Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14851

pharmacokinetics (PK) studies for the

HAPs chemicals, which could provide

the basis for negotiation of enforcable

consent agreements (ECAs). These PK

studies would be used to conduct routeto-route extrapolation of toxicity data

from routes other than inhalation to

predict the effects of inhalation

exposure, as an alternative to testing

proposed under the HAPs rule.

On October 18, 1996, EPA extended

the public comment period on the

proposed rule from December 23, 1996

to January 31, 1997 (61 FR 54383) (FRL–

5571–3). This extension was for the

purpose of allowing more time for the

submission of PK proposals and

adequate time for comments on the

proposed rule to be submitted after the

Agency had responded to the proposals.

EPA received several PK proposals. Due

to the complexity of the issues raised by

these proposals, EPA successively

extended the public comment period

(61 FR 67516, December 23, 1996 (FRL–

5580–6); 62 FR 9142, February 28, 1997)

to allow the Agency more time to

respond to the PK proposals and to

finalize the test guidelines to be

referenced in the proposed HAPs test

rule.

The HAPs proposed rule published on

June 26, 1996 (61 FR 33178) provides

that testing would be conducted using

the harmonized guidelines developed

by the Office of Prevention, Pesticides,

and Toxic Substances (OPPTS) that

were proposed on June 20, 1996 (61 FR

31522)(FRL–5367–7). The process of

developing these guidelines is

proceeding at the same time as the

development of the HAPs test rule. For

the purposes of the proposed HAPs test

rule and testing under TSCA section

4(a), the Office of Pollution Prevention

and Toxics (OPPT) intends to

promulgate final TSCA test guidelines.

The Agency will solicit public comment

on the applicability of the test

guidelines to the HAPs rule and will

follow this practice with respect to all

future TSCA section 4(a) test rules.

These guidelines will be published in

the Federal Register on or before May

30, 1997.

In addition, there has been a delay in

finalizing Agency reviews of the PK

proposals. EPA intends to provide

comments to all submitters of PK

proposals as soon as possible but, at any

event prior to the close of the comment

period. EPA also recognizes that

submitters may need to revise their

proposals based on EPA comments. In

addition, the Agency believes that the

public should have adequate

opportunity to comment on the

development of ECAs based on the PK

proposals. If the Agency finds the

original or revised PK proposals

acceptable, EPA will therefore

announce, in the Federal Register, one

or more public meetings to discuss the

proposals and to negotiate ECAs based

on the proposals. In that notice, the

Agency will solicit persons interested in

participating in or monitoring

negotiations for the development of

ECAs based on the revised PK testing

proposals. These negotiations will be

conducted under the process described

in subpart B of 40 CFR part 790.

The Agency emphasizes that the

submission of proposals to develop

ECAs to conduct alternative testing

using PK is no guarantee that EPA and

the submitters will, in fact, conclude

such agreements. Therefore, EPA urges

all submitters of PK proposals to

comment on the HAPs proposed rule as

an activity separate from the PK

proposal/ECA process. Comments on

the proposed rule should be submitted

as described in the ‘‘ADDRESSES’’

section of this document prior to the

close of the comment period.

Accordingly, EPA is extending the

comment period on the proposed rule to

June 30, 1997.

List of Subjects in 40 CFR Part 799

Environmental protection, Chemicals,

Hazardous substances, Reporting and

recordkeeping requirements.

Dated: March 24, 1997.

Charles M. Auer,

Director, Chemical Control Division, Office

of Pollution Prevention and Toxics.

[FR Doc. 97–7815 Filed 3–27–97; 8:45 am]

BILLING CODE 6560–50–F

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 413

[BPD–808–P]

RIN 0938–AG70

Medicare and Medicaid Programs;

Salary Equivalency Guidelines for

Physical Therapy, Respiratory

Therapy, Speech Language Pathology,

and Occupational Therapy Services

AGENCY: Health Care Financing

Administration (HCFA), HHS.

ACTION: Proposed rule.

SUMMARY: This proposed rule sets forth

proposed revisions to the salary

equivalency guidelines for Medicare

payment for the reasonable costs of

physical therapy and respiratory

therapy services furnished under

arrangements by an outside contractor.

The proposed rule also sets forth

proposed new salary equivalency

guidelines for Medicare payment for the

reasonable costs of speech language

pathology and occupational therapy

services furnished under arrangements

by an outside contractor. The proposed

guidelines do not apply to inpatient

hospital services and hospice services.

The guidelines would be used by

Medicare fiscal intermediaries to

determine the maximum allowable cost

of those services.

The guidelines will not be effective

until at least 60 days after the date of

publication of the final rule. However,

to illustrate how the schedules would

operate, we have calculated the

proposed revised schedules for physical

respiratory therapy services and

proposed new schedules for speechlanguage pathology and occupational

therapy services as if the guidelines

were effective on April 1, 1997.

DATES: Comments will be considered if

we receive them at the appropriate

address, as provided below, no later

than 5 p.m. on May 27, 1997.

ADDRESSES: Mail written comments (one

original and three copies) to the

following address: Health Care

Financing Administration, Department

of Health and Human Services,

Attention: BPD–808–P, PO. Box 7517,

Baltimore, MD 21244–0517.

If you prefer, you may deliver your

written comments (one original and

three copies) to one of the following

addresses:

Room 309–G, Hubert H. Humphrey

Building, 200 Independence Avenue,

SW, Washington, DC 20201, or

Room C5–09–26, 7500 Security

Boulevard, Baltimore, MD 21244–

1850.

Because of staffing and resource

limitations, we cannot accept comments

by facsimile (FAX) transmission.

If comments concern information

collection or recordkeeping

requirements, please address a copy of

comments to the following address:

Office of Management and Budget,

Office of Information and Regulatory

Affairs, Room 3206, New Executive

Office Building, Washington, DC 20503,

Attention: Allison Herron Eydt.

In commenting, please refer to file

code BPD–808–P. Comments received

timely will be available for public

inspection as they are received,

generally beginning approximately 3

weeks after publication of a document,

in Room 309–G of the Department’s

offices at 200 Independence Avenue,

SW, Washington, DC, on Monday
14852 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

through Friday of each week from 8:30

a.m. to 5 p.m. (phone: (202) 690–7890).

Comments may also be submitted

electronically to the following e-mail

address: BPD–808–NC@hcfa.gov. E-mail

comments must include the full name

and address of the sender and must be

submitted to the referenced address in

order to be considered. All comments

must be incorporated in the e-mail

message because we may not be able to

access attachments. Electronically

submitted comments will be available

for public inspection at the

Independence Avenue address below.

Copies: To order copies of the Federal

Register containing this document, send

your request to: New Orders,

Superintendent of Documents, PO. Box

371954, Pittsburgh, PA 15250–7954.

Specify the date of the issue requested

and enclose a check or money order

payable to the Superintendent of

Documents, or enclose your Visa or

Master Card number and expiration

date. Credit card orders can also be

placed by calling the order desk at (202)

512–1800 or by faxing to (202) 512–

2250. The cost for each copy is $8.00.

As an alternative, you can view and

photocopy the Federal Register

document at most libraries designated

as Federal Depository Libraries and at

many other public and academic

libraries throughout the country that

receive the Federal Register.

FOR FURTHER INFORMATION CONTACT:

Jackie Gordon, (410) 786–4517.

SUPPLEMENTARY INFORMATION:

I. Background

Section 1861(v)(5) of the Social

Security Act (the Act) requires the

Secretary to determine the reasonable

cost of services furnished to Medicare

beneficiaries ‘‘under an arrangement’’

with a provider of services, by therapists

or other health-related personnel. The

Health Care Financing Administration

(HCFA) pays the provider directly for

these services, rather than paying the

therapist or supplying organization.

Under section 1861(w)(1) of the Act,

this payment discharges the beneficiary

from liability to pay for the services.

Section 1861(v)(5) of the Act also

specifies that the reasonable costs for

these services may not exceed an

amount equal to the salary that would

reasonably have been paid for the

services (together with any additional

costs that would have been incurred by

the provider or other organization) to

the person performing them if they had

been performed in an employment

relationship with a provider or other

organization (rather than under such

arrangement), plus allowances for

certain expenses that may be incurred

by the contracting therapy organization

in furnishing the services as the

Secretary in regulations determines to

be appropriate.

These statutory requirements are

implemented in existing regulations at

42 CFR 413.106. The regulations apply

to the services of physical, occupational,

speech, and other therapists and

services of other health specialists

(other than physicians) furnished under

arrangements with a provider of

services, a clinic, a rehabilitation

agency, or a public health agency. The

regulations provide for:

• Hourly salary equivalency amounts

comprised of:

—A prevailing hourly salary rate based

on the 75th percentile of the range of

salaries paid to full-time employee

therapists by providers in the

geographic area, by type of therapy.

—Fringe benefit and expense factors to

take into account fringe benefits

generally received by an employee

therapist, as well as expenses (such as

maintaining an office, insurance, etc.)

that a therapist or therapist

organization might incur in furnishing

services under arrangements.

• A standard travel allowance to

recognize time spent in traveling to the

provider’s site or the patient’s home.

• As provided for in existing

regulations at § 413.106(e) and

explained in section 1412 of the

Provider Reimbursement Manual, the

following are additional allowances for

costs incurred for services furnished by

an outside supplier. In addition to the

guidelines established for the adjusted

hourly salary equivalency amount and

the travel allowance, the following costs

incurred for services furnished by an

outside supplier are recognized,

provided the services are properly

documented as having been received by

the provider.

—Overtime, if an outside supplier

utilizes the services of its employees

(including the services of aides and

assistants) at an individual provider

in excess of the provider’s standard

workweek;

—Administrative and supervisory

duties, if an outside supplier provides

more than one therapist and at least

one therapist spends more than 20

percent of his or her time supervising

other therapists and performing

administrative duties;

—Depreciable or leased equipment,

including maintenance costs of

equipment remaining at the provider’s

site, that the outside supplier uses in

furnishing direct services to the

provider’s patients (may also include

equipment that is transported from

one provider site to another but

excludes equipment owned by the

provider);

—Supplies furnished by the supplier for

direct patient care (e.g., gases and

sprays for respiratory therapy),

excluding items such as envelopes,

stamps, and typewriters that are

reimbursed as overhead expenses and

included in the fringe benefit and

expense factor;

—Travel expenses, based on 10 times

the General Services Administration

mileage rate for each day an outside

supplier travels to a provider site;

—Aides, who are paid as an add-on

based on the wage rate of a

comparable employee, such as a

nurse’s aide (all therapy types use

aides); (Because we have received

several inquiries regarding continuing

to use wages of providers’’ nurses

aides as the basis for comparison, we

welcome comments on other methods

for determining guidelines for aides.)

—Assistants, who are paid as a function

of the hourly salary equivalency

amount at 75 percent of these

amounts. (All therapy types use

assistants except respiratory

therapists.)

The provider must supply the

intermediary with documentation that

supports these additional costs to the

intermediary’s satisfaction. These are

the only additional costs that will be

recognized.

The regulations at 42 CFR 431.106

(b)(5) and (c) also provide for an

exemption for limited part-time or

intermittent services if the provider

required the services of an outside

supplier for a particular type of therapy

service and the total hours of services

performed for the provider, by type of

service, average less than 15 hours per

week for those weeks in the cost

reporting period during which services

were furnished by nonemployee

therapists. (Travel time is not counted

in the computation, even if the actual

time is used.) If a provider qualifies for

this exemption, the reasonable cost of

such services is evaluated on a

reasonable rate per unit of service basis,

except that payment for these services

in the aggregate, during the cost

reporting period, may not exceed the

amount that would be allowable had the

provider purchased these services on a

regular part-time basis for an average of

15 hours per week for the number of

weeks in which services were furnished.

Where the contract provides for a

method of payment other than rate per

unit of service (e.g., hourly rate or

percentage of charges), payment cannot
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14853

exceed the guideline adjusted hourly

amounts plus other allowable costs,

even though the services are performed

on a limited or intermittent part-time

basis.

In addition, the regulations at

§ 413.106(f)(1) currently provide for an

exception because of a binding contract.

An exception may be granted to a

provider that entered into a written

binding contract with a therapist or

contracting organization prior to the

date the initial guidelines are published

for a particular type of therapy. This

exception would not apply to physical

and respiratory therapy services

furnished under arrangements because

we have previously published initial

guidelines for these services. Before the

exception may be granted, however, the

provider must submit the contract to its

intermediary, subject to review and

approval by the HCFA regional office.

This exception may be granted for the

contract period, but no longer than 1

year from the date the guidelines for the

particular therapy are published. During

the period in which a binding contract

exception is in effect, the cost of the

services will be evaluated under the

prudent buyer concept. (Section 1414.1

of the Provider Reimbursement Manual

contains instructions on this exception.)

This exception does not apply to

providers who enter into a contingency

contract with a therapist or contracting

organization or another provider. In a

contingency contract, the provider and

contractor agree that if Medicare does

not reimburse the provider for the rate

that the contract is set at the provider

and contractor agree that the contractor

will make up the difference. We do not

consider a contingency contract a

binding contract.

Also, the regulations at § 413.106(f)(2)

provide for an exception for unique

circumstances or special labor market

conditions. An exception may be

granted when a provider demonstrates

that the costs for therapy services

established by the guidelines are

inappropriate to a particular provider

because of some unique circumstances

or special labor market conditions in the

area. As explained in section 1414.2 of

the Provider Reimbursement Manual,

exceptions will be granted only in

extraordinary circumstances. Before the

exception may be granted, the provider

must submit appropriate evidence to its

intermediary to substantiate its claim.

The provider’s request for an exception,

together with substantiating

documentation, must be submitted to

the intermediary each year, no later than

150 days after the close of the provider’s

cost reporting period. Because providers

had been required to submit cost reports

to intermediaries no later than 90 days

after the close of their cost reporting

periods, we had required that the

provider’s request for an exception,

together with substantiating

documentation, also be submitted to the

intermediary no later than 90 days after

the close of its cost reporting period. On

June 27, 1995 (60 FR 33137), we

changed the due date for submission of

cost reports to 150 days after the close

of the provider’s cost reporting period.

Accordingly, as explained under

Section II.F. of this preamble, we are

proposing to revise the time period for

a provider’s request for an exception,

together with substantiating

documentation, to 150 days after the

close of its cost reporting period. If the

circumstances giving rise to the

exception remain unchanged from a

prior cost reporting period, however, the

provider need only submit evidence to

the intermediary 150 days after the close

of its cost reporting period to establish

that fact.

In order to establish an exception for

unique circumstances, the provider

must submit evidence to establish that

it has some unique method of delivering

therapy or other services, which affects

its costs, that is different from the other

providers in the area. The exception

will be effective no earlier than the

onset of the unique circumstances.

In order to substantiate an exception

for special labor market conditions, the

provider must submit evidence enabling

the intermediary to establish that the

going rate in the area for a particular

type of service is higher than the

guideline limit and that such services

are unavailable at the guideline

amounts. It is the duty of the provider

to prove to the satisfaction of the

intermediary that it has reasonably

exhausted all possible sources of this

service without success.

The intermediary collects information

on the rates that other providers in the

area generally pay therapists or other

health care specialists. Once this

information is collected, the

intermediary will determine whether

other providers in the area, in

comparison to the provider requesting

the exception, generally pay therapists

or other health care specialists higher

rates than the guideline amounts. (As

discussed in section II.F.3. of this

notice, we specifically invite comments

on the exception process.)

Under § 413.106(b)(6), HCFA issues

guidelines establishing the hourly salary

equivalency amounts in geographical

areas for therapy services furnished to

Medicare beneficiaries under

arrangements. These guidelines apply

only to the amount of payment the

Medicare program makes to a provider

for therapy services obtained under

arrangements. The guidelines are not

intended to dictate or otherwise

interfere in the terms of a contract that

a provider may wish to enter into with

a therapist or therapist organization.

The guidelines do not apply to services

furnished by employees of a hospital or

employees of other providers. There is

also an exception to the guidelines for

inpatient hospital services provided by

hospitals paid under the prospective

payment system or subject to rate of

increase limits (§ 413.106(f)(4), in which

case the services are evaluated under

the Medicare program’s reasonable cost

provisions as described at § 413.5).

However, as explained under section

II.F. of this preamble, we are proposing

regulations that would provide that the

salary equivalency guidelines will apply

in situations where compensation, at

least in part, to a therapist employed by

the provider is based on a fee-for-service

or on a percentage of income (or

commission). The entire compensation

would be subject to the guidelines in

cases where the nature of the

arrangements are most like an under

‘‘arrangement’’ situation, although

technically the provider may treat the

therapists as employees. The guidelines

would be applied in this situation so

that an employment relationship is not

being used to circumvent the guidelines.

The guidelines would apply to skilled

nursing facilities (SNFs) providing

therapy services under arrangements

that elect prospective payment under

section 1888(d) of the Act because that

prospective payment system only

applies to routine and capital services

and does not apply to ancillary services

which include therapy services.

Section 413.106(d) provides that,

prior to the beginning of a period to

which a guideline will be applied,

HCFA will publish a notice in the

Federal Register establishing the

guideline amounts to be applied to each

geographical area by type of therapy. We

have issued schedules of salary

equivalency guidelines for the

reasonable costs of physical therapy

services since 1975, and for respiratory

therapy services since 1978. On

September 30, 1983, we published a

final notice (48 FR 44922) that revised

the methodology used to establish the

schedules, as well as the guidelines

themselves. The guidelines continue to

apply to physical therapy and

respiratory therapy services provided

under arrangements, as set forth in

§ 413.106, with hospitals, home health

agencies (HHAs), SNFs, hospital-based

HHAs, hospital-based SNFs,
14854 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

comprehensive outpatient rehabilitation

facilities (CORFs), and outpatient

rehabilitation providers (ORPs). (Since

we are now proposing to issue

guidelines for occupational therapists,

the guidelines will also apply to

community mental health centers that

provide occupational therapy services

furnished under arrangements.)

The September 30, 1983 final notice

provided that, for providers with cost

reporting periods beginning after

October 1, 1982, the published

guidelines would be revised upward by

the projected 0.6 percent monthly

inflation rate, not compounded. It also

provided that, if for any reason we did

not publish a new schedule of

guidelines to be effective for cost

reporting periods beginning on or after

October 1, 1983 or did not announce

other changes in the existing schedule,

the existing guidelines would remain in

effect, increased by the projected 0.6

percent monthly inflation rate, not

compounded, until a new schedule of

guidelines was issued. This monthly

inflation rate was based on a Data

Resources Incorporated (DRI) forecast of

the annual rate of increase in each

component of the salary equivalency

amounts (that is, salary, fringe benefits,

rent, and other expenses), with each

component weighted to form a

composite rate of increase for the 12-

month period ending March 31, 1984.

Since the last schedules of guidelines

were issued in 1983, we have received

periodic comments on the methodology

used to develop the guidelines. Some of

the issues raised in these comments

concerned limitations in the data

available to us on therapists’ salaries

and other expenses incurred in

furnishing services under arrangements

with providers. We have received

comments that payments for therapy

services performed in different provider

settings and in urban and rural areas

differ and that the guidelines should

reflect those differences. Other

commenters have expressed concern

that the factors used to update the fringe

benefits and expense factors are not

adequate. In addition, some commenters

raised concerns about more technical

aspects of the methodology, such as the

method used to update the salary

equivalency amounts to account for

inflation. We address all these concerns

in this proposed rule.

We have never issued schedules of

salary equivalency guidelines for speech

language pathology and occupational

therapy services provided under

arrangements even though section

1861(v)(5) of the Act explicitly

authorizes the Secretary to do so.

Currently, payment for these services is

based on reasonable cost. However, we

are aware that without introducing

guidelines for contracted speechlanguage pathology and occupational

therapy services, the Medicare program

could be paying for costs that are

unreasonable and in excess of what

Congress intended under section

1861(v)(5) of the Act. In fact, as

evidence of this, the General

Accounting Office (GAO) Report,

‘‘Medicare: Tighter Rules Needed to

Curtail Overcharges for Therapy In

Nursing Homes’’ (GAO/HEHS–95–23,

March 1995) also found that nursing

homes may be claiming substantial

amounts of unallowable or unreasonable

costs, or both, for therapy services

provided to Medicare beneficiaries. The

GAO recommended ways that HCFA

could curb Medicare losses on payments

for rehabilitation therapies provided to

nursing home residents. GAO

concluded that, without salary

equivalency guidelines for all therapy

services provided under arrangements

to nursing homes, Medicare has little

control over payments to providers. In

response to GAO’s recommendations,

we indicated that, until guidelines were

developed for all therapy services,

providers’ therapy costs were subject to

the test of reasonableness as required by

regulations at 42 CFR 413.9. We also

indicated that we were working on

developing revised salary equivalency

guidelines for physical therapy and

respiratory services and developing

guidelines for speech-language

pathology and occupational therapy

services.

II. Provisions of the Proposed Rule

In this proposed rule, we would

revise the methodology for establishing

the schedules for the maximum

payment for physical therapy and

respiratory therapy services. We

propose to revise the determination of

reasonable cost for physical therapy and

respiratory therapy furnished under

arrangements by an outside contractor

by rebasing the guideline amounts.

We also propose to establish salary

equivalency guidelines for speech

language pathology and occupational

therapy services furnished under

arrangements by an outside contractor

using the same methodology we propose

to use for determining reasonable cost

for physical therapy and respiratory

therapy services.

In addition, we are proposing to: (1)

Eliminate the exception to the salary

equivalency guidelines for a provider

that entered into a written binding

contract with a therapist or contracting

organization prior to the date the initial

guidelines are published; (2) apply the

salary equivalency guidelines in

situations where compensation, at least

in part, to a therapist employed by the

provider is based on a fee-for-service or

on a percentage of income (or

commission). (Section II.F. of this

preamble contains a detailed discussion

of these proposals and other proposals

we’re seeking comments on.)

A. Data Sources for Schedules

In all previously issued salary

equivalency guideline notices, we have

used the Bureau of Labor Statistics

(BLS) hospital and nursing home

industry wage survey data as our sole

source in accordance with the Senate

Committee on Finance recommendation

(S. Rept. No. 1230, 92nd Cong., 2nd

Sess. 251 (1972)). Specifically, the

Committee recommended that, to the

extent feasible, timely and accurate

salary data compiled by BLS on the 75th

percentile of salaries should be used in

determining the prevailing salary

amounts. However, in this proposed

rule we have decided not to use the BLS

data as our sole, or even as our primary

source for developing the guidelines.

We have a number of reasons for this

decision.

First, BLS issued its last hospital

industry wage surveys in 1989 and 1991

and has discontinued conducting its

survey of hospital wages. Accordingly,

even if we had chosen to use BLS

survey data as our primary source for

this proposed rule, we would have

needed to investigate other therapy

survey data sources for use in future

guidelines. In addition, although, the

BLS survey data continue to meet the

rigorous publication standards of BLS

and provide the only national data that

we are aware of for wages by occupation

that are statistically reliable, questions

have been raised as to whether the BLS

data meet the Senate Committee on

Finance’s recommendation on

timeliness. We have taken this concern

into consideration in this proposed rule.

Furthermore, the BLS hospital industry

wage surveys of 1989 and 1991 include

only hospital data. (The last BLS

nursing home industry wage survey was

performed in 1985.) We believe it is

reasonable to include data on combined

hospital and SNF wages in the

determination of the guidelines as was

done previously because therapy wage

levels are primarily determined in

occupational labor markets, not industry

labor markets. (We also needed to

review the SNF therapy data so that we

could determine the wage levels in

SNFs holding all other factors

(including local labor market conditions

and working conditions) constant.
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14855

For the above reasons we determined

that we would not use the BLS survey

as the sole source of data for

determining the guidelines. We,

therefore, decided to seek other survey

data sources of hospital and SNF

industry specific occupational wage

information. Regulations at 42 CFR

413.106(b)(6) provide that the

guidelines may be derived from other

statistically valid survey data, in lieu of

HCFA guidelines, provided that the

study designs, questionnaires, and

instructions, as well as the resultant

survey data, are submitted to and

approved in advance by HCFA.

Beginning in 1994, we solicited the

therapy industry for such statistically

valid survey data. The therapy industry

had long held that nursing home wages

for therapists were higher than hospital

wages for therapists because it was more

difficult to hire and retain therapists in

nursing homes. However, other

individuals with experience in the

therapy industry have indicated that

some therapists prefer working in

nursing homes for the following

reasons: Preference for working with

elderly; location of SNF closer to home;

more opportunities for physical therapy

work in SNF; and working flexible

hours. The therapy industry initially

provided us data in 1995, but after our

analysis we found the data to be

inadequate for use at the regional or

national level for several reasons: The

sample was not representative; the data

were not documented or audited; and

primarily large firms paid under

contract to the SNF were surveyed.

In March 1996, the National

Association for the Support of Long

Term Care (NASL), representing

portions of the therapy industry,

submitted an October 1995 sample

survey of salaried therapists in hospitals

and nursing homes to HCFA, as allowed

under our regulations. This survey did

not meet the requirements of the

regulations at § 413.106(b)(6), since the

survey design, questionnaires, and

instructions were not approved by

HCFA prior to the start of the survey.

Nevertheless, the survey did provide

data that were current in SNFs and

hospitals. We, therefore, conducted a

special analysis of this NASL survey

data, including a limited audit of the

survey records. Based on this analysis

and limited audit, we determined that

the survey was not adequate as a sole or

primary source of data in determining

the guidelines, but could be useful in

combination with other data sources.

There were several reasons for this

determination:

• The data were not audited or

certified by an independent party. We

were permitted to conduct an audit of

the survey records only under stringent

restrictions designed to protect the

confidentiality of the survey

respondents. Those restrictions made it

impossible for us to verify the survey

results. For example, we were unable to

compare submitted survey data with

data from other sources.

• The verification survey, conducted

to determine the reliability of data

submitted by mail, did not appear to be

adequate. Only five providers were

included in the verification survey.

Specifically, we were not satisfied that

the verification sample was either

sufficiently large or adequately

representative.

• The survey is not sufficiently

representative. There were variable

response rates for hospitals and SNFs.

The response rate for hospitals was 10.8

percent and the response rate for SNFs

was 29.9 percent. In addition, the

sample seemed to include an

overrepresentation of large hospitals

and chain-affiliated SNFs.

Because there is an

underrepresentation of small hospitals

and non-chain SNFs in the NASL

survey, we cannot be assured with this

small response rate that the large

hospitals and chain-affiliated SNFs will

adequately represent the small hospitals

and non-chain SNFs not included in the

survey. (The GAO stated in its report,

‘‘Medicare Early Resolution of

Overcharges for Therapy in Nursing

Homes is Unlikely’’, August 16, 1996, p.

7, regarding the NASL survey data,

‘‘However, the survey response rate was

low (10 percent for hospitals and 30

percent for SNFs), which raises

questions about how representative the

data are.’’ In a footnote on that page,

GAO points out, ‘‘Official government

surveys generate a much higher

response rate. The BLS White Collar Pay

Survey (one component of which was

the hospital salary data survey on which

the draft guidelines were based) had an

overall response rate of 82 percent.

Typically, BLS response rates exceed 80

percent).’’

• Despite requests for the raw

unedited data file, the file was not

provided to us.

• We have questions about the

validity of certain edits.

• We were also concerned that

supervisory time and compensation in

lieu of benefits were not consistently

reported. Additionally, we were

concerned that the supervisory time

included in the NASL survey was above

a certain threshold that we use in

developing the guidelines.

As we analyzed the NASL survey

data, which as discussed above, was

submitted for the purpose of being used

to develop the guideline amounts, we

also studied several other surveys of

hospitals and nursing homes, each of

which are more recent than the BLS

surveys, although none was specifically

submitted to be used in developing the

guidelines.

We analyzed five additional data

sources for hospital wage rates and two

for freestanding SNF wage rates. The

additional hospital data sources

examined were: the University of Texas

National Hospital Survey (1994 National

Survey of Hospital and Medical School

Salaries, University of Texas Medical

Branch, Galveston, TX, 1994, pp. 15–

19); the American Rehabilitation

Association (ARA) Surveys of

Freestanding Hospitals and of

Rehabilitation Units (1995 Salary

Survey, American Rehabilitation

Association, pp. 53–59 and 94–101); the

Maryland Health Services Cost Review

Commission’s census of hospitals; the

American Health Care Association’s

(AHCA) report that includes hospital

data profile (1994 AHCA Survey, Sec. 1,

p. 10, Buck Associates); and the NASL

1995 survey of hospitals. For SNFs, we

analyzed data from the 1995 NASL

survey of SNFs, the January 1995 AHCA

survey of SNFs (1995 AHCA Survey,

Sec. 3, p. 3, Buck Associates), and the

1996 survey of SNFs by Mutual of

Omaha, a Medicare intermediary.

Several of these data sources had

regional wage levels. We drew the

following conclusions about the merits

of these data sources for our purposes in

determining appropriate therapy salary

guidelines (that is, not in relation to the

original purposes of the surveys):

• The University of Texas National

Hospital Survey data are from October

1994. This annual voluntary hospital

survey was conducted for many years

for hospitals in various regions of the

country to use to benchmark regional

wage levels for specific health

professional occupations. While there

are data from all regions of the United

States, the survey was not designed to

be representative or statistically valid at

the regional level. It appears to give

fairly reasonable levels at the national

level.

• The American Health Care

Association’s report includes data on

both hospitals and SNFs. The SNF data

for January 1995 are both current and

industry-specific. The data for SNFs,

however, are unevenly edited and

appear to include some supervisors and

additional salary in lieu of benefits. The

sample is heavily weighted by large

chains that are members of the

Association. The SNF data appear as

both employee-weighted and facility-
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weighted averages, and do not permit

computation of accurate median and

75th percentile levels.

• The Maryland Health Services Cost

Review Commission conducts a census

of all Maryland hospitals yearly. We

analyzed data from the 1995 census.

While this is a complete census

covering over 50 hospitals, it is for

Maryland only. In addition, speechlanguage pathologists are not included

as a separate occupational category.

• The American Rehabilitation

Association’s survey of its members and

prospective members collected July

1994 data. The response rate was low,

and the Association indicated in its

report that these data cannot be

presumed to represent the full

population of rehabilitation facilities.

No information on SNFs was reported

due to an inadequate sample. This

survey appears to give reasonable wage

levels at the national level when

compared to other data sources.

• Mutual of Omaha conducted a 1995

survey of 2,000 SNF Medicare providers

that it services. The data are current and

industry-specific, but include only

information on occupational therapists

and speech language pathologists. The

survey was national in scope. Although

the survey’s response rate was very

high, only a small percentage of records

contained information on wage rates for

full-time employed therapists.

Our conclusion from this analysis was

that none of the available data sources

met the statistical validity criteria

recommended in the Senate Committee

on Finance Report and specified in the

regulations sufficiently well to serve as

the sole or even primary source of data

for establishing the guidelines. Based on

this examination, we determined that a

different approach was necessary. As we

examined all these potential data

sources, we found that mean wage

levels at the national level for the most

part clustered when adjustments were

made for definitional differences. This

observation suggested to us that, while

no one of the data sources was adequate

as a sole or primary source of data for

establishing the guidelines, employing

all these sources together could provide

a useful and valid basis for the

guidelines to be used by intermediaries

determining the maximum allowable

cost of therapy services furnished under

arrangements. Therefore, we concluded

that we could blend data from the

several sources to develop a national

‘‘best estimate’’ of prevailing salary

levels as the basis for the guidelines.

Under this approach, we give weight to

each data source, but preferential status

to none. None of the data sources or the

average of all of the sources could

provide regional variations. A new

method would have to be used for

regional variations.

In an occupational market, wage

levels across settings for the same

occupation should bear rational

relationships in competitive labor

markets when adjustments are made for

compensating differentials for fringe

benefits, working conditions, risk of

injury, and geographic areas. This

implies that therapists working in

hospital and SNF settings can migrate

between practice settings with relatively

little difficulty. Because of the ease of

mobility, labor market forces that affect

one therapist practice setting also

influence other practice settings. This is

not to say that therapists’ practice

activities in all settings are exactly the

same. In setting the guideline amounts,

we acknowledged that, because of the

ease of mobility of licensed therapy

workers across settings, a salary

equivalency rate that is too high could

put upward pressure on the wages paid

to therapists in the larger hospital

sector. Similarly, a rate that is too low

could make it difficult for providers

subject to the guidelines to attract

therapists from the hospital setting.

We have decided, for the reasons

discussed, not to use the NASL industry

survey as the sole or primary data

source for setting the guidelines.

However, we do believe that it has

sufficient strength to include its data

along with data from the other sources

in a blend as the basis for the salary

equivalency guidelines. We have used a

blend of hospital and SNF therapist

wages in the past to reflect occupational

markets and the associated mobility

between the two settings. We had

considered at one point including a

differential between therapist wages in

hospitals and nursing homes in the

guideline amounts. We reconsidered

when we looked across all of the other

data sources which included all

provider types. We noted clustering of

wage levels across provider types that

made such a differential inappropriate

for occupational labor markets when

adjustments are made for locality. We

believe that proposing to use the 75th

percentile of blended hospital and SNF

wage data (weighted by relative

employment levels in hospitals and

SNFs) to measure the occupational

market for therapy services is equitable.

Our new approach in which all

appropriate data sources were used but

adjusted for the mix of SNF and hospital

therapy employees will, therefore,

provide a buffer for costs that SNFs and

other providers may incur in furnishing

therapy services to Medicare

beneficiaries. We invite comments on

this methodology, which is described in

more detail in section II.B. of this

preamble.

We could not use Medicare cost

report information for wage rates

because the cost reports for SNFs and

other providers do not have hourly wage

rates for employees. The cost reports do

provide aggregate salaries of employees

and costs other than salaries that would

include contract labor cost. However,

they do not provide the hours worked

either by staff or contractors, except for

contracted physical and respiratory

therapy services for which we have

developed salary equivalency guidelines

for the services and do require hourly

time records.

We did use 1994 Medicare

predominantly settled cost report data

for prospective payment systems (PPS)

hospitals to obtain fringe benefit

information. We used Worksheet S–3,

Part II from form HCFA–2552. These

data are used to adjust the labor portion

of hospital payments under the PPS. We

believe their use is also appropriate

here. We use the 1994 Medicare

predominantly settled cost report data,

because this is the same data that HCFA

used for its wage index update for

prospective payment system hospitals

for FY 1997. This is the most recent

Medicare predominantly settled cost

report data that has undergone special

scrutiny for the purpose of wage survey

data. Moreover, BLS Employment Cost

Index information for March 1994 show

that fringe benefits in hospitals and

SNFs are similar for professional and

technical workers.

B. Methodology

In order to determine the hourly

salary equivalency amounts, we

determined the ‘‘best estimate’’ of wages

for both hospitals and SNFs. We first

found mean wage rates for each of the

data sources listed above.

BLS surveyed average hourly earnings

(AHE) for all four therapies in 1989.

However, their January 1991 survey

included the average hourly earnings

only for full-time physical and

respiratory therapists. (BLS January

1991 average hourly earnings for fulltime physical and respiratory therapists

were found in the BLS Occupational

Wage Survey: Hospitals, January 1991,

pp. 36–119. The hospitals in this survey

employed 50 or more workers.) We,

therefore, needed to estimate 1991

average hourly wages for speech

language pathology and occupational

therapy. To do so, we started with the

BLS 1989 survey of all four therapies as

a baseline (BLS Industry Wage Survey:

Hospitals, March 1989 (the latest

previous survey), pp 33–118). The
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hospitals in the 1989 survey employed

100 or more workers. Our analysis of the

University of Texas data for U.S.

hospitals indicated that the wages for

speech language pathology and

respiratory therapy increased at a

similar rate between 1989 and 1993.

Wages for occupational therapy and

physical therapy also increased at a

similar rate during that period.

Therefore, we determined that we could

employ the 1989 ratios of speech

language pathology to respiratory

therapy, and of occupational therapy to

physical therapy, in order to estimate

1991 wage levels for speech language

pathology and occupational therapy.

Specifically, multiplying the ratio of

1989 average hourly occupational

therapy wages to 1989 average hourly

physical therapy wages by 1991

physical therapy wages yielded

estimated 1991 occupational therapy

wages. The following formula

summarizes the computation (all values

are average hourly wages):

[(March 1989 AHE, OT)/(March 1989 AHE,

PT)] × (January 1991 AHE, PT)=(estimated

January 1991 AHE, OT).

Similarly, multiplying the ratio of

1989 average hourly speech language

pathology wages to 1989 average hourly

respiratory therapy wages by the 1991

average hourly respiratory therapy

wages yielded estimated 1991 average

hourly speech language pathology

wages. Again, the following formula

summarizes the computation (all values

are average hourly wages):

[(March 1989 AHE, SLP)/(March 1989

AHE, RT)] × (January 1991 AHE,

RT)=estimated January 1991 AHE, SLP.

The American Health Care

Association data provided facilityweighted mean wage rates for SNFs. The

Association has estimated that 5 percent

of the SNF wage rates represented

supervisors and additional wages paid

in lieu of fringe benefits. We used that

estimate to reduce the Association

survey wage data to a nonsupervisory,

no additional salary in lieu of benefits

basis.

We converted annual data in the

American Rehabilitation Association

and University of Texas surveys to

hourly wages using a divisor of 2080

hours, which represents a standard

work year.

The Maryland Health Services Cost

Review Commission census data

provided wage data, paid hours, and

numbers of personnel for each hospital.

We eliminated data for employees who

worked less than 35 hours or more than

40 hours a week to restrict the

computation to full-time employees

only. We then determined the average

hourly wage for each hospital by

dividing aggregate wages by the number

of paid hours. Finally, we computed the

average hourly wages across all

hospitals, weighted by the number of

employees in each hospital.

NASL data were first divided by 52 to

arrive at weekly salary, then divided by

the number of hours worked per week

which were also given in the survey, to

obtain hourly wage rates. As in the case

of the Maryland census data, we

eliminated data for employees who

worked less than 35 hours, or more than

40 hours, a week to restrict the

computation to full-time employees

only.

We trended all data forward to the

fourth quarter of 1995, the base period

for the NASL survey. For data from the

University of Texas, the American

Rehabilitation Association, the

American Health Care Association, and

the Maryland Commission census (all

sources with 1994 or 1995 bases), we

trended these data using average hourly

earnings for hospital workers published

in the BLS Current Employment

Statistics’ Survey, Standard Industrial

Code 806 (Hospitals). To update the BLS

survey data from 1991, we derived rates

of increase for the period from January

1991 through January 1994 (the period

which predates the other data sources,

which were surveyed in 1994–1996)

based 50 percent on American Hospital

Association Panel wage data and 50

percent on the average hourly earnings

for hospital workers published in the

BLS Current Employment Statistics

Survey, Standard Industrial Code 806

(Hospitals).

For the period from January 1994

through October 1995, we used only the

BLS Current Employment Statistics

Survey as the basis for the rate of

increase in the BLS survey data (as we

did for the other data sources, which

date from that period). The American

Hospital Association data had a higher

rate of increase during the 1991–1993

period than the BLS data, resulting in

cumulating 1995 therapist wage levels

that reflect current market conditions in

1995.

After all data were trended to fourth

quarter 1995, we determined the salary

equivalency guideline amounts for April

1997 in five steps. Those five steps

were: (1) Determine average wages by

therapy type, separately for hospitals

and nursing homes; (2) blend the

hospital and nursing home average

wages by therapy type, to yield average

wages by therapy type for the four

occupational markets; (3) approximate

the 75th percentile of wages by therapy

type; (4) calculate salary equivalency

guideline levels for fourth quarter 1995,

by adding amounts for fringe benefits,

rent, etc.; and (5) update these guideline

amounts to April 1997, the proposed

effective date.

In the first step, we determined the

mean wage levels, by therapy type, for

hospitals in each of the available data

sources. (Data sources used for hospitals

were: BLS, Industry Wage Survey:

Hospitals, March 1989 and

Occupational Wage Survey: Hospitals,

January 199l; University of Texas

National Hospital Survey 1994 National

Survey of Hospital and Medical School

Salaries; American Rehabilitation

Association’s surveys of freestanding

hospitals and of rehabilitation units,

1995 Salary Survey; Maryland Health

Services Cost Review Commission’s

census of hospitals; American Health

Care Association hospital report’s data

profile, 1994 AHCA Survey; and NASL

1995 survey of hospitals.) We similarly

determined the mean wage levels, by

therapy type, for nursing homes in each

of the available data sources. (Data

sources used for SNFs were: 1995 NASL

survey of SNFs; American Health Care

Association survey of SNFs, 1995 AHCA

Survey; and the 1996 survey of SNFs by

Mutual of Omaha.) We then averaged

the mean wage levels from the available

data sources by therapy type, separately

for hospitals and nursing homes.

In the second step, we blended the

hospital and nursing home average wage

levels by therapy, to yield average wage

levels by therapist type across the four

occupational markets. We employed a

blending process used in the previous

salary equivalency guidelines notice (48

FR 44922, September 30, 1983), to

weight the occupational averages by

relative employment levels in hospitals

and nursing homes, respectively. To

establish appropriate weights, we used

employment of therapists in nursing

homes (SIC 805) and in hospitals (SIC

806), as found in the BLS Occupational

Employment Statistics Survey. (The

most recent available survey of

employment in nursing homes is for

1993, while the most recent survey data

of employment in hospitals is for 1995.)

We applied these weights to the mean

hospital and SNF wage rates by the four

therapist types, as determined in the

first step. The BLS Occupational

Employment Statistics Survey shows

that the hospital industry is a major

employer of therapists of all types,

while SNFs employ fewer salaried

therapists. The weights for hospitals and

nursing homes, respectively, are: For

physical therapy, 85 percent and 15

percent; for occupational therapy, 85

percent and 15 percent; for speech

language pathology, 82 percent and 18
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percent; and for respiratory therapy, 99

percent and 1 percent.

In the third step we approximated the

75th percentile of the blended wage

rates for each therapy occupation. It was

necessary to approximate the 75th

percentile because, unlike our previous

computations of the guidelines, in this

proposal we could not determine

percentile values directly from each of

the sources. We have observed in the

BLS data and a regression analysis we

performed on NASL data that the 75th

percentile was approximately 110

percent of the mean. We, therefore,

increased each of the four blended wage

averages by 10 percent to approximate

the 75th percentile of wages in each

discipline across the occupational

market.

Salary equivalency guidelines are

based on the therapists’ time in the

facility. Adjustments to average hourly

earnings data were necessary to include

a reasonable allowance for vacation,

sick leave, and administrative time. In

order to convert the average hourly

earnings from an hours paid basis to an

hours worked basis, we applied a factor

of 2080/1808 to the average hourly

earnings determined thus far, which is

the same methodology used in the

previous notice. The 1808 figure was

computed based on 2080 hours (40

hours/week × 52 weeks; a standard work

year) less 15 vacation days, 10 sick leave

days and 9 holidays equal to 34 days,

or 272 hours. Data on leave benefits

come from the BLS Employee Benefits

Survey. (U.S. Department of Labor,

Bureau of Labor Statistics: Employee

Benefits in Small Private

Establishments, 1992, Bulletin 2441,

U.S. Government Printing Office, May

1994, pp. 10–20.)

In the fourth step we added fringe

benefit and expense factors to the

prevailing salary rates determined for

each therapy type. The fringe benefit

and expense factors are intended to

recognize fringe benefits that are

received by an employee therapist, as

well as overhead expenses that a

therapist or therapist organization might

incur in furnishing services under

arrangements. These factors are

expressed as percentages of the

prevailing hourly rate and are applied to

every hour of service furnished at the

provider site. Fringe benefits may

include vacation and sick pay,

insurance premiums, pension payments,

allowance for job-related training,

meals, severance pay, bonuses, etc.

We computed fringe benefits as a

percent of total compensation using

fiscal year 1994 Medicare cost reports

for hospitals under the prospective

payment system. We used the Medicare

cost reports for prospective payment

system hospitals to obtain fringe benefit

information because these data are

carefully scrutinized; they are used to

adjust the labor portion of hospital

payments under the prospective

payment system. We believe these data

are the best proxy for therapist fringe

benefit information, which is not

available for SNFs. Also, the BLS

Employment Cost Index for March 1994

showed that fringe benefits for

professional and technical workers in

hospitals and nursing homes were

similar. The fringe benefit component is

about 14 percent of the total salary

equivalency amount.

The expense component takes into

account expenses a therapist or

therapist organization might have, such

as maintaining an office, purchasing

insurance, etc. We based the expense

component of the guidelines on an

estimate of the costs of maintaining a

therapy services office. The general

methodology for computing the expense

component is similar to that used in the

1983 notice (48 FR 44922, September

30, 1983) but the factors have been

revised. This component has rental and

non-rental portions.

To determine the rental portion of the

expense component, we used the 1991

rental income data (updated to fourth

quarter 1995 using Consumer Price

Index (CPI) rental data) compiled by the

Building Owners and Managers

Association International (BOMA) and

published in the 1992 BOMA

Experience Exchange Report for

Downtown and Suburban Office

Buildings. (Building Owners and

Managers Association International:

1992 BOMA Experience Exchange

Report, Washington, DC, 1992, p. 27.)

BOMA reported a national rent average,

excluding utility cost, of $16.87 per

square foot per year. We applied an

occupancy factor of .971 to take into

account the space used for rental

building hallways, elevators, etc., that

are included in the BOMA rent figure

but that are not part of the area rented

for an office. We then added the BOMA

utilities cost of $1.92 per square foot.

We determined total rental cost

assuming a rental area of 250 square

feet, the same rental area used in prior

schedules of guidelines. Total 1991

rental cost was divided by 1808 (the

hours factor applied to average hourly

earnings) to compute rental cost per

hour worked in 1991.

The expense component includes

costs of maintaining an office, such as

wages and salaries of administrative and

clerical help, insurance, telephones, etc.

We believe that Medicare should only

pay for services at their reasonable cost.

We estimated this component, including

rent, to be reasonable at 30 percent of

total expenses in 1991. We based our 30

percent estimate of total expenses on

informal discussion with the

rehabilitation industry. We request

comments on whether this is a

reasonable estimate. This component

had previously been lower because it

was based on a single person

maintaining an office out of a home as

opposed to the costs of maintaining a

business. The 1991 rent per square foot

amount and the other expenses amount

were constant across the four therapy

types, although the weights of these

factors vary by therapy type (the weight

for rent is lowest for physical therapy

and highest for respiratory therapy).

The dollar amount for 1991 rent per

hour was trended to fourth quarter 1995,

using the proxy selected for rent, the

CPI-U for Housing, published by BLS.

The 1991 dollar amounts for the

remainder of the other expenses factor

were trended to October 1995, using

their selected proxies. This was done for

each of the four therapy types. The

expense factor, including rent, is about

28 percent of the total salary

equivalency amount.

Using the 1994 Medicare cost reports

allows us to recognize that the relative

values of certain factors, such as fringe

benefits, have increased more than the

relative values of other factors such as

rent or wages and salaries. For instance,

if the January 1991 values of the proxies

for office rent and clerical worker fringe

benefits are assumed to be equal to 1.0,

then the fourth quarter 1995 values of

these two proxies are 1.131 for rent and

1.249 for clerical worker fringe benefits.

The values of these proxies have

increased by different percentages.

We summed the fourth quarter 1995

dollar values of the ‘‘blended’’ wages,

fringe benefits, rent, and the remainder

of the other expenses factors to obtain

salary equivalency guideline amounts

for fourth quarter 1995. We updated the

resultant fourth quarter 1995 salary

equivalency guideline amounts to April

1997, using a DRI/McGraw-Hill 1996:3

forecast. The April 1997 national

guidelines below are based on the

amounts determined above:

Physical Therapy ...................................$48.78

Occupational Therapy .............................46.27

Speech Language Pathology ....................44.51

Respiratory Therapy ................................38.51

In previous schedules, statewide

therapy guideline amounts were

calculated from the wage data for 22

Metropolitan Statistical Areas (MSAs)

provided by the BLS survey. We

averaged prevailing hourly rates for the

surveyed MSAs within each State to
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14859

determine that State’s therapy rate. We

also grouped contiguous states into

regions and used an average of the

surveyed MSA wage rates from the

region in order to determine the rate for

States with no MSAs in the BLS survey.

As we acknowledged in the notice of the

last schedule (48 FR 44923), this

method has two major shortcomings.

First, where BLS conducted more than

one survey in a given State, such as New

York, providers located in the surveyed

MSAs were subject to the State rate even

though actual salary data were available

for those MSAs. Secondly, direct

application of individual MSA

prevailing rates (or an average of MSA

rates) to establish guidelines is

relatively insensitive to geographic

variations in wage rates.

Commenters on the existing

guidelines have suggested that the

guidelines should both account more

fully for local cost variation, and more

accurately reflect the different therapy

service costs in urban and rural regions.

In addition, commenters have cautioned

us to avoid any methodology which

would create unreasonable differences

between adjoining geographical regions.

In developing these proposed

guidelines, we have reconsidered how

to account for local cost variations in

the light of those comments. Two other

long-term care Medicare benefit

programs, SNF care and home health

care, use the prospective payment

system hospital wage index to adjust for

local area variations in labor-related

costs. We have decided to employ a

modified version of the prospective

payment system hospital wage index as

the best available method for taking

local cost variation into account.

Specifically, we propose to employ the

pre-reclassified hospital wage index in

order to establish the therapy guideline

amounts for urban areas. (We use the

pre-reclassified wage index because

reclassifications apply to hospitals

under the prospective payment system

only.) For the rural areas of each State,

we propose to use a weighted average of

the wage index values for the urban

areas of the State. This modified

geographic adjustment index accounts

for two salient features of the

geographical variation in therapy costs.

First, within MSAs there is an

association between therapist hourly

salary and fringe benefit rates and

overall hospital hourly salary and fringe

benefit rates, because nursing facilities

compete in the same labor market areas

as hospitals and other health care

providers such as home health agencies.

In addition, the therapy market for rural

(non-MSA) areas tends to reflect the

prevailing compensation conditions of

the urban areas in the region.

In order to determine the geographic

adjustment for the rural areas, it is first

necessary to determine a weighted

average of the wage index values for the

urban areas. We determined the

weighted average of the geographic

adjustment index values for the MSAs

in each State by the following method.

We began with the pre-reclassified

hospital wage index, based on the fiscal

year 1993 Hospital Cost Report

Information System (HCRIS) data set of

hospitals under the prospective

payment system, for each MSA. (This is

the same data used as the basis for the

hospital wage index effective for

hospitals on October 1, 1996 (that is,

fiscal year 1997)). For each MSA, we

then obtained the number of total

adjusted hours worked in prospective

payment system hospitals from the

fiscal 1993 HCRIS data set. We applied

two edits to this data. We excluded all

hospital cost reports that showed

adjusted hourly compensation outside

of three standard deviations of the mean

of the distribution in order to eliminate

erroneous reports. We also excluded all

cost reports from rural areas. A total of

2,837 hospitals under the prospective

payment system satisfied these edits.

After obtaining the number of hours

worked in each MSA, we added hours

from MSAs in each State to determine

the total number of hours worked in the

State. For MSAs that cover more than

one State, we used only the hours from

hospitals inside a State boundary for

determining the total hours worked in

the State. Once we determined the total

hours worked in the State, the ratio of

hours worked in an MSA to total state

hours provided the weight for each

MSA. We then multiplied each MSA’s

pre-reclassified hospital wage index by

the weight for the MSA, and added the

results to produce the geographic

adjustment index for the non-MSA

(rural) areas of the State.

Finally, we normalized the index

values to the national average so that an

area with an average geographic

adjustment equal to the national average

would have a geographic adjustment

index of 1.0. We first computed a

national area geographic adjustment

index by calculating the ratio of hospital

hours worked in each MSA to national

hospital hours worked, multiplying this

ratio by each MSA’s geographic

adjustment index, and adding the

results. We then divided this national

geographic adjustment index into the

area geographic adjustment index for

each region to produce the normalized

therapist geographic adjustment index.

The results of these calculations are

shown in Tables I and II. Table I shows

the geographic adjustment index values

and hourly salary equivalency amounts

for each of the 318 MSAs in the 50

States and Puerto Rico. Table II lists

geographic adjustment index values and

hourly salary equivalency upper limits

for the rural (that is, non-MSA) areas of

each State and Puerto Rico.

In this proposed rule, we computed

the nonurban geographic adjustment

index for a State as a weighted-average

index, using hospital hours for each

MSA in the State as the weights. We are

considering computing the nonurban

geographic adjustment index by an

alternative method. We are soliciting

comments on alternative methods for

determining the nonurban geographic

adjustment index under these

guidelines.

C. Specific Number of Schedules

We are proposing one schedule of

guidelines for respiratory therapists, in

contrast to the three schedules in the

notice of September 30, 1983. This

decision is based on the fact that HCFA

does not differentiate in covering

respiratory therapists by different levels.

Therefore, to make coverage conform

with payment for respiratory therapy

services, we are proposing one schedule

for respiratory therapists. Information

from fiscal intermediaries and the

American Association for Respiratory

Care indicates that industry practice is

to use only one schedule. Also, in the

BLS 1989 Hospital Wage Industry

Survey, there were four different wage

classes and a summary (weighted

average) wage level for respiratory

therapists. Only class III and the

summary level were reported for all 18

MSAs surveyed. For respiratory

therapists in 1991, there were two wage

classes and a summary wage level

shown. Although the summary level

occupational definitions were

comparable from 1989 to 1991,

occupational definitions for basic

classes changed between surveys. The

summary level was the consistent

category—present for all MSAs in both

surveys and encompassing all

nonsupervisory levels of responsibility

for both surveys. We propose to

continue to have one schedule of

guidelines for physical therapists.

Likewise, we propose to establish one

schedule of guidelines for speech

language pathologists and one for

occupational therapists.

The standard travel allowance is 50

percent of the salary equivalency

amount. It is longstanding policy that

has been used in all of the previous

guideline notices. For example, the
14860 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

proposed standard travel allowance

amount for physical therapists in

Bangor, Maine would be determined as

follows:

Bangor, Maine hourly salary

equivalency amount ................... $46.60

Standard travel allowance ............. ×. 50

Section II.B reflects the proposed

changes for computing the salary

component and fringe benefit expense

factors.

The salary equivalency amount is

made up of a salary component and

fringe benefit and expense factors, while

the travel allowance, which is an

additional allowance, reflects payment

for the therapist’s time spent in

traveling to the provider site or to the

patient’s home. We are proposing

changes in the methodology for

computing the salary component and

fringe benefit and expense factors.

Although we are not proposing to

change the current methodology with

respect to the standard travel allowance

in this proposed rule, we are seeking

public comment on an optional travel

allowance methodology for use when

therapy services are furnished in areas

in which geographic distance creates

unique labor markets as discussed in

section II.F.1 of this notice.

The schedules of guidelines that

follow (Tables I and II) are based on the

projected amounts, while the standard

travel allowance is 50 percent of the

guideline amount for each therapy type.

D. Tables of Guidelines and Geographic

Adjustment Indexes

The salary equivalency guideline

amounts for each therapy type are

calculated in three steps: (1)

Multiplication of the labor-related share

(83.379 percent of the composite

weight) by the geographic adjustment

index and by the national salary

equivalency rate for the therapist type;

(2) multiplication of the non-labor

related share (16.621 percent of the

composite weight) by the national salary

equivalency rate for the therapist type;

and (3) summation of the results from

steps 1 and 2. The salary equivalency

guideline amounts for each therapy type

computed by this method are presented

in Tables I and II.

TABLE I.—GEOGRAPHIC ADJUSTMENT INDEX AND SALARY EQUIVALENCY UPPER GUIDELINE FOR URBAN AREAS

Urban area (constituent counties or county equivalents) Index Physical therapy

Occupational therapySpeech language

pathology

Respiratory

therapy

0040 Abilene, TX, Taylor, TX .................................................... 0.8112 41.10 38.99 37.50 32.45

0060 Aguadilla, PR, Aguada, PR, Aguadilla, PR, Moca, PR 1 .. 0.4271 26.29 24.94 23.99 20.75

0080 Akron, OH, Portage, OH, Summit, OH ............................. 0.9931 48.50 46.00 44.25 38.29

0120 Albany, GA, Dougherty, GA, Lee, GA .............................. 0.8665 43.35 41.12 39.56 34.22

0160 Albany-Schenectady-Troy, NY, Albany, NY, Montgomery, NY, Rensselaer, NY, Saratoga, NY, Schenectady,

NY, Schoharie, NY ........................................................ 0.8692 43.46 41.22 39.66 34.31

0200 Albuquerque, NM, Bernalillo, NM, Sandoval, NM, Valencia, NM .......................................................................... 0.9418 46.41 44.02 42.35 36.64

0220 Alexandria, LA, Rapides, LA ............................................ 0.8183 41.39 39.26 37.77 32.68

0240 Allentown-Bethlehem-Easton, PA, Carbon, PA, Lehigh,

PA, Northampton, PA .................................................... 1.0071 49.07 46.54 44.77 38.74

0280 Altoona, PA, Blair, PA ...................................................... 0.9585 47.09 44.67 42.97 37.18

0320 Amarillo, TX, Potter, TX, Randall, TX ............................... 0.8799 43.90 41.64 40.05 34.65

0380 Anchorage, AK, Anchorage, AK1 ..................................... 1.3329 64.35 61.04 58.71 50.80

0440 Ann Arbor, MI, Lenawee, MI, Livingston, MI,

Washtenaw, MI ............................................................. 1.1754 55.91 53.04 51.02 44.14

0450 Anniston, AL, Calhoun, AL ............................................... 0.8087 41.00 38.89 37.41 32.37

0460 Appleton-Oshkosh-Neenah, WI, Calumet, WI,

Outagamie, WI, Winnebago, WI ................................... 0.8960 44.55 42.26 40.65 35.17

0470 Arecibo, PR, Arecibo, PR, Camuy, PR, Hatillo, PR 1 ....... 0.4432 26.94 25.56 24.59 21.27

0480 Asheville, NC, Buncombe, NC, Madison, NC .................. 0.9408 46.37 43.99 42.31 36.61

0500 Athens, GA, Clarke, GA, Madison, GA, Oconee, GA ...... 0.9482 46.67 44.27 42.59 36.85

0520 Atlanta, GA, Barrow, GA, Bartow, GA, Carroll, GA, Cherokee, GA, Clayton, GA, Cobb, GA, Coweta, GA,

DeKalb, GA, Douglas, GA, Fayette, GA, Forsyth, GA,

Fulton, GA, Gwinnett, GA, Henry, GA, Newton, GA,

Paulding, GA, Pickens, GA, Rockdale, GA, Spalding,

GA, Walton, GA* ........................................................... 1.0112 49.24 46.70 44.93 38.87

0560 Atlantic City-Cape May, NJ, Atlantic City, NJ, Cape May,

NJ .................................................................................. 1.1165 53.52 50.76 48.83 42.25

0600 Augusta-Aiken, GA-SC, Columbia, GA, McDuffie, GA,

Richmond, GA, Aiken, SC, Edgefield, SC .................... 0.8906 44.33 42.05 40.45 35.00

0640 Austin-San Marcos, TX, Bastrop, TX, Caldwell, TX,

Hays, TX, Travis, TX, Williamson, TX .......................... 0.9327 46.04 43.67 42.01 36.35

0680 Bakersfield, CA, Kern, CA ................................................ 1.0270 49.88 47.31 45.51 39.38

0720 *Baltimore, MD, Anne Arundel, MD, Baltimore, MD, Baltimore City, MD, Carroll, MD, Harford, MD, Howard,

MD, Queen Annes, MD ................................................. 0.9876 48.28 45.79 44.05 38.11

0733 Bangor, ME, Penobscot, ME ............................................ 0.9465 46.60 44.21 42.52 36.79

0743 Barnstable-Yarmouth, MA, Barnstable, MA ..................... 1.3759 64.07 60.77 58.46 50.58

0760 Baton Rouge, LA, Ascension, LA, East Baton Rouge,

LA, Livingston, LA, West Baton Rouge, LA .................. 0.85 42.68 40.48 38.94 33.69

0840 Beaumont-Port Arthur, TX, Hardin, TX, Jefferson, TX,

Orange, TX .................................................................... 0.8644 43.26 41.04 39.48 34.16

0860 Bellingham, WA, Whatcom, WA ....................................... 1.1407 54.50 51.70 49.73 43.03

0870 Benton Harbor, MI, Berrien, MI ........................................ 0.8573 42.98 40.76 39.21 33.93
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14861

TABLE I.—GEOGRAPHIC ADJUSTMENT INDEX AND SALARY EQUIVALENCY UPPER GUIDELINE FOR URBAN AREAS—

Continued

Urban area (constituent counties or county equivalents) Index Physical therapy

Occupational therapySpeech language

pathology

Respiratory

therapy

0875 Bergen-Passaic, NJ, Bergen, NJ, Passaic, NJ* ............... 1.1878 56.42 53.52 51.48 44.54

0880 Billings, MT, Yellowstone, MT .......................................... 0.9158 45.36 43.02 41.39 35.81

0920 Biloxi-Gulfport-Pascagoula, MS, Hancock, MS, Harrison,

MS, Jackson, MS .......................................................... 0.8622 43.18 40.95 39.40 34.09

0960 Binghamton, NY, Broome, NY, Tioga, NY ....................... 0.8892 44.27 42.00 40.40 34.94

1000 Birmingham, AL, Blount, AL, Jefferson, AL, St. Clair, AL,

Shelby, AL ..................................................................... 0.9108 45.15 42.83 41.20 35.65

1010 Bismarck, ND, Burleigh, ND, Morton, ND ........................ 0.7986 40.59 38.50 37.04 32.04

1020 Bloomington, IN, Monroe, IN ............................................ 0.8720 43.57 41.33 39.76 34.40

1040 Bloomington-Normal, IL, McLean, IL ................................ 0.9061 44.96 42.65 41.03 35.49

1080 Boise City, ID, Ada, ID, Canyon, ID ................................. 0.9457 46.57 44.18 42.49 36.77

1123 Boston-Brockton-Nashua-MA-NH, Bristol, MA, Essex,

MA, Middlesex, MA, Norfolk, MA, Plymouth, MA, Suffolk, MA, Worcester, MA, Hillsborough, NH,

Merrimack, NH, Rockingham, NH, Strafford, NH* ........ 1.1705 55.71 52.85 50.84 43.98

1125 Boulder-Longmont, CO, Boulder, CO ............................... 0.9597 47.14 44.72 43.01 37.22

1145 Brazoria, TX, Brazoria, TX ............................................... 0.9274 45.83 43.47 41.82 36.18

1150 Bremerton, WA, Kitsap, WA ............................................. 1.0987 52.79 50.08 48.17 41.68

1240 Brownsville-Harlingen-San Benito, TX, Cameron, TX ...... 0.8610 43.13 40.91 39.35 34.05

1260 Bryan-College Station,TX, Brazos, TX ............................. 0.8921 44.39 42.11 40.51 35.05

1280 Buffalo-Niagara Falls, NY, Erie, NY, Niagara, NY* .......... 0.9179 45.44 43.10 41.46 35.87

1303 Burlington, VT, Chittenden, VT, Franklin, VT, Grand Isle,

VT .................................................................................. 1.0148 49.38 46.84 45.06 38.99

1310 Caguas, PR, Caguas, PR, Cayey, PR, Cidra, PR,

Gurabo, PR, San Lorenzo, PR 1 ................................... 0.4609 27.66 26.24 25.24 21.84

1320 Canton-Massillon, OH, Carroll, OH, Stark, OH ................ 0.8716 43.56 41.32 39.74 34.39

1350 Casper, WY, Natrona, WY ............................................... 0.8891 44.27 41.99 40.39 34.95

1360 Cedar Rapids, IA, Linn, IA ................................................ 0.8525 42.78 40.58 39.04 33.77

1400 Champaign-Urbana, IL, Champaign, IL ............................ 0.9465 46.60 44.21 42.52 36.76

1440 Charleston-North Charleston, SC, Berkeley, SC,

Charleston, SC, Dorchester, SC ................................... 0.9034 44.85 42.54 40.93 35.41

1480 Charleston, WV, Kanawha, WV, Putnam, WV ................. 0.9601 47.16 44.73 43.03 37.23

1520 Charlotte-Gastonia-Rock Hill, NC–SC, Cabarrus, NC,

Gaston, NC, Lincoln, NC, Mecklenburg, NC, Rowan,

NC, Union, NC, York, SC* ............................................ 0.9696 47.54 45.10 43.38 37.53

1540 Charlottesville, VA, Albemarle, VA, Charlottesville City,

VA, Fluvanna, VA, Greene, VA .................................... 0.9227 45.64 43.29 41.64 36.03

1560 Chattanooga, TN-GA, Catoosa, GA, Dade, GA, Walker,

GA, Hamilton, TN, Marion, TN ...................................... 0.8917 44.38 42.09 40.49 35.03

1580 Cheyenne, WY, Laramie, WY .......................................... 0.7739 39.58 37.55 36.12 31.25

1600 Chicago, IL, Cook, IL, DeKalb, IL, DuPage, IL, Grundy,

IL, Kane, IL, Kendall, IL, Lake, IL, McHenry, IL, Will,

IL* .................................................................................. 1.0845 52.22 49.53 47.65 41.22

1620 Chico-Paradise, CA, Butte, CA ........................................ 1.0499 50.81 48.20 46.36 40.11

1640 Cincinnati, OH–KY–IN, Dearborn, IN, Ohio, IN, Boone,

KY, Campbell, KY, Gallatin, KY, Grant, KY, Kenton,

KY, Pendleton, KY, Brown, OH, Clermont, OH, Hamilton, OH, Warren, OH* ................................................... 0.9644 47.33 44.90 43.19 37.37

1660 Clarksville-Hopkinsville, TN–KY, Christian, KY, Montgomery, TN ................................................................... 0.7777 39.74 37.69 36.26 31.37

1680 Cleveland-Lorain-Elyria, OH, Ashtabula, OH, Cuyahoga,

OH, Geauga, OH, Lake, OH, Lorain, OH, Medina,

OH* ................................................................................ 0.9964 48.63 46.13 44.38 38.39

1720 Colorado Springs, CO, El Paso, CO ................................ 0.9415 46.40 44.01 42.34 36.63

1740 Columbia, MO, Boone, MO .............................................. 0.8969 44.59 42.29 40.68 35.20

1760 Columbia, SC, Lexington, SC, Richland, SC ................... 0.9233 45.66 43.31 41.66 36.05

1800 Columbus, GA-AL Russell, AL, Chattanoochee, GA,

Harris, GA, Muscogee, GA ........................................... 0.7841 40.00 37.94 36.50 31.58

1840 Columbus, OH, Delaware, OH, Fairfield, OH, Franklin,

OH, Licking, OH, Madison, OH, Pickaway, OH* .......... 0.9758 47.80 45.34 43.61 37.73

1880 Corpus Christi, TX, Nueces, TX, San Patricio, TX ........... 0.8951 44.51 42.22 40.62 35.14

1900 Cumberland, MD–WV, Allegany, MD, Mineral, WV ......... 0.8740 43.66 41.41 39.83 34.46

1920 Dallas, TX, Collin, TX, Dallas, TX, Denton, TX, Ellis, TX,

Henderson, TX, Hunt, TX, Kaufman, TX, Rockwall,

TX* ................................................................................ 0.9806 47.99 45.52 43.79 37.89

1950 Danville, VA, Danville City, VA, Pittsylvania, VA .............. 0.8564 42.94 40.73 39.18 33.90

1960 Davenport-Rock Island-Moline, IA-IL, Scott, IA, Henry,

IL, Rock Island, IL ......................................................... 0.8454 42.49 40.31 38.77 33.55
14862 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

TABLE I.—GEOGRAPHIC ADJUSTMENT INDEX AND SALARY EQUIVALENCY UPPER GUIDELINE FOR URBAN AREAS—

Continued

Urban area (constituent counties or county equivalents) Index Physical therapy

Occupational therapySpeech language

pathology

Respiratory

therapy

2000 Dayton-Springfield, OH, Clark, OH, Greene, OH, Miami,

OH, Montgomery, OH ................................................... 0.9635 47.30 44.86 43.16 37.34

2020 Daytona Beach, FL, Flagler, FL, Volusia, FL ................... 0.8941 44.47 42.18 40.58 35.11

2030 Decatur, AL, Lawrence, AL, Morgan, AL ......................... 0.8450 42.48 40.29 38.76 33.53

2040 Decatur, IL, Macon, IL ...................................................... 0.7910 40.28 38.21 36.75 31.80

2080 Denver, CO, Adams, CO, Arapahoe, CO, Denver, CO,

Douglas, CO, Jefferson, CO* ........................................ 1.0246 49.78 47.22 45.42 39.30

2120 Des Moines, IA, Dallas, IA, Polk, IA, Warren, IA ............. 0.8885 44.25 41.97 40.37 34.93

2160 Detroit, MI, Lapeer, MI, Macomb, MI, Monroe, MI, Oakland, MI, St. Clair, MI, Wayne, MI* ............................... 1.0809 52.07 49.36 47.51 41.11

2180 Dothan, AL, Dale, AL, Houston, AL ................................. 0.7801 39.84 37.79 36.35 31.45

2190 Dover, DE, Kent, DE ........................................................ 0.9068 44.99 42.67 41.05 35.5

2200 Dubuque, IA, Dubuque, IA ............................................... 0.8176 41.36 39.23 37.74 32.65

2240 Duluth-Superior, MN–WI, St. Louis, MN, Douglas, WI ..... 0.9491 46.71 44.31 42.62 36.88

2281 Dutchess County, NY, Dutchess, NY ............................... 1.0673 51.52 48.87 47.01 40.67

2290 Eau Claire, WI, Chippewa, WI, Eau Claire, WI ................ 0.8747 43.68 41.44 39.86 34.49

2320 El Paso, TX, El Paso, TX ................................................. 0.9539 46.91 44.49 42.80 37.03

2330 Elkhart-Goshen, IN, Elkhart, IN ........................................ 0.8871 44.19 41.91 40.32 34.88

2335 Elmira, NY, Chemung, NY ................................................ 0.8484 42.61 40.42 38.88 33.64

2340 Enid, OK, Garfield, OK ..................................................... 0.7924 40.34 38.26 36.81 31.84

2360 Erie, PA, Erie, PA ............................................................. 0.9232 45.66 43.31 41.66 36.04

2400 Eugene-Springfield, OR, Lane, OR .................................. 1.1360 54.31 51.52 49.56 42.88

2440 Evansville-Henderson, IN–KY, Posey, IN, Vanderburgh,

IN, Warrick, IN, Henderson, KY .................................... 0.9054 44.93 42.62 41.00 35.47

2520 Fargo-Moorhead, ND–MN, Clay, MN, Cass, ND ............. 0.9117 45.19 42.86 41.23 35.67

2560 Fayetteville, NC, Cumberland, NC ................................... 0.9078 45.03 42.71 41.09 35.55

2580 Fayetteville-Springdale-Rogers, AR, Benton, AR, Washington, AR ..................................................................... 0.7277 37.70 35.76 34.40 29.77

2620 Flagstaff, AZ–UT, Coconino, AZ, Kane, UT ..................... 0.9090 45.08 42.76 41.13 35.59

2640 Flint, MI, Genesee, MI ...................................................... 1.1337 54.22 51.43 49.47 42.80

2650 Florence, AL, Colbert, AL, Lauderdale, AL ...................... 0.8001 40.65 38.56 37.09 32.09

2655 Florence, SC, Florence, SC ............................................. 0.8662 43.34 41.11 39.54 34.21

2670 Fort Collins-Loveland, CO, Larimer, CO .......................... 1.0646 51.41 48.76 46.91 40.58

2680 Ft. Lauderdale, FL, Broward, FL* ..................................... 1.0632 51.35 48.71 46.86 40.54

2700 Fort Myers-Cape Coral, FL, Lee, FL ................................ 0.9104 45.14 42.81 41.18 35.63

2710 Fort Pierce-Port St. Lucie, FL, Martin, FL, St. Lucie, FL 1.0250 49.80 47.23 45.44 39.31

2720 Fort Smith, AR–OK, Crawford, AR, Sebastian, AR,

Sequoyah, OK ............................................................... 0.7926 40.34 38.27 36.81 31.85

2750 Fort Walton Beach, FL, Okaloosa, FL .............................. 0.9265 45.79 43.43 41.78 36.15

2760 Fort Wayne, IN, Adams, IN, Allen, IN, DeKalb, IN, Huntington, IN, Wells, IN, Whitley, IN ................................. 0.8870 44.18 41.91 40.32 34.88

2800 Forth Worth-Arlington, TX Hood, TX, Johnson, TX,

Parker, TX, Tarrant, TX* ............................................... 1.0233 49.73 47.17 45.37 39.26

2840 Fresno, CA, Fresno, CA, Madera, CA ............................. 1.1265 53.93 51.15 49.20 42.57

2880 Gadsden, AL, Etowah, AL ................................................ 0.8951 44.51 42.22 40.62 35.14

2900 Gainesville, FL, Alachua, FL ............................................ 0.9509 46.78 44.38 42.69 36.93

2920 Galveston-Texas City, TX, Galveston, TX ....................... 1.1084 53.19 50.45 48.53 41.99

2960 Gary, IN Lake, IN, Porter, IN ............................................ 0.9717 47.63 45.18 43.46 37.60

2975 Glens Falls, NY, Warren, NY, Washington, NY ............... 0.8630 43.21 40.98 39.43 34.11

2980 Goldsboro, NC, Wayne, NC ............................................. 0.8459 42.51 40.32 38.79 33.56

2985 Grand Forks, ND–MN, Polk, MN, Grand Forks, ND ........ 0.9082 45.05 42.73 41.10 35.56

2995 Grand Junction, CO, Mesa, CO ....................................... 0.8402 42.28 40.11 38.58 33.38

3000 Grand Rapids-Muskegon-Holland, MI, Allegan, MI, Kent,

MI, Muskegon, MI, Ottawa, MI ...................................... 1.0199 49.59 47.04 45.25 39.15

3040 Great Falls, MT, Cascade, MT ......................................... 0.8750 43.70 41.45 39.87 34.50

3060 Greeley, CO, Weld, CO .................................................... 0.9767 47.83 45.37 43.65 37.76

3080 Green Bay, WI, Brown, WI ............................................... 0.9110 45.16 42.84 41.21 35.65

3120 Greensboro-Winston-Salem-High Point, NC, Alamance,

NC, Davidson, NC, Davie, NC, Forsyth, NC, Guilford,

NC, Randolph, NC, Stokes, NC, Yadkin, NC* .............. 0.9388 46.29 43.91 42.24 36.54

3150 Greenville, NC, Pitt, NC .................................................... 0.9150 45.32 42.99 41.36 35.78

3160 Greenville-Spartanburg-Anderson, SC, Anderson, SC,

Cherokee, SC, Greenville, SC, Pickens, SC,

Spartanburg, SC ........................................................... 0.8998 44.70 42.40 40.79 35.29

3180 Hagerstown, MD, Washington, MD .................................. 0.9248 45.72 43.37 41.72 36.10

3200 Hamilton-Middletown, OH, Butler, OH .............................. 0.9565 47.01 44.59 42.90 37.11

3240 Harrisburg-Lebanon-Carlisle, PA, Cumberland, PA, Dauphin, PA, Lebanon, PA, Perry, PA ................................ 1.0238 49.75 47.19 45.39 39.27
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14863

TABLE I.—GEOGRAPHIC ADJUSTMENT INDEX AND SALARY EQUIVALENCY UPPER GUIDELINE FOR URBAN AREAS—

Continued

Urban area (constituent counties or county equivalents) Index Physical therapy

Occupational therapySpeech language

pathology

Respiratory

therapy

3283 Hartford, CT, Hartford, CT, Litchfield, CT, Middlesex,

CT, Tolland, CT* ........................................................... 1.2465 58.81 55.78 53.66 46.42

3285 Hattiesburg, MS, Forrest, MS, Lamar, MS ....................... 0.7309 37.84 35.89 34.52 29.87

3290 Hickory-Morganton-Lenoir, NC, Alexander, NC, Burke,

NC, Caldwell, NC, Catawba, NC .................................. 0.8694 43.47 41.23 39.66 34.32

3320 Honolulu, HI, Honolulu, HI 1 .............................................. 1.1552 56.92 53.99 51.93 44.93

3350 Houma, LA, Lafourche, LA, Terrebonne, LA .................... 0.7915 40.30 38.23 36.77 31.82

3360 Houston, TX, Chambers, TX, Fort Bend, TX, Harris, TX,

Liberty, TX, Montgomery, TX, Waller, TX* ................... 1.0079 49.10 46.57 44.80 38.76

3400 Huntington-Ashland, WV–KY–OH, Boyd, KY, Carter, KY,

Greenup, KY, Lawrence, OH, Cabell, WV, Wayne, WV 0.9247 45.72 43.37 41.72 36.09

3440 Huntsville, AL, Limestone, AL, Madison, AL .................... 0.8271 41.75 39.60 38.09 32.96

3480 Indianapolis, IN, Boone, IN, Hamilton, IN, Hancock, IN,

Hendricks, IN, Johnson, IN, Madison, IN, Marion, IN,

Morgan, IN, Shelby, IN* ................................................ 0.9981 48.70 46.20 44.44 38.45

3500 Iowa City, IA, Johnson, IA ................................................ 0.9435 46.48 44.09 42.41 36.70

3520 Jackson, MI, Jackson, MI ................................................. 0.9117 45.19 42.86 41.23 35.67

3560 Jackson, MS, Hinds, MS, Madison, MS, Rankin, MS ...... 0.7946 40.43 38.35 36.89 31.91

3580 Jackson, TN, Madison, TN ............................................... 0.8354 42.09 39.92 38.40 33.33

3600 Jacksonville, FL, Clay, FL, Duval, FL, Nassau, FL, St.

Johns, FL ...................................................................... 0.9158 45.36 43.02 41.39 35.81

3605 Jacksonville, NC, Onslow, NC .......................................... 0.7111 37.03 35.12 33.79 29.23

3610 Jamestown, NY, Chautaqua, NY ...................................... 0.7731 39.55 37.52 36.09 31.22

3620 Janesville-Beloit, WI, Rock, WI ........................................ 0.8713 43.55 41.30 39.73 34.38

3640 Jersey City, NJ, Hudson, NJ ............................................ 1.1472 54.77 51.95 49.97 43.24

3660 Johnson City-Kingsport-Bristol, TN–VA, Carter, TN,

Hawkins, TN, Sullivan, TN, Unicoi, TN, Washington,

TN, Bristol City, VA, Scott, VA, Washington, VA .......... 0.8954 44.53 42.23 40.63 35.15

3680 Johnstown, PA, Cambria, PA, Somerset, PA .................. 0.8464 42.53 40.34 38.81 33.58

3700 Jonesboro, AR .................................................................. 0.7277 37.70 35.76 34.40 29.77

3710 Joplin, MO, Jasper, MO, Newton, MO ............................. 0.7698 39.42 37.39 35.97 31.12

3720 Kalamazoo-Battlecreek, MI, Calhoun, MI, Kalamazoo,

MI, Van Buren, MI ......................................................... 1.0625 51.32 48.68 46.83 40.52

3740 Kankakee, IL, Kankakee, IL ............................................. 0.9187 45.47 43.13 41.49 35.90

3760 Kansas City, KS–MO, Johnson, KS, Leavenworth, KS,

Miami, KS, Wyandotte, KS, Cass, MO, Clay, MO,

Clinton, MO, Jackson, MO, Lafayette, MO, Platte, MO,

Ray, MO* ....................................................................... 0.9553 46.96 44.55 42.85 37.07

3800 Kenosha, WI, Kenosha, WI .............................................. 0.9217 45.60 43.25 41.60 36.00

3810 Killeen-Temple, TX, Bell, TX, Coryell, TX ........................ 1.0474 50.71 48.10 46.27 40.03

3840 Knoxville, TN, Anderson, TN, Blount, TN, Knox, TN,

Loudon, TN, Sevier, TN, Union, TN .............................. 0.8569 42.96 40.75 39.20 33.92

3850 Kokomo, IN, Howard, IN, Tipton, IN ................................. 0.8658 43.32 41.09 39.53 34.20

3870 La Crosse, WI–MN, Houston, MN, La Crosse, WI ........... 0.8686 43.44 41.20 39.63 34.29

3880 Lafayette, LA, Acadia, LA, Lafayette, LA, St. Landry, LA,

St. Martin, LA ................................................................ 0.8228 41.57 39.43 37.93 32.82

3920 Lafayette, IN, Clinton, IN, Tippecanoe, IN ....................... 0.8851 44.11 41.84 40.25 34.82

3960 Lake Charles, LA, Calcasieu, LA ..................................... 0.8098 41.04 38.93 37.45 32.40

3980 Lakeland-Winter Haven, FL, Polk, FL .............................. 0.8843 44.07 41.81 40.22 34.80

4000 Lancaster, PA, Lancaster, PA .......................................... 0.9659 47.39 44.95 43.24 37.42

4040 Lansing-East Lansing, MI, Clinton, MI, Eaton, MI,

Ingham, MI .................................................................... 1.0089 49.14 46.61 44.84 38.80

4080 Laredo, TX, Webb, TX ...................................................... 0.7129 37.10 35.19 33.86 29.29

4100 Las Cruces, NM, Dona Ana, NM ...................................... 0.8564 42.94 40.73 39.18 33.90

4120 Las Vegas, NV–AZ, Mohave, AZ, Clark, NV, Nye, NV* .. 1.0956 52.67 49.96 48.06 41.58

4150 Lawrence, KS, Douglas, KS ............................................. 0.8665 43.35 41.12 39.56 34.22

4200 Lawton, OK, Comanche, OK ............................................ 0.8431 42.40 40.22 38.69 33.47

4243 Lewiston-Auburn, ME, Androscoggin, ME ........................ 0.9484 46.68 44.28 42.60 36.85

4280 Lexington, KY, Bourbon, KY, Clark, KY, Fayette, KY,

Jessamine, KY, Madison, KY, Scott, KY, Woodford,

KY .................................................................................. 0.8359 42.11 39.94 38.42 33.24

4320 Lima, OH, Allen, OH, Auglaize, OH ................................. 0.8801 43.90 41.64 40.06 34.66

4360 Lincoln, NE, Lancaster, NE .............................................. 0.9234 45.66 43.31 41.67 36.05

4400 Little Rock-North Little Rock, AR, Faulkner, AR, Lonoke,

AR, Pulaski, AR, Saline, AR ......................................... 0.8665 43.35 41.12 39.56 34.22

4420 Longview-Marshall, TX, Gregg, TX, Harrison, TX,

Upshur, TX .................................................................... 0.8713 43.55 41.30 39.73 34.38

4480 Los Angeles-Long Beach, CA, Los Angeles, CA* ........... 1.2441 58.71 55.69 53.57 46.35
14864 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

TABLE I.—GEOGRAPHIC ADJUSTMENT INDEX AND SALARY EQUIVALENCY UPPER GUIDELINE FOR URBAN AREAS—

Continued

Urban area (constituent counties or county equivalents) Index Physical therapy

Occupational therapySpeech language

pathology

Respiratory

therapy

4520 Louisville, KY–IN, Clark, IN, Floyd, IN, Harrison, IN,

Scott, IN, Bullitt, KY, Jefferson, KY, Oldham, KY ......... 0.9522 46.84 44.43 42.74 36.98

4600 Lubbock, TX, Lubbock, TX ............................................... 0.8577 42.99 40.78 39.23 33.94

4640 Lynchburg, VA, Amherst, VA, Bedford, VA, Bedford City,

VA, Campbell, VA, Lynchburg City, VA ........................ 0.8116 41.12 39.00 37.52 32.46

4680 Macon, GA, Bibb, GA, Houston, GA, Jones, GA, Peach,

GA, Twiggs, GA ............................................................ 0.8894 44.28 42.00 40.41 34.96

4720 Madison, WI, Dane, WI .................................................... 1.0100 49.19 46.66 44.88 38.83

4800 Mansfield, OH, Crawford, OH, Richland, OH ................... 0.8591 43.05 40.83 39.28 33.99

4840 Mayaguez, PR, Anasco, PR, Cabo Rojo, PR,

Hormigueros, PR, Mayaguez, PR, Sabana Grande,

PR, San German, PR1 .................................................. 0.4248 26.20 24.85 23.90 20.68

4880 McAllen-Edinburg-Mission, TX, Hidalgo, TX .................... 0.8552 42.89 40.68 39.14 33.86

4890 Medford-Ashland, OR, Jackson, OR ................................ 1.0148 49.38 46.84 45.06 38.99

4900 Melbourne-Titusville-Palm Bay, FL, Brevard FL ............... 0.9140 45.28 42.95 41.32 35.75

4920 Memphis, TN–AR–MS, Crittenden, AR, DeSoto, MS,

Fayette, TN, Shelby, TN, Tipton, TN* ........................... 0.8231 41.59 39.45 37.94 32.83

4940 Merced, CA, Merced, CA ................................................. 1.0744 51.81 49.14 47.27 40.90

5000 Miami, FL, Dade, FL* ....................................................... 1.0017 48.85 46.34 44.57 38.56

5015 Middlesex-Somerset-Hunterdon, NJ, Hunterdon, NJ,

Middlesex, NJ, Somerset, NJ* ...................................... 1.0969 52.72 50.01 48.11 41.62

5080 Milwaukee-Waukesha, WI, Milwaukee, WI, Ozaukee, WI,

Washington, WI, Waukesha, WI* .................................. 0.9721 47.65 45.19 43.47 37.61

5120 Minneapolis-St. Paul, MN–WI, Anoka, MN, Carver, MN,

Chisago, MN, Dakota, MN, Hennepin, MN, Isanti, MN,

Ramsey, MN, Scott, MN, Sherburne, MN, Washington,

MN, Wright, MN, Pierce, WI, St. Croix, WI* ................. 1.0862 52.29 49.60 47.71 41.28

5160 Mobile, AL, Baldwin, AL, Mobile, AL ................................ 0.8044 40.82 38.72 37.25 32.23

5170 Modesto, CA, Stanislaus, CA ........................................... 1.0684 51.56 48.91 47.05 40.73

5190 Monmouth-Ocean, NJ, Monmouth, NJ, Ocean, NJ* ........ 1.0919 52.52 49.82 47.92 41.46

5200 Monroe, LA, Ouachita, LA ................................................ 0.8276 41.77 39.62 38.11 32.97

5240 Montgomery, AL, Autauga, AL, Elmore, AL, Montgomery, AL ........................................................................... 0.7938 40.39 38.31 36.86 31.89

5280 Muncie, IN, Delaware, IN ................................................. 0.9791 47.93 45.46 43.73 37.84

5330 Myrtle Beach, SC, Horry, SC ........................................... 0.7852 40.04 37.98 36.54 31.61

5345 Naples, FL, Collier, FL ...................................................... 1.0280 49.92 47.35 45.55 39.41

5360 Nashville, TN, Cheatham, TN, Davidson, TN, Dickson,

TN, Robertson, TN, Rutherford TN, Sumner, TN,

Williamson, TN, Wilson, TN* ......................................... 0.9153 45.34 43.00 41.37 35.79

5380 Nassau-Suffolk, NY, Nassau, NY, Suffolk, NY* ............... 1.3654 63.64 60.37 58.07 50.24

5483 New Haven-Bridgeport-Stamford-Danbury-Waterbury,

CT Fairfield, CT New Haven, CT* ................................ 1.2805 60.19 57.09 54.92 47.52

5523 New London-Norwich, CT, New London, CT ................... 1.2359 58.37 55.37 53.26 46.08

5560 New Orleans, LA, Jefferson, LA, Orleans, LA,

Plaquemines, LA, St. Bernard, LA, St. Charles, LA, St.

James, LA, St. John The Baptist, LA, St. Tammany,

LA* ................................................................................. 0.9368 46.21 43.83 42.16 36.48

5600 New York, NY, Bronx, NY, Kings, NY, New York, NY,

Putnam, NY, Queens, NY, Richmond, NY, Rockland,

NY, Westchester, NY* ................................................... 1.4266 66.13 62.73 60.34 52.21

5640 Newark, NJ, Essex, NJ, Morris, NJ, Sussex, NJ, Union,

NJ, Warren, NJ* ............................................................ 1.1855 56.32 53.43 51.39 44.47

5660 Newburgh, NY–PA, Orange, NY, Pike, PA ...................... 1.0889 52.40 49.70 47.81 41.36

5720 Norfolk-Virginia Beach-Newport News, VA–NC,

Currituck, NC, Chesapeake City, VA, Gloucester, VA,

Hampton City, VA, Isle of Wight, VA, James City, VA,

Mathews, VA, Newport News City, VA, Norfolk City,

VA, Poquoson City, VA, Portsmouth City, VA, Suffolk

City, VA, Virginia Beach City, VA, Williamsburg City,

VA, York, VA* ................................................................ 0.8414 42.33 40.15 38.62 33.42

5775 Oakland, CA, Alameda, CA, Contra Costa, CA* .............. 1.5110 69.56 65.98 63.47 54.92

5790 Ocala, FL, Marion, FL ....................................................... 0.9177 45.43 43.09 41.46 35.87

5800 Odessa-Midland, TX, Ector, TX, Midland, TX .................. 0.8549 42.88 40.67 38.13 33.85

5880 Oklahoma City, OK, Canadian, OK, Cleveland, OK,

Logan, OK, McClain, OK, Oklahoma, OK,

Pottawatomie, OK* ........................................................ 0.8437 42.42 40.24 38.71 33.49

5910 Olympia, WA, Thurston, WA ............................................ 1.0774 51.93 49.26 47.38 41.00

5920 Omaha, NE–IA, Pottawattamie, IA, Cass, NE, Douglas,

NE, Sarpy, NE, Washington, NE .................................. 0.9555 46.97 44.55 42.86 37.08
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14865

TABLE I.—GEOGRAPHIC ADJUSTMENT INDEX AND SALARY EQUIVALENCY UPPER GUIDELINE FOR URBAN AREAS—

Continued

Urban area (constituent counties or county equivalents) Index Physical therapy

Occupational therapySpeech language

pathology

Respiratory

therapy

5945 Orange County, CA, Orange, CA* ................................... 1.2061 57.16 54.22 52.16 45.13

5960 Orlando, FL, Lake, FL, Orange, FL, Osceola, FL, Seminole, FL* ........................................................................ 0.9545 46.93 44.51 42.82 37.05

5990 Owensboro, KY, Daviess, KY ........................................... 0.7635 39.16 37.15 35.73 30.92

6015 Panama City, FL, Bay, FL ................................................ 0.8125 41.15 39.04 37.55 32.49

6020 Parkersburg-Marietta, WV–OH, Washington, OH, Wood,

WV ................................................................................. 0.7939 40.40 38.32 36.86 31.89

6080 Pensacola, FL, Escambia, FL, Santa Rosa, FL ............... 0.8267 41.73 39.58 38.08 32.95

6120 Peoria-Pekin, IL, Peoria, IL, Tazewell, IL, Woodford, IL .. 0.8975 44.61 42.32 40.71 35.22

6160 Philadelphia, PA–NJ, Burlington, NJ, Camden, NJ,

Gloucester, NJ, Salem, NJ, Bucks, PA, Chester, PA,

Delaware, PA, Montgomery, PA, Philadelphia, PA* ..... 1.1326 54.17 51.39 49.43 42.77

6200 Phoenix-Mesa, AZ, Maricopa, AZ, Pinal, AZ* .................. 0.9888 48.32 45.84 44.09 38.15

6240 Pine Bluff, AR, Jefferson, AR ........................................... 0.7948 40.43 38.35 36.89 31.92

6280 Pittsburgh, PA, Allegheny, PA, Beaver, PA, Butler, PA,

Fayette, PA, Washington, PA, Westmoreland, PA* ...... 0.9778 47.88 45.41 43.69 37.80

6323 Pittsfield, MA, Berkshire, MA ............................................ 1.0636 51.37 48.72 46.87 40.55

6340 Pocatello, ID, Bannock, ID ............................................... 0.8854 44.12 41.85 40.26 34.83

6360 Ponce, PR, Guayanilla, PR, Juana Diaz, PR, Penuelas,

PR, Ponce, PR, Villalba, PR, Yauco, PR 1 ................... 0.4722 28.12 26.68 25.66 22.20

6403 Portland, ME, Cumberland, ME, Sagadahoc, ME, York,

ME ................................................................................. 0.9695 47.54 45.09 43.38 37.53

6440 Portland-Vancouver, OR–WA, Clackamas, OR, Columbia, OR, Multnomah, OR, Washington, OR, Yamhill,

OR, Clark, WA* ............................................................. 1.1324 54.17 51.38 49.42 42.76

6483 Providence-Warwick, RI, Bristol, RI, Kent, RI, Newport,

RI, Providence, RI, Washington, RI .............................. 1.1180 53.58 50.82 48.89 42.30

6520 Provo-Orem, UT, Utah, UT ............................................... 1.0196 49.58 47.03 45.24 39.14

6560 Pueblo, CO, Pueblo, CO .................................................. 0.8350 42.07 39.90 38.39 33.21

6580 Punta Gorda, FL, Charlotte, FL ........................................ 0.8419 42.35 40.17 38.64 33.43

6600 Racine, WI Racine, WI ..................................................... 0.8905 44.33 42.05 40.45 34.99

6640 Raleigh-Durham-Chapel Hill, NC, Chatham, NC, Durham, NC, Franklin, NC, Johnston, NC, Orange, NC,

Wake, NC ...................................................................... 0.9805 47.99 45.52 43.79 37.88

6660 Rapid City, SD, Pennington, SD ...................................... 0.8522 42.77 40.57 39.02 33.76

6680 Reading, PA, Berks, PA ................................................... 0.9520 46.83 44.42 42.73 36.97

6690 Redding, CA, Shasta, CA ................................................. 1.1697 55.68 52.82 50.81 43.96

6720 Reno, NV, Washoe, NV .................................................... 1.1105 53.27 50.53 48.61 42.06

6740 Richland-Kennewick-Pasco, WA, Benton, WA, Franklin,

WA ................................................................................. 1.0049 48.98 46.46 44.69 38.67

6760 Richmond-Petersburg, VA, Charles City County, VA,

Chesterfield, VA, Colonial Heights City, VA, Dinwiddie,

VA, Goochland, VA, Hanover, VA, Henrico, VA, Hopewell City, VA, New Kent, VA, Petersburg City, VA,

Powhatan, VA, Prince George, VA, Richmond City,

VA .................................................................................. 0.9267 45.80 43.44 41.79 36.16

6780 Riverside-San Bernardino, CA, Riverside, CA, San

Bernardino, CA* ............................................................ 1.1468 54.75 51.93 49.96 43.22

6800 Roanoke, VA, Botetourt, VA, Roanoke, VA, Roanoke

City, VA, Salem City, VA .............................................. 0.8771 43.78 41.53 39.95 34.56

6820 Rochester, MN, Olmsted, MN .......................................... 1.0511 50.86 48.24 46.09 39.88

6840 Rochester, NY, Genesee, NY, Livingston, NY, Monroe,

NY, Ontario, NY, Orleans, NY, Wayne, NY* ................ 0.9725 47.66 45.21 43.49 37.63

6880 Rockford, IL, Boone, IL, Ogle, IL, Winnebago, IL ............ 0.9065 44.98 42.66 41.04 35.51

6895 Rocky Mount, NC, Edgecombe, NC, Nash, NC ............... 0.9026 44.82 42.51 40.90 35.38

6920 Sacramento, CA, El Dorado, CA, Placer, CA, Sacramento, CA* ................................................................. 1.2449 58.74 55.72 53.60 46.37

6960 Saginaw-Bay City-Midland, MI, Bay, MI, Midland, MI,

Saginaw, MI .................................................................. 0.9688 47.51 45.07 43.35 37.51

6980 St. Cloud, MN, Benton, MN, Stearns, MN ........................ 0.9532 46.88 44.46 42.77 37.01

7000 St. Joseph, MO, Andrews, MO, Buchanan, MO .............. 0.8619 43.16 40.94 39.38 34.08

7040 St. Louis, MO–IL, Clinton, IL, Jersey, IL, Madison, IL,

Monroe, IL, St. Clair, IL, Franklin, MO, Jefferson, MO,

Lincoln, MO, St. Charles, MO, St. Louis, MO, St.

Louis City, MO, Warren, MO* ....................................... 0.9093 45.09 42.77 41.14 35.60

7080 Salem, OR, Marion, OR, Polk, OR ................................... 0.9805 47.99 45.52 43.79 37.88

7120 Salinas, CA, Monterey, CA ............................................... 1.3912 64.69 61.36 59.03 51.07

7160 Salt Lake City-Ogden, UT, Davis, UT, Salt Lake, UT,

Weber, UT* ................................................................... 0.9754 47.78 45.32 43.60 37.72
14866 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

TABLE I.—GEOGRAPHIC ADJUSTMENT INDEX AND SALARY EQUIVALENCY UPPER GUIDELINE FOR URBAN AREAS—

Continued

Urban area (constituent counties or county equivalents) Index Physical therapy

Occupational therapySpeech language

pathology

Respiratory

therapy

7200 San Angelo, TX, Tom Green, TX ..................................... 0.7637 39.17 37.15 35.74 30.92

7240 San Antonio, TX, Bexar, TX, Comal, TX, Guadalupe,

TX, Wilson, TX* ............................................................. 0.8456 42.50 40.31 38.78 33.55

7320 San Diego, CA, San Diego, CA* ...................................... 1.2230 57.85 54.87 52.79 45.67

7360 San Francisco, CA, Marin, CA, San Francisco, CA, San

Mateo, CA* .................................................................... 1.4373 66.57 63.14 60.74 52.55

7400 San Jose, CA, Santa Clara, CA* ...................................... 1.4634 67.63 64.15 61.71 53.39

7440 San Juan-Bayamon, PR, Aguas Buenas, PR,

Barceloneta, PR, Bayamon, PR, Canovanas, PR,

Carolina, PR, Catano, PR, Ceiba, PR, Comerio, PR,

Corozal, PR, Dorado, PR, Fajardo, PR, Florida, PR,

Guaynabo, PR, Humacao, PR, Juncos, PR, Los

Piedras, PR, Loiza, PR, Luguillo, PR, Manati, PR,

Morovis, PR, Naguabo, PR, Naranjito, PR, Rio

Grande, PR, San Juan, PR, Toa Alta, PR, Toa Baja,

PR, Trujillo Alto, PR, Vega Alta, PR, Vega Baja, PR,

Yabucoa, PR1 * .............................................................. 0.4542 27.39 25.98 24.99 21.62

7460 San Luis Obispo-Atascadero-Paso Robles, CA, San Luis

Obispo, CA .................................................................... 1.1653 55.50 52.65 50.64 43.82

7480 Santa Barbara-Santa Maria-Lompoc, CA, Santa Barbara, CA ........................................................................ 1.1331 54.19 51.40 49.45 42.78

7485 Santa Cruz-Watsonville, CA, Santa Cruz, CA .................. 1.3627 63.53 60.26 57.97 50.16

7490 Santa Fe, NM, Los Alamos, NM, Santa Fe, NM .............. 1.0909 52.48 49.78 47.88 41.43

7500 Santa Rosa, CA, Sonoma, CA ......................................... 1.2586 59.30 56.25 54.11 46.81

7510 Sarasota-Bradenton, FL, Manatee, FL, Sarasota, FL ...... 0.9866 48.24 45.75 44.01 38.08

7520 Savannah, GA, Bryan, GA, Chatham, GA, Effingham,

GA ................................................................................. 0.9725 47.66 45.21 43.49 37.63

7560 Scranton-Wilkes-Barre-Hazleton, PA, Columbia, PA,

Lackawanna, PA, Luzerne, PA, Wyoming, PA ............. 0.8821 43.98 41.72 40.13 34.72

7600 Seattle-Bellevue-Everett, WA, Island, WA, King, WA,

Snohomish, WA* ........................................................... 1.1474 54.78 51.96 49.98 43.24

7610 Sharon, PA, Mercer, PA ................................................... 0.8955 44.53 42.24 40.63 35.15

7620 Sheboygan, WI, Sheboygan, WI ...................................... 0.7825 39.93 37.88 36.44 31.53

7640 Sherman-Denison, TX, Grayson, TX ................................ 0.8682 43.42 41.19 39.62 34.28

7680 Shreveport-Bossier City, LA, Bossier, LA, Caddo, LA,

Webster, LA .................................................................. 0.9433 46.47 44.08 42.41 36.69

7720 Sioux City, IA–NE, Woodbury, IA, Dakota, NE ................ 0.8379 42.19 40.02 38.49 33.31

7760 Sioux Falls, SD, Lincoln, SD, Minnehaha, SD ................. 0.8688 43.44 41.21 39.64 34.30

7800 South Bend, IN, St. Joseph, IN ........................................ 1.0013 48.83 46.32 44.56 38.55

7840 Spokane, WA, Spokane, WA ........................................... 1.0607 51.25 48.61 46.76 40.46

7880 Springfield, IL, Menard, IL, Sangamon, IL ....................... 0.8740 43.66 41.41 39.83 34.46

7920 Springfield, MO, Christian, MO, Greene, MO, Webster,

MO ................................................................................. 0.7885 40.18 38.11 36.66 31.72

8003 Springfield, MA, Hampden, MA, Hampshire, MA ............. 1.0670 51.51 48.85 47.00 40.66

8050 State College, PA, Centre, PA ......................................... 0.9614 47.21 44.78 43.08 37.27

8080 Steubenville-Weirton, OH–WV, Jefferson, OH, Brooke,

WV, Hancock, WV ........................................................ 0.8331 41.99 39.83 38.32 33.15

8120 Stockton-Lodi, CA, San Joaquin, CA ............................... 1.1420 54.56 51.75 49.78 43.07

8140 Sumter, SC, Sumter, SC .................................................. 0.7760 39.67 37.63 36.20 31.32

8160 Syracuse, NY, Cayuga, NY, Madison, NY, Onondaga,

NY, Oswego, NY ........................................................... 0.9469 46.62 44.22 42.54 36.81

8200 Tacoma, WA, Pierce, WA ................................................. 1.0946 52.63 49.92 48.02 41.55

8240 Tallahassee, FL, Gadsden, FL, Leon, FL ........................ 0.8379 42.19 40.02 38.49 33.31

8280 Tampa-St. Petersburg-Clearwater, FL, Hernando, FL,

Hillsborough, FL, Pasco, FL, Pinellas, FL* ................... 0.9323 46.03 43.66 42.00 36.34

8320 Terre Haute, IN, Clay, IN, Vermillion, IN, Vigo, IN ........... 0.8659 43.33 41.10 39.53 34.20

8360 Texarkana, AR-Texarkana, TX, Miller, AR, Bowie, TX .... 0.8570 42.96 40.75 39.20 33.92

8400 Toledo, OH, Fulton, OH, Lucas, OH, Wood, OH ............. 1.0443 50.58 47.98 46.15 39.93

8440 Topeka, KS, Shawnee, KS ............................................... 1.0166 49.46 46.91 45.13 39.04

8480 Trenton, NJ, Mercer, NJ ................................................... 1.0633 51.35 48.71 46.86 40.54

8520 Tucson, AZ, Pima, AZ ...................................................... 0.9140 45.28 42.95 41.32 35.75

8560 Tulsa, OK, Creek, OK, Osage, OK, Rogers, OK, Tulsa,

OK, Wagoner, OK ......................................................... 0.8159 41.29 39.17 37.68 32.60

8600 Tuscaloosa, AL, Tuscaloosa, AL ...................................... 0.7846 40.02 37.96 36.52 31.59

8640 Tyler, TX, Smith, TX ......................................................... 1.0075 49.09 46.56 44.79 38.75

8680 Utica-Rome, NY, Herkimer, NY, Oneida, NY ................... 0.8480 42.60 40.41 38.87 33.63

8720 Vallejo-Fairfield-Napa, CA, Napa, CA, Solano, CA .......... 1.4057 65.28 61.92 59.57 51.54

8735 Ventura, CA, Ventura, CA ................................................ 1.1545 55.06 52.23 50.24 43.47

8750 Victoria, TX, Victoria, TX .................................................. 0.8459 42.51 40.32 38.79 33.56
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14867

TABLE I.—GEOGRAPHIC ADJUSTMENT INDEX AND SALARY EQUIVALENCY UPPER GUIDELINE FOR URBAN AREAS—

Continued

Urban area (constituent counties or county equivalents) Index Physical therapy

Occupational therapySpeech language

pathology

Respiratory

therapy

8760 Vineland-Millville-Bridgeton, NJ, Cumberland, NJ ............ 1.0072 49.06 46.55 44.78 38.74

8780 Visalia-Tulare-Porterville, CA, Tulare, CA ........................ 1.0231 49.72 47.16 45.37 39.25

8800 Waco, TX, McLennan, TX ................................................ 0.7834 39.97 37.91 36.47 31.56

8840 Washington, DC–MD–VA–WV, District of Columbia, DC,

Calvert, MD, Charles, MD, Frederick, MD, Montgomery, MD, Prince Georges, MD, Alexandria City, VA,

Arlington, VA, Clarke, VA, Culpeper, VA, Fairfax, VA,

Fairfax City, VA, Falls Church City, VA, Fauquier, VA,

Fredericksburg City, VA, King George, VA, Loudoun,

VA, Manassas City, VA, Manassas Park City, VA,

Prince William, VA, Spotsylvania, VA, Stafford, VA,

Warren, VA, Berkeley, WV, Jefferson, WV* ................. 1.0909 52.48 49.78 47.88 41.43

8920 Waterloo-Cedar Falls, IA, Black Hawk, IA ........................ 0.8774 43.79 41.54 39.96 34.57

8940 Wausau, WI, Marathon, WI .............................................. 1.0405 50.43 47.83 46.01 39.81

8960 West Palm Beach-Boca Raton, FL, Palm Beach, FL ...... 1.0283 49.93 47.36 45.56 39.42

9000 Wheeling, OH–WV, Belmont, OH, Marshall, WV, Ohio,

WV ................................................................................. 0.7623 39.11 37.10 35.69 30.88

9040 Wichita, KS, Butler, KS, Harvey, KS, Sedgwick, KS ........ 0.9443 46.51 44.12 42.44 36.72

9080 Wichita Falls, TX, Archer, TX, Wichita, TX ...................... 0.8105 41.07 38.96 37.48 32.43

9140 Williamsport, PA, Lycoming, PA ....................................... 0.8534 42.82 40.61 39.07 33.80

9160 Wilmington-Newark, DE–MD, New Castle, DE, Cecil,

MD ................................................................................. 1.1405 54.49 51.69 49.72 43.02

9200 Wilmington, NC, New Hanover, NC, Brunswick, NC ....... 0.9118 45.19 42.87 41.24 35.68

9260 Yakima, WA, Yakima, WA ................................................ 1.0105 49.21 46.68 44.90 38.85

9270 Yolo, CA Yolo, CA ............................................................ 1.1535 55.02 52.19 50.21 43.44

9280 York, PA, York, PA ........................................................... 0.9176 45.43 43.09 41.45 35.86

9320 Youngstown-Warren, OH, Columbiana, OH, Mahoning,

OH, Trumbull, OH ......................................................... 0.9819 48.04 45.57 43.84 37.93

9340 Yuba City, CA, Sutter, CA Yuba, CA ............................... 1.0496 50.80 48.18 46.35 40.10

9360 Yuma, AZ, Yuma, AZ ....................................................... 0.9572 47.04 44.62 42.92 37.14

1 Nonlabor portion increased in the following areas based on cost of living surveys conducted by the U.S. Office of Personnel Management:

Location Adjustment

factor

Alaska ........................................................................................................................................................................................................ 1.250

Hawaii ........................................................................................................................................................................................................ 1.225

Puerto Rico ................................................................................................................................................................................................ 1.100

*Large Urban Area.

TABLE II.—GEOGRAPHIC ADJUSTMENT INDEX AND SALARY EQUIVALENCY GUIDELINE AMOUNTS FOR NONURBAN AREAS

Nonurban area Wage index Physical

therapy

Occupational therapySpeech language therapy

Respiratory

therapy

Alabama .................................................................................................... 0.8477 42.59 40.39 38.86 33.62

Alaska 1 ..................................................................................................... 1.3329 64.35 61.04 58.71 50.80

Arizona ...................................................................................................... 0.9718 47.63 45.18 43.46 37.60

Arkansas ................................................................................................... 0.8270 41.74 39.60 38.09 32.96

California ................................................................................................... 1.2551 59.16 56.11 53.98 46.70

Colorado ................................................................................................... 0.9895 48.35 45.86 44.12 38.17

Connecticut ............................................................................................... 1.2644 59.53 56.47 54.32 47.00

Delaware ................................................................................................... 1.1100 53.25 50.51 48.59 42.04

Florida ....................................................................................................... 0.9589 47.11 44.68 42.98 37.19

Georgia ..................................................................................................... 0.9596 47.14 44.71 43.01 37.21

Hawaii 1 ..................................................................................................... 1.1552 56.92 53.99 51.93 44.93

Idaho ......................................................................................................... 0.9457 46.57 44.18 42.49 36.77

Illinois ........................................................................................................ 1.0368 50.28 47.69 45.88 39.69

Indiana ...................................................................................................... 0.9570 47.03 44.61 42.91 37.13

Iowa .......................................................................................................... 0.8889 44.26 41.98 40.39 34.94

Kansas ...................................................................................................... 0.9553 46.96 44.55 42.85 37.07

Kentucky ................................................................................................... 0.9022 44.80 42.50 40.88 35.37

Louisiana ................................................................................................... 0.8884 44.24 41.96 40.37 34.93

Maine ........................................................................................................ 0.9607 47.18 44.75 43.05 37.25

Maryland ................................................................................................... 1.0011 48.82 46.31 44.55 38.55

Massachusetts .......................................................................................... 1.1619 55.36 52.52 50.52 43.71

Michigan .................................................................................................... 1.0717 51.70 49.04 47.17 40.81
14868 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

TABLE II.—GEOGRAPHIC ADJUSTMENT INDEX AND SALARY EQUIVALENCY GUIDELINE AMOUNTS FOR NONURBAN AREAS—

Continued

Nonurban area Wage index Physical

therapy

Occupational therapySpeech language therapy

Respiratory

therapy

Minnesota ................................................................................................. 1.0586 51.16 48.53 46.68 40.39

Mississippi ................................................................................................. 0.8033 40.78 38.68 37.21 32.19

Missouri ..................................................................................................... 0.8996 44.70 42.40 40.78 35.29

Montana .................................................................................................... 0.8980 44.63 42.33 40.72 35.23

Nebraska ................................................................................................... 0.9479 46.66 44.26 42.58 36.84

Nevada ...................................................................................................... 1.1012 52.90 50.17 48.27 41.76

New Hampshire ........................................................................................ 1.1705 55.71 52.85 50.84 43.98

New Jersey 2 ............................................................................................. .................... .................... .................... .................... ....................

New Mexico .............................................................................................. 0.9501 46.75 44.34 42.66 36.91

New York .................................................................................................. 1.2428 58.66 55.64 53.52 46.31

North Carolina ........................................................................................... 0.9456 46.57 44.17 42.49 36.76

North Dakota ............................................................................................. 0.8717 43.56 41.32 39.75 34.39

Ohio .......................................................................................................... 0.9764 47.82 45.36 43.63 37.75

Oklahoma .................................................................................................. 0.8320 41.95 39.79 38.28 33.12

Oregon ...................................................................................................... 1.1085 53.19 50.46 48.54 41.99

Pennsylvania ............................................................................................. 1.0269 49.87 47.31 45.51 39.37

Puerto Rico 1 ............................................................................................. 0.4539 27.38 25.97 24.98 21.62

Rhode Island 2 .......................................................................................... .................... .................... .................... .................... ....................

South Carolina .......................................................................................... 0.8964 44.57 42.27 40.67 35.18

South Dakota ............................................................................................ 0.8638 43.24 41.02 39.46 34.14

Tennessee ................................................................................................ 0.8711 43.54 41.30 39.73 34.37

Texas ........................................................................................................ 0.9492 46.71 44.31 42.62 36.88

Utah .......................................................................................................... 0.9824 48.06 45.59 43.86 37.94

Vermont .................................................................................................... 1.0148 49.38 46.84 45.06 38.99

Virginia ...................................................................................................... 0.9249 45.73 43.37 41.72 36.10

Washington ............................................................................................... 1.1105 53.27 50.53 48.61 42.06

West Virginia ............................................................................................. 0.9145 45.30 42.97 41.34 35.76

Wisconsin .................................................................................................. 0.9480 46.67 44.26 42.58 36.84

Wyoming ................................................................................................... 0.8386 42.22 40.04 38.52 33.33

1 Nonlabor portion increased in the following areas based on cost of living surveys conducted by the U.S. Office of Personnel Management:

Location Adjustment

factor

Alaska ........................................................................................................................................................................................................ 1.250

Hawaii ........................................................................................................................................................................................................ 1.225

Puerto Rico ................................................................................................................................................................................................ 1.100

2All counties within the State are classified urban.

E. Salary Equivalency Amount Updates

The adjusted hourly salary

equivalency amounts were developed

using fourth quarter 1995 wage level

data, 1994 fringe benefit data as a share

of wage levels, and fourth quarter 1995

dollar amounts for rent and other

expenses (updated from January 1991 to

the fourth quarter of 1995 using their

price proxies). In order to account for

input price inflation between the base

period (fourth quarter 1995), the

illustrative implementation period of

April 1997, and subsequent updated

periods, HCFA developed therapyspecific input price indexes, using as

weights the fourth quarter 1995 relative

importance factors of the salary

equivalency market baskets guideline.

The therapy-specific input price indexes

are fixed-weight, or Laspeyres type,

input price indexes that were

constructed in two steps. First, a base

period (fourth quarter 1995) was

selected and the proportion of total

costs accounted for by designated cost

categories was estimated. In the second

step, a rate of price increase for each

cost category was multiplied by the

expenditure’s relative importance for

that category. (Section II.B of this

preamble discusses the methodology

used to develop the base-period weights

(fourth quarter 1995) for each therapyspecific input price index.) The sum of

these products for all cost categories

yielded the percentage change in the

input price index.

Five indexes (base = fourth quarter

1995) were developed initially: One

each representing physical therapy,

occupational therapy, speech language

pathology, respiratory therapy, and a

weighted composite index of all four

therapy types. The individual therapy

indexes were built into the composite

index based upon the relative

proportion of total therapy services. All

input price indexes have the same cost

categories and price proxies. However

the base period weights vary because of

slight differences in the cost structures

associated with providing each type of

therapy. Table III presents the therapyspecific base period weights as well as

the price proxies proposed to represent

inflation for each cost category.
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14869

TABLE III.—THERAPY SPECIFIC ADJUSTED HOURLY SALARY EQUIVALENCY INPUT PRICE INDEXES (BASE PERIOD: FOURTH

QUARTER 1995=100.000)

Base period weights by therapy type(1)

Proposed price proxies Physical

therapy

Occupational therapySpeech language pathology

Respiratory

therapy

Composite

therapy

index

Total .............................................. 100.000 100.000 100.000 100.000 100.000

A. Therapist Compensation .......... 73.720 72.304 71.208 66.733 71.900

Wages .................................... 59.326 58.186 57.304 53.703 57.860 50% ECI Civilian Hospital Workers/50% ECI Private Professional & Technical Workers

Wages.

Benefits .................................. 14.395 14.118 13.904 13.030 14.039 50% ECI Civilian Hospital Workers/50% ECI Private Professional & Technical Workers

Benefits.

B. Overhead .................................. 26.273 27.696 28.792 33.275 28.099

Other Compensation .............. 10.733 11.314 11.762 13.593 11.478

Other Wages .......................... 8.779 9.255 9.621 11.119 9.389

Clerical Wages ....................... 4.422 4.661 4.846 5.600 4.729 ECI Wages Private Administrative

Support Including Clerical.(2)

Managerial Wages ................. 4.357 4.593 4.775 5.519 4.660 ECI Wages Private Executive, Administrative, & Managerial.(2)

Other Benefits ........................ 1.953 2.059 2.141 2.474 2.089

Clerical Benefits ..................... 0.987 1.041 1.082 1.251 1.056 ECI Benefits Private Administrative Support Including Clerical.(2)

Managerial Benefits ............... 0.966 1.018 1.059 1.223 1.033 ECI Benefits Private Executive,

Administrative, & Managerial.(2)

Office Costs ........................... 6.482 6.834 7.104 8.210 6.933 CPI–U Housing.

Other Costs ............................ 9.058 9.549 9.927 11.472 9.688 CPI–U All Items Less Food & Energy.

Composite Index Share (3) ............ 0.313 0.412 0.153 0.122 1.000

(1)Base year weights were developed for each type of therapy offered under arrangement. These weights are multiplied by price index levels

to measure composite price change over time.

(2)ECI=Employment Cost Index. ECIs are fixed-weighted indexes which track labor cost free from the influence of employment shifts among

occupations and industries.

(3) The composite index share represents the proportion that each therapy index type represents of the composite index. These shares were

derived from estimates of the 1995 shares of therapy services offered under arrangement by therapy type.

Despite the differences in the fourth quarter 1995 base-year weights for the four therapists’ input price indexes,

there were virtually no differences in the rates of increase for these indexes. Therefore, we propose to use the composite

index to adjust the hourly salary equivalency amounts for inflation. Using the composite index is advantageous because

of its administrative simplicity and demonstrated validity. Because the five indexes produce rates of increase that are

essentially the same, the gain in administrative ease does not come at the expense of the validity of the inflation

adjustment being used. Table IV, which presents the calendar year rates of increase in the four therapist indexes and

the composite index, demonstrates their similarity.

TABLE IV.—THERAPY INPUT PRICE INDEXES FOR FORECASTING THE INCREASE IN THE COST OF THERAPY SERVICES,

CALENDAR YEARS 1991–1999

Calendar year

Physical

therapist

index

Occupational therapist index

Speech language pathologist

index

Respiratory

therapist

index

Composite

therapist

index 1

Historical

1991 .......................................................................................................... 4.8 4.8 4.8 4.8 4.8

1992 .......................................................................................................... 4.0 4.0 4.0 4.0 4.0

1993 .......................................................................................................... 3.5 3.5 3.5 3.5 3.5

1994 .......................................................................................................... 3.0 3.0 3.1 3.0 3.1

1995 .......................................................................................................... 2.6 2.6 2.6 2.6 2.6

Forecast 2

1996 .......................................................................................................... 3.1 3.1 3.1 3.1 3.1

1997 .......................................................................................................... 3.2 3.2 3.2 3.2 3.2

1998 .......................................................................................................... 3.2 3.2 3.2 3.2 3.2

1999 .......................................................................................................... 3.3 3.3 3.3 3.3 3.3

Released by: HCFA, OACT, Office of National Health Statistics.

1The outlays for services rendered in 1995 were used to develop the outlay-weighted composite therapy index.

2Source: DRI/McGraw-Hill HHC 3rd QTR 1996;@USSIM/TRENDL25YR0896@CISSIM/CONTROL963.
14870 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

1The monthly rate of inflation is 0.00272. It is

necessary to create the multiplicative factor that

produces the next monthly level. Each month’s

factor (Table V) is 1.00272 times the previous

month’s factor.

Table IV shows calendar year rates of

inflation for historical years 1991

through 1995 and forecasted years 1996

through 1999. Salary equivalency

amount adjustments will be made on a

monthly basis using the factors in Table

V.

TABLE V: ADJUSTED HOURLY SALARY

EQUIVALENCY AMOUNT MONTHLY INFLATION FACTORS USING OUTLAY

WEIGHTED COMPOSITE INDEX

[An example of how to use the inflation factors

follows this table.]

Salary equivalency period Period inflation factors Month Year

1 April .................... 1997 1.00000

2 May .................... 1997 1.00272

3 June ................... 1997 1.00546

4 July ..................... 1997 1.00819

5 August ................ 1997 1.01094

6 September ......... 1997 1.01369

7 October .............. 1997 1.01646

8 November .......... 1997 1.01922

9 December .......... 1997 1.02200

10 January .............. 1998 1.02478

11 February ............. 1998 1.02758

12 March ................. 1998 1.03037

13 April .................... 1998 1.03318

14 May .................... 1998 1.03600

15 June ................... 1998 1.03882

16 July ..................... 1998 1.04165

17 August ................ 1998 1.04449

18 September ......... 1998 1.04733

19 October .............. 1998 1.05018

20 November .......... 1998 1.05304

21 December .......... 1998 1.05591

22 January .............. 1999 1.05879

23 February ............. 1999 1.06167

24 March ................. 1999 1.06456

25 April .................... 1999 1.06746

26 May .................... 1999 1.07037

27 June ................... 1999 1.07329

28 July ..................... 1999 1.07621

29 August ................ 1999 1.07914

30 September ......... 1999 1.08208

31 October .............. 1999 1.08503

32 November .......... 1999 1.08799

33 December .......... 1999 1.09095

34 January .............. 2000 1.09392

35 February ............. 2000 1.09690

36 March ................. 2000 1.09989

Source: DRI/McGraw-Hill HHC 3rd QTR

1996; @USSIM/TRENDL25YR0896

For example, the proposed national

salary equivalency guideline amount for

physical therapists for cost reporting

periods beginning April 1997 is $48.78.

The salary equivalency guideline

amount for cost reporting periods

beginning in May 1997 would be

determined as follows:

April 1997 national physical therapy

salary equivalency amount .............$48.78

May 1997 monthly inflation factor .....1.00272

May 1997 national salary equivalency

amount .............................................$48.91

We have developed monthly

adjustment factors for May 1997 through

March 2000. If we do not publish new

schedules of guidelines for cost

reporting periods beginning on or after

April 1, 2000, or do not announce other

changes in the schedules, the schedules

would remain in effect, increased by the

appropriate adjustment factor (0.00272

monthly, compounded) 1, until new

guideline schedules are issued. This is

equivalent to a compounded annual rate

of increase of 3.3 percent. The 3.3

percent rate of increase in the proposed

guidelines is based upon the forecast

rate of increase in the composite

therapists input price index that HCFA’s

Office of the Actuary developed. For the

period between 1997 and 1999, the

price proxies in the therapists input

price index were forecast in DRI/

McGraw-Hill’s 1996 third quarter

forecast.

The 3.3 percent forecast rate of

increase is based upon the average

annual rate of increase for the period

between 1997 and 1999. The 3.3 and 7.2

percent rates of increase are applied to

their respective salary equivalency

guidelines in different ways. The 3.3

percent is applied to the guidelines we

are now proposing in a multiplicative

fashion. That is, the salary equivalency

guideline amount for each month is

multiplied by one plus the 12th root of

the 3.3 percent average annual rate of

increase for each month moved away

from the guideline base period.

Conversely, the 7.2 percent rate of

increase was applied by adding 0.6

percent of the October 1982 base value

to the adjustment factor for each month

after the guideline base period. The

effect of using the additive adjustment

factor rather than the multiplicative

factor is that the additive factor gets

progressively smaller in percentage

terms each year.

Choosing appropriate wage and price

proxies for each expense category

necessarily involved making tradeoffs

and exercising judgment. HCFA used

four, sometimes conflicting, criteria to

evaluate the strengths and weaknesses

of each proxy in the therapy-specific

input price indexes: relevance,

reliability, timeliness, and time-series

length. A relevant price variable should

appropriately represent price changes

for specific goods or services within the

expense category. Relevance may

encompass judgments about relative

efficiency in the market generating the

price and wage increases and may

include normative factors relating to

fairness and national policy objectives.

The second criterion, reliability,

concerns sampling variability. If the

proxy wage-price variable has a high

sampling variability or inexplicable

erratic patterns over time, its value is

greatly diminished since it is unlikely to

accurately reflect price changes in the

associated expenditure category. In

some cases, low sampling variability

can conflict with relevance, since the

more specifically the price variable is

defined in terms of service, commodity,

or geographic area, the higher the

potential sampling variability. An

example of such a conflict is the tradeoff

that must be made when considering

two proxies, one of which is the product

of a rigorously designed survey

methodology for a somewhat broader

occupational or industry grouping,

while the other more closely surveys the

targeted industry or occupation, but

from a nonscientifically designed,

nonrepresentative sample. Timeliness of

actual published data is the third

criterion. For this reason, monthly and

quarterly data take priority over annual

data. The fourth criterion is the length

of time the time-series data have been

available. A well-established time series

is needed to provide a valid base from

which to forecast future price changes

in the series.

The price proxies for the therapyspecific input price indexes are based

on BLS data and are one of the two

following types:

• Employment Cost Indexes (ECIs),

which measure the rate of change in

employee wage rates and employer costs

for employee benefits per hour worked.

These indexes are fixed-weight indexes

that strictly measure the change in wage

rates and employee benefits per hour.

They are not affected by shifts in

employment mix.

• Consumer Price Indexes (CPIs),

which measure change in the prices of

final goods and services purchased by

the typical consumer. They are fixedweight price measures.

These price proxies ‘‘best balance’’

the criteria of relevance, reliability,

timeliness, and time-series length. For

reasons that are discussed later, the

main issue in selecting price proxies for

the Therapists Input Price Index is

relevance.

In selecting price proxies for updating

payment rates for various provider types

(hospitals, offices of physicians, SNFs,

home health agencies, etc.), HCFA

considers using internal price proxies

(that is, health-sector-specific data),

external price proxies (that is,

exclusively based upon economy-wide
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14871

2See, for example, Changes to the Inpatient

Hospital Prospective Payment System and Fiscal

Year 1997 Rates; Final rule. 61 FR 46192, August

30, 1996.

3The ECI for Civilian Hospital Workers provides

data on hospital workers in the total private

economy and the public sector, excluding the

Federal Government. Because this price series

represents hospitals, it is health sector-specific.

4See, for example, Changes to the Inpatient

Hospital Prospective Payment System and Fiscal

Year 1997 Rates; Final rule. 61 FR 46192, August

30, 1996.

price proxies), or a blend of internal and

external price proxies based upon the

competitive structure of the market and

Medicare reasonable cost principles.2

It is generally accepted that prices for

most nonlabor inputs are not directly

influenced or biased by health-sectorspecific market forces. As a result, we

propose to use economy-wide price

proxies for approximate price changes

for the nonlabor inputs. However,

workers in the four therapist

occupations and industries are

potentially affected by market

imperfections associated with both

supply and demand. Imperfections in

these labor markets include third party

payment, based at least in part on actual

labor costs rather than on costs in

efficiently operating competitive labor

markets. Limitations on entry and

restrictions on job content also

potentially influence compensation

levels and rates of increase relative to

workers with similar education, skills,

and work effort, but in different

occupations and industries. Therefore,

compensation of these workers should

not be considered totally free from

market imperfections and health

industry influence. To the extent that

supply and demand imperfections exist,

using health-sector-specific

compensation proxies could manifest

these imperfections and, therefore,

would not be the most socially or

economically desirable public policy.

The Prospective Payment Assessment

Commission (ProPAC) has affirmed the

blending of internal and external

compensation indexes for the

prospective payment system. The

Physician Payment Review Commission

also has recognized that it is appropriate

to use external compensation proxies for

certain health sector specific

occupations such as physicians.

At the same time, it is important to

recognize some of the unique features of

the four therapist labor markets that

suggested that health-sector-specific

proxies may also have relevance. HCFA

has chosen to balance these internal and

external forces by using an equal blend

of sector-specific compensation proxies

(ECI Civilian Hospital Workers) and

economy-wide compensation price

proxies (ECI Private Professional and

Technical Workers) for measuring

therapist compensation price growth.3

The proxies that are discussed in this

section have been chosen to most

closely estimate the changes that will

occur in the different costs that are part

of a salary equivalency guideline. We

have already estimated the level of base

period costs for the fourth quarter of

1995 that a provider would pay. The

rehabilitation therapist input price

index (IPI) proxies escalate the base

level 1995 fourth quarter costs to the

present (using actual price and wage

change data) and into the future (with

forecasted data). Thus, a March 1998

guideline reflects what we believe the

cost to an efficient provider to employ

a therapist will be in March 1998. The

rehabilitation therapist input price

index using these price proxies,

weighted by the shares of costs of the

expense categories they represent, is

used to forecast the escalation of these

costs over time. The principles being

adopted here are the same as those in

HCFA’s use of a 50/50 blend of internal

and external price proxies elsewhere in

Medicare regulatory policy to adjust the

professional and technical labor

compensation component of the

prospective payment system hospital

input price index (IPI).4 In other words,

under the prospective payment system

hospital IPI (market basket),

compensation for physical therapists,

occupational therapists, speech

language pathologists, and respiratory

therapists is updated using the same

price proxies and blend as are proposed

for these same therapists under

arrangements. Consistent with its

application in the hospital IPI, HCFA’s

proposed therapy-specific input price

indexes apply the blend to professional

and technical occupations only.

However, for clerical and managerial

workers, who are employed in

significant proportions in nonhealth

sectors of the overall economy, HCFA’s

therapy-specific input price indexes use

economy-wide compensation proxies to

measure price change just as is done in

the prospective payment system

hospital IPI for clerical and managerial

workers.

F. Other Proposed Changes in Policies

1. Optional Travel Allowance

We particularly invite comments from

the public on a proposal to extend to

other providers the optional travel

allowance for therapy furnished under

arrangement by an outside contractor

that is currently available to HHAs. The

optional travel allowance could be used

when therapy services are furnished in

areas in which geographic distance

creates unique labor markets. The actual

number of travel hours could be used in

lieu of the standard travel allowance.

This would be used at the option of the

provider, who would maintain time

records of visits. Only the actual time

spent in travel to reach the visit site

would be included in the actual travel

time. Payment for the actual travel

hours would be based on the adjusted

hourly salary equivalency amount for

the area, and this amount would not be

affected by the additional allowance for

administrative-supervisory duties or by

any other additional allowances

described in section 1412 of the

Provider Reimbursement Manual.

2. Data Sources for Future Salary

Equivalency Guidelines

We have learned from the BLS that its

1991 ‘‘Occupational Wage Survey:

Hospitals, January 1991’’ is the last

edition of the series that it will produce.

Prior BLS occupational wage surveys

have been used to establish salary

equivalency guidelines for physical

therapy and respiratory therapy services

furnished under arrangements, and we

are proposing to include as two of our

data sources the 1989 and 1991 surveys

trended forward. We developed our

proposed guideline amounts using

many survey sources, we invite

comments on alternative data sources

and methodologies for future updates.

3. Application of Guidelines

We are proposing to revise

§ 413.106(c) to add a new paragraph

(c)(6) that would provide that the salary

equivalency guidelines will apply in

situations where compensation to a

therapist employed by the provider is

based, at least in part, on a fee-forservice or on a percentage of income (or

commission). The entire compensation

would be subject to the guidelines in

cases where the nature of the

arrangements are most like an under

‘‘arrangement’’ situation, although

technically the provider may treat the

therapists as employees. The guidelines

would be applied in this situation so

that an employment relationship is not

being used to circumvent the guidelines.

Since June 1977, there has been

longstanding governing policy at section

1403 of the Provider Reimbursement

Manual, Guideline Application,

regarding this issue for making

payments to providers. That instruction

states, ‘‘In situations where

compensation, at least in part, is based

on a fee-for-service or on a percentage

of income (or commission), these

arrangements will be considered
14872 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

nonsalary arrangements, and the entire

compensation will be subject to the

guidelines in this chapter.’’ This

instruction clearly requires the

intermediary to apply the salary

equivalency guidelines in cases where

the provider is paying the physicial

therapists on a fee-for-service basis. This

instruction considered the nature of

those arrangements and that they are

most like an under ‘‘arrangement’’

situation, although technically they are

employees. Therefore, the instructions

further the statutory purpose as

reflected in the legislative history of the

salary equivalency guidelines. This

instruction addresses the fact that HCFA

recognizes that certain employment

relationships would effectively

circumvent the guidelines and provided

for these circumstances in section 1403

of the Provider Reimbursement Manual.

4. Limiting Contracted Services To 40

Hours

While we were evaluating the data we

used in developing the guideline

amounts, we became aware of a

tendency for contracted therapy hours

in some cases to exceed 40 hours per

therapist a week, the amount of hours a

full-time employee would generally

work. While the Medicare program does

not dictate the mode of delivery of

therapy services, we do believe that

under section 1861(v)(1)(A) of the Act,

in making payments for services on a

reasonable cost basis, costs incurred that

are associated with providing therapy

services that exceed the hours of a fulltime employee are unnecessary in the

efficient delivery of needed health

services. It is our understanding that

providers obtain services on a

contractual basis because the facility

does not require the services of a fulltime employee and, therefore, it is more

efficient to contract for therapy services

rather than hire a full-time employee

who may spend many hours not

delivering services. Therefore, we

propose to eliminate the expense factor

where the hours of therapy services

exceed 40 hours. Because the expense

factor is associated with costs of

maintaining an outside contractor’s

office, we believe where 40 or more

hours of service are provided per

therapist, the contracted services are

being delivered in the same manner as

a full-time salaried employee. We invite

comments on this proposal.

5. Outcomes Based Systems

We have received several comments

requesting that the guidelines not

restrict differential therapy services (for

example, ‘‘full-service’’ programs

offering supervision, outcomes

measurement, and therapy department

support). Those comments have

suggested that for example, where

providers incur additional costs for

outcomes measurement systems where

Medicare beneficiaries benefit and thus,

the provider incurs less routine costs,

the provider should be allowed to claim

those additional costs related to the

outcomes measurement system. We are

aware of no outcomes measurement for

therapy services that would permit the

adoption of the proposal for

differentiated services. However, we

invite comments on the development of

an outcomes based system.

6. Exception for Binding Contract

Existing regulations at 42 CFR

413.106(f)(1) provide for an exception to

the salary equivalency guidelines for a

provider that has entered into a written

binding contract with a therapist or

contracting organization prior to the

date the initial guidelines are published.

Before the exception is granted, the

provider was required to submit the

contract to its intermediary, subject to

review and approval by the HCFA

regional office. The exception may be

granted for the contract period, but no

longer than 1 year from the date the

guidelines for the particular therapy are

published. During the period in which

a binding contract exception is in effect,

the cost of the services is evaluated

under the prudent buyer concept.

(Section 1414.1 of the Provider

Reimbursement Manual contains

instructions on this exception.)

We are proposing to eliminate this

exception. We believe that providers

should have been prudent purchasers of

therapy services prior to the

establishment of guidelines for speech

language pathology and occupational

therapy services and, therefore, should

not be disadvantaged if contracted

speech-language pathology and

occupational therapy services are

subject to the proposed guideline

amounts. We also wish to point out that

there has never been an exception for

providers who enter into a contingency

contract with a therapist or contracting

organization and we are not now

providing such an exception. In a

contingency contract, the provider and

contractor agree that, if Medicare does

not reimburse the provider for the rate

that the contract is set at, the provider

and contractor agree that the provider

will not be liable for the difference.

7. Exceptions Process for Unique

Circumstances or Special Labor Market

Conditions

Section 413.106 provides that a

provider may request an exception to

the established hourly salary

equivalency amount for unique

circumstances or special labor market

conditions. The provider must submit

evidence or information to the

intermediary, in accordance with

instructions issued in § 1414.2 of the

Provider Reimbursement Manual, so

that the intermediary can make a

determination on the request. We invite

specific comments on the substantiating

documentation requirements and the

process used to determine whether a

provider would be granted an exception

for unique circumstances or special

labor market conditions.

8. Time Period for Submission of

Exception Requests

We are proposing to revise the time

period for a provider to submit a request

for an exception to the salary

equivalency guidelines for unique

circumstances or special labor market

conditions, to within 150 days after the

close of its cost reporting period. Under

existing policy, a provider’s request for

an exception, together with

substantiating documentation, must be

submitted to the intermediary no later

than 90 days after the close of its cost

reporting period. In response to

provider claims that 90 days is not long

enough for providers to submit cost

reports and, as mentioned earlier, we

have published final regulations to

change the due date for submission of

cost reports (60 FR 33137). If the

circumstances giving rise to the

exception remain unchanged from a

prior cost reporting period, however, the

provider need only submit evidence to

the intermediary 150 days after the close

of its cost reporting period to establish

that fact.

III. Regulatory Impact

A. Background

For proposed rules such as this, we

generally prepare a regulatory flexibility

analysis that is consistent with the

Regulatory Flexibility Act (RFA) (5

U.S.C. 601 through 612), unless we

certify that a proposed rule would not

have a significant economic impact on

a substantial number of small entities.

For purposes of the RFA, States and

individuals are not considered small

entities. All therapists, however, are

treated as small entities.

Also, section 1102(b) of the Act

requires us to prepare a regulatory

impact analysis for any proposed rule

that may have a significant impact on

the operations of a substantial number

of small rural hospitals. Such an

analysis must conform to the provisions

of section 604 of the RFA. For purposes
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14873

of section 1102(b) of the Act, we define

a small rural hospital as a hospital that

is located outside a Metropolitan

Statistical Area and has fewer than 50

beds. We are not preparing a rural

hospital impact statement because we

have determined, and we certify, that

this proposed rule would not have a

significant economic impact on the

operations of a substantial number of

small rural hospitals.

This proposed rule would (1) Revise

the methodology for determining salary

equivalency guidelines for physical

therapy and respiratory therapy services

furnished under arrangement; (2) apply

the revised methodology for payment of

physical therapy and respiratory

therapy services to speech language

pathology and occupational therapy

services; and (3) establish revised

schedules of salary equivalency

guidelines for physical and respiratory

therapy services and initial schedules of

salary equivalency guidelines for speech

language pathology and occupational

therapy services. The proposed

guidelines would be used by Medicare

fiscal intermediaries to determine the

maximum allowable payment for

therapy services furnished under

arrangements.

As we indicated earlier, the salary

equivalency guidelines for physical and

respiratory therapy services furnished

under arrangements were last revised in

1983, with provisions for yearly

adjustments for inflation. In addition,

although the law gives us explicit

authority to establish salary equivalency

guidelines for speech language

pathology and occupational therapy

services furnished under arrangements,

we have never previously done so. We

have, instead, paid for these services

using reasonable cost methodologies.

We now believe that, if we continue to

use these methods to pay for speech

language pathology and occupational

therapy services furnished under

arrangements, we would be paying for

costs that are in excess of what Congress

intended under section 1861(v)(5) of the

Act.

Although we expect that the

establishment of these proposed revised

guidelines would be beneficial to the

Medicare program as well as to

Medicare beneficiaries, we recognize

that a large number of small entities,

such as suppliers of rehabilitation

therapy services, would be affected by

these proposed revised guidelines, and

a substantial number of these entities

may be required to make changes in

their operations. This analysis, in

combination with the remainder of this

preamble, is consistent with the

standards for analysis set forth by the

RFA.

B. Anticipated Effects

1. Effects on the Medicare Trust Funds

The proposed guidelines are based

upon a provider’s reasonable cost for an

employee therapist furnishing therapy

services. This cost includes the

prevailing salary levels for therapists,

prevailing market area fringe benefits, as

well as a share of the other expenses

that could be attributed to an employee

therapist. The estimated savings to the

Medicare Trust Funds result from the

differences in the proposed guidelines

relative to current rates of payment after

behavioral offsets for increased add-ons,

volume, intensity, mix of services and

other revenue enhancement behaviors

have occurred.

Although we were confronted with

limited available data on the effect of

the proposed guidelines on the

Medicare Trust Funds, we developed an

estimate of that effect. A detailed paper

on the methodology of the impact

analysis is available to interested parties

upon request. We had limited data

sources with which to develop hourly

salary rates and other expense factors

and to develop a projection of the effect

of the proposed guidelines on the

Medicare Trust Funds for proposed

versus current levels. We are limited

because the Medicare cost reports and

claims data do not furnish us with data

on hourly rates paid to therapists and

other relevant expense and net revenue

data. So, we based the hourly salary

rates and the effect of the proposed

guidelines on the Medicare Trust Funds

on the best data available to us from

HCFA sources and the therapy industry.

The hourly salary rates were based on

a blend of hospital and SNF survey data

sources and the impact analysis was

based on billing data from HCFA’s

Decision Support Access Facility

(DSAF) files and SNF cost report data

from the Hospital Cost Reporting

Information System file as well as

industry sources. We invite comments

on other data sources that may be used.

Based upon various data sources for

1993, 1994, and 1995 we formed a base

line for purposes of projecting volume

of services in future years for each of the

four therapy types. For each therapy

type, we then found the difference

between the current rate and the

proposed rate, multiplied that difference

by the projected volume in order to

estimate the savings or additional

outlays that this proposed rule would

have.

When trend factors from the DRI/

McGraw Hill third quarter 1996 forecast

of the HCFA rehabilitation therapist

input price index are used, we estimate

the proposed guidelines for April 1997

will increase the current national or

aggregate guidelines per hour for

physical therapy by 30.5 percent and

the national or aggregate guidelines for

respiratory therapy by 8.1 percent. At

the same time, the proposed guidelines

for occupational therapy and speechlanguage pathology will decrease

estimated current aggregate rates by 42.7

percent and 28.1 percent, respectively.

Our projected savings per year are

based on the difference between current

and proposed total costs after a standard

behavioral adjustment is applied for

lower proposed prices relative to

current payments under current

payment rules.

We followed the Office of the Actuary

(OACT) standard practice of allowing an

offset of 35–50 percent for behavioral

changes when we estimated the

proposed savings resulting from

lowered prices. In recent years suppliers

of therapy services have bundled

physical therapy, occupational therapy,

and speech language pathology (but not

respiratory therapy) when they have

contracted to furnish therapy services to

SNFs. The 35 percent behavioral offset

allows for changes in behavior that

generate increased revenue to the

suppliers at the lower average price for

the bundle of services. The behavioral

offset was not applied to respiratory

therapy services because proposed

prices are higher than current regulation

prices and the respiratory therapy

industry contracts separately with the

SNF industry. We chose the lower end

of the range because services are

provided in the facility based on time in

facility, not fee for service, thus there

are substantially fewer opportunities for

revenue enhancing behavior. Suppliers

are estimated to compensate for about

one third of the reduction in prices by

a combination of increased add-ons,

volume, intensity, change in mix, and a

shift in the site of service or a change

in options for reimbursement. Suppliers

might shift from being suppliers where

payment is controlled by salary

equivalency guidelines to being

providers where payment is on a

reasonable cost basis not subject to

guidelines (unless as providers they also

contract for therapy services); or they

may increase the volume of services in

physical therapy where guideline

amounts are higher; or they may use less

experienced and therefore lower

salaried therapists. Other revenue

enhancement practices may emerge

which cannot be fully anticipated.

Using this offset, the 41⁄2 year impact of

the proposed guidelines for 1997
14874 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

through 2001 for therapy services under

arrangements is estimated to be a

savings of $1,250 million for Medicare

Part A and $410 million for Medicare

Part B.

When the 41⁄2 year impact analysis

methodology and the expected

percentage increase in Medicare

enrollees per year (from 2002 to 2006)

are used to estimate the increased

volume of rehabilitation therapy

services for 2002 to 2006, the impact on

outlays over 91⁄2 years is a savings of

$2,920 million for Medicare Part A and

$980 million for Medicare Part B.

For a 91⁄2 year impact, the expected

percentage increase in Medicare

enrollees for 2002–2006 was used in

part to compute estimated volume of

services. The results were then

multiplied by the estimated current and

proposed guidelines, which had been

estimated by extending the current

guidelines by their inflation methods

and the proposed guidelines by their

proposed inflation method. Estimated

outlays for each year under current and

proposed guideline amounts were

calculated. Again a 35-percent

behavioral offset was applied to the

aggregate savings for physical therapy,

occupational therapy, and speech

language pathology services, and the

resultant outlay savings calculated. The

results using the proposed guideline

amounts were additional estimated

savings. When combined with the 41⁄2

year total impact shown above, the

estimated 91⁄2 year savings total is

$2,920 million for Medicare Part A and

$980 million for Medicare Part B.

Our projected outlays under current

guidelines, under the proposed

guidelines, and the difference between

the two sets for fiscal year 1997 through

fiscal year 2001 are as follows:

SALARY EQUIVALENCY: OUTLAYS AND SAVINGS ESTIMATES—PARTS A AND B

Federal fiscal year

Estimated outlays

Estimated savings after offset (in millions, rounded)

Coinsurance

(in millions,

rounded)

Under current

regulations before offset (in

millions)

Under proposed regulations

Before offset

(in millions)

After offset of

35 percent (in

millions)

1997 ...................................................................................... $1,790 $1,530 $1,630 $140 $20

1998 ...................................................................................... 3,900 3,310 3,530 340 30

1999 ...................................................................................... 4,230 3,560 3,810 380 40

2000 ...................................................................................... 4,420 3,730 3,990 390 40

2001 ...................................................................................... 4,620 3,900 4,170 410 40

2002 ...................................................................................... 4,830 4,080 4,360 430 40

2003 ...................................................................................... 5,040 4,270 4,560 440 40

2004 ...................................................................................... 5,260 4,480 4,770 450 40

2005 ...................................................................................... 5,490 4,690 4,990 460 40

2006 ...................................................................................... 5,740 4,930 5,240 460 40

Totals ......................................................................... 45,320 38,480 41,050 3900 370

The budget outlays and savings include coinsurance and are before the Part B premium offset.

This applies the 35 percent offset to physical therapy, occupational therapy, and speech-language pathology only and no offset to respiratory

therapy.

Estimates are based on an illustrative effective date of April 1, 1997.

SALARY EQUIVALENCY: OUTLAYS AND SAVINGS ESTIMATES 1—PART A

Federal fiscal year

Estimated outlays

Estimated savings (in millions, rounded)

Under current

regulations before offset (in

millions)

Under proposed regulations

Before offset

(in millions)

After offset of

35 percent (in

millions) 2

1997 .................................................................................................................. $1,370 $1,200 $1,270 $100

1998 .................................................................................................................. 2,990 2,590 2,740 250

1999 .................................................................................................................. 3,250 2,780 2,960 290

2000 .................................................................................................................. 3,400 2,910 3,100 300

2001 .................................................................................................................. 3,550 3,050 3,240 310

2002 .................................................................................................................. 3,710 3,190 3,390 320

2003 .................................................................................................................. 3,870 3,330 3,540 330

2004 .................................................................................................................. 4,040 3,490 3,700 340

2005 .................................................................................................................. 4,210 3,660 3,870 340

2006 .................................................................................................................. 4,410 3,850 4,070 340

Totals ..................................................................................................... 34,800 30,050 31,880 2,920

1Estimates are based on an illustrative effective date of April 1, 1997.

2This applies the 35 percent offset to physical therapy, occupational therapy, and speech-language pathology only and no offset to respiratory

therapy.
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14875

SALARY EQUIVALENCY: OUTLAYS AND SAVINGS ESTIMATES 1—PART B

Federal fiscal year

Estimated outlays 2

Under current

regulations before offset (in

millions)

Under proposed regulations

Estimated savings (in millions, rounded)Coinsurance

(in millions,

rounded) Before offset

(in millions)

After offset of

35 percent (in

millions) 3

1997 ...................................................................................... $420 $330 $360 $40 $20

1998 ...................................................................................... 910 720 790 90 30

1999 ...................................................................................... 980 780 850 90 40

2000 ...................................................................................... 1,020 820 890 90 40

2001 ...................................................................................... 1,070 850 930 100 40

2002 ...................................................................................... 1,120 890 970 110 40

2003 ...................................................................................... 1,170 940 1,020 110 40

2004 ...................................................................................... 1,220 990 1,070 110 40

2005 ...................................................................................... 1,280 1,030 1,120 120 40

2006 ...................................................................................... 1,330 1,080 1,170 120 40

Totals .................................................................................... 10,520 8,430 9,170 980 370

1Estimates are based on an illustrative effective date of April 1, 1997.

2The budget outlays and savings include coinsurance and are before the Part B premium offset.

3This applies the 35 percent offset to physical therapy, occupational therapy, and speech-language pathology only and no offset to respiratory

therapy.

2. Effects on Providers

We expect that the proposed salary

equivalency guidelines will provide

adequate payments for all classes of

efficient providers. It is possible that

certain inefficient therapy suppliers

may be unwilling to contract with

providers at the proposed salary

equivalency rates, expanding the market

for more efficient therapy suppliers. We

also understand that certain therapy

suppliers were requiring providers to

purchase a bundled package of physical

therapy, occupational therapy, and

speech-language pathology services. By

requiring this bundling of services,

suppliers were able to make substantial

profits because, even though there was

an hourly payment limit on the physical

therapy services, there were no

guidelines for the speech-language

pathology and occupational therapy

services. Consequently, the suppliers

marked up the speech-language

pathology and occupational therapy

services. Our proposed guidelines for

speech-language pathology and

occupational therapy services may

eliminate suppliers profiting from

excessively high prices for occupational

therapy and speech language pathology.

We expect that providers will continue

to provide therapy services at the

proposed published rates. We expect

that providers will be able to furnish the

same array of beneficiary services they

furnish under current guidelines

amounts or payment on a reasonable

cost basis.

3. Effects on Beneficiaries

We believe that the impact of the

proposed guidelines on Medicare

beneficiaries will be minimal.

Beneficiaries may be slightly affected by

the proposed guidelines for physical

therapy, speech language pathology, and

occupational therapy services. With

respect to physical therapy services, the

Medicare Part B coinsurance amounts

associated with these services, that must

be paid by beneficiaries (20 percent of

the provider’s charges to the

beneficiary) may increase if providers

increase charges for those services. The

charges may increase because physical

therapy hourly amounts recognized by

Medicare fiscal intermediaries to

determine the maximum allowable cost

of those services will increase in this

proposed rule over the previous

schedules of guidelines. However, the

Medicare program does not dictate a

provider’s charge structure. We do

expect charges to be reasonably related

to cost. Conversely, beneficiary

coinsurance would be reduced for

speech language pathology and

occupational therapy services because

Medicare payment rates for these

services would be reduced by the

establishment of guidelines in this

proposed notice and the provider’s

charges to the beneficiary may also

decrease. Because respiratory therapy

provided in comprehensive outpatient

rehabilitation facilities under

arrangements is a Part B service,

Medicare Part B coinsurance amounts

related to those services that must be

paid by beneficiaries may increase if

providers increase charges for those

services. This may also occur because

respiratory therapy hourly amounts

recognized by Medicare fiscal

intermediaries to determine the

maximum allowable cost of those

services will increase in this proposed

notice over the previous schedules of

guidelines. We believe that our

proposed guideline amounts are

adequate so that therapy suppliers

should continue to contract with

providers to furnish services to

beneficiaries. Since we are now

introducing proposed guideline

amounts for occupational therapy and

speech language pathology, if providers

are passing along the therapy companies

higher charges, then we would expect

providers’ charges may be lower for

those services.

4. Effects on Therapists and Therapist

Companies

The proposed salary equivalency

guidelines would have varying impacts

on the four categories of therapists.

Speech language pathologists and

occupational therapists working for

contract suppliers should be minimally

affected, since the suppliers typically

bundle all therapy services when

negotiating rates (including overhead)

with providers. Physical therapists

acting as suppliers or employed by

supplying therapy companies may be

affected positively because physical

therapy hourly rates recognized by

Medicare fiscal intermediaries to

determine the maximum allowable cost

of those services will increase in this

proposed notice and, therefore,

providers may contract with physical

therapists at a higher amount. Also,

providers may contract with therapy

companies at a higher amount and they,

in turn, may pay the therapists higher

salaries. Similarly, respiratory therapists

acting as therapy suppliers or employed

by therapy suppliers may be positively

affected because respiratory therapy
14876 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

hourly amounts recognized by Medicare

fiscal intermediaries to determine the

maximum allowable cost of those

services will increase in this proposed

notice and, therefore, providers may

contract with respiratory therapy

suppliers at a higher amount. Also

providers may contract with therapy

companies at a higher amount and they,

in turn, may pay the therapists higher

salaries.

We recognize that a large percentage

of providers have contracts with therapy

companies that may dominate a market

area. We understand that because the

contracted physical therapy services

have been limited by the guidelines,

some of these therapy companies have

been requiring providers to sign up for

three therapy services, that is, physical,

occupational and speech-language

pathology services, but were

overcharging providers for speechlanguage pathology and occupational

therapy services. These therapy

companies may incorrectly claim that

the introduction of our proposed

guidelines for contracted speechlanguage pathology and occupational

therapy services may put them out of

business. Our rates are designed to

reflect adequate rates for all classes of

efficient suppliers. Even though we do

not pay contracted therapy companies

directly, unless they also act as

providers, and (with the exception of

independent physical therapists and

occupational therapists) contracted

therapy services are one of the few

Medicare services that have not been

targeted in earlier deficit reduction

laws.

Other changes in behavior might

include a change in the type of therapy

offered (perhaps substituting physical

therapy for occupational therapy and

increasing the volume of services

furnished in physical therapy, which

has a higher guideline amount), use by

suppliers of less experienced (and

therefore lower salaried) therapists, a

shift by suppliers from furnishing

therapy services under arrangements to

furnishing therapy services under

agreement, in which the therapy

company bills Medicare directly as a

provider under Part B. In the latter case,

the providers are paid under Part B on

a reasonable cost basis and are not

subject to salary equivalency guidelines

unless they contract for therapy

services.

Inefficiently run rehabilitation

therapy companies may cut expenses

and become more efficient, as is

happening in much of the rest of the

economy. More efficient companies may

expand or enter the market, picking up

the therapy services volume which less

efficient suppliers may leave unserved.

Therapists’’ productivity could increase.

Overhead is a likely candidate for

expense reduction. In addition, profit

margins may be reduced, but still be at

or above competitive rates for efficient

firms. Individual therapy suppliers may

already have lower overhead than

corporate suppliers. Multi-therapy

companies may adjust their service mix

away from therapy types for which they

are inefficient producers and expand the

therapy types for which they are

efficient producers.

Due to the proposed salary

equivalency guidelines, some therapists

who work for inefficient rehabilitation

therapy suppliers may have

compensation levels above competitive

rates and may find that their yearly

salary and fringe benefit increases lag

those of therapists employed in other

more competitive settings of the local

therapist labor market. A deceleration in

wage increases for workers with

excessively high compensation levels

will continue until wages in various

settings, after compensating non-wage

differences, are roughly comparable for

each therapy type. Those therapists

whose employers curtail furnishing

services under arrangements with

providers may either furnish therapy for

those same employers as employees of

rehabilitation agencies that will bill

Medicare directly as providers, change

employers to those efficiently run

companies that expand their contracted

therapy services, or become selfemployed and contract directly with

providers to furnish therapy services

under arrangements. Therapists who are

employed by efficient rehabilitation

therapy suppliers where salaries are in

line with those of other therapists (after

adjustments for compensating non-wage

differentials) in the local labor market

should notice no substantial effect. The

expected effects described above result

in a better functioning, more efficient

health care system.

C. Alternatives Considered

Section 1861(v)(5) of the Act requires

us to determine the reasonable cost of

services furnished to Medicare

beneficiaries ‘‘under an arrangement’’

with a provider of services, by therapists

or other health-related personnel. Other

alternatives to implementing the salary

equivalency program are to continue

paying for therapy services furnished

under arrangements using current

reasonable cost methodologies or to use

alternative data sources to establish the

proposed salary equivalency guidelines.

We rejected the first alternative

because, if we continue to pay for

speech language pathology and

occupational therapy services furnished

under arrangements using reasonable

cost methodologies, we will be paying

for costs that are in excess of what

Congress intended under section

1861(v)(5) of the Act, to the detriment

of the Medicare Trust Funds. In the case

of physical therapy and respiratory

therapy services, current salary

equivalency guidelines may reflect less

than a provider’s reasonable costs in

furnishing these services.

As we indicated in our discussion of

data sources we used to establish the

proposed guidelines (see section II.A. of

this proposed rule), we were unable to

find a sole or primary source of data on

hourly rates paid to therapists by

providers that is timely and statistically

valid. Because the BLS hospital wage

industry surveys were not timely, we

were unable to use that data as our sole

source as in prior guideline notices. The

rehabilitation therapy industry has

submitted survey data to HCFA that

they believe support higher guideline

amounts than are proposed in this

proposed rule. Although the survey data

was submitted to us to determine its

appropriateness for use in determining

new guideline amounts as provided in

42 CFR 413.106(b)(6), it did not meet

the requirements in those regulations,

but we nevertheless evaluated the data.

As indicated in Section II.A. of this

preamble, because we were unable to

find a sole or primary source that met

our criteria of reliability, validity, and

representativeness, we decided to blend

selected hospital and SNF data sources

so that the wages and salary parts of our

proposed rule have been determined

using a ‘‘best estimate’’ approach, giving

equal weight to each data source, but

preferential status to none.

D. Conclusion

Federal Medicare expenditures have

grown at an extraordinary rate in recent

years. A study commissioned by the

National Association for Support of

Long-Term Care indicates that 75

percent of all therapy services under

arrangements were furnished in SNFs.

We also project that the 65 and over

population will nearly double by the

year 2025. We believe that the salary

equivalency guidelines proposed in this

rule are in the public interest since they

balance the needs of Medicare program

beneficiaries, (taxpayers), providers of

therapy services, and suppliers who

furnish therapy services under

arrangements. Nevertheless, we solicit

public comments as well as acceptable

data on the extent to which any of the

affected entities would be significantly

economically affected by these

guidelines.
Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules 14877

We are not preparing a rural impact

analysis since we have determined, and

certify, that this proposed rule would

not have a significant impact on the

operations of a substantial number of

small rural hospitals.

In accordance with the provisions of

Executive Order l2866, this proposed

rule was reviewed by the Office of

Management and Budget.

IV. Response to Comments

Because of the large number of items

of correspondence we normally receive

on a proposed rule, we are not able to

acknowledge or respond to them

individually. However, we will consider

all comments that we receive by the

date and time specified in the ‘‘Dates’’

section of this preamble, and if we

proceed with the final rule, we will

respond to the comments in the

preamble of the final rule.

V. Collection of Information

Requirements

Under the Paperwork Reduction Act

of 1995, agencies are required to provide

a 60-day notice in the Federal Register

and solicit public comment before a

collection of information requirement is

submitted to the Office of Management

and Budget (OMB) for review and

approval. In order to fairly evaluate

whether an information collection

should be approved by OMB, section

3506(c)(2)(A) of the Paperwork

Reduction Act of 1995 requires that we

solicit comment on the following issues:

• Whether the information collection

is necessary and useful to carry out the

proper functions of the agency;

• The accuracy of the agency’s

estimate of the information collection

burden;

• The quality, utility, and clarity of

the information to be collected; and

• Recommendations to minimize the

information collection burden on the

affected public, including automated

collection techniques.

This proposed rule contains a

collection of information requirement

that would be subject to OMB review

and approval. Section 413.106(e)

requires a provider of therapy services

to supply its intermediary with

documentation that supports additional

costs incurred for services furnished by

an outside supplier. Under § 413.106(f),

before an exception to the application of

the guidelines may be granted, the

provider must submit appropriate

evidence, in accordance with

instructions issued in section 1414 of

the Provider Reimbursement Manual, to

its intermediary to substantiate its

claim.

Public reporting burden for this

collection of information is estimated to

be 10 providers at 15 minutes each to

prepare and submit to the intermediary

documentation that supports the

additional costs. We estimate that 10

providers will request an exception. It

will take intermediaries 2 hours to

process each request. The total public

burden is 221⁄2 hours.

This collection of information request

is not effective until it has been

approved by OMB. A notice will be

published in the Federal Register when

approval is obtained. Organizations and

individuals desiring to submit

comments on this requirement should

direct them to the OMB official whose

name appears in the ADDRESSES section

of this preamble.

List of Subjects in 42 CFR Part 413

Health facilities, Kidney diseases,

Medicare, Puerto Rico, Reporting and

recordkeeping requirements.

42 CFR part 413 would be amended

as set forth below:

PART 413—PRINCIPLES OF

REASONABLE COST

REIMBURSEMENT; PAYMENT FOR

END-STAGE RENAL DISEASE

SERVICES; OPTIONAL

PROSPECTIVELY DETERMINED

PAYMENT FOR SKILLED NURSING

FACILITIES

1. The authority citation for part 413

continues to read as follows:

Authority: Secs. 1102, 1861(v)(1)(A), and

1871 of the Social Security Act (42 U.S.C

1302, 1395x(v)(1)(A), and 1395hh).

2. In § 413.106, paragraph (c)(5) is

redesignated as paragraph (c)(6) and

republished, a new paragraph (c)(5) is

added, paragraph (f)(1) is removed and

paragraphs (f) (2), (3), and (4) are

redesignated as (f) (1), (2), and (3) and

republished, to read as follows:

§ 413.106 Reasonable cost of physical and

other therapy services furnished under

arrangements.

* * * * *

(c) Application. * * *

(5) If therapy services are performed

in situations where compensation to a

therapist employed by the provider is

based, at least in part, on a fee-forservice or on a percentage of income (or

commission), the guidelines will apply.

The entire compensation will be subject

to the guidelines in cases where the

nature of the arrangements is most like

an under ‘‘arrangement’’ situation,

although technically the provider may

treat the therapists as employees. The

intent of this section is to prevent an

employment relationship from being

used to circumvent the guidelines.

(6) These provisions are applicable to

individual therapy services or

disciplines by means of separate

guidelines by geographical area and

apply to costs incurred after issuance of

the guidelines but no earlier than the

beginning of the provider’s cost

reporting period described in paragraph

(a) of this section. Until a guideline is

issued for a specific therapy or

discipline, costs are evaluated so that

such costs do not exceed what a prudent

and cost-conscious buyer would pay for

the given service.

* * * * *

(f) Exceptions: The following

exceptions may be granted but only

upon the provider’s demonstration that

the conditions indicated are present:

(1) Exception because of unique

circumstances or special labor market

conditions. An exception may be

granted under this section by the

intermediary if a provider demonstrates

that the costs for therapy services

established by the guideline amounts

are inappropriate to a particular

provider because of some unique

circumstances or special labor market

conditions in the area. The provider’s

request for an exception, together with

substantiating documentation, must be

submitted to the intermediary each year,

no later than 150 days after the close of

the provider’s cost reporting period. If

the circumstances giving rise to the

exception remain unchanged from a

prior cost reporting period, however, the

provider need only submit evidence of

the intermediary 150 days after the close

of its cost reporting period to establish

that fact.

(2) Exception for services furnished by

risk-basis HMO providers. For special

rules concerning services furnished to

an HMO’s enrollees who are Medicare

beneficiaries by a provider owned or

operated by a risk-basis HMO (see

§ 417.201(b) of this chapter) or related to

a risk-basis HMO by common

ownership or control (see § 417.205(c) of

this chapter).

(3) Exception for inpatient hospital

services. Effective with cost reporting

periods beginning on or after October 1,

1983, the costs of therapy services

furnished under arrangements to a

hospital inpatient are excepted from the

guidelines issued under this section if

such costs are subject to the provisions

of § 413.40 or part 412 of this chapter.

The intermediary will grant the

exception without request from the

provider.

* * * * *

(Catalog of Federal Domestic Assistance

Program No. 93.773 Medicare—Hospital
14878 Federal Register / Vol. 62, No. 60 / Friday, March 28, 1997 / Proposed Rules

Insurance Program and Program No. 93.774,

Medicare—Supplementary Medical

Insurance Program)

Dated: November 8, 1996.

Bruce C. Vladeck,

Administrator, Health Care Financing

Administration.

Dated: January 13, 1997.

Donna E. Shalala,

Secretary.

[FR Doc. 97–7477 Filed 3–26–97; 2:28 pm]

BILLING CODE 4120–01–P