15022 Federal Register / Vol. 79, No. 52 / Tuesday, March 18, 2014 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 412 

[CMS–1599–IFC2] 

RIN 0938–AR12 

Medicare Program; Extension of the 

Payment Adjustment for Low-Volume 

Hospitals and the Medicare-Dependent 

Hospital (MDH) Program Under the 

Hospital Inpatient Prospective 

Payment Systems (IPPS) for Acute 

Care Hospitals for Fiscal Year 2014 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Interim final rule with comment 

period. 

SUMMARY: This interim final rule with 

comment period implements changes to 

the payment adjustment for low-volume 

hospitals and to the Medicaredependent hospital (MDH) program 

under the hospital inpatient prospective 

payment systems (IPPS) for FY 2014 

(through March 31, 2014) in accordance 

with sections 1105 and 1106, 

respectively, of the Pathway for SGR 

Reform Act of 2013. 

DATES: Effective date: March 14, 2014. 

Applicability dates: The provisions of 

this interim final rule with comment 

period are applicable for discharges on 

or after October 1, 2013, and on or 

before March 31, 2014. 

Comment date: To be assured 

consideration, comments must be 

received at one of the addresses 

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

13, 2014. 

ADDRESSES: In commenting, please refer 

to file code CMS–1599–IFC2. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed). 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1599–IFC2, P.O. Box 8013, 

Baltimore, MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1599–IFC2, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–01850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–9994 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Michele Hudson, (410) 786–5490. 

Maria Navarro, (410) 786–4553. 

Shevi Marciano, (410) 786–2874. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://regulations.gov. 

Follow the search instructions on that 

Web site to view public comments. 

Comments received timely will be also 

available for public inspection as they 

are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

I. Background 

On December 26, 2013, the Pathway 

for SGR Reform Act of 2013 (Pub. L. 

113–67) was enacted. Section 1105 of 

the Pathway for SGR Reform Act 

extends changes to the payment 

adjustment for low-volume hospitals for 

an additional 6 months, through March 

31, 2014, of fiscal year (FY) 2014. 

Section 1106 of the Pathway for SGR 

Reform Act extends the Medicaredependent, small rural hospital (MDH) 

program for an additional 6 months, 

through March 31, 2014, of FY 2014. 

II. Provisions of the Interim Final Rule 

With Comment Period 

A. Extension of the Payment Adjustment 

for Low-Volume Hospitals 

1. Background 

Section 1886(d)(12) of the Social 

Security Act (the Act) provides for an 

additional payment to each qualifying 

low-volume hospital under the Inpatient 

Prospective Payment Systems (IPPS) 

beginning in FY 2005. Sections 3125 

and 10314 of the Affordable Care Act 

provided for a temporary change in the 

low-volume hospital payment policy for 

FYs 2011 and 2012. Section 605 of the 

American Taxpayer Relief Act of 2012 

(ATRA) extended, for FY 2013, the 

temporary changes in the low-volume 

hospital payment policy provided for in 

FYs 2011 and 2012 by the Affordable 

Care Act. Prior to the enactment of the 

Pathway for SGR Reform Act, beginning 

with FY 2014, the low-volume hospital 

qualifying criteria and payment 

adjustment returned to the statutory 

requirements under section 1886(d)(12) 

of the Act that were in effect prior to the 

amendments made by the Affordable 

Care Act and the ATRA. (For additional 

information on the expiration of the 

temporary changes in the low-volume 

hospital payment policy for FYs 2011 

through 2013 provided for by the 

Affordable Care Act and the ATRA, refer 

to the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50610 through 50613).) The 

regulations describing the payment 

adjustment for low-volume hospitals are 

at 42 CFR 412.101. 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 79, No. 52 / Tuesday, March 18, 2014 / Rules and Regulations 15023 

2. Low-Volume Hospital Payment 

Adjustment for FYs 2011, 2012, and 

2013 

For FYs 2011 and 2012, sections 3125 

and 10314 of the Affordable Care Act 

expanded the definition of low-volume 

hospital and modified the methodology 

for determining the payment adjustment 

for hospitals meeting that definition. 

Specifically, the provisions of the 

Affordable Care Act amended the 

qualifying criteria for low-volume 

hospitals under section 1886(d)(12)(C)(i) 

of the Act to specify that, for FYs 2011 

and 2012, a hospital qualifies as a lowvolume hospital if it is more than 15 

road miles from another subsection (d) 

hospital and has less than 1,600 

discharges of individuals entitled to, or 

enrolled for, benefits under Part A 

during the fiscal year. In addition, 

section 1886(d)(12)(D) of the Act, as 

added by the Affordable Care Act, 

provides that the low-volume hospital 

payment adjustment (that is, the 

percentage increase) is to be determined 

‘‘using a continuous linear sliding scale 

ranging from 25 percent for low volumehospitals with 200 or fewer discharges 

of individuals entitled to, or enrolled 

for, benefits under Part A in the fiscal 

year to 0 percent for low-volume 

hospitals with greater than 1,600 

discharges of such individuals in the 

fiscal year.’’ 

We revised the regulations at 42 CFR 

412.101 to reflect the changes to the 

qualifying criteria and the payment 

adjustment for low-volume hospitals 

according to the provisions of the 

Affordable Care Act in the FY 2011 

IPPS/LTCH PPS final rule (75 FR 50238 

through 50275 and 50414). In addition, 

we also defined, at § 412.101(a), the 

term ‘‘road miles’’ to mean ‘‘miles’’ as 

defined at § 412.92(c)(1), and clarified 

the existing regulations to indicate that 

a hospital must continue to qualify as a 

low-volume hospital in order to receive 

the payment adjustment in that year 

(that is, it is not based on a one-time 

qualification). 

Section 605 of the ATRA extended the 

temporary changes in the low-volume 

hospital payment policy provided for in 

FYs 2011 and 2012 by the Affordable 

Care Act for FY 2013, that is, for 

discharges occurring before October 1, 

2013. In a Federal Register notice 

published on March 7, 2013 (78 FR 

14689 through 14694) (hereinafter 

referred to as the FY 2013 IPPS notice), 

we announced the extension of the 

Affordable Care Act amendments to the 

low-volume hospital payment 

adjustment requirements under section 

1886(d)(12) of the Act for FY 2013 

pursuant to section 605 of the ATRA. To 

implement the extension of the 

temporary change in the low-volume 

hospital payment adjustment policy for 

FY 2013 provided for by the ATRA, in 

the FY 2013 IPPS notice, we updated 

the discharge data source used to 

identify qualifying low-volume 

hospitals and calculate the payment 

adjustment (percentage increase). In 

addition, we established a procedure for 

a hospital to request low-volume 

hospital status for FY 2013 (which was 

consistent with the process for the lowvolume hospital payment adjustment for 

FYs 2011 and 2012). We also noted our 

intent to make conforming changes to 

the regulations text at § 412.101 to 

reflect the changes to the qualifying 

criteria and the payment adjustment for 

low-volume hospitals in accordance 

with the amendments made by section 

605 of the ATRA in future rulemaking. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50612), we adopted 

revisions to paragraphs (b)(2)(i), 

(b)(2)(ii), (c)(1), (c)(2), and (d) of 

§ 412.101 consistent with the provisions 

of section 605 of the ATRA. 

3. Implementation of the Extension of 

the Low-Volume Hospital Payment 

Adjustment for FY 2014 (through March 

31, 2014) 

Section 1105 of the Pathway for SGR 

Reform Act extends, for the first 6 

months of FY 2014 (that is, through 

March 31, 2014), the temporary changes 

in the low-volume hospital payment 

policy provided for in FYs 2011 and 

2012 by the Affordable Care Act and 

extended through FY 2013 by the 

ATRA. Prior to the enactment of section 

1105 of the Pathway for SGR Reform 

Act, beginning with FY 2014, the lowvolume hospital definition and payment 

adjustment methodology returned to the 

policy established under statutory 

requirements that were in effect prior to 

the amendments made by the Affordable 

Care Act as extended by the ATRA. 

Section 1105 of the Pathway for SGR 

Reform Act extends the changes made 

by the Affordable Care Act and 

extended by the ATRA by amending 

sections 1886(d)(12)(B), (C)(i), and (D) of 

the Act. Subparagraph (B) of section 

1886(d)(12) of the Act sets forth the 

applicable percentage increase under 

the original low-volume hospital 

payment adjustment policy established 

under statutory requirements that were 

in effect prior to the amendments made 

by the Affordable Care Act (that is, the 

time periods for which the temporary 

changes provided for by the Affordable 

Care Act, as extended by the ATRA, do 

not apply). Section 1105 of the Pathway 

for SGR Reform Act amends section 

1886(d)(12)(B) by striking ‘‘fiscal year 

2014 and subsequent fiscal years’’ and 

inserting ‘‘the portion of fiscal year 2014 

beginning on April 1, 2014, fiscal year 

2015, and subsequent fiscal years.’’ 

Section 1886(d)(12)(C)(i) of the Act, 

which specifies the definition of a lowvolume hospital, is amended by 

inserting ‘‘and the portion of fiscal year 

2014 before’’ after ‘‘and 2013,’’ each 

place it appears and by inserting ‘‘or 

portion of fiscal year’’ after ‘‘during the 

fiscal year.’’ Lastly, section 

1886(d)(12)(D) of the Act, which sets 

forth the temporary applicable 

percentage increase provided for by the 

provisions of the Affordable Care Act 

and extended by the ATRA, is amended 

by inserting ‘‘and the portion of fiscal 

year 2014 before April 1, 2014,’’ after 

‘‘and 2013,’’ and by inserting ‘‘or the 

portion of fiscal year’’ after ‘‘in the fiscal 

year’’. 

As noted previously, section 1105 of 

the Pathway for SGR Reform Act 

amends the definition of a low-volume 

hospital in subparagraph (C)(i) of 

section 1886(d)(12) of the Act by 

inserting ‘‘and the portion of fiscal year 

2014 before’’ after ‘‘and 2013,’’ each 

place it appears. This amendatory text 

appears to contain a technical error in 

that it omits ‘‘April 1, 2014’’ which is 

the date ‘‘before’’ which the temporary 

changes to the low-volume hospital 

definition are applicable. As amended 

by section 1105 of the Pathway for SGR 

Reform Act, section 1886(d)(12)(C)(i) of 

the Act reads: ‘‘For purposes of this 

paragraph, the term ‘‘low-volume 

hospital’’ means, for a fiscal year, a 

subsection (d) hospital (as defined in 

paragraph (1)(B)) that the Secretary 

determines is located more than 25 road 

miles (or, with respect to fiscal years 

2011, 2012, and 2013, and the portion 

of fiscal year 2014 before 15 road miles) 

from another subsection (d) hospital and 

has less than 800 discharges (or, with 

respect to fiscal years 2011, 2012, and 

2013, and the portion of fiscal year 2014 

before 1,600 discharges of individuals 

entitled to, or enrolled for, benefits 

under part A) during the fiscal year or 

the portion of fiscal year.’’ Adding 

‘‘April 1, 2014’’ after ‘‘and the portion 

of fiscal year 2014 before’’ would make 

the applicable period for the changes to 

section 1886(d)(12)(C) of the Act 

consistent with the applicable period 

under the other amendments to section 

1886(d)(12) of the Act, which plainly 

state that the temporary changes to the 

low-volume hospital payment 

adjustment are applicable ‘‘before April 

1, 2014.’’ Specifically, as amended by 

section 1105 of the Pathway for SGR 

Reform Act, section 1886(d)(12)(D) of 

the Act specifies that the ‘‘temporary 


sroberts on DSK5SPTVN1PROD with RULES
15024 Federal Register / Vol. 79, No. 52 / Tuesday, March 18, 2014 / Rules and Regulations 

applicable percentage increase’’ 

(provided for by the provisions of the 

Affordable Care Act as extended by the 

ATRA) is applicable ‘‘[f]or discharges 

occurring in fiscal years 2011, 2012, and 

2013, and the portion of fiscal year 2014 

before April 1, 2014’’. Similarly, as 

amended by section 1105 of the 

Pathway for SGR Reform Act, section 

1886(d)(12)(B) of the Act specifies that 

the applicable percentage increase 

under the original low-volume hospital 

payment adjustment policy (prior to the 

amendments made by the Affordable 

Care Act, as extended by the ATRA) 

applies ‘‘[f]or discharges occurring in 

fiscal years 2005 through 2010 and for 

discharges occurring in the portion of 

fiscal year 2014 beginning on April 1, 

2014, fiscal year 2015, and subsequent 

fiscal years’’. Thus we believe it is clear 

that ‘‘April 1, 2014’’ was inadvertently 

omitted from the amendment to the lowvolume hospital definition at section 

1886(d)(12)(C)(i) of the Act under the 

extension provided for by section 1105 

of the Pathway for SGR Reform Act and 

that the temporary changes to this 

definition are applicable to FYs 2011, 

2012, and 2013, and the portion of FY 

2014 before April 1, 2014, consistent 

with the amendments made to 

subparagraphs (B) and (D) of section 

1886(d)(12) of the Act by section 1105 

of the Pathway for SGR Reform Act. 

Accordingly, in this interim final rule 

with comment period, in implementing 

section 1105 of the Pathway for SGR 

Reform Act, we are establishing that the 

temporary changes to the low-volume 

hospital definition specified in section 

1886(d)(12)(C)(i) of the Act (and 

implemented in § 412.101(b)(2)(ii)) are 

applicable to FYs 2011, 2012, and 2013, 

and the portion of FY 2014 before April 

1, 2014 (that is, through March 31, 

2014). As discussed later, we are 

revising the regulation text at 

§ 412.101(b)(2)(ii) to reflect the 

extension of the temporary changes to 

the low-volume hospital definition 

through March 31, 2014. 

To implement the extension of the 

temporary change in the low-volume 

hospital payment policy through the 

first half of FY 2014 (that is, for 

discharges occurring through March 31, 

2014) provided for by the Pathway for 

SGR Reform Act, in accordance with the 

existing regulations at § 412.101(b)(2)(ii) 

and consistent with our implementation 

of the changes in FYs 2011 and 2012 

and the extension of those changes in 

FY 2013, we are updating the discharge 

data source used to identify qualifying 

low-volume hospitals and calculate the 

payment adjustment (percentage 

increase) for FY 2014 discharges 

occurring before April 1, 2014. Under 

existing § 412.101(b)(2)(ii), for FYs 2011, 

2012 and 2013, a hospital’s Medicare 

discharges from the most recently 

available MedPAR data, as determined 

by CMS, are used to determine if the 

hospital meets the discharge criteria to 

receive the low-volume payment 

adjustment in the current year. The 

applicable low-volume percentage 

increase, as originally provided for by 

the provisions of the Affordable Care 

Act, is determined using a continuous 

linear sliding scale equation that results 

in a low-volume hospital payment 

adjustment ranging from an additional 

25 percent for hospitals with 200 or 

fewer Medicare discharges to a zero 

percent additional payment adjustment 

for hospitals with 1,600 or more 

Medicare discharges. 

For FY 2014 discharges occurring 

before April 1, 2014, consistent with our 

historical policy, qualifying low-volume 

hospitals and their payment adjustment 

will be determined using Medicare 

discharge data from the March 2013 

update of the FY 2012 MedPAR file, as 

these data were the most recent data 

available at the time of the development 

of the FY 2014 payment rates and 

factors established in the FY 2014 IPPS/ 

LTCH PPS final rule. Table 14 of this 

interim final rule with comment period 

(which is available only through the 

Internet on the CMS Web site at http:// 

www.cms.hhs.gov/AcuteInpatientPPS/

01_overview.asp) lists the ‘‘subsection 

(d)’’ hospitals with fewer than 1,600 

Medicare discharges based on the March 

2013 update of the FY 2012 MedPAR 

files and their FY 2014 low-volume 

payment adjustment (if eligible). 

Eligibility for the low-volume hospital 

payment adjustment for the first 6 

months of FY 2014 is also dependent 

upon meeting (in the case of a hospital 

that did not qualify for the low-volume 

hospital payment adjustment in FY 

2013) or continuing to meet (in the case 

of a hospital that did qualify for the lowvolume hospital payment adjustment in 

FY 2013) the mileage criterion specified 

at § 412.101(b)(2)(ii). We note that the 

list of hospitals with fewer than 1,600 

Medicare discharges in Table 14 does 

not reflect whether or not the hospital 

meets the mileage criterion. A hospital 

also must be located more than 15 road 

miles from any other IPPS hospital in 

order to qualify for a low-volume 

hospital payment adjustment for FY 

2014 discharges occurring before April 

1, 2014. 

In order to receive a low-volume 

hospital payment adjustment under 

§ 412.101, in accordance with our 

previously established procedure, a 

hospital must notify and provide 

documentation to its Medicare 

Administrative Contractor (MAC) that it 

meets the mileage criterion. The use of 

a Web-based mapping tool, such as 

MapQuest, as part of documenting that 

the hospital meets the mileage criterion 

for low-volume hospitals, is acceptable. 

The MAC will determine if the 

information submitted by the hospital, 

such as the name and street address of 

the nearest hospitals, location on a map, 

and distance (in road miles, as defined 

in the regulations at § 412.101(a)) from 

the hospital requesting low-volume 

hospital status, is sufficient to document 

that the hospital requesting low-volume 

hospital status meets the mileage 

criterion. The MAC may follow up with 

the hospital to obtain additional 

necessary information to determine 

whether or not the hospital meets the 

low-volume hospital mileage criterion. 

In addition, the MAC will refer to the 

hospital’s Medicare discharge data 

determined by CMS (as provided in 

Table 14, which is available only 

through the Internet on the CMS Web 

site at http://www.cms.hhs.gov/

AcuteInpatientPPS/01_overview.asp) to 

determine whether or not the hospital 

meets the discharge criterion, and the 

amount of the payment adjustment for 

FY 2014 discharges occurring before 

April 1, 2014, once it is determined that 

the mileage criterion has been met. The 

Medicare discharge data shown in Table 

14, as well as the Medicare discharge 

data for all ‘‘subsection (d)’’ hospitals 

with claims in the March 2013 update 

of the FY 2012 MedPAR file, is also 

available on the CMS Web site for 

hospitals to view the count of their 

Medicare discharges. The data can be 

used to help hospitals decide whether 

or not to apply for low-volume hospital 

status. 

Consistent with our previously 

established procedure, we are 

implementing the following procedure 

for a hospital to request low-volume 

hospital status for FY 2014 discharges 

occurring before April 1, 2014. In order 

for the applicable low-volume 

percentage increase to be applied to 

payments for its discharges beginning 

on or after October 1, 2013 (that is, the 

beginning of FY 2014), a hospital must 

make its request for low-volume 

hospital status in writing and this 

request must be received by its MAC no 

later than March 31, 2014. A hospital 

that qualified for the low-volume 

payment adjustment in FY 2013 may 

continue to receive a low-volume 

payment adjustment for FY 2014 

discharges occurring before April 1, 

2014 without reapplying if it continues 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 79, No. 52 / Tuesday, March 18, 2014 / Rules and Regulations 15025 

to meet the Medicare discharge 

criterion, based on the March 2013 

update of the FY 2012 MedPAR data 

(shown in Table 14), and the distance 

criterion; however, the hospital must 

send written verification that is received 

by its MAC no later than March 31, 

2014, that it continues to be more than 

15 miles from any other ‘‘subsection 

(d)’’ hospital. This procedure is similar 

to the policy we established in the FY 

2013 IPPS notice (78 FR 14689) 

implementing the extension of the 

temporary changes to the low-volume 

hospital payment adjustment for FY 

2013 provided by section 605 of the 

ATRA, as well as the procedure for a 

hospital to request low-volume hospital 

status in the FY 2011 IPPS/LTCH final 

rule (see 75 FR 50274 through 50275) 

and FY 2012 IPPS/LTCH final rule (see 

76 FR 51680) under the provisions of 

the Affordable Care Act. 

Requests for low-volume hospital 

status for FY 2014 discharges occurring 

before April 1, 2014 that are received by 

the MAC after March 31, 2014 will be 

processed by the MAC, however, the 

hospital will not be eligible to have the 

low-volume hospital payment 

adjustment at § 412.101(c)(2) applied to 

such discharges. In general, this 

approach is consistent with our 

procedure for application of the 

extension of the changes to the lowvolume payment adjustment for FY 

2013 provided for by the ATRA to 

payments for discharges beginning on or 

after October 1, 2012. The MAC also 

will not apply the low-volume hospital 

payment adjustment at § 412.101(c)(2) 

prospectively in determining payments 

for the hospital’s FY 2014 discharges, 

because, beginning on April 1, 2014, the 

6-month extension of the temporary 

changes to the low-volume hospital 

payment adjustment policy provided for 

by the Pathway for SGR Reform Act will 

have expired and the low-volume 

hospital definition and payment 

methodology will revert back to the 

statutory requirements that were in 

effect prior to the amendments made by 

the Affordable Care Act. If the hospital 

would have otherwise met the criteria to 

qualify as a low-volume hospital under 

the temporary changes to the lowvolume hospital policy, the MAC will 

notify the hospital that, although the 

hospital meets the low-volume hospital 

criteria set forth at § 412.101(b)(2)(ii) 

and would have had low-volume 

hospital status within 30 days from the 

date of the determination, the hospital 

does not meet the criteria for lowvolume hospital status applicable for 

discharges occurring on or after April 1, 

2014 at § 412.101(b)(2)(i). 

Program guidance on the systems 

implementation of these provisions, 

including changes to PRICER software 

used to make payments, will be 

announced in an upcoming transmittal. 

In this interim final rule with comment, 

we are amending the regulations text at 

42 CFR 412.101 to make conforming 

changes to the qualifying criteria and 

the payment adjustment for low-volume 

hospitals according to the amendments 

made by section 1105 of the Pathway for 

SGR Reform Act discussed previously. 

In accordance with section 

1886(d)(12) of the Act, beginning on 

April 1, 2014, the low-volume hospital 

definition and payment adjustment 

methodology will revert back to the 

statutory requirements that were in 

effect prior to the amendments made by 

the Affordable Care Act (as amended by 

the ATRA and the Pathway for SGR 

Reform Act). Specifically, for FY 2014 

discharges occurring on or after April 1, 

2014 and in subsequent years, in order 

to qualify as a low-volume hospital, a 

subsection (d) hospital must be more 

than 25 road miles from another 

subsection (d) hospital and have less 

than 200 discharges (that is, less than 

200 total discharges, including both 

Medicare and non-Medicare discharges) 

during the fiscal year. (For additional 

information on the expiration of the 

temporary changes to the low-volume 

hospital payment adjustment, refer to 

section V.C.3. of the preamble of the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50612).) 

B. Extension of the MedicareDependent, Small Rural Hospital (MDH) 

Program 

Section 1106 of the Pathway for SGR 

Reform Act of 2013 provides for a 6- 

month extension of the Medicaredependent, small rural hospital (MDH) 

program, effective from October 1, 2013 

to March 31, 2014. Specifically, section 

1106 of the Pathway for SGR Reform Act 

amended sections 1886(d)(5)(G)(i) and 

1886(d)(5)(G)(ii)(II) of the Act by 

striking ‘‘October 1, 2013’’ and inserting 

‘‘April 1, 2014’’. Section 1106 of the 

Pathway for SGR Reform Act also made 

conforming amendments to sections 

1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of 

the Act. Generally, as a result of this 

extension, a provider that was classified 

as an MDH as of the September 30, 2013 

expiration of the MDH program, will be 

reinstated as an MDH effective October 

1, 2013 through March 31, 2014, subject 

to the requirements of the regulations at 

§ 412.108, with no need to reapply for 

MDH classification. (For additional 

information on the MDH program and 

the payment methodology, refer to the 

FY 2012 IPPS/LTCH PPS final rule (76 

FR 51683 through 51684).) 

Prior to the enactment of the ATRA, 

under section 3124 of the Affordable 

Care Act, the MDH program authorized 

by section 1886(d)(5)(G) of the Act was 

to expire at the end of FY 2012. Section 

606 of the ATRA extended the MDH 

program through FY 2013. In the FY 

2013 IPPS notice (78 FR 14689), we 

announced the extension of the MDH 

program through FY 2013 as provided 

by section 606 of the ATRA. We made 

the conforming regulatory changes in 

the FY 2014 IPPS/LTCH final rule (78 

FR 50648 and 50966), amending the 

regulations at § 412.108(a)(1) and 

(c)(2)(iii) to reflect the statutory 

extension of the MDH program through 

FY 2013. 

In this FY 2014 IPPS interim final rule 

with comment period, we are amending 

the regulations at § 412.108(a)(1) and 

(c)(2)(iii) to reflect the statutory 

extension of the MDH program through 

March 31, 2014, as provided for by 

section 1106 of the Pathway for SGR 

Reform Act. Since MDH status is now 

extended by statute through March 31, 

2014, generally, hospitals that 

previously qualified for MDH status will 

be reinstated as an MDH retroactively to 

October 1, 2013. However, in the 

following two situations, the effective 

date of MDH status may not be 

retroactive to October 1, 2013. 

1. MDHs That Classified as Sole 

Community Hospitals (SCHs) On or 

After October 1, 2013 

In anticipation of the September 30, 

2013 expiration of the MDH provision, 

and because a hospital cannot be both 

an SCH and an MDH (see section 

1886(d)(5)(G)(iv)(III) of the Act and 

§ 412.108(a)(1)(ii)), we allowed MDHs 

that applied for reclassification as sole 

community hospitals (SCHs) by August 

31, 2013, to have such status be effective 

on October 1, 2013 under the 

regulations at § 412.92(b)(2)(v). MDHs 

that applied by the August 31, 2013 

deadline and were approved for SCH 

classification received SCH status 

effective October 1, 2013. Hospitals that 

applied for SCH status after the August 

31, 2013 SCH application deadline 

would have been subject to the usual 

effective date for SCH classification, that 

is, 30 days after the date of CMS’ written 

notification of approval, resulting in an 

effective date of SCH status later than 

October 1, 2013. (This policy was noted 

in the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50648).) 

In order to be reclassified as an MDH, 

these hospitals must first cancel their 

SCH status according to § 412.92(b)(4), 

because a hospital cannot be both an 


sroberts on DSK5SPTVN1PROD with RULES
15026 Federal Register / Vol. 79, No. 52 / Tuesday, March 18, 2014 / Rules and Regulations 

SCH and an MDH, and then reapply and 

be approved for MDH status under 

§ 412.108(b). However, we note that 

because the partial year extension of the 

MDH program pursuant to section 1106 

of the Pathway to SGR Reform Act 

expires on March 31, 2014, there may 

not be sufficient time for hospitals that 

have reclassified as SCHs in 

anticipation of the expiration of the 

MDH program to cancel their SCH status 

in accordance with § 412.92(b)(4) and 

then reapply and be approved for MDH 

status under § 412.108(b) with an 

effective date prior to the March 31, 

2014 expiration of the MDH program. 

Under § 412.92(b)(4), a hospital’s 

cancellation of its SCH classification 

becomes effective no later than 30 days 

after the date the hospital submits its 

request. Under § 412.108(b)(3), the 

Medicare contractor will make a 

determination regarding whether a 

hospital meets the criteria for MDH 

status and notify the hospital within 90 

days from the date that it receives the 

hospital’s request and all of the required 

documentation. Under § 412.108(b)(4), a 

determination of MDH status made by 

the Medicare contractor is effective 30 

days after the date the fiscal 

intermediary provides written 

notification to the hospital. 

2. MDHs That Requested a Cancellation 

of Their Rural Classification Under 

§ 412.103(b) 

One of the criteria to be classified as 

an MDH is that the hospital must be 

located in a rural area. To qualify for 

MDH status, some MDHs reclassified 

from an urban to a rural hospital 

designation, under the regulations at 

§ 412.103(b). With the September 30, 

2013 expiration of the MDH provision, 

some of these providers may have 

requested a cancellation of their rural 

classification. Therefore, in order to 

qualify for MDH status, these hospitals 

must again request to be reclassified as 

rural under § 412.103(b) and must also 

reapply for MDH status under 

§ 412.108(b). 

We note that because the partial year 

extension of the MDH program pursuant 

to section 1106 of the Pathway to SGR 

Reform Act expires on March 31, 2014, 

there may not be sufficient time for 

hospitals that have canceled their rural 

reclassification in anticipation of the 

expiration of the MDH program to 

request to be reclassified as rural under 

§ 412.103(b) and then reapply and be 

approved for MDH status under 

§ 412.108(b) with an effective date 

before the March 31, 2014 expiration of 

the MDH program. As noted previously, 

under § 412.108(b)(3), the Medicare 

contractor will make a determination 

regarding whether a hospital meets the 

criteria for MDH status and notify the 

hospital within 90 days from the date 

that it receives the hospital’s request 

and all of the required documentation. 

Under § 412.108(b)(4), a determination 

of MDH status made by the Medicare 

contractor is effective 30 days after the 

date the fiscal intermediary provides 

written notification to the hospital. 

Any provider that falls within either 

of the two exceptions listed previously 

may not have its MDH status 

automatically reinstated effective 

October 1, 2013. That is, if a provider 

reclassified to SCH status or cancelled 

its rural status effective October 1, 2013, 

its MDH status will not be retroactive to 

October 1, 2013, but will instead be 

applied prospectively, if time permits, 

based on the date the hospital is notified 

that it again meets the requirements for 

MDH status, in accordance with 

§ 412.108(b)(4), after the hospital 

reapplies for MDH status. Once granted, 

this MDH status will remain in effect 

through March 31, 2014, subject to the 

requirements at § 412.108. However, if a 

provider reclassified to SCH status or 

cancelled its rural status effective on a 

date later than October 1, 2013, MDH 

status will be reinstated effective from 

October 1, 2013 but will end on the date 

on which the provider changed its 

status to an SCH or cancelled its rural 

status. Those hospitals may also reapply 

for MDH status to be effective again 30 

days from the date the hospital is 

notified of the determination, in 

accordance with § 412.108(b)(4). Once 

granted, this status will remain in effect 

through March 31, 2014 subject to the 

requirements at § 412.108. Providers 

that fall within either of the two 

exceptions, in order to reclassify as an 

MDH, will have to reapply for MDH 

status according to the classification 

procedures in 42 CFR 412.108(b). 

Specifically, the regulations at 

§ 412.108(b) require the following: 

• The hospital submit a written 

request along with qualifying 

documentation to its contractor to be 

considered for MDH status. 

• The contractor make its 

determination and notify the hospital 

within 90 days from the date that it 

receives the request for MDH 

classification and all required 

documentation. 

• The determination of MDH status 

be effective 30 days after the date of the 

contractor’s written notification to the 

hospital. 

For any MDH status requests received 

after March 31, 2014 (or for which the 

Medicare contractor’s determination is 

made within 30 days of March 31, 2014, 

such that the effective date of MDH 

status would be after March 31, 2014), 

the Medicare contractor will process the 

request and send a letter to the hospital 

indicating that, although the hospital 

meets the MDH classification criteria set 

forth at § 412.108(a) and would have 

had a MDH status effective date of 30 

days from the date of that letter, the 

MDH program has expired by that date 

under current law. That is, because 

section 1106 of the Pathway for SGR 

Reform Act extends the MDH program 

through March 31, 2014 only, MDH 

status cannot be applied for requests 

received after March 31, 2014 (or for 

which the Medicare contractor’s 

determination is made within 30 days of 

March 31, 2014, such that the effective 

date of MDH status would be after 

March 31, 2014). The following are 

examples of various scenarios that 

illustrate how and when MDH status 

under section 1106 of the Pathway to 

SGR Reform Act will be determined for 

hospitals that were MDHs as of the 

September 30, 2013 expiration of the 

MDH program, subject to the timing 

considerations we have described 

previously: 

Example 1: Hospital A was classified 

as an MDH as of the September 30, 2013 

expiration of the MDH program. 

Hospital A retained its rural 

classification and did not reclassify as 

an SCH. Hospital A’s MDH status will 

be automatically reinstated retroactively 

to October 1, 2013. 

Example 2: Hospital B was classified 

as an MDH as of the September 30, 2013 

expiration of the MDH program. Per the 

regulations at § 412.92(b)(2)(v) and in 

anticipation of the expiration of the 

MDH program, Hospital B applied for 

reclassification as an SCH by August 31, 

2013, and was approved for SCH status 

effective on October 1, 2013. Hospital 

B’s MDH status will not be 

automatically reinstated. In order to 

reclassify as an MDH, Hospital B must 

first cancel its SCH status, in accordance 

with § 412.92(b)(4), and reapply for 

MDH status under the regulations at 

§ 412.108(b). 

Example 3: Hospital C was classified 

as an MDH as of the September 30, 2013 

expiration of the MDH program. 

Hospital C missed the application 

deadline of August 31, 2013 for 

reclassification as an SCH under the 

regulations at § 412.92(b)(2)(v) and was 

not eligible for its SCH status to be 

effective as of October 1, 2013. The 

MAC approved Hospital C’s request for 

SCH status effective November 16, 2013. 

Hospital C’s MDH status will be 

reinstated effective October 1, 2013 

through November 15, 2013 and MDH 

status will be cancelled effective 

November 16, 2013. In order to 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 79, No. 52 / Tuesday, March 18, 2014 / Rules and Regulations 15027 

reclassify as an MDH, Hospital C must 

cancel its SCH status, in accordance 

§ 412.92(b)(4), and reapply for MDH 

status under the regulations at 

§ 412.108(b). 

Example 4: Hospital D was classified 

as an MDH as of the September 30, 2013 

expiration of the MDH program. In 

anticipation of the expiration of the 

MDH program, Hospital D requested 

that its rural classification be cancelled 

per the regulations at § 412.103(g). 

Hospital D’s rural classification was 

cancelled effective October 1, 2013. 

Hospital D’s MDH status will not be 

automatically reinstated. In order to 

reclassify as an MDH, Hospital D must 

first request to be reclassified as rural 

under § 412.103(b) and must reapply for 

MDH status under § 412.108(b). 

Example 5: Hospital E was classified 

as an MDH as of the September 30, 2013 

expiration of the MDH program. In 

anticipation of the expiration of the 

MDH program, Hospital E requested that 

its rural classification be cancelled per 

the regulations at § 412.103(g). Hospital 

E’s rural classification was cancelled 

effective January 1, 2014. Hospital E’s 

MDH status will be reinstated but only 

for the period of time during which it 

met the criteria for MDH status. Since 

Hospital E cancelled its rural status and 

was classified as urban effective January 

1, 2014, MDH status will only be 

reinstated effective October 1, 2013 

through December 31, 2013, and will be 

cancelled effective January 1, 2014. In 

order to reclassify as an MDH, Hospital 

E must first request to be reclassified as 

rural under § 412.103(b) and must 

reapply for MDH status under 

§ 412.108(b). 

Finally, we note that hospitals 

continue to be bound by 

§ 412.108(b)(4)(i) through (iii) to report 

a change in the circumstances under 

which the status was approved. Thus, if 

a hospital’s MDH status has been 

extended and it no longer meets the 

requirements for MDH status, it is 

required under § 412.108(b)(4)(i) 

through (iii) to make such a report to its 

MAC. Additionally, under the 

regulations at § 412.108(b)(5), Medicare 

contractors are required to evaluate on 

an ongoing basis whether or not a 

hospital continues to qualify for MDH 

status. 

Program guidance on the systems 

implementation of these provisions, 

including changes to PRICER software 

used to make payments, will be 

announced in an upcoming transmittal. 

A provider affected by the MDH 

program extension will receive a notice 

from its MAC detailing its status in light 

of the MDH program extension. In this 

interim final rule with comment period, 

we are making conforming changes to 

the regulations text at § 412.108(a)(1) 

and (c)(2)(iii) to reflect the changes 

made by section 1106 of the Pathway to 

SGR Reform Act of 2013. 

We also note that, in the FY 2014 

IPPS/LTCH PPS final rule (78 FR 50620 

through 50647), we implemented the 

changes to the payment adjustment 

methodology for Medicare 

disproportionate share hospitals (DSHs) 

required under section 3133 of the 

Affordable Care Act, which includes the 

new ‘‘uncompensated care payment’’ 

that began in FY 2014. In that same final 

rule (78 FR 50645), we adopted a policy 

of including an interim uncompensated 

care payment in the payment for each 

hospital discharge (that is, distributing 

interim uncompensated care payments 

on a per-discharge basis). At cost report 

settlement, we reconcile the total 

amounts paid on a per-discharge basis 

during the Federal fiscal year with the 

amount of the uncompensated care 

payment calculated for each hospital. 

SCHs are paid based on their hospitalspecific rate from certain specified base 

years or the Federal rate, whichever 

yields the greatest aggregate payment for 

the hospital’s cost reporting period. In 

the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 50644), we established a policy 

of including the uncompensated care 

payment amount as part of the Federal 

rate payment in the comparison of 

payments under the hospital-specific 

rate and the Federal rate for SCHs. 

Uncompensated care payments to MDHs 

were not explicitly addressed in the FY 

2014 IPPS/LTCH PPS final rule because, 

prior to the enactment of the Pathway 

for SGR Reform Act, the MDH program 

was to expire at the end of FY 2013. 

Section 1886(d)(5)(G) of the Act 

provides that, for discharges occurring 

on or after October 1, 2006, MDHs are 

paid based on the Federal rate or, if 

higher, the Federal rate plus 75 percent 

of the amount by which the Federal rate 

is exceeded by the updated hospitalspecific rate from certain specified base 

years (see 76 FR 51684). The ‘‘Federal 

rate’’ used in the MDH payment 

methodology is the same ‘‘Federal rate’’ 

that is used in the SCH payment 

methodology. Accordingly, consistent 

with the policy established for SCHs in 

the FY 2014 IPPS/LTCH PPS final rule, 

in determining MDH payments for 

discharges occurring on or after October 

1, 2013 and before April 1, 2014, a pro 

rata share of the uncompensated care 

payment amount for that period will be 

included as part of the Federal rate 

payment in the comparison of payments 

under the hospital-specific rate and the 

Federal rate. That is, in making this 

comparison at cost report settlement, we 

will include the pro rata share of the 

uncompensated care payment amount 

that reflects the period of time the 

hospital was paid under the MDH 

program for its discharges occurring on 

or after October 1, 2013 and before April 

1, 2014. Consistent with the policy 

established for hospitals with Medicare 

cost reporting periods that span more 

than one Federal fiscal year in the 

interim final rule that appeared in the 

October 3, 2013 Federal Register titled 

‘‘FY 2014 IPPS Changes to Certain Cost 

Reporting Procedures Related to 

Disproportionate Share Hospital 

Uncompensated Care Payments’’ (78 FR 

61191), this pro rata share will be 

determined based on the proportion of 

the applicable Federal fiscal year that is 

included in that cost reporting period 

(78 FR 61192 through 61194). 

Section 1106 of the Pathway for SGR 

Reform Act provides for an extension of 

the MDH program through March 31, 

2014, only. Therefore, beginning April 

1, 2014, all hospitals that previously 

qualified for MDH status will no longer 

have MDH status. At that time, the 

general policy and payment 

methodology will be the same as 

discussed in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50648). 

III. Collection of Information 

Requirements 

This document does not impose 

information collection and 

recordkeeping requirements. 

Consequently, it need not be reviewed 

by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 35). 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Waiver of Proposed Rulemaking and 

Delay of Effective Date 

We ordinarily publish a notice of 

proposed rulemaking in the Federal 

Register and invite public comment 

prior to a rule taking effect in 

accordance with section 553(b) of the 

Administrative Procedure Act (APA) 

and section 1871 of the Act. In addition, 

in accordance with section 553(d) of the 

APA and section 1871(e)(1)(B)(i) of the 

Act, we ordinarily provide a 30-day 


sroberts on DSK5SPTVN1PROD with RULES
15028 Federal Register / Vol. 79, No. 52 / Tuesday, March 18, 2014 / Rules and Regulations 

delay to a substantive rule’s effective 

date. For substantive rules that 

constitute major rules, in accordance 

with 5 U.S.C. 801, we ordinarily provide 

a 60-day delay in the effective date. 

None of the processes or effective date 

requirements apply, however, when the 

rule in question is interpretive, a general 

statement of policy, or a rule of agency 

organization, procedure or practice. 

They also do not apply when the statute 

establishes rules to be applied, leaving 

no discretion or gaps for an agency to 

fill in through rulemaking. 

In addition, an agency may waive 

notice and comment rulemaking, as well 

as any delay in effective date, when the 

agency for good cause finds that notice 

and public comment on the rule as well 

the effective date delay are 

impracticable, unnecessary, or contrary 

to the public interest. In cases where an 

agency finds good cause, the agency 

must incorporate a statement of this 

finding and its reasons in the rule 

issued. 

The Pathway for SGR Reform Act 

requires the agency make the changes to 

the payment adjustment for low-volume 

hospitals and the MDH program set 

forth in this interim final rule with 

comment period for an additional 6 

months, effective October 1, 2013 

through March 31, 2014. We are 

conforming our regulations to specific 

statutory requirements contained in 

sections 1105 and 1106 of the Pathway 

to SGR Reform Act or that directly result 

from those statutory requirements and 

informing the public of the procedures 

and practices the agency will follow to 

ensure compliance with those statutory 

provisions. To the extent that notice and 

comment rulemaking or a delay in 

effective date or both would otherwise 

apply, we believe that there is good 

cause to waive such requirements and to 

implement the requirements of section 

1105 and 1106 of the Pathway to SGR 

Reform Act through an interim final rule 

with comment period. Specifically, we 

find it unnecessary to undertake notice 

and comment rulemaking in this 

instance because this interim final rule 

with comment period sets forth the 

requirements for the extension of the 

temporary changes to the payment 

adjustment for low-volume hospitals 

and the MDH program as prescribed by 

the Pathway to SGR Reform Act. As the 

changes outlined in this interim final 

rule with comment period have already 

taken effect, it would also be 

impracticable to undertake notice and 

comment rulemaking. For the reasons 

outlined, we find good cause to waive 

the notice of proposed rulemaking for 

the requirements for the extension of the 

temporary changes to the payment 

adjustment for low-volume hospitals 

and the MDH program as prescribed by 

the Pathway to SGR Reform Act and 

issue these provisions on an interim 

final basis. Even though we are waiving 

notice of proposed rulemaking 

requirements and are issuing these 

provisions on an interim basis, we are 

providing a 60-day public comment 

period. 

For these reasons, we also find that a 

waiver of any delay in effective date, if 

it were otherwise applicable, is 

necessary to comply with the 

requirements of the Pathway for SGR 

Reform Act of 2013. Therefore, we find 

good cause to waive notice and 

comment procedures as well as any 

delay in effective date. 

VI. Regulatory Impact Analysis 

A. Introduction 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Social 

Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(Pub. L. 104–4), Executive Order 13132 

on Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. A 

regulatory impact analysis (RIA) must 

be prepared for regulatory actions with 

economically significant effects ($100 

million or more in any 1 year). The 

changes announced in this interim final 

rule with comment period are 

‘‘economically’’ significant, under 

section 3(f)(1) of Executive Order 12866, 

and therefore we have prepared a RIA, 

that to the best of our ability, presents 

the costs and benefits of this interim 

final rule with comment period. In 

accordance with Executive Order 12866, 

this interim final rule with comment 

period has been reviewed by the Office 

of Management and Budget. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses, if a rule has a significant 

impact on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

government jurisdictions. We estimate 

that most hospitals and most other 

providers and suppliers are small 

entities as that term is used in the RFA. 

The great majority of hospitals and most 

other health care providers and 

suppliers are small entities, either by 

being nonprofit organizations or by 

meeting the Small Business 

Administration definition of a small 

business (having revenues of less than 

$7.5 to $34.5 million in any 1 year). (For 

details on the latest standard for health 

care providers, we refer readers to page 

33 of the Table of Small Business Size 

Standards at the Small Business 

Administration’s Web site at http://

www.sba.gov/services/

contractingopportunities/

sizestandardstopics/tableofsize/

index.html.) For purposes of the RFA, 

all hospitals and other providers and 

suppliers are considered to be small 

entities. Individuals and States are not 

included in the definition of a small 

entity. We believe that this interim final 

rule with comment period will have a 

significant impact on small entities. 

Because we acknowledge that many of 

the affected entities are small entities, 

the analysis discussed in this section 

would fulfill any requirement for a final 

regulatory flexibility analysis. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. With the exception of hospitals 

located in certain New England 

counties, for purposes of section 1102(b) 

of the Act, we now define a small rural 

hospital as a hospital that is located 

outside of an urban area and has fewer 

than 100 beds. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

(Pub. L. 104–4) also requires that 

agencies assess anticipated costs and 

benefits before issuing any rule whose 

mandates require spending in any 1 year 

of $100 million in 1995 dollars, updated 

annually for inflation. In 2014, that 

threshold is approximately $141 

million. This interim final rule with 

comment period will not mandate any 

requirements for State, local, or tribal 

governments, nor will it affect private 

sector costs. 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 79, No. 52 / Tuesday, March 18, 2014 / Rules and Regulations 15029 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

This interim final rule with comment 

period will not have a substantial effect 

on State and local governments. 

Although this interim final rule with 

comment period merely reflects the 

implementation of two provisions of the 

Pathway for SGR Reform Act of 2013, 

we nevertheless prepared this impact 

analysis in the interest of ensuring that 

the impacts of these changes are fully 

understood. The following analysis, in 

conjunction with the remainder of this 

document, demonstrates that this 

interim final rule with comment period 

is consistent with the regulatory 

philosophy and principles identified in 

Executive Order 12866 and 13563, the 

RFA, and section 1102(b) of the Act. 

The provisions of this interim final rule 

with comment period will positively 

affect payments to a substantial number 

of small rural hospitals and providers, 

as well as other classes of hospitals and 

providers, and the effects on some 

hospitals and providers may be 

significant. The impact analysis, which 

discusses the effect on total payments to 

IPPS hospitals and providers, is 

presented in this section. 

B. Statement of Need 

This interim final rule with comment 

period is necessary to update the FY 

2014 IPPS final payment policies to 

reflect changes required by the 

implementation of two provisions of the 

Pathway for SGR Reform Act. Section 

1105 of the Pathway for SGR Reform Act 

extends the payment adjustment for 

low-volume hospitals through March 

31, 2014. Section 1106 of the Pathway 

for SGR Reform Act extends the MDH 

program through March 31, 2014. As 

noted previously, program guidance on 

the systems implementation of these 

provisions, including changes to 

PRICER software used to make 

payments, will be announced in an 

upcoming transmittal. 

C. Overall Impact 

The FY 2014 IPPS/LTCH PPS final 

rule included an impact analysis for the 

changes to the IPPS included in that 

rule. This interim final rule with 

comment period updates those impacts 

to the IPPS to reflect the changes made 

by sections 1105 and 1106 of the 

Pathway for SGR Reform Act. Since 

these sections were not budget neutral, 

the overall estimates for hospitals have 

changed from our estimates that were 

published in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 51037). We 

estimate that the changes in the FY 2014 

IPPS/LTCH PPS final rule, in 

conjunction with the changes included 

in this interim final rule with comment 

period, will result in an approximate 

$1.44 billion increase in total payments 

to IPPS hospitals relative to FY 2013 

rather than the $1.2 billion increase we 

projected in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 51037). 

D. Anticipated Effects 

The impact analysis reflects the 

change in estimated payments to IPPS 

hospitals in FY 2014 as a result of the 

implementation of sections 1105 and 

1106 of the Pathway for SGR Reform Act 

relative to estimated FY 2014 payments 

to IPPS hospitals that were published in 

the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 51037). As described later in this 

regulatory impact analysis, FY 2014 

IPPS payments to hospitals affected by 

sections 1105 and 1106 of the Pathway 

for SGR Reform Act are projected to 

increase by $227 million (relative to the 

FY 2014 payments estimated for these 

hospitals for the FY 2014 IPPS/LTCH 

PPS final rule). Therefore, we project 

that, on the average, overall IPPS 

payments in FY 2014 for all hospitals 

will increase by approximately an 

additional 0.24 percent as a result of the 

estimated $227 million increase in 

payments due to the provisions in the 

Pathway for SGR Reform Act compared 

to the previous estimate of FY 2014 

payments to all IPPS hospitals 

published in the FY 2014 IPPS/LTCH 

PPS final rule. 

1. Effects of the Extension of the 

Temporary Changes to the Payment 

Adjustment for Low-Volume Hospitals 

The 6-month extension, through 

March 31, 2014, of the temporary 

changes to the payment adjustment for 

low-volume hospitals (originally 

provided for by the Affordable Care Act 

for FYs 2011 and 2012 and extended 

through FY 2013 under section 605 of 

the ATRA) as provided for under 

section 1105 of the Pathway for SGR 

Reform Act is a non-budget neutral 

payment provision. The provisions of 

the Affordable Care Act expanded the 

definition of low-volume hospital and 

modified the methodology for 

determining the payment adjustment for 

hospitals meeting that definition for FYs 

2011 and 2012, and the provisions of 

the ATRA provided for an additional 

year extension, through FY 2013. 

Prior to the enactment of the Pathway 

for SGR Reform Act, beginning October 

1, 2013, the low-volume hospital 

definition and payment adjustment 

methodology was to return to the 

statutory requirements that were in 

effect prior to the amendments made by 

the Affordable Care Act and the ATRA. 

With the additional 6-month extension, 

through March 31, 2014, provided for by 

the Pathway for SGR Reform Act, based 

on FY 2012 claims data (March 2013 

update of the MedPAR file), we estimate 

that approximately 600 hospitals will 

now qualify as a low-volume hospital 

through March 31, 2014. We project that 

these hospitals will experience an 

increase in payments of approximately 

$161 million as compared to our 

previous estimates of payments to these 

hospitals for FY 2014 published in the 

FY 2014 IPPS/LTCH PPS final rule. 

2. Effects of the Extension of the MDH 

Program 

The extension of the MDH program 

through March 31, 2014 as provided for 

under section 1106 of the Pathway for 

SGR Reform Act is a non-budget neutral 

payment provision. Hospitals that 

qualify as a MDHs receive the higher of 

operating IPPS payments made under 

the Federal standardized amount or the 

payments made under the Federal 

standardized amount plus 75 percent of 

the difference between the Federal 

standardized amount and the hospitalspecific rate (a hospital-specific costbased rate). Because this provision is 

not budget neutral, we estimate that the 

extension of this payment provision will 

result in a 0.1 percent increase in 

payments overall. Prior to the extension 

of the MDH program, there were 198 

MDHs, of which 118 were estimated to 

be paid under the blended payment of 

the Federal standardized amount and 

hospital-specific rate in FY 2013 (78 FR 

51019). Because those 118 MDHs will 

now receive the blended payment (that 

is, the Federal standardized amount 

plus 75 percent of the difference 

between the Federal standardized 

amount and the hospital-specific rate) 

for the first half of FY 2014 (until April 

1, 2014), we estimate that those 

hospitals will experience an overall 

increase in payments of approximately 

$66 million as compared to our previous 

estimates of payments to these hospitals 

for FY 2014 published in the FY 2014 

IPPS/LTCH PPS final rule. 

E. Alternatives Considered 

This interim final rule with comment 

period provides descriptions of the 

statutory provisions that are addressed 

and identifies policies for implementing 

these provisions. Due to the prescriptive 

nature of the statutory provisions, no 

alternatives were considered. 


sroberts on DSK5SPTVN1PROD with RULES
15030 Federal Register / Vol. 79, No. 52 / Tuesday, March 18, 2014 / Rules and Regulations 

F. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at http://

www.whitehouse.gov/omb/circulars/

a004/a-4.pdf), in Table I, we have 

prepared an accounting statement 

showing the classification of 

expenditures associated with the 

provisions of this interim final rule with 

comment period as they relate to acute 

care hospitals. This table provides our 

best estimate of the change in Medicare 

payments to providers as a result of the 

changes to the IPPS presented in this 

interim final rule with comment period. 

All expenditures are classified as 

transfers from the Federal government 

to Medicare providers. As previously 

discussed, relative to what was 

projected in the FY 2014 IPPS/LTCH 

PPS final rule, the changes in this 

interim final rule with comment period 

to implement sections 1105 and 1106 of 

the Pathway for SGR Reform Act of 2013 

are projected to increase FY 2014 

payments to IPPS hospitals by 

approximately $227 million. 

TABLE I—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES UNDER THE IPPS FROM PUBLISHED

FY 2014 TO REVISED FY 2014 

Category Transfers 

Annualized Monetized Transfers .............................................................. $227 million. 

From Whom to Whom .............................................................................. Federal Government to IPPS Medicare Providers. 

Total ................................................................................................... $227 million. 

List of Subjects in 42 CFR Part 412 

Administrative practice and 

procedure, Health facilities, Medicare, 

Puerto Rico, Reporting and 

recordkeeping requirements. 

For the reasons stated in the preamble 

of this interim final rule with comment 

period, the Centers for Medicare & 

Medicaid Services is amending 42 CFR 

Chapter IV as follows: 

PART 412—PROSPECTIVE PAYMENT 

SYSTEMS FOR INPATIENT HOSPITAL 

SERVICES 

■ 1. The authority citation for Part 412 

continues to read as follows: 

Authority: Sections 1102, 1862, and 1871 

of the Social Security Act (42 U.S.C. 1302, 

1395y, and 1395hh). 

§ 412.101 [Amended] 

■ 2. Section 412.101 is amended by— 

■ A. In paragraph (b)(2)(i), removing the 

phrase ‘‘FY 2014 and subsequent fiscal 

years,’’ and adding in its place the 

phrase ‘‘the portion of FY 2014 

beginning on April 1, 2014, FY 2015, 

and subsequent fiscal years,’’. 

■ B. In paragraph (b)(2)(ii), removing the 

phrase ‘‘For FY 2011, FY 2012, and FY 

2013,’’ and adding in its place the 

phrase ‘‘For FY 2011, FY 2012, FY 2013, 

and the portion of FY 2014 before April 

1, 2014,’’. 

■ C. In paragraph (c)(1), removing the 

phrase ‘‘FY 2014 and subsequent fiscal 

years,’’ and adding in its place the 

phrase ‘‘the portion of FY 2014 

beginning on April 1, 2014 and 

subsequent fiscal years,’’. 

■ D. In paragraph (c)(2) introductory 

text, removing the phrase ‘‘For FY 2011, 

FY 2012, and FY 2013,’’ and adding in 

its place the phrase ‘‘For FY 2011, FY 

2012, FY 2013, and the portion of FY 

2014 before April 1, 2014,’’. 

■ E. In paragraph (d), removing the 

phrase ‘‘FY 2014 and subsequent fiscal 

years,’’ and adding in its place the 

phrase ‘‘the portion of FY 2014 

beginning on April 1, 2014 and 

subsequent fiscal years,’’. 

§ 412.108 [Amended] 

■ 3. Section 412.108 is amended by— 

■ A. In paragraph (a)(1) introductory 

text, removing the phrase ‘‘before 

October 1, 2013’’ and adding in its place 

the phrase ‘‘before April 1, 2014’’. 

■ B. In paragraph (c)(2)(iii) introductory 

text, removing the phrase ‘‘before 

October 1, 2013’’ and adding in its place 

the phrase ‘‘before April 1, 2014’’. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: February 26, 2014. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: March 6, 2014. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2014–05922 Filed 3–14–14; 11:15 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 412, 413, 414, 419, 424, 

482, 485, and 489 

[CMS–1599–& 1455–CN5] 

RINs 0938–AR53 and 0938–AR73 

Medicare Program; Hospital Inpatient 

Prospective Payment Systems for 

Acute Care Hospitals and the LongTerm Care Hospital Prospective 

Payment System and Fiscal Year 2014 

Rates; Quality Reporting Requirements 

for Specific Providers; Hospital 

Conditions of Participation; Payment 

Policies Related to Patient Status; 

Corrections 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rules; correction. 

SUMMARY: This document corrects 

technical errors in the final rules that 

appeared in the August 19, 2013 

Federal Register titled ‘‘Medicare 

Program; Hospital Inpatient Prospective 

Payment Systems for Acute Care 

Hospitals and the Long-Term Care 

Hospital Prospective Payment System 

and Fiscal Year 2014 Rates; Quality 

Reporting Requirements for Specific 

Providers; Hospital Conditions of 

Participation; Payment Policies Related 

to Patient Status.’’ 

DATES: This correcting document is 

effective on March 18, 2014. 

FOR FURTHER INFORMATION CONTACT: 

Cindy Tourison (410) 786–1093. 

SUPPLEMENTARY INFORMATION: 


sroberts on DSK5SPTVN1PROD with RULES