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[Federal Register Volume 79, Number 52 (Tuesday, March 18, 2014)]
[Rules and Regulations]
[Pages 15022-15030]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05922]

[[Page 15022]]

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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.

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SUMMARY: This interim final rule with comment period implements changes 
to the payment adjustment for low-volume hospitals and to the Medicare-
dependent 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 
Medicare-dependent, 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.

[[Page 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 low-volume 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 volume-hospitals 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 Sec.  412.101(a), the term ``road 
miles'' to mean ``miles'' as defined at Sec.  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 low-volume hospital payment adjustment for FYs 2011 and 
2012). We also noted our intent to make conforming changes to the 
regulations text at Sec.  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 Sec.  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 low-volume 
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 low-volume 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

[[Page 15024]]

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 low-volume 
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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 low-volume hospital payment adjustment in FY 
2013) the mileage criterion specified at Sec.  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 
Sec.  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 Sec.  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

[[Page 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 Sec.  
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 low-volume 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 Sec.  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 low-volume 
hospital policy, the MAC will notify the hospital that, although the 
hospital meets the low-volume hospital criteria set forth at Sec.  
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 low-volume hospital status applicable for discharges 
occurring on or after April 1, 2014 at Sec.  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 Medicare-Dependent, Small Rural Hospital (MDH) 
Program

    Section 1106 of the Pathway for SGR Reform Act of 2013 provides for 
a 6-month extension of the Medicare-dependent, 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 Sec.  
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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  412.92(b)(4), because a 
hospital cannot be both an

[[Page 15026]]

SCH and an MDH, and then reapply and be approved for MDH status under 
Sec.  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 Sec.  412.92(b)(4) and then reapply and be approved for 
MDH status under Sec.  412.108(b) with an effective date prior to the 
March 31, 2014 expiration of the MDH program. Under Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  412.103(b) and must also reapply for 
MDH status under Sec.  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 Sec.  412.103(b) and then reapply and be approved for MDH status 
under Sec.  412.108(b) with an effective date before the March 31, 2014 
expiration of the MDH program. As noted previously, under Sec.  
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 Sec.  
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 Sec.  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 Sec.  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 Sec.  412.108(b)(4). Once granted, 
this status will remain in effect through March 31, 2014 subject to the 
requirements at Sec.  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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  412.92(b)(4), and reapply for MDH status under 
the regulations at Sec.  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 Sec.  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

[[Page 15027]]

reclassify as an MDH, Hospital C must cancel its SCH status, in 
accordance Sec.  412.92(b)(4), and reapply for MDH status under the 
regulations at Sec.  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 Sec.  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 Sec.  412.103(b) and must reapply for MDH 
status under Sec.  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 Sec.  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 Sec.  412.103(b) 
and must reapply for MDH status under Sec.  412.108(b).
    Finally, we note that hospitals continue to be bound by Sec.  
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 Sec.  412.108(b)(4)(i) through (iii) to 
make such a report to its MAC. Additionally, under the regulations at 
Sec.  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 Sec.  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 hospital-specific 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 hospital-
specific 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

[[Page 15028]]

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.

[[Page 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 hospital-specific rate (a hospital-specific 
cost-based 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.

[[Page 15030]]

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

0
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).

Sec.  412.101  [Amended]

0
2. Section 412.101 is amended by--
0
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,''.
0
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,''.
0
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,''.
0
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,''.
0
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,''.

Sec.  412.108  [Amended]

0
3. Section 412.108 is amended by--
0
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''.
0
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
```