**GAO-02-1015R**                      Aug 15, 2002                  

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## Highlights

GAO reviewed the Centers for Medicare and Medicaid Services' (CMS) new rule on the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2003 Rates.  GAO found that (1) the rule would revise the Medicare acute care hospital inpatient prospective payment systems for operating and capital costs to implement changes arising from CMS's continuing experience with the systems, and (2) CMS complied with applicable requirements in promulgating the rule.

##  Department of Health and Human Services, Centers for Medicare and Medicaid Services: Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year2003 Rates, GAO-02-1015R, August 15, 2002

B-291043August 15, 2002The Honorable Max Baucus     Chairman     The Honorable Chuck Grassley     Ranking Minority Member     Committee on Finance     United States SenateThe Honorable Bill Thomas     Chairman     The Honorable Charles Rangel     Ranking Minority Member     Committee on Ways and Means     House of Representatives     Subject:Department of Health and Human Services, Centers for Medicare and Medicaid Services: Medicare Program; Changes to the Hospital Inpatient    Prospective Payment Systems and Fiscal Year 2003 RatesPursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Department of Health and    Human Services, Centers for Medicare and Medicaid Services (CMS), entitled Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2003 Rates    (RIN: 0938-AL23).  We received the rule on July 31, 2002.  It was published in the Federal Register as a final rule on August 1, 2002.  67 Fed. Reg. 49982.     The final rule revises the Medicare acute care hospital inpatient prospective payment systems for operating and capital costs to implement changes arising from CMS's continuing experience with    the systems.  Among other things, the rule also describes the changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and    capital-related costs.     Enclosed is our assessment of the CMS's compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule.  Our review indicates that    the CMS complied with the applicable requirements.     If you have any questions about this report, please contact James W. Vickers, Assistant General Counsel, at (202) 512-8210.  The official responsible for GAO evaluation work relating to the    subject matter of the rule is William Scanlon, Managing Director, Health Care.  Mr. Scanlon can be reached at (202) 512-7114.                 signed     Kathleen E. Wannisky     Managing Associate General Counsel     Enclosurecc: Ann Stallion     Regulations Coordinator     Department of Health and       Human Services            ENCLOSURE     ANALYSIS UNDER 5 U.S.C.  801(a)(1)(B)(i)-(iv) OF A MAJOR RULE     ISSUED BY THE     DEPARTMENT OF HEALTH AND HUMAN SERVICES,     CENTERS FOR MEDICARE AND MEDICAID SERVICES     ENTITLED     "MEDICARE PROGRAM; CHANGES TO THE HOSPITAL INPATIENT PROSPECTIVE PAYMENT SYSTEMS AND FISCAL YEAR 2003 RATES"     (RIN: 0938-AL23)(i) Cost-benefit analysis     CMS estimates that the impact of the changes made by the final rule for fiscal year (FY) 2003 on the inpatient prospective payment system to be an increase of $0.3 billion as compared to the FY    2002 payments.(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C.  603-605, 607, and 609     CMS prepared a Final Regulatory Flexibility Analysis in connection with its Regulatory Impact Analysis.  The analysis discusses the impacts of the final rule on hospitals by geographic    location, size, and payment classification.(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.  1532-1535     The final rule does not contain either an intergovernmental or private sector mandate, as defined in title II, of more than $100 million in any one year.(iv) Other relevant information or requirements under acts and executive orders     Administrative Procedure Act, 5 U.S.C.  551 etseq.     The final rule was issued using the notice and comment procedures found at 5 U.S.C. 553.  On May 9, 2002, CMS published a Notice of Proposed Rulemaking in the Federal Register.  67    Fed. Reg. 31404.  In response, CMS received 1,196 comments, which are discussed in the preamble.     Paperwork Reduction Act, 44 U.S.C.  3501-3520     The final rule contains information collections that are subject to review by the Office of Management and Budget under the Paperwork Reduction Act.     Several of the collections have already been approved by OMB and their OMB approval numbers and expiration dates are listed in the preamble.  For the new or modified collections contained    in the final rule that require OMB approval, the information required under the act is contained in the preamble, including the estimated annual burdens of each collection.     Statutory authorization for the rule     The final rule was promulgated under the authority contained in sections 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) and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Pub. L.    106-554).     Executive Order No. 12866     The final rule was reviewed by OMB and found to be an economically significant regulatory action under the order.     Executive Order No. 13132 (Federalism)     CMS has examined the final rule under the order and concludes that it will not have any negative impact on the rights, rules, and responsibilities of state, local, or tribal governments.

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