                                                        [FY99 MEDPAR Update 12/99 Grouper V17.0]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Number        Arithmetic         10th            25th            50th            75th            90th
                   DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           35069          9.0962               2               4               6              12              19
2.......................................            7064          9.6692               3               5               7              12              19
4.......................................            6022          7.3316               1               2               5               9              16
5.......................................           95151          3.2852               1               1               2               3               7
6.......................................             340          3.2412               1               1               2               4               7
7.......................................           12054         10.2745               2               4               7              13              21
8.......................................            3662          3.0145               1               1               2               4               7
9.......................................            1623          6.4898               1               3               5               8              12
10......................................           18297          6.5874               2               3               5               8              13
11......................................            3300          4.1488               1               2               3               5               8
12......................................           44849          6.0417               2               3               4               7              11
13......................................            6185          5.0928               2               3               4               6               9
14......................................          330036          5.9583               2               3               5               7              11
15......................................          139608          3.6293               1               2               3               5               7
16......................................           11101          6.1222               2               3               5               7              12
17......................................            3437          3.3750               1               2               3               4               6
18......................................           25899          5.5415               2               3               4               7              10
19......................................            7951          3.7393               1               2               3               5               7
20......................................            5735         10.2382               3               5               8              13              20
21......................................            1356          6.8754               2               3               5               9              13
22......................................            2501          4.9384               2               2               4               6               9
23......................................            8311          4.2224               1               2               3               5               8
24......................................           52472          5.0144               1               2               4               6              10
25......................................           24380          3.3056               1               2               3               4               6
26......................................              20          3.2000               1               1               2               3               7
27......................................            3567          5.0962               1               1               3               6              11
28......................................           10686          6.2281               1               3               5               8              13
29......................................            3910          3.7133               1               2               3               5               7
31......................................            3209          4.2312               1               2               3               5               8
32......................................            1545          2.7398               1               1               2               3               5
34......................................           19531          5.1937               1               2               4               6              10
35......................................            5177          3.4199               1               2               3               4               6
36......................................            4223          1.3640               1               1               1               1               2
37......................................            1476          3.6917               1               1               3               5               8
38......................................             115          2.5304               1               1               1               3               5
39......................................            1152          1.9106               1               1               1               2               4
40......................................            1755          3.5801               1               1               2               4               8
41......................................               1          4.0000               4               4               4               4               4
42......................................            2698          2.2279               1               1               1               3               5
43......................................              83          3.3012               1               2               3               4               7
44......................................            1226          4.9625               2               3               4               6               9
45......................................            2490          3.2743               1               2               3               4               6
46......................................            2940          4.5871               1               2               4               6               9
47......................................            1183          3.2975               1               1               3               4               6
49......................................            2228          4.9677               1               2               4               6               9
50......................................            2569          1.9844               1               1               1               2               3
51......................................             264          2.5606               1               1               1               3               6
52......................................             196          2.1276               1               1               1               2               5
53......................................            2569          3.6734               1               1               2               4               8
54......................................               4          1.5000               1               1               1               1               3
55......................................            1560          2.8865               1               1               1               3               6
56......................................             526          3.0646               1               1               2               4               6
57......................................             579          3.9862               1               1               2               4               8
59......................................             111          2.4414               1               1               2               2               5
60......................................               2          1.0000               1               1               1               1               1
61......................................             208          4.8894               1               1               2               6              13
62......................................               2          3.5000               2               2               5               5               5
63......................................            3168          4.2601               1               2               3               5               9
64......................................            3162          6.4756               1               2               4               8              14
65......................................           31728          2.8963               1               1               2               4               5
66......................................            6938          3.1721               1               1               3               4               6
67......................................             477          3.5241               1               2               3               4               7
68......................................           13401          4.1595               1               2               3               5               8
69......................................            4228          3.2774               1               2               3               4               6
70......................................              33          2.9091               1               2               3               4               5
71......................................             105          3.8667               1               2               3               6               7
72......................................             812          3.3017               1               2               3               4               6
73......................................            6402          4.3380               1               2               3               5               8
75......................................           39147          9.9967               3               5               8              12              20
76......................................           39851         11.2556               3               5               9              14              21

[[Page 26390]]

 
77......................................            2375          4.8880               1               2               4               7              10
78......................................           30492          6.9444               3               5               6               8              11
79......................................          183121          8.4551               3               4               7              11              16
80......................................            8291          5.6652               2               3               5               7              10
81......................................               5          9.2000               2               2              10              10              19
82......................................           63683          6.9428               2               3               5               9              14
83......................................            6462          5.5305               2               3               4               7              10
84......................................            1494          3.3681               1               2               3               4               6
85......................................           20066          6.3638               2               3               5               8              12
86......................................            1923          3.7889               1               2               3               5               7
87......................................           62959          6.2450               1               3               5               8              12
88......................................          403808          5.2212               2               3               4               7               9
89......................................          524107          6.0245               2               3               5               7              11
90......................................           51271          4.2271               2               3               4               5               7
91......................................              49          3.3061               1               2               3               4               5
92......................................           13763          6.2465               2               3               5               8              12
93......................................            1543          3.9942               1               2               3               5               7
94......................................           12332          6.3027               2               3               5               8              12
95......................................            1561          3.6887               1               2               3               5               7
96......................................           64893          4.7277               2               3               4               6               8
97......................................           31521          3.6879               1               2               3               5               7
98......................................              18          4.6667               1               1               3               6               7
99......................................           18166          3.2204               1               1               2               4               6
100.....................................            7230          2.2047               1               1               2               3               4
101.....................................           19700          4.4248               1               2               3               5               8
102.....................................            4970          2.7360               1               1               2               3               5
103.....................................             442         48.6041               9              12              29              64             112
104.....................................           33069         11.6306               3               6              10              15              22
105.....................................           29348          9.2675               4               5               7              11              17
106.....................................            3800         11.2111               5               7               9              13              20
107.....................................           90499         10.3531               5               7               9              12              17
108.....................................            5234         10.5728               3               5               8              13              20
109.....................................           61584          7.7338               4               5               6               9              13
110.....................................           54902          9.4567               2               5               8              11              18
111.....................................            7109          5.4788               2               4               5               7               8
112.....................................           60796          3.7594               1               1               3               5               8
113.....................................           44201         12.0562               3               6               9              15              24
114.....................................            8478          8.2536               2               4               7              10              16
115.....................................           14032          8.4152               1               4               7              11              16
116.....................................          308071          3.7287               1               1               3               5               8
117.....................................            3404          4.0523               1               1               2               5               9
118.....................................            6649          2.8117               1               1               1               3               6
119.....................................            1445          4.8374               1               1               3               6              12
120.....................................           36651          8.1192               1               2               5              10              18
121.....................................          163449          6.4387               2               3               5               8              12
122.....................................           80682          3.8317               1               2               3               5               7
123.....................................           40870          4.5742               1               1               3               6              11
124.....................................          134743          4.3708               1               2               3               6               8
125.....................................           74923          2.7862               1               1               2               4               5
126.....................................            5131         11.6936               3               6               9              14              22
127.....................................          680654          5.3354               2               3               4               7              10
128.....................................           11526          5.8044               3               4               5               7               9
129.....................................            4173          2.8447               1               1               1               3               7
130.....................................           89048          5.8037               2               3               5               7              10
131.....................................           26830          4.3785               1               3               4               6               7
132.....................................          152932          3.0474               1               1               2               4               6
133.....................................            7573          2.3956               1               1               2               3               4
134.....................................           32813          3.2987               1               2               3               4               6
135.....................................            7100          4.4668               1               2               3               5               9
136.....................................            1170          2.9120               1               1               2               4               6
138.....................................          191436          4.0071               1               2               3               5               8
139.....................................           77194          2.5069               1               1               2               3               5
140.....................................           76478          2.7136               1               1               2               3               5
141.....................................           85791          3.7068               1               2               3               5               7
142.....................................           42652          2.6766               1               1               2               3               5
143.....................................          185700          2.1667               1               1               2               3               4
144.....................................           78800          5.3171               1               2               4               7              11
145.....................................            6884          2.8117               1               1               2               4               6
146.....................................           11215         10.1815               5               7               9              12              17
147.....................................            2418          6.6208               3               5               6               8              10

[[Page 26391]]

 
148.....................................          134272         12.1101               5               7              10              14              22
149.....................................           17551          6.6488               4               5               6               8              10
150.....................................           20300         11.1450               4               7               9              14              20
151.....................................            4479          5.9272               2               3               5               8              10
152.....................................            4441          8.1743               3               5               7              10              14
153.....................................            1914          5.4713               3               4               5               7               8
154.....................................           29346         13.2615               4               7              10              16              25
155.....................................            6052          4.3354               1               2               3               6               8
156.....................................               2         28.0000              28              28              28              28              28
157.....................................            8196          5.4926               1               2               4               7              11
158.....................................            4393          2.6271               1               1               2               3               5
159.....................................           16421          5.0258               1               2               4               6              10
160.....................................           10974          2.7204               1               1               2               4               5
161.....................................           11483          4.1695               1               2               3               5               9
162.....................................            7018          1.9577               1               1               1               2               4
163.....................................               8          2.7500               1               1               3               3               3
164.....................................            4720          8.4019               4               5               7              10              15
165.....................................            1942          4.8553               2               3               5               6               8
166.....................................            3307          5.0889               2               3               4               6               9
167.....................................            2896          2.7099               1               2               2               3               5
168.....................................            1511          4.5963               1               2               3               6               9
169.....................................             802          2.4214               1               1               2               3               5
170.....................................           11287         11.1669               2               5               8              14              23
171.....................................            1125          4.7911               1               2               4               6               9
172.....................................           30485          6.9710               2               3               5               9              14
173.....................................            2492          3.8435               1               1               3               5               8
174.....................................          236408          4.8222               2               3               4               6               9
175.....................................           28026          2.9414               1               2               3               4               5
176.....................................           15607          5.2668               2               3               4               6              10
177.....................................            9489          4.5521               2               2               4               6               8
178.....................................            3568          3.1373               1               2               3               4               6
179.....................................           12177          6.0139               2               3               5               7              11
180.....................................           85083          5.3978               2               3               4               7              10
181.....................................           24320          3.4134               1               2               3               4               6
182.....................................          232501          4.3626               1               2               3               5               8
183.....................................           78432          2.9618               1               1               2               4               6
184.....................................              98          3.2449               1               2               2               4               5
185.....................................            4300          4.4963               1               2               3               6               9
186.....................................               2          4.5000               2               2               7               7               7
187.....................................             722          3.8130               1               2               3               5               8
188.....................................           74594          5.5723               1               2               4               7              11
189.....................................           11097          3.1388               1               1               2               4               6
190.....................................              69          6.0290               2               3               4               6              11
191.....................................            9367         14.0878               4               7              10              18              28
192.....................................             974          6.5842               2               4               6               8              11
193.....................................            5669         12.5490               5               7              10              15              23
194.....................................             755          6.7497               2               4               6               8              12
195.....................................            4869          9.9029               4               6               8              12              17
196.....................................            1190          5.6832               2               4               5               7               9
197.....................................           20225          8.7363               3               5               7              11              16
198.....................................            6079          4.4996               2               3               4               6               8
199.....................................            1724          9.6456               3               4               8              12              19
200.....................................            1071         10.7404               2               4               8              14              22
201.....................................            1465         13.8314               3               6              11              18              27
202.....................................           25595          6.5031               2               3               5               8              13
203.....................................           28958          6.6940               2               3               5               9              13
204.....................................           54818          5.8581               2               3               4               7              11
205.....................................           22519          6.2964               2               3               5               8              12
206.....................................            1778          3.8335               1               2               3               5               7
207.....................................           30768          5.1176               1               2               4               6              10
208.....................................            9616          2.8974               1               1               2               4               6
209.....................................          342301          5.1232               3               3               4               6               8
210.....................................          126555          6.8082               3               4               6               8              11
211.....................................           31227          4.9152               3               4               4               6               7
212.....................................               7          3.0000               2               2               2               3               4
213.....................................            8882          8.7299               2               4               7              11              17
216.....................................            5822          9.7583               2               4               7              12              19
217.....................................           17573         13.0833               3               5               9              16              28
218.....................................           21344          5.3594               2               3               4               6              10
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[[Page 26392]]

 
220.....................................               2          2.5000               1               1               4               4               4
223.....................................           17434          2.5812               1               1               2               3               5
224.....................................            7953          2.0448               1               1               2               3               4
225.....................................            5575          4.7146               1               2               3               6              10
226.....................................            4985          6.2828               1               2               4               8              13
227.....................................            4416          2.6594               1               1               2               3               5
228.....................................            2437          3.5568               1               1               2               4               8
229.....................................            1080          2.3944               1               1               2               3               5
230.....................................            2102          5.1237               1               2               3               6              10
231.....................................           10618          4.8282               1               2               3               6              10
232.....................................             565          3.5894               1               1               2               4               9
233.....................................            4542          7.6797               2               3               5               9              16
234.....................................            2666          3.5709               1               2               3               4               7
235.....................................            5334          5.1245               1               2               4               6              10
236.....................................           38564          4.8516               1               3               4               6               9
237.....................................            1576          3.7386               1               2               3               5               7
238.....................................            7594          8.4664               3               4               6              10              16
239.....................................           51719          6.2172               2               3               5               8              12
240.....................................           11850          6.5754               2               3               5               8              13
241.....................................            2953          3.9401               1               2               3               5               7
242.....................................            2477          6.5268               2               3               5               8              12
243.....................................           84831          4.7022               1               3               4               6               9
244.....................................           11891          4.7802               1               2               4               6               9
245.....................................            4929          3.7206               1               2               3               4               7
246.....................................            1342          3.6461               1               2               3               4               7
247.....................................           15047          3.4443               1               1               3               4               7
248.....................................            9336          4.7321               1               2               4               6               9
249.....................................           10719          3.7768               1               1               3               5               8
250.....................................            3509          4.2485               1               2               3               5               8
251.....................................            2351          2.9872               1               1               3               4               5
252.....................................               1          2.0000               2               2               2               2               2
253.....................................           18878          4.6841               1               3               4               6               9
254.....................................           10341          3.2080               1               2               3               4               6
255.....................................               1          1.0000               1               1               1               1               1
256.....................................            5803          5.1260               1               2               4               6              10
257.....................................           16795          2.8263               1               2               2               3               5
258.....................................           15710          2.0006               1               1               2               2               3
259.....................................            3717          2.7896               1               1               1               3               6
260.....................................            4780          1.4749               1               1               1               2               2
261.....................................            1730          2.1624               1               1               1               2               4
262.....................................             673          3.8098               1               1               3               5               7
263.....................................           24527         11.5534               3               5               8              14              23
264.....................................            3877          6.9010               2               3               5               8              14
265.....................................            3868          6.6099               1               2               4               8              14
266.....................................            2527          3.3174               1               1               2               4               7
267.....................................             255          5.2353               1               1               3               6              12
268.....................................             896          3.6953               1               1               2               4               8
269.....................................            8856          8.2516               2               3               6              10              16
270.....................................            2734          3.2579               1               1               2               4               7
271.....................................           21090          7.1019               2               4               6               8              13
272.....................................            5465          6.3420               2               3               5               8              12
273.....................................            1341          4.2118               1               2               3               5               8
274.....................................            2368          6.9548               2               3               5               9              14
275.....................................             224          3.3125               1               1               2               4               7
276.....................................            1076          4.6515               1               2               4               6               9
277.....................................           83707          5.7178               2               3               5               7              10
278.....................................           28524          4.3359               2               3               4               5               7
279.....................................               4          4.0000               2               2               4               5               5
280.....................................           15047          4.1980               1               2               3               5               8
281.....................................            6682          3.0805               1               1               3               4               6
283.....................................            5322          4.5569               1               2               3               6               9
284.....................................            1852          3.1960               1               1               2               4               6
285.....................................            6125         10.4263               3               5               8              13              20
286.....................................            1995          6.2000               2               3               5               7              11
287.....................................            5974         10.5387               3               5               8              13              20
288.....................................            2252          5.7234               2               3               4               6               9
289.....................................            4326          3.1248               1               1               2               3               7
290.....................................            8214          2.4329               1               1               2               2               4
291.....................................              57          1.6316               1               1               1               2               2
292.....................................            4945          9.9610               2               4               7              13              21

[[Page 26393]]

 
293.....................................             321          4.9346               1               2               4               7              10
294.....................................           83924          4.7128               1               2               4               6               9
295.....................................            3464          3.8467               1               2               3               5               7
296.....................................          232274          5.2398               2               3               4               6              10
297.....................................           40842          3.4744               1               2               3               4               6
298.....................................             106          3.1887               1               2               2               4               6
299.....................................            1052          5.5542               1               2               4               6              11
300.....................................           15582          6.1317               2               3               5               8              12
301.....................................            3101          3.7004               1               2               3               5               7
302.....................................            7525          9.4141               4               5               7              11              16
303.....................................           19405          8.4850               4               5               7              10              15
304.....................................           11967          8.8979               2               4               7              11              18
305.....................................            2852          3.8443               1               2               3               5               7
306.....................................            7925          5.4829               1               2               3               7              12
307.....................................            2226          2.2668               1               1               2               3               4
308.....................................            7673          6.3836               1               2               4               8              14
309.....................................            3947          2.4880               1               1               2               3               5
310.....................................           23701          4.3591               1               2               3               5               9
311.....................................            8200          1.8902               1               1               1               2               3
312.....................................            1570          4.5166               1               1               3               6              10
313.....................................             633          2.1153               1               1               1               3               4
314.....................................               2          1.0000               1               1               1               1               1
315.....................................           28524          7.4721               1               1               5              10              17
316.....................................           96406          6.6791               2               3               5               8              13
317.....................................            1230          3.2114               1               1               2               3               6
318.....................................            5544          5.9975               1               3               4               7              12
319.....................................             460          2.8630               1               1               2               4               6
320.....................................          181708          5.3834               2               3               4               7              10
321.....................................           28174          3.8452               1               2               3               5               7
322.....................................              69          4.0580               1               2               3               5               7
323.....................................           16353          3.2183               1               1               2               4               7
324.....................................            7365          1.8789               1               1               1               2               3
325.....................................            7788          3.8947               1               2               3               5               7
326.....................................            2414          2.6582               1               1               2               3               5
327.....................................               7          9.2857               1               1               2               4              13
328.....................................             718          3.9053               1               1               3               5               8
329.....................................             104          2.0481               1               1               1               3               4
331.....................................           43233          5.5300               1               2               4               7              11
332.....................................            4795          3.2715               1               1               2               4               7
333.....................................             296          5.0507               1               2               3               6              10
334.....................................           12132          4.8938               2               3               4               6               8
335.....................................           11393          3.4104               2               3               3               4               5
336.....................................           40525          3.5229               1               2               3               4               7
337.....................................           30540          2.1759               1               1               2               3               3
338.....................................            1641          5.2956               1               2               3               7              12
339.....................................            1503          4.5269               1               1               3               6              10
340.....................................               1          1.0000               1               1               1               1               1
341.....................................            3836          3.2018               1               1               2               3               7
342.....................................             775          3.1174               1               2               2               4               6
344.....................................            3934          2.2567               1               1               1               2               4
345.....................................            1272          3.7673               1               1               2               5               8
346.....................................            4622          5.8090               1               3               4               7              11
347.....................................             396          3.3712               1               1               2               4               7
348.....................................            3105          4.2029               1               2               3               5               8
349.....................................             589          2.6027               1               1               2               3               5
350.....................................            6157          4.3937               2               2               4               5               8
352.....................................             646          3.8498               1               2               3               5               8
353.....................................            2631          6.7081               3               3               5               8              13
354.....................................            8209          5.8725               3               3               4               7              10
355.....................................            5698          3.3243               2               3               3               4               5
356.....................................           25961          2.4179               1               1               2               3               4
357.....................................            5767          8.4947               3               4               7              10              16
358.....................................           21628          4.3926               2               3               3               5               7
359.....................................           29103          2.8141               2               2               3               3               4
360.....................................           16133          2.9634               1               2               2               3               5
361.....................................             420          3.4524               1               1               2               4               7
362.....................................               1          1.0000               1               1               1               1               1
363.....................................            3079          3.4784               1               2               2               3               7
364.....................................            1611          3.5847               1               1               2               5               7
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[[Page 26394]]

 
366.....................................            4226          6.7283               1               3               5               8              14
367.....................................             472          3.1462               1               1               2               4               7
368.....................................            2861          6.7113               2               3               5               8              13
369.....................................            2832          3.1963               1               1               2               4               6
370.....................................            1141          5.7160               3               3               4               5               9
371.....................................            1174          3.6567               2               3               3               4               5
372.....................................             916          3.4509               2               2               2               3               5
373.....................................            3916          2.2829               1               2               2               2               3
374.....................................             125          3.4880               2               2               2               3               5
375.....................................               6          2.6667               2               2               2               3               3
376.....................................             254          3.4803               1               2               2               4               7
377.....................................              53          3.8679               1               1               2               5               8
378.....................................             151          2.3444               1               1               2               3               4
379.....................................             355          3.1127               1               1               2               3               7
380.....................................              74          2.1622               1               1               2               2               4
381.....................................             176          1.9545               1               1               1               2               3
382.....................................              39          1.3077               1               1               1               1               2
383.....................................            1545          3.8913               1               1               3               5               8
384.....................................             123          2.3415               1               1               1               2               4
389.....................................               8          5.8750               3               3               4               8              10
390.....................................              19          3.7368               1               1               3               5               7
392.....................................            2508          9.4769               3               4               7              12              19
393.....................................               1          8.0000               8               8               8               8               8
394.....................................            1724          6.6810               1               2               4               8              15
395.....................................           80464          4.5303               1               2               3               6               9
396.....................................              17          3.7059               1               1               2               5               6
397.....................................           18071          5.2277               1               2               4               7              10
398.....................................           18051          5.9638               2               3               5               7              11
399.....................................            1614          3.5520               1               2               3               4               7
400.....................................            6845          9.0488               1               3               6              12              20
401.....................................            5827         11.1903               2               5               8              14              23
402.....................................            1483          3.9400               1               1               3               5               8
403.....................................           33277          8.0524               2               3               6              10              17
404.....................................            4491          4.2224               1               2               3               6               9
406.....................................            2546         10.2859               3               4               7              13              21
407.....................................             695          4.4086               1               2               4               6               8
408.....................................            2246          7.7061               1               2               5              10              18
409.....................................            3281          5.9113               2               3               4               6              11
410.....................................           40863          3.7201               1               2               3               5               6
411.....................................              13          2.3077               1               1               2               4               4
412.....................................              29          2.7241               1               1               2               3               6
413.....................................            6149          7.2477               2               3               6               9              14
414.....................................             712          4.0941               1               2               3               5               9
415.....................................           39856         14.1713               4               6              11              18              28
416.....................................          195783          7.3483               2               4               6               9              14
417.....................................              32          6.1875               1               2               4               7              13
418.....................................           22097          6.1239               2               3               5               7              11
419.....................................           15859          4.8212               2               2               4               6               9
420.....................................            3091          3.5642               1               2               3               4               6
421.....................................           12242          3.8638               1               2               3               5               7
422.....................................              96          5.2708               1               2               2               5               7
423.....................................            8073          8.1416               2               3               6              10              17
424.....................................            1354         13.3936               2               5               9              16              28
425.....................................           15006          4.0716               1               2               3               5               8
426.....................................            4313          4.5613               1               2               3               6               9
427.....................................            1660          5.0283               1               2               3               6              10
428.....................................             839          7.1025               1               2               4               8              15
429.....................................           27480          6.4737               2               3               5               8              12
430.....................................           58011          8.2066               2               3               6              10              16
431.....................................             295          6.5864               2               3               5               8              13
432.....................................             389          4.7506               1               2               3               5               9
433.....................................            5781          3.0073               1               1               2               4               6
434.....................................           21835          5.0844               1               2               4               6               9
435.....................................           14486          4.2925               1               2               4               5               8
436.....................................            3499         12.8337               4               7              11              17              25
437.....................................            9750          8.9544               3               5               8              11              15
439.....................................            1287          8.1756               1               3               5              10              17
440.....................................            5017          8.8433               2               3               6              10              19
441.....................................             579          3.2383               1               1               2               4               7
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[[Page 26395]]

 
443.....................................            3547          3.3941               1               1               2               4               7
444.....................................            5150          4.2252               1               2               3               5               8
445.....................................            2223          3.0031               1               1               2               4               5
447.....................................            4854          2.5117               1               1               2               3               5
448.....................................               1          4.0000               4               4               4               4               4
449.....................................           26543          3.6722               1               1               3               4               7
450.....................................            6363          2.0525               1               1               1               2               4
451.....................................               1          1.0000               1               1               1               1               1
452.....................................           21656          4.9536               1               2               3               6              10
453.....................................            4464          2.8156               1               1               2               3               5
454.....................................            4930          4.5554               1               2               3               6               9
455.....................................            1070          2.6262               1               1               2               3               5
461.....................................            3356          4.5584               1               1               2               5              11
462.....................................           12630         11.5264               4               6               9              15              21
463.....................................           18895          4.2653               1               2               3               5               8
464.....................................            5456          3.0770               1               1               2               4               6
465.....................................             227          3.3612               1               1               2               3               7
466.....................................            1719          3.8674               1               1               2               4               8
467.....................................            1301          4.0638               1               1               2               4               7
468.....................................           58386         12.9325               3               6              10              17              26
471.....................................           11423          5.7339               3               4               5               6               9
473.....................................            7615         12.8411               2               3               7              19              32
475.....................................          109114         11.1765               2               5               9              15              22
476.....................................            4448         11.6369               2               5              10              15              21
477.....................................           25690          8.1425               1               3               6              10              17
478.....................................          111192          7.3159               1               3               5               9              15
479.....................................           22375          3.6220               1               2               3               5               7
480.....................................             460         19.1848               7               9              14              23              38
481.....................................             229         27.1485              16              19              23              32              43
482.....................................            6119         12.7756               4               7              10              15              24
483.....................................           43070         38.8321              14              21              32              49              70
484.....................................             323         13.3065               2               5              10              18              28
485.....................................            2932          9.3905               4               5               7              11              17
486.....................................            2012         12.1511               1               5               9              16              24
487.....................................            3491          7.5408               1               3               6              10              15
488.....................................             767         16.9465               4               7              12              21              34
489.....................................           14253          8.5597               2               3               6              10              18
490.....................................            5283          5.1333               1               2               4               6              10
491.....................................           11332          3.4896               2               2               3               4               6
492.....................................            2667         16.1234               4               5               9              26              34
493.....................................           54030          5.7170               1               3               5               7              11
494.....................................           27254          2.4838               1               1               2               3               5
495.....................................             145         20.2552               6               8              12              18              33
496.....................................            1270          9.9843               4               5               7              12              18
497.....................................           22593          6.2173               2               3               5               7              11
498.....................................           19133          3.4179               1               2               3               4               6
499.....................................           30738          4.7687               1               2               4               6               9
500.....................................           42090          2.6897               1               1               2               3               5
501.....................................            1943         10.5713               4               5               8              13              20
502.....................................             612          5.9379               2               3               5               7              10
503.....................................            5563          3.9730               1               2               3               5               7
504.....................................             122         30.0984              10              15              25              40              60
505.....................................             153          4.7190               1               1               2               6              12
506.....................................             962         17.6258               4               8              14              24              37
507.....................................             280          9.1857               2               4               7              13              18
508.....................................             637          7.1350               2               3               5               9              15
509.....................................             165          6.1333               1               2               4               8              12
510.....................................            1653          7.8506               2               3               5               9              17
511.....................................             594          4.4646               1               1               3               6              10
                                         ----------------
                                                10930692
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                   Table 7B.--Medicare Prospective Payment System, Selected Percentile Lengths of Stay
                                                        [FY99 MEDPAR Update 12/99 Grouper V18.0]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Number        Arithmetic         10th            25th            50th            75th            90th
                   DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           35069          9.0962               2               4               6              12              19

[[Page 26396]]

 
2.......................................            7064          9.6692               3               5               7              12              19
4.......................................            6022          7.3316               1               2               5               9              16
5.......................................           95151          3.2852               1               1               2               3               7
6.......................................             340          3.2412               1               1               2               4               7
7.......................................           12054         10.2745               2               4               7              13              21
8.......................................            3662          3.0145               1               1               2               4               7
9.......................................            1623          6.4898               1               3               5               8              12
10......................................           18297          6.5874               2               3               5               8              13
11......................................            3300          4.1488               1               2               3               5               8
12......................................           44849          6.0417               2               3               4               7              11
13......................................            6185          5.0928               2               3               4               6               9
14......................................          362463          6.0528               2               3               5               7              11
15......................................          139608          3.6293               1               2               3               5               7
16......................................           11101          6.1222               2               3               5               7              12
17......................................            3437          3.3750               1               2               3               4               6
18......................................           25899          5.5415               2               3               4               7              10
19......................................            7951          3.7393               1               2               3               5               7
20......................................            5735         10.2382               3               5               8              13              20
21......................................            1356          6.8754               2               3               5               9              13
22......................................            2501          4.9384               2               2               4               6               9
23......................................            8311          4.2224               1               2               3               5               8
24......................................           52472          5.0144               1               2               4               6              10
25......................................           24380          3.3056               1               2               3               4               6
26......................................              20          3.2000               1               1               2               3               7
27......................................            3567          5.0962               1               1               3               6              11
28......................................           10685          6.2270               1               3               5               8              13
29......................................            3910          3.7133               1               2               3               5               7
31......................................            3209          4.2312               1               2               3               5               8
32......................................            1545          2.7398               1               1               2               3               5
34......................................           19531          5.1937               1               2               4               6              10
35......................................            5177          3.4199               1               2               3               4               6
36......................................            4223          1.3640               1               1               1               1               2
37......................................            1476          3.6917               1               1               3               5               8
38......................................             115          2.5304               1               1               1               3               5
39......................................            1152          1.9106               1               1               1               2               4
40......................................            1755          3.5801               1               1               2               4               8
41......................................               1          4.0000               4               4               4               4               4
42......................................            2698          2.2279               1               1               1               3               5
43......................................              83          3.3012               1               2               3               4               7
44......................................            1226          4.9625               2               3               4               6               9
45......................................            2490          3.2743               1               2               3               4               6
46......................................            2940          4.5871               1               2               4               6               9
47......................................            1183          3.2975               1               1               3               4               6
49......................................            2228          4.9677               1               2               4               6               9
50......................................            2569          1.9844               1               1               1               2               3
51......................................             264          2.5606               1               1               1               3               6
52......................................             196          2.1276               1               1               1               2               5
53......................................            2569          3.6734               1               1               2               4               8
54......................................               4          1.5000               1               1               1               1               3
55......................................            1560          2.8865               1               1               1               3               6
56......................................             526          3.0646               1               1               2               4               6
57......................................             579          3.9862               1               1               2               4               8
59......................................             111          2.4414               1               1               2               2               5
60......................................               2          1.0000               1               1               1               1               1
61......................................             208          4.8894               1               1               2               6              13
62......................................               2          3.5000               2               2               5               5               5
63......................................            3168          4.2601               1               2               3               5               9
64......................................            3162          6.4756               1               2               4               8              14
65......................................           31728          2.8963               1               1               2               4               5
66......................................            6938          3.1721               1               1               3               4               6
67......................................             477          3.5241               1               2               3               4               7
68......................................           13401          4.1595               1               2               3               5               8
69......................................            4228          3.2774               1               2               3               4               6
70......................................              33          2.9091               1               2               3               4               5
71......................................             105          3.8667               1               2               3               6               7
72......................................             812          3.3017               1               2               3               4               6
73......................................            6402          4.3380               1               2               3               5               8
75......................................           39147          9.9967               3               5               8              12              20
76......................................           39851         11.2556               3               5               9              14              21
77......................................            2375          4.8880               1               2               4               7              10

[[Page 26397]]

 
78......................................           30492          6.9444               3               5               6               8              11
79......................................          183121          8.4551               3               4               7              11              16
80......................................            8291          5.6652               2               3               5               7              10
81......................................               5          9.2000               2               2              10              10              19
82......................................           63683          6.9428               2               3               5               9              14
83......................................            6462          5.5305               2               3               4               7              10
84......................................            1494          3.3681               1               2               3               4               6
85......................................           20066          6.3638               2               3               5               8              12
86......................................            1923          3.7889               1               2               3               5               7
87......................................           62959          6.2450               1               3               5               8              12
88......................................          403808          5.2212               2               3               4               7               9
89......................................          524106          6.0245               2               3               5               7              11
90......................................           51271          4.2271               2               3               4               5               7
91......................................              49          3.3061               1               2               3               4               5
92......................................           13763          6.2465               2               3               5               8              12
93......................................            1543          3.9942               1               2               3               5               7
94......................................           12332          6.3027               2               3               5               8              12
95......................................            1561          3.6887               1               2               3               5               7
96......................................           64893          4.7277               2               3               4               6               8
97......................................           31521          3.6879               1               2               3               5               7
98......................................              18          4.6667               1               1               3               6               7
99......................................           18166          3.2204               1               1               2               4               6
100.....................................            7230          2.2047               1               1               2               3               4
101.....................................           19700          4.4248               1               2               3               5               8
102.....................................            4970          2.7360               1               1               2               3               5
103.....................................             442         48.6041               9              12              29              64             112
104.....................................           33352         11.6423               3               6              10              15              22
105.....................................           29488          9.2812               4               5               7              11              17
106.....................................            3785         11.2201               5               7               9              13              20
107.....................................           90361         10.3492               5               7               9              12              17
108.....................................            5213         10.5580               3               5               8              13              20
109.....................................           61526          7.7320               4               5               6               9              13
110.....................................           54724          9.4413               2               5               8              11              18
111.....................................            7102          5.4816               2               4               5               7               8
112.....................................           60794          3.7592               1               1               3               5               8
113.....................................           49775         12.1191               4               6               9              15              24
114.....................................            8478          8.2536               2               4               7              10              16
115.....................................           14032          8.4152               1               4               7              11              16
116.....................................          308070          3.7287               1               1               3               5               8
117.....................................            3404          4.0523               1               1               2               5               9
118.....................................            6649          2.8117               1               1               1               3               6
119.....................................            1445          4.8374               1               1               3               6              12
120.....................................           36650          8.1194               1               2               5              10              18
121.....................................          163449          6.4387               2               3               5               8              12
122.....................................           80682          3.8317               1               2               3               5               7
123.....................................           40869          4.5742               1               1               3               6              11
124.....................................          134743          4.3708               1               2               3               6               8
125.....................................           74923          2.7862               1               1               2               4               5
126.....................................            5131         11.6936               3               6               9              14              22
127.....................................          680654          5.3354               2               3               4               7              10
128.....................................           11526          5.8044               3               4               5               7               9
129.....................................            4173          2.8447               1               1               1               3               7
130.....................................           89048          5.8037               2               3               5               7              10
131.....................................           26830          4.3785               1               3               4               6               7
132.....................................          152932          3.0474               1               1               2               4               6
133.....................................            7573          2.3956               1               1               2               3               4
134.....................................           32813          3.2987               1               2               3               4               6
135.....................................            7100          4.4668               1               2               3               5               9
136.....................................            1170          2.9120               1               1               2               4               6
138.....................................          191436          4.0071               1               2               3               5               8
139.....................................           77194          2.5069               1               1               2               3               5
140.....................................           76478          2.7136               1               1               2               3               5
141.....................................           85791          3.7068               1               2               3               5               7
142.....................................           42652          2.6766               1               1               2               3               5
143.....................................          185700          2.1667               1               1               2               3               4
144.....................................           78800          5.3171               1               2               4               7              11
145.....................................            6884          2.8117               1               1               2               4               6
146.....................................           11215         10.1815               5               7               9              12              17
147.....................................            2418          6.6208               3               5               6               8              10
148.....................................          134272         12.1101               5               7              10              14              22

[[Page 26398]]

 
149.....................................           17551          6.6488               4               5               6               8              10
150.....................................           20300         11.1450               4               7               9              14              20
151.....................................            4479          5.9272               2               3               5               8              10
152.....................................            4441          8.1743               3               5               7              10              14
153.....................................            1914          5.4713               3               4               5               7               8
154.....................................           29346         13.2615               4               7              10              16              25
155.....................................            6052          4.3354               1               2               3               6               8
156.....................................               2         28.0000              28              28              28              28              28
157.....................................            8196          5.4926               1               2               4               7              11
158.....................................            4393          2.6271               1               1               2               3               5
159.....................................           16421          5.0258               1               2               4               6              10
160.....................................           10974          2.7204               1               1               2               4               5
161.....................................           11483          4.1695               1               2               3               5               9
162.....................................            7018          1.9577               1               1               1               2               4
163.....................................               8          2.7500               1               1               3               3               3
164.....................................            4720          8.4019               4               5               7              10              15
165.....................................            1942          4.8553               2               3               5               6               8
166.....................................            3307          5.0889               2               3               4               6               9
167.....................................            2896          2.7099               1               2               2               3               5
168.....................................            1511          4.5963               1               2               3               6               9
169.....................................             802          2.4214               1               1               2               3               5
170.....................................           11287         11.1669               2               5               8              14              23
171.....................................            1125          4.7911               1               2               4               6               9
172.....................................           30485          6.9710               2               3               5               9              14
173.....................................            2492          3.8435               1               1               3               5               8
174.....................................          236408          4.8222               2               3               4               6               9
175.....................................           28026          2.9414               1               2               3               4               5
176.....................................           15607          5.2668               2               3               4               6              10
177.....................................            9489          4.5521               2               2               4               6               8
178.....................................            3568          3.1373               1               2               3               4               6
179.....................................           12177          6.0139               2               3               5               7              11
180.....................................           85083          5.3978               2               3               4               7              10
181.....................................           24320          3.4134               1               2               3               4               6
182.....................................          232501          4.3626               1               2               3               5               8
183.....................................           78432          2.9618               1               1               2               4               6
184.....................................              98          3.2449               1               2               2               4               5
185.....................................            4300          4.4963               1               2               3               6               9
186.....................................               2          4.5000               2               2               7               7               7
187.....................................             722          3.8130               1               2               3               5               8
188.....................................           74594          5.5723               1               2               4               7              11
189.....................................           11097          3.1388               1               1               2               4               6
190.....................................              69          6.0290               2               3               4               6              11
191.....................................            9367         14.0878               4               7              10              18              28
192.....................................             974          6.5842               2               4               6               8              11
193.....................................            5669         12.5490               5               7              10              15              23
194.....................................             755          6.7497               2               4               6               8              12
195.....................................            4869          9.9029               4               6               8              12              17
196.....................................            1190          5.6832               2               4               5               7               9
197.....................................           20225          8.7363               3               5               7              11              16
198.....................................            6079          4.4996               2               3               4               6               8
199.....................................            1724          9.6456               3               4               8              12              19
200.....................................            1071         10.7404               2               4               8              14              22
201.....................................            1465         13.8314               3               6              11              18              27
202.....................................           25595          6.5031               2               3               5               8              13
203.....................................           28958          6.6940               2               3               5               9              13
204.....................................           54818          5.8581               2               3               4               7              11
205.....................................           22519          6.2964               2               3               5               8              12
206.....................................            1778          3.8335               1               2               3               5               7
207.....................................           30768          5.1176               1               2               4               6              10
208.....................................            9616          2.8974               1               1               2               4               6
209.....................................          394168          5.1231               3               3               4               6               8
210.....................................          146423          6.8039               3               4               6               8              11
211.....................................           35938          4.9292               3               4               4               6               7
212.....................................               7          3.0000               2               2               2               3               4
213.....................................            8882          8.7299               2               4               7              11              17
216.....................................            5822          9.7583               2               4               7              12              19
217.....................................           17573         13.0833               3               5               9              16              28
218.....................................           21344          5.3594               2               3               4               6              10
219.....................................           19125          3.2444               1               2               3               4               5
220.....................................               2          2.5000               1               1               4               4               4

[[Page 26399]]

 
223.....................................           17434          2.5812               1               1               2               3               5
224.....................................            7953          2.0448               1               1               2               3               4
225.....................................            5575          4.7146               1               2               3               6              10
226.....................................            4985          6.2828               1               2               4               8              13
227.....................................            4416          2.6594               1               1               2               3               5
228.....................................            2437          3.5568               1               1               2               4               8
229.....................................            1080          2.3944               1               1               2               3               5
230.....................................            2102          5.1237               1               2               3               6              10
231.....................................           10618          4.8282               1               2               3               6              10
232.....................................             565          3.5894               1               1               2               4               9
233.....................................            4542          7.6797               2               3               5               9              16
234.....................................            2666          3.5709               1               2               3               4               7
235.....................................            5334          5.1245               1               2               4               6              10
236.....................................           43318          4.8912               2               3               4               6               9
237.....................................            1576          3.7386               1               2               3               5               7
238.....................................            7594          8.4664               3               4               6              10              16
239.....................................           51719          6.2172               2               3               5               8              12
240.....................................           11850          6.5754               2               3               5               8              13
241.....................................            2953          3.9401               1               2               3               5               7
242.....................................            2477          6.5268               2               3               5               8              12
243.....................................           84831          4.7022               1               3               4               6               9
244.....................................           11891          4.7802               1               2               4               6               9
245.....................................            4929          3.7206               1               2               3               4               7
246.....................................            1342          3.6461               1               2               3               4               7
247.....................................           15047          3.4443               1               1               3               4               7
248.....................................            9336          4.7321               1               2               4               6               9
249.....................................           10719          3.7768               1               1               3               5               8
250.....................................            3509          4.2485               1               2               3               5               8
251.....................................            2351          2.9872               1               1               3               4               5
252.....................................               1          2.0000               2               2               2               2               2
253.....................................           18878          4.6841               1               3               4               6               9
254.....................................           10341          3.2080               1               2               3               4               6
255.....................................               1          1.0000               1               1               1               1               1
256.....................................            5803          5.1260               1               2               4               6              10
257.....................................           16795          2.8263               1               2               2               3               5
258.....................................           15710          2.0006               1               1               2               2               3
259.....................................            3717          2.7896               1               1               1               3               6
260.....................................            4780          1.4749               1               1               1               2               2
261.....................................            1730          2.1624               1               1               1               2               4
262.....................................             673          3.8098               1               1               3               5               7
263.....................................           27219         11.5858               3               5               8              14              23
264.....................................            4261          6.9681               2               3               5               8              14
265.....................................            3868          6.6099               1               2               4               8              14
266.....................................            2527          3.3174               1               1               2               4               7
267.....................................             255          5.2353               1               1               3               6              12
268.....................................             896          3.6953               1               1               2               4               8
269.....................................            8856          8.2516               2               3               6              10              16
270.....................................            2734          3.2579               1               1               2               4               7
271.....................................           21090          7.1019               2               4               6               8              13
272.....................................            5465          6.3420               2               3               5               8              12
273.....................................            1341          4.2118               1               2               3               5               8
274.....................................            2368          6.9548               2               3               5               9              14
275.....................................             224          3.3125               1               1               2               4               7
276.....................................            1076          4.6515               1               2               4               6               9
277.....................................           83707          5.7178               2               3               5               7              10
278.....................................           28524          4.3359               2               3               4               5               7
279.....................................               4          4.0000               2               2               4               5               5
280.....................................           15047          4.1980               1               2               3               5               8
281.....................................            6682          3.0805               1               1               3               4               6
283.....................................            5322          4.5569               1               2               3               6               9
284.....................................            1852          3.1960               1               1               2               4               6
285.....................................            6125         10.4263               3               5               8              13              20
286.....................................            1995          6.2000               2               3               5               7              11
287.....................................            5974         10.5387               3               5               8              13              20
288.....................................            2252          5.7234               2               3               4               6               9
289.....................................            4326          3.1248               1               1               2               3               7
290.....................................            8214          2.4329               1               1               2               2               4
291.....................................              57          1.6316               1               1               1               2               2
292.....................................            4945          9.9610               2               4               7              13              21
293.....................................             321          4.9346               1               2               4               7              10

[[Page 26400]]

 
294.....................................           83924          4.7128               1               2               4               6               9
295.....................................            3464          3.8467               1               2               3               5               7
296.....................................          232274          5.2398               2               3               4               6              10
297.....................................           40842          3.4744               1               2               3               4               6
298.....................................             106          3.1887               1               2               2               4               6
299.....................................            1052          5.5542               1               2               4               6              11
300.....................................           15582          6.1317               2               3               5               8              12
301.....................................            3101          3.7004               1               2               3               5               7
302.....................................            7525          9.4141               4               5               7              11              16
303.....................................           19405          8.4850               4               5               7              10              15
304.....................................           11967          8.8979               2               4               7              11              18
305.....................................            2852          3.8443               1               2               3               5               7
306.....................................            7925          5.4829               1               2               3               7              12
307.....................................            2226          2.2668               1               1               2               3               4
308.....................................            7673          6.3836               1               2               4               8              14
309.....................................            3947          2.4880               1               1               2               3               5
310.....................................           23701          4.3591               1               2               3               5               9
311.....................................            8200          1.8902               1               1               1               2               3
312.....................................            1570          4.5166               1               1               3               6              10
313.....................................             633          2.1153               1               1               1               3               4
314.....................................               2          1.0000               1               1               1               1               1
315.....................................           28524          7.4721               1               1               5              10              17
316.....................................           96405          6.6791               2               3               5               8              13
317.....................................            1230          3.2114               1               1               2               3               6
318.....................................            5544          5.9975               1               3               4               7              12
319.....................................             460          2.8630               1               1               2               4               6
320.....................................          181708          5.3834               2               3               4               7              10
321.....................................           28174          3.8452               1               2               3               5               7
322.....................................              69          4.0580               1               2               3               5               7
323.....................................           16353          3.2183               1               1               2               4               7
324.....................................            7365          1.8789               1               1               1               2               3
325.....................................            7788          3.8947               1               2               3               5               7
326.....................................            2414          2.6582               1               1               2               3               5
327.....................................               7          9.2857               1               1               2               4              13
328.....................................             718          3.9053               1               1               3               5               8
329.....................................             104          2.0481               1               1               1               3               4
331.....................................           43233          5.5300               1               2               4               7              11
332.....................................            4795          3.2715               1               1               2               4               7
333.....................................             296          5.0507               1               2               3               6              10
334.....................................           12132          4.8938               2               3               4               6               8
335.....................................           11393          3.4104               2               3               3               4               5
336.....................................           40525          3.5229               1               2               3               4               7
337.....................................           30540          2.1759               1               1               2               3               3
338.....................................            1641          5.2956               1               2               3               7              12
339.....................................            1503          4.5269               1               1               3               6              10
340.....................................               1          1.0000               1               1               1               1               1
341.....................................            3836          3.2018               1               1               2               3               7
342.....................................             775          3.1174               1               2               2               4               6
344.....................................            3934          2.2567               1               1               1               2               4
345.....................................            1272          3.7673               1               1               2               5               8
346.....................................            4622          5.8090               1               3               4               7              11
347.....................................             396          3.3712               1               1               2               4               7
348.....................................            3105          4.2029               1               2               3               5               8
349.....................................             589          2.6027               1               1               2               3               5
350.....................................            6157          4.3937               2               2               4               5               8
352.....................................             646          3.8498               1               2               3               5               8
353.....................................            2631          6.7081               3               3               5               8              13
354.....................................            8209          5.8725               3               3               4               7              10
355.....................................            5698          3.3243               2               3               3               4               5
356.....................................           25961          2.4179               1               1               2               3               4
357.....................................            5767          8.4947               3               4               7              10              16
358.....................................           21628          4.3926               2               3               3               5               7
359.....................................           29103          2.8141               2               2               3               3               4
360.....................................           16133          2.9634               1               2               2               3               5
361.....................................             420          3.4524               1               1               2               4               7
362.....................................               1          1.0000               1               1               1               1               1
363.....................................            3079          3.4784               1               2               2               3               7
364.....................................            1611          3.5847               1               1               2               5               7
365.....................................            1917          7.3005               2               3               5               9              16
366.....................................            4226          6.7283               1               3               5               8              14

[[Page 26401]]

 
367.....................................             472          3.1462               1               1               2               4               7
368.....................................            2861          6.7113               2               3               5               8              13
369.....................................            2832          3.1963               1               1               2               4               6
370.....................................            1141          5.7160               3               3               4               5               9
371.....................................            1174          3.6567               2               3               3               4               5
372.....................................             916          3.4509               2               2               2               3               5
373.....................................            3916          2.2829               1               2               2               2               3
374.....................................             125          3.4880               2               2               2               3               5
375.....................................               6          2.6667               2               2               2               3               3
376.....................................             254          3.4803               1               2               2               4               7
377.....................................              53          3.8679               1               1               2               5               8
378.....................................             151          2.3444               1               1               2               3               4
379.....................................             355          3.1127               1               1               2               3               7
380.....................................              74          2.1622               1               1               2               2               4
381.....................................             176          1.9545               1               1               1               2               3
382.....................................              39          1.3077               1               1               1               1               2
383.....................................            1545          3.8913               1               1               3               5               8
384.....................................             123          2.3415               1               1               1               2               4
389.....................................               8          5.8750               3               3               4               8              10
390.....................................              19          3.7368               1               1               3               5               7
392.....................................            2508          9.4769               3               4               7              12              19
393.....................................               1          8.0000               8               8               8               8               8
394.....................................            1724          6.6810               1               2               4               8              15
395.....................................           80464          4.5303               1               2               3               6               9
396.....................................              17          3.7059               1               1               2               5               6
397.....................................           18071          5.2277               1               2               4               7              10
398.....................................           18051          5.9638               2               3               5               7              11
399.....................................            1614          3.5520               1               2               3               4               7
400.....................................            6845          9.0488               1               3               6              12              20
401.....................................            5827         11.1903               2               5               8              14              23
402.....................................            1483          3.9400               1               1               3               5               8
403.....................................           32911          8.0630               2               3               6              10              17
404.....................................            4457          4.2257               1               2               3               6               9
406.....................................            2546         10.2859               3               4               7              13              21
407.....................................             695          4.4086               1               2               4               6               8
408.....................................            2247          7.7036               1               2               5              10              18
409.....................................            3281          5.9113               2               3               4               6              11
410.....................................           40862          3.7202               1               2               3               5               6
411.....................................              13          2.3077               1               1               2               4               4
412.....................................              29          2.7241               1               1               2               3               6
413.....................................            6515          7.2391               2               3               6               9              14
414.....................................             746          4.0804               1               2               3               5               8
415.....................................           39856         14.1713               4               6              11              18              28
416.....................................          195783          7.3483               2               4               6               9              14
417.....................................              32          6.1875               1               2               4               7              13
418.....................................           22097          6.1239               2               3               5               7              11
419.....................................           15859          4.8212               2               2               4               6               9
420.....................................            3091          3.5642               1               2               3               4               6
421.....................................           12242          3.8638               1               2               3               5               7
422.....................................              96          5.2708               1               2               2               5               7
423.....................................            8073          8.1416               2               3               6              10              17
424.....................................            1354         13.3936               2               5               9              16              28
425.....................................           15006          4.0716               1               2               3               5               8
426.....................................            4313          4.5613               1               2               3               6               9
427.....................................            1660          5.0283               1               2               3               6              10
428.....................................             839          7.1025               1               2               4               8              15
429.....................................           30016          6.4824               2               3               5               8              12
430.....................................           58011          8.2066               2               3               6              10              16
431.....................................             295          6.5864               2               3               5               8              13
432.....................................             389          4.7506               1               2               3               5               9
433.....................................            5781          3.0073               1               1               2               4               6
434.....................................           21835          5.0844               1               2               4               6               9
435.....................................           14486          4.2925               1               2               4               5               8
436.....................................            3499         12.8337               4               7              11              17              25
437.....................................            9750          8.9544               3               5               8              11              15
439.....................................            1287          8.1756               1               3               5              10              17
440.....................................            5017          8.8433               2               3               6              10              19
441.....................................             579          3.2383               1               1               2               4               7
442.....................................           15896          8.2292               1               3               6              10              17
443.....................................            3547          3.3941               1               1               2               4               7

[[Page 26402]]

 
444.....................................            5150          4.2252               1               2               3               5               8
445.....................................            2223          3.0031               1               1               2               4               5
447.....................................            4854          2.5117               1               1               2               3               5
448.....................................               1          4.0000               4               4               4               4               4
449.....................................           26543          3.6722               1               1               3               4               7
450.....................................            6363          2.0525               1               1               1               2               4
451.....................................               1          1.0000               1               1               1               1               1
452.....................................           21656          4.9536               1               2               3               6              10
453.....................................            4464          2.8156               1               1               2               3               5
454.....................................            4930          4.5554               1               2               3               6               9
455.....................................            1070          2.6262               1               1               2               3               5
461.....................................            3357          4.5594               1               1               2               5              11
462.....................................           12630         11.5264               4               6               9              15              21
463.....................................           18895          4.2653               1               2               3               5               8
464.....................................            5455          3.0761               1               1               2               4               6
465.....................................             227          3.3612               1               1               2               3               7
466.....................................            1719          3.8674               1               1               2               4               8
467.....................................            1301          4.0638               1               1               2               4               7
468.....................................           58391         12.9318               3               6              10              17              26
471.....................................           11423          5.7339               3               4               5               6               9
473.....................................            7615         12.8411               2               3               7              19              32
475.....................................          109112         11.1767               2               5               9              15              22
476.....................................            4448         11.6369               2               5              10              15              21
477.....................................           25690          8.1425               1               3               6              10              17
478.....................................          111191          7.3157               1               3               5               9              15
479.....................................           22375          3.6220               1               2               3               5               7
480.....................................             460         19.1848               7               9              14              23              38
481.....................................             229         27.1485              16              19              23              32              43
482.....................................            6119         12.7756               4               7              10              15              24
483.....................................           47190         38.8624              14              21              32              49              70
484.....................................             323         13.3065               2               5              10              18              28
485.....................................            2932          9.3905               4               5               7              11              17
486.....................................            2012         12.1511               1               5               9              16              24
487.....................................            3491          7.5408               1               3               6              10              15
488.....................................             767         16.9465               4               7              12              21              34
489.....................................           14253          8.5597               2               3               6              10              18
490.....................................            5283          5.1333               1               2               4               6              10
491.....................................           11332          3.4896               2               2               3               4               6
492.....................................            2667         16.1234               4               5               9              26              34
493.....................................           54030          5.7170               1               3               5               7              11
494.....................................           27254          2.4838               1               1               2               3               5
495.....................................             145         20.2552               6               8              12              18              33
496.....................................            1270          9.9843               4               5               7              12              18
497.....................................           22593          6.2173               2               3               5               7              11
498.....................................           19133          3.4179               1               2               3               4               6
499.....................................           30738          4.7687               1               2               4               6               9
500.....................................           42090          2.6897               1               1               2               3               5
501.....................................            1943         10.5713               4               5               8              13              20
502.....................................             612          5.9379               2               3               5               7              10
503.....................................            5563          3.9730               1               2               3               5               7
504.....................................             122         30.0984              10              15              25              40              60
505.....................................             153          4.7190               1               1               2               6              12
506.....................................             962         17.6258               4               8              14              24              37
507.....................................             280          9.1857               2               4               7              13              18
508.....................................             637          7.1350               2               3               5               9              15
509.....................................             165          6.1333               1               2               4               8              12
510.....................................            1653          7.8506               2               3               5               9              17
511.....................................             594          4.4646               1               1               3               6              10
                                         ----------------
                                                11059625
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 26403]]


 Table 8A.--Statewide Average Operating Cost-to-Charge Ratios for Urban
             and Rural Hospitals (Case Weighted) March 2000
------------------------------------------------------------------------
                        State                           Urban     Rural
------------------------------------------------------------------------
ALABAMA.............................................     0.401     0.355
ALASKA..............................................     0.469     0.722
ARIZONA.............................................     0.373     0.516
ARKANSAS............................................     0.478     0.454
CALIFORNIA..........................................     0.344     0.443
COLORADO............................................     0.427     0.560
CONNECTICUT.........................................     0.495     0.503
DELAWARE............................................     0.507     0.449
DISTRICT OF COLUMBIA................................     0.521  ........
FLORIDA.............................................     0.363     0.380
GEORGIA.............................................     0.474     0.486
HAWAII..............................................     0.409     0.554
IDAHO...............................................     0.549     0.570
ILLINOIS............................................     0.427     0.515
INDIANA.............................................     0.532     0.543
IOWA................................................     0.493     0.623
KANSAS..............................................     0.443     0.656
KENTUCKY............................................     0.477     0.493
LOUISIANA...........................................     0.406     0.495
MAINE...............................................     0.597     0.554
MARYLAND............................................     0.759     0.821
MASSACHUSETTS.......................................     0.525     0.537
MICHIGAN............................................     0.558     0.597
MINNESOTA...........................................     0.510     0.590
MISSISSIPPI.........................................     0.455     0.455
MISSOURI............................................     0.413     0.506
MONTANA.............................................     0.525     0.570
NEBRASKA............................................     0.468     0.623
NEVADA..............................................     0.293     0.483
NEW HAMPSHIRE.......................................     0.543     0.583
NEW JERSEY..........................................     0.411  ........
NEW MEXICO..........................................     0.477     0.498
NEW YORK............................................     0.529     0.610
NORTH CAROLINA......................................     0.539     0.489
NORTH DAKOTA........................................     0.622     0.660
OHIO................................................     0.513     0.578
OKLAHOMA............................................     0.422     0.509
OREGON..............................................     0.560     0.581
PENNSYLVANIA........................................     0.396     0.517
PUERTO RICO.........................................     0.479     0.578
RHODE ISLAND........................................     0.523  ........
SOUTH CAROLINA......................................     0.456     0.452
SOUTH DAKOTA........................................     0.537     0.600
TENNESSEE...........................................     0.441     0.482
TEXAS...............................................     0.406     0.511
UTAH................................................     0.505     0.627
VERMONT.............................................     0.623     0.590
VIRGINA.............................................     0.467     0.500
WASHINGTON..........................................     0.577     0.652
WEST VIRGINIA.......................................     0.577     0.530
WISCONSIN...........................................     0.559     0.622
WYOMING.............................................     0.475     0.681
------------------------------------------------------------------------


    Table 8B.--Statewide Average Capital Cost-to-Charge Ratios (Case
                          Weighted) March 2000
------------------------------------------------------------------------
                             State                                Ratio
------------------------------------------------------------------------
ALABAMA.......................................................     0.040
ALASKA........................................................     0.070
ARIZONA.......................................................     0.041
ARKANSAS......................................................     0.050
CALIFORNIA....................................................     0.037
COLORADO......................................................     0.046
CONNECTICUT...................................................     0.036
DELAWARE......................................................     0.051
DISTRICT OF COLUMBIA..........................................     0.039
FLORIDA.......................................................     0.045
GEORGIA.......................................................     0.056
HAWAII........................................................     0.042
IDAHO.........................................................     0.049
ILLINOIS......................................................     0.042
INDIANA.......................................................     0.057
IOWA..........................................................     0.056
KANSAS........................................................     0.054
KENTUCKY......................................................     0.046
LOUISIANA.....................................................     0.050
MAINE.........................................................     0.039
MARYLAND......................................................     0.013
MASSACHUSETTS.................................................     0.054
MICHIGAN......................................................     0.053
MINNESOTA.....................................................     0.049
MISSISSIPPI...................................................     0.045
MISSOURI......................................................     0.046
MONTANA.......................................................     0.050
NEBRASKA......................................................     0.054
NEVADA........................................................     0.030
NEW HAMPSHIRE.................................................     0.063
NEW JERSEY....................................................     0.037
NEW MEXICO....................................................     0.044
NEW YORK......................................................     0.051
NORTH CAROLINA................................................     0.050
NORTH DAKOTA..................................................     0.074
OHIO..........................................................     0.050
OKLAHOMA......................................................     0.048
OREGON........................................................     0.048
PENNSYLVANIA..................................................     0.040
PUERTO RICO...................................................     0.043
RHODE ISLAND..................................................     0.030
SOUTH CAROLINA................................................     0.047
SOUTH DAKOTA..................................................     0.066
TENNESSEE.....................................................     0.051
TEXAS.........................................................     0.048
UTAH..........................................................     0.049
VERMONT.......................................................     0.051
VIRGINIA......................................................     0.058
WASHINGTON....................................................     0.064
WEST VIRGINIA.................................................     0.047
WISCONSIN.....................................................     0.054
WYOMING.......................................................     0.057
------------------------------------------------------------------------

Appendix A--Regulatory Impact Analysis

I. Introduction

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612), unless we certify that a proposed rule would not have 
a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, we consider all hospitals to be 
small entities.
    Also, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis for any proposed rule that may have a 
significant impact on the operations of a substantial number of 
small rural hospitals. Such an analysis must conform to the 
provisions of section 603 of the RFA. With the exception of 
hospitals located in certain New England counties, for purposes of 
section 1102(b) of the Act, we define a small rural hospital as a 
hospital with fewer than 100 beds that is located outside of a 
Metropolitan Statistical Area (MSA) or New England County 
Metropolitan Area (NECMA). Section 601(g) of the Social Security 
Amendments of 1983 (Public Law 98-21) designated hospitals in 
certain New England counties as belonging to the adjacent NECMA. 
Thus, for purposes of the hospital inpatient prospective payment 
system, we classify these hospitals as urban hospitals.
    It is clear that the changes being proposed in this document 
would affect both a substantial number of small rural hospitals as 
well as other classes of hospitals, and the effects on some may be 
significant. Therefore, the discussion below, in combination with 
the rest of this proposed rule, constitutes a combined regulatory 
impact analysis and regulatory flexibility analysis.
    We have reviewed this proposed rule under the threshold criteria 
of Executive Order 13132, Federalism, and have determined that the 
proposed rule will not have any negative impact on the rights, 
roles, and responsibilities of State, local, or tribal governments.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in an expenditure in any one year 
by State, local, or tribal governments, in the aggregate, or by the 
private sector, of $100 million. This proposed rule does not mandate 
any requirements for State, local, or tribal governments.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

II. Objectives

    The primary objective of the hospital inpatient prospective 
payment system is to create incentives for hospitals to operate 
efficiently and minimize unnecessary costs while at the same time 
ensuring that payments are sufficient to adequately compensate 
hospitals for their legitimate costs. In addition, we share national 
goals of preserving the Medicare Trust Fund.
    We believe the proposed changes would further each of these 
goals while maintaining the financial viability of the hospital 
industry and ensuring access to high quality health care for 
Medicare beneficiaries. We expect that these proposed changes would 
ensure that the outcomes of this payment system are reasonable and 
equitable while avoiding or minimizing unintended adverse 
consequences.

III. Limitations of Our Analysis

    As has been the case in our previously published regulatory 
impact analyses, the following quantitative analysis presents the 
projected effects of our proposed policy changes, as well as 
statutory changes effective for FY 2001, 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

[[Page 26404]]

not make adjustments for future changes in such variables as 
admissions, lengths of stay, or case-mix. As we have done in 
previous proposed rules, we are soliciting comments and information 
about the anticipated effects of these changes on hospitals and our 
methodology for estimating them.

IV. Hospitals Included In and Excluded From the Prospective Payment 
System

    The prospective payment systems for hospital inpatient operating 
and capital-related costs encompass nearly all general, short-term, 
acute care hospitals that participate in the Medicare program. There 
were 44 Indian Health Service hospitals in our database, which we 
excluded from the analysis due to the special characteristics of the 
prospective payment method for these hospitals. Among other short-
term, acute care hospitals, only the 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 February 2000, we have 
included 4,836 hospitals in our analysis. This represents about 80 
percent of all Medicare-participating hospitals. The majority of 
this impact analysis focuses on this set of hospitals.
    The remaining 20 percent are specialty hospitals that are 
excluded from the prospective payment system and continue to be paid 
on the basis of their reasonable costs (subject to a rate-of-
increase ceiling on their inpatient operating costs per discharge). 
These hospitals include psychiatric, rehabilitation, long-term care, 
children's, and cancer hospitals. The impacts of our final policy 
changes on these hospitals are discussed below.

V. Impact on Excluded Hospitals and Units

    As of February 2000, there were 1,081 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. Broken down by specialty, there were 549 psychiatric, 
194 rehabilitation, 238 long-term care, 73 childrens', 17 Christian 
Science Sanatoria, and 10 cancer hospitals. In addition, there were 
1,470 psychiatric units and 910 rehabilitation units in hospitals 
otherwise subject to the prospective payment system. These excluded 
units are also paid in accordance with Sec. 413.40. Under 
Sec. 413.40(a)(2)(i)(A), the rate-of-increase ceiling is not 
applicable to the 36 specialty hospitals and units in Maryland that 
are paid in accordance with the waiver at section 1814(b)(3) of the 
Act.
    As required by section 1886(b)(3)(B) of the Act, the update 
factor applicable to the rate-of-increase limit for excluded 
hospitals and units for FY 2001 would be between 0 and 3.1 percent, 
depending on the hospital's or unit's costs in relation to its limit 
for the most recent cost reporting period for which information is 
available.
    The impact on excluded hospitals and units of the update in the 
rate-of-increase limit depends on the cumulative cost increases 
experienced by each excluded hospital or unit since its applicable 
base period. For excluded hospitals and units that have maintained 
their cost increases at a level below the percentage increases in 
the rate-of-increase limits since their base period, the major 
effect will be on the level of incentive payments these hospitals 
and units receive. Conversely, for excluded hospitals and units with 
per-case cost increases above the cumulative update in their rate-
of-increase limits, the major effect will be the amount of excess 
costs that would not be reimbursed.
    We note that, under Sec. 413.40(d)(3), an excluded hospital or 
unit whose costs exceed 110 percent of its rate-of-increase limit 
receives its rate-of-increase limit plus 50 percent of the 
difference between its reasonable costs and 110 percent of the 
limit, not to exceed 110 percent of its limit. In addition, under 
the various provisions set forth in 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.

VI. Graduate Medical Education Impact of National Average Per Resident 
Amount (PRA)

    As discussed in section IV.G. of the preamble, this proposed 
rule would implement statutory provisions enacted by section 311 of 
Public Law 106-113 that establish a methodology for the use of a 
national average PRA in computing direct graduate medical education 
(GME) payments for cost reporting periods beginning on or after 
October 1, 2000 and on or before September 30, 2005. The methodology 
would establish a ``floor'' and ``ceiling'' based on a locality-
adjusted, updated national average PRA. Under section 
1886(h)(2)(D)(iii) of the Act, as added by section 311(a) of Public 
Law 106-113, the PRA for a hospital for the cost reporting period 
beginning during FY 2001 cannot be below 70 percent of the locality-
adjusted, updated national average PRA. Thus, if a hospital's PRA 
for the cost reporting period beginning during FY 2001 would 
otherwise be below the floor, the hospital's PRA for that cost 
reporting period would be equal to 70 percent of the locality-
adjusted, national average PRA. Under section 1886(h)(2)(D)(iv) of 
the Act, as added by section 311(a) of Public Law 106-113, if a 
hospital's PRA exceeds 140 percent of the locality-adjusted, updated 
national average PRA, the hospital's PRA would be frozen (for FYs 
2001 and 2002) or subject to a 2-percent reduction to the otherwise 
applicable update (for FYs 2003 through 2005). See section IV.G. of 
the preamble for a fuller explanation of this policy.
    For purposes of the proposed rule, we have calculated an 
estimated impact of this proposed policy on teaching hospitals' PRAs 
for FY 2001 making assumptions about update factors and geographic 
adjustment factors (GAF) for each hospital. Generally, utilizing FY 
1997 data, we calculated a floor and a ceiling and estimated the 
impact on hospitals. This impact was then inflated to FY 2001 to 
estimate the total impact on the Medicare program for FY 2001. The 
estimated numbers for this impact should not be used by hospitals in 
calculating their own individual PRAs; hospitals must use the 
methodology stated in section IV.G. of this proposed rule to revise 
(if appropriate) their individual PRAs.
    In calculating this impact, we utilized Medicare cost report 
data for all cost reports ending in FY 1997. We excluded hospitals 
that file manual cost reports because we did not have access to 
their Medicare utilization data. We also excluded all teaching 
hospitals in Maryland because these hospitals are paid under a 
Medicare waiver. For those hospitals that had two cost reporting 
periods ending in FY 1997, we used the later of the two periods. A 
total of 1,231 teaching hospitals were included in this analysis.
    Utilizing the proposed FY 1997 weighted average PRA of $68,487, 
we calculated a FY 1997 70-percent floor of $47,941 and a FY 1997 
140-percent ceiling of $95,882. We then estimated that, for cost 
reporting periods ending in FY 1997, 339 hospitals had PRAs that 
were below $47,941 (27.5 percent of 1,231 hospitals), and 180 
hospitals had PRAs above $95,882 (14.6 percent of 1,231 hospitals). 
Thus, for example, to illustrate the extremes in impact for a 
hospital with PRAs below the floor, Hospital A had a FY 1997 primary 
care PRA of $22,000 and a non-primary care PRA of $20,000. When 
these PRAs are replaced by a single PRA of $47,941, the hospital 
gains over 110 percent in payments per resident. For a hospital with 
PRAs above the ceiling, Hospital B had a FY 1997 primary care PRA of 
$150,000 and a non-primary care PRA of $148,000. When these PRAs are 
frozen and not updated for inflation in FY 2001, the percentage loss 
in payments per resident that year would be equal to the CPI-U 
percentage that would otherwise have been used to update the PRA.
    For the 339 hospitals that had PRAs below the FY 1997 $47,941 
floor, we estimated that the total cost to the Medicare program for 
FY 2001 of applying the floor would be $33.3 million. For the 180 
hospitals that had PRAs above the FY 1997 $95,882 ceiling, we 
estimated that the total savings to the Medicare program for FY 2001 
would be $18.7 million. Subtracting the estimated savings of $18.7 
million from the estimated costs of $33.3 million yields an 
estimated total net cost to the Medicare program for FY 2001 of 
$14.6 million.

VII. Quantitative Impact Analysis of the Proposed Policy Changes Under 
the Prospective Payment System for Operating Costs

A. Basis and Methodology of Estimates

    In this proposed rule, we are announcing policy changes and 
payment rate updates for the prospective payment systems for 
operating and capital-related costs. We estimate the total impact of 
these changes for FY 2001 payments compared to FY 2000 payments to 
be approximately a $1.3 billion increase. We have prepared separate 
impact analyses of the proposed changes to each system. This section 
deals with changes to the operating prospective payment system.
    The data used in developing the quantitative analyses presented 
below are

[[Page 26405]]

taken from the FY 1999 MedPAR file and the most current provider-
specific file that is used for payment purposes. Although the 
analyses of the changes to the operating prospective payment system 
do not incorporate cost data, the most recently available hospital 
cost report data were used to categorize hospitals. Our analysis has 
several qualifications. First, we do not make adjustments for 
behavioral changes that hospitals may adopt in response to these 
proposed policy changes. Second, due to the interdependent nature of 
the prospective payment system, it is very difficult to precisely 
quantify the impact associated with each proposed change. Third, we 
draw upon various sources for the data used to categorize hospitals 
in the tables. In some cases, particularly the number of beds, there 
is a fair degree of variation in the data from different sources. We 
have attempted to construct these variables with the best available 
source overall. For individual hospitals, however, some 
miscategorizations are possible.
    Using cases in the FY 1999 MedPAR file, we simulated payments 
under the operating prospective payment system given various 
combinations of payment parameters. Any short-term, acute care 
hospitals not paid under the general prospective payment systems 
(Indian Health Service hospitals and hospitals in Maryland) are 
excluded from the simulations. Payments under the capital 
prospective payment system, or payments for costs other than 
inpatient operating costs, are not analyzed here. Estimated payment 
impacts of proposed FY 2001 changes to the capital prospective 
payment system are discussed in section IX of this Appendix.
    The proposed changes discussed separately below are the 
following:
    <bullet> The effects of the annual reclassification of diagnoses 
and procedures and the recalibration of the diagnosis-related group 
(DRG) relative weights required by section 1886(d)(4)(C) of the Act.
    <bullet> The effects of changes in hospitals' wage index values 
reflecting the wage index update (FY 1997 data).
    <bullet> The effects of our proposal to remove from the wage 
index the costs and hours associated with teaching physicians paid 
under Medicare Part A, residents, and certified registered nurse 
anesthetists (CRNAs) during the second year of a 5-year phase-out, 
by calculating a wage index based on 40 percent of hospitals' 
average hourly wages after removing these costs and hours, and 60 
percent of hospitals' average hourly wages with these costs 
included.
    <bullet> The effects of geographic reclassifications by the 
Medicare Geographic Classification Review Board (MGCRB) that will be 
effective in FY 2001.
    <bullet> The total change in payments based on FY 2001 policies 
relative to payments based on FY 2000 policies.
    To illustrate the impacts of the FY 2001 proposed changes, our 
analysis begins with a FY 2000 baseline simulation model using: The 
FY 2000 DRG GROUPER (version 17.0); the FY 2000 wage index; and no 
MGCRB reclassifications. Outlier payments are set a 5.1 percent of 
total DRG plus outlier payments.
    Each proposed and statutory policy change is then added 
incrementally to this baseline model, finally arriving at an FY 2001 
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 2000 to FY 2001. Five factors have significant 
impacts here. The first is the update to the standardized amounts. 
In accordance with section 1886(d)(3)(A)(iv) of the Act, we are 
proposing to update the large urban and the other areas average 
standardized amounts for FY 2001 using the most recently forecasted 
hospital market basket increase for FY 2001 of 3.1 percent minus 1.1 
percentage points (for an update of 2.0 percent).
    Under section 1886(b)(3) of the Act, as amended by section 406 
of Public Law 106-113, the updates to the average standardized 
amounts and the hospital-specific amounts for sole community 
hospitals (SCHs) will be equal to the full market basket increase 
for FY 2001. Consequently, the update factor used for SCHs in this 
impact analysis is 3.1 percent. Under section 1886(b)(3)(D) of the 
Act, the update factor for the hospital-specific amounts for MDHs is 
equal to the market basket increase of 3.1 percent minus 1.1 
percentage points (for an update of 2.0 percent).
    A second significant factor that impacts changes in hospitals' 
payments per case from FY 2000 to FY 2001 is a change in MGCRB 
reclassification status from one year to the next. That is, 
hospitals reclassified in FY 2000 that are no longer reclassified in 
FY 2001 may have a negative payment impact going from FY 2000 to FY 
2001; conversely, hospitals not reclassified in FY 2000 that are 
reclassified in FY 2001 may have a positive impact. In some cases, 
these impacts can be quite substantial, so if a relatively small 
number of hospitals in a particular category lose their 
reclassification status, the percentage change in payments for the 
category may be below the national mean.
    A third significant factor is that we currently estimate that 
actual outlier payments during FY 2000 will be 6.1 percent of actual 
total DRG payments. When the FY 2000 final rule was published, we 
projected FY 2000 outlier payments would be 5.1 percent of total DRG 
plus outlier payments; the standardized amounts were offset 
correspondingly. The effects of the higher than expected outlier 
payments during FY 2000 (as discussed in the Addendum to this 
proposed rule) are reflected in the analyses below comparing our 
current estimates of FY 2000 payments per case to estimated FY 2001 
payments per case.
    Fourth, section 111 of Public Law 106-113 revised section 
1886(d)(5)(B)(ii) of the Act so that the IME adjustment changes from 
FY 2000 to FY 2001 from approximately a 6.25-percent increase for 
every 100-percent increase in a hospital's resident-to-bed ratio 
during FY 2000 to approximately a 6.2-percent increase in FY 2001. 
Similarly, section 112 of Public Law 106-113 revised section 
1886(d)(5)(F)(ix) of the Act so that the DSH adjustment for FY 2001 
is reduced by 3-percent from what would otherwise have been paid 
(this is the same percentage reduction that was applied in FY 2000).
    Finally, section 405 of Public Law 106-113 provided that certain 
SCHs may elect to receive payment on the basis of their costs per 
case during their cost reporting period that began during 1996. To 
be eligible, a SCH must have received for its cost reporting period 
beginning during 1999, payment on the basis of its hospital-specific 
rate. For FY 2001, eligible SCHs that elect rebasing receive a 
hospital-specific rate comprised of 75-percent of the higher of 
their FY 1982 or FY 1987 hospital-specific rate, and 25-percent of 
their FY 1996 hospital-specific rate.
    Table I demonstrates the results of our analysis. The table 
categorizes hospitals by various geographic and special payment 
consideration groups to illustrate the varying impacts on different 
types of hospitals. The top row of the table shows the overall 
impact on the 4,836 hospitals included in the analysis. This number 
is 86 fewer hospitals than were included in the impact analysis in 
the FY 2000 final rule (64 FR 41624).
    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 2,710 
hospitals located in urban areas (MSAs or NECMAs) included in our 
analysis. Among these, there are 1,545 hospitals located in large 
urban areas (populations over 1 million), and 1,165 hospitals in 
other urban areas (populations of 1 million or fewer). In addition, 
there are 2,126 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 2001 payment classifications, including any 
reclassifications under section 1886(d)(10) of the Act. For example, 
the rows labeled urban, large urban, other urban, and rural show 
that the number of hospitals paid based on these categorizations 
(after consideration of geographic reclassifications) are 2,786, 
1,617, 1,169, and 2,050, 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) or 
receive DSH payments, or some combination of these two adjustments. 
There are 3,730 nonteaching hospitals in our analysis, 870 teaching 
hospitals with fewer than 100 residents, and 236 teaching hospitals 
with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their 
DSH payment status, and whether they are considered urban or rural 
after MGCRB reclassifications. Hospitals in the rural DSH 
categories, therefore, represent hospitals that were not 
reclassified for purposes of the standardized amount or for purposes 
of the DSH adjustment. (They may, however, have been reclassified 
for purposes of the wage index.) 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.

[[Page 26406]]

    The next five rows examine the impacts of the proposed changes 
on rural hospitals by special payment groups (SCHs, rural referral 
centers (RRCs), and MDHs), as well as rural hospitals not receiving 
a special payment designation. The RRCs (150), SCHs (660), MDHs 
(352), and SCH and RRCs (58) shown here were not reclassified for 
purposes of the standardized amount. There are 20 RRCs, 1 MDH, 5 
SCHs and 2 SCH and RRCs that will be reclassified as urban for the 
standardized amount in FY 2001 and, therefore, are not included in 
these rows.
    The next two groupings are based on type of ownership and the 
hospital's Medicare utilization expressed as a percent of total 
patient days. These data are taken primarily from the FY 1998 
Medicare cost report files, if available (otherwise FY 1997 data are 
used). Data needed to determine ownership status or Medicare 
utilization percentages were unavailable for 34 and 35 hospitals, 
respectively. For the most part, these are new hospitals.
    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 
2000 and FY 2001, or for only one of those 2 years, by urban and 
rural status. The next rows illustrate the overall number of FY 2001 
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.
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B. Impact of the Proposed Changes to the DRG Reclassifications and 
Recalibration of Relative Weights (Column 1)

    In column 1 of Table I, we present the combined effects of the 
DRG reclassifications and recalibration, as discussed in section II 
of the preamble to this proposed rule. Section 1886(d)(4)(C)(i) of 
the Act requires us to annually make appropriate classification 
changes and to recalibrate the DRG weights in order to reflect 
changes in treatment patterns, technology, and any other factors 
that may change the relative use of hospital resources.
    We compared aggregate payments using the FY 2000 DRG relative 
weights (GROUPER version 17) to aggregate payments using the 
proposed FY 2001 DRG relative weights (GROUPER version 18). Overall 
payments are unaffected by the DRG reclassification and 
recalibration. Consistent with the minor changes we are proposing 
for the FY 2001 GROUPER, the redistributional impacts of DRG 
reclassifications and recalibration across hospital groups are very 
small (a 0.0 percent impact for large and other urban hospitals; a 
0.1 percent increase for rural hospitals). Within hospital 
categories, the net effects for urban hospitals are small positive 
changes for small hospitals (a 0.1 percent increase for hospitals 
with fewer than 200 beds), and small decreases for larger hospitals 
(a 0.1 percent decrease for hospitals with more than 300 beds). 
Among rural hospitals, small hospital categories experience the 
largest increases, a 0.2 percent increase for hospitals with fewer 
than 50 beds.
    The breakdown by urban census division shows that the small 
decrease among urban hospitals is confined to the West North Central 
and Mountain regions. Payments to urban hospitals in most other 
regions are unchanged, while payments to urban hospitals in Puerto 
Rico rise by 0.1 percent. All rural hospital census divisions 
experience payment increases ranging from 0.1 percent for hospitals 
in New England, Middle Atlantic, East North Central, West North 
Central, and Mountain regions to 0.2 percent for hospitals in the 
South Atlantic, East South Central, West South Central, Pacific, and 
Puerto Rico census divisions.

C. Impact of Updating the Wage Data (Column 2)

    Section 1886(d)(3)(E) of the Act requires that, beginning 
October 1, 1993, we annually update the wage data used to calculate 
the wage index. In accordance with this requirement, the proposed 
wage index for FY 2001 is based on data submitted for hospital cost 
reporting periods beginning on or after October 1, 1996 and before 
October 1, 1997. 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 2 shows 
the percentage changes in payments when going from a model using the 
FY 2000 wage index (based on FY 1996 wage data before geographic 
reclassifications to a model using the FY 2001 prereclassification 
wage index based on FY 1997 wage data). Sections 152 and 154 of 
Public Law 106-113 reclassified certain hospitals for purposes of 
the wage index standardized amounts. For purposes of this column, 
these hospitals are located in their prereclassification geographic 
location. The impacts of these statutory reclassifications are shown 
in column 5, when examining the impacts of geographic 
reclassification.
    The wage data collected on the FY 1997 cost reports are similar 
to the data used in the calculation of the FY 2000 wage index. For a 
thorough discussion of the data used to calculate the wage index, 
see section III.B. of this proposed rule.
    The results indicate that the new wage data have an overall 
impact of a 0.3 percent increase in hospital payments (prior to 
applying the budget neutrality factor, see column 5). Rural 
hospitals especially appear to benefit from the update. Their 
payments increase by 1.4 percent. These increases are attributable 
to relatively large increases in the wage index values for the rural 
areas of particular States; Hawaii, Louisiana, and Montana all had 
increases greater than 6 percent in their prereclassification wage 
index values.
    Urban hospitals as a group are not significantly affected by the 
updated wage data. The gains of hospitals in other urban areas (0.6 
percent increase) are offset by decreases among hospitals in large 
urban areas (0.3 percent decrease). Urban hospitals in Puerto Rico 
experience a 7.0 percent decrease, largely due to declines of 6 
percent or more in the prereclassified FY 2001 wage indexes of 2 
MSAs. Urban hospitals in the East South Central census region 
experience a 6 percent decline due to several MSAs in Tennessee with 
prereclassified FY 2001 wage indexes that fall by 6 percent or more. 
We note that the wage data used for the proposed wage index are 
based upon the data available as of February 22, 2000 and, 
therefore, do not reflect revision requests received and processed 
by the fiscal intermediaries after that date. To the extent these 
requests are granted by hospitals' fiscal intermediaries, these 
revisions will be reflected in the final rule. In addition, we 
continue to verify the accuracy of the data for hospitals with 
extraordinary changes in their data from the prior year.
    The largest increases are seen in the rural census divisions. 
Rural South Atlantic experiences the greatest positive impact, 1.9 
percent. Hospitals in five other census divisions receive positive 
impacts over 1.0 percent: West South Central at 1.7, East North 
Central at 1.5, East South Central at 1.4, Pacific at 1.4, and West 
North Central at 1.3. The following chart compares the shifts in 
wage index values for labor market areas for FY 2000 relative to FY 
2001. This chart demonstrates the impact of the proposed changes for 
the FY 2001 wage index relative to the FY 2000 wage index. The 
majority of labor market areas (322) experience less than a 5-
percent change. A total of 39 labor market areas experience an 
increase of more than 5 percent with 12 having an increase greater 
than 10 percent. A total of 15 areas experience decreases of more 
than 5-percent. Of those, 10 decline by 10 percent or more.

------------------------------------------------------------------------
                                        Number of labor market areas
  Percentage change in area wage   -------------------------------------
           index values                  FY 2000            FY 2001
------------------------------------------------------------------------
Increase more than 10 percent.....                  8                 12
Increase more than 5 percent and                   22                 27
 less than 10 percent.............
Increase or decrease less than 5                  318                322
 percent..........................
Decrease more than 5 percent and                   17                  5
 less than 10 percent.............
Decrease more than 10 percent.....                  5                 10
------------------------------------------------------------------------

    Among urban hospitals, 125 would experience an increase of 
between 5 and 10 percent and 19 more than 10 percent. A total of 401 
rural hospitals have increases greater than 5 percent, but none 
greater than 10 percent. On the negative side, 55 urban hospitals 
have decreases in their wage index values of at least 5 percent but 
less than 10 percent. Twelve urban hospitals have decreases in their 
wage index values greater than 10 percent. There are no rural 
hospitals with decreases in their wage index values greater than 5 
percent or with increases of more than 10 percent. The following 
chart shows the projected impact for urban and rural hospitals.

------------------------------------------------------------------------
                                             Number of hospitals
  Percentage change in area wage   -------------------------------------
           index values                   Urban              Rural
------------------------------------------------------------------------
Increase more than 10 percent.....                 19                  0
Increase more than 5 percent and                  125                401
 less than 10 percent.............
Increase or decrease less than 5                2,499              1,725
 percent..........................

[[Page 26415]]

 
Decrease more than 5 percent and                   55                  0
 less than 10 percent.............
Decrease more than 10 percent.....                 12                  0
------------------------------------------------------------------------

D. Impact of 5-Year Phase-Out of Teaching Physicians', Residents', 
and CRNAs' Costs (Column 3)

    As described in section III.C. of this preamble, the proposed FY 
2001 wage index is calculated by blending 60 percent of hospitals' 
average hourly wages calculated without removing teaching physician 
(paid under Medicare Part A), residents, or CRNA costs (and hours); 
and 40 percent of average hourly wages calculated after removing 
these costs (and hours). This constitutes the second year of a 5-
year phase-out of these costs and hours, where the proportion of the 
calculation based upon average hourly wages after removing these 
costs increases by 20 percentage points per year.
    In order to determine the impact of moving from the 80/20 blend 
percentage to the 60/40 blend percentage, we first estimated the 
payments for FY 2001 using the FY 2001 prereclassified wage index 
calculated using the 80/20 blend percentage (Column 2). We then 
estimated what the payments for FY 2001 would have been if the 60/40 
blend percentage was applied to the FY 2001 prereclassified wage 
index. Column 3 compares the differences in these payment estimates 
and shows that the 60/40 blend percentage does not significantly 
impact overall payments (0.0 percent change). Only 53 labor market 
areas experience a decrease in their wage index and none decreases 
by more than -0.1 percent.

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. As noted in the Addendum to this proposed 
rule, we compared simulated aggregate payments using the FY 2000 DRG 
relative weights and wage index to simulated aggregate payments 
using the proposed FY 2001 DRG relative weights and blended wage 
index. Based on this comparison, we computed a wage and 
recalibration budget neutrality factor of 0.996506. 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 1, 2, and 3, minus approximately 0.3 percent 
attributable to the budget neutrality factor. There may be some 
variation of plus or minus 0.1 percent due to rounding.

F. Impact of MGCRB Reclassifications (Column 5)

    Our impact analysis to this point has assumed hospitals are paid 
on the basis of their actual geographic location (with the exception 
of ongoing policies that provide that certain hospitals receive 
payments on bases other than where they are geographically located, 
such as hospitals in rural counties that are deemed urban under 
section 1886(d)(8)(B) of the Act). The changes in column 5 reflect 
the per case payment impact of moving from this baseline to a 
simulation incorporating the MGCRB decisions for FY 2001. As noted 
below, these decisions affect hospitals' standardized amount and 
wage index area assignments. In addition, until FY 2002, rural 
hospitals reclassified for purposes of the standardized amount 
qualify to be treated as urban for purposes of the DSH adjustment.
    Beginning in 1998, by February 28 of each year, the MGCRB makes 
reclassification determinations that will be effective for the next 
fiscal year, which begins on October 1. (In previous years, these 
determinations were made by March 30.) 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, or for 
FYs 1999 through 2001, for purposes of qualifying for a DSH 
adjustment or to receive a higher DSH payment.
    The proposed FY 2001 wage index values incorporate all of the 
MGCRB's reclassification decisions for FY 2001. The wage index 
values also reflect any decisions made by the HCFA Administrator 
through the appeals and review process for MGCRB decisions as of 
February 29, 2000. Additional changes that result from the 
Administrator's review of MGCRB decisions or a request by a hospital 
to withdraw its application will be reflected in the final rule for 
FY 2001.
    Section 152 of Public Law 106-113 reclassified certain hospitals 
for purposes of the wage index and the standardized amounts. The 
impacts of these statutory reclassifications are included in this 
column.
    The overall effect of geographic reclassification is required by 
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, we 
applied an adjustment of 0.994270 to ensure that the effects of 
reclassification are budget neutral. (See section II.A.4.b. of the 
Addendum to this proposed rule.)
    As a group, rural hospitals benefit from geographic 
reclassification. Their payments rise 2.4 percent, while payments to 
urban hospitals decline 0.4 percent. Hospitals in other urban areas 
see a decrease in payments of 0.3 percent, while large urban 
hospitals lose 0.5 percent. Among urban hospital groups (that is, 
bed size, census division, and special payment status), payments 
generally decline.
    A positive impact is evident among most of the rural hospital 
groups. The largest decrease among the rural census divisions is 0.6 
percent for Puerto Rico. The largest increases are in rural Middle 
Atlantic and West South Central. These regions all receive an 
increase of 2.8 percent.
    Among rural hospitals designated as RRCs, 127 hospitals are 
reclassified for purposes of the wage index only, leading to the 5.3 
percent increase in payments among RRCs overall. This positive 
impact on RRCs is also reflected in the category of rural hospitals 
with 150-199 beds, which has a 4.9 percent increase in payments.
    Rural hospitals reclassified for FY 2000 and FY 2001 experience 
a 5.7 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 2001 only experience a 4.6 percent increase in 
payments, while rural hospitals reclassified for FY 2000 only 
experience a 0.4 percent decrease in payments. Urban hospitals 
reclassified for FY 2001 but not FY 2000 experience a 3.3 percent 
increase in payments overall. Urban hospitals reclassified for FY 
2000 but not for FY 2001 experience a 1.1 percent decline in 
payments.
    The FY 2001 Reclassification rows of Table I show the changes in 
payments per case for all FY 2001 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 8.4 percent increase in payments. In addition, rural 
hospitals reclassified just for the wage index receive a 5.4 percent 
payment increase. The overall impact on reclassified hospitals is to 
increase their payments per case by an average of 5 percent for FY 
2001.
    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 0.4 percent. Rural 
nonreclassified hospitals decrease by 0.4 percent, and urban 
nonreclassified hospitals lose 0.6 percent (the amount of the budget 
neutrality offset).
    The foregoing analysis was based on MGCRB and HCFA Administrator 
decisions made by February 29, 2000. As previously noted, there may 
be changes to some MGCRB decisions through the appeals, review, and 
applicant withdrawal process. The outcome

[[Page 26416]]

of these cases will be reflected in the analysis presented in the 
final rule.

G. All Changes (Column 6)

    Column 6 compares our estimate of payments per case, 
incorporating all changes reflected in this proposed rule for FY 
2001 (including statutory changes), to our estimate of payments per 
case in FY 2000. It includes the effects of the 2.0 percent update 
to the standardized amounts and the hospital-specific rates for MDHs 
and the 3.1 percent update for SCHs. It also reflects the 1.0 
percentage point difference between the projected outlier payments 
in FY 2000 (5.1 percent of total DRG payments) and the current 
estimate of the percentage of actual outlier payments in FY 2000 
(6.1 percent), as described in the introduction to this Appendix and 
the Addendum to this proposed rule.
    Another change affecting the difference between FY 2000 and FY 
2001 payments arises from section 1886(d)(5)(8) of the Act, as 
amended by Public Law 106-113. As noted in the introduction to this 
impact analysis, for FY 2001, the IME adjustment is decreased from 
last year (6.5 percent in FY 2000 and 6.25 percent in FY 2001).
    We also note that column 6 includes the impacts of FY 2001 MGCRB 
reclassifications compared to the payment impacts of FY 2000 
reclassifications. Therefore, when comparing FY 2001 payments to FY 
2000, the percent changes due to FY 2001 reclassifications shown in 
column 5 need to be offset by the effects of reclassification on 
hospitals' FY 2000 payments (column 7 of Table 1, July 30, 1999 
final rule (64 FR 41625)). For example, the impact of MGCRB 
reclassifications on rural hospitals' FY 2001 payments was 
approximately a 2.4 percent increase, offsetting most of the 2.6 
percent increase in column 7 for FY 2000. Therefore, the net change 
in FY 2001 payments due to reclassification for rural hospitals is 
actually a decrease of 0.2 percent relative to FY 2000. However, 
last year's analysis contained a somewhat different set of 
hospitals, so this might affect the numbers slightly.
    Finally, section 405 of Public Law 106-113 provided that certain 
SCHs may elect to receive payment on the basis of their costs per 
case during their cost reporting period that began during 1996. To 
be eligible, a SCH must have received payment for cost reporting 
periods beginning during 1999 on the basis of its hospital-specific 
rate. For FY 2001, eligible SCHs that elect rebasing receive a 
hospital-specific rate comprised of 75 percent of the higher of 
their FY 1982 or FY 1987 hospital-specific rate, and 25 percent of 
their 1996 hospital-specific rate. The impact of this provision is 
modeled in column 6 as well.
    There might also be interactive effects among the various 
factors comprising the payment system that we are not able to 
isolate. For these reasons, the values in column 6 may not equal the 
sum of the changes in columns 4 and 5, plus the other impacts that 
we are able to identify.
    The overall payment change from FY 2000 to FY 2001 for all 
hospitals is a 1.2 percent increase. This reflects the 2.0 percent 
update for FY 2001 (3.1 percent for SCHs), the 1.0 percent lower 
outlier payments in FY 2001 compared to FY 2000 (5.1 percent 
compared to 6.1 percent); the change in the IME adjustment (6.5 in 
FY 2000 to 6.2 in FY 2001); and the rebasing of certain SCHs to 
their 1996 hospital-specific rate.
    Hospitals in urban areas experience a 0.9 percent increase in 
payments per case compared to FY 2000. The 0.4 percent negative 
impact due to reclassification is offset by an identical negative 
impact for FY 2000. Hospitals in rural areas, meanwhile, experience 
a 2.8 percent payment increase. As discussed previously, this is 
primarily due to the positive effect of the wage index and DRG 
changes (1.2 percent increase).
    Among urban census divisions, other than the Middle Atlantic and 
East South Central regions (which experience no change and a 0.2 
percent increase in payments, respectively), payments increased 
between 0.9 and 1.6 percent between FY 2000 and FY 2001. The rural 
census division experiencing the smallest increase in payments was 
Puerto Rico (0.1 percent). The largest increases by rural hospitals 
are in the Mountain and West North Central regions, both with 3.1 
percent. Among other rural census divisions, the largest increases 
are in the South Atlantic and the East North Central, both with 3.0.
    Among special categories of rural hospitals, those hospitals 
receiving payment under the hospital-specific methodology (SCHs, 
MDHs, and SCH/RRCs) experience payment increases of 3.5 percent, 3.1 
percent, and 2.1 percent, respectively. This outcome is primarily 
related to the fact that, for hospitals receiving payments under the 
hospital-specific methodology, there are no outlier payments. 
Therefore, these hospitals do not experience negative payment 
impacts from the decline in outlier payments from FY 2000 to FY 2001 
(from 6.1 of total DRG plus outlier payments to 5.1 percent) as do 
hospitals paid based on the national standardized amounts.
    The largest negative payment impacts from FY 2000 to FY 2001 are 
among hospitals that were reclassified for FY 2000 and are not 
reclassified for FY 2001. Overall, these hospitals lose 2.8 percent. 
The urban hospitals in this category lose 2.7 percent, while the 
rural hospitals lose 2.9 percent. On the other hand, hospitals 
reclassified for FY 2001 that were not reclassified for FY 2000 
would experience the greatest payment increases: 6.1 percent 
overall; 8.5 percent for 119 rural hospitals in this category and 
4.2 percent for 41 urban hospitals.

             Table II.--Impact Analysis of Changes for FY 2000 Operating Prospective Payment System
                                               [Payments per case]
----------------------------------------------------------------------------------------------------------------
                                                                    Average FY      Average FY
            (BY GEOGRAPHIC LOCATION)                 Number of     2000 payment    2001 payment     All changes
                                                     hospitals       per case        per case
                                                             (1)         (2) \1\         (3) \1\             (4)
----------------------------------------------------------------------------------------------------------------
ALL HOSPITALS                                              4,836          $6,816          $6,895             1.2
    URBAN HOSPITALS.............................           2,710           7,391           7,457             0.9
    LARGE URBAN AREAS...........................           1,545           7,927           7,973             0.6
    OTHER URBAN AREAS...........................           1,165           6,694           6,786             1.4
RURAL HOSPITALS.................................           2,126           4,565           4,695             2.8
BED SIZE (URBAN):
    0-99 BEDS...................................             687           4,970           5,041             1.4
    100-199 BEDS................................             928           6,235           6,300             1.0
    200-299 BEDS................................             543           7,022           7,076             0.8
    300-499 BEDS................................             410           7,884           7,943             0.8
    500 OR MORE BEDS............................             142           9,762           9,859             1.0
BED SIZE (RURAL):
    0-49 BEDS...................................           1,208           3,787           3,925             3.6
    50-99 BEDS..................................             549           4,273           4,402             3.0
    100-149 BEDS................................             217           4,671           4,789             2.5
    150-199 BEDS................................              85           5,112           5,251             2.7
    200 OR MORE BEDS............................              67           5,719           5,847             2.2
URBAN BY CENSUS DIVISION:
    NEW ENGLAND.................................             146           7,843           7,939             1.2
    MIDDLE ATLANTIC.............................             412           8,311           8,314             0.0

[[Page 26417]]

 
    SOUTH ATLANTIC..............................             400           7,045           7,120             1.1
    EAST NORTH CENTRAL..........................             457           7,113           7,187             1.0
    EAST SOUTH CENTRAL..........................             156           6,648           6,660             0.2
    WEST NORTH CENTRAL..........................             185           7,128           7,235             1.5
    WEST SOUTH CENTRAL..........................             343           6,788           6,898             1.6
    MOUNTAIN....................................             132           7,047           7,138             1.3
    PACIFIC.....................................             434           8,591           8,678             1.0
    PUERTO RICO.................................              45           3,169           3,198             0.9
RURAL BY CENSUS DIVISION:
    NEW ENGLAND.................................              52           5,462           5,604             2.6
    MIDDLE ATLANTIC.............................              79           4,927           5,056             2.6
    SOUTH ATLANTIC..............................             276           4,698           4,840             3.0
    EAST NORTH CENTRAL..........................             280           4,615           4,751             3.0
    EAST SOUTH CENTRAL..........................             265           4,231           4,331             2.4
    WEST NORTH CENTRAL..........................             491           4,380           4,517             3.1
    WEST SOUTH CENTRAL..........................             337           4,062           4,170             2.7
    MOUNTAIN....................................             201           4,895           5,046             3.1
    PACIFIC.....................................             140           5,612           5,769             2.8
 
    PUERTO RICO.................................               5           2,455           2,457             0.1
-------------------------------------------------
 
             (BY PAYMENT CATEGORIES)
-------------------------------------------------
 
URBAN HOSPITALS:                                           2,786           7,352           7,419             0.9
    LARGE URBAN.................................           1,617           7,852           7,898             0.6
    OTHER URBAN.................................           1,169           6,681           6,776             1.4
    RURAL HOSPITALS.............................           2,050           4,538           4,665             2.8
TEACHING STATUS:
    NON-TEACHING................................           3,730           5,502           5,578             1.4
    FEWER THAN 100 RESIDENTS....................             870           7,175           7,256             1.1
    100 OR MORE RESIDENTS.......................             236          10,914          11,001             0.8
DISPROPORTIONATE SHARE HOSPITALS (DSH):
    NON-DSH.....................................           3,025           5,850           5,915             1.1
URBAN DSH:
    100 BEDS OR MORE............................           1,377           7,959           8,047             1.1
    FEWER THAN 100 BEDS.........................              76           4,966           5,045             1.6
RURAL DSH:
    SOLE COMMUNITY (SCH)........................             153           4,198           4,397             4.7
    REFERRAL CENTERS (RRC)......................              54           5,384           5,465             1.5
OTHER RURAL DSH HOSPITALS:
    100 BEDS OR MORE............................              48           4,141           4,249             2.6
    FEWER THAN 100 BEDS.........................             103           3,706           3,844             3.7
URBAN TEACHING AND DSH:
    BOTH TEACHING AND DSH.......................             716           8,864           8,962             1.1
    TEACHING AND NO DSH.........................             325           7,372           7,413             0.6
    NO TEACHING AND DSH.........................             737           6,362           6,432             1.1
    NO TEACHING AND NO DSH......................           1,008           5,711           5,744             0.6
RURAL HOSPITAL TYPES:
    NONSPECIAL STATUS HOSPITALS.................             830           3,968           4,092             3.1
    RRC.........................................             150           5,269           5,380             2.1
    SCH.........................................             660           4,534           4,692             3.5
    MDH.........................................             352           3,786           3,903             3.1
    SCH AND RRC.................................              58           5,533           5,651             2.1
TYPE OF OWNERSHIP:
    VOLUNTARY...................................           2,820           6,987           7,062             1.1
    PROPRIETARY.................................             768           6,276           6,335             0.9
    GOVERNMENT..................................           1,214           6,307           6,427             1.9
    UNKNOWN.....................................              34          11,179          11,236             0.5
MEDICARE UTILIZATION AS A PERCENT OF INPATIENT
 DAYS:
    0-25........................................             379           9,010           9,136             1.4
    25-50.......................................           1,830           7,891           7,972             1.0
    50-65.......................................           1,893           5,958           6,036             1.3
    OVER 65.....................................             699           5,297           5,358             1.2
    UNKNOWN.....................................              35          11,178          11,236             0.5
HOSPITALS RECLASSIFIED BY THE MEDICARE
 GEOGRAPHIC REVIEW BOARD:
RECLASSIFICATION STATUS DURING FY 2000 AND FY
 2001:
    RECLASSIFIED DURING BOTH FY 2000 AND FY 2001             381           5,848           5,921             1.2
    URBAN.......................................              52           8,046           8,033            -0.2
    RURAL.......................................             329           5,272           5,367             1.8

[[Page 26418]]

 
    RECLASSIFIED DURING FY 2001 ONLY............             160           5,900           6,259             6.1
    URBAN.......................................              41           7,600           7,917             4.2
    RURAL.......................................             119           4,604           4,994             8.5
    RECLASSIFIED DURING FY 2000 ONLY............             118           5,940           5,774            -2.8
    URBAN.......................................              31           7,428           7,226            -2.7
    RURAL.......................................              87           4,584           4,449            -2.9
FY 2000 RECLASSIFICATIONS:
    ALL RECLASSIFIED HOSPITALS..................             541           5,861           6,005             2.4
    STANDARDIZED AMOUNT ONLY....................              66           4,864           4,892             0.6
    WAGE INDEX ONLY.............................             386           5,889           5,930             0.7
    BOTH........................................              46           6,494           6,424            -1.1
    NONRECLASSIFIED.............................           4,312           6,944           7,030             1.2
    ALL URBAN RECLASSIFIED......................              93           7,865           7,986             1.5
    STANDARDIZED AMOUNT ONLY....................              16           5,230           5,246             0.3
    WAGE INDEX ONLY.............................              59           8,321           8,508             2.2
    BOTH........................................              18           8,036           7,962            -0.9
    NONRECLASSIFIED.............................           2,592           7,384           7,447             0.9
    ALL RURAL RECLASSIFIED......................             448           5,145           5,296             2.9
    STANDARDIZED AMOUNT ONLY....................              53           4,728           4,856             2.7
    WAGE INDEX ONLY.............................             372           5,177           5,327             2.9
    BOTH........................................              23           5,267           5,460             3.7
    NONRECLASSIFIED.............................           1,677           4,121           4,234             2.7
    OTHER RECLASSIFIED HOSPITALS (SECTION                     26           4,765           4,808            0.9
     1886(d)(8)(B)).............................
----------------------------------------------------------------------------------------------------------------
\1\ These payment amounts per case do not reflect any estimates of annual case-mix increase.

    Table II presents the projected impact of the proposed changes 
for FY 2001 for urban and rural hospitals and for the different 
categories of hospitals shown in Table I. It compares the estimated 
payments per case for FY 2000 with the average estimated per case 
payments for FY 2001, 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 6 of Table I.

VIII. Impact of Organ, Tissue and Eye Procurement Condition of 
Participation on CAHs

    In this proposed rule, we propose to add a CoP for organ, tissue 
and eye procurement for CAHs. We do not anticipate that this 
condition would have a substantial economic impact on CAHs. However, 
we believe it is desirable to inform the public of our projections 
of its likely effects. There are several provisions in this proposed 
condition that would impact CAHs to a greater or lesser degree. 
Specifically, CAHs would be required to have written protocols; have 
agreements with an OPO, a tissue bank, and an eye bank; refer all 
deaths that occur in the CAH to the OPO or a third party designated 
by the OPO; ensure that CAH employees who initiate a request for 
donation to the family of a potential donor have been trained as a 
designated requestor; and work cooperatively with the OPO, tissue 
bank, and eye bank in educating CAH staff, reviewing death records, 
and maintaining potential donors. It is important to note that 
because of the inherent flexibility of this condition, the extent of 
its economic impact is dependent upon decisions that will be made 
either by the CAH or by the CAH in conjunction with the OPO or the 
tissue and eye banks. Thus, the impact on individual CAHs will vary 
and is subject in large part to their decision making. The impact 
will also vary based on whether a CAH currently has an organ 
donation protocol and its level of compliance with existing law and 
regulations. For example, if a CAH was a Medicare hospital in 
compliance with the hospital CoP for organ, tissue, and eye 
procurement prior to converting to a CAH, there will be no 
additional impact.
    The first requirement in the proposed CoP is that CAHs have and 
implement written protocols that reflect the various other 
requirements of the proposed CoP. Currently, under section 1138 of 
the Act, CAHs must have written protocols for organ donation. Most 
CAHs will need to rewrite their existing protocols to conform with 
this regulation; however, this is clearly not a requirement that 
imposes a significant economic burden.
    In addition, a CAH must have an agreement with its designated 
OPO and with at least one tissue bank and at least one eye bank. 
CAHs are required under section 1138 of the Act to refer all 
potential donors to an OPO. Also, the OPO regulation at 42 CFR 
486.306 requires, as a qualification for designation as an OPO, that 
the OPO have a working relationship with at least 75 percent of the 
hospitals in its service area that participate in the Medicare and 
Medicaid programs and that have an operating room and the equipment 
and personnel for retrieving organs. Therefore, some CAHs may 
already have an agreement with their designated OPO. Although CAHs 
may need to modify those existing agreements, the need to make 
modifications would not impose a significant economic burden. 
Although there is no statutory or regulatory requirement for a CAH 
to have agreements with tissue and eye banks, we must assume some 
CAHs have agreements with tissue and eye banks, since hospitals are 
the source for virtually all tissues and eyes.
    The CoP would require CAHs to notify the OPO about every death 
that occurs in the CAH. The average Medicare hospital has 
approximately 165 beds and 200 deaths per year. However, by statute 
and regulation, CAHs may use no more than 15 beds for acute care 
services. Assuming that the number of deaths in a hospital is 
related to the number of acute care beds, there should be 
approximately 18 deaths per year in the average CAH. Thus, the 
economic impact for a CAH of referring all deaths would be small.
    Under the proposed CoP, a CAH may agree to have the OPO 
determine medical suitability for tissue and eye donation or may 
have alternative arrangements with a tissue bank and an eye bank. 
These alternative arrangements could include the CAH's direct 
notification of the tissue and eye bank of potential tissue and eye 
donors or direct notification of all deaths. Again, the impact is 
small, and the regulation permits the CAH to decide how this process 
will take place. We recognize that many communities already have a 
one-phone-call system in place. In addition, some OPOs are also 
tissue banks or eye banks or both. A CAH that chose to use the OPO's 
tissue and eye bank services in these localities would need to make 
only one telephone call on every death.
    This proposed CoP requires that the individual who initiates a 
request for

[[Page 26419]]

donation to the family of a potential donor must be an OPO 
representative or a designated requestor. A designated requestor is 
an individual who has taken a course offered or approved by the OPO 
in the methodology for approaching families of potential donors and 
requesting donation. The CAH would need to arrange for designated 
requestor training. Most OPOs have trained designated requestors as 
part of the hospital CoP for organ, tissue, and eye procurement. 
Even if the CAH wants to have a sufficient number of designated 
requestors to ensure that all shifts are covered, this provision of 
the regulation would not have a significant economic impact on CAHs. 
In addition, the CAH may be able to choose to have donation requests 
initiated by the OPO, the tissue bank, or the eye bank staff rather 
than CAH staff, in which case there is no economic impact.
    The regulation requires a CAH to work cooperatively with the 
OPO, a tissue bank, and an eye bank in educating CAH staff. We do 
not believe education of CAH staff will demand a significant amount 
of staff time. In addition, most OPOs already give educational 
presentations for the staff in their hospitals.
    The regulation requires a CAH to work cooperatively with the 
OPO, a tissue bank, and an eye bank in reviewing death records. Most 
OPOs currently conduct extensive CAH death record reviews. The CAH's 
assistance is required only to provide lists of CAH deaths and 
facilitate access to records.
    Finally, the regulation requires a CAH to work cooperatively 
with the OPO, a tissue bank, and an eye bank in maintaining 
potential donors while necessary testing and placement of potential 
donated organs and tissues take place. It is possible that because 
of the proposed CoP, some CAHs may have their first organ donors. 
Therefore, we considered the impact on a CAH of maintaining a brain 
dead potential donor on a ventilator until the organs can be placed. 
CAHs with full ventilator capability should have no trouble 
maintaining a potential donor until the organs are placed. However, 
some CAHs have ventilator capability only so that a patient can be 
maintained until he or she is transferred to a larger facility for 
treatment. These CAHs would have the equipment and staffing to 
maintain a potential donor until transfer to another facility 
occurs. Some CAHs do not have ventilator capability and would be 
unable to maintain a potential donor. However, CAHs without 
ventilator capability would still be obligated to notify the OPO, or 
a third party designated by the OPO, of all individuals whose death 
is imminent or who have died in the CAH because there is a potential 
to obtain a tissue or an eye donation. We do not believe there will 
be a significant impact on CAHs no matter what their situation--full 
ventilator capability, ventilator capability only for patients who 
are to be transferred to a larger facility, or no ventilator 
capability.
    We are sensitive to the possible burden this proposed CoP may 
place on CAHs. Therefore, we are particularly interested in comments 
and information concerning the previously mentioned requirements.

IX. Impact of Proposed Changes in the Capital Prospective Payment 
System

A. General Considerations

    We now have cost report data for the 7th year of the capital 
prospective payment system (cost reports beginning in FY 1998) 
available through the December 1999 update of the HCRIS. We also 
have updated information on the projected aggregate amount of 
obligated capital approved by the fiscal intermediaries. However, 
our impact analysis of payment changes for capital-related costs is 
still limited by the lack of hospital-specific data on several 
items. These are the hospital's projected new capital costs for each 
year, its projected old capital costs for each year, and the actual 
amounts of obligated capital that will be put in use for patient 
care and recognized as Medicare old capital costs in each year. The 
lack of this information affects our impact analysis in the 
following ways:
    <bullet> 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.
    <bullet> 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 is 
required to notify its intermediary that it has obligated capital by 
the later of October 1, 1992, or 90 days after the beginning of the 
hospital's first cost reporting period under the capital prospective 
payment system. The intermediary must then notify the hospital of 
its determination whether the criteria for recognition of obligated 
capital have been met by the later of the end of the hospital's 
first cost reporting period subject to the capital prospective 
payment system or 9 months after the receipt of the hospital's 
notification. The amount that is recognized as old capital is 
limited to the lesser of the actual allowable costs when the asset 
is put in use for patient care or the estimated costs of the capital 
expenditure at the time it was obligated. We have substantial 
information regarding fiscal intermediary determinations of 
projected aggregate obligated capital amounts. However, we still do 
not know when these projects will actually be put into use for 
patient care, the actual amount that will be recognized as obligated 
capital when the project is put into use, or the Medicare share of 
the recognized costs. Therefore, we do not know actual obligated 
capital commitments for purposes of the FY 2001 capital cost 
projections. In Appendix B of this proposed rule, we discuss the 
assumptions and computations that we employ to generate the amount 
of obligated capital commitments for use in the FY 2001 capital cost 
projections.
    In Table III of this section, we present the redistributive 
effects that are expected to occur between ``hold-harmless'' 
hospitals and ``fully prospective'' hospitals in FY 2001. In 
addition, we have integrated sufficient hospital-specific 
information into our actuarial model to project the impact of the 
proposed FY 2001 capital payment policies by the standard 
prospective payment system hospital groupings. While we now have 
actual information on the effects of the transition payment 
methodology and interim payments under the capital prospective 
payment system and cost report data for most hospitals, we still 
need to randomly generate numbers for the change in old capital 
costs, new capital costs for each year, and obligated amounts that 
will be put in use for patient care services and recognized as old 
capital each year. We continue to be unable to predict accurately FY 
2001 capital costs for individual hospitals, but with the most 
recent data on hospitals' experience under the capital prospective 
payment system, there is adequate information to estimate the 
aggregate impact on most hospital groupings.

B. Projected Impact Based on the Proposed FY 2001 Actuarial Model

1. Assumptions

    In this impact analysis, we model dynamically the impact of the 
capital prospective payment system from FY 2000 to FY 2001 using a 
capital cost model. The FY 2001 model, as described in Appendix B of 
this proposed rule, integrates actual data from individual hospitals 
with randomly generated capital cost amounts. We have capital cost 
data from cost reports beginning in FY 1989 through FY 1998 as 
reported on the December 1999 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 
January 1, 2000 in the provider-specific file. We used these data to 
determine the proposed FY 2001 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 1998, and we age that capital by a formula 
described in Appendix B. Therefore, we need to randomly generate 
only new capital acquisitions for any year after FY 1998. All 
Federal rate payment parameters are assigned to the applicable 
hospital.
    For purposes of this impact analysis, the proposed FY 2001 
actuarial model includes the following assumptions:
    <bullet> Medicare inpatient capital costs per discharge will 
change at the following rates during these periods:

        Average Percentage Change in Capital Costs per Discharge
------------------------------------------------------------------------
                                                              Percentage
                        Fiscal year                             change
------------------------------------------------------------------------
1999.......................................................         3.16
2000.......................................................         2.34
2001.......................................................         1.99
------------------------------------------------------------------------

    <bullet> We estimate that the Medicare case-mix index will 
increase by 0.5 percent in FY 2000 and in FY 2001.

[[Page 26420]]

    <bullet> The Federal capital rate and the hospital-specific rate 
were updated in FY 1996 by an analytical framework that considers 
changes in the prices associated with capital-related costs and 
adjustments to account for forecast error, changes in the case-mix 
index, allowable changes in intensity, and other factors. The 
proposed FY 2001 update is 0.9 percent (see section IV. of the 
Addendum to this proposed rule).

2. Results

    We have used the actuarial model to estimate the change in 
payment for capital-related costs from FY 2000 to FY 2001. Table III 
shows the effect of the capital prospective payment system on low 
capital cost hospitals and high capital cost hospitals. We consider 
a hospital to be a low capital cost hospital if, based on a 
comparison of its initial hospital-specific rate and the applicable 
Federal rate, it will be paid under the fully prospective payment 
methodology. A high capital cost hospital is a hospital that, based 
on its initial hospital-specific rate and the applicable Federal 
rate, will be paid under the hold-harmless payment methodology. 
Based on our actuarial model, the breakdown of hospitals is as 
follows:

                               Capital Transition Payment Methodology for FY 2001
----------------------------------------------------------------------------------------------------------------
                                                                                                    Percent of
                Type of hospital                    Percent of      Percent of      Percent of        capital
                                                     hospitals      discharges     capital costs     payments
----------------------------------------------------------------------------------------------------------------
Low Cost Hospital...............................              67              62              56              61
High Cost Hospital..............................              33              38              44              39
----------------------------------------------------------------------------------------------------------------

    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 into 
use for patient care). If the redetermined hospital-specific rate is 
greater than the adjusted Federal rate, these hospitals will be paid 
under the hold-harmless payment methodology. Regardless of whether 
the hospital became a hold-harmless payment hospital as a result of 
a redetermination, we continue to show these hospitals as low 
capital cost hospitals in Table III.
    Assuming no behavioral changes in capital expenditures, Table 
III displays the percentage change in payments from FY 2000 to FY 
2001 using the above described actuarial model. With the proposed 
Federal rate, we estimate aggregate Medicare capital payments will 
increase by 5.89 percent in FY 2001. This increase is noticeably 
higher than last year's (3.34 percent) due to the combination of the 
increase in the number of hospital admissions, the increase in case-
mix, and the increase in the Federal blend percentage from 90 
percent to 100 percent and a decrease in the hospital-specific rate 
percentage from 10 percent to 0 percent for fully prospective 
payment hospitals.
[GRAPHIC] [TIFF OMITTED] TP05MY00.007

    We project that low capital cost hospitals paid under the fully 
prospective payment methodology will experience an average increase 
in payments per case of 6.67 percent, and high capital cost 
hospitals will experience an average increase of 1.07 percent. These 
results are due to the change in the blended percentages to the 
payment system to 100 percent adjusted Federal rate and 0 percent 
hospital-specific rate.
    For hospitals paid under the fully prospective payment 
methodology, the Federal rate payment percentage will increase from 
90 percent to 100 percent and the hospital-specific rate payment 
percentage will decrease from 10 to 0 percent in FY 2001. 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 74.15 percent to 81.77 
percent. We estimate the percentage of hold-harmless hospitals paid 
based on 100

[[Page 26421]]

percent of the Federal rate will increase from 87.78 percent to 
88.92 percent. We estimate that the few remaining high cost hold-
harmless hospitals (176) will experience an increase in payments of 
1.14 percent from FY 2000 to FY 2001. This increase reflects our 
estimate that exception payments per discharge will increase 70.81 
percent from FY 2000 to FY 2001 for high cost hold-harmless 
hospitals. While we estimate that this group's regular hold-harmless 
payments for old capital will decline by 26.87 percent due to the 
retirement of old capital, we estimate that its high overall capital 
costs will cause an increase in these hospitals' exceptions payments 
from $56.83 per discharge in FY 2000 to $97.07 per discharge in FY 
2001. This is primarily due to the estimated decrease in outlier 
payments, which will cause an estimated increase in exceptions 
payments to cover unmet capital costs.
    We expect that the average hospital-specific rate payment per 
discharge will decrease from $32.44 in FY 2000 to $0.00 in FY 2001. 
This decrease is due to the decrease in the hospital-specific rate 
payment percentage from 10 percent in FY 2000 to 0 percent in FY 
2001 for fully prospective payment hospitals.
    We are proposing no changes in our exceptions policies for FY 
2001. As a result, the minimum payment levels would be--
    <bullet> 90 percent for sole community hospitals;
    <bullet> 80 percent for urban hospitals with 100 or more beds 
and a disproportionate share patient percentage of 20.2 percent or 
more; or
    <bullet> 70 percent for all other hospitals.
    We estimate that exceptions payments will increase from 1.62 
percent of total capital payments in FY 2000 to 2.02 percent of 
payments in FY 2001. The projected distribution of the exception 
payments is shown in the chart below:

                  Estimated FY 2001 Exceptions Payments
------------------------------------------------------------------------
                                                            Percent of
            Type of hospital                 Number of      exceptions
                                             hospitals       payments
------------------------------------------------------------------------
Low Capital Cost........................             186              46
High Capital Cost.......................             191              54
                                         -------------------------------
    Total...............................             377             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.
BILLING CODE 4120-01-P

[[Page 26422]]

[GRAPHIC] [TIFF OMITTED] TP05MY00.008


[[Page 26423]]


[GRAPHIC] [TIFF OMITTED] TP05MY00.009

BILLING CODE 4120-01-C
    As we explain in Appendix B of this proposed rule, we were not 
able to use 61 of the 4,836 hospitals in our database due to 
insufficient (missing or unusable) data. Consequently, the payment 
methodology distribution is based on 4,775 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 the 
hold-harmless payment methodology.
    The percentage of hospitals paid fully Federal (100 percent of 
the Federal rate) as hold-harmless hospitals is expected to increase 
to 32.9 percent in FY 2001.
    Table IV indicates that 63.1 percent of hospitals will be paid 
under the fully prospective payment methodology. (This figure, 
unlike the figure of 67 percent for low cost capital hospitals in 
the chart on ``Capital Transition Payment Methodology for FY 2001,'' 
in section VII.B.2. of this impact analysis takes into account 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 (74.0 percent and 76.7 percent, respectively 
by payment classification) are being paid under the fully 
prospective payment methodology. This is a reflection of their lower 
than average capital costs per case. In contrast, only 35.3 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 2001 actuarial model to estimate the potential 
impact of our proposed changes for FY 2001 on total capital payments 
per case, using a universe of 4,775 hospitals. The individual 
hospital payment parameters are taken from the best available data, 
including: the January 1, 2000 update to the provider-specific file, 
cost report data, and audit information supplied by intermediaries. 
In Table V we present the results of the cross-sectional analysis 
using the results of our actuarial model and the aggregate impact of 
the proposed FY 2001 payment policies. Columns 3 and 4 show 
estimates of payments per case under our model for FY 2000 and FY 
2001. Column 5 shows the total percentage change in payments from FY 
2000 to FY 2001. Column 6 presents the percentage change in payments 
that can be attributed to Federal rate changes alone.
    Federal rate changes represented in Column 6 include the 1.60 
percent increase in the Federal rate, a 0.5 percent increase in case 
mix, changes in the adjustments to the Federal rate (for example, 
the effect of the new hospital wage index on the geographic 
adjustment factor), and reclassifications by the MGCRB. Column 5 
includes the effects of the Federal rate changes represented in 
Column 6. Column 5 also reflects the effects of all other changes, 
including the change from 90 percent to 100 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 increase 4.2 percent in FY 2001. The 
results show that the effect of the Federal rate change alone is to 
increase payments by 0.9 percent. In addition to the increase 
attributable to the Federal rate change, a 3.3 percent increase is 
attributable to the effects of all other changes.
    Our comparison by geographic location shows an overall increase 
in payments to hospitals in all areas. This comparison also shows 
that urban and rural hospitals will experience slightly different 
rates of increase in capital payments per case (3.9 percent and 5.9 
percent, respectively). This difference is due to the lower rate of 
increase for urban hospitals relative to rural hospitals (0.6 
percent and 2.7 percent, respectively) from the Federal rate changes 
alone. Urban hospitals will gain approximately the same as rural 
hospitals (3.3 percent versus 3.2 percent, respectively) from the 
effects of all other changes.

[[Page 26424]]

    All regions are estimated to receive increases in total capital 
payments per case, partly due to the increased share of payments 
that are based on the Federal rate (from 90 to 100 percent). Changes 
by region vary from a minimum of 2.6 percent increase (Middle 
Atlantic urban region) to a maximum of 7.5 percent increase (East 
North Central rural region).
    By type of ownership, government hospitals are projected to have 
the largest rate of increase of total payment changes (5.6 percent, 
a 1.4 percent increase due to the Federal rate changes, and a 4.2 
percent increase from the effects of all other changes). Payments to 
voluntary hospitals will increase 4.0 percent (a 0.9 percent 
increase due to Federal rate changes, and a 3.1 percent increase 
from the effects of all other changes) and payments to proprietary 
hospitals will increase 3.6 percent (a 0.4 percent increase due to 
Federal rate changes, and a 3.2 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 and for purposes of DSH for FYs 1999 
through 2001. Although the Federal capital rate is not affected, a 
hospital's geographic classification for purposes of the operating 
standardized amount does affect a hospital's capital payments as a 
result of the large urban adjustment factor and the disproportionate 
share adjustment for urban hospitals with 100 or more beds. 
Reclassification for wage index purposes affects the geographic 
adjustment factor, since that factor is constructed from the 
hospital wage index.
    To present the effects of the hospitals being reclassified for 
FY 2001 compared to the effects of reclassification for FY 2000, we 
show the average payment percentage increase for hospitals 
reclassified in each fiscal year and in total. For FY 2001 
reclassifications, we indicate those hospitals reclassified for 
standardized amount purposes only, for wage index purposes only, and 
for both purposes. The reclassified groups are compared to all other 
nonreclassified hospitals. These categories are further identified 
by urban and rural designation.
    Hospitals reclassified for FY 2001 as a whole are projected to 
experience a 5.9 percent increase in payments (a 2.4 percent 
increase attributable to Federal rate changes and a 3.5 percent 
increase attributable to the effects of all other changes). Payments 
to nonreclassified hospitals will increase slightly less (4.2 
percent) than reclassified hospitals (5.9 percent) overall. Payments 
to nonreclassified hospitals will increase less than reclassified 
hospitals from the Federal rate changes (0.9 percent compared to 2.4 
percent), but they will gain about the same from the effects of all 
other changes (3.3 percent compared to 3.5 percent).

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BILLING CODE 4120-01-C

Appendix B: Technical Appendix on the Capital Cost Model and Required 
Adjustments

    Under section 1886(g)(1)(A) of the Act, we set capital 
prospective payment rates for FY 1992 through FY 1995 so that 
aggregate prospective payments for capital costs were projected to 
be 10 percent lower than the amount that would have been payable on 
a reasonable cost basis for capital-related costs in that year. To 
implement this requirement, we developed the capital acquisition 
model to determine the budget neutrality adjustment factor. Even 
though the budget neutrality requirement expired effective with FY 
1996, we must continue to determine the recalibration and geographic 
reclassification budget neutrality adjustment factor and the 
reduction in the Federal and hospital-specific rates for exceptions 
payments. To determine these factors, we must continue to project 
capital costs and payments.
    We used the capital acquisition model from the start of 
prospective payments for capital costs through FY 1997. We now have 
7 years of cost reports under the capital prospective payment 
system. For FY 1998, we developed a new capital cost model to 
replace the capital acquisition model. This revised model makes use 
of the data from these cost reports.
    The following cost reports are used in the capital cost model 
for this proposed rule: The December 31, 1999 update of the cost 
reports for PPS-IX (cost reporting periods beginning in FY 1992), 
PPS-X (cost reporting periods beginning in FY 1993), PPS-XI (cost 
reporting periods beginning in FY 1994), PPS-XII (cost reporting 
periods beginning in FY 1995), PPS-XIII (cost reporting periods 
beginning in FY 1996), PPS-XIV (cost reporting periods beginning in 
FY 1997), and PPS-XV (cost reporting periods beginning in FY 1998). 
In addition, to model payments, we use the January 1, 2000 update of 
the provider-specific file, and the March 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 2000 hospital-specific rates 
using the provider-specific file and the intermediary audit file.

[[Page 26427]]

(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..................................        129
Provider-Specific and Audit File.............................      4,707
                                                              ----------
    Total....................................................      4,836
------------------------------------------------------------------------

    Eighty-two of the 4,836 hospitals had unusable or missing data, 
or had no cost reports available. For 20 of the 82 hospitals, we 
were unable to determine a hospital-specific rate from the available 
cost reports. However, there was adequate cost information to 
determine that these hospitals were paid under the hold-harmless 
methodology. Since the hospital-specific rate is not used to 
determine payments for hospitals paid under the hold-harmless 
methodology, there was sufficient cost report information available 
to include these 20 hospitals in the analysis. We were able to 
estimate hospital-specific amounts for one additional hospital from 
the PPS-IX cost reports. Hence we were able to use 21 of the 82 
hospitals. We used 4,775 hospitals for the analysis. Sixty-one 
hospitals could not be used in the analysis because of insufficient 
information. These hospitals account for less than 0.7 percent of 
admissions. Therefore, any effects from the elimination of their 
cost report data should be minimal.
    We analyzed changes in capital-related costs (depreciation, 
interest, rent, leases, insurance, and taxes) reported in the cost 
reports. We found a wide variance among hospitals in the growth of 
these costs. For hospitals with more than 100 beds, the distribution 
and mean of these cost increases were different for large changes in 
bed-size (greater than <plus-minus>20 percent). We also analyzed 
changes in the growth in old capital and new capital for cost 
reports that provided this information. For old capital, we limited 
the analysis to decreases in old capital. We did this since the 
opportunity for most hospitals to treat ``obligated'' capital put 
into service as old capital has expired. Old capital costs should 
decrease as assets become fully depreciated and as interest costs 
decrease as the loan is amortized.
    The new capital cost model separates the hospitals into three 
mutually exclusive groups. Hold-harmless hospitals with data on old 
capital were placed in the first group. Of the remaining hospitals, 
those hospitals with fewer than 100 beds comprise the second group. 
The third group consists of all hospitals that did not fit into 
either of the first two groups. Each of these groups displayed 
unique patterns of growth in capital costs. We found that the gamma 
distribution is useful in explaining and describing the patterns of 
increase in capital costs. A gamma distribution is a statistical 
distribution that can be used to describe patterns of growth rates, 
with the greatest proportion of rates being at the low end. We use 
the gamma distribution to estimate individual hospital rates of 
increase as follows:
    (1) For hold-harmless hospitals, old capital cost changes were 
fitted to a truncated gamma distribution, that is, a gamma 
distribution covering only the distribution of cost decreases. New 
capital costs changes were fitted to the entire gamma distribution, 
allowing for both decreases and increases.
    (2) For hospitals with fewer than 100 beds (small), total 
capital cost changes were fitted to the gamma distribution, allowing 
for both decreases and increases.
    (3) Other (large) hospitals were further separated into three 
groups:
    <bullet> Bed-size decreases over 20 percent (decrease).
    <bullet> Bed-size increases over 20 percent (increase).
    <bullet> 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 
1999 (the MedPAR data year) and later, we use the number of 
discharges from the MedPAR data. Some hospitals had considerably 
more discharges in FY 1999 than in the years for which we calculated 
cost per discharge from the cost report data. Consequently, a 
hospital with few cost report discharges would have a high capital 
cost per discharge, since fixed costs would be allocated over only a 
few discharges. If discharges increase substantially, the cost per 
discharge would decrease because fixed costs would be allocated over 
more discharges. If the projection of capital cost per discharge is 
not adjusted for increases in discharges, the projection of 
exceptions would be overstated. We address this situation by 
recalculating the cost per discharge with the MedPAR discharges if 
the MedPAR discharges exceed the cost report discharges by more than 
20 percent. We do not adjust for increases of less than 20 percent 
because we have not received all of the FY 1999 discharges, and we 
have removed some discharges from the analysis because they are 
statistical outliers. This adjustment reduces our estimate of 
exceptions payments, and consequently, the reduction to the Federal 
rate for exceptions is smaller. We will continue to monitor our 
modeling of exceptions payments and make adjustments as needed.
    The average national capital cost per discharge generated by 
this model is the combined average of many randomly generated 
increases. This average must equal the projected average national 
capital cost per discharge, which we projected separately (outside 
this model). We adjusted the shape parameter of the gamma 
distributions so that the modeled average capital cost per discharge 
matches our projected capital cost per discharge. The shape 
parameter for old capital was not adjusted since we are modeling the 
aging of ``existing'' assets. This model provides a distribution of 
capital costs among hospitals that is consistent with our aggregate 
capital projections.
    Once each hospital's capital-related costs are generated, the 
model projects capital payments. We use the actual payment 
parameters (for example, the case-mix index and the geographic 
adjustment factor) that are applicable to the specific hospital.
    To project capital payments, the model first assigns the 
applicable payment methodology (fully prospective or hold-harmless) 
to the hospital as determined from the provider-specific file and 
the cost reports. The model simulates Federal rate payments using 
the assigned payment parameters and hospital-specific estimated 
outlier payments. The case-mix index for a hospital is derived from 
the FY 1999 MedPAR file using the FY 2001 DRG relative weights 
included in section VI. of the Addendum to this proposed rule. The 
case-mix index is increased each year after FY 1999 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 2000. We project that case-mix will 
increase 0.5 percent in FY 2001. (Since we are using FY 1999 cases 
for our analysis, the FY 1999 increase in case-mix has no effect on 
projected capital payments.)

[[Page 26428]]

    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 2000, the budget neutrality adjustment factors 
were 1.00142 for the national rate and 1.00134 for the Puerto Rico 
rate.
    Since we implemented a separate geographic adjustment factor for 
Puerto Rico, we applied separate budget neutrality adjustments for 
the national geographic adjustment factor and the Puerto Rico 
geographic adjustment factor. We applied the same budget neutrality 
factor for DRG reclassifications and recalibration nationally and 
for Puerto Rico. Separate adjustments were unnecessary for FY 1998 
and earlier since the geographic adjustment factor for Puerto Rico 
was implemented in FY 1998.
    To determine the factors for FY 2001, we first determined the 
portions of the Federal national and Puerto Rico rates that would be 
paid for each hospital in FY 2001 based on its applicable payment 
methodology. Using our model, we then compared, separately for the 
national rate and the Puerto Rico rate, estimated aggregate Federal 
rate payments based on the FY 2000 DRG relative weights and the FY 
2000 geographic adjustment factor to estimated aggregate Federal 
rate payments based on the FY 2000 relative weights and the FY 2001 
geographic adjustment factor. In making the comparison, we held the 
FY 2001 Federal rate portion constant and set the other budget 
neutrality adjustment factor and the exceptions reduction factor to 
1.00. To achieve budget neutrality for the changes in the national 
geographic adjustment factor, we applied an incremental budget 
neutrality adjustment of 0.99846 for FY 2001 to the previous 
cumulative FY 2000 adjustment of 1.00142, yielding a cumulative 
adjustment of 0.99988 through FY 2001. For the Puerto Rico 
geographic adjustment factor, we applied an incremental budget 
neutrality adjustment of 1.00312 for FY 2001 to the previous 
cumulative FY 2000 adjustment of 1.00134, yielding a cumulative 
adjustment of 1.00446 through FY 2001. We then compared estimated 
aggregate Federal rate payments based on the FY 2000 DRG relative 
weights and the FY 2001 geographic adjustment factors to estimated 
aggregate Federal rate payments based on the FY 2001 DRG relative 
weights and the FY 2001 geographic adjustment factors. The 
incremental adjustment for DRG classifications and changes in 
relative weights would be 1.00019 nationally and for Puerto Rico. 
The cumulative adjustments for DRG classifications and changes in 
relative weights and for changes in the geographic adjustment 
factors through FY 2001 would be 1.00007 nationally and 1.00465 for 
Puerto Rico. The following table summarizes the adjustment factors 
for each fiscal year:

                     Budget Neutrality Adjustment for DRG Reclassifications and Recalibration and the Geographic Adjustment Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              National                                                 Puerto Rico
                                     -------------------------------------------------------------------------------------------------------------------
                                                 Incremental adjustment                                    Incremental adjustment
                                     ---------------------------------------------             ---------------------------------------------
             Fiscal year                                  DRG                                                       DRG
                                       Geographic  reclassifications                Cumulative   Geographic  reclassifications                Cumulative
                                       adjustment         and           Combined                 adjustment         and           Combined
                                         factor      recalibration                                 factor      recalibration
--------------------------------------------------------------------------------------------------------------------------------------------------------
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  ...........  .................  ...........      1.00000
1999................................      0.99944         1.00335         1.00279      1.00294      0.99898         1.00335         1.00233      1.00233
2000................................      0.99857         0.99991         0.99848      1.00142      0.99910         0.99991         0.99901      1.00134
2001................................      0.99846         1.00019         0.99865      1.00007      1.00312         1.00019         1.00331      1.00465
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The methodology used to determine the recalibration and 
geographic (DRG/GAF) budget neutrality adjustment factor is similar 
to that used in establishing budget neutrality adjustments under the 
prospective payment system for operating costs. One difference is 
that, under the operating prospective payment system, the budget 
neutrality adjustments for the effect of geographic 
reclassifications are determined separately from the effects of 
other changes in the hospital wage index and the DRG relative 
weights. Under the capital prospective payment system, there is a 
single DRG/GAF budget neutrality adjustment factor (the national 
rate and the Puerto Rico rate are determined separately) for changes 
in the geographic adjustment factor (including geographic 
reclassification) and the DRG relative weights. In addition, there 
is no adjustment for the effects that geographic reclassification 
has on the other payment parameters, such as the payments for 
serving low-income patients or the large urban add-on payments.
    In addition to computing the DRG/GAF budget neutrality 
adjustment factor, we used the model to simulate total payments 
under the prospective payment system.
    Additional payments under the exceptions process are accounted 
for through a reduction in the Federal and hospital-specific rates. 
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 FYs 1992 through 
2000, the proposed factors for FY 2001, and the estimated factors 
that would be applicable through FY 2005. We caution that these are 
estimates for FYs 2001 and later, and are subject to revisions 
resulting from continued methodological refinements, receipt of 
additional data, and changes in payment policy. We note that in 
making these projections, we have assumed that the cumulative 
national DRG/GAF budget neutrality adjustment factor will remain at 
1.00007 (1.00465 for Puerto Rico) for FY 2001 and later because we 
do not have sufficient information to estimate the change that will 
occur in the factor for years after FY 2001.
    The projections are as follows:

BILLING CODE 4120-01-P

[[Page 26429]]

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APPENDIX C--REPORT TO CONGRESS
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[[Page 26433]]


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BILLING CODE 4120-01-C

[[Page 26434]]

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 2001 by hospitals 
subject to the prospective payment system and by hospitals or units 
excluded from the prospective payment system. Section 
1886(b)(3)(B)(i)(XVI) of the Act sets the FY 2001 percentage 
increase in the operating cost standardized amounts equal to the 
rate of increase in the hospital market basket minus 1.1 percent for 
prospective payment hospitals in all areas. Section 
1886(b)(3)(B)(iv) of the Act sets the FY 2001 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. For Medicare-
dependent, small rural hospitals, the percentage increase is the 
same update factor as all other hospitals subject to the prospective 
payment system, or the rate of increase in the market basket minus 
1.1 percentage points. Section 406 of Public Law 106-113 amended 
section 1886(b)(3)(B)(i) of the Act to provide that, for sole 
community hospitals, the rate of increase in the hospital-specific 
rates for FY 2001 only is equal to the market basket percentage 
increase. Prior to FY 2001, sole community hospitals were subject to 
the same percentage increase to their hospital-specific rates as all 
other hospitals subject to the prospective payment system set forth 
in section 1886(b)(3)(B)(i) of the Act.
    Under section 1886(b)(3)(B)(ii) of the Act, the FY 2001 
percentage increase in the rate-of-increase limits for hospitals and 
units excluded from the prospective payment system ranges from the 
percentage increase in the excluded hospital market basket less a 
percentage between 0 and 2.5 percentage points, depending on the 
hospital's or unit's costs in relation to its limit for the most 
recent cost reporting period for which information is available, or 
0 percentage point if costs do not exceed two-thirds of the limit.
    In accordance with section 1886(d)(3)(A) of the Act, we are 
proposing to update the standardized amounts, the hospital-specific 
rates, and the rate-of-increase limits for hospitals and units 
excluded from the prospective payment system as provided in section 
1886(b)(3)(B) of the Act. Based on the first quarter 2000 forecast 
of the FY 2001 market basket increase of 3.1 percent for hospitals 
and units subject to the prospective payment system, the proposed 
update to the standardized amounts is 2.0 percent (that is, the 
market basket rate of increase minus 1.1 percent percentage points) 
for hospitals in both large urban and other areas. The proposed 
update to the hospital-specific rate applicable to Medicare-
dependent, small rural hospitals is also 2.0 percent. The proposed 
update to the hospital-specific rate applicable to sole community 
hospitals is 3.1 percent. The proposed update for hospitals and 
units excluded from the prospective payment system would range from 
the percentage increase in the excluded hospital market basket 
(currently estimated at 3.1 percent) minus a percentage between 0 
and 2.5 percentage points, or 0 percentage point, resulting in an 
increase in the rate-of-increase limit between 0.6 and 3.1 percent, 
or 0 percent.
    Section 1886(e)(4) of the Act requires that the Secretary, 
taking into consideration the recommendations of the Medicare 
Payment Advisory Commission (MedPAC), recommend update factors for 
each fiscal year that take into account the amounts necessary for 
the efficient and effective delivery of medically appropriate and 
necessary care of high quality. Under section 1886(e)(5) of the Act, 
we are required to publish the update factors recommended under 
section 1886(e)(4) of the Act. Accordingly, this appendix provides 
the recommendations of appropriate update factors and the analysis 
underlying our recommendations.
    In its March 1, 2000 report, MedPAC did not make a specific 
update recommendation for FY 2001 payments for Medicare acute 
inpatient hospitals. However, at its April 13, 2000 public meeting, 
MedPAC announced that it was recommending a combined update between 
3.5 percent and 4.0 percent for operating and capital-related 
payments for FY 2001. This recommendation is higher than the current 
law amount as prescribed by Public Law 105-33 and proposed in this 
rule. Because of the timing of the announcement and our need for 
ample time to perform a proper analysis of the recommendation, we 
will address the comparison of HCFA's update recommendation and 
MedPAC's update recommendation in the FY 2001 final rule in August 
2000 when we will have had the opportunity to review the data 
analyses that substantiate MedPAC's recommendation.
    We describe the basis for our FY 2001 update recommendation 
(Table 1) in section II. of this Appendix.

II. Secretary's Recommendations

    Under section 1886(e)(4) of the Act, we are recommending that an 
appropriate update factor for the standardized amounts is 2.0 
percentage points for hospitals located in large urban and other 
areas. We are also recommending an update of 2.0 percentage points 
to the hospital-specific rate for Medicare-dependent, small rural 
hospitals. In addition, we are recommending an update of 3.1 
percentage points to the hospital-specific rate for sole community 
hospitals. We believe these recommended update factors would ensure 
that Medicare acts as a prudent purchaser and provide incentives to 
hospitals for increased efficiency, thereby contributing to the 
solvency of the Medicare Part A Trust Fund.
    We recommend that hospitals excluded from the prospective 
payment system receive an update of between 0.6 and 3.1 percentage 
points, or 0 percentage points. The update for excluded hospitals 
and units is equal to the increase in the excluded hospital 
operating market basket less a percentage between 0 and 2.5 
percentage points, or 0 percentage points, depending on the 
hospital's or unit's costs in relation to its rate-of-increase limit 
for the most recent cost reporting period for which information is 
available. The market basket rate of increase for excluded hospitals 
and units is currently forecast at 3.1 percent.
    Our update recommendation of 2.0 percent (market basket increase 
minus 1.1 percent) for prospective payment system operating costs 
standardized amounts is supported by the following analyses that 
measure changes in hospital productivity, scientific and 
technological advances, practice pattern changes, and changes in 
case-mix:

A. Productivity

    Service level productivity is defined as the ratio of total 
service output to full-time equivalent employees (FTEs). While we 
recognize that productivity is a function of many variables (for 
example, labor, nonlabor material, and capital inputs), we use a 
labor productivity measure since this update framework applies to 
operating payment. To recognize that we are apportioning the short-
run output changes to the labor input and not considering the 
nonlabor inputs, we weight our productivity measure for operating 
costs by the share of direct labor services in the market basket to 
determine the expected effect on cost per case.
    Our recommendation for the service productivity component is 
based on historical trends in productivity and total output for both 
the hospital industry and the general economy, and projected levels 
of future hospital service output. MedPAC's predecessor, the 
Prospective Payment Assessment Commission (ProPAC), estimated 
cumulative service productivity growth to be 4.9 percent from 1985 
through 1989, or 1.2 percent annually. At the same time, ProPAC 
estimated total output growth at 3.4 percent annually, implying a 
ratio of service productivity growth to output growth of 0.35.
    Since it is not possible at this time to develop a productivity 
measure specific to Medicare patients, we examined productivity 
(output per hour) and output (gross domestic product) for the 
economy. Depending on the exact time period, annual changes in 
productivity range from 0.3 to 0.35 percent of the change in output 
(that is, a 1.0 percent increase in output would be correlated with 
a 0.3 to 0.35 percent change in output per hour).
    Under our framework, the recommended update is based in part on 
expected productivity--that is, projected service output during the 
year, multiplied by the historical ratio of service productivity to 
total service output, multiplied by the share of labor in total 
operating inputs, as calculated in the hospital market basket. This 
method estimates an expected labor productivity improvement in the 
same proportion to expected total service growth that has occurred 
in the past and assumes that, at a minimum, growth in FTEs changes 
proportionally to the growth in total service output. Thus, the 
recommendation allows for unit productivity to be smaller than the 
historical averages in years that output growth is relatively low 
and larger in years that output growth is higher than the historical 
averages. Based on the above estimates from both the hospital 
industry and the economy, we have chosen to employ the

[[Page 26435]]

range of ratios of productivity change to output change of 0.30 to 
0.35.
    The expected change in total hospital service output is the 
product of projected growth in total admissions (adjusted for 
outpatient usage), projected real case-mix growth, expected quality-
enhancing intensity growth, and net of expected decline in intensity 
due to reduction of cost-ineffective practice. Case-mix growth and 
intensity numbers for Medicare are used as proxies for those of the 
total hospital, since case-mix increases (used in the intensity 
measure as well) are unavailable for non-Medicare patients. Thus, 
expected output growth is simply the sum of the expected change in 
intensity (0.0 percent), projected admissions change (1.6 percent 
for FY 2001), and projected real case-mix growth (0.5 percent), or 
2.1 percent. The share of direct labor services in the market basket 
(consisting of wages, salaries, and employee benefits) is 61.4 
percent.
    Multiplying the expected change in total hospital service output 
(2.1 percent) by the ratio of historical service productivity change 
to total service growth of 0.30 to 0.35 and by the direct labor 
share percentage 61.4, provides our productivity standard of -0.5 to 
-0.4 percent.

B. Intensity

    We base our intensity standard on the combined effect of three 
separate factors: changes in the use of quality enhancing services, 
changes in the use of services due to shifts in within-DRG severity, 
and changes in the use of services due to reductions of cost-
ineffective practices. For FY 2001, we recommend an adjustment of 
0.0 percent. The basis of this recommendation is discussed below.
    We have no empirical evidence that accurately gauges the level 
of quality-enhancing technology changes. A study published in the 
Winter 1992 issue of the Health Care Financing Review, 
``Contributions of case mix and intensity change to hospital cost 
increases'' (pp. 151-163), suggests that one-third of the intensity 
change is attributable to high-cost technology. The balance was 
unexplained but the authors speculated that it is attributable to 
fixed costs in service delivery.
    Typically, a specific new technology increases cost in some uses 
and decreases cost in other uses. Concurrently, health status is 
improved in some situations while in other situations it may be 
unaffected or even worsened using the same technology. It is 
difficult to separate out the relative significance of each of the 
cost-increasing effects for individual technologies and new 
technologies.
    Other things being equal, per-discharge fixed costs tend to 
fluctuate in inverse proportion to changes in volume. Fixed costs 
exist whether patients are treated or not. If volume is declining, 
per-discharge fixed costs will rise, but the reverse is true if 
volume is increasing.
    Following methods developed by HCFA's Office of the Actuary for 
deriving hospital output estimates from total hospital charges, we 
have developed Medicare-specific intensity measures based on a 5-
year average using FYs 1995 through 1999 MedPAR billing data. Case-
mix constant intensity is calculated as the change in total Medicare 
charges per discharge adjusted for changes in the average charge per 
unit of service as measured by the CPI for hospital and related 
services and changes in real case-mix. Thus, in order to measure 
changes in intensity, one must measure changes in real case-mix.
    For FYs 1995 through 1999, observed case-mix index change ranged 
from a low of -0.3 percent to a high of 1.7 percent, with a 5-year 
average change of 0.6 percent. Based on evidence from past studies 
of case-mix change, we estimate that real case-mix change fluctuates 
between 1.0 and 1.4 percent and the observed values generally fall 
in this range, although some years the figures fall outside this 
range. The average percentage change in charge per discharge was 3.6 
percent and the average annual change in the CPI for hospital and 
related services was 4.1 percent. Dividing the change in charge per 
discharge by the quantity of the real case-mix index change and the 
CPI for hospital and related services yields an average annual 
change in intensity of -1.9 percent. Assuming the technology/fixed 
cost ratio still holds (.33), technology would account for a -0.6 
percent annual decline while fixed costs would account for a -1.3 
percent annual decline. The decline in fixed costs per discharge 
makes intuitive sense as volume, measured by total discharges, has 
increased during the period. In the past, we have not recommended a 
negative intensity adjustment. Although we are not recommending a 
negative adjustment for FY 2001, we are reflecting the possible 
range that such a negative adjustment could span, based on our 
analysis. Accordingly, for FY 2001, we are recommending an intensity 
adjustment between 0 percent and -0.6 percent.

C. Change in Case-Mix

    Our analysis takes into account projected changes in case-mix, 
adjusted for changes attributable to improved coding practices. For 
our FY 2001 update recommendation, we are projecting a 0.5 percent 
increase in the case-mix index. We define real case-mix as actual 
changes in the mix (and resources requirements) of Medicare patients 
as opposed to changes in coding behavior that results in assignment 
of cases to higher weighted DRGS, but do not reflect greater 
resource requirements. Unlike in past years, where we differentiated 
between ``real'' case-mix increase and increases attributable to 
changes in coding behavior, we do not feel changes in coding 
behavior will impact the overall case-mix in FY 2001. As such for FY 
2001, we estimate that real case-mix is equal to projected change in 
case-mix. Thus, we are recommending a 0.0 adjustment for case-mix.

D. Effect of FY 1999 DRG Reclassification and Recalibration

    We estimate that DRG reclassification and recalibration for FY 
1999 resulted in a 0.0 percent change in the case-mix index when 
compared with the case-mix index that would have resulted if we had 
not made the reclassification and recalibration changes to the 
GROUPER.

E. Forecast Error Correction

    We make a forecast error correction if the actual market basket 
changes differ from the forecasted market basket by 0.25 percentage 
points or more. There is a 2-year lag between the forecast and the 
measurement of forecast error. Our update framework for FY 2001 does 
not reflect a forecast error correction because, for FY 1999, there 
was less than a 0.25 percentage point difference between the actual 
market basket and the forecasted market basket.
    As we explained in section I. of this Appendix, a comparison of 
our update recommendation to MedPAC's recommendation is unavailable 
for this proposed rule. MedPAC did not announce its recommendation 
for a combined update of between 3.5 percent and 4.0 percent for 
operating and capital-related payments for FY 2001 until its April 
13, 2000 public meeting. This recommendation is higher than the 
current law amount as prescribed by Public Law 105-33 and proposed 
in this rule. Because of the timing of the announcement and our need 
for ample time to perform a proper analysis of the recommendation, 
we will address the comparison of HCFA's update recommendation and 
MedPAC's update recommendation in the FY 2001 final rule in August 
2000 when we will have had the opportunity to review the data 
analyses that substantiate MedPAC's recommendation. The following is 
a summary of the update range supported by our analyses:

[[Page 26436]]



              Table 1.--HHS' FY 2001 Update Recommendation
------------------------------------------------------------------------
               Market basket                             MB
------------------------------------------------------------------------
Policy Adjustments Factors:
    Productivity..........................  -0.5 to -0.4
    Intensity.............................  0.0 to -0.6
                                           =============================
        Subtotal..........................  -0.5 to -1.0
                                           =============================
Case-Mix Adjustment Factors:
    Projected Case-Mix Change.............  -0.5
    Real Across DRG Change................  0.5
                                           -----------------------------
        Subtotal..........................  0.0
Effect of 1999 Reclassification and         0.0
 Recalibration.
Forecast Error Correction.................  0.0
Total Recommended Update..................  MB -0.5 to MB -1.0
------------------------------------------------------------------------

    Consistent with current law, we are recommending an update of 
market basket increase minus 1.1 percentage points (or 2.0 percent). 
We note that this approximates the lower bound of the range 
suggested by our framework when accounting for a negative intensity 
change.
    For FY 2001, we believe that a 2.0 update factor appropriately 
reflects current trends in health care delivery, including the 
recent decreases in the use of hospital inpatient services and the 
corresponding increase in the use of hospital outpatient and 
postacute care services. We also recommend that the hospital-
specific rates applicable to Medicare-dependent, small rural 
hospitals be increased by the same update, 2.0 percentage points. 
Furthermore, we recommend that the hospital-specific rates 
applicable to sole community hospitals be increased by an update of 
3.1 percentage points.

[FR Doc. 00-10874 Filed 5-4-00; 8:45 am]
BILLING CODE 4120-01-P


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