[Federal Register Volume 62, Number 60 (Friday, March 28, 1997)]
[Proposed Rules]
[Pages 14851-14878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7477]


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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.

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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 speech-language 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

[[Page 14852]]

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: <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="bffdeffb92878f8792f1fcffd7dcd9de91d8d0c9">[email protected]</a>. 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 
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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:
    <bullet> 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.
    <bullet> A standard travel allowance to recognize time spent in 
traveling to the provider's site or the patient's home.
    <bullet> As provided for in existing regulations at Sec. 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

[[Page 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 Sec. 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 Sec. 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 Sec. 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 
(Sec. 413.106(f)(4), in which case the services are evaluated under the 
Medicare program's reasonable cost provisions as described at 
Sec. 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 Sec. 413.106, with 
hospitals, home health agencies (HHAs), SNFs, hospital-based HHAs, 
hospital-based SNFs,

[[Page 14854]]

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 speech-language 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.

[[Page 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 
Sec. 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:
    <bullet> 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.
    <bullet> 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.
    <bullet> 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).''
    <bullet> Despite requests for the raw unedited data file, the file 
was not provided to us.
    <bullet> We have questions about the validity of certain edits.
    <bullet> 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):
    <bullet> 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.
    <bullet> 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-

[[Page 14856]]

 weighted averages, and do not permit computation of accurate median 
and 75th percentile levels.
    <bullet> 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, speech-language 
pathologists are not included as a separate occupational category.
    <bullet> 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.
    <bullet> 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 full-time 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

[[Page 14857]]

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)]  x  (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)]  x  (January 1991 
AHE, RT)=estimated January 1991 AHE, SLP.

    The American Health Care Association data provided facility-
weighted 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

[[Page 14858]]

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  x  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

[[Page 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

[[Page 14860]]

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.....................................    x . 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          
----------------------------------------------------------------------------------------------------------------
                                                                            Occu-        Speech                 
         Urban area (constituent counties       Index       Physical      pational      language     Respiratory
              or county equivalents)                         therapy       therapy      pathology      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, AK \1\..        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

[[Page 14861]]

                                                                                                                
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

[[Page 14862]]

                                                                                                                
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

[[Page 14863]]

                                                                                                                
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

[[Page 14864]]

                                                                                                                
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, PR\1\................        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

[[Page 14865]]

                                                                                                                
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

[[Page 14866]]

                                                                                                                
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,                                                                      
         PR\1\ *..........................        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

[[Page 14867]]

                                                                                                                
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:                                                                               


------------------------------------------------------------------------
                                                              Adjustment
                          Location                              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       
----------------------------------------------------------------------------------------------------------------
                                                                                           Speech               
                 Nonurban area                   Wage index    Physical   Occupational    language   Respiratory
                                                               therapy       therapy      therapy      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

[[Page 14868]]

                                                                                                                
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:                                                                               


------------------------------------------------------------------------
                                                              Adjustment
                          Location                              factor  
------------------------------------------------------------------------
Alaska......................................................       1.250
Hawaii......................................................       1.225
Puerto Rico.................................................      1.100 
------------------------------------------------------------------------
\2\ All 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 therapy-specific 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 therapy-
specific 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 therapy-specific base 
period weights as well as the price proxies proposed to represent 
inflation for each cost category.

[[Page 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(<SUP>1)                              
                              ------------------------------------------------------------------                
                                                             Speech                  Composite    Proposed price
                                 Physical   Occupational    language   Respiratory    therapy        proxies    
                                 therapy       therapy     pathology     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.(<SUP>2)  
    Managerial Wages.........        4.357         4.593        4.775        5.519        4.660  ECI Wages      
                                                                                                  Private       
                                                                                                  Executive,    
                                                                                                  Administrative
                                                                                                  , &           
                                                                                                  Managerial.(<SUP>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.(<SUP>2)  
    Managerial Benefits......        0.966         1.018        1.059        1.223        1.033  ECI Benefits   
                                                                                                  Private       
                                                                                                  Executive,    
                                                                                                  Administrative
                                                                                                  , &           
                                                                                                  Managerial.(<SUP>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 (<SUP>3)....        0.313         0.412        0.153        0.122       1.000                  
----------------------------------------------------------------------------------------------------------------
(<SUP>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.                                 
(<SUP>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.                                                           
(<SUP>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                                                
----------------------------------------------------------------------------------------------------------------
                                                                              Speech                            
                                                  Physical   Occupational    language   Respiratory   Composite 
                 Calendar year                   therapist     therapist   pathologist   therapist    therapist 
                                                   index         index        index        index      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.                                                  
\1\ The outlays for services rendered in 1995 were used to develop the outlay-weighted composite therapy index. 
\2\ Source: DRI/McGraw-Hill HHC 3rd QTR 1996;@USSIM/TRENDL25YR0896@CISSIM/CONTROL963.                           


[[Page 14870]]

    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 
                      Month                          Year      factors  
------------------------------------------------------------------------
 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) <SUP>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.
---------------------------------------------------------------------------

     <SUP>1 The 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.
---------------------------------------------------------------------------

    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 therapy-specific input price indexes are 
based on BLS data and are one of the two following types:
    <bullet> 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.
    <bullet> Consumer Price Indexes (CPIs), which measure change in the 
prices of final goods and services purchased by the typical consumer. 
They are fixed-weight 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

[[Page 14871]]

price proxies), or a blend of internal and external price proxies based 
upon the competitive structure of the market and Medicare reasonable 
cost principles.<SUP>2
---------------------------------------------------------------------------

     2 See, for example, Changes to the Inpatient Hospital 
Prospective Payment System and Fiscal Year 1997 Rates; Final rule. 
61 FR 46192, August 30, 1996.
---------------------------------------------------------------------------

    It is generally accepted that prices for most nonlabor inputs are 
not directly influenced or biased by health-sector-specific 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.<SUP>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).<SUP>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.
---------------------------------------------------------------------------

     <SUP>3 The 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.
     <SUP>4 See, for example, Changes to the Inpatient Hospital 
Prospective Payment System and Fiscal Year 1997 Rates; Final rule. 
61 FR 46192, August 30, 1996.
---------------------------------------------------------------------------

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 Sec. 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-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.
    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

[[Page 14872]]

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 full-time 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 full-time 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 Sec. 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

[[Page 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 speech-language 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 4\1/2\ 
year impact of the proposed guidelines for 1997

[[Page 14874]]

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 4\1/2\ 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 9\1/2\ years is a 
savings of $2,920 million for Medicare Part A and $980 million for 
Medicare Part B.
    For a 9\1/2\ 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 4\1/2\ year total impact shown above, 
the estimated 9\1/2\ 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                        
----------------------------------------------------------------------------------------------------------------
                                                 Estimated outlays                                              
                                 ------------------------------------------------    Estimated                  
                                                    Under proposed regulations     savings after    Coinsurance 
       Federal fiscal year         Under current --------------------------------   offset (in     (in millions,
                                    regulations                    After offset      millions,       rounded)   
                                   before offset   Before offset   of 35 percent     rounded)                   
                                   (in millions)   (in millions)   (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                         
----------------------------------------------------------------------------------------------------------------
                                                                 Estimated outlays                              
                                                 ------------------------------------------------               
                                                                    Under proposed regulations       Estimated  
                                                   Under current --------------------------------   savings (in 
               Federal fiscal year                  regulations                    After offset      millions,  
                                                   before offset   Before offset   of 35 percent     rounded)   
                                                   (in millions)   (in millions)   (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 
----------------------------------------------------------------------------------------------------------------
\1\ Estimates are based on an illustrative effective date of April 1, 1997.                                     
\2\ This applies the 35 percent offset to physical therapy, occupational therapy, and speech-language pathology 
  only and no offset to respiratory therapy.                                                                    


[[Page 14875]]


                          Salary Equivalency: Outlays and Savings Estimates \1\--Part B                         
----------------------------------------------------------------------------------------------------------------
                                                               Estimated outlays \2\                            
                                 -------------------------------------------------------------------------------
                                                    Under proposed regulations                                  
                                   Under current --------------------------------    Estimated                  
       Federal fiscal year          regulations                    After offset     savings (in     Coinsurance 
                                   before offset   Before offset   of 35 percent     millions,     (in millions,
                                   (in millions)   (in millions)   (in millions)     rounded)        rounded)   
                                                                        \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 
----------------------------------------------------------------------------------------------------------------
\1\ Estimates are based on an illustrative effective date of April 1, 1997.                                     
\2\ The budget outlays and savings include coinsurance and are before the Part B premium offset.                
\3\ This 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

[[Page 14876]]

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 speech-language pathology and occupational 
therapy services. These therapy companies may incorrectly claim that 
the introduction of our proposed guidelines for contracted speech-
language 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 self-employed 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.

[[Page 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:
    <bullet> Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
    <bullet> The accuracy of the agency's estimate of the information 
collection burden;
    <bullet> The quality, utility, and clarity of the information to be 
collected; and
    <bullet> 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 Sec. 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 22\1/2\ 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 Sec. 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:


Sec. 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-for-service 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 Sec. 417.201(b) of this chapter) or related to a 
risk-basis HMO by common ownership or control (see Sec. 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 Sec. 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

[[Page 14878]]

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


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