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 Department of Health and Human Services Health Care Financing Administration 42 CFR Parts 405, 412, 413, 485, and 486
[HCFA-1158-P]
RIN 0938-AK73
 AGENCY: Health Care Financing Administration (HCFA), HHS.
 ACTION: Proposed rule.
 SUMMARY: We are proposing to revise the Medicare hospital inpatient prospective payment systems for operating and capital costs to: Implement applicable statutory requirements, including a number of provisions of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Public Law 106-554); and implement changes arising from our continuing experience with these systems. In addition, in the Addendum to this proposed rule, we are describing proposed changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. These changes would be applicable to discharges occurring on or after October 1, 2001. We also are setting forth proposed rate-of-increase limits as well as proposed policy changes for hospitals and hospital units excluded from the prospective payment systems. We also are proposing changes to the policies governing payments to hospitals for the direct costs of graduate medical education and critical access hospitals.
 DATES: Comments will be considered if received at the appropriate address, as provided below, no later than 5 p.m. on July 3, 2001.
 ADDRESSES: Mail written comments (an original and three copies) to the following address ONLY: Health Care Financing Administration, Department of Health and Human Services, Attention: HCFA-1158-P, P.O. Box 8010, Baltimore, MD 21244-1850. If you prefer, you may deliver by courier your written comments (an original and three copies) to one of the following addresses: Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, or Room C5-14-03, Central Building, 7500 Security Boulevard, Baltimore, MD 21244-1850. Comments mailed to those addresses specified as appropriate for courier delivery may be delayed and could be considered late. Because of staffing and resource limitations, we cannot accept comments by facsimile (FAX) transmission. In commenting, please refer to file code HCFA-1158-P. For information on viewing public comments, see the beginning of the 
                            **SUPPLEMENTARY INFORMATION**
                             section. For comments that relate to information collection requirements, mail a copy of comments to the following addresses: Health Care Financing Administration, Office of Information Services, Security and Standards Group, Division of HCFA Enterprise Standards, Room N2-14-26, 7500 Security Boulevard, Baltimore, Maryland 21244-1850. Attn: John Burke, HCFA-1158-P; and Office of Information and Regulatory Affairs, Office of Management and Budget, Room 3001, New Executive Office Building, Washington, DC 20503, Attn: Allison Herron Eydt, HCFA Desk Officer.
 FOR FURTHER INFORMATION CONTACT: Steve Phillips, (410) 786-4548, Operating Prospective Payment, Diagnosis-Related Groups (DRGs), Wage Index, Hospital Geographic Reclassifications, and Sole Community Hospital Issues Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded Hospitals, Graduate Medical Education and Critical Access Hospital Issues


SUPPLEMENTARY INFORMATION: Inspection of Public Comments 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 C5-12-08 of the Health Care Financing Administration, 7500 Security Blvd., Baltimore, MD, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. Please call (410) 786-7197 to arrange to view these comments. Availability of Copies and Electronic Access *Copies:*
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                         containing this document, send your request to: New Orders, Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date of the issue requested and enclose a check or money order payable to the Superintendent of Documents, or enclose your Visa or Master Card number and expiration date. Credit card orders can also be placed by calling the order desk at (202) 512-1800 or by faxing to (202) 512-2250. The cost for each copy is $8.00. As an alternative, you can view and photocopy the 
                        **Federal Register**
                         document at most libraries designated as Federal Depository Libraries and at many other public and academic libraries throughout the country that receive the 
                        **Federal Register**
                        . This 
                        **Federal Register**
                         document is also available from the 
                        **Federal Register**
                         online database through GPO Access, a service of the U.S. Government Printing Office. Free public access is available on a Wide Area Information Server (WAIS) through the Internet and via asynchronous dial-in. Internet users can access the database by using the World Wide Web; the Superintendent of Documents home page address is ­http://www.access.gpo.gov/​nara_​docs/​, by using local WAIS client software, or by telnet to swais.access.gpo.gov, then login as guest (no password required). Dial-in users should use communications software and modem to call (202) 512-1661; type swais, then login as guest (no password required). I. Background A. Summary Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of hospital inpatient stays under a prospective payment system. Under these prospective payment systems, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs). Under section 1886(d)(1)(B) of the Act in effect without consideration of the amendments made by the Balanced Budget Act of 1997 (Public Law 105-33), the Balanced Budget Refinement Act of 1999 (Public Law 106-113, and the recent Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Public Law 106-554, enacted on December 21, 2000), certain specialty hospitals are excluded from the hospital inpatient prospective payment system: Psychiatric hospitals and units, rehabilitation hospitals and 
                        ( print page 22647)
                        units, children's hospitals, long-term care hospitals, and cancer hospitals. For these hospitals and units, Medicare payment for operating costs is based on reasonable costs subject to a hospital-specific annual limit, until the payment provisions of Public Laws 105-33, 106-113, and 106-554 that are applicable to three classes of these hospitals are implemented, as discussed below. Various sections of Public Laws 105-33, 106-113, and 106-554 provide for the transition of rehabilitation hospitals and units, psychiatric hospitals and units, and long-term care hospitals from being paid on an excluded hospital basis to being paid on an individual prospective payment system basis. These provisions are as follows: Rehabilitation Hospitals and Units. Section 1886(j) of the Act, as added by section 4421 ofPublic Law 105-33 and amended by section 125 of Public Law 106-113 and section 305 of Public Law 106-554, authorizes the implementation of a prospective payment system for inpatient hospital services furnished by rehabilitation hospitals and units. Section 4421 of Public Law 105-33 amended the Act by adding section 1886(j). Section 1886(j) of the Act provides for a fully implemented prospective payment system for inpatient rehabilitation hospitals and rehabilitation units, effective for cost reporting periods beginning on or after October 2002, with payment provisions during a transitional period of October 1, 2000 to October 1, 2002 based on target amounts specified in section 1886(b) of the Act. Section 125 of Public Law 106-113 amended section 1886(j) of the Act to require the Secretary to use a discharge as the payment unit for inpatient rehabilitation services under the prospective payment system and to establish classes of patient discharges by functional-related groups. Section 305 of Public Law 106-554 further amended section 1886(j) of the Act to allow hospitals to elect to be paid the full Federal prospective payment rather than the transitional period payments specified in the Act. A brief discussion of the November 3, 2000 proposed rule (65 FR 66304) that we issued to propose implementation of the prospective payment system for inpatient rehabilitation hospitals and rehabilitation units is included under section VI.A.4. of this preamble.
                    Psychiatric Hospitals and Units. Sections 124(a) and (c) ofPublic Law 106-113 provide for the development of a per diem prospective payment system for payment for inpatient hospital services of psychiatric hospitals and units under the Medicare program, effective for cost reporting periods beginning on or after October 1, 2002. This system must include an adequate patient classification system that reflects the differences in patient resource use and costs among these hospitals and must maintain budget neutrality. We are in the process of developing a proposed rule, to be followed by a final rule, to implement the prospective payment system for psychiatric hospitals and units, effective for October 1, 2002.
                    Long-Term Care Hospitals. Sections 123(a) and (c) ofPublic Law 106-113 provide for the development of a per discharge prospective payment system for payment for inpatient hospital services furnished by long-term care hospitals under the Medicare program, effective for cost reporting periods beginning on or after October 1, 2002. Section 307(b)(1) of Public Law 106-554 provides that payments under the long-term care prospective payment system will be made on a prospective payment basis rather than a cost basis. The long-term care hospital prospective payment system must include a patient classification system that reflects the differences in patient resource use and costs, and must maintain budget neutrality. We are planning to develop a proposed rule, to be followed by a final rule, to implement the prospective payment system for long-term care hospitals, effective for October 1, 2002. Section 307 of Public Law 106-554 provides that if the Secretary is unable to develop a prospective payment system for long-term care hospitals that can be implemented by October 1, 2002, the Secretary must implement a prospective payment system that bases payment under the system using the existing acute hospital DRGs, modified where feasible to account for resource use of long-term care hospital patients using the most recently available hospital discharge data for long-term care services. Under sections 1820 and 1834(g) of the Act, payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services on a reasonable cost basis. Reasonable cost is determined under the provisions of section 1861(v)(1)(A) of the Act and existing regulations under Parts 413 and 415. Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act; the amount of payment for direct GME costs for a cost reporting period is based on the hospital's number of residents in that period and the hospital's costs per resident in a base year. The regulations governing the hospital inpatient prospective payment system are located in 42 CFR Part 412. The regulations governing excluded hospitals and hospital units are located in Parts 412 and 413. The regulations governing GME payments and payments to CAHs are located in Part 413. On August 1, 2000, we published a final rule in the 
                        **Federal Register**
                         (65 FR 47054) that implemented both statutory requirements and other changes to the Medicare hospital inpatient prospective payment systems for both operating costs and capital-related costs, as well as changes addressing payment for excluded hospitals and payments for GME costs. Generally, these changes were effective for discharges occurring on or after October 1, 2000. On March 2, 2001, we published correction notices in the 
                        **Federal Register**
                         (66 FR 13020) relating to the calculation of certain wage indexes and the labeling of certain DRGs. Public Law 106-554 made a number of changes to the Act relating to prospective payments to hospitals for inpatient services and payments to excluded hospitals. This proposed rule would implement amendments enacted by Public Law 106-554 relating to FY 2002 payments for hospital inpatient services, new medical services and technology, GME costs, the payment adjustment for disproportionate share hospitals (DSHs), the indirect medical education (IME) adjustment for teaching hospitals, sole community hospitals (SCHs), and CAHs. It would also implement changes affecting hospitals' geographic reclassifications and wage index. These changes are addressed in sections II., III., IV., and VI. of this preamble. Other provisions of Public Law 106-554 that relate to Medicare payments to hospitals effective prior to October 1, 2001 (that is, for FY 2001 or for the period between April 1, 2001 and September 30, 2001), are addressed in a separate interim final rule with comment period (HCFA-1178-IFC). B. Major Contents of This Proposed Rule In this proposed rule, we are setting forth proposed changes to the Medicare hospital inpatient prospective payment systems for operating costs and for capital-related costs in FY 2002. We also are proposing changes relating to payments for GME costs and payments to excluded hospitals and units and CAHs. The proposed changes would be 
                        ( print page 22648)
                        effective for discharges occurring on or after October 1, 2001. The following is a summary of the major changes that we are proposing to make: 1. Proposed Changes to the DRG Reclassifications and Recalibrations of Relative Weights As required by section 1886(d)(4)(C) of the Act, we adjust the DRG classifications and relative weights annually. Based on analyses of Medicare claims data, we are proposing to establish a number of new DRGs and make changes to the designation of diagnosis and procedure codes under other existing DRGs. Our proposed changes for FY 2002 are set forth in section II. of this preamble. We also address the provisions of section 533 of Public Law 106-544 regarding development of a mechanism for adequate payment for new medical services and technologies and the required report to Congress on expeditiously introducing new medical services and technology into the DRGs. 2. Proposed Changes to the Hospital Wage Index In section III. of this preamble, we discuss proposed revisions to the wage index and the annual update of the wage data. Specific issues addressed in this section include the following: The FY 2002 wage index update, using FY 1998 wage data.
                    The transition to excluding from the wage index Part A physician wage costs that are teaching-related, as well as resident and Part A certified registered nurse anesthetist (CRNA) costs.
                    The costs of contracted pharmacy and laboratory services.
                    The collection of occupational mix data, as required by section 304(c) ofPublic Law 106-554.
                    Revisions to the wage index based on hospital redesignations and reclassifications, including changes to reflect the provisions of sections 304(a) and (b) ofPublic Law 106-554 relating to 3-year wage index reclassifications by the MGCRB, the use of 3 years of wage data for evaluating reclassification requests for FYs 2003 and later, and the application of a statewide wage index for reclassifications beginning in FY 2003.
                    Requests for wage data corrections and modification of the process and timetable for updating the wage index, and a proposed revision of that timetable. 3. Other Decisions and Proposed Changes to the Prospective Payment System for Inpatient Operating and Graduate Medical Education Costs In section IV. of this preamble, we discuss several provisions of the regulations in 42 CFR Parts 412 and 413 and set forth certain proposed changes concerning the following: Sole community hospitals.
                    Rural referral centers.
                    Changes relating to the IME adjustment as a result of section 302 ofPublic Law 106-554.
                    Changes relating to the DSH adjustment as a result of section 303 ofPublic Law 106-554.
                    The establishment of policies relating to the 3-year application of wage index reclassifications by the MGCRB, the use of 3 years of wage data in evaluating reclassification requests to the MGCRB for FYs 2003 and later, and the use of a statewide wage index for reclassifications beginning in FY 2003, as required by sections 304(a) and (b) ofPublic Law 106-554.
                    Proposed requirements for additional payments for new medical services and technology, as required by section 533(b) ofPublic Law 106-554.
                    Changes relating to payment for the direct costs of GME, including changes as a result of section 511 ofPublic Law 106-554. 4. Prospective Payment System for Capital-Related Costs In section V. of this preamble, we specify the proposed payment requirements for capital-related costs, including the special exceptions payment, beginning October 1, 2002. 5. Proposed Changes for Hospitals and Hospital Units Excluded from the Prospective Payment Systems In section VI. of this preamble, we discuss the following proposals concerning excluded hospital and hospital units and CAHs: Limits on and adjustments to the proposed target amounts for FY 2002.
                    Revision of the methodology for wage neutralizing the hospital-specific target amounts using preclassified wage data.
                    Updated caps for new excluded hospitals and units as well as changes in the effective date of classifications of excluded hospitals and units.
                    The prospective payment system for inpatient rehabilitation hospitals and units.
                    Payments to CAHs, including exclusion from the payment window requirements; the availability of CRNA pass-through payments; payment for emergency room on-call physicians; treatment of ambulance services; the use of certain qualified practitioners for preanesthesia and postanesthesia evaluations; and clarification of location requirements for CAHs. 6. Determining Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits In the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the FY 2002 prospective payment rates for operating costs and capital-related costs. We also establish the proposed threshold amounts for outlier cases. In addition, we address update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2002 for hospitals and hospital units excluded from the prospective payment system. 7. Impact Analysis In Appendix A, we set forth an analysis of the impact that the proposed changes described in this proposed rule would have on affected entities. 8. Capital Acquisition Model Appendix B contains the technical appendix on the proposed FY 2002 capital cost model. 9. Report to Congress on the Update Factor for Hospitals Under the Prospective Payment System and Hospitals and Units Excluded From the Prospective Payment System Section 1886(e)(3) of the Act requires the Secretary to report to Congress on our initial estimate of a recommended update factor for FY 2002 for payments to hospitals included in the prospective payment systems, and hospitals excluded from the prospective payment systems. This report is included as Appendix C to this proposed rule. 10. Proposed Recommendation of Update Factor for Hospital Inpatient Operating Costs As required by sections 1886(e)(4) and (e)(5) of the Act, Appendix D provides our recommendation of the appropriate percentage change for FY 2002 for the following: Large urban area and other area average standardized amounts (and hospital-specific rates applicable to sole community and Medicare-dependent, small rural hospitals) for hospital inpatient services paid for under the prospective payment system for operating costs.
                    Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by hospitals( print page 22649)
                        and hospital units excluded from the prospective payment system. 11. Discussion of Medicare Payment Advisory Commission Recommendations Under section 1805(b) of the Act, the Medicare Payment Advisory Commission (MedPAC) is required to submit a report to Congress, not later than March 1 of each year, that reviews and makes recommendations on Medicare payment policies. This annual report makes recommendations concerning hospital inpatient payment policies. In section VII. of this preamble, we discuss the MedPAC recommendations and any actions we are proposing to take with regard to them (when an action is recommended). For further information relating specifically to the MedPAC March 1 report or to obtain a copy of the report, contact MedPAC at (202) 653-7220 or visit MedPAC's website at: www.medpac.gov. II. Proposed Changes to DRG Classifications and Relative Weights A. Background Under the prospective payment system, we pay for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary's stay is assigned. The formula used to calculate payment for a specific case takes an individual hospital's payment rate per case and multiplies it by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG relative to the average resources used to treat cases in all DRGS. Congress recognized that it would be necessary to recalculate the DRG relative weights periodically to account for changes in resource consumption. Accordingly, section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually. These adjustments are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. The proposed changes to the DRG classification system, and the proposed recalibration of the DRG weights for discharges occurring on or after October 1, 2001, are discussed below. B. DRG Reclassification 1. General Cases are classified into DRGs for payment under the prospective payment system based on the principal diagnosis, up to eight additional diagnoses, and up to six procedures performed during the stay, as well as age, sex, and discharge status of the patient. The diagnosis and procedure information is reported by the hospital using codes from the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM). Medicare fiscal intermediaries enter the information into their claims processing systems and subject it to a series of automated screens called the Medicare Code Editor (MCE). These screens are designed to identify cases that require further review before classification into a DRG. After screening through the MCE and any further development of the claims, cases are classified into the appropriate DRG by the Medicare GROUPER software program. The GROUPER program was developed as a means of classifying each case into a DRG on the basis of the diagnosis and procedure codes and demographic information (that is, sex, age, and discharge status). It is used both to classify past cases in order to measure relative hospital resource consumption to establish the DRG weights and to classify current cases for purposes of determining payment. The records for all Medicare hospital inpatient discharges are maintained in the Medicare Provider Analysis and Review (MedPAR) file. The data in this file are used to evaluate possible DRG classification changes and to recalibrate the DRG weights. In the July 30, 1999 final rule (64 FR 41500), we discussed a process for considering non-MedPAR data in the recalibration process. In order for the use of particular data to be feasible, we must have sufficient time to evaluate and test the data. The time necessary to do so depends upon the nature and quality of the data submitted. Generally, however, a significant sample of the data should be submitted by August 1, approximately 8 months prior to the publication of the proposed rule, so that we can test the data and make a preliminary assessment as to the feasibility of using the data. Subsequently, a complete database should be submitted no later than December 1 for consideration in conjunction with the next year's proposed rule. Currently, cases are assigned to one of 503 DRGs (including one DRG for a diagnosis that is invalid as a discharge diagnosis and one DRG for ungroupable diagnoses) in 25 major diagnostic categories (MDCs). Most MDCs are based on a particular organ system of the body (for example, MDC 6 (Diseases and Disorders of the Digestive System)). However, some MDCs are not constructed on this basis because they involve multiple organ systems (for example, MDC 22 (Burns)). In general, cases are assigned to an MDC based on the principal diagnosis, before assignment to a DRG. However, there are five DRGs to which cases are directly assigned on the basis of procedure codes. These are the DRGs for liver, bone marrow, and lung transplants (DRGs 480, 481, and 495, respectively) and the two DRGs for tracheostomies (DRGs 482 and 483). Cases are assigned to these DRGs before classification to an MDC. Within most MDCs, cases are then divided into surgical DRGs (based on a surgical hierarchy that orders individual procedures or groups of procedures by resource intensity) and medical DRGs. Medical DRGs generally are differentiated on the basis of diagnosis and age. Some surgical and medical DRGs are further differentiated based on the presence or absence of complications or comorbidities (CC). Generally, the GROUPER does not consider other procedures; that is, nonsurgical procedures or minor surgical procedures generally not performed in an operating room are not listed as operating room (OR) procedures in the GROUPER decision tables. However, there are a few non-OR procedures that do affect DRG assignment for certain principal diagnoses, such as extracorporeal shock wave lithotripsy for patients with a principal diagnosis of urinary stones. The major changes we are proposing to make to the DRG classification system for FY 2002 are summarized in Charts 1, 2, and 3 below, followed by detailed discussions in individual sections according to MDC assignment. Other issues concerning DRGs are also set forth below. Unless otherwise noted, our DRG analysis is based on data from 100 percent of the FY 2000 MedPAR file containing hospital bills received through May 31, 2000 for discharges in FY 2000. 
                        ( print page 22650) Chart 1.—Summary of Proposed Changes in DRG Assignments
Diagnosis related groups (DRGs)
Added 
                                 as new
RemovedPre-MDC:DRG 512 (Simultaneous Pancreas/Kidney Transplant)
XDRG 513 (Pancreas Transplants)
XMDC 5 (Diseases and Disorders of the Circulatory System):DRG 112 (Percutaneous Cardiovascular Procedures)

XDRG 514 (Cardiac Defibrillator Implant with Cardiac Catheterization)
XDRG 515 (Cardiac Defibrillator Implant without Cardiac Catheterization)
XDRG 516 (Percutaneous Cardiovascular Procedures with Acute Myocardial Infarction (AMI))
XDRG 517 (Percutaneous Cardiovascular Procedures without AMI, with Coronary Artery Stent Implant
XDRG 518 (Percutaneous Cardiovascular Procedures without AMI, without Coronary Artery Stent Implant
XMDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue):DRG 519 (Cervical Spinal Fusion with CC)
XDRG 520 (Cervical Spinal Fusion without CC)
XMDC 20 (Alcohol/Drug Use and Alcohol/Drug-Induced Organic Mental Disorders):DRG 434 Alcohol/Drug Abuse or Dependency, Detoxification or Other Symptomatic Treatment with CC)

XDRG 435 (Alcohol/Drug Abuse or Dependency, Detoxification or Other Symptomatic Treatment without CC)

XDRG 436 (Alcohol/Drug Dependence with Rehabilitation Therapy)

XDRG 437 (Alcohol/Drug Dependence, Combined Rehabilitation and Detoxification Therapy)

XDRG 521 (Alcohol/Drug Abuse or Dependence with CC)
XDRG 522 (Alcohol/Drug Abuse or Dependence without CC, with Rehabilitation Therapy)
XDRG 523 (Alcohol/Drug Abuse or Dependence without CC, without Rehabilitation Therapy)
X
 Chart 2.—Summary of Proposed Assignment or Reassignment of Diagnosis or Procedure Codes in Existing DRGs
Diagnosis/procedure codes
Removed from DRG
Reassigned to DRGMDC 5 (Diseases and Disorders of the Circulatory System):Principal Diagnosis Code:410.01 Acute myocardial infarction of anterolateral wall, initial episode of care
116
516410.11 Acute myocardial infarction of other anterior wall, initial episode of care
116
516410.21 Acute myocardial infarction of inferolateral wall, initial episode of care
116
516410.31 Acute myocardial infarction of inferoposterior wall, initial episode of care
116
516410.41 Acute myocardial infarction of other inferior wall, initial episode of care
116
516410.51 Acute myocardial infarction of other lateral wall, initial episode of care
116
516410.61 True posterior wall infarction, initial episode of care
116
516410.71 Subendocardial infarction, initial episode of care
116
516410.81 Acute myocardial infarction of other specified sites, initial episode of care
116
516410.91 Acute myocardial infarction of unspecified site, initial episode of care
116
516Procedure Codes:37.94 Implantation or replacement of automatic cardioverter/defibrillation, total system (AICD)
104, 105
514, 51537.95 Implantation of automatic cardioverter/defibrillator lead(s) only
104, 105
514, 51537.96 Implantation of automatic cardioverter/defibrillator pulse generator only
104, 105
514, 51537.97 Replacement of automatic cardioverter/ defibrillator lead(s) only
104, 105
514, 51537.98 Replacement of automatic cardioverter/defibrillator pulse generator only
104, 105
514, 515Operating Room Procedures:35.96 Percutaneous valvuloplasty
116
516, 517, 51836.01 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy without mention of thrombolytic agent
116
516, 517, 51836.02 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy with mention of thrombolytic agent
116
516, 517, 51836.05 Multiple vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy performed during the same operation, with or without mention of thrombolytic agent
116
516, 517, 51836.09 Other removal of coronary artery obstruction
116
516, 517, 51837.34 Catheter ablation of lesion or tissues of heart
116
516, 517, 51892.27 Implantation or insertion of radioactive elements
Non-OR in MDC-5
517Nonoperating Room Procedures:36.06 Insertion of coronary artery stent(s)
116
51737.21 Right heart cardiac catheterization
104
514( print page 22651)37.22 Left heart cardiac catheterization
104
51437.23 Right and left heart cardiac catheterization
104
51437.26 Cardiac electrophysiologic stimulation and recording studies
104, 112
514, 516, 517, 51837.27 Cardiac mapping
112
516, 517, 51888.52 Angiocardiography of right heart structures
104
51488.53 Angiocardiography of left heart structures
104
51488.54 Combined right and left heart angiocardiography
104
51488.55 Coronary arteriography using a single catheter
104
51488.56 Coronary arteriography using two catheters
104
51488.57 Other and unspecified coronary arteriography
104
51488.58 Negative-contrast cardiac roentgenography
104
514MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue):Procedure Codes:81.02 Other cervical fusion, anterior technique
497, 498
519, 52081.03 Other cervical fusion, posterior technique
497, 498
519, 520MDC 15 (Newborns and Other Neonates with Conditions Originating in the Perinatal Period)Diagnosis Codes:773.0 Hemolytic disease due to RH isoimmunization
389
390773.1 Hemolytic disease due to ABO isoimmunization
389
390Secondary Diagnosis Codes:478.1 Other diseases of nasal cavity and sinuses
390
391520.6 Disturbances in tooth eruption
390
391623.8 Other specified noninflammatory disorders of vagina
390
391709.00 Dyschroma, unspecified
390
391709.01 Vitiglio
390
391709.09 Dyschromia, Other
390
391744.1 Accessory Auricle
390
391754.61 Congenital pes planus
390
391757.33 Congenital pigmentary anomalies of skin
390
391757.39 Other specified anomaly of skin
390
391764.08 “Light for dates” without mention of fetal malnutrition, 2,000-2,499 grams
390
391764.98 Fetal growth retardation, unspecified, 2,000-2,499 grams
390
391772.6 Cutaneous hemorrhage
390
391794.15 Abnormal and auditory function studies
390
391796.4 Other abnormal clinical findings
390
391V20.2 Routine infant or child health check
390
391V72.1 Examination of ears and hearing
390
391
 Chart 3.—Summary of Proposed Retitled DRGs
MDC
DRG 
                                 No.
Current name
Proposed nameMDC 5
DRG 116
Other Permanent Cardiac Pacemaker Implantation, or PTCA, with Coronary Artery Stent Implant
Other Cardiac Pacemaker Implantation.MDC 8
DRG 497
Spinal Fusion with CC
Spinal Fusion except Cervical with CC.MDC 8
DRG 498
Spinal Fusion without CC
Spinal Fusion except Cervical without CC.
 2. MDC 5 (Diseases and Disorders of the Circulatory System) a. Removal of Defibrillator Cases From DRGs 104 and 105 DRGs 104 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization) and 105 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization) include the replacement or open repair of one or more of the four heart valves. These valves may be diseased or damaged, resulting in either leakage or restriction of blood flow to the heart, compromising the ability of the heart to pump blood. This procedure requires the use of a heart-lung bypass machine, as the heart must be stilled and opened to repair or replace the valve. Cardiac defibrillators are implanted to correct episodes of fibrillation (very fast heart rate) caused by malfunction of the conduction mechanism of the heart. Through implanted cardiac leads, the defibrillator mechanism senses changes in heart rhythm. When very fast heart rates occur, the defibrillator produces a burst of electric current through the leads to restore the normal heart rate. An implanted defibrillator constantly monitors heart rhythm. The implantation of this device does not require the use of a heart-lung bypass machine, and would be expected to be very different in terms of resource usage, although both procedures currently group to DRGs 104 and 105. As part of our ongoing review of DRGs, we examined Medicare claims data on DRG 104 and DRG 105. We reviewed 100 percent of the FY 2000 MedPAR file containing hospital bills received through May 31, 2000, for 
                        ( print page 22652)
                        discharges in FY 2000, and found that the average charges across all cases in DRG 104 were $84,060, while the average charges across all cases in DRG 105 were $66,348. Carving out code 37.94 (Implantation or replacement of automatic cardioverter/defibrillator, total system [AICD]) from DRGs 104 and 105 increased those average charges to $91,366 for DRG 104 and $67,323 for DRG 105. We identified 11,021 defibrillator cases in DRG 104 (out of 25,112 total cases), with average charges of $74,719, and 2,434 defibrillator cases in DRG 105 (out of 20,094 total cases), with average charges of $59,267. We performed additional review on cases containing code 37.95 (Implantation of automatic cardioverter/ defibrillator lead(s) only) with code 37.96 (Implantation of automatic cardioverter/defibrillator pulse generator only) and on cases containing code 37.97 (Replacement of automatic cardioverter/defibrillator lead(s) only) with code 37.98 (Replacement of automatic cardioverter/defibrillator pulse generator only). This subgrouping contained only 56 patients. The average charges for the 18 patients in DRG 104 were $58,847. The average charges for the 38 patients in DRG 105 were $54,891. Because we believe the defibrillator cases are significantly different from other cases in DRGs 104 and 105, we are proposing to create two new DRGs: DRG 514 (Cardiac Defibrillator Implant with Cardiac Catheterization) and DRG 515 (Cardiac Defibrillator Implant without Cardiac Catheterization). We are proposing to remove procedure codes 37.94, 37.95 and 37.96, and 37.97 and 37.98 from DRGs 104 and 105 to form the new DRGs 514 and 515. The proposed new DRGs 514 and 515 would include principal diagnosis codes and procedure codes as reflected in Chart 4 below: Chart 4.—Composition of Proposed New DRGs 514 and 515 in MDC 5
Diagnosis and procedure codes
Included in proposed DRG 514
Included in proposed DRG 515Principal Diagnosis Codes:All of the principal diagnosis codes assigned to MDC-5
X
XPrincipal or Secondary Procedure Code:37.94 Implantation or replacement of automatic cardioverter/defibrillation, total system (AICD)
X
XCombination Operating Procedure Codes:37.95 Implantation of automatic cardioverter/defibrillator lead(s) only; plus37.96 Implantation of automatic cardioverter/defibrillator pulse generator only;
X
XOr37.97 Replacement of automatic cardioverter/defibrillator lead(s) only; plus37.98 Replacement of automatic cardioverter/defibrillator pulse generator only
X
XPlus: One of the Following Nonoperating Room Procedure Codes:37.21 Right heart cardiac catheterization
X37.22 Left heart cardiac catheterization
X37.23 Combined right and left heart cardiac catheterization
X37.26 Cardiac electrophysiologic stimulation and recording studies
X88.52 Angiocardiography of right heart structures
X88.53 Angiocardiography of left heart structures
X88.54 Combined right and left heart angiocardiography
X88.55 Coronary arteriography using a single catheter
X88.56 Coronary arteriography using two catheters
X88.57 Other and unspecified coronary arteriography
X88.58 Negative-contrast cardiac roentgenography
X
 b. Percutaneous Cardiovascular Procedures We reviewed other DRGs within MDC 5 in order to determine if there were also logic changes that could be made to these DRGs. The data was arrayed in a variety of ways displaying myriad permutations, resulting in the following proposed changes. A percutaneous transluminal coronary angioplasty (PTCA) is an acute intervention intended to minimize cardiac damage by restarting circulation to the heart. Some patients with an acute myocardial infarction (AMI) are now treated by performing a PTCA during the hospitalization for the AMI. Currently, PTCAs with a coronary stent implant are assigned to DRG 116 (Other Permanent Cardiac Pacemaker Implantation, or PTCA with Coronary Artery Stent Implant), along with pacemaker implants. The remaining percutaneous cardiovascular procedures are assigned to DRG 112 (Percutaneous Cardiovascular Procedures). The volume of percutaneous cardiovascular procedures has grown dramatically, with 186,669 cases identified in the FY 2000 MedPAR file containing hospital bills submitted through May 31, 2000. Because of the high volume, we decided to review the DRG for percutaneous cardiovascular procedures. As a first step in the evaluation, we combined the percutaneous cardiovascular procedures from DRGs 112 and 116. We then subdivided the combined percutaneous cardiovascular procedure group into two groups based on the principal diagnosis (Pdx) of AMI. Group
Count
Average chargeWith Pdx of AMI
50,442
$31,722Without Pdx of AMI
136,227
23,989
 Each of these groups was further evaluated by subdividing them based on whether a coronary stent was implanted. The vast majority of patients with an AMI had a coronary stent implanted. Patients without an AMI were subdivided into two groups based on whether a coronary stent was implanted. Group
Count
Average chargeWithout Pdx of AMI with stent
111,441
$24,745( print page 22653)Without Pdx of AMI without stent
24,786
20,589
 Based on this analysis, we are proposing to remove the PTCAs with coronary artery stent from DRG 116, thus limiting DRG 116 to permanent cardiac pacemaker implantation. This removal will leave approximately 68,000 non-PTCA cases in DRG 116. In conjunction with this evaluation, we considered a new technology, intravascular brachytherapy, that is being used to treat coronary in-stent stenosis. A gamma-radiation-impregnated tape is threaded through the affected vessel for a specified amount of dwell time, and then the tape is removed. Intravascular brachytherapy was approved by the Food and Drug Administration in November 2000. Intravascular brachytherapy is assigned to procedure code 92.27 (Implantation or insert of radioactive elements). With the use of angioplasty, these cases are currently assigned to DRG 112 (Percutaneous Cardiovascular Procedures). Therefore, cases involving this new technology will be implicated by these proposed changes. We are proposing to retitle DRG 116 “Other Cardiac Pacemaker Implantation,” remove DRG 112, and create three new DRGs: DRG 516 (Percutaneous Cardiovascular Procedures with Acute Myocardial Infarction (AMI)); DRG 517 (Percutaneous Cardiovascular Procedures without AMI, with Coronary Artery Stent Implant; and DRG 518 (Percutaneous Cardiovascular Procedures without AMI, without Coronary Artery Stent Implant). The principal diagnosis codes and operating room and nonoperating room procedure codes that are proposed to be included in the new DRGs 516, 517, and 518 are reflected in Chart 5. In order to be assigned to new DRG 516, cases must contain one of the principal diagnoses 
                        *plus*
                         the operating room procedures listed in Chart 5. Because DRG 516 contains acute myocardial infarction, which is hierarchically ordered before DRGs 517 and 518, any AMI cases also containing codes 92.27 or 36.06 would automatically be assigned to DRG 516. We are proposing to assign patients with a percutaneous cardiovascular procedure and intravascular radiation treatment to new DRG 517. As more data become available, we will reassess the assignment of intravascular radiation treatment to DRG 517. Proposed new DRG 518 would contain the same operating room and nonoperating room procedures as new proposed DRG 517, with the exception of codes 92.27 and 36.06. Chart 5.—Composition of Proposed New DRGs 516, 517, and 518 in MDC 5
Diagnosis and procedure codes
Included in Proposed DRG 516
Included in Proposed DRG 517
Included in Proposed DRG 518Principal Diagnosis Codes:410.01 Acute myocardial infarction of anterolateral wall, initial episode of care
X410.11 Acute myocardial infarction of other anterior wall, initial episode of care
X410.21 Acute myocardial infarction of inferolateral wall, initial episode of care
X410.31 Acute myocardial infarction of inferoposterior wall, initial episode of care
X410.41 Acute myocardial infarction of other inferior wall, initial episode of care
X410.51 Acute myocardial infarction of other lateral wall, initial episode of care
X410.61 True posterior wall infarction, initial episode of care
X410.71 Subendocardial infarction, initial episode of care
X410.81 Acute myocardial infarction of other specified sites, initial episode of care.
X410.91 Acute myocardial infarction of unspecified site, initial episode of care
Xplus: Operating Room Procedures:35.96 Percutaneous valvuloplasty
X
X
Xand36.01 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy without mention of thromolytic agent
X
X
Xor36.02 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy with mention of thrombolytic agent
X
X
Xor36.05 Multiple vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy performed during the same operation, with or without mention of thrombolytic agent
X
X
Xand36.09 Other removal of coronary artery obstruction
X
X
Xand37.34 Catheter ablation of lesion or tissues of heart
X
X
X92.27 Implantation or insertion of radioactive elements

XOR: Nonoperating Room Procedures:36.06 Insertion of coronary artery stent(s)

X37.26 Cardiac electrophysiologic stimulation and recording studies
X
X
X37.27 Cardiac mapping
X
X
X
 DRG 121 (Circulatory Disorders with AMI and Major Complication, Discharged Alive), DRG 122 (Circulatory Disorders with AMI without Major Complication, Discharged Alive), and DRG 123 (Circulatory Disorders with AMI, Expired) are not affected by these changes. c. Removal of Heart Assist Systems The ICD-9-CM Coordination and Maintenance Committee considered the nonoperative removal of heart assist systems at its November 17, 2000 meeting. A device called the intra-aortic balloon pump (IABP) is one of the most common types of ventricular assist systems. A balloon catheter is placed 
                        ( print page 22654)
                        into the patient's descending thoracic aorta, and inflates and deflates with each heartbeat. This device is timed with the patient's own heart rhythm, and inflates and circulates blood to the heart and other organs. This allows the heart to rest and recover. The IABP may be used preoperatively, intraoperatively, or postoperatively. It supports the patient from a few hours to several days. Code 37.64 (Removal of heart assist system) already exists, and it is considered by the GROUPER to be an operative procedure. However, the nonoperative removal of a heart assist system can be done at the patient's bedside, is noninvasive, and requires no anesthesia. Therefore, the Committee created code 97.44 (Nonoperative removal of heart assist system) for use with discharges beginning on or after October 1, 2001. In the past, we have assigned new ICD-9-CM codes to the same DRG to which the predecessor code was assigned. If this practice were to be followed, we would have proposed that code 97.44 be assigned to MDC 5, DRGs 478 (Other Vascular Procedures with CC) and 479 (Other Vascular Procedures without CC). After hospital charge data became available, we would have considered moving it to other DRGs. However, in accordance with section 533(a) of Public Law 106-554, which requires a more expeditious technique of recognizing new medical services or technology for the hospital inpatient prospective payment system, we will reconsider this longstanding practice when possible. Therefore, as code 97.44 was designed to capture heart assist system removal that is clearly nonoperative, we are not proposing to designate 97.44 as a code which the GROUPER recognizes as a procedure. This assignment can be found in Table 6B, New Procedure Codes in the addendum to this proposed rule. Therefore, these cases will be assigned by the GROUPER to a medical DRG based on the principal diagnosis, or to a surgical DRG if a surgical procedure recognized by the GROUPER is performed. 3. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Refusions We have received questions from correspondents regarding the appropriateness of the spinal fusion DRGs: DRG 496 (Combined Anterior/Posterior Spinal Fusion); DRG 497 (Spinal Fusion with CC); and DRG 498 (Spinal Fusion without CC). Several correspondents expressed concern about the inclusion of all refusions of the spine into one procedure code, 81.09 (Refusion of spine, any level or technique). The correspondents pointed out that because all refusions using any technique or level are in this one code, all of these cases are assigned to DRG 497 and DRG 498. They also pointed out that fusion cases involving both an anterior and posterior technique are assigned to DRG 496. Although cases with the refusion code that involve anterior and posterior techniques would appear to be more appropriately assigned to DRG 496, this is not the case. We recognized this limitation in the refusion codes and further acknowledged that this limitation in the ICD-9-CM coding system creates DRG problems by preventing the assignment to DRG 496 even when both anterior and posterior techniques are used for refusion cases. Therefore, we referred the issue to the ICD-9-CM Coordination and Maintenance Committee and requested the Committee to consider code revisions for the refusions of the spine during its year 2000 public meetings. After its deliberations, the Committee approved a series of new procedure codes for refusion of the spine that could lead to improvements within DRGs 497 and 498. These new codes, listed below, go into effect on October 1, 2001. 81.30 Refusion of spine, not otherwise specified 81.31 Refusion of atlas-axis spine 81.32 Refusion of other cervical spine, anterior technique 81.33 Refusion of other cervical spine, posterior technique 81.34 Refusion of dorsal and dorsolumbar spine, anterior technique 81.35 Refusion of dorsal and dorsolumbar spine, posterior technique 81.36 Refusion of lumbar and lumbosacral spine, anterior technique 81.37 Refusion of lumbar and lumbosacral spine, lateral transverse process technique 81.38 Refusion of lumbar and lumbosacral spine, posterior technique 81.39 Refusion of spine, not elsewhere classified As previously stated, all refusions of the spine and corrections of the pseudarthrosis of the spine are assigned to code 81.09. Code 81.09, which is always assigned to DRG 497 or DRG 498, includes refusions at any level of the spine using any technique. With the creation of the new procedure codes listed above, it will be possible to determine the level of the spine at which the refusion is performed, as well as the technique used, and assign the case to a more appropriate DRG. These new procedure codes should greatly improve our ability to determine the level and technique used in the refusion. In the past, we have assigned new ICD-9-CM codes to the same DRG to which the predecessor code was assigned. If this practice were followed, these new codes would have been assigned to DRG 497 and 498 as they are currently. After data became available, we would have considered moving them to other DRGs. However, in accordance with section 533(a) of Public Law 106-554, which requires more expeditious methods of recognizing new medical services or technology under the inpatient hospital prospective payment system, we will reconsider this longstanding practice when possible. Since the new codes clearly allow us to identify cases where the technique was either anterior or posterior and these cases are clinically similar and, therefore, should be handled in the same fashion, we are proposing to immediately assign these cases on the same basis as the fusion codes (81.00 through 81.09). We would not wait for actual claims data before making this change. These proposed assignments are reflected in Chart 6 and also can be found in Table 6B, in section V. of the Addendum to this proposed rule. b. Fusion of Cervical Spine We have received an additional inquiry concerning the spinal DRGs that focused on fusions of the cervical spine. The inquirer stated that there was a significant difference between inpatients who undergo anterior cervical spinal fusion and other types of spinal fusion in regard to treatment, recovery time, costs, and risk of complications. Anterior cervical spinal fusions are assigned to procedure code 81.02, Other cervical fusion, anterior technique. The inquirer pointed out that anterior cervical fusions differ significantly from anterior techniques at other levels since the anatomic approach is far less invasive. Thoracic anterior techniques require working around the cardiac and respiratory systems in the chest cavity, while lumbar anterior working around bowel and digestive system and the abdominal muscles. The inquirer recommended that code 81.02 be removed from DRGs 497 and 498 and grouped separately. We analyzed claims data from 100 percent of the FY 2000 MedPAR file containing hospital bills received through May 31, 2000, and confirmed 
                        ( print page 22655)
                        that charges are lower for fusions of the cervical spine than fusions of the thoracic and lumbar spine. This was true for both anterior and posterior cervical fusions of the spine. Our medical consultants agree that the data and their clinical analysis support the creation of new DRGs for cervical fusions of the spine. Therefore, we are proposing to remove procedure codes 81.02 and 81.03 from the spinal fusion DRGs (currently, DRGs 497 and 498) and assign them to new DRGs for cervical spinal fusion with and without CC. We are proposing to make four groupings for fusion DRGs. We believe that the net effect of this proposal would be an increase in the weights for DRGs 497 and 498, since the lower charges for the cervical fusions would be removed. The average standardized charge for all spinal fusions with CCs was $26,957. For all spinal fusions without CCs, the average charge was $16,492. The table below also shows average standardized charges for these types of cases before and after the proposed revisions. Proposed revised spinal fusion DRGs
Average charge before proposed revisions
Average charge after revisionsDRG 497 Spinal Fusion Except Cervical with CC
$26,957
$36,821DRG 498 Spinal Fusion Except Cervical without CC
17,492
26,297DRG 519 Cervical Spinal Fusion with CC

26,957DRG 520 Cervical Spinal Fusion without CC

16,492
 Based on the proposed groupings, we would create two new DRGs: DRG 519 (Cervical Spinal Fusion with CC); and DRG 520 (Cervical Spinal Fusion without CC). The procedure codes that would be included in the proposed DRGs 519 and 520 are reflected in Chart 6 below. We are also proposing to add the new ICD-9-CM procedure codes for refusion of the cervical spine (81.32 and 81.33) to the new cervical spine fusion DRGs because they are clinically similar. We are proposing to retitle DRG 497 “Spinal Fusion Except Cervical with CC” and DRG 498 “Spinal Fusion Except Cervical without CC.” The retitled DRGs 497 and 498 would retain fusion codes 81.00, 81.01, and 81.04 through 81.08 and include the proposed new refusion codes 81.30, 81.31, and 81.34 through 81.39, as reflected in Chart 6 below. c. Posterior Spinal Fusion We received other correspondence regarding the current DRG assignment for code 81.07, Lumbar and lumbosacral fusion, lateral transverse process technique. The correspondent stated that physicians consider code 81.07 to be a posterior procedure. The patient is placed prone on the operating table and the spine is exposed through a vertical midline incision. The correspondent pointed out that code 81.07 is not classified as a posterior procedure within DRG 496 (Combined Anterior/Posterior Spinal Fusion). Therefore, when 81.07 is reported with one of the anterior techniques fusion codes, it is not assigned to DRG 496. The correspondent recommended that code 81.07 be added to the list of posterior spinal fusion codes for use in determining assignment to DRG 496. We have consulted with our clinical advisors and they agree that this addition should be made. Since we are proposing to handle the new refusion codes in the same manner as the fusion codes, we also are proposing to assign DRG 496 when 81.37 is used with one of the anterior technique fusion or refusion codes. This would be similar to the manner in which code 81.07 is classified. For assignment to DRG 496, we would consider codes 81.01, 81.04, 81.06, 81.32, 81.34, and 81.36 to be anterior techniques and codes 81.03, 81.05, 81.07, 81.08, 81.33, 81.35, and 81.38 to be posterior techniques. Chart 6.—Proposed Revised Composition of DRGS 496, 497, and 498 and Proposed Composition of Proposed DRG 519 and 520 in MDC 8
Diagnosis and procedure codes
Existing DRG 496
Proposed to be retained in or added to existing DRG 497
Proposed to be retained in or added to existing DRG 498
Included in proposed DRG 519
Included in proposed DRG 520Proposed to be assigned as anterior techniques
Proposed to be assigned as posterior techniquesPrincipal or Secondary Procedure Codes:81.00 Spinal fusion, not otherwise specified


X
X81.01 Atlas-axis fusion


X
X81.02 Other cervical fusion, anterior technique
X



X
X81.03 Other cervical fusion, posterior technique

X


X
X81.04 Lumbar and lumbosacral fusion, anterior technique
X

X
X81.05 Lumbar and lumbosacral fusion, posterior technique

X
X
X81.06 Lumbar and lumbosacral fusion, anterior technique
X

X
X81.07 Lumbar and lumbosacral fusion, lateral transverse process technique

X
X
X81.08 Lumbar and lumbosacral fusion, posterior technique

X
X
X81.30 Refusion of spine, not otherwise specified


X
X81.31 Refusion of atlas-axis spine


X
X81.32 Refusion of other cervical spine, anterior technique
X



X
X( print page 22656)81.33 Refusion of other cervical spine, posterior technique

X


X
X81.34 Refusion of dorsal and dorsolumbar spine, anterior technique
X

X
X81.35 Refusion of dorsal and dorsolumbar spine, posterior technique

X
X
X81.36 Refusion of lumbar and lumbosacral spine, anterior technique
X

X
X81.37 Refusion of lumbar and lumbosacral spine, posterior technique

X
X
X81.38 Refusion of lumbar and lumbosacral spine, posterior technique

X
X
X81.39 Refusion of spine, not elsewhere classified


X
X
 d. Spinal Surgery The California Division of Workers' Compensation notified us of a possible problem with the following spinal DRGs: DRG 496 (Combined Anterior/Posterior Spinal Fusion) DRG 497 (Spinal Fusion with CC) DRG 498 (Spinal Fusion without CC) DRG 499 (Back & Neck Procedures except Spinal Fusion with CC) DRG 500 (Back & Neck Procedures except Spinal Fusion without CC) The Division of Workers' Compensation uses the DRG categories developed by HCFA to classify types of hospital care. However, instead of using HCFA's weights for determining reimbursement for inpatient services, the Division sets a global fee for all inpatient medical services not otherwise exempted. This fee is established by multiplying the product of the DRG weight (or revised DRG weight for a small number of categories) and the health facility's composite factor by 1.20 to get the maximum amount for worker compensation admissions. The Division of Workers' Compensation has received reports that the formula it uses for reimbursing cases may be providing inadequate reimbursement. California hospitals and orthopedists have reported that certain spinal surgery DRGs (DRGs 496 through 500) may involve different types of care and/or technologies than those in use at the time these groups were formulated. Health care providers in California report “recent increased use of the new implantation devices, hardware, and instrumentation, coupled with requirements for intensive hospital services accompanying use of new procedures, has led to inadequate reimbursement in these DRGs.” As a short-term response to these concerns, the California Division of Workers' Compensation is exempting the costs of hardware and instrumentation from the global fee of the fee schedule for DRGS 496 through 500. The Division also requested that HCFA examine these DRGs for any potential problem under the Medicare reimbursement system. The ICD-9-CM coding system does not capture specific types of implantation devices, hardware, and instrumentation. Therefore, we were not able to verify the claim that these new devices have led to increased costs in specific cases. As discussed in section II.D. of this preamble, we believe that the adoption of a more detailed coding system, such as ICD-10-PCS, would supply greater amounts of detail on these items. However, in the short term, it is not possible to identify a specific problem that involves implantation devices, hardware, and instrumentation. 4. MDC 12 (Diseases and Disorders of the Male Reproductive System) At its May 11, 2000 public meeting, the ICD-9-CM Coordination and Maintenance Committee considered a request from a manufacturer to create a unique code for the procedure, Penile plethysmography with nerve stimulation, in DRG 334 (Major Male Pelvic Procedures with CC). The penile plethysmography is a test that can be performed during a radical prostatectomy procedure. During the course of the procedure, the physician places a probe within an area where the prostatic nerves are thought to be located and is able to detect minor changes in penile tumescence or detumescence. This reaction tells the physician that the nerve bundles have been located, which may aid the physician in performing a nerve-sparing radical prostatectomy procedure with precision. The nerve bundles can also be restimulated at the conclusion of the procedure, providing immediate feedback as to whether erectile function will be restored after surgery. After a presentation on the nerve identifying procedure and review of existing ICD-9-CM codes, the ICD-9-CM Coordination and Maintenance Committee determined that the existing code 89.58 (Plethysmogram) adequately describes this test. Radical prostatectomies for patients with cancer of the prostate are grouped in either DRG 334 (Major Male Pelvic Procedures with CC) or DRG 335 (Major Male Pelvic Procedures without CC). We have received a request from a manufacturer of a nerve-identifying device to assign cases containing code 89.58 into DRG 334 only, not into DRG 335, resulting in higher payments to hospitals. During FY 2001, DRG 334 had a relative weight of 1.5591, and DRG 335 had a relative weight of 1.1697. The manufacturer requested that we designate code 89.58 as an operating room procedure code that would be recognized by the GROUPER software, and make that code applicable only to DRG 334. The manufacturer believed that this would serve to take any cases of nerve sparing out of the lower paying DRG 335, and would make the technology more attractive to hospitals. As paired DRGs 334 and 335 are currently structured, they differ only in whether or not a secondary diagnosis identified as a CC is recorded. Using 100 percent of the FY 2000 MedPAR file which contains hospital 
                        ( print page 22657)
                        bills for FY 2000 through May 31, 2000, we examined those cases in DRG 334 to which the procedure code for prostatectomy was assigned. Of the total 7,241 cases in DRG 334 identified, 5,611 of these cases contained procedure code 60.5 (Radical prostatectomy). Only three of the prostatectomy cases included code 89.58. There is not a sufficient number of cases on which to base an assessment of the payment for this procedure. Therefore, we are not proposing to modify the assignment of code 89.58. 5. MDC 15 (Newborns and Other Neonates With Conditions Originating in the Perinatal Period) DRG 390 (Neonate with Other Significant Problems) contains newborn or neonate cases with other significant problems, not assigned to DRGs 385 through 389, DRG 391, or DRG 469. To be assigned to DRG 389 (Full Term Neonate with Major Problems), the neonate must have one of the principal or secondary diagnosis listed under this DRG. A neonate is assigned to DRG 390 when the neonate has a principal or secondary diagnosis of newborn or neonate with other significant problems that are not assigned to DRG 385 through 389, 391, or 469. We have received correspondence suggesting a number of changes to be made to DRGs 398 and 391. These changes involve removing two codes from DRG 389 and adding 17 codes to DRG 391, as described below. a. DRG 389 (Full Term Neonate With Major Problems) The correspondent suggested removing the following codes from DRG 389 and assigning them to DRG 390: 773.0 Hemolytic disease due to RH isoimmunization 773.1 Hemolytic disease due to ABO isoimmunization The correspondent stated that hemolytic disease due to RH isoimmunization or due to ABO isoimmunization should not be considered a major problem. The correspondent recommended that these two conditions be classified as significant problems instead and thus assigned to DRG 390. Our medical consultants sought additional advice from the National Association of Children's Hospitals and Related Institutions (NACHRI). (HCFA contracts with the 3M Health Information Systems to maintain the DRG system. The medical experts at 3M evaluate proposed DRG changes from a clinical perspective. These medical consultants assist HCFA in evaluating alternative proposals.) NACHRI and our medical consultants agree that it is appropriate to remove codes 773.0 and 773.1 from DRG 389. Therefore, we are proposing to remove 773.0 and 773.1 from DRG 389 so that neonates with these conditions are assigned to DRG 390. b. DRG 391 (Normal Newborn) We also have received correspondence with recommendations for changes to DRG 391. The correspondent pointed out that the following secondary codes currently lead to the assignment of the neonate to DRG 390 (Neonate with Other Significant Problems). The correspondent believed that the conditions described by these codes should not cause the neonate to be classified under DRG 390 when reported as a secondary diagnosis. The correspondent recommended that these conditions be listed under DRG 391 (Normal Newborn). 478.1 Other diseases of nasal cavity and sinuses 520.6 Disturbances in tooth eruption 623.8 Other specified noninflammatory disorders of vagina 709.00 Dyschroma, unspecified 709.01 Vitiglio 709.09 Dyschromia, Other 744.1 Accesory auricle 754.61 Congenital pes planus 757.33 Congenital pigmentary anomalies of skin 757.39 Other specified anomaly of skin, Other 764.08 “Light for dates” without mention of fetal malnutrition, 2,000-2,499 grams 764.98 Fetal growth retardation, unspecified, 2,000-2,499 grams 772.6 Cutaneous hemorrhage 794.15 Abnormal and auditory function studies 796.4 Other abnormal clinical findings V20.2 Routine infant or child health check V72.1 Examination of ears and hearing Our medical consultants also sought the advice of NACHRI on this recommendation. NACHRI reviewed the list of codes and agreed that none of these conditions should be considered to be a significant problem for a neonate. NACHRI concurred that neonates with these secondary diagnoses should be classified as normal newborns. Therefore, we are proposing to add the codes listed above to DRG 391 and not classify them to DRG 390 when reported as a secondary diagnosis. c. Medicare Code Editor Changes The Medicare Code Editor (MCE) is a front-end software program that detects and reports errors in the coding of claims data. The age conflict edit detects inconsistencies between a patient's age and any diagnosis on the patient's record. A subset of diagnoses is considered valid only for patients over the age of 14 years. These diagnoses are identified as “adult” diagnoses and range in age from 15 through 124 years. Therefore, any codes included on the Newborn Diagnoses edit are valid only for patients under age 14. It has come to our attention that cases including the ICD-9-CM code 770.7, Chronic respiratory disease arising in the perinatal period, are being rejected. However, a condition such as bronchopulmonary dysplasia always originates in the perinatal period, so regardless of the patient's age, this condition is always coded as 770.7. The age at which the diagnosis was established or the age at continuing treatment does not affect the assignment of code 770.7. Because correct coding is causing these claims to be rejected, we are proposing to remove code 770.7 from the Newborn Diagnoses edit in the MCE, as well as remove it from DRG 387 (Prematurity with Major Problems) and DRG 389 (Full Term Neonate with Major Problems). Clinical conditions in code 770.7, such as pulmonary fibrosis, would group to DRG 92 (Interstitial Lung Disease with CC) and DRG 93 (Interstitial Lung Disease without CC). Therefore, we are proposing the addition of code 770.7 to DRGs 92 and 93, as they are most similar clinically. We will monitor these cases in upcoming MedPAR data to ascertain that the cases consume similar resources. 6. MDC 20 (Alcohol/Drug Use and Alcohol/Drug-Induced Organic Mental Disorders) DRG 434 (Alcohol/Drug Abuse or Dependency, Detoxification or Other Symptomatic Treatment with CC is assigned when the patient has a principal diagnosis of alcohol or drug abuse or dependence along with a secondary diagnosis classified as a CC. If these patients do not have a CC, they are assigned to DRG 435 (Alcohol/Drug Abuse or Dependency, detoxification or Other Symptomatic Treatment without CC). When the patients receive rehabilitation and detoxification therapy during the stay, they are assigned to DRG 437 (Alcohol/Drug Dependence, Combined Rehabilitation and Detoxification Therapy). If the patients receive only rehabilitation therapy, they are assigned to DRG 436 (Alcohol/Drug Dependence with Rehabilitation Therapy). 
                        ( print page 22658) We have received inquiries as to why the relative weight for DRG 437, which includes both rehabilitation and detoxification (for FY 2001, the relative weight is .6606, with a geometric mean length of stay of 7.5) is lower than the FY 2001 relative weight for DRG 434, which includes only detoxification (.7256, with a geometric mean length of stay of 3.9). Likewise, the FY 2001 relative weight for DRG 436, which includes only rehabilitation (.7433), is higher than the FY 2001 relative weight for DRG 437, which includes combined rehabilitation and detoxification therapy (.6606). The inquirers indicated that those patients receiving the combination therapy would be expected to have a longer length of stay, require more services, and, therefore, be more costly to treat. We analyzed data from 100 percent of the FY 2000 MedPAR file which contains hospital bills received through May 31, 2000, and did not find support for the inquirers' assertion that combination therapy is more costly to treat. The relative weights indicate that the presence of a CC in DRG 434 leads to a significantly higher weight than is found in DRG 435, which does not have a CC. Therefore, we analyzed the alcohol/drug DRGs and focused on eliminating the distinction between rehabilitation and rehabilitation with detoxification and assessing the impact of CCs. We combined data on DRGs 436 and 437 and then subdivided the data based on the presence or absence of a CC. The following table contains the results of the analysis. Average Charges for Cases—With and Without CCs
DRGs
With CC
Without CCCount
Charge
Length of stay
Count
Charge
Length of stayDetoxification Cases—DRG 434 and DRG 435
3,298
$8,548
5.0
9,689
$5,111
4.1All Rehabilitation Cases—DRG 436 and DRG 437
3,298
8,117
10.1
4,473
7,407
9.6
 We found that, for both the detoxification and rehabilitation DRGs, the with-CC group has higher charges than the without-CC group. However, the with-CC groups still contain the anomaly that the detoxification DRG 434 has a slightly higher average charge than the combined rehabilitation DRGs 436 and 437. It appears that any significant medical problems as indicated by the presence of a CC dominate the cost incurred by hospitals for treating alcohol and drug abuse patients. For the without-CC groups, the detoxification DRG 435 has substantially lower average charges than the combined rehabilitation DRGs 436 and 437. Because the average charges of the with-CC for both the detoxification DRG 434 and combined rehabilitation DRGs 436 and 437 have similar average charges, we are proposing to combine these two groups. Based on the results of our analysis, we are proposing to restructure MDC 20 as follows. We first identified those cases with a principal diagnosis within MDC 20 where the patient left against medical advice. These cases are found in DRG 433 (Alcohol/Drug Abuse or Dependence, Left Against Medical Advice (AMA)). We next identified all remaining cases with a principal diagnosis within MDC 20 where there was a CC. We assigned these cases to a proposed new DRG, Alcohol/Drug Abuse or Dependence with CC). The remaining cases (without CC and did not leave against medical advice) were then divided into two proposed new DRGs based on whether or not the patient received rehabilitation (Alcohol/Drug Abuse or Dependence without CC, with Rehabilitation Therapy; and Alcohol/Drug Abuse or Dependence without CC, without Rehabilitation Therapy). The following table illustrates the number of patients and average charges for each of the four proposed DRGs. Frequencies and Average Charges for New DRGs
DRG
Group title
Number of cases
Average charges433
Alcohol/Drug Abuse or Dependence, Left Against Medical Advice
3,509
$3,855521
Alcohol/Drug Abuse or Dependence with CC
18,235
8,470522
Alcohol/Drug Abuse or Dependence without CC, with Rehabilitation Therapy
4,473
7,407523
Alcohol/Drug Abuse or Dependence without CC, without Rehabilitation Therapy
9,689
5,111
 This table illustrates that groups based first on the presence of CC and then on whether or not the patient receives rehabilitation therapy provide a much better explanation of differences in charges. Therefore, we are proposing to retain DRG 433, make DRGs 434 through 437 invalid, and create new DRGs 521, 522, and 523 to include the diagnosis and procedure codes reflected in Chart 7 below. Chart 7.—Proposed Restructure of MDC 20
[Alcohol/drug use and alcohol/drug-induced organic mental disorders]
Diagnosis and procedure code
Included in existing DRG 433
Included in proposed DRG 521
Included in proposed DRG 522
Included in proposed DRG 523Principal diagnosis:All principal diagnosis within existing MDC 20 involving cases in which patients left against medical advice (AMA)
X( print page 22659)All principal diagnoses within existing MDC 20 where there is a CC and where patient did not leave against medical advice (AMA)

XAll principal diagnoses within existing MDC 20 without CC and where patient did not leave against medical advice (AMA)


XAll principal diagnoses in existing MDC 20 involving cases where patients did not leave against medical advice (AMA)



XProcedure Codes:94.61 Alcohol rehabilitation


X94.63 Alcohol rehabilitation and detoxification


X94.64 Drug rehabilitation


X94.66 Drug rehabilitation and detoxification


X94.67 Combined alcohol and drug rehabilitation


X94.69 Combined alcohol and drug rehabilitation and detoxification


X
 7. MDC 25 (Human Immunodeficiency Virus Infections) Effective October 1, 2000, ICD-9-CM diagnosis codes 783.2 (Abnormal loss of weight) and 783.4 (Lack of expected normal physiological development) were made invalid (65 FR 47171). These two old diagnosis codes were expanded to five digits and the following new diagnosis codes were created: 783.21 Loss of weight 783.22 Underweight 783.40 Unspecified lack of normal physiological development 783.41 Failure to thrive 783.42 Delayed milestones 783.43 Short stature These six revised codes were created in response to an industry request. Specifically, code 783.2 did not differentiate between whether the patient had lost weight recently or whether the patient was underweight. Code 783.4 was expanded to capture concepts such as failure to thrive, delayed milestones, and short stature. None of these concepts were captured in the old codes. We listed these new codes in the August 1, 2000 final rule on the hospital inpatient prospective payment system in Table 6A—New Diagnosis Codes (65 FR 47169). At the time the final rule was published, all of these codes were assigned to DRGs 296 through 298. After the final rule was published, we received an inquiry as to why these new diagnosis codes were not included in MDC 25 as human immunodeficiency virus (HIV)-related conditions. The inquirer pointed out that the predecessor codes (783.2 and 783.4) were included in MDC 25 as HIV-related conditions and suggested that the new codes be added to MDC 25. These cases will be assigned to other MDCs if the patient does not have HIV. We agree that the expanded codes should have been placed in the MDC 25 as HIV-related conditions. The omission was an oversight. Therefore, we are proposing to add diagnosis codes 783.21, 783.22, 783.40, 783.41, 783.42, and 783.43 as HIV-related conditions within MDC 25. When these six revised codes are reported with code 042 HIV, the patient will be classified within MDC 25. 8. Surgical Hierarchies Some inpatient stays entail multiple surgical procedures, each one of which, occurring by itself, could result in assignment of the case to a different DRG within the MDC to which the principal diagnosis is assigned. Therefore, it is necessary to have a decision rule by which these cases are assigned to a single DRG. The surgical hierarchy, an ordering of surgical classes from resource intensive most least, performs that function. Its application ensures that cases involving multiple surgical procedures are assigned to the DRG associated with the most resource-intensive surgical class. Because the relative resource intensity of surgical classes can shift as a function of DRG reclassification and recalibration, we reviewed the surgical hierarchy of each MDC, as we have for previous reclassifications, to determine if the ordering of classes coincided with the intensity of resource utilization, as measured by the same billing data used to compute the DRG relative weights. A surgical class can be composed of one or more DRGs. For example, in MDC 11, the surgical class “kidney transplant” consists of a single DRG (DRG 302) and the class “kidney, ureter and major bladder procedures” consists of three DRGs (DRGs 303, 304, and 305). Consequently, in many cases, the surgical hierarchy has an impact on more than one DRG. The methodology for determining the most resource-intensive surgical class involves weighting each DRG for frequency to determine the average resources for each surgical class. For example, assume surgical class A includes DRGs 1 and 2 and surgical class B includes DRGs 3, 4, and 5. Assume also that the average charge of DRG 1 is higher than that of DRG 3, but the average charges of DRGs 4 and 5 are higher than the average charge of DRG 2. To determine whether surgical class A should be higher or lower than surgical class B in the surgical hierarchy, we would weight the average charge of each DRG by frequency (that is, by the number of cases in the DRG) to determine average resource consumption for the surgical class. The surgical classes would then be ordered from the class with the highest average resource utilization to that with the lowest, with the exception of “other OR procedures” as discussed below. This methodology may occasionally result in a case involving multiple procedures being assigned to the lower-weighted DRG (in the highest, most resource-intensive surgical class) of the available alternatives. However, given that the logic underlying the surgical hierarchy provides that the GROUPER searches for the procedure in the most resource-intensive surgical class, this result is unavoidable. We note that, notwithstanding the foregoing discussion, there are a few instances when a surgical class with a lower average relative weight is ordered above a surgical class with a higher average relative weight. For example, the “other OR procedures” surgical class is uniformly ordered last in the surgical hierarchy of each MDC in which it occurs, regardless of the fact that the relative weight for the DRG or 
                        ( print page 22660)
                        DRGs in that surgical class may be higher than that for other surgical classes in the MDC. The “other OR procedures” class is a group of procedures that are least likely to be related to the diagnoses in the MDC but are occasionally performed on patients with these diagnoses. Therefore, these procedures should only be considered if no other procedure more closely related to the diagnoses in the MDC has been performed. A second example occurs when the difference between the average weights for two surgical classes is very small. We have found that small differences generally do not warrant reordering of the hierarchy since, by virtue of the hierarchy change, the relative weights are likely to shift such that the higher-ordered surgical class has a lower average weight than the class ordered below it. Based on the preliminary recalibration of the DRGs, we are proposing to modify the surgical hierarchy as set forth below. As we stated in the September 1, 1989 final rule (54 FR 36457), we are unable to test the effects of proposed revisions to the surgical hierarchy and to reflect these changes in the proposed relative weights due to the unavailability of the revised GROUPER software at the time the proposed rule is prepared. Rather, we simulate most major classification changes to approximate the placement of cases under the proposed reclassification and then determine the average charge for each DRG. These average charges then serve as our best estimate of relative resource use for each surgical class. We test the proposed surgical hierarchy changes after the revised GROUPER is received and reflect the final changes in the DRG relative weights in the final rule. Further, as discussed in section II.C. of this preamble, we anticipate that the final recalibrated weights will be somewhat different from those proposed, because they will be based on more complete data. Consequently, further revision of the hierarchy, using the above principles, may be necessary in the final rule. At this time, we are proposing to revise the surgical hierarchy for the pre-MDC DRGs, MDC 5 (Diseases and Disorders of the Circulatory System), MDC 8 (Diseases and Disorders of the Musculoskeletal System & Connective Tissue) and MDC 20 (Alcohol/Drug Use & Alcohol/Drug Induced Organic Mental Disorders), as these are proposed to be revised under sections II.B.2., II.B.3., and II.B.6. of this preamble, as follows: In the pre-MDC DRGs, we are proposing to reorder Lung Transplant (DRG 495) above Bone Marrow Transplant (DRG 481). We are also proposing to reorder Simultaneous Pancreas/Kidney Transplant (DRG 512) and Pancreas Transplant (DRG 513) above Lung Transplant (DRG 495).
                    In MDC 5, we are proposing to reorder Cardiac Defibrillator Implants (DRGs 514 and 515) above Other Cardiothoracic Procedures (DRG 108). We are also proposing to reorder Percutaneous Cardiovascular Procedures (DRGs 516, 517, and 518) above Other Vascular Procedures (DRGs 478 and 479).
                    In MDC 8, we are proposing to reorder Cervical Spinal Fusion (DRGs 519 and 520) above Back & Neck Procedures Except Spinal Fusion (DRGs 499 and 500).
                    In MDC 20, we are proposing to order as follows: Alcohol/Drug Abuse or Dependence, Left AMA (DRG 433) above Alcohol/Drug Abuse or Dependence With CC (DRG 521); Alcohol/Drug Abuse or Dependence With CC (DRG 521) above Alcohol/Drug Abuse or Dependence With Rehabilitation Therapy Without CC (DRG 522); and Alcohol/Drug Abuse or Dependence With Rehabilitation Therapy Without CC (DRG 522) above Alcohol/Drug Abuse or Dependence Without Rehabilitation Therapy Without CC (DRG 523). 9. Refinement of Complications and Comorbidities (CC) List In the September 1, 1987 final notice (52 FR 33143) concerning changes to the DRG classification system, we modified the GROUPER logic so that certain diagnoses included on the standard list of CCs would not be considered a valid CC in combination with a particular principal diagnosis. Thus, we created the CC Exclusions List. We made these changes for the following reasons: (1) To preclude coding of CCs for closely related conditions; (2) to preclude duplicative coding or inconsistent coding from being treated as CCs; and (3) to ensure that cases are appropriately classified between the complicated and uncomplicated DRGs in a pair. We developed this standard list of diagnoses using physician panels to include those diagnoses that, when present as a secondary condition, would be considered a substantial complication or comorbidity. In previous years, we have made changes to the standard list of CCs, either by adding new CCs or deleting CCs already on the list. At this time, we do not propose to delete any of the diagnosis codes on the CC list. In the May 19, 1987 proposed notice (52 FR 18877) concerning changes to the DRG classification system, we explained that the excluded secondary diagnoses were established using the following five principles: Chronic and acute manifestations of the same condition should not be considered CCs for one another (as subsequently corrected in the September 1, 1987 final notice (52 FR 33154)).
                    Specific and nonspecific (that is, not otherwise specified (NOS)) diagnosis codes for a condition should not be considered CCs for one another.
                    Conditions that may not coexist, such as partial/total, unilateral/bilateral, obstructed/unobstructed, and benign/malignant, should not be considered CCs for one another.
                    The same condition in anatomically proximal sites should not be considered CCs for one another.
                    Closely related conditions should not be considered CCs for one another. The creation of the CC Exclusions List was a major project involving hundreds of codes. The FY 1988 revisions were intended only as a first step toward refinement of the CC list in that the criteria used for eliminating certain diagnoses from consideration as CCs were intended to identify only the most obvious diagnoses that should not be considered complications or comorbidities of another diagnosis. For that reason, and in light of comments and questions on the CC list, we have continued to review the remaining CCs to identify additional exclusions and to remove diagnoses from the master list that have been shown not to meet the definition of a CC. (See the September 30, 1988 final rule (53 FR 38485) for the revision made for the discharges occurring in FY 1989; the September 1, 1989 final rule (54 FR 36552) for the FY 1990 revision; the September 4, 1990 final rule (55 FR 36126) for the FY 1991 revision; the August 30, 1991 final rule (56 FR 43209) for the FY 1992 revision; the September 1, 1992 final rule (57 FR 39753) for the FY 1993 revision; the September 1, 1993 final rule (58 FR 46278) for the FY 1994 revisions; the September 1, 1994 final rule (59 FR 45334) for the FY 1995 revisions; the September 1, 1995 final rule (60 FR 45782) for the FY 1996 revisions; the August 30, 1996 final rule (61 FR 46171) for the FY 1997 revisions; the August 29, 1997 final rule (62 FR 45966) for the FY 1998 revisions; the July 31, 1998 final rule (63 FR 40954) for the FY 1999 revisions, and the August 1, 2000 final rule (65 FR 47064) for the FY 2001 revisions. In the July 30, 1999 final rule (64 FR 41490) we did not modify the CC Exclusions List for FY 2000 because we 
                        ( print page 22661)
                        did not make any changes to the ICD-9-CM codes for FY 2000. We are proposing a limited revision of the CC Exclusions List to take into account the changes that will be made in the ICD-9-CM diagnosis coding system effective October 1, 2001. (See section II.B.11. below, for a discussion of ICD-9-CM changes.) These proposed changes are being made in accordance with the principles established when we created the CC Exclusions List in 1987. Tables 6F and 6G in section V. of the Addendum to this proposed rule contain the proposed revisions to the CC Exclusions List that would be effective for discharges occurring on or after October 1, 2001. Each table shows the principal diagnoses with proposed changes to the excluded CCs. Each of these principal diagnoses is shown with an asterisk, and the additions or deletions to the CC Exclusions List are provided in an indented column immediately following the affected principal diagnosis. CCs that are added to the list are in Table 6G—Additions to the CC Exclusions List. Beginning with discharges on or after October 1, 2001, the indented diagnoses will not be recognized by the GROUPER as valid CCs for the asterisked principal diagnosis. CCs that are deleted from the list are in Table 6H—Deletions from the CC Exclusions List. Beginning with discharges on or after October 1, 2001, the indented diagnoses will be recognized by the GROUPER as valid CCs for the asterisked principal diagnosis. Copies of the original CC Exclusions List applicable to FY 1988 can be obtained from the National Technical Information Service (NTIS) of the Department of Commerce. It is available in hard copy for $133.00 plus shipping and handling. A request for the FY 1988 CC Exclusions List (which should include the identification accession number (PB) 88-133970) should be made to the following address: National Technical Information Service, United States Department of Commerce, 5285 Port Royal Road, Springfield, VA 22161; or by calling (800) 553-6847. Users should be aware of the fact that all revisions to the CC Exclusions List (FYs 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998, and 1999) and those in Tables 6F and 6G of this document must be incorporated into the list purchased from NTIS in order to obtain the CC Exclusions List applicable for discharges occurring on or after October 1, 2001. (Note: There was no CC Exclusions List in FY 2000 because we did not make changes to the ICD-9-CM codes for FY 2000.) Alternatively, the complete documentation of the GROUPER logic, including the current CC Exclusions List, is available from 3M/Health Information Systems (HIS), which, under contract with HCFA, is responsible for updating and maintaining the GROUPER program. The current DRG Definitions Manual, Version 18.0, is available for $225.00, which includes $15.00 for shipping and handling. Version 19.0 of this manual, which includes the final FY 2002 DRG changes, will be available in October 2001 for $225.00. These manuals may be obtained by writing 3M/HIS at the following address: 100 Barnes Road, Wallingford, CT 06492; or by calling (203) 949-0303. Please specify the revision or revisions requested. 10. Review of Procedure Codes in DRGs 468, 476, and 477 Each year, we review cases assigned to DRG 468 (Extensive OR Procedure Unrelated to Principal Diagnosis), DRG 476 (Prostatic OR Procedure Unrelated to Principal Diagnosis), and DRG 477 (Nonextensive OR Procedure Unrelated to Principal Diagnosis) to determine whether it would be appropriate to change the procedures assigned among these DRGs. DRGs 468, 476, and 477 are reserved for those cases in which none of the OR procedures performed is related to the principal diagnosis. These DRGs are intended to capture atypical cases, that is, those cases not occurring with sufficient frequency to represent a distinct, recognizable clinical group. DRG 476 is assigned to those discharges in which one or more of the following prostatic procedures are performed and are unrelated to the principal diagnosis: 60.0 Incision of prostate 60.12 Open biopsy of prostate 60.15 Biopsy of periprostatic tissue 60.18 Other diagnostic procedures on prostate and periprostatic tissue 60.21 Transurethral prostatectomy 60.29 Other transurethral prostatectomy 60.61 Local excision of lesion of prostate 60.69 Prostatectomy NEC 60.81 Incision of periprostatic tissue 60.82 Excision of periprostatic tissue 60.93 Repair of prostate 60.94 Control of (postoperative) hemorrhage of prostate 60.95 Transurethral balloon dilation of the prostatic urethra 60.99 Other operations on prostate All remaining OR procedures are assigned to DRGs 468 and 477, with DRG 477 assigned to those discharges in which the only procedures performed are nonextensive procedures that are unrelated to the principal diagnosis. The original list of the ICD-9-CM procedure codes for the procedures we consider nonextensive procedures, if performed with an unrelated principal diagnosis, was published in Table 6C in section IV. of the Addendum to the September 30, 1988 final rule (53 FR 38591). As part of the final rules published on September 4, 1990 (55 FR 36135), August 30, 1991 (56 FR 43212), September 1, 1992 (57 FR 23625), September 1, 1993 (58 FR 46279), September 1, 1994 (59 FR 45336), September 1, 1995 (60 FR 45783), August 30, 1996 (61 FR 46173), and August 29, 1997 (62 FR 45981), we moved several other procedures from DRG 468 to 477, and some procedures from DRG 477 to 468. No procedures were moved in FY 1999, as noted in the July 31, 1998 final rule (63 FR 40962); in FY 2000, as noted in the July 30, 1999 final rule (64 FR 41496); or in FY 2001, as noted in the August 1, 2000 final rule (65 FR 47064). a. Moving Procedure Codes From DRGs 468 or 477 to MDCs We annually conduct a review of procedures producing assignment to DRG 468 or DRG 477 on the basis of volume, by procedure, to see if it would be appropriate to move procedure codes out of these DRGs into one of the surgical DRGs for the MDC into which the principal diagnosis falls. The data are arrayed two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by volume of procedure codes within each MDC. Using 100 percent of the FY 2000 MedPAR file containing bills submitted through May 31, 2000 for discharges in FY 2000, we determined that the quantity of cases in DRG 477 totaled 17,153. There were 106 instances where the major operative procedure appeared only once (6.4 percent of the time), resulting in assignment to DRG 477. Using the same 100 percent sample of the FY 2000 MedPAR file, we reviewed DRG 468. There were a total of 40,429 cases, with one major operative code causing the DRG assignment 311 times (or 8 percent) and 230 instances where the major operative procedure appeared only once (or 6 percent of the time). Our medical consultants then identified those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical DRGs for the MDC in which the 
                        ( print page 22662)
                        diagnosis falls. Based on this year's review, we did not identify any necessary changes in procedures under DRG 477 and, therefore, are not proposing to move any procedures from DRG 477 to one of the surgical DRGs. However, our medical consultants have identified a number of procedure codes that should be removed from DRG 468 and put into more clinically coherent DRGs. The movement of these codes are specified in the charts below: Movement of Procedure Codes From DRG 468
Procedure code
Description
Included in DRG
Description**MDC 1—Diseases and Disorders of the Nervous System**5495
Peritoneal Incision
7
Peripheral and Cranial Nerve and Other Nervous System Procedures with CC5495
Peritoneal Incision
8
Peripheral and Cranial Nerve and Other Incision Nervous System Procedures without CC**MDC 3—Diseases and Disorders of the Ear**3821
Blood Vessel Biopsy
63
Other Ear, Nose, Mouth and Throat OR Procedure**MDC 4—Diseases and Disorders of the Respiratory System**3821
Blood Vessel Biopsy
76
Other Respiratory System OR Procedures with CC3821
Blood Vessel Biopsy
77
Other Respiratory System OR Procedures without CC3929
Vascular Shunt & Bypass NEC
76
Other Respiratory System OR Procedures with CC3929
Vascular Shunt & Bypass NEC
77
Other Respiratory System OR Procedures without CC3931
Suture of Artery
76
Other Respiratory System OR Procedures with CC3931
Suture of Artery
77
Other Respiratory System OR Procedures without CC5411
Exploratory Laparotomy
76
Other Respiratory System OR Procedures with CC5411
Exploratory Laparotomy
77
Other Respiratory System OR Procedures without CC7749
Bone Biopsy NEC
76
Other Respiratory System OR Procedures with CC7749
Bone Biopsy NEC
77
Other Respiratory System OR Procedures without CC8669
Free Skin Graft NEC
76
Other Respiratory System OR Procedures with CC8669
Free Skin Graft NEC
77
Other Respiratory System OR Procedures without CC**MDC 5—Diseases and Disorders of the Circulatory System**3402
Exploratory Thoracotomy
120
Other Circulatory System OR Procedures3403
Reopen Thoracotomy Site
120
Other Circulatory System OR Procedures3421
Transpleura Thoracoscopy
120
Other Circulatory System OR Procedures3422
Mediastinoscoy Circulatory
120
Other Circulatory System OR Procedures3426
Open Mediastinal Biopsy
120
Other Circulatory System OR Procedures436
Distal Gastrectomy
120
Other Circulatory System OR Procedures437
Partial Gastrectomy with Jejunal Anastamosis
120
Other Circulatory System OR Procedures4389
Partial Gastrectomy
120
Other Circulatory System OR Procedures4399
Total Gastrectomy
120
Other Circulatory System OR Procedures14561
Multiple Segment Small Bowel Excision
120
Other Circulatory System OR Procedures4562
Partial Small Bowel Resectomy NEC
120
Other Circulatory System OR Procedures4572
Cecectomy
120
Other Circulatory System OR Procedures4573
Right Hemicolectomy
120
Other Circulatory System OR Procedures4574
Transverse Colon Resectomy
120
Other Circulatory System OR Procedures4575
Left Hemicolectomy
120
Other Circulatory System OR Procedures4579
Partial Large Bowel Excision NEC
120
Other Circulatory System OR Procedures458
Total Intra-Abdominal Colectomy
120
Other Circulatory System OR Procedures4593
Small-to-Large Bowel NEC
120
Other Circulatory System OR Procedures4603
Large Bowel Exteriorization
120
Other Circulatory System OR Procedures4613
Permanent Colostomy
120
Other Circulatory System OR Procedures4709
Other Appendectomy
120
Other Circulatory System OR Procedures4862
Anterior Rectal Resction With Colostomy
120
Other Circulatory System OR Procedures4863
Anterior Rectal Resection NEC
120
Other Circulatory System OR Procedures4869
Rectal Resection
120
Other Circulatory System OR Procedures5012
Open Liver Biopsy
120
Other Circulatory System OR Procedures540
Abdominal Wall Incision
120
Other Circulatory System OR Procedures**MDC 6—Diseases and Disorders of the Digestive System**5122
Cholecystectomy
170
Other Digestive System OR Procedures with CC5122
Cholecystectomy
171
Other Digestive System OR Procedures without CC5123
Laparoscopic Cholecystectomy
170
Other Digestive System OR Procedures with CC5132
GB-To-Intestine Anastomy
170
Other Digestive System OR Procedures with CC5136
Choledochoenterostomy
170
Other Digestive System OR Procedures with CC( print page 22663)5136
Choledochoenterostomy
171
Other Digestive System OR Procedures without CC5137
Hepatic Duct-GI Anastomy
170
Other Digestive System OR Procedures with Anastomy CC5137
Hepatic Duct-GI Anastomy
171
Other Digestive System OR Procedures without CC5159
Bile Duct Incision NEC
170
Other Digestive System OR Procedures with CC5159
Bile Duct Incision NEC
171
Other Digestive System OR Procedures without CC**MDC 7—Diseases and Disorders of the Hepatobiliary System and Pancreas**540
Abdominal Wall Incision
201
Other Hepatobiliary and Pancreas Procedure**MDC 8—Diseases and Disorders of the Musculoskeletal System and Connective Tissue**3479
Other Chest Wall Repair
233
Other Musculoskeletal System & Connective Tissue OR Procedure with CC3479
Other Chest Wall Repair
234
Other Musculoskeletal System & Connective Tissue OR Procedure without CC**MDC 11—Diseases and Disorders of the Kidney and Urinary Tract**540
Abdominal Wall Incision
315
Other Kidney & Urinary Tract OR Procedure5451
Laparoscopic Periton Adhesiolysis
315
Other Kidney & Urinary Tract OR Procedure5459
Other Periton Adhesiolysis
315
Other Kidney & Urinary Tract OR Procedure
 b. Reassignment of Procedures Among DRGs 468, 476, and 477 We also annually review the list of ICD-9-CM procedures that, when in combination with their principal diagnosis code, result in assignment to DRGs 468, 476, and 477, to ascertain if any of those procedures should be moved from one of these DRGs to another of these DRGs based on average charges and length of stay. We look at the data for trends such as shifts in treatment practice or reporting practice that would make the resulting DRG assignment illogical. If our medical consultants were to find these shifts, we would propose moving cases to keep the DRGs clinically similar or to provide payment for the cases in a similar manner. Generally, we move only those procedures for which we have an adequate number of discharges to analyze the data. Based on our review this year, we are not proposing to move any procedures from DRG 468 to DRGs 476 or 477, from DRG 476 to DRGs 468 or 477, or from DRG 477 to DRGs 468 or 476. c. Adding Diagnosis Codes to MDCs Based on our review this year, we are not proposing to add any diagnosis codes to MDCs. 11. Changes to the ICD-9-CM Coding System As described in section II.B.1. of this preamble, the ICD-9-CM is a coding system that is used for the reporting of diagnoses and procedures performed on a patient. In September 1985, the ICD-9-CM Coordination and Maintenance Committee was formed. This is a Federal interdepartmental committee, co-chaired by the National Center for Health Statistics (NCHS) and HCFA, charged with maintaining and updating the ICD-9-CM system. The Committee is jointly responsible for approving coding changes, and developing errata, addenda, and other modifications to the ICD-9-CM to reflect newly developed procedures and technologies and newly identified diseases. The Committee is also responsible for promoting the use of Federal and non-Federal educational programs and other communication techniques with a view toward standardizing coding applications and upgrading the quality of the classification system. The NCHS has lead responsibility for the ICD-9-CM diagnosis codes included in the 
                        *Tabular List*
                         and 
                        *Alphabetic Index for Diseases,*
                         while HCFA has lead responsibility for the ICD-9-CM procedure codes included in the 
                        *Tabular List*
                         and 
                        *Alphabetic Index for Procedures.* The Committee encourages participation in the above process by health-related organizations. In this regard, the Committee holds public meetings for discussion of educational issues and proposed coding changes. These meetings provide an opportunity for representatives of recognized organizations in the coding field, such as the American Health Information Management Association (AHIMA) (formerly American Medical Record Association (AMRA)), the American Hospital Association (AHA), and various physician specialty groups as well as physicians, medical record administrators, health information management professionals, and other members of the public to contribute ideas on coding matters. After considering the opinions expressed at the public meetings and in writing, the Committee formulates recommendations, which then must be approved by the agencies. The Committee presented proposals for coding changes for implementation in FY 2002 at public meetings held on May 11, 2000 and November 17, 2000, and finalized the coding changes after consideration of comments received at the meetings and in writing by January 8, 2001. Copies of the Coordination and Maintenance Committee minutes of the 2000 meetings can be obtained from the HCFA home page at: http://www.hcfa.gov/​medicare/​icd9cm.htm. Paper copies of these minutes are no longer available and the mailing list has been discontinued. We encourage commenters to address suggestions on coding issues involving diagnosis codes to: Donna Pickett, Co-Chairperson; ICD-9-CM Coordination and Maintenance Committee; NCHS; Room 1100; 6525 Belcrest Road; Hyattsville, MD 20782. Comments may be sent by E-mail to: dfp4@cdc.gov. Questions and comments concerning the procedure codes should be addressed to: Patricia E. Brooks, Co-Chairperson; ICD-9-CM Coordination and Maintenance Committee; HCFA, Center for Health Plans and Providers, Purchasing Policy Group, Division of Acute Care; C4-07-07; 7500 Security 
                        ( print page 22664)
                        Boulevard; Baltimore, MD 21244-1850. Comments may be sent by E-mail to: pbrooks@hcfa.gov. The ICD-9-CM code changes that have been approved will become effective October 1, 2001. The new ICD-9-CM codes are listed, along with their proposed DRG classifications, in Tables 6A and 6B (New Diagnosis Codes and New Procedure Codes, respectively) in section V. of the Addendum to this proposed rule. As we stated above, the code numbers and their titles were presented for public comment at the ICD-9-CM Coordination and Maintenance Committee meetings. Both oral and written comments were considered before the codes were approved. Therefore, we are soliciting comments only on the proposed DRG classification of these new codes. Further, the Committee has approved the expansion of certain ICD-9-CM codes to require an additional digit for valid code assignment. Diagnosis codes that have been replaced by expanded codes or other codes or have been deleted are in Table 6C (Invalid Diagnosis Codes). These invalid diagnosis codes will not be recognized by the GROUPER beginning with discharges occurring on or after October 1, 2001. For codes that have been replaced by new or expanded codes, the corresponding new or expanded diagnosis codes are included in Table 6A (New Diagnosis Codes). There were no procedure codes that were replaced by expanded codes or other codes, or were deleted. Revisions to diagnosis code titles are in Table 6E (Revised Diagnosis Code Titles), which also include the proposed DRG assignments for these revised codes. Revisions to procedure code titles are in Table 6F (Revised Procedure Codes Titles). In September 2000, the Department implemented a policy of paying for inpatient hospital stays for Medicare beneficiaries participating in clinical trials (HCFA Program Memorandum AB 00-89, September 19, 2000). Hospitals were encouraged to identify the patients involved by reporting an ICD-9-CM code. This would allow the examination of data on the patients involved in clinical trials. However, there was no clear ICD-9-CM diagnosis code for patients who took part in a clinical trial. There was a code for patients receiving an examination as part of the control group for clinical trials. This control group code was V70.7 (Examination for normal comparison or control in clinical research). Hospitals were instructed to use V70.5 (Health examination of defined subpopulations), for patients participating in a clinical trial. This coding directive has created some confusion because of the title and description of the two codes. Hospitals also have requested that all clinical patients be captured under one code. They indicated that the use of one code would be especially useful because patients frequently do not know if they are part of the control group or are receiving new therapy. To help alleviate the confusion, the ICD-9-CM Coordination and Maintenance Committee revised code V70.7. Effective October 1, 2001, the new title of code V70.7 is “Examination of patient in clinical trial.” This revision will make it easier to capture data on Medicare beneficiaries who are participating in a clinical trial. 12. Other Issues a. Pancreas Transplant Effective July 1, 1999, Medicare covers whole organ pancreas transplantation if the transplantation is performed simultaneously with or after a kidney transplant (procedure codes 55.69 (Other kidney transplantation), or diagnosis code V42.0 (Organ or tissue replaced by transplant, Kidney), along with 52.80 (Pancreatic transplant, not otherwise specified), or 52.82 (Homotransplant of pancreas)). A discussion of the history of these coverage decisions and codes can be found in the August 1, 2000 final rule on the prospective payment system for FY 2001 (65 FR 47067). We discussed the appropriate DRG classification for these cases in both the July 30, 1999 final rule (64 FR 41497) and the August 1, 2000 final rule (65 FR 47067). Currently, cases can be assigned to one of two major DRGs depending on principal diagnosis. If a kidney transplant and a pancreas transplant are performed simultaneously on a patient with chronic renal failure secondary to diabetes with renal manifestations (diagnosis codes 250.40 through 250.43), the cases will be assigned to DRG 302 (Kidney Transplant). If a pancreas transplant is performed following a kidney transplant (during a different hospital admission) on a patient with chronic renal failure secondary to diabetes with renal manifestations, the case is assigned to DRG 468 (Extensive OR Procedure Unrelated to Principal Diagnosis). This is because pancreas transplant is not assigned to MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract), the MDC to which a principal diagnosis of chronic renal failure secondary to diabetes is assigned. In the August 1, 2000 final rule, we noted that we would continue to monitor these transplant cases to determine the appropriateness of establishing a new DRG. For this proposed rule, using 100 percent of the data in the FY 2000 MedPAR file (which contains hospital bills received for FY 2000 through May 31, 2000), we analyzed the cases for which procedure codes 52.80 and 52.82 were reported. (Our data showed that 15 of the cases were coded using 52.83 (Heterotransplant of pancreas), which is not a covered procedure under any circumstances.) We identified a total of 221 cases for this time period. The United Network for Organ Sharing (UNOS) reported it had identified 270 cases through September 2000. These 221 MedPAR cases were distributed over 6 DRGs, with the majority (158 cases or 72 percent) assigned to DRG 302, and 23 cases (10 percent) assigned to DRG 468. The remaining 40 cases were distributed between 4 other DRGs, with the majority (25 cases) being assigned to DRG 292 (Other Endocrine, Nutritional and Metabolic OR Procedures with CC). Four cases were assigned to DRG 483 (Tracheostomy with Principal Diagnosis except Face, Mouth and Neck Diagnoses) in the Pre-MDC grouping, which took precedence over any other DRG assignment. We arrayed the data based on the presence or absence of kidney transplant; that is, pancreas transplant codes with or without 55.69. The majority of cases (166 or 75 percent) had the combined kidney-pancreas transplant in one operative episode, with 55 (25 percent) of the cases having pancreas transplant subsequent to the kidney transplant. Differences in hospital charges were significantly higher for a pancreas transplant plus a kidney transplant ($138,809) than a pancreas transplant alone ($85,972), and both were higher than average standardized charges in DRG 302 ($64,760) or DRG 468 ($39,707), although it must be noted that these figures do reflect the resource intensive patients assigned to DRG 483. Those patients in DRG 483 had average standardized charges of $377,934. Because these categories of patients do not fit into existing DRGs from either a clinical or resource perspective, we are proposing to create two new DRGs that would reflect these patients' unique clinical profiles: DRG 512 (Simultaneous Pancreas/Kidney Transplant) and DRG 513 (Pancreas Transplants). Cases grouped to either proposed DRGs 512 or 513 must have a principal or secondary diagnosis code and procedure code or combination of 
                        ( print page 22665)
                        procedure codes as indicated in the chart below: Composition of Proposed DRGs 512 and 513
Diagnosis and procedure codes
Included in proposed DRG 512
Included in proposed DRG 513Principal or Secondary ICD-9-CM Diabetes Mellitus Code:250.00 Diabetes mellitus without mention of complication, Type II or unspecified type, not stated as uncontrolled
X
X250.01 Diabetes mellitus without mention of complication, Type I, not stated as uncontrolled
X
X250.02 Diabetes mellitus without mention of complication, Type I,
X
X250.03 Diabetes mellitus without mention of complication, Type I, uncontrolled
X
X250.10 Diabetes with ketoacidosis, Type II or Unspecified type, not stated as uncontrolled
X
X250.11 Diabetes with ketoacidosis, Type I, not stated as uncontrolled
X
X250.12 Diabetes with ketoacidosis, Type II or unspecified type, uncontrolled
X
X250.13 Diabetes with ketoacidosis, Type I, controlled
X
X250.20 Diabetes with hyperosmolarity, Type II or unspecified type, not stated as uncontrolled
X
X250.21 Diabetes with hyperosmolarity, Type I, not stated as uncontrolled
X
X250.22 Diabetes with hyperosmolarity, Type II or unspecified type, uncontrolled
X
X250.23 Diabetes with hyperosmolarity, Type I, uncontrolled
X
X250.30 Diabetes with other coma, Type II or unspecified type, not stated as uncontrolled250.31 Diabetes with other coma, Type I, not stated as uncontrolled
X
X250.32 Diabetes with other coma, Type II or unspecified type, uncontrolled
X
X250.33 Diabetes with other coma, Type I, uncontrolled
X
X250.40 Diabetes with renal manifestations, Type II or unspecified type, not stated as uncontrolled
X
X250.41 Diabetes with renal manifestations, Type I, not stated as uncontrolled
X
X250.42 Diabetes with renal manifestations, Type II unspecified type, uncontrolled
X
X250.43 Diabetes with renal manifestations, Type I, uncontrolled
X
X250.50 Diabetes with ophthalmic manifestations, Type II or unspecified type, not stated as uncontrolled
X
X250.51 Diabetes with ophthalmic manifestations, Type I, not stated as uncontrolled
X
X250.52 Diabetes with ophthalmic manifestations, Type II or unspecified type, uncontrolled
X
X250.53 Diabetes with ophthalmic manifestations, Type I, uncontrolled
X
X250.60 Diabetes with neurological manifestations, Type II or unspecified type, not stated as uncontrolled
X
X250.61 Diabetes with neurological manifestations, Type I, not stated as uncontrolled
X
X250.62 Diabetes with neurological manifestations, Type II or unspecified type, uncontrolled
X
X250.63 Diabetes with neurological manifestations, Type I uncontrolled
X
X250.70 Diabetes with peripheral circulatory disorders, Type II or unspecified type, not stated as uncontrolled
X
X250.71 Diabetes with peripheral circulatory disorders, Type I, not stated as uncontrolled
X
X250.72 Diabetes with peripheral circulatory disorders, Type II or unspecified type, uncontrolled
X
X250.73 Diabetes with peripheral circulatory disorders, Type I, uncontrolled
X
X250.80 Diabetes with other specified manifestations, Type II or unspecified type, not stated as uncontrolled
X
X250.81 Diabetes with other specified manifestations, Type I, not stated as uncontrolled
X
X250.82 Diabetes with other specified manifestations, Type II or unspecified type, uncontrolled
X
X250.83 Diabetes with other specified manifestations, Type I, uncontrolled
X
X250.90 Diabetes with unspecified complication, Type II or unspecified type, not stated as uncontrolled
X
X250.91 Diabetes with unspecified complication, Type I, not stated as uncontrolled
X
X250.92 Diabetes with unspecified complication, Type II or unspecified type, uncontrolled
X
X250.93 Diabetes with unspecified complication, Type I, uncontrolled
X
XPrincipal or Secondary Diagnosis Code:585 Chronic renal failure
X
X403.01 Hypertensive renal disease, malignant, with renal failure
X
X403.11 Hypertensive renal disease, benign, with renal failure
X
X403.91 Hypertensive renal disease, unspecified, with renal failure
X
X404.02 Hypertensive heart & renal disease, malignant, with renal failure
X
X404.03 Hypertensive heart & renal disease, malignant, with congestive heart failure and renal disease
X
X404.12 Hypertensive heart & renal disease, benign, with renal failure
X
X404.13 Hypertensive heart & renal disease, benign, with congestive heart failure and renal disease
X
X404.92 Hypertensive heart & renal disease, unspecified, with renal failure
X
X404.93 Hypertensive heart & renal disease, unspecified, with congestive heart failure and renal failure
X
XV42.0 Organ or tissue replaced by transplant, kidney
X
XV43.89 Organ or tissue replaced by other means, other (Kidney)
X
XProcedure Code:52.80 Pancreatic transplant, not otherwise specified

X52.82 Homotransplant of pancreas

XCombination Procedure Codes:52.80 Pancreatic transplant, not otherwise specified, plus55.69 Other kidney transplantation
Xor52.82 Homotransplant of pancreas plus55.69 Other kidney transplantation
X
 
 
 The logic for the proposed DRG 512 accepts the pair of diagnosis codes in any position (principal/secondary or secondary/secondary). The pair of procedure codes must be present along with the two diagnosis codes. This DRG would be placed in the Pre-MDC GROUPER logic immediately following DRG 480 (Liver Transplant). The logic for DRG 513 accepts the pair of diagnosis codes in any position (principal/secondary or secondary/secondary). Only one procedure code must be used along with the two diagnosis codes. This DRG would be placed in the Pre-MDC GROUPER logic immediately following proposed new DRG 512 (Simultaneous Pancreas/Kidney Transplant). b. Intestinal Transplantation Effective April 1, 2001, Medicare covers intestinal transplantation for the purpose of restoring intestinal function in patients with irreversible intestinal failure (Medicare Program Memorandum Transmittal No. AB-00-130, December 22, 2000). This procedure is covered only when performed for patients who have failed total parenteral nutrition (TPN) and only when performed in centers that meet approval criteria. Intestinal failure is defined as the loss of absorptive capacity of the small bowel secondary to severe primary gastrointestinal disease or surgically induced short bowel syndrome. Intestinal failure prevents oral nutrition and may be associated with both mortality and profound morbidity. If an intestinal transplantation alone is performed on a patient with an intestinal principal diagnosis, the case would be assigned to either DRG 148 (Major Small & Large Bowel Procedures With CC) or DRG 149 (Major Small & Large Bowel Procedures Without CC). If an intestinal transplantation and a liver transplantation are performed simultaneously, the case would be assigned to DRG 480 (Liver Transplant). If an intestinal transplantation and a pancreas transplantation are performed simultaneously, currently the case would be assigned to either DRG 148 or DRG 149. As we have proposed in section II.B.12.A. of this proposed rule, effective October 1, 2001, the case would be assigned to DRG 513 (Pancreas Transplant). We are proposing to make a conforming change to the regulations at § 412.2(e)(4) and § 486.302 to include intestines (and multivisceral organs) in the list of organs for which Medicare pays for the acquisition costs on a reasonable cost basis. Effective October 1, 2000, procedure code 46.97 (Transplant of intestine) was created. We have examined our Medicare claims data to determine whether it is appropriate to propose a new intestinal transplant DRG. We examined 100 percent of the data in the FY 2000 MedPAR file containing bills submitted through May 31, 2000. Therefore, we focused our examination on the previous code assignment for intestinal transplant, code 46.99 (Other operations on intestines), and facilities that are currently performing intestinal transplantation. We were able to identify only one case, with an average charge of approximately $10,738 as compared to the average standardized charges for DRGs 148 and 149, which are approximately $37,961, and $16,965, respectively. We will continue to monitor these cases to determine whether it may be appropriate in the future to establish a new DRG. C. Recalibration of DRG Weights We are proposing to use the same basic methodology for the FY 2002 recalibration as we did for FY 2001 (August 1, 2000 final rule (65 FR 47069)). That is, we would recalibrate the weights based on charge data for Medicare discharges. However, we propose to use the most current charge information available, the FY 2000 MedPAR file. (For the FY 2001 recalibration, we used the FY 1999 MedPAR file.) The MedPAR file is based on fully coded diagnostic and procedure data for all Medicare inpatient hospital bills. The proposed recalibrate DRG relative weights are constructed from FY 2000 MedPAR data (discharges occurring between October 1, 1999 and September 30, 2000), based on bills received by HCFA through December 31, 2000, from all hospitals subject to the prospective payment system and short-term acute care hospitals in waiver States. The FY 2000 MedPAR file includes data for approximately 11,008,302 Medicare discharges. The methodology used to calculate the proposed DRG relative weights from the FY 2000 MedPAR file is as follows: To the extent possible, all the claims were regrouped using the proposed DRG classification revisions discussed in section II.B. of this preamble. As noted in section II.B.8., due to the unavailability of the revised GROUPER software, we simulated most major classification changes to approximate the placement of cases under the proposed reclassification. However, there are some changes that cannot be modeled.
                    Charges were standardized to remove the effects of differences in area wage levels, indirect medical education and disproportionate share payments, and, for hospitals in Alaska and Hawaii, the applicable cost-of-living adjustment.
                    The average standardized charge per DRG was calculated by summing the standardized charges for all cases in the DRG and dividing that amount by the number of cases classified in the DRG.
                    We then eliminated statistical outliers, using the same criteria used in computing the current weights. That is, all cases that are outside of 3.0 standard deviations from the mean of the log distribution of both the charges per case and the charges per day for each DRG are eliminated.
                    The average charge for each DRG was then recomputed (excluding the statistical outliers) and divided by the national average standardized charge per case to determine the relative weight. A transfer case is counted as a fraction of a case based on the ratio of its transfer payment under the per diem payment methodology to the full DRG payment for nontransfer cases. That is, transfer cases paid under the transfer methodology equal to half of what the case would receive as a nontransfer would be counted as 0.5 of a total case.
                    We established the relative weight for heart and heart-lung, liver, and lung transplants (DRGs 103, 480, and 495) in a manner consistent with the methodology for all other DRGs except that the transplant cases that were used to establish the weights were limited to those Medicare-approved heart, heart-lung, liver, and lung transplant centers that have cases in the FY 1999 MedPAR file. (Medicare coverage for heart, heart-lung, liver, and lung transplants is limited to those facilities that have received approval from HCFA as transplant centers.)
                    Acquisition costs for kidney, heart, heart-lung, liver, lung, and pancreas transplants continue to be paid on a reasonable cost basis. Unlike other excluded costs, the acquisition costs are concentrated in specific DRGs (DRG 302 (Kidney Transplant); DRG 103 (Heart Transplant); DRG 480 (Liver Transplant); DRG 495 (Lung Transplant); and proposed new DRGs 512 (Simultaneous Pancreas/Kidney Transplant) and 513 (Pancreas Transplant). Because these costs are paid separately from the prospective payment rate, it is necessary to make an adjustment to prevent the relative weights for these DRGs from including the acquisition costs. Therefore, we subtracted the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average charge for the DRG and before eliminating statistical outliers.( print page 22667) When we recalibrated the DRG weights for previous years, we set a threshold of 10 cases as the minimum number of cases required to compute a reasonable weight. We propose to use that same case threshold in recalibrating the DRG weights for FY 2002. Using the FY 2000 MedPAR data set, there are 39 DRGs that contain fewer than 10 cases. We computed the weights for these 39 low-volume DRGs by adjusting the FY 2001 weights of these DRGs by the percentage change in the average weight of the cases in the other DRGs. The new weights are normalized by an adjustment factor (1.44813) so that the average case weight after recalibration is equal to the average case weight before recalibration. This adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the prospective payment system, and accounts for the gradual shift in cases toward higher-weighted DRGs over time. Section 1886(d)(4)(C)(iii) of the Act requires that, beginning with FY 1991, reclassification and recalibration changes be made in a manner that assures that the aggregate payments are neither greater than nor less than the aggregate payments that would have been made without the changes. Although normalization is intended to achieve this effect, equating the average case weight after recalibration to the average case weight before recalibration does not necessarily achieve budget neutrality with respect to aggregate payments to hospitals because payment to hospitals is affected by factors other than average case weight. Therefore, as we have done in past years and as discussed in section II.A.4.b. of the Addendum to this proposed rule, we are proposing to make a budget neutrality adjustment to ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act is met. D. Incorporating New Medical Services and Technologies in the Inpatient Hospital Prospective Payment System Much attention recently has focused on how well Medicare incorporates the cost of new medical services and technologies into its payment systems. Of particular concern is the adequacy of Medicare's payment systems in facilitating access to new technologies for Medicare beneficiaries. Section 533 of Public Law 106-554 directs the Secretary to develop a mechanism for ensuring adequate payment under the hospital inpatient prospective payment system for new medical services and technologies, and to report to Congress on ways to more expeditiously incorporate new services and technologies into that system. This discussion addresses the requirements of section 533 of Public Law 106-554. 1. Overview Medicare payment for an inpatient hospital discharge under the inpatient prospective payment system is determined by multiplying the relative weight associated with a particular DRG by the national average standardized amount (adjusted for other hospital characteristics such as a geographic wage index, teaching status, and treating a high percentage of low-income patients). Cases are classified into DRGs for payment under the prospective payment system based on the principal diagnosis, up to eight additional diagnoses, and up to six procedures performed during the stay, as well as age, sex, and discharge status of the patient. The diagnosis and procedure information is reported by the hospital using codes from the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM). The DRG relative weights are recalculated each year to reflect the average resources expended across all hospitals to treat patients within a particular DRG. In general, the inpatient prospective payment system makes payments for new medical services and technologies as soon as these items are payable. New items or services generally fit within existing DRGs, and hospitals using these items and services will be paid at established payment rates for the applicable DRGs. Payment rates may subsequently be adjusted through the annual process of evaluating the assignment of cases within DRGs and recalculating the relative weights associated with each DRG based on average charges. These annual changes are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. Since the prospective payment system was first implemented in October 1983, the pace of innovation in medical technology has been rapid. Generally speaking, the system appears to have accommodated these innovations without occasioning significant concerns regarding access to new technologies. In its March 2001 report to the Congress, the Medicare Payment Advisory Commission stated “the design of the inpatient PPS (prospective payment system) makes it easier to ensure an appropriate distribution of payments while accommodating technological advances” (page 44). 2. Current Practice—Coding and Payment A number of issues arise relating to present methods of incorporation of new technologies in the inpatient hospital prospective payment system. One issue is the appropriate ICD-9-CM code to be assigned to the new technology. This issue is discussed in detail below. Assuming the new technology is or can be covered by Medicare, a determination must be made concerning to which DRG should the new technology be assigned. The DRG (and the value of the relative weight associated with that DRG) to which the new technology is assigned determines the payment rate for the new technology. Under the DRG system, the condition of the patient is the primary consideration in the decision to assign a new technology to a DRG. Therefore, a new technology generally will be assigned to the same DRG as the DRG's predecessor technologies and treatment modalities. In this way, hospitals can receive payment for new technology under the inpatient hospital prospective payment system quickly. As use of the new technology diffuses among hospitals, HCFA will gradually and largely automatically recalibrate DRG payment rates based on hospital claims data to reflect increasing or decreasing costs of cases assigned to the DRG. Generally, it takes 2 years for claims data to be reflected in recalibrated DRG weights. Considering the actual costs as reflected in the claims data, HCFA may also reassign new technologies to different DRGs. However, because a new technology is often more costly initially than the predecessor technologies, the adequacy of the initial payment rate occasionally becomes an issue. At present, if payment is to be made other than by routine assignment of the new technology to an existing DRG, it is necessary to establish a new ICD-9-CM code. The lag between application for a new code and its being made effective for payment is at least a year. Because we use actual charge data from hospitals, additional costs or savings from the new technology are not reflected in the DRG weight for 2 years after a new code is effective. For example, the costs or savings attributable to any new technologies that were assigned new ICD-9-CM codes effective October 1, 1999, will be reflected in the DRG relative weights effective for discharges on or after October 1, 2001. The lag before new technology affected payment has been viewed by some observers as a useful check on payment changes, helping to ensure that 
                        ( print page 22668)
                        these changes reflect the benefit of a new technology. Hospitals would adopt and utilize the new technology, it was reasoned, with a speed and to a degree commensurate with its medical advantages. Any differences in the resource requirements between the new and existing technologies would then be reflected over time in claims data and in changes in the DRG weights. To the extent particular new technologies may have been initially given relatively low payment, the design of the system provided incentives to compensate by achieving efficiencies elsewhere. Conversely, if a particular new technology reduced costs compared to existing technologies, hospitals would reap the payment benefits until such time as the DRG weights began to reflect the lower costs. 3. Current Practice—Data Recently, HCFA provided an explicit avenue to permit more rapid payment adjustment through use of additional data. The Conference Report that accompanied the Balanced Budget Act of 1997 (Public Law 105-33) stated that “in order to ensure that Medicare beneficiaries have access to innovative new drug therapies, the conferees believe that HCFA should consider, to the extent feasible, reliable, validated data other than Medicare Provider Analysis and Review (MedPAR) data in annually recalibrating and reclassifying the DRGs” (H.R. Conf. Rep. No. 105-217, 105th Cong., 1st Sess., at 734 (1997)). The MedPAR contains records for all Medicare hospital discharges and is the source data used for DRG recalibration. Although we had never precluded the use of non-MedPAR data, we established an explicit process for the submission of such data in a manner consistent with the annual recalibration of the DRG weights. We stated in the July 30, 1999 
                        **Federal Register**
                         that, in the case of external data, a significant sample of the data should be submitted by August 1, approximately 8 months prior to the publication of the proposed rule. This would allow us to verify and test the data and make a preliminary assessment as to the feasibility of the data's use (64 FR 41499). Subsequently, a complete database must be submitted no later than December 1, approximately 4 months prior to the publication of the proposed rule. On the issue of the use of sample data, we stated in the 
                        **Federal Register**
                         that we were not establishing specific criteria regarding sample sizes or data collection methodologies prior to gaining experience that would enable us to realistically reflect the availability of external data based on actual experience. We also encouraged anyone interested in submitting such data in the future to contact us to discuss the specific data they wish to submit and whether the data may be adequate. 4. New Legislation Section 533 of Public Law 106-554 addresses the issue of how new technologies are introduced into the DRGs, and how DRG payment rates must be adapted to accommodate them. Specifically, the provision requires that the Secretary: Not later than April 1, 2001, submit a report to Congress on methods of expeditiously incorporating new medical services and technologies into the clinical coding system.
                    Not later than October 1, 2001, implement the preferred methods described in the report.
                    Effective October 1, 2001, establish a mechanism to recognize the costs of new medical services and technologies after notice and opportunity for public comment.
                    Establish criteria to identify new medical services or technologies after notice and an opportunity for public comment. 5. DRG Assignment Issues As background for discussion of how the DRGs should be changed to better accommodate new technology, this section will discuss the rationale for basing the initial DRG assignment on patient condition. The underlying assumption of the prospective payment system is that because hospitals are responsible for the delivery of care they can respond to the incentives to control costs inherent in the system. The success of any payment system that is predicated on providing incentives for cost control is almost totally dependent on the effectiveness with which the incentives are communicated. The DRGs were designed to be a management tool that is used also as the basis for prospective payments. The key distinction between a management tool and payment method is the ability of the hospital to use the information to take action in response to the incentives in the system. Thus, a management tool communicates information in a form and at a level of detail that can lead to specific actions. The effectiveness of any incentive-based payment system is enhanced if the payment method is simultaneously a management tool. Because the DRGs were developed to group clinically similar patients, an extremely important means of communication between the clinical and financial aspects of care was created. DRGs provided administrators and physicians with a meaningful basis for evaluating both the process of providing care and the associated financial impacts. Development of care pathways by DRG and profit-and-loss reports by DRG product lines became commonplace. With the adoption of these new management methods, length of stay and the use of ancillary services dropped dramatically. The DRGs not only provided a communications tool for hospital management, but they also provided an effective means for hospitals and Medicare to communicate. Instead of accountants and lawyers arguing the fine points of cost accounting, the focus of payment deliberations became the determination of a fair payment rate for patients with specific clinical problems. The vast majority of modifications to the DRGs since the inception of the Medicare inpatient hospital prospective payment system have resulted from recommendations from hospitals. The recommendations have almost always been the result of clinicians identifying specific types of patients with unique needs. A recent example of such a clinical dialogue relates to the DRGs for burns. The FY 1999 update to the DRGs included a major restructuring of the burn DRGs. This restructuring was the direct result of detailed and specific clinical recommendations provided to HCFA by burn specialists. Central to the success of the Medicare inpatient hospital prospective payment system is that DRGs have remained a clinical description of why the patient required hospitalization. We believe it would be undesirable to transform DRGs into detailed descriptions of the technology and processes used by the hospital to treat the patient. If such a transformation were to happen, the DRGs would become largely a repackaging of fee-for-service without the management and communication benefits. A fundamental assumption underlying DRGs is that the hospital has the responsibility for deciding what technology and process to employ in treating a particular type of patient. As hospitals in the aggregate make treatment decisions, these decisions are reflected in the DRG payment weights. The separation of the clinical and payment weight methodologies allows a stable clinical methodology to be maintained while the payment weights evolve in response to changing practice patterns. The packaging of all services associated with the care of a particular type of patient into a single payment amount provides the incentive for efficiency inherent in a DRG-based prospective payment system. Substantial disaggregation of the DRGs 
                        ( print page 22669)
                        into smaller units of payment, or a substantial number of cases receiving extra payments, would undermine the incentives and communication value in the DRG system. 6. Coding Issues To permit us to identify use of a new technology on hospital claims and hence to make different payments than would otherwise be applicable, we would require a code that can be used to specify when that technology is used. a. Process for Establishing New Codes The ICD-9-CM Coordination and Maintenance Committee is responsible for discussing potential changes to ICD-9-CM. This is a Federal interdepartmental committee, co-chaired by the National Center for Health Statistics (NCHS) and HCFA. The NCHS has lead responsibility for the ICD-9-CM diagnosis codes, while HCFA has lead responsibility for the ICD-9-CM procedure codes. The committee holds meetings twice a year, usually in May and November. Agendas for the discussions about procedure codes are published on HCFA's Internet website a month before the meeting. A 
                        **Federal Register**
                         notice is also published listing topics to be discussed. The meetings are open to the public and are held usually in Baltimore, Maryland. Shortly afterwards, an extensive summary of the meeting is published on HCFA's website and the public is given an additional opportunity to comment. Final comments are due by early January. A complete, current timeline is included in the Summary Report of the Committee at: www.hcfa.gov/​medicare/​icd9cm.htm. For a topic to be discussed at one of the two yearly meetings of the committee, the committee must receive a request 2 months prior to the meeting. This timeframe allows HCFA to publish the agendas in the 
                        **Federal Register**
                         notices and allows individuals and organizations to review the agenda and to determine if they wish to attend the public meetings. The timeframe is also necessary to allow the committee to research the topic and prepare a draft solution in time for the meeting. During the meetings, the committee provides a brief description of the topic (such as a new technology that may not be adequately identified by the current code) and then describes the technology or procedure through a formal presentation. Frequently, medical experts who perform the procedure make a presentation to describe the procedure and how it might be different from other procedures in the current code. Proposals are made to either continue capturing the procedure in the existing code, revise existing codes, or create a new code. The public then discusses the merits of the proposals and offers any alternate suggestions. The ICD-9-CM is updated once a year, effective October 1. This date coincides with the annual updates to the DRGs within the inpatient hospital prospective payment system. Each spring HCFA publishes a proposed rule that includes proposed changes to the inpatient hospital prospective payment system. This notice also includes final decisions on changes to ICD-9-CM codes. By August 1, HCFA publishes the new codes in the Addendum to the final rule, which is a technical presentation of actual changes to be made in both the index and tabular sections of the ICD-9-CM coding books. The Addendum is available on HCFA's website and is also sent to organizations such as the American Hospital Association (AHA) and the American Health Information Management Association (AHIMA) to distribute to their members. By October 1 of each year, the Department of Health and Human Services also produces a CD-ROM version of the ICD-9-CM, which may be purchased at the Government Printing Office. Since the ICD-9-CM is not a copyrighted system, many publishers and organizations distribute and sell books or other publications that include the changes to ICD-9-CM. Although the committee's process for discussing proposed changes to the ICD-9-CM fully involves and informs the public, the deliberative nature of the process does require some time. Topics discussed at the May and November 2000 meetings of the Committee are for changes to ICD-9-CM in October 2001. Therefore, depending on whether a request is considered at the May or November meeting, resulting changes may not be effective for approximately a year to a year-and-a-half later. b. Options To Expedite the Implementation of Coding Changes Several constraints upon the system would complicate implementing extensive changes. One significant complication is the interaction between the DRG system and the ICD-9-CM diagnosis and procedure codes (in the case of new services and technologies, the discussion focuses on procedure rather than diagnosis codes). When a new procedure code is created, a decision must be made as to whether the new code affects DRG assignment (for example, resulting in a case being assigned to a surgical rather than a medical DRG). Currently, new technology is generally assigned to the same DRG as its predecessor codes. Even if new codes do not affect DRG assignment, the GROUPER software (used to assign cases to DRGs) must be reprogrammed to recognize and classify all the new codes. This is necessary to allow Medicare's claims processing systems to process the claim. In addition to the changes to the GROUPER software, implementing changes to ICD-9-CM codes is a detailed and far-reaching process involving modifications to code books and software coding systems, as well as changes to hospitals' claims processing systems. As described above, the current process is organized around the annual publication of coding changes in the 
                        **Federal Register**
                         as part of the updates and changes to the inpatient hospital prospective payment system. The changes are made available during the summer, and communicated via multiple channels to hospitals. This process allows for the necessary processing changes to be thoroughly tested prior to implementation, both by HCFA and by the hospitals. This testing procedure is essential given the volume (generally 11 million claims annually) and dollar impact (approximately $75 billion during FY 2001) of Medicare inpatient discharges. Another important issue when considering expediting the process of making coding changes is that the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected (section 1886(d)(4)(C)(iii) of the Act). If ICD-9-CM changes were made at multiple times during the year, the budget neutrality requirement would mean the standardized amounts, and potentially the cost outlier thresholds, would change as well. These changes would compromise the prospective nature of the payment system, whereby hospitals are able to project their revenues for the year and plan accordingly. Because we do not believe the requirement in section 533 of Public Law 106-554 to explore ways to expedite coding changes was intended to disrupt the prospective nature of the payment system, we did not consider options that would require revising the DRG weights and the standardized amounts more than once a year. With these considerations in mind, we explored the potential for shortening the current process. First, we are proposing to move the November meeting of the Coordination and Maintenance Committee to December without significant disruption. To move it further would 
                        ( print page 22670)
                        disrupt the process for production of the annual inpatient prospective payment system regulation. This step would shorten the code assignment process by a month and permit coding changes resulting in payment changes to be implemented in a year. Second, we are proposing to expedite the process by issuing new coding decisions resulting from the spring meeting of the Committee (currently in May) that would be effective the following October 1. It may be necessary to move the May meeting to April to accommodate this procedure. Because the timing of this process would not allow the coding changes to be incorporated into the proposed rule published in the spring, cases with the new codes would have to be assigned to the same DRG to which they would have been assigned without the new code and no other payment adjustments would be possible. These coding changes would thus not affect the DRG weights or the budget neutrality calculations. However, more rapid introduction of new codes would permit reflection of the codes in claims data more quickly, and thus would permit eventual adjustment of payment rates sooner than otherwise possible. This capability could be of particular use where otherwise available data were not sufficient to support an immediate payment change, because hospital claims data permitting identification of use of the new technology would be available more quickly. This change would reduce the time between discussion of a proposed code and its implementation from a minimum of 11 months to 6 months. It would allow for the collection of MedPAR data a full year earlier than under the current process, providing the possibility that DRG revisions based on new codes could be expedited by up to 1 year. There would be significant challenges to making this proposed process work. Because the changes would not be published in the proposed rule, the public would be given less opportunity to consider the merits of the proposals, and it would have to either attend the spring meeting of the Committee or respond to the summary report within a few weeks. The decisions from the spring meeting must be finalized by the middle of June in order for us to include the changes in the Addendum of the final rule and in order to make changes in the GROUPER software to be effective October 1; it may be necessary to schedule the spring meeting earlier to meet this deadline. The opportunity to solicit additional input from industry groups and experts would be curtailed because of the short time lines. There would be an increased risk of errors related to revisions in the procedure code index (a manual process performed by HCFA), as there would be less time available to review and revise the procedure index to ensure that all changes are accurately reflected. For example, we are creating a new procedure code to capture percutaneous gastrojejunostomy (code 44.32). All coding instructions (indexing, inclusion terms, and exclusion terms) must be verified so that the procedure is appropriately indexed. If one of the many index entries for gastrojejunostomy is not correctly updated, percutaneous gastrojejunostomy would be assigned to another gastroenterostomy (code 44.39), which is an operating room procedure. This can have a significant impact on national health care data. Coders at different hospitals may follow different entries and arrive at different codes. To limit the potential for confusion in the hospital and coding communities resulting from two separate schedules for implementing code changes, we would limit these changes to those that meet our definition of new technology eligible for special treatment as proposed below. It would not be necessary, however, to demonstrate that the cases involving the new technology would be inadequately paid, since there would be no payment impacts of these changes. The changes would be included in the Addendum of the proposed rule for the inpatient hospital prospective payment system, and placed on the website for use by the industry in updating books and software systems. They also would be published in the final rule, and included in the CD-ROM version of ICD-9-CM that is distributed by the Government Printing Office. We are requesting public comments on this proposal. c. Limitations of ICD-9-CM While the updating process currently in use may not lend itself to expeditiously incorporating new medical services and technologies into the ICD-9-CM coding system, another important factor is the dated and limited structure of the ICD-9-CM system. The ICD-9-CM system was developed in the 1970s and implemented in 1979. Dramatic advances have occurred in medicine since that time. Although the ICD-9-CM Coordination and Maintenance Committee has attempted to make coding modifications to capture new technology, it has sometimes been difficult to achieve a reasonable result. The ICD-9-CM procedure codes are made up of four digits: two numerical characters followed by a decimal, and then two additional numerical characters. The first two digits indicate a category, such as 36—Operations on the vessels of the heart. The third digit provides additional breakdown, such as 36.0—Removal of coronary artery obstruction and insertion of stents. When the fourth digit is added, the code is fully described. There are only 10 codes available within each category (fourth digits 0-9). Once a category is full, we must either combine types of similar procedures under one code, or find a place in another section of the codebook for a new code. The benefit of such a system is that we can collapse the codes into categories when analyzing claims data to capture a wide range of similar procedures. However, if similar codes are placed in separate sections of the code book, coders may not easily find them. Errors may occur when trying to identify particular types of cases when codes are not carefully placed within a system such as the current ICD-9-CM. ICD-9-CM is 22 years old and the premises on which the coding system was established are dated. A number of approaches and techniques used for procedures such as lasers and the use of scopes were not anticipated when the structure of ICD-9-CM was developed. Consequently, the basic categories were established on technology that is now outdated. Making needed coding changes each year has been quite difficult and involves making compromises that effect the precision of the coding. d. Short-Term Solutions Within the ICD-9-CM Structure To consider how we might better respond to requests for new codes in the short term, we examined ICD-9-CM to attempt to identify an open series of codes that could be used for new procedures and technologies. There are currently 16 chapters of procedure codes. However, codes 17.00 through 17.99 are not in use. These codes are found between Chapter 3, “Operations on the Eye,” and Chapter 4, “Operations on the Ear.” This series of 100 codes could be used to provide codes for new procedures and technology. To fully utilize this new series of codes, we would assign new procedures to the next available code. A limitation of this approach would be that this new chapter would capture a diverse group of procedures potentially affecting all body systems. Assigning procedure codes to this new chapter would undoubtedly create 
                        ( print page 22671)
                        considerable confusion for coders. Currently, procedures are grouped by body system, and similar procedures are placed in categories. This arrangement assists the coder in choosing the most appropriate code because he or she can quickly review closely related codes that are together. Using Chapter 17 for new technology codes, on the other hand, would mean that closely related codes would be widely separated. Use of Chapter 17 would also require a major revision of coding rules since coders are taught to identify codes within a group of similar procedures. They are not accustomed to looking for a list of unrelated procedures in a separate section of the coding book. To supplement the Chapter 17 codes, the Coordination and Maintenance Committee may be able to assign vacant codes in other chapters. However, large numbers of sequences are already fully or nearly fully occupied, and this strategy would only provide limited availability of new codes. e. Alternative Short-Term Approaches Some observers have expressed concern that the additional codes available within the ICD-9-CM code set may not be adequate to accommodate both routine changes in coding and the new technologies under consideration here, particularly if a long-term change, such as adoption of ICD-10-PCS, is significantly delayed. We have examined several alternative short-term options in the event the additional available codes are used before a long-term solution is reached. In evaluating these alternatives, one must consider the changes each entails to hospitals' and HCFA's coding and claims processing systems, and the time necessary to implement such changes (balanced against the timeframe for adopting a long-term coding solution). Expanding ICD-9-CM procedure codes by making them alphanumeric or adding a fifth digit would make available a substantial number of new codes for new technology but would require substantial system changes and create standards issues. This approach was extensively discussed in meetings of the ICD-9-CM Coordination and Maintenance Committee prior to the development of ICD-10-PCS. Input from the public indicated that such a significant modification to a limited and dated system would only make the system worse. The time it would take to make this system work well would be longer than that required to build a new system and the resources needed for system changes would be significant. Such a modification of the ICD-9-CM standard code set would require the formal standards setting process prescribed by the regulations implementing the Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191). We solicit comments from the public about the desirability of pursuing expansion and modification of the ICD-9-CM standards for this purpose. Using the V-code section of ICD-9-CM diagnosis codes to report new technology would not require any systems changes or create any standards issues and would create a moderate number of codes for new technology. We have discussed this recommendation with NCHS. NCHS opposed this option as an inappropriate use of diagnosis codes. While “V” codes are used for the classification of factors influencing health status and contact with health services, they are not a substitute for procedure coding. By adding procedure coding concepts to the diagnosis coding system, confusion could easily lead to increased errors. Furthermore, the V-code section has only a limited number of available spots. We also considered using HCFA Common Procedure Coding System (HCPCS) codes to report use of new technology for inpatient cases. However, using HCPCS would require a moderate amount of systems change and may require the formal standards setting process prescribed by Public Law 104-191, since the HCPCS code set is not the standard for inpatient services. However, it would make a substantial number of codes available for new technology. Alphanumeric HCPCS codes are currently used in outpatient departments and physician offices for reporting services, and they are used on a limited basis by hospitals in reporting specific inpatient services. For instance, alphanumeric HCPCS codes are used for reporting the use of hemophilia clotting factors used during an inpatient stay. Use of HCPCS codes would require that a new service or technology either be assigned a code through otherwise applicable processes for HCPCS coding or that HCFA assign a specific, temporary code for use in connection with new technology payments for inpatient hospital services. Specifically assigned codes could be assigned relatively quickly. However, use of such codes would run the risk of confusion if other codes were assigned to the same service or items when used in other settings. More generally, HCPCS coding would duplicate information found in the ICD-9-CM procedure codes. Careful attention to integration of coding across the two systems would be necessary, and dissemination of information about correct coding to hospital coders would present challenges. Even with excellent integration and dissemination, the risk of confusion by hospital coders would be high. The use of HCPCS codes would also raise questions on how the accuracy of claims data will be assessed. HCFA contracts with Peer Review Organizations (PROs) to validate the accuracy of coded data. Consideration would need to be given to how the accuracy of these data could be verified. If two separate coding systems with overlapping information are used, considerable variations in reporting practices might arise. Similar to the option of using alphanumeric ICD-9-CM procedure codes, changes in systems and in hospital coding procedures that would be associated with this approach would take time and resources to implement for hospitals, HCFA, and potentially other payers such as Medicare secondary insurers. In recognition of these considerations, we do not propose to proceed with use of HCPCS codes for this purpose at the present. We believe this possibility should be revisited later if the ICD-9-CM codes in fact prove inadequate and if a longer term solution is not yet available. However, we are encouraging public comments on the concept of using HCPCS codes to identify specific new technologies on inpatient hospital claims. f. Development of ICD-10-PCS; A Possible Long-Term Solution While acknowledging the limitations of the ICD-9-CM system, the Secretary designated the ICD-9-CM system as the national standard in a final rule in the 
                        **Federal Register**
                         on August 17, 2000 (65 FR 50311) following notice and comment rulemaking in accordance with Public Law 104-191. In that same final rule, the public was advised that there would be a need in the near future to replace this dated coding system with a system that could better capture today's health care information. At that time, work was proceeding on an updated variant of the ICD system, ICD-10, that could replace ICD-9-CM, but this system was not yet completed. The World Health Organization developed ICD-10 as an international diagnosis coding system. NCHS has been modifying ICD-10 to replace the diagnosis section of ICD-9-CM. This system is being referred to as ICD-10-CM. At the same time, HCFA has been developing the ICD-10-Procedure Coding System (ICD-10-PCS) as a possible replacement for the ICD-9-CM procedure codes. 
                        ( print page 22672) Criteria for the development of a new procedure coding system were established by the National Committee on Vital and Health Statistics (NCVHS). The criteria included the following: Completeness—all substantially different procedures have a unique code.
                    Expandability—the structure of the system allows incorporation of new procedures and technologies as unique codes.
                    Standardized terminology—the coding system includes definitions of the terminology used. While the meaning of the specific words can vary in common usage, the coding scheme does not include multiple meanings for the same term. Each term is assigned a specific meaning.
                    Multiaxial—the system has a multiaxial structure with each code character having the same meaning within the specific procedure section and across procedure sections to the extent possible.
                    Diagnostic information is not included in the procedure description. The ICD-10-PCS was developed using these criteria by HCFA through a contract with 3M Health Information Systems. The ICD-10-PCS system provides much greater code capacity because all substantially different procedures have a unique code. While the ICD-9-CM procedure coding system is limited to a maximum of 10,000 codes, the current draft of ICD-10-PCS contains 197,769 codes and the number could be expanded further. g. Public Meeting on Implementing ICD-10-PCS The Department of Health and Human Services is starting the process of soliciting public comments on whether it should proceed to adopt ICD-10-PCS as the national standard for coding inpatient hospital services to replace ICD-9-CM procedures. A public meeting on this issue has been scheduled for May 17, 2001, in the HCFA Auditorium in Baltimore, Maryland. Information on this meeting can be found in the Summary Report of the November 2000 meeting of the ICD-9-CM Coordination and Maintenance Committee at: www.hcfa.gov/​medicare/​icd9cm.htm. The public is encouraged to attend and participate in the discussion on whether ICD-10-PCS should become a national standard. Organizations and groups will be given the opportunity to make a brief presentation on their members' behalf. Groups wishing to be scheduled to present should contact Pat Brooks, HCFA, at (410) 786-5318. This meeting will begin the process of evaluating ICD-10-PCS as a future national standard. h. Proposed Methods of Expeditiously Incorporating New Medical Services and Technologies Into the Coding System In summary, we are proposing a two-part strategy for expeditiously incorporating new medical services and technologies into the clinical coding system used with respect to payment for inpatient hospital services. First, we are proposing to shorten the timeframe for implementing new codes by processing changes that do not have payment implications without first publishing them in the proposed rule in the spring. This means new codes approved at the spring meeting of the ICD-9-CM Coordination and Maintenance Committee could be implemented by October of the same year. We also are proposing to move the November meeting to December. These proposed changes would reduce the time it currently takes to implement new codes, as well as reduce the time required to collect data through the MedPAR by up to a year in many cases. Second, to make more codes available to identify new technology, we will immediately begin to work with the public to use Chapter 17 of ICD-9-CM procedures. This will provide room for 100 additional procedure codes. We also will continue the current process of adding and revising codes within the current chapters as room and structure allow. Our long-range strategy is to consider the implementation of ICD-10-PCS as a replacement system for ICD-9-CM. However, because of the need to address any such change through notice and public rulemaking procedures (a proposed and final rule), in addition to the need to revise both our payment systems and those of hospitals, this could occur no earlier than October 2003. 7. New Requirements Relative to New Services and Technologies Section 533 of Public Law 106-554 addresses the process by which new technologies and services are introduced into the DRGs and how DRG payment rates are to be adapted to accommodate them. Section 533(b) added new section 1886(d)(5)(K) to the Act, which specifies that the Secretary must establish criteria to use to identify a new technology after notice and an opportunity for public comment. Under new section 1886(d)(5)(K)(ii)(I) of the Act, effective for discharges occurring on or after October 1, 2001, the Secretary is required to apply a mechanism to recognize the costs of new technologies if, “based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges under this subsection is inadequate.” Further, new section 1886(d)(5)(K)(v) stipulates that the requirement for an additional payment for a new medical service or technology may be satisfied by means of “an add-on payment, a payment adjustment, or any other similar mechanism for increasing the amount otherwise payable with respect to a discharge under this subsection.” Section 533(b) also added a new section 1886(d)(5)(L) to the Act which states that the requirement for an additional payment for a new medical service or technology may also be met through establishing “new-technology groups into which a new medical service or technology will be classified.” In section IV.F. of this preamble, we are setting forth, for public comment, our policy proposals to implement section 1886(d)(5)(K) of the Act, as added by section 533(b) of Public Law 106-554. In summary, the proposed policies include— Proposed criteria for identifying new medical services and technologies for additional payments beyond the DRG prospective payment system payment.
                    The proposed methodology for determining the adequacy of current payments for new services and technology.
                    The proposed methodology for determining the amount of the additional payment and for payment mechanism for new medical services and technologies. III. Proposed Changes to the Hospital Wage Index A. Background Section 1886(d)(3)(E) of the Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary must adjust the standardized amounts “for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level.” In accordance with the broad discretion conferred under the Act, we currently define hospital labor market areas based on the definitions of Metropolitan Statistical Areas (MSAs), Primary MSAs (PMSAs), and New England County Metropolitan Areas (NECMAs) issued by the Office of Management and Budget 
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                        (OMB). The OMB also designates Consolidated MSAs (CMSAs). A CMSA is a metropolitan area with a population of one million or more, comprising two or more PMSAs (identified by their separate economic and social character). For purposes of the hospital wage index, we use the PMSAs rather than CMSAs since they allow a more precise breakdown of labor costs. If a metropolitan area is not designated as part of a PMSA, we use the applicable MSA. Rural areas are areas outside a designated MSA, PMSA, or NECMA. For purposes of the wage index, we combine all of the rural counties in a State to calculate a rural wage index for that State. We note that, effective April 1, 1990, the term Metropolitan Area (MA) replaced the term MSA (which had been used since June 30, 1983) to describe the set of metropolitan areas consisting of MSAs, PMSAs, and CMSAs. The terminology was changed by OMB in the March 30, 1990 
                        **Federal Register**
                         to distinguish between the individual metropolitan areas known as MSAs and the set of all metropolitan areas (MSAs, PMSAs, and CMSAs) (55 FR 12154). For purposes of the prospective payment system, we will continue to refer to these areas as MSAs. Beginning October 1, 1993, section 1886(d)(3)(E) of the Act requires that we update the wage index annually. Furthermore, this section provides that the Secretary base the update on a survey of wages and wage-related costs of short-term, acute care hospitals. The survey should measure, to the extent feasible, the earnings and paid hours of employment by occupational category, and must exclude the wages and wage-related costs incurred in furnishing skilled nursing services. As discussed below in section III.F. of this preamble, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating the wage index. B. FY 2002 Wage Index Update The proposed FY 2002 wage index values in section V of the Addendum to this proposed rule (effective for hospital discharges occurring on or after October 1, 2001 and before October 1, 2002) are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 1998 (the FY 2001 wage index was based on FY 1997 wage data). The proposed FY 2002 wage index includes the following categories of data associated with costs paid under the hospital inpatient prospective payment system (as well as outpatient costs), which were also included in the FY 2001 wage index: Salaries and hours from short-term, acute care hospitals.
                    Home office costs and hours.
                    Certain contract labor costs and hours.
                    Wage-related costs. Consistent with the wage index methodology for FY 2001, the proposed wage index for FY 2002 also continues to exclude the direct and overhead salaries and hours for services not paid through the inpatient prospective payment system such as skilled nursing facility (SNF) services, home health services, or other subprovider components that are not subject to the prospective payment system. We calculate a separate Puerto Rico-specific wage index and apply it to the Puerto Rico standardized amount. (See 62 FR 45984 and 46041.) This wage index is based solely on Puerto Rico's data. Finally, section 4410 of Public Law 105-33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is not located in a rural area may not be less than the area wage index applicable to hospitals located in rural areas in that State. C. FY 2002 Wage Index Proposal Because it is used to adjust payments to hospitals under the prospective payment system, the hospital wage index should, to the extent possible, reflect the wage costs associated with the areas of the hospital included under the hospital inpatient prospective payment system. In response to concerns within the hospital community related to the removal, from the wage index calculation, of costs related to graduate medical education (GME) (teaching physicians and residents) and certified registered nurse anesthetists (CRNAs), which are paid by Medicare separately from the prospective payment system, the American Hospital Association (AHA) convened a workgroup to develop a consensus recommendation on this issue. The workgroup recommended that costs related to GME and CRNAs be phased out of the wage index calculation over a 5-year period. Based upon our analysis of hospitals' FY 1996 wage data, and consistent with the AHA workgroup's recommendation, we specified in the July 30, 1999 final rule (64 FR 41505) that we would phase-out these costs from the calculation of the wage index over a 5-year period, beginning in FY 2000. In keeping with the decision to phase-out costs related to GME and CRNAs, the proposed FY 2002 wage index is based on a blend of 40 percent of an average hourly wage including these costs, and 60 percent of an average hourly wage excluding these costs. Beginning with the FY 1998 cost reports, we revised the Worksheet S-3, Part II so that hospitals can separately report teaching physician Part A costs on lines 4.01, 10.01, 12.01, and 18.01. Therefore, it is no longer necessary for us to conduct the special survey we used for the FY 2000 and FY 2001 wage indexes (64 FR 41505 and 65 FR 47071). 1. Health Insurance and Health-Related Costs In the August 1, 2000 final rule, we clarified our definition of “purchased health insurance costs” and “self-insurance” for hospitals that provide health insurance to employees (65 FR 47073). For purposes of the wage index, purchased or self-funded health insurance plan costs include the hospitals' insurance premium costs, external administration costs, and the share of costs for services delivered to employees. In response to a comment received concerning this issue, we stated that, for self-funded health insurance costs, personnel costs associated with hospital staff that deliver the services to the employees must continue to be excluded from wage-related costs if the costs are already included in the wage data as salaries on Worksheet S-3, Part II, Line 1. However, after further consideration of this policy, particularly with respect to concerns expressed by our fiscal intermediaries about the level of effort required during the wage index desk review process to ensure hospitals are appropriately identifying and excluding these costs, we are proposing a revision. Effective with the calculation of the FY 2003 wage index, for either purchased or self-funded health insurance, we would allow health insurance personnel costs, associated with hospital staff that deliver services to employees, to be included as part of the wage-related costs. We believe this proposed revised policy will ensure that health insurance costs are consistently reported by hospitals. Health insurance costs would continue to be developed using generally accepted accounting principles. In the August 1, 2000 final rule (65 FR 47073), we further clarified that health-related costs (including employee physical examinations, flu shots, and clinic visits, and other services that are not covered by employees' health insurance plans but are provided at no cost or at discounted rates to employees of the hospital) may be included as “other” wage-related costs if, among 
                        ( print page 22674)
                        other criteria, the combined cost of all such health-related costs is greater than one percent of the hospital's total salaries (less excluded area salaries). For purposes of calculating the FY 2003 wage index (which will be based on data for cost reporting periods beginning in FY 1999), we are proposing to revise this policy to allow hospitals to include health-related costs as allowable core wage-related costs. 2. Costs of Contracted Pharmacy and Laboratory Services Our policy concerning inclusion of contract labor costs for purposes of calculating the wage index has evolved over the years. We recognize the role of contract labor in meeting special personnel needs of many hospitals. In addition, improvements in the wage data have allowed us to more accurately identify contract labor costs and hours. As a result, effective with the FY 1994 wage index, we included the costs of direct patient care contract services in the wage index calculation. The FY 1999 wage index included the costs and hours of certain management contract services, and the FY 2000 wage index included the costs for contract physician Part A services. (The 1996 proposed rule (61 FR 27456) provided an in-depth background to the issues related to the inclusion of contract labor costs in the wage index calculation.) We revised the 1998 cost report to collect the data associated with contract pharmacy, Worksheet S-3, Part II, Line 9.01, and contract laboratory, Worksheet S-3, Part II, Line 9.02. The cost reporting instructions for these line numbers followed that for all contract labor lines; that is, to include the amount paid for services furnished under contract for direct patient care, and not include cost for equipment, supplies, travel expenses, and other miscellaneous or overhead items (Medicare Provider Reimbursement Manual, Part 2, Cost Reporting Forms and Instructions, Chapter 36, Transmittal 6, page 36-32). Effective with the FY 2002 wage index, which uses FY 1998 wage data, we are proposing to include the costs and hours of contract pharmacy and laboratory. 3. Collection of Occupational Mix Data Section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E) of the Act to require that the Secretary must provide for the collection of data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. The initial collection of these data must be completed by September 30, 2003, for application beginning October 1, 2004. Currently, the wage data collected by HCFA on the cost report reflect the sum of wages, hours, and wage-related costs for all hospital employees. There is no separate collection by occupational categories of employees, such as registered nurses or physical therapists. Total salaries and hours reflect management decisions made by hospitals in terms of how many employees within a certain occupation to employ to treat different types of patients. For example, a large academic medical center may tend to hire more high-cost specialized employees to treat its more acutely ill patient population. The argument is that the higher labor costs incurred to treat this patient population are reflected in the higher case mix of these hospitals, and therefore, reflecting these costs in the wage index is essentially counting them twice. An occupational mix adjustment can be used to account for hospital management decisions about how many employees to hire in each occupational category. Occupational mix data measure the price the hospital must pay for employees within each category. A wage index that reflected only these market prices would remove the impact of management decisions about the mix of employees needed and, therefore, better capture geographic variations in the labor market. We have examined this issue previously. In the May 27, 1994 
                        **Federal Register**
                         (59 FR 27724), we discussed the outcome of consideration of this issue by a hospital workgroup. At that time, the workgroup's consensus was that the data required to implement an occupational mix adjustment were not available and the likelihood of obtaining such data would be minimal. There seemed to be little support among hospital industry representatives for developing a system that would create additional reporting burdens with an unproven or minimal impact on the distribution of payments. Also, in the August 30, 1991 
                        **Federal Register**
                         (56 FR 43219), we stated our belief that the collection of these data would be costly and difficult. In considering the format to collect occupational mix data, we looked to data currently being collected by the Bureau of Labor Statistics (BLS), which conducts an annual mail survey to produce estimates of employment and wages for specific occupations. This program, Occupational Employment Statistics (OES), collects data on wage and salary workers in nonfarm establishments in order to produce employment and wage estimates for over 700 occupations. The OES survey collects wage data in 12 hourly rate intervals. Employers report the number of employees in an occupation per each wage range. To illustrate, the wage intervals used for the 1999 survey are as follows: Interval
Hourly wages
Annual wagesRange A
Under $6.75
Under $14,040Range B
6.75 to 8.49
14,040 to 17,659Range C
8.50 to 10.74
17,660 to 22,359Range D
10.75 to 13.49
22,360 to 28,079Range E
13.50 to 16.99
28,080 to 35,359Range F
17.00 to 21.49
35,360 to 44,719Range G
21.50 to 27.24
44,720 to 56,679Range H
27.25 to 34.49
56,680 to 71,759Range I
34.50 to 43.74
71,760 to 90,999Range J
43.75 to 55.49
91,000 to 115,439Range K
55.50 to 69.99
115,440 to 145,599Range L
70,000 and over
145,600 and over
 It should be noted that this table is for illustrative purposes, and we may update the data ranges in our actual collection instrument. Although we initially considered using the OES data, section 304(c) of Public Law 106-554 requires us to 
                        ( print page 22675)
                        collect data from every short-term, acute care hospital. The OES data are a sample survey and, therefore, as currently conducted, are not consistent with the statutory requirement to include data from every hospital. Another issue with using OES data is that, for purposes of the Medicare wage index, the hospitals' data must be reviewed and verified by the fiscal intermediaries. The OES survey is a voluntary survey. Although we decided to pursue a separate data collection effort than OES, we propose to model our format after the one used by OES. In this way, hospitals participating in the OES survey, should have no additional recordkeeping and reporting requirements beyond those of the OES survey. The OES survey of the hospital industry is designed to capture all occupational categories within the industry. For purposes of adjusting the wage index for occupational mix, we do not believe it is necessary to collect data from such a comprehensive scope of categories. Furthermore, because the data must be audited, a comprehensive list of categories would be excessively burdensome. In deciding which job categories to include, we reviewed the occupational categories collected by OES and identified those with at least 35,000 hospital employees. Our goal is to collect data from a sample of job categories that provides a valid measure of wage rates within a geographical area. Using this threshold of at least 35,000 employees within a category nationally, we are proposing to collect the number of employees by wage range as illustrated in the above table, for the occupational categories listed below. The following data are based on the 1999 OES survey: OES code
Category
Employees
Percent of total hospital 
                                 employees
Mean hourly wage15008
Medicine and Health Services Managers
93,680
1.9
$27.3827302
Social Workers, Medial and Psychiatric
53,360
1.1
16.3332102
Physicians and Surgeons
125,640
2.6
43.7632308
Physical Therapists
39,840
0.8
26.1432502
Registered Nurses
1,231,980
25.0
21.1232505
Licensed Practical Nurses
206,360
4.2
13.3932517
Pharmacists
46,860
1.0
28.6232911, 32928, 32931
Clinical Technologists and Technicians
122,380
2.50
11.6951002, 55105, 55108, 55305
First-Line Supervisors and Clerical Workers
445,730
9.5
11.3955332, 5534765038, 67002, 67005
Food Preparation Workers and Housekeeping
218,440
4.5
8.1766008
Nursing Aides, Orderlies, and Attendants
301,240
6.2
8.67
 We believe this list of occupational categories provides a good representation of the employee mix at most hospitals. Definitions for each occupational category are available on the BLS website at http://stats.bls.gov/​oes/​1999/​oes_​alph.htm. We have yet to settle on the methodology on how to use the occupational mix index. One option would be to weight each hospital's wage index by its occupational mix index. This requires calculating a national occupational mix index and then breaking it down by MSA and by hospital, similar to how the wage index is broken down. In this way, the wage index would capture geographic differences in wage rates. The decision about how to apply the occupational mix index to the wage index depends on the quality of the data collected, since this effort will be the first time wage and hour data by occupation are collected in this audited manner. Section 304(c) directs the Secretary to provide for the collection of these data by September 30, 2003, and to apply them in the wage index by October 1, 2004. Therefore, the data are to be incorporated in the FY 2005 wage index. Under our current timetable, the FY 2005 wage index will be based on wage data collected from hospitals' cost reporting periods beginning during FY 2001. In order to facilitate the fiscal intermediaries' review of these data, we believe the occupational mix data should coincide with the data otherwise used to calculate the cost report. Therefore, we will conduct a special survey of all short-term acute-care hospitals that are required to report wage data to collect these data coinciding with hospitals' FY 2001 cost reports. More specific procedural information regarding this survey will be included in the FY 2002 final rule scheduled to be published by August 1, 2001. D. Verification of Wage Data From the Medicare Cost Report The data for the proposed FY 2002 wage index were obtained from Worksheet S-3, Parts II and III of the FY 1998 Medicare cost reports. The data file used to construct the proposed wage index includes FY 1998 data submitted to HCFA as of mid-February 2001. As in past years, we performed an intensive review of the wage data, mostly through the use of edits designed to identify aberrant data. We asked our fiscal intermediaries to revise or verify data elements that resulted in specific edit failures. Some unresolved data elements are included in the calculation of the proposed FY 2002 wage index pending their resolution before calculation of the final FY 2002 wage index. We have instructed the intermediaries to complete their verification of questionable data elements and to transmit any changes to the wage data no later than April 9, 2001. We expect that all unresolved data elements will be resolved by that date. The revised data will be reflected in the final rule. Also, as part of our editing process, we removed data for 47 hospitals that failed edits. For 23 of these hospitals, we were unable to obtain sufficient documentation to verify or revise the data because the hospitals are no longer participating in the Medicare program or are in bankruptcy status. Twenty-four hospitals had incomplete or inaccurate data resulting in zero or negative average hourly wages. Therefore, they were removed from the calculation. The data for these hospitals will be included in the final wage index if we receive corrected data that pass our edits. As a result, the proposed FY 2002 wage index is calculated based on FY 1998 wage data for 4,868 hospitals. 
                        ( print page 22676) E. Computation of the Proposed FY 2002 Wage Index We note a proposed technical change to the FY 2002 calculation. For the FY 2001 wage index calculation, we initially proposed to subtract Line 13 of Worksheet S-3, Part III from total hours when determining the excluded hours ratio used to estimate the amount of overhead attributed to excluded areas (65 FR 26299). However, the formula resulted in large and inappropriate increases in the average hourly wages for some hospitals (65 FR 47074), particularly hospitals that have large overhead and excluded area costs. Therefore, for the final FY 2001 wage index calculation, we reverted to the FY 2000 excluded hours ratio formula, which did not subtract Line 13. We, and others in the hospital community, continued to believe that subtracting Part III, Line 13 from total hours is the correct formula for determining the excluded hours ratio. We analyzed how the application of this formula resulted in overstated average hourly wages for some hospitals and how we could improve the overall accuracy of the overhead allocation methodology. We became aware that the problem was not in the excluded hours ratio formula. Rather, our wage index calculation did not also remove the overhead wage-related costs associated with excluded areas, an amount that must be estimated before it can be subtracted from the calculation. The combined effect of applying the excluded hours ratio formula, which appropriately removes salaries of lower-wage, overhead employees, and not subtracting overhead wage-related costs associated with excluded areas, resulted in overstated salary costs and average hourly wages. For the FY 2002 wage index calculation, we are proposing to apply the excluded hours ratio formula that subtracts Part III, Line 13 from total hours. Additionally, for the first time in the wage index calculation, we estimated and subtracted overhead wage-related costs allocated to excluded areas. After we applied this new calculation, there were still a few hospitals that experienced large increases in their average hourly wages. The intermediaries verified that the hospitals' wage data were accurate, so we kept the data in the wage index calculation. These hospitals primarily function as SNFs, psychiatric hospitals, or rehabilitation hospitals that have few acute care beds. The hospitals' higher average hourly wages reflect the costs of the higher salaried employees that remain in the wage index calculation after we subtract the costs of excluded area and associated overhead employees. The method used to compute the proposed FY 2002 wage index follows. Step 1—As noted above, we are proposing to base the FY 2002 wage index on wage data reported on the FY 1998 Medicare cost reports. We gathered data from each of the non-Federal, short-term, acute care hospitals for which data were reported on the Worksheet S-3, Parts II and III of the Medicare cost report for the hospital's cost reporting period beginning on or after October 1, 1997 and before October 1, 1998. In addition, we included data from any hospital that had cost reporting periods beginning before October 1997 and reported a cost reporting period covering all of FY 1998. These data were included because no other data from these hospitals would be available for the cost reporting period described above, and because particular labor market areas might be affected due to the omission of these hospitals. However, we generally describe these wage data as FY 1998 data. We note that, if a hospital had more than one cost reporting period beginning during FY 1998 (for example, a hospital had two short cost reporting periods beginning on or after October 1, 1997 and before October 1, 1998), we included wage data from only one of the cost reporting periods, the longest, in the wage index calculation. If there was more than one cost reporting period and the periods were equal in length, we included the wage data from the latest period in the wage index calculation. Step 2—Salaries—The method used to compute a hospital's average hourly wage is a blend of 40 percent of the hospital's average hourly wage including all GME and CRNA costs, and 60 percent of the hospital's average hourly wage after eliminating all GME and CRNA costs. In calculating a hospital's average salaries plus wage-related costs, including all GME and CRNA costs, we subtracted from Line 1 (total salaries) the Part B salaries reported on Lines 3 and 5, home office salaries reported on Line 7, and excluded salaries reported on Lines 8 and 8.01 (that is, direct salaries attributable to skilled nursing facility services, home health services, and other subprovider components not subject to the prospective payment system). We also subtracted from Line 1 the salaries for which no hours were reported on Lines 2, 4, and 6. To determine total salaries plus wage-related costs, we added to the net hospital salaries the costs of contract labor for direct patient care, certain top management, pharmacy, laboratory, and physician Part A services (Lines 9, 9.01, 9.02, 10, and 10.01), home office salaries and wage-related costs reported by the hospital on Lines 11, 12, and 12.01, and nonexcluded area wage-related costs (Lines 13, 14, 16, 18, 18.01, and 20). We note that contract labor and home office salaries for which no corresponding hours are reported were not included. In addition, wage-related costs for specific categories of employees (Lines 16, 18, 18.01, and 20) are excluded if no corresponding salaries are reported for those employees (Lines 2, 4, 4.01, and 6, respectively). We then calculated a hospital's salaries plus wage-related costs by subtracting from total salaries the salaries plus wage-related costs for teaching physicians, Lines (4.01, 10.01, 12.01, and 18.01), Part A CRNAs (Lines 2 and 16), and residents (Lines 6 and 20). Step 3—Hours—With the exception of wage-related costs, for which there are no associated hours, we computed total hours using the same methods as described for salaries in Step 2. Step 4—For each hospital reporting both total overhead salaries and total overhead hours greater than zero, we then allocated overhead costs to areas of the hospital excluded from the wage index calculation. First, we determined the ratio of excluded area hours (sum of Lines 8 and 8.01 of Worksheet S-3, Part II) to revised total hours (Line 1 minus the sum of Part II, Lines 3, 5, 7, and Part III, Line 13 of Worksheet S-3). We then computed the amounts of overhead salaries and hours to be allocated to excluded areas by multiplying the above ratio by the total overhead salaries and hours reported on Line 13 of Worksheet S-3, Part III. Next, we computed the amounts of overhead wage-related costs to be allocated to excluded areas using three steps: (1) We determined the ratio of overhead hours (Part III, Line 13) to revised hours (Line 1 minus the sum of Lines 3, 5, and 7); (2) we computed overhead wage-related costs by multiplying the overhead hours ratio by wage-related costs reported on Part II, Lines 13, 14, 16, 18, 18.01, and 20; and (3) we multiplied the computed overhead wage-related costs by the above excluded area hours ratio. Finally, we subtracted the computed overhead salaries, wage-related costs, and hours associated with excluded areas from the total salaries (plus wage-related costs) and hours derived in Steps 2 and 3. Using the above method for computing overhead salaries, wage-related costs, and hours to allocate to 
                        ( print page 22677)
                        excluded areas, we also computed these costs excluding all costs associated with GME and CRNAs (Lines 2, 4.01, 6, 10.01, 12.01, and 18.01). Step 5—For each hospital, we adjusted the total salaries plus wage-related costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimated the percentage change in the employment cost index (ECI) for compensation for each 30-day increment from October 14, 1997 through April 15, 1999 for private industry hospital workers from the Bureau of Labor Statistics' 
                        *Compensation and Working Conditions.*
                         We use the ECI because it reflects the price increase associated with total compensation (salaries plus fringes) rather than just the increase in salaries. In addition, the ECI includes managers as well as other hospital workers. This methodology to compute the monthly update factors uses actual quarterly ECI data and assures that the update factors match the actual quarterly and annual percent changes. The factors used to adjust the hospital's data were based on the midpoint of the cost reporting period, as indicated below. Midpoint of Cost Reporting Period
After
Before
Adjustment factor12/14/97
01/15/98
1.0329201/14/98
02/15/98
1.0304802/14/98
03/15/98
1.0282803/14/98
04/15/98
1.0262104/14/98
05/15/98
1.0241105/14/98
06/15/98
1.0220006/14/98
07/15/98
1.0197307/14/98
08/15/98
1.0171408/14/98
09/15/98
1.0142409/14/98
10/15/98
1.0113710/14/98
11/15/98
1.0088511/14/98
12/15/98
1.0066912/14/98
01/15/99
1.0046201/14/99
02/15/99
1.0023902/14/99
03/15/99
1.0000003/14/99
04/15/99
0.99746
 For example, the midpoint of a cost reporting period beginning January 1, 1998 and ending December 31, 1998 is June 30, 1998. An adjustment factor of 1.01973 would be applied to the wages of a hospital with such a cost reporting period. In addition, for the data for any cost reporting period that began in FY 1998 and covered a period of less than 360 days or more than 370 days, we annualized the data to reflect a 1-year cost report. Annualization is accomplished by dividing the data by the number of days in the cost report and then multiplying the results by 365. Step 6—Each hospital was assigned to its appropriate urban or rural labor market area before any reclassifications under section 1886(d)(8)(B) or section 1886(d)(10) of the Act. Within each urban or rural labor market area, we added the total adjusted salaries plus wage-related costs obtained in Step 5 (with and without GME and CRNA costs) for all hospitals in that area to determine the total adjusted salaries plus wage-related costs for the labor market area. Step 7—We divided the total adjusted salaries plus wage-related costs obtained under both methods in Step 6 by the sum of the corresponding total hours (from Step 4) for all hospitals in each labor market area to determine an average hourly wage for the area. Because the proposed FY 2002 wage index is based on a blend of average hourly wages, we then added 40 percent of the average hourly wage calculated without removing GME and CRNA costs, and 60 percent of the average hourly wage calculated with these costs excluded. Step 8—We added the total adjusted salaries plus wage-related costs obtained in Step 5 for all hospitals in the nation and then divided the sum by the national sum of total hours from Step 4 to arrive at a national average hourly wage (using the same blending methodology described in Step 7). Using the data as described above, the national average hourly wage is $22.0545. Step 9—For each urban or rural labor market area, we calculated the hospital wage index value by dividing the area average hourly wage obtained in Step 7 by the national average hourly wage computed in Step 8. Step 10—Following the process set forth above, we developed a separate Puerto Rico-specific wage index for purposes of adjusting the Puerto Rico standardized amounts. (The national Puerto Rico standardized amount is adjusted by a wage index calculated for all Puerto Rico labor market areas based on the national average hourly wage as described above.) We added the total adjusted salaries plus wage-related costs (as calculated in Step 5) for all hospitals in Puerto Rico and divided the sum by the total hours for Puerto Rico (as calculated in Step 4) to arrive at an overall average hourly wage of $10.8100 for Puerto Rico. For each labor market area in Puerto Rico, we calculated the Puerto Rico-specific wage index value by dividing the area average hourly wage (as calculated in Step 7) by the overall Puerto Rico average hourly wage. Step 11—Section 4410 of Public Law 105-33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area may not be less than the area wage index applicable to hospitals located in rural areas in that State. Furthermore, this wage index floor is to be implemented in such a manner as to ensure that aggregate prospective payment system payments are not greater or less than those that would have been made in the year if this section did not apply. For FY 2002, this change affects 240 hospitals in 41 MSAs. The MSAs affected by this provision are identified in Table 4A by a footnote. F. Revisions to the Wage Index Based on Hospital Redesignation Under section 1886(d)(8)(B) of the Act, hospitals in certain rural counties adjacent to one or more MSAs are considered to be located in one of the adjacent MSAs if certain standards are met. Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the prospective payment system. 1. Provisions of Public Law 106-554 Section 304 of Public Law 106-554 made changes to several provisions of section 1886(d)(10) of the Act relating to hospital reclassifications and the wage index: Section 304(a) amended section 1886(d)(10)(D) of the Act by adding a clause (v) to provide that, beginning with FY 2001, an MGCRB decision on a hospital reclassification for purposes of the wage index is effective for 3 years, unless the hospital elects to terminate the reclassification. Section 304(a) also provides that the MGCRB must use the 3 most recent years' average hourly wage data in evaluating a hospital's reclassification application for FY 2003 and any succeeding fiscal year (section 1886(d)(10)(D)(vi) of the Act).
                    Section 304(b) provides that, by October 1, 2001, the Secretary must establish a mechanism under which a statewide entity may apply to have all of the geographic areas in the State treated as a single geographic area for purposes of computing and applying a single wage index, for reclassifications beginning in FY 2003. Section 304(b) further requires that, if the Secretary applies a statewide wage index to an area, an application by an individual hospital in that area would not be considered. We address our policy proposals relating to implementation of these three provisions of sections 304(a) and (b) of Public Law 106-554 in section IV. of this proposed rule. The following 
                        ( print page 22678)
                        discussion of the proposed revisions to the wage index based on hospital redesignations reflects these proposed policies. 2. Effects of Reclassification The methodology for determining the wage index values for redesignated hospitals is applied jointly to the hospitals located in those rural counties that were deemed urban under section 1886(d)(8)(B) of the Act and those hospitals that were reclassified as a result of the MGCRB decisions under section 1886(d)(10) of the Act. Section 1886(d)(8)(C) of the Act provides that the application of the wage index to redesignated hospitals is dependent on the hypothetical impact that the wage data from these hospitals would have on the wage index value for the area to which they have been redesignated. Therefore, as provided in section 1886(d)(8)(C) of the Act, the wage index values were determined by considering the following: If including the wage data for the redesignated hospitals would reduce the wage index value for the area to which the hospitals are redesignated by 1 percentage point or less, the area wage index value determined exclusive of the wage data for the redesignated hospitals applies to the redesignated hospitals.
                    If including the wage data for the redesignated hospitals reduces the wage index value for the area to which the hospitals are redesignated by more than 1 percentage point, the area wage index determined inclusive of the wage data for the redesignated hospitals (the combined wage index value) applies to the redesignated hospitals.
                    If including the wage data for the redesignated hospitals increases the wage index value for the area to which the hospitals are redesignated, both the area and the redesignated hospitals receive the combined wage index value.
                    The wage index value for a redesignated urban or rural hospital cannot be reduced below the wage index value for the rural areas of the State in which the hospital is located.
                    Rural areas whose wage index values would be reduced by excluding the wage data for hospitals that have been redesignated to another area continue to have their wage index values calculated as if no redesignation had occurred.
                    Rural areas whose wage index values increase as a result of excluding the wage data for the hospitals that have been redesignated to another area have their wage index values calculated exclusive of the wage data of the redesignated hospitals.
                    Currently, the wage index value for an urban area is calculated exclusive of the wage data for hospitals that have been reclassified to another area. For the FY 2002 wage index, we are proposing to include the wage data for a reclassified urban hospital in both the area to which it is reclassified and the MSA where the hospital is physically located. We believe this will improve consistency and predictability in hospital reclassification and wage indices, as well as alleviate the fluctuations in the wage indexes due to reclassifications. For example, hospitals applying to reclassify into another area will know which hospitals' data will be included in calculating the wage index, because even if some hospitals in the area are reclassified, their data will be included in the calculation of the wage index of the area where they are geographically located. Also, in some cases, excluding the data of hospitals reclassified to another MSA could have a large downward impact on the wage index of the MSA in which the hospital is physically located. The negative impact of removing the data of the reclassified hospitals from the wage index calculation could lead to large wage disparities between the reclassified hospitals and other hospitals in the MSA, as the remaining hospitals would receive reduced payments due to a lower wage index. Our proposed approach would promote consistency, and simplify our rules, with respect to how we construct the wage indexes of rural and urban areas. As noted above, in the case of rural hospitals redesignated to another area, the wage index of the rural area where the hospitals are geographically located is calculated by including the wage data of the redesignated hospitals (unless doing so would result in a lower wage index). Finally, we note that the Medicare Payment Advisory Commission (MedPAC), in its March 2001 “Report to the Congress: Medicare Payment Policy,” recommended this policy (p. 82). (Section VII. of this preamble includes a discussion of MedPAC's recommendations and our responses.) To illustrate the potential negative impact on hospitals in an area where reclassifications of some hospitals to another area results in a decline in the wage index after the reclassified hospitals are excluded from the wage index calculation, MedPAC points out that hospitals in several MSAs have organized to pay qualifying hospitals not to reclassify. Our proposed policy change would remove this distorted incentive. The proposed wage index values for FY 2002 are shown in Tables 4A, 4B, 4C, and 4F in the Addendum to this proposed rule. Hospitals that are redesignated should use the wage index values shown in Table 4C. Areas in Table 4C may have more than one wage index value because the wage index value for a redesignated urban or rural hospital cannot be reduced below the wage index value for the rural areas of the State in which the hospital is located. When the wage index value of the area to which a hospital is redesignated is lower than the wage index value for the rural areas of the State in which the hospital is located, the redesignated hospital receives the higher wage index value; that is, the wage index value for the rural areas of the State in which it is located, rather than the wage index value otherwise applicable to the redesignated hospitals. As mentioned earlier, section 304(a) of Public Law 106-554 amended section 1886(d)(10)(D) of the Act by adding a new clause (v) to provide that a reclassification of a hospital by the MGCRB for purposes of the wage index is effective for 3 years (instead of 1 year) unless, under procedures established by the Secretary, the hospital elects to terminate the reclassification before the end of the 3-year period. Section 304(a) of Public Law 106-554 also amended section 1886(d)(10)(D) of the Act to specify that, for applications for reclassification for the wage index for FYs 2003 and later, the MGCRB must base any comparison of the average hourly wage of the hospital with the average hourly wage for hospitals in the area in which it is located and the area to which it seeks reclassification, using data from the most recently published hospital wage survey (as of the date of the hospital's application), as well as data from each of the two immediately preceding surveys. (Our policy proposals to incorporate the provisions of section 304(a) of Public Law 106-554 in the regulations are addressed in section IV.E. of this proposed rule). Consistent with the section 304(a) amendment, Tables 3A and 3B list the 3-year average hourly wage for each labor market area before the redesignation of hospitals, based on FY 1996, 1997, and 1998 wage data. In addition, Table 2 in the Addendum to this proposed rule includes the adjusted average hourly wage for each hospital from the FY 1996 and FY 1997 cost reporting periods, as well as the FY 1998 period. Table 2 also shows the 3-year average (as well as hospitals' average hourly wages for each of the 3 years) that the MGCRB will use (as published in the final rule following 
                        ( print page 22679)
                        this proposed rule) to evaluate a hospital's application for reclassification for FY 2003 (unless that average hourly wage is later revised in accordance with § 412.63(w)(2)). The 3-year averages are calculated by dividing the sum of the dollars (adjusted to a common reporting period using the method described previously in this section) across all 3 years, by the sum of the hours. If a hospital is missing data for any of the previous years, its average hourly wage for the 3-year period is calculated based on the data available during that period. Applications for FY 2003 reclassifications are due to the MGCRB by September 1, 2001. (We note that the new location and mailing address of the MGCRB and the Provider Reimbursement Review Board (PRRB) is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244-2670. The MGCRB and PRRB will be functioning at this new location as of May 21, 2001. Also, please specify whether the mail is intended for the MGCRB or the PRRB.) At the time this proposed wage index was constructed, the MGCRB had completed its review of FY 2002 reclassification requests. The proposed FY 2002 wage index values incorporate all 643 hospitals redesignated for purposes of the wage index (hospitals redesignated under section 1886(d)(8)(B) or section 1886(d)(10) of the Act for FY 2002. The final number of reclassifications may vary because some MGCRB decisions are still under review by the Administrator and because some hospitals may withdraw their requests for reclassification. Any changes to the wage index that result from withdrawals of requests for reclassification, wage index corrections, appeals, and the Administrator's review process will be incorporated into the wage index values published in the final rule following this proposed rule. The changes may affect not only the wage index value for specific geographic areas, but also the wage index value redesignated hospitals receive; that is, whether they receive the wage index value for the area to which they are redesignated, or a wage index value that includes the data for both the hospitals already in the area and the redesignated hospitals. Further, the wage index value for the area from which the hospitals are redesignated may be affected. Under § 412.273, hospitals that have been reclassified by the MGCRB are permitted to withdraw their applications within 45 days of the publication of this proposed rule in the 
                        **Federal Register.**
                         The request for withdrawal of an application for reclassification that would be effective in FY 2002 must be received by the MGCRB by June 18, 2001. A hospital that requests to withdraw its application may not later request that the MGCRB decision be reinstated. In addition, because the 3-year effect of the amendment made by section 304(a) of Public Law 106-554 is applicable to reclassifications for FY 2001 (which had already taken place prior to the date of enactment of Public Law 106-554) and because the application process for reclassification for FY 2002 had already been completed by the date of enactment, we are deeming hospitals that are reclassified for purposes of the wage index to one area for FY 2001 and are reclassified for purposes of the wage index or the standardized amount to another area for FY 2002 to be reclassified to the area for which they applied for FY 2002, unless they elect to receive the wage index reclassification they were granted for FY 2001. Consistent with our application withdrawal procedures under § 412.273, we are allowing hospitals that wish to receive, for FY 2002, the reclassification they were granted for FY 2001, to withdraw their applications within 45 days of the publication of this proposed rule (that is, by June 18, 2001. (These procedures are discussed in detail under section IV.E.1. of this preamble.) 3. Statewide Wage Index As stated earlier, section 304(b) of Public Law 106-554 requires the Secretary to establish, by October 1, 2001, a process (based on the voluntary process utilized by the Secretary under section 1848 of the Act) under which an appropriate statewide entity may apply to have all the geographic areas in the State treated as a single geographic area for purposes of computing and applying a single wage index, for reclassification beginning in FY 2003. Section 304(b) further requires that, if the Secretary applies a statewide wage index to an area, an application by an individual hospital in that area would not be considered. We believe the reference to the voluntary process utilized by the Secretary under section 1848 of the Act refers to the process whereby we allow a State containing multiple physician fee schedule payment areas (and thus multiple geographic adjustment factors) to voluntarily convert to a single statewide payment area with a single geographic adjustment factor (see § 414.4(b), as discussed in the June 24, 1994 
                        **Federal Register**
                         (59 FR 32759). Section IV.E. of this proposed rule contains our policy proposal for implementing the provisions of section 304(b) in regulations. We are proposing that hospitals that seek a statewide geographic reclassification under the amendments made by section 304(b) of Public Law 106-554 apply to the MGCRB with the same deadlines as other hospitals. An approved application by the MGCRB would mean that the data of all the hospitals in the State would be used in computing and applying the wage index for that State. We are proposing that the statewide wage index would be applicable for 3 years from the date of approval or until all of the participating hospitals terminate their approved statewide wage index reclassification (effective with the next full fiscal year after their termination request), whichever occurs first. 4. Section 402 of Public Law 106-113 Beginning October 1, 1988, section 1886(d)(8)(B) of the Act required us to treat a hospital located in a rural county adjacent to one or more urban areas as being located in the MSA to which the greatest number of workers in the county commute, if the rural county would otherwise be considered part of an urban area under the standards published in the 
                        **Federal Register**
                         on January 3, 1980 (45 FR 956) for designating MSAs (and for designating NECMAs), and if the commuting rates used in determining outlying counties (or, for New England, similar recognized areas) were determined on the basis of the aggregate number of resident workers who commute to (and, if applicable under the standards, from) the central county or counties of 
                        *all*
                         contiguous MSAs (or NECMAs). Hospitals that met the criteria using the January 3, 1980 version of these OMB standards were deemed urban for purposes of the standardized amounts and for purposes of assigning the wage data index. During FY 1994, we incorporated the revised MSA definitions based on 1990 census population data. As a result, some counties that previously were treated as an adjacent county under section 1886(d)(8)(B) of the Act officially became part of certain MSAs. However, as specified in the Act, we continued to utilize the January 3, 1980 standards. For FY 2000, there were 27 hospitals in 22 counties affected by this provision. On March 30, 1990, OMB issued revised 1990 standards (55 FR 12154). There has been an increasing amount of interest by the hospital industry in using the 1990 standards as opposed to the 1980 standards to determine which hospitals qualify under the provisions set forth in section 1886(d)(8)(B) of the Act. Section 402 of Public Law 106-113 provides that, with respect to FYs 2001 
                        ( print page 22680)
                        and 2002, a hospital may elect to have the 1990 standards applied to it for purposes of section 1886(d)(8)(B) and that, beginning with FY 2003, hospitals will be required to use the standards published in the 
                        **Federal Register**
                         by the Director of OMB based on the most recent decennial census. We worked with staff of the Population Distribution Branch within the Population Division of the United States Census Bureau to compile a list of hospitals that meet the March 30, 1990 standards using 1990 census population data and information prepared for the Metropolitan Area Standards Review Project. The conditions that must be met for a hospital located in a rural county adjacent to one or more urban areas to be treated as being located in the urban area to which the greatest number of workers in the rural county commute are as follows: The rural county would otherwise be considered part of an MSA but for the fact that the rural county does not meet the standard established by OMB relating to the commuting rate of workers between the county and the central county or counties of any adjacent MSA.
                    The county would meet the commuting standard if commuting to (and where applicable, from) the central county or central counties of all adjacent MSAs or NECMAs (rather than to just one) were considered. A county meeting the above commuting standards must also meet the other standards established by OMB for inclusion in an MSA as an outlying county. In order to meet these requirements, the rural county must have a degree of “metropolitan character.” “Metropolitan character” is established by meeting one of the following OMB standards, which were published in the 
                        **Federal Register**
                         on March 30, 1990: a. At least 50 percent of the employed workers residing in the county commute to the central county/counties, and either— The population density of the county is at least 25 persons per square mile; or
                    At least 10 percent of the population, or at least 5,000 persons, lives in the qualifier urbanized area(s). b. From 40 to 50 percent of the employed workers commute to the central county/counties, and either— The population density is at least 35 persons per square mile; or
                    At least 10 percent of the population, or at least 5,000 persons, lives in the qualifier urbanized area(s). c. From 25 to 40 percent of the employed workers commute to the central county/counties and either the population density of the county is at least 50 persons per square mile, or any two of the following conditions exist: Population density is at least 35 persons per square mile.
                    At least 35 percent of the population is urban.
                    At least 10 percent of the population, or at least 5,000 persons, lives in the qualifier urbanized area(s). d. From 15 to 25 percent of the employed workers commute to the central county/counties, the population density of the county is at least 50 persons per square mile, and any two of the following conditions also exist: Population density is at least 60 persons per square mile.
                    At least 35 percent of the population is urban.
                    Population growth between the last two decennial censuses is at least 20 percent.
                    At least 10 percent of the population, or at least 5,000 persons, lives in the qualifier urbanized area(s). Also accepted as meeting this commuting requirement under item d. are: The number of persons working in the county who live in the central county/counties is equal to at least 15 percent of the number of employed workers living in the county; or
                    The sum of the number of workers commuting to and from the central county/counties is equal to at least 20 percent of the number of employed workers living in the county. e. From 15 to 25 percent of the employed workers commute to the central county/counties, the population density of the county is less than 50 persons per square mile, and any two of the following conditions also exist: At least 35 percent of the population is urban.
                    Population growth between the last two decennial censuses is at least 20 percent.
                    At least 10 percent of the population, or at least 5,000 persons, lives in the qualifier urbanized area(s). f. At least 2,500 of the population lives in a central city of the MSA located in the qualifier urbanized area(s). When we apply the 1990 standards as opposed to 1980 standards, the number of qualifying counties increases from 22 to 31. On the basis of the evaluation of these data, effective for discharges occurring on or after October 1, 2001, hospitals located in the first column of the following table are proposed to be considered, for purposes of assigning the inpatient standardized amount and the wage index, to be located in the corresponding urban area in the second column: Rural County
MSAChilton, AL
Birmingham, AL.Marshall, AL
Huntsville, AL.Talladega, AL
Anniston, AL.Bradford, FL
Jacksonville, FL.Hendry, FL
West Palm Beach-Boca Raton, FL.Putnam, FL
Gainesville, FL.Jackson, GA
Athens, GA.Christian, IL
Springfield, IL.Macoupin, IL
St. Louis, MO-IL.Piatt, IL
Champaign-Urbana, IL.Brown, IN
Indianapolis, IN.Carroll, IN
Lafayette, IN.Henry, IN
Indianapolis, IN.Jefferson, KS
Topeka, KS.Barry, MI
Kalamazoo-Battle Creek, MI.Cass, MI
Benton Harbor, MI.Ionia, MI
Grand Rapids-Muskegon-Holland, MI.Shiawassee, MI
Flint, MI.Tuscola, MI
Saginaw-Bay City-Midland, MICaswell, NC
Greensboro-Winston Salem-High Point, NC.Greene, NC
Greenville, NC.Harnett, NC
Raleigh-Durham-Chapel Hill, NC.Wilson, NC
Rocky Mount, NC.Preble, OH
Dayton-Springfield, OH.Van Wert, OH
Lima, OH.Adams, PA
York, PA.Lawrence, PA
Pittsburgh, PA.Monroe, PA
Newark, NJ.Schuylkill, PA
Reading, PA.Jefferson, WI
Milwaukee-Waukesha, WI.Walworth, WI
Milwaukee-Waukesha, WI.
 There are 14 counties that meet the qualifying criteria using 1990 standards that did not meet the criteria using the 1980 standards. These 14 counties are: Chilton, AL Talladega, AL Bradford, FL Hendry, FL Putnam, FL Jackson, GA Piatt, IL Brown, IN Carroll, IN Greene, NC Wilson, NC Adams, PA Monroe, PA Schuylkill, PA In addition, when we apply the 1980 standards for three of the counties, the MSA assigned is different from the MSA that would be assigned using the 1990 standards. These counties are as follows: 
                        ( print page 22681) Rural county
1980 MSA designation
1990 MSA designationIonia, MI
Lansing-East Lansing, MI
Grand Rapids-Muskegon-Hollan, MI.Caswell, NC
Danville, VA
Greensboro-Winston Salem-High Point, NC.Harnett, NC
Fayetteville, NC
Raleigh-Durham-Chapel Hill, NC.
 Section 402 of Public Law 106-113 states that hospitals may elect to use either the January 3, 1980 standards or the March 30, 1990 standards for payments during FY 2001 and FY 2002. We are assuming hospitals will elect to go to the MSA resulting in the highest payment amount accounting for the applicable wage indexes and standardized amounts. Based on our analysis, we believe all hospitals in the designated rural counties would benefit by being included in the respective MSAs shown above. Therefore, we are proposing to assign the FY 2002 standardized amount and wage index of each respective MSA to the affected hospitals. Hospitals electing not to use the 1990 standards would be required to notify their fiscal intermediary in writing of such election prior to September 1, 2001, in order to allow sufficient time to reflect this change in our payment systems. (For FY 2001, we are providing further information related to this election, including recalculated wage indexes, through separate instruction.) We note that five rural counties no longer meet the qualifying criteria when we apply the revised OMB standards. These rural counties are as follows: Indian River, FL; Mason, IL; Owen, IN; Morrow, OH; and Lincoln, WV. For FY 2002, we propose to continue to treat these hospitals as attached to an MSA on the basis of the 1980 standards. Beginning FY 2003, they must meet the 1990 standards to continue to be treated as such. We stated in the August 1, 2000 final rule that implemented changes to the prospective payment system for FY 2001 that we were in the process of working with OMB to identify the hospitals that would be affected by section 402 of Public Law 106-113 (65 FR 47076). We further indicated we would revise payments to hospitals in the affected counties as soon as data were available. Now that the affected counties have been identified, hospitals in the 14 counties identified above will be offered the opportunity to elect this designation, as previously described. (For FY 2001, we are providing further information related to this election, including recalculated wage indexes, through separate instructions.) Finally, three hospitals located in counties affected by the revised OMB standards also have been reclassified by the MGCRB. The affected hospitals are listed below. If the hospitals do not wish to be reclassified for FY 2002 based on their new designation as described above, they must follow the procedures described above for requesting that their reclassification be withdrawn. Provider Number
1990 MSA designation
FY 2002 reclassification, MSA34-0071
Raleigh-Durham-Chapel Hill, NC
Fayetteville, NC.34-0124
Raleigh-Durham-Chapel Hill, NC
Fayetteville, NC.34-0126
Rocky Mount, NC
Raleigh-Durham-Chapel Hill, NC (wage index only.)
 G. Requests for Wage Data Corrections As stated in section II.D. of this preamble, the data file used to construct the proposed wage index includes FY 1998 data submitted to HCFA as of mid-February 2001. In a memorandum dated February 5, 2001, we instructed all Medicare intermediaries to inform the prospective payment hospitals they service of the availability of the wage data file and the process and timeframe for requesting revisions. The wage data file was made available on February 13, 2001 through the Internet at HCFA's home page (http://www.hcfa.gov). We also instructed the intermediaries to advise hospitals of the availability of these data either through their representative hospital organizations or directly from HCFA. Additional details on ordering this data file are discussed in section IX.A of this preamble, “Requests for Data from the Public.” In addition, Table 2 in the Addendum to this proposed rule contains each hospital's adjusted average hourly wage used to construct the proposed wage index values for the past 3 years, including the FY 1998 data used to construct the proposed FY 2002 wage index. It should be noted that the hospital average hourly wages shown in Table 2 do not reflect any changes made to a hospital's data after mid-February 2001. Changes approved by a hospital's fiscal intermediary and forwarded to HCFA by April 9, 2001, will be reflected on the final public use wage data file scheduled to be made available on or about May 4, 2001. We believe hospitals have sufficient time to ensure the accuracy of their FY 1998 wage data. Moreover, the ultimate responsibility for accurately completing the cost report rests with the hospital, which must attest to the accuracy of the data at the time the cost report is filed. Hospitals should know what wage data were submitted on their cost reports. Additionally, they are notified of any changes to their data as a result of their intermediary's review. However, if a hospital believed that its FY 1998 wage data were incorrectly reported, the hospital was to submit corrections along with complete, detailed supporting documentation to its intermediary by March 9, 2001. Hospitals were notified of this deadline, and of all other possible deadlines and requirements, through written communications from their fiscal intermediaries in early February 2001. After reviewing requested changes submitted by hospitals, intermediaries transmitted any revised cost reports to HCFA and forwarded a copy of the revised Worksheet S-3, Parts II and III to the hospitals. In addition, fiscal intermediaries were to notify hospitals of the changes or the reasons that changes were not accepted. This procedure ensures that hospitals have every opportunity to verify the data that will be used to construct their wage index values. We believe that fiscal intermediaries are generally in the best position to make evaluations regarding the appropriateness of a particular cost and whether it should be included in the wage index data. However, if a hospital disagrees with the intermediary's resolution of a requested change, the hospital may contact HCFA in an effort to resolve policy disputes. We note that the April 9, 2001 deadline also applies to these requested changes. We will not consider factual determinations at this time, as these 
                        ( print page 22682)
                        should have been resolved earlier in the process. Any wage data corrections to be reflected in the final wage index must have been reviewed and verified by the intermediary and transmitted to HCFA on or before April 9, 2001. (The deadline for hospitals to request changes from their fiscal intermediaries was March 9, 2001.) These deadlines are necessary to allow sufficient time to review and process the data so that the final wage index calculation can be completed for development of the final prospective payment rates to be published by August 1, 2001. We have created the process described above to resolve all substantive wage data correction disputes before we finalize the wage data for the FY 2002 payment rates. Accordingly, hospitals that do not meet the procedural deadlines set forth above will not be afforded a later opportunity to submit wage data corrections or to dispute the intermediary's decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines set forth above will not be permitted to later challenge, before the Provider Reimbursement Review Board, HCFA's failure to make a requested data revision (See 
                        *W. A. Foote Memorial Hospital*
                         v. 
                        *Shalala,*
                         No. 99-CV-75202-DT (E.D. Mich. 2001)). The final wage data public use file will be released by May 4, 2001. Hospitals should examine both Table 2 of this proposed rule and the May 4 final public use wage data file (which reflects revisions to the data used to calculate the values in Table 2) to verify the data HCFA is using to calculate the wage index. Hospitals will have until June 4, 2001, to submit requests to correct errors in the final wage data due to data entry or tabulation errors by the intermediary or HCFA. The correction requests that will be considered at that time will be limited to errors in the entry or tabulation of the final wage data that the hospital could not have known about before the release of the final wage data public use file. As with the file made available in February 2001, HCFA will make the final wage data file released in May 2001 available to hospital associations and the public on the Internet. However, the May 2001 file will be made available solely for the limited purpose of identifying any potential errors made by HCFA or the intermediary in the entry of the final wage data that result from the correction process described above (with the March 9 deadline). Hospitals are encouraged to review their hospital wage data promptly after the release of the final file. Data presented at this time cannot be used by hospitals to initiate new wage data correction requests. If, after reviewing the final file, a hospital believes that its wage data are incorrect due to a fiscal intermediary or HCFA error in the entry or tabulation of the final wage data, it should send a letter to both its fiscal intermediary and HCFA. The letters should outline why the hospital believes an error exists and provide all supporting information, including dates. These requests must be 
                        *received*
                         by HCFA and the intermediaries no later than June 4, 2001. Requests mailed to HCFA should be sent to: Health Care Financing Administration; Center for Health Plans and Providers; Attention: Wage Index Team, Division of Acute Care; C4-07-07; 7500 Security Boulevard; Baltimore, MD 21244-1850. Each request must also be sent to the hospital's fiscal intermediary. The intermediary will review requests upon receipt and contact HCFA immediately to discuss its findings. At this point in the process, that is, between release of the May 2001 wage index file and June 4, 2001, changes to the hospital wage data will only be made in those very limited situations involving an error by the intermediary or HCFA that the hospital could not have known about before its review of the final wage data file. Specifically, neither the intermediary nor HCFA will accept the following types of requests at this stage of the process: Requests for wage data corrections that were submitted too late to be included in the data transmitted to HCFA on or before April 9, 2001.
                    Requests for correction of errors that were not, but could have been, identified during the hospital's review of the February 2001 wage data file.
                    Requests to revisit factual determinations or policy interpretations made by the intermediary or HCFA during the wage data correction process. Verified corrections to the wage index received timely (that is, by June 4, 2001) will be incorporated into the final wage index to be published by August 1, 2001 and effective October 1, 2001. Again, we believe the wage data correction process described above provides hospitals with sufficient opportunity to bring errors in their wage data to the intermediary's attention. Moreover, because hospitals will have access to the final wage data by early May 2001, they will have the opportunity to detect any data entry or tabulation errors made by the intermediary or HCFA before the development and publication of the FY 2002 wage index by August 1, 2001 and the implementation of the FY 2002 wage index on October 1, 2001. If hospitals avail themselves of this opportunity, the wage index implemented on October 1 should be accurate. Nevertheless, in the event that errors are identified after that date, we retain the right to make midyear changes to the wage index under very limited circumstances. Specifically, in accordance with § 412.63(w)(2), we may make midyear corrections to the wage index only in those limited circumstances in which a hospital can show (1) That the intermediary or HCFA made an error in tabulating its data; and (2) that the hospital could not have known about the error, or did not have an opportunity to correct the error, before the beginning of FY 2002 (that is, by the June 4, 2001 deadline). As indicated earlier, since a hospital will have the opportunity to verify its data, and the intermediary will notify the hospital of any changes, we do not foresee any specific circumstances under which midyear corrections would be necessary. However, should a midyear correction be necessary, the wage index-change for the affected area will be effective prospectively from the date the correction is made. H. Modification of the Process and Timetable for Updating the Wage Index Although the wage data correction process described above has proven successful in the past for ensuring that the wage data used each year to calculate the wage indexes are generally reliable and accurate, we are concerned about the growing volume of wage data revisions initiated by hospitals during February and the first week of March. We first discussed this issue in the FY 1998 proposed rule (62 FR 29918). At that time, we noted that, in developing the FY 1997 wage index, the wage data were revised between the proposed and final rules for more than 13 percent of the hospitals (approximately 700 of 5,200). Last year, in developing the FY 2001 wage index, the wage data were revised between the proposed and final rules for more than 32 percent of the hospitals (1,605 of 4,950). Since hospitals are expected to submit complete and accurate cost report data, and intermediaries review and request hospitals to correct problematic wage data before the data are submitted to HCFA in mid-November, we believe there should be limited revisions at this stage of the process. We remind the hospital community that the primary purpose of this file is to allow hospitals to verify that we have their correct data on file. However, according to information received from the 
                        ( print page 22683)
                        intermediaries, these late revisions are frequently due to hospitals' lack of responsiveness in providing sufficient information to the intermediaries during the desk reviews (that is, during the intermediary's review of the hospital's cost report). We are proposing two changes to the wage index development process and timetable beginning with the FY 2003 wage index. We believe these changes will encourage earlier submissions of wage data revisions by hospitals and will allow intermediaries more time to address the heavy volume of revisions requested after the intermediaries have completed their desk reviews of these data. First, we are proposing to release the preliminary wage data file by early January rather than early February. As with the current preliminary file, the January file would include desk reviewed wage data that intermediaries submitted to HCFA by November of the previous year and any timely revisions HCFA received from intermediaries prior to release of the January file. Hospitals would be allowed until early February to submit requests for wage data revisions to their intermediaries. Second, intermediaries would be allowed approximately 8 weeks from the hospitals' deadline for submitting revision requests (that is, until early March) to review and transmit revised wage data to HCFA. We believe this proposed revised schedule will improve the quality of the wage index by allowing intermediaries more time to sufficiently review wage data revisions before the data are submitted to HCFA. Further, we believe the proposed revised process will encourage hospitals to submit revisions earlier, so the proposed wage index, from which hospitals base geographic reclassification decisions, is more accurate. IV. Other Decisions and Proposed Changes to the Prospective Payment System for Inpatient Operating Costs and Graduate Medical Education Costs A. Sole Community Hospitals (SCHs) (§§ 412.63, 412.71, 412.72, 412.73, 412.75, 412.77, and 412.92) For the benefit of the reader, in this proposed rule, we are discussing and seeking to clarify many of the rules and policies governing SCHs because of the legislative changes that have occurred in recent years. It has been several years since the SCH criteria have been published in one location. Rather than continue to refer to various 
                        **Federal Register**
                         documents and sections of the Code of Federal Regulations, we are publishing a detailed discussion of these policies, proposing to make further changes to incorporate the provisions of sections 213, 302, 303, 304, and 311 of Public Law 106-554, and proposing to clarify other related policies. Under the hospital inpatient prospective payment system, special payment protections are provided to an SCH. Section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that, by reason of factors such as isolated location, weather conditions, travel conditions, absence of other like hospitals (as determined by the Secretary), or historical designation by the Secretary as an Essential Access Community Hospital (EACH), is the sole source of inpatient hospital services reasonably available to Medicare beneficiaries. The regulations that set forth the criteria that a hospital must meet to be classified as an SCH are at § 412.92. To be classified as an SCH, a hospital must either have been designated as an SCH prior to the beginning of the prospective payment system on October 1, 1983, and must be located more than 35 miles from other like hospitals, or the hospital must be located in a rural area and meet one of the following requirements: It is located more than 35 miles from other like hospitals.
                    It is located between 25 and 35 miles from other like hospitals, and it— —Serves at least 75 percent of all inpatients, or 75 percent of Medicare beneficiary inpatients, within a 35-mile radius or, if larger, within its service area; or —Has fewer than 50 beds and would qualify on the basis of serving 75 percent of its area's inpatients except that some patients seek specialized care unavailable at the hospital. It is located between 15 and 25 miles from other like hospitals, and because of local topography or extreme weather conditions, the other like hospitals are inaccessible for at least 30 days in each of 2 out of 3 years.
                    The travel time between the hospital and the nearest like hospital is at least 45 minutes because of distance, posted speed limits, and predictable weather conditions.
                    Effective with hospital cost reporting periods beginning on or after April 1, 1990, section 1886(d)(5)(D)(i) of the Act, as amended by section 6003(e) of Public Law 101-239, provides that SCHs are paid based on whichever of the following rates yields the greatest aggregate payment:
                    The Federal rate applicable to the hospital.
                    The updated hospital-specific rate based on FY 1982 costs per discharge.
                    The updated hospital-specific rate based on FY 1987 costs per discharge. Effective with hospital cost reporting periods beginning on or after October 1, 2000, section 1886(b)(3)(I)(i) of the Act, as added by section 405 of Public Law 106-113 and amended by section 213 of Public Law 106-554, provides for other options, in addition to the three bulleted options in the above paragraph, for determining which rate would yield the greatest aggregate payment. For discharges for FY 2001 through FY 2003, these additional optional rates are— A phase-in blended rate of the updated hospital-specific rate based on FY 1982 costs per discharge and an FY 1996 hospital-specific rate; or
                    A phase-in blended rate of the updated hospital-specific rate based on FY 1987 costs per discharge and an FY 1996 hospital-specific rate. For discharges beginning in FY 2004, the additional optional rate would be 100 percent of the FY 1996 hospital-specific rate. For each cost reporting period, the fiscal intermediary determines which of the payment options will yield the highest rate of payment. Payments are automatically made at the highest rate using the best data available at the time the fiscal intermediary makes the determination. However, it may not be possible for the fiscal intermediary to determine in advance precisely which of the rates will yield the highest payment by year's end. In many instances, it is not possible to forecast the update factor for the Federal rates, outlier payments, the amount of the DSH adjustment, or the IME adjustment, all of which are applicable only to payments based on the Federal rate. The fiscal intermediary makes a final adjustment at the close of the cost reporting period to determine precisely which of the payment rates would yield the highest payment to the hospital. If a hospital disagrees with the fiscal intermediary's determination regarding the final amount of program payment to which it is entitled, it has the right to appeal the fiscal intermediary's decision in accordance with the procedures set forth in Subpart R of Part 405, which concern provider payment determinations and appeals. In calculating a hospital-specific rate for an SCH based on its FY 1996 cost reporting period, we will, to the extent possible, use the same methodology that we used to calculate the hospital-specific rate based on either the FY 1982 or FY 1987 cost reporting period. That 
                        ( print page 22684)
                        methodology is set forth in §§ 412.71, 412.72, 412.73, 412.75 and 412.77. If a hospital has a cost reporting period ending in FY 1982, it will be paid a hospital-specific rate based on its FY 1982 costs; or a hospital-specific rate based on its FY 1987 costs; or a hospital-specific rate based on its FY 1996 costs (which, until FY 2004, would be a blend of the greater of the FY 1982 or FY 1987 costs and the FY 1996 costs); or it will be paid based on the Federal rate.
                    If a hospital has no cost reporting period ending in FY 1982, it will be paid a hospital-specific rate based on its FY 1987 costs; or a hospital-specific rate based on its FY 1996 costs (which, until FY 2004, would be a blend of its FY 1987 costs and FY 1996 costs); or it will be paid based on the Federal rate.
                    If a hospital has no cost reporting period ending in either FY 1982 or FY 1987, it will be paid based on its FY 1996 costs; or it will be paid based on the Federal rate.
                    If a hospital has no cost reporting period ending in FY 1982, FY 1987, or FY 1996, it cannot be paid based on a hospital-specific rate; it will be paid based on the Federal rate.
                    If a hospital was operating during any or all of FY 1982, FY 1987, or FY 1996, but, for some reason, the cost report records are no longer available, the hospital will be treated as if it had no cost report for the applicable period. The hospital will not be allowed to substitute any other base period for the FY 1982, FY 1987, or FY 1996 base period. For each SCH, the fiscal intermediary will calculate a hospital-specific rate based on the hospital's FY 1982, FY 1987, or FY 1996 cost report as follows: Determine the hospital's total allowable Medicare inpatient operating cost, as stated on the cost report.
                    Divide the total Medicare operating cost by the number of Medicare discharges (without adjusting for transfers) in the cost reporting period to determine the base period cost per case.
                    In order to take into consideration the hospital's individual case-mix, the base year cost per case is divided by the hospital's case-mix index applicable to the cost reporting period. This step is necessary to adjust the hospital's base period cost for case mix. This is done to remove the effects of case mix from the base period costs per case. Payments using these base period costs are then adjusted to reflect the actual case mix during the payment year. A hospital's case mix is computed based on its Medicare patient discharges subject to DRG-based payment. The fiscal intermediary will inform each SCH of its hospital-specific rate based on its applicable cost reporting period within 180 days after the start of its cost reporting period. An SCH is also eligible for a payment adjustment if, for reasons beyond its control, it experiences a decline in volume of greater than 5 percent compared to its preceding cost reporting period. This adjustment is also available to hospitals that could qualify as SCHs but choose not to be paid as SCHs; that is, hospitals that qualify and successfully apply to be designated as SCHs but continue to receive payments based on the Federal rate. In addition, section 6003(c)(1) of Public Law 101-239 deleted the sunset date on the 5-percent volume decline adjustment, thus allowing SCHs to receive the adjustment indefinitely. The sunset provision was included under section 1886(d)(5)(C)(ii) of the Act. (Section 6003(c)(1) of Public Law 101-239 amended that provision and redesignated it as section 1886(d)(5)(D) of the Act.) In the September 1, 1983, issue of the 
                        **Federal Register**
                         (48 FR 39781), we stated that any hospital designated as an SCH would retain that status until it experienced a change in circumstances. Section 6003(e)(3) of Public Law 101-239 specifically stated that any hospital classified as an SCH as of the date of enactment of Public Law 101-239 (December 19, 1989), will retain its SCH status even if the hospital did not meet the criteria established under section 6003(e)(1) of that law. These hospitals are the “grandfathered” SCH hospitals. Therefore, we have continued to allow hospitals designated as SCHs prior to December 19, 1989, to be “grandfathered” under current criteria. In the June 4, 1991, 
                        **Federal Register,**
                         we stated that a hospital's special status as an SCH would not be retained in light of the hospital's geographic reclassification for purposes of the standardized amount. In the event the hospital's reclassification ceases, it must reapply for special status and must meet all of the applicable qualifying criteria in effect at the time it seeks requalification (56 FR 25482). However, in the event a “grandfathered” SCH was successfully reclassified, it would be reinstated as an SCH if its reclassification ceased. Section 401(a) of Public Law 106-113 established that any subsection (d) hospital (section 1886(d) of the Act) located in an urban area may be redesignated as being located in a rural area if the hospital meets one of several criteria established by the legislation. One of these criteria is that the hospital could qualify as an SCH if the hospital were located in a rural area. Under this provision, an urban hospital that may have been “grandfathered” as an SCH could now qualify and receive payment as an SCH if it met the criteria of a rural SCH. Given this extension of SCH eligibility, we no longer believe it is necessary to extend special protection to “grandfathered” SCHs that successfully apply for geographic reclassification through the MGCRB for the standardized amount after their MGCRB reclassification ends. This circumstance falls under the provisions of §§ 412.92(b)(3) and (b)(5), which state that an approved classification as an SCH remains in effect without need for reapproval unless there is a change in the circumstances under which the classification was approved. We believe that a successful reclassification by the MGCRB fits the definition of a change in circumstances. Because some hospitals may not have understood the effect reclassification would have on their special status, under existing § 412.273(a) we are permitting affected hospitals the option to withdraw their applications for reclassification for FY 2002, even if the MGCRB has issued a decision, by submitting a withdrawal request to the MGCRB within 45 days of publication of this proposed rule. Finally, just as a competing hospital that closes leaves an opportunity for an existing hospital to qualify as an SCH, a new hospital that opens in an area with an existing hospital designated as an SCH endangers the SCH status of the existing hospital. As of October 1, 1997, no designations of hospitals as EACHs can be made. The EACHs designated by HCFA before October 1, 1997, will continue to be paid as SCHs for as long as they comply with the terms, conditions, and limitations under which they were designated as EACHs. Under § 412.92(b)(2), we define the effective dates for several situations in which a hospital gains or gives up SCH status. First, SCH status and the associated payment adjustment is effective 30 days after HCFA's written notification to the SCH. Thus, 30 days after the issuance of HCFA's notice of approval, the hospital is considered to be an SCH and the payment adjustment is applied to discharges occurring on or after that date. Second, § 412.92(b)(4)(ii) defines the effective date when a hospital chooses to give up its SCH status. Our policy has always been that an SCH can elect to give up its SCH status at any time by submitting a written request to the appropriate HCFA regional office 
                        ( print page 22685)
                        through its fiscal intermediary. The change to fully national rates becomes effective no later than 30 days after the hospital submits its request. We believe that the “no later than 30 days” policy for the effective date for cancelling SCH status is in keeping with the prospective nature of the prospective payment system. In addition, the 30-day timeframe to give up SCH status provides the fiscal intermediaries with enough time to alter their automated payment systems prospectively, thus avoiding expensive and time-consuming reprocessing of claims. The variable timeframe of “no later than 30 days from the date of the hospital's request” also permits the regional office, the fiscal intermediary, and the hospital to select a mutually agreeable date, for example, at the end of a month, to facilitate the change in SCH status. We expect that hospitals will anticipate when they wish to give up SCH status and to submit their requests in sufficient time to permit the 30-day period for making the change. In addition, § 412.92(b)(2)(ii) defines the effective date of SCH status in the situation where a final and nonappealable administrative or judicial decision reverses HCFA's denial of SCH status to a hospital. In this situation, if the hospital's application was submitted on or after October 1, 1983, the effective date will be 30 days after the date of HCFA's original written notification of denial. Under § 412.92(b)(2)(iii), we define retroactive approval of SCH status. If a hospital is granted retroactive approval of SCH status by a final and nonappealable court order or an administrative decision under subpart R of Part 405 of the regulations, and it wishes its SCH status terminated prior to the current date (that is, it wishes to be paid as an SCH for a time-limited period, all of which is in the past), it must submit written notice to the HCFA regional office through its fiscal intermediary within 90 days of the court order or the administrative decision. This written notice must clearly state that, although SCH status was granted retroactively by the court order or by the administrative decision, the hospital wants this status terminated as of a specific date. If written notice is not received within 90 days of the court order or the administrative decision, SCH status will continue. Written requests to terminate SCH status that are received subsequent to the 90-day period will be effective no later than 30 days after the request is submitted, as discussed above. Under § 412.92(c)(1), we define mileage. We believe that mileage should continue to be measured by the shortest route over improved roads maintained by any local, State, or Federal Government entity for public use. We consider improved roads to include the paved surface up to the front entrance of the hospital because this portion of the distance is utilized by the public to access the hospital. This definition provides consistency with the  interpretation of the MGCRB when considering hospital reclassification applications. The MGCRB measures the distance between the hospital and the county line of the area to which it seeks reclassification beginning with the paved area outside the front entrance of the hospital. This provides a consistent, national definition that is easily recognizable for each hospital. Finally, rounding of mileage is not permissible. this is also consistent with the MGCRB definition of mileage (56 FR 25483). We are proposing to revise the definition of “miles” under § 412.92(c)(1) to state that an improved road includes the paved surface up to the front entrance of the hospital. Under § 412.92(c)(2), we define “like” hospital. We consider like hospitals to be those hospitals furnishing short-term acute care. That is, a hospital may not qualify for an SCH classification on the grounds that neighboring hospitals offer specialty services, thereby seeking to exclude close-by competitors as like hospitals, in order to meet the mileage criteria by measuring to a like hospital that is located further away. For example, we believe that competing hospitals within a given area may each have their own specialty services, while all the facilities continue to be considered short-term acute care hospitals. We note that under § 412.92(a)(1)(ii), a hospital with fewer than 50 beds may qualify for SCH status under a special provision if patients that it would normally serve are seeking care elsewhere due to the unavailability of specialty services. This means that, if a hospital can prove that the patients from its service area are seeking specialty services elsewhere (such as, among others, heart surgery, transplants, and burn care), rather than routine care, and, because of that fact, that it otherwise would have met the criteria of section § 412.92(a)(1)(i), it can qualify as an SCH. We note that § 412.92(b)(1)(iii)(A) retains an outdated reference to “hospitals located within a 50 mile radius of the hospital.” With the issuance of the September 1, 1989 
                        **Federal Register**
                         (54 FR 36481, 36482), the 50 mile radius was determined to be unreasonable and all references should have been changed to 35 miles in accordance with § 412.92(a)(1)(i). We are proposing to revise the reference to “a 50 mile radius” in § 412.92(b)(1)(iii)(A) to read “a 35 mile radius”. We note that the travel time and weather conditions criteria set forth in § 412.92(a)(3) were discussed in detail in the September 4, 1990 
                        **Federal Register**
                         (55 FR 36050 through 36055 and 36162 through 36163). Under § 412.92(a)(1)(i) and (b)(1)(ii), we define the market area analysis criteria used to determine SCH status. There are several points concerning these requests for SCH status that we would like to clarify in this proposed rule. First, a hospital seeking an SCH designation based on these criteria must make its initial request to the fiscal intermediary with all the appropriate documents as will be discussed below (§ 412.92(b)(1)(i)). The fiscal intermediary will make a recommendation on the request, based on receipt of all the appropriate documentation and its own investigation and analysis, and that recommendation will be forwarded to the HCFA regional office for another level of review and final approval or disapproval. The fiscal intermediary would forward its recommendation to the HCFA regional office located in the hospital's area as opposed to the fiscal intermediary's area, if there is a difference in these areas. As discussed above, an approval of the request for SCH status will be effective 30 days after HCFA issues the approval letter. If a determination on the request requires the use of data that are available at HCFA central office only, upon receipt of the fiscal intermediary's recommendation, the HCFA regional office will forward the request and the fiscal intermediary's recommendation to the appropriate contact at HCFA central office where the determination will be made. Second, a hospital must provide patient origin data (the number of patients from each zip code from which the hospital draws inpatients) for all inpatient discharges to document the boundaries of its service area (§ 412.92(b)(1)(ii)(A)). Or, the hospital can request that HCFA develop patient origin data to define its service area based on the number of patients from each zip code from which the hospital draws Medicare Part A inpatients (§ 412.92(b)(1)(iii)). Then, the lowest number of zip codes in descending percentage order of Medicare inpatients that meets the 75-percent threshold will be used to represent the hospital's service area. We note that hospitals cannot substitute zip codes elsewhere 
                        ( print page 22686)
                        on the list in order to manipulate the service area. See (
                        *Howard Young Medical Center, Inc.*
                         v. 
                        *Shalala,*
                         207 F.3d 437 (7th Cir. 2000).) Third, the hospital must provide patient origin data from all other hospitals located within a 35-mile radius of it or, if larger, within its service area, to document that no more than 25 percent of either all of the population or the Medicare beneficiaries residing in the hospital's service area and hospitalized for inpatient care were admitted to other like hospitals for care (§ 412.92(b)(1)(ii)(B)). Again, HCFA central office can develop patient origin data for other hospitals within the requesting hospital's service area if the hospital is requesting SCH status based on an examination of Medicare Part A inpatient utilization. In either case, the requesting hospital is required to submit a comprehensive list of hospitals located within a 35-mile radius or, if larger, within its service area. This list will be checked by both the fiscal intermediary and HCFA. Again, a requesting hospital cannot argue that a competing hospital should be excluded from the service area based on the existence of specialty services at that hospital if both hospitals are short-term acute care facilities. Distances between all reported hospitals will be checked by both the fiscal intermediary and HCFA, through electronic geographic mapping services (such as Yahoo or Mapquest) or by physically driving the distance involved. In addition, data will be analyzed based on the year for which the hospital requests SCH status. Subsequent hospital mergers or terminations will not be taken into consideration in processing the request. For example, if a hospital requests SCH status using data for FY 1999, and that data show that there is a competing hospital in existence that subsequently closed its doors in FY 2000, the data will be analyzed with the terminated hospital in existence, unless the hospital seeking SCH status applies using later data, such as FY 2001. This principle is consistent with how we analyze wage index data. If a terminated hospital has a viable cost report for the year of wage data that is being analyzed to produce the wage index, its data are included as part of the computation. B. Rural Referral Centers (§ 412.96) Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at § 412.96 set forth the criteria a hospital must meet in order to receive special treatment under the prospective payment system as a rural referral center. For discharges occurring before October 1, 1994, rural referral centers received the benefit of payment based on the other urban amount rather than the rural standardized amount. Although the other urban and rural standardized amounts were the same for discharges beginning with that date, rural referral centers would continue to receive special treatment under both the disproportionate share hospital (DSH) payment adjustment and the criteria for geographic reclassification. Section 401 of Public Law 106-113 amended section 1886(d)(8) of the Act by adding subparagraph (E), which creates a mechanism, separate and apart from the MGCRB, permitting an urban hospital to apply to the Secretary to be treated as being located in the rural area of the State in which the hospital is located. The statute directs the Secretary to treat a qualifying hospital as being located in the rural area for purposes of provisions under section 1886(d) of the Act. Congress clearly intended hospitals that become rural under section 1886(d)(8)(E) of the Act to receive some benefit as a result. In addition, one of the criteria under section 1886(d)(8)(E) of the Act is that the hospital would qualify as an SCH or a rural referral center if it were located in a rural area. An SCH would be eligible to be paid on the basis of the higher of its hospital-specific rate or the Federal rate. On the other hand, the only benefit under section 1886(d) of the Act for an urban hospital to become a rural referral center would be waiver of the proximity requirements that are otherwise applicable under the MGCRB process, as set forth in § 412.230(a)(3)(i). When we implemented section 401 of Public Law 106-113 in the August 1, 2000 final rule (65 FR 47089), we stated that we believed Congress contemplated that hospitals might seek to be reclassified as rural under section 1886(d)(8)(E) of the Act in order to become rural referral centers so that the hospitals would be exempt from the MGCRB proximity requirement and could be reclassified by the MGCRB to another urban area. Therefore, in that final rule we sought a policy approach that would appropriately address our concern that these urban to rural redesignations not be utilized inappropriately, and that would benefit hospitals seeking to reclassify under the MGCRB process by achieving rural referral center status. (We became aware of several specific hospitals that were rural referral centers for FY 1991, but subsequently lost their status when the county in which they were located became urban, and had expressed their wish to be redesignated as a rural referral center in order to be eligible to reclassify.) Accordingly, in light of section 1886(d)(8)(E) of the Act and the language in the accompanying Conference Report, effective as of October 1, 2000, hospitals located in what is now an urban area, if they were ever a rural referral center, were reinstated to rural referral center status. In addition, as discussed in 62 FR 45999 and 63 FR 26317, under section 4202 of Public Law 105-33, a hospital that was classified as a rural referral center for FY 1991 is to be classified as a rural referral center for FY 1998 and later years so long as that hospital continued to be located in a rural area and did not voluntarily terminate its rural referral center status. Otherwise, a hospital seeking rural referral center status must satisfy applicable criteria. One of the criteria under which a hospital may qualify as a rural referral center is to have 275 or more beds available for use. A rural hospital that does not meet the bed size requirement can qualify as a rural referral center if the hospital meets two mandatory prerequisites (specifying a minimum case-mix index and a minimum number of discharges) and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume). With respect to the two mandatory prerequisites, a hospital may be classified as a rural referral center if its— Case-mix index is at least equal to the lower of the median case-mix index for urban hospitals in its census region, excluding hospitals with approved teaching programs, or the median case-mix index for all urban hospitals nationally; and
                    Number of discharges is at least 5,000 per year, or if fewer, the median number of discharges for urban hospitals in the census region in which the hospital is located. (The number of discharges criterion for an osteopathic hospital is at least 3,000 discharges per year.) 1. Case-Mix Index Section 412.96(c)(1) provides that HCFA will establish updated national and regional case-mix index values in each year's annual notice of prospective payment rates for purposes of determining rural referral center status. The methodology we use to determine the proposed national and regional case-mix index values is set forth in regulations at § 412.96(c)(1)(ii). The proposed national case-mix index value includes all urban hospitals nationwide, and the proposed regional values are the median values of urban hospitals within each census region, excluding those 
                        ( print page 22687)
                        with approved teaching programs (that is, those hospitals receiving indirect medical education payments as provided in § 412.105). These values are based on discharges occurring during FY 1999 (October 1, 1998 through September 30, 1999) and include bills posted to HCFA's records through December 1999. We are proposing that, in addition to meeting other criteria, hospitals with fewer than 275 beds, if they are to qualify for initial rural referral center status for cost reporting periods beginning on or after October 1, 2001, must have a case-mix index value for FY 2000 that is at least— 1.3286; or
                    The median case-mix index value for urban hospitals (excluding hospitals with approved teaching programs as identified in § 412.105) calculated by HCFA for the census region in which the hospital is located. The median case-mix values by region are set forth in the following table: Region
Case-mix index value1. New England (CT, ME, MA, NH, RI, VT)
1.23772. Middle Atlantic (PA, NJ, NY)
1.23053. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)
1.30554. East North Central (IL, IN, MI, OH, WI)
1.26135. East South Central (AL, KY, MS, TN)
1.25376. West North Central (IA, KS, MN, MO, NE, ND, SD)
1.16537. West South Central (AR, LA, OK, TX)
1.24848. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)
1.32869. Pacific (AK, CA, HI, OR, WA)
1.2693
 The preceding numbers will be revised in the final rule to the extent required to reflect the updated FY 2000 MedPAR file, which will contain data from additional bills received through March 31, 2001. Hospitals seeking to qualify as rural referral centers or those wishing to know how their case-mix index value compares to the criteria should obtain hospital-specific case-mix values from their fiscal intermediaries. Data are available on the Provider Statistical and Reimbursement (PS&R) System. In keeping with our policy on discharges, these case-mix index values are computed based on all Medicare patient discharges subject to DRG-based payment. 2. Discharges Section 412.96(c)(2)(i) provides that HCFA will set forth the national and regional numbers of discharges in each year's annual notice of prospective payment rates for purposes of determining rural referral center status. As specified in section 1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 discharges. We are proposing to update the regional standards based on discharges for urban hospitals' cost reporting periods that began during FY 1999 (that is, October 1, 1998 through September 30, 1999). That is the latest year for which we have complete discharge data available. Therefore, we are proposing that, in addition to meeting other criteria, a hospital, if it is to qualify for initial rural referral center status for cost reporting periods beginning on or after October 1, 2001, must have as the number of discharges for its cost reporting period that began during FY 1999 a figure that is at least— 5,000; or
                    The median number of discharges for urban hospitals in the census region in which the hospital is located, as indicated in the following table: Region
Number of
                                 discharges1. New England (CT, ME, MA, NH, RI, VT)
70832. Middle Atlantic (PA, NJ, NY)
83713. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)
82024. East North Central (IL, IN, MI, OH, WI)
74305. East South Central (AL, KY, MS, TN)
65056. West North Central (IA, KS, MN, MO, NE, ND, SD)
47087. West South Central (AR, LA, OK, TX)
49118. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)
82879. Pacific (AK, CA, HI, OR, WA)
7001
 These numbers will be revised in the final rule based on the latest FY 1999 cost report data. We reiterate that an osteopathic hospital, if it is to qualify for rural referral center status for cost reporting periods beginning on or after October 1, 2001, must have at least 3,000 discharges for its cost reporting period that began during FY 2000. C. Indirect Medical Education (IME) Adjustment (§ 412.105) 1. IME Adjustment Factor Formula Multiplier (Section 302 of Public Law 106-554 and § 412.105(d)(3)) Section 1886(d)(5)(B) of the Act provides that prospective payment hospitals that have residents in an approved graduate medical education (GME) program receive an additional payment to reflect the higher indirect operating costs associated with GME. The regulations regarding the calculation of this additional payment, known as the indirect medical education (IME) adjustment, are located at § 412.105. The additional payment is based in part on the applicable IME adjustment factor. The IME adjustment factor is calculated using a hospital's ratio of residents to beds, which is represented as r, and a multiplier, which is represented as c, in the following equation: c × [(1 + r).405
                         − 1]. The formula is traditionally described in terms of a certain percentage increase in 
                        ( print page 22688)
                        payment for every 10-percent increase in the resident-to-bed ratio. Section 302 of Public Law 106-554 amended section 1886(d)(5)(B) of the Act to modify the transition for the IME formula multiplier, or c, that was first established by Public Law 105-33 and revised by Public Law 106-113. Section 302(a) of Public Law 106-554 provides that, for discharges occurring during FY 2002, the formula multiplier is 1.6. For discharges occurring during FY 2003 and thereafter, the formula multiplier is 1.35. (Section 302(b) of Public Law 106-554 provides for a special payment rule which states that, for discharges occurring on or after April 1, 2001 and before October 1, 2001, IME payments are to be made if “c” equalled 1.66 rather than 1.54. We are issuing a separate interim final rule with comment period (HCFA-1178-IFC) to include this change for payments in FY 2001.) The multiplier of 1.6 for FY 2002 represents a 6.5-percent increase for every 10-percent increase in the resident-to-bed ratio. The multiplier for FY 2003 and thereafter (1.35) represents a 5.5-percent increase for every 10-percent increase in the resident-to-bed ratio. We are proposing to revise § 412.105(d)(3)(vi) to reflect the change in the formula multiplier for FY 2002 to 1.6 as made by section 302(a) of Public Law 106-554 for discharges occurring during FY 2002. We also are proposing to add § 412.105(d)(3)(vii) to incorporate the formula multiplier of 1.35 for discharges occurring on or after October 1, 2002. 2. Resident-to-Bed Ratio Cap (§ 412.105(a)(1)) It has come to our attention that there is some misunderstanding about § 412.105(a)(1) regarding the determination of the resident-to-bed ratio that is used in calculating the IME adjustment. Section 4621(b)(1) of Public Law 105-33 amended section 1886(d)(5)(B) of the Act by adding a new clause (vi) to provide that, effective for cost reporting periods beginning on or after October 1, 1997, the resident-to-bed ratio may not exceed the ratio calculated during the prior cost reporting period (after accounting for the cap on the hospital's number of full-time equivalent (FTE) residents). We implemented this policy in the August 29, 1997 final rule (62 FR 46003) and the May 12, 1998 final rule (63 FR 26323) under regulations at § 412.105(a)(1). Existing § 412.105(a)(1) specifies that “[e]xcept for the special circumstances for affiliated groups and new programs described in paragraphs (f)(1)(vi) and (f)(1)(vii) of this section, for a hospital's cost reporting periods beginning on or after October 1, 1997, this ratio may not exceed the ratio for the hospital's most recent prior cost reporting period.” We are proposing to clarify § 412.105(a)(1) to add a provision that this ratio may not exceed the ratio for the hospital's most recent prior cost reporting period 
                        *after accounting for the cap on the number of FTE residents.* In general, the resident-to-bed ratio from the prior cost reporting period, which is to be used as the cap on the resident-to-bed ratio for the current payment cost reporting period, should only include an FTE count that is subject to the FTE cap on the number of allopathic and osteopathic residents, but is 
                        *not*
                         subject to the rolling average. (An explanation of rolling average appears in section IV.G.3. of this preamble.) The following illustrates the steps for determining the resident-to-bed ratio for the current payment year cost reporting period and the cap on the resident-to-bed ratio: *Current payment year cost reporting period resident-to-bed ratio:* *Step 1.*
                         Determine the hospital's number of FTE residents in the current payment year cost reporting period. *Step 2.*
                         Compare the number of FTEs from step 1 to the hospital's FTE cap (§ 412.105(f)(1)(iv)). If the number of FTEs from step 1 exceeds the FTE cap, replace it with the number of FTEs in the FTE cap. *Step 3.*
                         Determine the 3-year rolling average of the FTE residents using the FTEs from the current payment year cost reporting period and the prior two cost reporting periods (subject to the FTE cap in each cost reporting period). (Include podiatry and dental residents, and exclude residents in new programs in accordance with § 412.105(f)(1)(iv) and proposed revised (f)(1)(v). Residents in new programs are added to the quotient of the rolling average.) *Step 4.*
                         Determine the hospital's number of beds (see § 412.105(b)) in the current payment year cost reporting period. *Step 5.*
                         Determine the ratio of the number of FTEs from step 3 to the number of beds from step 4. The lower of this resident-to-bed ratio or the resident-to-bed ratio cap (calculated below) from the immediately preceding cost reporting period is used to calculate the hospital's IME adjustment factor for the current payment year cost reporting period. *Resident-to-bed ratio cap:* *Step 1.*
                         Determine the hospital's number of FTE residents in its cost reporting period that immediately precedes the current payment year cost reporting period. *Step 2.*
                         Compare the number of FTEs from step 1 to the hospital's FTE cap. If the number of FTEs from step 1 exceeds the FTE cap, replace it with the number of FTEs in the FTE cap. (If there is an increase in the number of FTEs in the current payment year cost reporting period due to a new program or an affiliation agreement, these FTEs are added to FTEs in the preceding cost reporting period after comparison to the FTE cap.) *Step 3.*
                         Determine the hospital's number of beds (§ 412.105(b)) in its cost reporting period that immediately precedes the current payment year cost reporting period. *Step 4.*
                         Determine the ratio of the number of FTEs in step 2 to the number of beds in step 3. This ratio is the resident-to-bed ratio cap for the current payment year cost reporting period. *Step 5.*
                         Compare the resident-to-bed ratio cap in step 4 to the resident-to-bed ratio in the current payment year cost reporting period. The lower of the resident-to-bed ratio from the current payment year cost reporting period or the resident-to-bed ratio cap from the immediately preceding cost reporting period is used to calculate the hospital's IME adjustment factor for the current payment year cost reporting period. We note that the resident-to-bed ratio cap is a cap on the resident-to-bed ratio calculated for all residents, including allopathic, osteopathic, dental, and podiatry residents (63 FR 26324, May 12, 1998). However, as described in existing § 412.105(a)(1), the resident-to-bed ratio cap may be adjusted to reflect an increase in the current cost reporting period's resident-to-bed ratio due to residents in a new GME program or an affiliation agreement. While this exception does not apply if the resident-to-bed ratio increases because of an increase in the number of podiatry or dentistry residents or because of a change in the number of beds, the ratio could increase after a one-year delay. An increase in the current cost reporting period's ratio (while subject to the cap on the overall number of allopathic and osteopathic residents) thereby establishes a higher cap for the following cost reporting period. The following is an example of the application of the cap on the resident-to-bed ratio: *Example—Part 1:* Assume Hospital A has 50 FTEs in its cost reporting period ending September 30, 1996, thereby establishing an IME FTE resident cap of 50 FTEs.( print page 22689)
                    In its cost reporting period of October 1, 1996 to September 30, 1997 (the prior year), it has 50 FTEs and 200 beds, so that its resident-to-bed ratio for this period is 50/200 = .25.
                    In the (current year) cost reporting period of October 1, 1997 to September 30, 1998 (the first cost reporting period in which the FTE resident cap, the resident-to-bed ratio cap, and the rolling average apply), Hospital A has 50 FTEs and 200 beds.
                    Hospital A s FTEs do not exceed its FTE cap, so its current number of FTEs (50) is used to calculate the 2-year rolling average: (50 + 50)/2 = 50.
                    The result of the rolling average is used as the numerator of the resident-to-bed ratio. Thus, the resident-to-bed ratio is 50/200 = .25.
                    .25 is compared to the resident-to-bed ratio from the prior period of October 1, 1996 to September 30, 1997. Because the FTE resident cap and the rolling average were not yet effective in the period of October 1, 1996 to September 30, 1997, that period's resident-to-bed ratio does not have to be recalculated to account for the FTE resident cap. Accordingly, the resident-to-bed ratio cap for October 1, 1997 to September 30, 1998 is .25.
                    Because the resident-to-bed ratio does not exceed the prior year ratio, Hospital A would use the resident-to-bed ratio of .25 to determine the IME adjustment in its cost reporting period of October 1, 1997 to September 30, 1998. *Example—Part 2:* In the (current year) cost reporting period of October 1, 1998 to September 30, 1999, Hospital A adds 1 podiatric and 1 dental resident, so that it has a total of 52 FTEs and 200 beds. Since the FTE resident cap only includes allopathic and osteopathic residents, Hospital A has not exceeded its FTE resident cap with the addition of a podiatric and a dental resident.
                    Accordingly, the (now) 3-year rolling average would be (52 + 50 + 50)/3 = 50.67.
                    50.67 is used in the numerator of the current payment year's resident-to-bed ratio, so that the resident-to-bed ratio is 50.67/200 = .253.
                    .253 is compared to the resident-to-bed ratio from the prior year's cost reporting period of October 1, 1997 to September 30, 1998 that is recalculated to account for the FTE resident cap. Because Hospital A did not exceed its FTE resident cap of 50 FTEs in this period of October 1, 1997 to September 30, 1998, the recalculated resident-to-bed ratio would be 50/200 = .25.
                    Compare the current year resident-to-bed ratio (.253) to the resident-to-bed ratio cap (.25); .253*does exceed*.25.
                    Therefore, the resident-to-bed ratio in the period of October 1, 1998 to September 30, 1999 is capped at .25, which is to be used in calculating Hospital A's IME adjustment for October 1, 1998 to September 30, 1999. *Example—Part 3:* In the cost reporting period of October 1, 1999 to September 30, 2000, Hospital A adds 2 internal medicine residents so that it has a total of 54 FTEs and 200 beds. While podiatric and dental residents are not included in the FTE resident cap, internal medicine residents are included. Hospital A has exceeded its IME FTE resident cap of 50 by 2 FTEs. Thus, 2 FTEs are excluded from the FTE count.
                    Accordingly, the rolling average would be (52 + 52 + 50)/3 = 51.33.
                    51.33 is used in the numerator of the resident-to-bed ratio, so that the resident-to-bed ratio is 51.33/200 = .257.
                    .257 is compared to the resident-to-bed ratio from October 1, 1998 to September 30, 1999 that is recalculated to only account for the FTE resident cap. The recalculated resident-to-bed ratio would be 50 allopathic or osteopathic FTEs plus 1 podiatric and 1 dental resident, which is 52/200 = .26.
                    .26 is the resident-to-bed ratio cap for October 1, 1999 to September 30, 2000. .257*does not exceed*.26.
                    Therefore, the resident-to-bed ratio in the period of October 1, 1998 to September 30, 1999 is .257, which is to be used in calculating this period s IME adjustment. If a hospital starts a new GME program, the adjustment to the resident-to-bed ratio cap applies for the period of years equal to the minimum accredited length for that type of program. (For example, for a new internal medicine program, the period of years equals 3; for a new surgery program, the period of years equals 5.) Within these program years, the number of new FTE residents in the current cost reporting period is added to the FTE resident count used in the numerator of the resident-to-bed ratio from the previous cost reporting period. The lower of the resident-to-bed ratio from the current cost reporting period or the adjusted resident-to-bed ratio from the preceding cost reporting period is used to calculate the hospital's IME adjustment for the current cost reporting period. If a hospital continues to expand its program after the period of years, the numerator of the resident-to-bed ratio from the preceding cost reporting period would not be adjusted to reflect these additional residents. However, an increase in the ratio of the current cost reporting period would establish a higher cap for the following cost reporting period. We also are proposing to add a provision that the exception for new programs described in § 412.105(f)(1)(vii) applies for the period of years equal to the minimum accredited length for that type of program. Similarly, if a hospital increases the number of FTE residents in the current cost reporting period because of an affiliation agreement, the number of additional FTEs is added to the FTE resident count used in the numerator of the resident-to-bed ratio from the previous cost reporting period. The lower of the resident-to-bed ratio from the current cost reporting period or the adjusted resident-to-bed ratio from the preceding cost reporting period is used to calculate the hospital's IME adjustment for the current cost reporting period. 3. Conforming Changes (§ 412.105(f)(1)(ii)(C) and (f)(1)(v)) In the August 29, 1997 final rule with comment period (62 FR 46003), the May 12, 1998 final rule (63 FR 26323), and the July 31, 1998 final rule (63 FR 40986), to implement the provisions of Public Law 105-33, we set forth certain policies that affected payment for both direct and indirect GME. Some of these policies related to the FTE cap on allopathic and osteopathic residents, the rolling average, and payment for residents training in nonhospital settings. When we amended the regulations under § 413.86 for direct GME, we inadvertently did not make certain conforming changes in § 412.105 for IME. We are proposing to make the following conforming changes: To revise § 412.105(f)(1)(ii)(C) to specify that, effective for discharges occurring on or after October 1, 1997, the time residents spend training in a nonhospital setting in patient care activities under an approved medical residency training program may be counted towards the determination of full-time equivalency if the criteria set forth at § 413.86(f)(3) or § 413.86(f)(4), as applicable, are met.
                    To revise § 412.105(f)(1)(v) to specify that residents in new residency programs are not included in the rolling average for a period of years equal to the minimum accredited length for the type of program. In addition, we are proposing to revise § 412.105(f)(1)(ix) to specify, for IME purposes, a temporary adjustment to a hospital's FTE cap to reflect residents added because of another hospital's closure of its medical residency program (to conform to the 
                        ( print page 22690)
                        proposed change for GME discussed in section IV.G.5. of this preamble). D. Payments to Disproportionate Share Hospitals (§ 412.106) Effective for discharges beginning on or after May 1, 1986, hospitals that serve a significantly disproportionate number of low-income patients (as defined in section 1886(d)(5)(F) of the Act) receive additional payments through the DSH adjustment. Section 1886(d)(5)(F)(ix) of the Act, as amended by section 112 of Public Law 106-113, specifies a percentage reduction in the payments a hospital would otherwise receive under the disproportionate share formula. Prior to enactment of section 303 of Public Law 106-554, the reduction percentages were as follows: 3 percent for FY 2001, 4 percent for FY 2002, and 0 percent for FY 2003 and each subsequent fiscal year. Section 303 of Public Law 106-554 revised the amount of the percent reductions to 2 percent for discharges occurring in FY 2001, and to 3 percent for discharges occurring in FY 2002. The reduction continues to be 0 percent for FY 2003 and each subsequent fiscal year. Section 303 of Public Law 106-554 contains a special rule for FY 2001: For discharges occurring on or after October 1, 2000 and before April 1, 2001, the reduction is to be 3 percent, and for discharges occurring on or after April 1, 2001 and before October 1, 2001, the reduction is to be 1 percent. Changes made by section 303 with respect to FY 2001 discharges are being implemented in a separate interim final rule with comment period (HCFA-1178-IFC). We are proposing to revise § 412.106(e) to reflect the change in the percentage for FY 2002 made by section 303 of Public Law 106-554. We also are proposing to make a technical change in the heading of paragraph (e). E. Medicare Geographic Classification Review Board (Proposed New § 412.235 and Existing §§ 412.256, 412.273, 412.274(b), and 412.276) With the creation of the Medicare Geographic Classification Review Board (MGCRB), beginning in FY 1991, under section 1886(d)(10) of the Act, hospitals could request reclassification from one geographic location to another for the purpose of using the other area's standardized amount for inpatient operating costs or the wage index value, or both (September 6, 1990 interim final rule with comment period (55 FR 36754), June 4, 1991 final rule with comment period (56 FR 25458), and June 4, 1992 proposed rule (57 FR 23631)). Implementing regulations in Subpart L of Part 412 (§§ 412.230 
                        *et seq.*) set forth criteria and conditions for redesignations from rural to urban, rural to rural, or from an urban area to another urban area with special rules for SCHs and RRCs. Section 304 of Public Law 106-554 contained several provisions related to the wage index and reclassification decisions made by the MGCRB. In summary, section 304 first establishes that hospital reclassification decisions by the MGCRB for wage index purposes are effective for 3 years, beginning with reclassifications for FY 2001. Second, it provides that the MGCRB must use the 3 most recent years of average hourly wage data in evaluating a hospital's reclassification application for FY 2003 and subsequent years. Third, it provides that an appropriate statewide entity may apply to have all of the geographic areas in a State treated as a single geographic area for purposes of computing and applying the wage index, for reclassifications beginning in FY 2003. A discussion of how we are proposing to implement these three provisions follows. (Section III.F. of this preamble discusses the application of these proposed policy changes to the development of the proposed FY 2002 and later wage indexes based on hospital reclassification under the provisions of section 304 of Public Law 106-554.) 1. Three-Year Reclassifications for Wage Index Purposes Section 304(a) of Public Law 106-554 amended section 1886(d)(10)(D) of the Act by adding clause (v), which provides that, if a hospital is approved for reclassification by the MGCRB for purposes of the wage index, the reclassification is effective for 3 years. The amendment made by section 304(a) is effective for reclassifications for FY 2001 and subsequent years. In addition, the legislation specifies that the Secretary must establish a mechanism under which a hospital may elect to terminate such reclassification during the 3-year period. Consistent with new section 1886(d)(10)(D)(v) of the Act, we are proposing to revise § 412.274(b) to provide under new paragraph (b)(2) that any hospital that is reclassified for a particular fiscal year for purposes of receiving the wage index value of another area would receive that reclassification for 3 years beginning with discharges occurring on the first day (October 1) of the second Federal fiscal year in which a hospital files a complete application. This 3-year reclassification would remain in effect unless the hospital terminates the reclassification under proposed revised procedures that we are establishing under new proposed § 412.273(b). The proposed provision would apply to hospitals that are reclassified for purposes of the wage index only, as well as those that are reclassified for both the wage index and the standardized amount. However, in the latter case, only the wage index reclassification would be extended for 2 additional years beyond the 1 year provided for in the existing regulations (3 years total). Hospitals seeking reclassification for purposes of the standardized amount must continue to reapply to the MGCRB on an annual basis. a. Special Rule for a Hospital That Was Reclassified for FY 2001 and FY 2002 to Different Areas Because the 3-year effect of the amendment made by section 304(a) of Public Law 106-554 is applicable to reclassifications for FY 2001 (which had already taken place prior to the date of enactment of section 304(a) (December 21, 2000), and because the application process for reclassifications for FY 2002 had already been completed by the date of enactment, we are establishing special procedures for hospitals that are reclassified for purposes of the wage index to one area for FY 2001, and are reclassified for purposes of the wage index or the standardized amount to another area for FY 2002. We are deeming such a hospital to be reclassified to the area for which it applied for FY 2002, unless the hospital elects to receive the wage index reclassification it was granted for FY 2001. Consistent with our procedures for withdrawing an application for reclassification (§ 412.273), we are allowing a hospital that wishes to receive the reclassification it was granted for FY 2001 to withdraw its FY 2002 application by making a written request to the MGCRB within 45 days of the publication date of this proposed rule (that is, by June 18, 2001). Again, only the wage index reclassification is extended for 2 additional years (3 years total). Hospitals seeking reclassification for purposes of the standardized amount must continue to reapply to the MGCRB on an annual basis. (We note that the new location and mailing address of the MGCRB and the Provider Reimbursement Review Board (PRRB) is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244-2670. The MGCRB and PRRB will be functioning at this new location as of May 21, 2001. Also, please specify whether the mail is intended for the MGCRB or the PRRB.) 
                        ( print page 22691) b. Overlapping Reclassifications Are Not Permitted Under the broad authority delegated to the Secretary by section 1886(d)(10) of the Act, we are proposing that a hospital that is reclassified to an area for purposes of the wage index may not extend the 3-year effect of the reclassification under section 304(a) of Public Law 106-554 by subsequently applying for reclassification to the same area for purposes of the wage index for a fiscal year that would be within the 3-year period. For example, if a hospital is reclassified for purposes of the wage index to Area A for FY 2002, is approved to receive Area A's wage index for 3 years (FYs 2002, 2003, and 2004), and reapplies to be reclassified to Area A for FYs 2003, 2004, and 2005 (3 years) for purposes of the wage index, the hospital would not be permitted to receive Area A's wage index for FY 2005 as a result of the reapplication. Instead, we are proposing that if the hospital wishes to extend the FY 2002 3-year reclassification for fiscal years beyond FY 2004, it would have to apply for reclassification for FY 2005. We believe new section 1886(d)(10)(D)(v) of the Act replaces the current annual reclassification cycle with a 3-year reclassification cycle. We believe this policy was intended to provide consistency and predictability in hospital reclassification and wage index data, as well as to alleviate the year-to-year fluctuations in the ability of some hospitals to qualify for reclassification. We do not believe it was intended to be used to extend reclassifications for which hospitals otherwise would not be eligible (by reapplying during the second year of a 3-year reclassification because a hospital fears it may not be eligible for reclassification after its current 3-year reclassification expires). c. Withdrawals of Applications and Terminations of Approved Reclassifications (1) General Under § 412.273(a), a hospital, or group of hospitals, may withdraw its application for reclassification at any time before the MGCRB issues its decision or, if after the MGCRB issues its decision, within 45 days of publication of our annual notice of proposed rulemaking concerning changes to the inpatient hospital prospective payment system and proposed payment rates for the fiscal year for which the application was filed. We are proposing that the withdrawal procedures and the applicable timeframes in the existing regulations would apply to hospitals that would receive 3-year reclassification for wage index purposes. For example, if a hospital applied for reclassification to Area A for purposes of the wage index for FY 2002, but wished or wishes to withdraw its application, it must have done so prior to the MGCRB issuing a decision on its application or, if the MGCRB issued such a decision, within 45 days of the publication date of this proposed rule. Such a withdrawal, if effective, means that the hospital would not be reclassified to Area A for purposes of the wage index for FY 2002 (and would not receive continued reclassification for FYs 2003 and 2004). In other words, a withdrawal, if accepted, prevents a reclassification from ever becoming effective. On the other hand, a reclassification decision that is terminated upon the request of the hospital has partial effect. Section 1886(d)(10)(D)(v) of the Act, as added by section 304(a) of Public Law 106-554, provides that a reclassification for purposes of the wage index is effective for 3 years “except that the Secretary shall establish procedures under which a * * * hospital may elect to terminate such reclassification before the end of such period.” Consistent with section 1886(d)(10)(D)(v) of the Act, we are proposing to allow a hospital to terminate its approved 3-year reclassification for 1 or 2 years of the 3-year effective period (proposed § 412.273(b)). For example, a hospital that has been reclassified for purposes of the wage index for FY 2001 is also reclassified for FYs 2002 and 2003 (3 years). Such a hospital could terminate its approved reclassification so that the reclassification is effective only for FY 2001, or only for FYs 2001 and 2002. Consistent with the prospective nature of reclassifications, we would not permit a hospital to terminate its approved 3-year reclassification for part of a fiscal year. A termination would be effective for the next fiscal year. In order to terminate an approved 3-year reclassification, we would require the hospital to notify the MGCRB in writing within 45 days of the publication date of the annual proposed rule for changes to the inpatient hospital prospective payment system. A termination request, once accepted, is effective for the balance of the 3-year period (as discussed below under reapplying within original 3-year period, following a termination). We are establishing a special procedural rule for handling FY 2001 reclassifications. As noted above, the amendments made by section 304(a) of Public Law 106-554 are effective for reclassifications for FYs 2001 and beyond, and reclassification applications for FY 2001 had already been submitted prior to the date of enactment of section 304(a). We are deeming those hospitals that were reclassified for FY 2001 to be reclassified for FYs 2002 and 2003. Therefore, if a deemed hospital that was reclassified for purposes of the wage index for FY 2001 does not wish to continue its reclassification for FY 2002 and FY 2003, the hospital must notify the MGCRB in writing within 45 days after the publication of this proposed rule (that is, by June 18, 2001). (2) Reinstatement After a Withdrawal of Application or a Termination of an Approved Reclassification We are proposing that if a hospital elects to withdraw its 3-year reclassification application after the MGCRB has issued its decision, it may cancel its withdrawal in a subsequent fiscal year and request the MGCRB to reinstate its reclassification for the remaining fiscal years of the 3-year reclassification period. (This proposal is consistent with our proposal that 3-year reclassification periods may not overlap, as discussed in section IV.E.1.b. of this preamble.) Alternatively, a hospital may apply for reclassification to a different area (that is, an area different from the one to which it was originally reclassified), and if successful, the reclassification effect would be for 3 years. Example 1: Hospital A files an application and the MGCRB issues a decision to reclassify it to Area A for purposes of wage index for FY 2002 through FY 2004 (3 years). Within 45 days after the publication of this proposed rule, Hospital A withdraws its application. Within the time for applying for a FY 2003 reclassification, Hospital A cancels its withdrawal for classification to Area A. Its reclassification to Area A is reinstated, but only for FYs 2003 and 2004. Example 2: Hospital B files an application for reclassification for wage index purposes for FY 2002 through FY 2004 and the MGCRB issues a decision for reclassification to Area B. Within 45 days after publication of this proposed rule, Hospital B withdraws its application. Hospital B does not cancel its withdrawal of the application. Hospital B timely applies and is reclassified to Area B for 3 years, beginning with FY 2003. In this case, the reclassification to Area B would be for FYs 2003 through 2005. Similarly, and for the same reasons, we are proposing that if a hospital elects to terminate its accepted 3-year reclassification, it may cancel that termination and have its original reclassification reinstated for the duration of the original 3-year period. Alternatively, a hospital could apply for reclassification to a different area and receive a new 3-year period of reclassification. Example 3: Hospital C is reclassified to Area A for purposes of the wage index for FY 
                            ( print page 22692)
                            2002, and terminates its 3-year reclassification effective for FYs 2003 and 2004. Within the timeframe for applying for FY 2004 reclassification, Hospital C cancels its termination. Its reclassification to Area A would be reinstated for FY 2004 only. Example 4: Hospital D has the same circumstances as Hospital C in Example 3, except that instead of canceling its termination, Hospital D applies and is reclassified to Area B for FY 2004. In this case, the reclassification would be for FYs 2004 through 2006. d. Special Rules for Group Reclassifications Section 412.232 discusses situations where all hospitals in a rural county are seeking urban redesignation, and § 412.234 discusses criteria where all hospitals in an urban county are seeking redesignation to another urban county. In these cases, hospitals submit an application as a group, and all hospitals in the county must be a party to the application. The reclassification is effective both for purposes of the wage index and the standardized amount of the area to which the hospitals are reclassified. Section 304(a) of Public Law 106-554 does not specifically address the group reclassification situations under §§ 412.232 and 412.234. However, we believe that, in the case of hospitals reclassified under these group reclassification procedures, it would be appropriate to extend the 3-year reclassification provision to these situations for the wage index only. In order to be reclassified for the standardized amount during the second and third years of a 3-year reclassification for the wage index, the hospitals located in these counties would have to reapply on an annual basis to the MGCRB either as a group or as individual hospitals and meet the criteria outlined in §§ 412.232(a) and 412.234(a). Hospitals that are part of a group reclassification would be able to withdraw or terminate their 3-year wage index reclassifications in the same manner as described above. If one hospital within the group elects to withdraw or terminate its reclassification, the reclassification of other hospitals in the group would be unaffected. Under section 152(b) of Public Law 106-113, hospitals in certain counties were deemed to be located in specified areas for purposes of payment under the hospital inpatient prospective payment system, for discharges occurring on or after October 1, 2000. For payment purposes, these hospitals are to be treated as though they were reclassified for purposes of both the standardized amount and the wage index. Section 152(b) also requires that these reclassifications be treated for FY 2001 as though they are reclassification decisions by the MGCRB. For purposes of applying the 3-year extension of wage index reclassifications, we are proposing to extend section 1886(d)(10)(D)(v) to hospitals reclassified under section 152(b) of Public Law 106-113. These hospitals also would have to apply for the standardized amount on an annual basis to the MGCRB. e. Administrator Authority To Cancel Inappropriate Reclassification Decisions Under the provisions of § 412.278(g), the Administrator has the authority to review an inappropriate reclassification decision made by the MGCRB, as discovered by either the hospital or HCFA, including 3-year reclassifications in the second and third year, and to determine whether or not to cancel that decision as a result of the review of the facts. Hospitals that are concerned that they have been inappropriately reclassified should follow the procedures outlined in § 412.278. 2. Three-Year Average Hourly Wages Section 304(a) of Public Law 106-554 amended section 1886(d)(10)(D) of the Act by adding clause (vi) which provides that the MGCRB must use the average of the 3 most recent years of hourly wage data for the hospital when evaluating a hospital's request for reclassification. Specifically, the MGCRB must base its evaluation on an average of the average hourly wage for the most recent years for the hospital seeking reclassification and the area to which the hospital seeks to reclassify. This provision is effective for reclassifications for FY 2003 and subsequent years. (Section III.F. of this preamble discusses the development and application of the proposed 3-year average hourly wage data (Table 2 in the Addendum to this proposed rule) that the MGCRB would use to evaluate hospitals' applications for reclassifications for FY 2003; and the 3-year average hourly wage data (Tables 3A and 3B in the Addendum to this proposed rule) for hospital reclassification applications for FY 2001.) We are proposing to revise §§ 412.230(e)(2) and 412.232(d)(2) to incorporate the provisions of section 1886(d)(10)(D)(vi) of the Act as added by section 304(a) of Public Law 106-554. Specifically, we are providing that, for redesignations effective beginning FY 2003, for hospital-specific data, the hospital must provide a 3-year average of its average hourly wages using data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes. For data for other hospitals, we are proposing to require hospitals to provide a 3-year average of the average hourly wage in the area in which the hospital is located and a 3-year average of the average hourly wage in the area to which the hospital seeks reclassification. The wage data would be taken from the HCFA hospital wage survey used to construct the wage index for prospective payment purposes. The 3-year averages are calculated by dividing the sum of the dollars (adjusted to a common reporting period using the method described in section III. of the proposed rule) across all 3 years, by the sum of the hours. 3. Statewide Wage Index As stated earlier, section 304(b) of Public Law 106-554 provides for a process under which an appropriate statewide entity may apply to have all the geographic areas in the State treated as a single geographic area for purposes of computing and applying the area wage index for reclassifications beginning in FY 2003. Section 304 does not indicate the duration of the application of these statewide wage indexes. However, it should be noted that the statutory language does refer to these applications as reclassifications. We are proposing that these statewide wage index applications be processed similar to MGCRB applications, with the same effective dates of the decisions and the withdrawal process. Therefore, similar to wage index reclassification decisions under section 1886(d)(10)(D)(v) of the Act as added by section 304(a) of Public Law 106-554, the statewide wage index reclassification would be effective for a total of 3 years. The same deadlines and timetable applicable to MGCRB reclassification applications would apply for statewide wage index applications. We are proposing to establish a new § 412.235 to include the requirements for statewide wage indexes. We are proposing to apply the following criteria to determine whether hospitals would be approved for a statewide geographic wage index reclassification (proposed § 412.235(a)): There must be unanimous support for a statewide wage index among hospitals in the State in which the statewide wage index would be applied. We would require a signed affidavit on behalf of all the hospitals in the State of this support as part of the application for reclassification.( print page 22693)
                    All hospitals in the State must apply through a signed single application for the statewide wage index in order for the application to be considered by the MGCRB. We believe this is necessary to ensure that every hospital in the State is included in the application, since the payment of every hospital would be affected by the statewide wage index.
                    There must be unanimous support for the termination or withdrawal of a statewide wage index among hospitals in the State in which the statewide index would be applied. We would require a signed affidavit for this agreement.
                    All hospitals in the State waive their rights to any wage index that they would otherwise receive absent the statewide wage index, including a wage index that any of the hospitals might have received through individual or group geographic reclassification under § 412.273(a). An individual hospital within the State may receive a wage index that could be higher or lower under the statewide wage index reclassification in comparison to its wage index otherwise (proposed § 412.235(b)). Specifically, hospitals must be aware that there may be a reduction in the wage index as a result of participation on a statewide basis. We are proposing to consider statewide wage index applications under the same process we use for hospital reclassification applications, including the effective dates of the MGCRB decision and the withdrawal process (proposed § 412.235(c)). We are proposing that applications for the statewide wage index would be effective for 3 years beginning with discharges occurring on the first day (October 1) of the second Federal fiscal year following the Federal fiscal year in which the hospitals file a complete application unless all of the participating hospitals terminate their approved statewide wage index classification earlier, as discussed below. Once approved by the MGCRB, an application for a statewide wage index can only be withdrawn or terminated as a result of a signed affidavit on behalf of all the hospitals in the State indicating their request that the statewide reclassification be withdrawn or terminated. A request for withdrawal or termination must be submitted within 45 days of the publication of the annual proposed rule for the inpatient hospital prospective payment system announcing the reclassification. New hospitals that open prior to the deadline for submitting an application for a statewide wage index, but after a group application has been submitted, would be required to agree to the statewide wage index in order for the group application to remain viable. New hospitals that open after the deadline for submitting an application would receive the statewide wage index. The agreement of new hospitals would also be required in order to withdraw or terminate a statewide wage index reclassification. The proposed rules discussed under section IV.E.1.c. of this preamble for withdrawals of applications and terminations of approved 3-year wage index reclassification decisions would apply to decisions regarding statewide wage index reclassifications. We also are proposing to allow hospitals outside a State in which hospitals have received approval of a statewide wage index classification to seek reclassification for the statewide wage index into that State. In that case, an outside hospital(s) that is reclassified into the statewide wage index area would receive a wage index calculated based on the statewide wage index reclassification. However, the support of such an outside hospital(s) would not be needed in the case of withdrawal or termination of a statewide wage index reclassification. F. New Medical Services and Technology: Additional Payments Under the Inpatient Hospital Prospective Payment System (Proposed New §§ 412.87 and 412.88) Section 533(b) of Public Law 106-554 amended section 1886(d)(5) of the Act to add new subparagraphs (K) and (L) to address a process of identifying and ensuring adequate payment for new medical services and technologies under Medicare. Under new section 1886(d)(5)(K)(i) of the Act, effective for discharges beginning on or after October 1, 2001, the Secretary is required to establish (after notice and opportunity for public comment) a mechanism to recognize the costs of new services and technologies under the inpatient hospital prospective payment system. New section 1886(d)(5)(K)(ii)(I) of the Act specifies that the mechanism must apply to a new medical service or technology if, “based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges * * * is inadequate.” New section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered “new” if it meets criteria established by the Secretary (after notice and opportunity for public comment). New sections 1886(d)(5)(K)(ii) through (vi) of the Act further provide— For an additional payment for new medical services and technology in an amount beyond the DRG prospective payment system payment rate that adequately reflects the estimated average cost of the service or technology.
                    That the requirement for an additional payment for a new service or technology may be satisfied by means of a new-technology group (described in new section 1886(d)(5)(L) of the Act), an add-on payment, a payment adjustment, or any other similar mechanism for increasing the amount otherwise payable with respect to a discharge.
                    For the collection of data relating to the cost of new medical service, or technology for not less than 2 years and no more than 3 years after an appropriate inpatient hospital services code is issued. The statute further provides that discharges involving new services or technology that occur after the collection of these data will be classified within a new or existing DRG group with a weighting factor derived from cost data collected for discharges occurring during such period. A discussion of how we are proposing to implement the provisions of section 533(b) of Public Law 106-554 follows. Section II.D. of this preamble discusses the Report to Congress required by section 533(a) of Public Law 106-553 relating to methods of expeditiously incorporating new medical services and technologies into the clinical coding system used for payments for inpatient hospital services and our preferred method of achieving this purpose. 1. Criteria for Identifying New Medical Services and Technology New section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered “new” if it meets criteria established by the Secretary (after notice and opportunity for public comment). (For convenience, hereafter we refer to “new medical services and technology” as “new technology.”) We are proposing that a new technology would be an appropriate candidate for an additional payment when, in the judgment of the Secretary, it represents an advance in medical technology that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries (proposed § 412.87(b)(1)). This criterion is to ensure that new technology can be demonstrated to provide a substantial clinical improvement based on verifiable evidence. Because any additional payments made under this 
                        ( print page 22694)
                        provision will be financed by reducing the payments made for all other services (in order to maintain budget neutrality as discussed under section IV.F.4. of this preamble), we believe that these payments should be focused on those technologies that afford clear improvements over use of previously available technologies. As explained below, we are proposing that new technologies meeting this clinical definition also must be demonstrated to be inadequately paid otherwise under the DRG system to receive special payment treatment (proposed § 412.87(b)(3)). Hospitals adopting other new technologies that do not meet these standards would be paid for these technologies through other applicable DRG payments. These payments would be recalibrated over time to reflect actual use of the new technology. We expect to implement this criterion by considering the clinical benefits for beneficiaries. We are aware that some technologies may offer substantial clinical improvements for small subsets of beneficiaries, such as those who have not responded to other treatments, and we expect to recognize such substantial advantages in these instances. In addition to the clinical and cost criteria, we are proposing that, in order to qualify for the special payment treatment provided under new section 1886(d)(5)(K)(ii)(I) of the Act, a specific technology must be new (proposed § 412.87(b)(2)). We believe the new provision contemplates the special payment treatment for new technologies until such time as data are available to reflect the cost of the technology in the DRG weights through recalibration (generally 2 years). Specifically, new section 1886(d)(5)(K)(ii)(II) of the Act states that the Secretary must “provide for the collection of data with respect to the costs of a new medical service or technology * * * for a period of not less than two years and not more than three years beginning on the date on which an inpatient hospital code is issued with respect to the service or technology.” In addition, new section 1886(d)(5)(K)(ii)(III) states that the Secretary must “provide for additional payment to be made * * * with respect to discharges involving a new medical service or technology described in subclause (I) that occur during the period described in subclause (II) in an amount that adequately reflects the estimated average costs of such service or technology.” We are proposing to make determinations regarding which technologies meet this criterion using a panel of Federal clinical and other experts, supplemented as appropriate with outside expertise. The results of all such determinations would be announced in the 
                        **Federal Register**
                         as part of the annual updates and changes to the inpatient hospital prospective payment system (proposed § 412.87(b)(1)). We note that this determination is separate and distinct from the coverage decision process. In the case of new technologies that have gone through the national coverage determination process, we would expect that the evidence reviewed in that process would, in general, be sufficient for making these determinations as well. Requests to recognize new technology for special payment treatment under new section 1886(d)(5)(K)(ii)(I) of the Act would be evaluated against this proposed criterion based on evidence submitted by the requestor. These requests should be submitted in conjunction with the initial submission of data on the costs of the new technology. In general, we encourage interested parties to initiate this process by August of the year preceding the year in which a new code identifying the new technology would become effective. This will allow maximum time to review the requestor's data and clinical material. In particular, it affords an opportunity to work with the requestor to resolve any problems or questions that may arise. At a minimum, requests should be submitted by early October of that year. It should be noted that submitting requests as late as October may not afford the opportunity for HCFA to work with the requestor to resolve problems or questions. Requests must be submitted by early October to allow adequate time to consider all aspects of a request prior to making a determination to be included in the proposed rule. Work begins on preparing the DRG changes for the following fiscal year by the middle of December, and any decisions to recognize particular new technologies should be taken into account at that time. We are soliciting comments on these proposals. In particular, given that this process is the result of new legislation with possibly major implications for the hospital inpatient prospective payment system, we invite public comment on: our definition of new medical services and technologies; the use of Federal clinical and other experts to make determinations regarding which criteria meet our definition of a new service or technology; the information necessary to determine whether payment would be inadequate; and our payment mechanism (see following discussions for these latter two issues). 2. Determining Adequacy of Current Payments for New Services and Technology Because the inpatient hospital prospective payment system includes costs associated with all aspects of a patient's stay in the hospital, it is not enough to simply identify a technology as “new” and pay an additional amount. A single DRG may encompass many different treatment approaches for a particular illness, with an array of costs associated with those approaches. Clinicians are expected to select the appropriate approach based on the needs of the patient, with the payments averaging out over time to approximate the level of resources needed to treat the average patient in the DRG. Section 1886(d)(b)(K)(ii) of the Act, as added by section 533(b) of Public Law 106-554, requires that the Secretary make a determination whether the payment otherwise applicable under the existing DRG is inadequate compared to the estimated costs incurred with respect to new technology (as defined previously). We believe that, in order to evaluate whether the DRG payment inadequately reflects the costs of new technology, we must be able to assess the costs of cases involving the new technology against other cases in the DRG. In other words, the criteria for identifying new technology that will receive special payment treatment should reflect whether the new technology is so expensive that hospitals are unlikely to offset the higher costs with other less costly cases within the DRG. We are proposing that this threshold be set at one standard deviation beyond the mean standardized charge for all cases in the DRG to which the new technology is assigned (or the case-weighted average of all relevant DRGs, if the new technology occurs in many different DRGs) (proposed § 412.87(b)(3)). (Standardization adjusts the actual charges of a case by the payment factors such as the wage index, the indirect medical education adjustment factor, and the disproportionate share adjustment factor.) This comparison would preferably be done using Medicare cases identifiable in our MedPAR database, although data from a clinical trial (including Food and Drug Administration clinical trials) where no bills were submitted for payment may be considered. To the extent possible, HCFA intends to rely on existing information in making these determinations. In most instances, the information would include the Medicare provider number of the hospital where each case was treated, 
                        ( print page 22695)
                        the beneficiary identification numbers of the Medicare patients, the dates of admission and discharge, the charges associated with each case, and all relevant ICD-9-CM codes associated with each case. We would then assess the charges of identified cases involving the new technology, accounting for the additional costs of the new technology that might not be included in the charges if the new technology is being provided by the manufacturer as part of the clinical trial. If the costs of the new technology are not included in the total charges, the requestor must submit adequate documentation upon which to formulate an estimate of the likely costs to hospitals of the new technology. A significant sample of the data should be submitted no later than early October, approximately 6 months prior to the publication of the proposed rule. Subsequently, a complete database must be submitted no later than mid-December. This timetable is necessary to allow adequate time to assess and verify the data, as well as to work with the submitters to deal with any unique situations with respect to data availability. It is also necessary to allow us to accurately incorporate the data into the proposed rule, which we begin preparing in January. We are soliciting public comments on this process. To illustrate the proposed use of the standard deviation thresholds, consider DRG 8 (Peripheral and Cranial Nerve and Other Nervous System Procedures Without CC). The average standardized charge of cases assigned to this DRG based on discharges during FY 2000 was $13,212, and the standard deviation was $8,978. Therefore, if a requestor were to seek assignment of a new technology that would otherwise be assigned to DRG 8 to a different DRG, the requestor would be expected to provide data indicating that the average standardized charge of cases receiving this new technology will exceed $22,190. These data must be of a sufficient sample size to demonstrate a significant likelihood that the true mean across all cases likely to receive the new technology will exceed the mean for the cases in DRG 8 by one standard deviation. Using standard deviation as the threshold takes into account the distribution of charges associated with different treatment modalities around the mean charge for a particular DRG, and the extent to which lower cost cases in the DRG should be expected to offset higher cost cases. Using this method, new technology in a DRG with very little variation in charges would be more likely to meet the criteria. This would be appropriate because there are fewer opportunities within such a DRG to recover the costs of very high cost cases from excess payments for very low cost cases. We note that, although we anticipate a limited number of new technologies will qualify under this proposed threshold, we will continue to evaluate the appropriateness of all DRG assignments. This applies not only to new technology but existing technologies as well. 3. Developing a Payment Mechanism Section 1886(d)(5)(K)(v) of the Act, as added by section 533(b) of Public Law 106-554, provides flexibility to the Secretary in terms of deciding exactly how the requirement for an additional payment will be satisfied: a new-technology group, an add-on payment, a payment adjustment, or any other similar mechanism for increasing the amount otherwise payable. We believe the approach most consistent with the design and incentives of the inpatient hospital prospective payment system would be to assign new technology to the most appropriate DRG based on the condition of the patient as described above, and adjust payments for individual cases that involve the new technology when the costs of those cases exceed a threshold amount. That is, we would not pay an additional amount for every case involving the new technology, but only where the costs of the entire case exceed the DRG payment amount. We are concerned that the establishment of new DRGs specifically for the purpose of recognizing costly new technology could potentially severely disrupt the DRG classification structure. In particular, we are concerned that some new technologies may involve large numbers of cases across multiple DRGs. Creating new DRGs specifically for new technology would pull cases out of existing DRGs, possibly leading to severe distortions in the relative weights and inadequate payments for cases remaining in the existing DRGs. We are proposing that Medicare provide higher payments for cases with higher costs involving identified new technologies, while preserving some of the incentives under the average-based payments for all treatment modalities for a particular patient category. The payment mechanism we are proposing would be based on the cost to hospitals for the new technology. We are proposing under § 412.88 that Medicare would pay a marginal cost factor of 50 percent for the costs of the new technology in excess of the full DRG payment. This would be calculated before any outlier payments under section 1886(d)(5)(A) of the Act, if applicable. Similarly, cases involving new technology would be eligible for outlier payments, with the additional amounts paid for the new technology included in the base payment amount. Costs would be determined by applying the cost-to-charge ratio in a manner identical to that currently used for outlier payments. If the costs of a new technology case exceed the DRG payment by more than the estimated costs of the new technology, Medicare payment would be limited to the DRG payment plus 50 percent of the estimated costs of the new technology, except if the case qualified for outlier payments. (We are proposing a conforming change to § 412.80 by adding a new paragraph (a)(3) to provide that outlier qualifying thresholds and payments would be in addition to standard DRG payments and additional payments for new medical services and technology (effective October 1, 2001).) For example, consider a new technology estimated to cost $3,000, in a DRG that pays $20,000. A hospital submits three claims for cases involving this new technology. After applying the hospital's cost-to-charge ratio, it is determined the costs of these three cases are $19,000, $22,000, and $25,000. Under our proposal, Medicare would pay $20,000 (the DRG payment) for the first claim. For the second claim, Medicare would pay one half of the amount by which the costs of the case exceed the DRG payment, up to the estimated cost of the new technology, or $21,000 ($20,000 plus one half of $2,000). For the third claim, Medicare would pay $21,500 ($20,000 plus one half of the total estimated costs of the new technology). We believe it is appropriate to limit the additional payment to 50 percent of the additional cost to appropriately balance the incentives. This limit would provide hospitals an incentive for continued cost-effective behavior in relation to the overall costs of the case. In addition, hospitals would face an incentive to balance the desirability of using the new technology versus the old; otherwise, there would be a large and perhaps inappropriate incentive to use the new technology. For example, in the late 1980s, we considered whether to establish a special payment adjustment for tissue plasminogen activator (TPA), a thrombolytic agent used in treating blockages of coronary arteries, reflecting the high costs of the drug. We did not establish such an adjustment because we believed that the updates to the standardized amounts, combined with the potential for continuing improvements in hospital 
                        ( print page 22696)
                        productivity, would be adequate to finance appropriate care of Medicare patients. In fact, the costs of the drug were offset by shorter hospital stays and an overall reduction in costs per case. As clinical experience with TPA accumulated, furthermore, it appeared that the drug was not as widely beneficial as its original proponents expected. Establishing an add-on payment for this drug might have actually led to more extensive use of this drug for patients who would not have benefited, and might have even been harmed, by its blood-thinning characteristics. 4. Budget Neutrality The report language accompanying section 533 of Public Law 106-554 directs that the Secretary implement the new mechanism on a budget neutral basis (H.R. Conf. Rep. No. 106-1033, 106th Cong., 2d Sess. at 897 (2000)). Section 1886(d)(4)(C)(iii) of the Act requires that the adjustments to annual DRG classifications and relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. Therefore, we would simulate projected payments under this provision for new technology during the upcoming fiscal year at the same time we estimate the payment effect of changes to the DRG classifications and recalibration. The impact of those additional payments would then be factored into the budget neutrality factor, which is applied to the standardized amounts. Because any additional payments directed toward new technology under this provision would be offset to ensure budget neutrality, it is important to carefully consider the extent of this provision and ensure that only technologies representing substantial advances are recognized for additional payments. In that regard, we would discuss in the annual proposed and final regulations implementing changes to the inpatient hospital prospective payment system those technologies that were considered under this provision; our determination as to whether a particular new technology meets our criteria for a new technology; whether it is determined further that cases involving the new technology would be inadequately paid under the existing DRG payment; and any assumptions that went into the budget neutrality calculations related to additional payments for that new technology, including the expected number, distribution, and costs of these cases. The payments made under this provision would be redistributed from all other payments made under the inpatient prospective payment system; DRG payments would be reduced by amounts we estimate to be necessary to pay for the estimated aggregate new technology payments. Our projections of the aggregate payments for new technology would involve not only estimates of the effect of the new technology on the entire cost per case but also estimates of the volume of cases expected to involve the new technology during the upcoming year. Given the uncertainty in both of these aspects of the projections, we believe it is important to expose our estimates to public comment before implementing them. G. Payment for Direct Costs of Graduate Medical Education (§ 413.86) 1. Background Under section 1886(h) of the Act, Medicare pays hospitals for the direct costs of graduate medical education (GME). The payments are based in part on the number of residents trained by the hospital. Section 1886(h) of the Act, as amended by section 4623 of Public Law 105-33, caps the number of residents that hospitals may count for direct GME. Section 1886(h)(2) of the Act, as amended by section 9202 of the Consolidated Omnibus Reconciliation Act (COBRA) of 1985 (Public Law 99-272), and implemented in regulations at § 413.86(e), establishes a methodology for determining payments to hospitals for the costs of approved GME programs. Section 1886(h)(2) of the Act, as amended by COBRA, sets forth a payment methodology for the determination of a hospital-specific, base-period per resident amount (PRA) that is calculated by dividing a hospital's allowable costs of GME for a base period by its number of residents in the base period. The base period is, for most hospitals, the hospital's cost reporting period beginning in FY 1984 (that is, the period of October 1, 1983 through September 30, 1984). The PRA is multiplied by the number of FTE residents working in all areas of the hospital complex (or nonhospital sites, when applicable), and the hospital's Medicare share of total inpatient days to determine Medicare's direct GME payments. In addition, as specified in section 1886(h)(2)(D)(ii) of the Act, for cost reporting periods beginning on or after October 1, 1993, through September 30, 1995, each hospital's PRA for the previous cost reporting period is not updated for inflation for any FTE residents who are not either a primary care or an obstetrics and gynecology resident. As a result, hospitals with both primary care and obstetrics and gynecology residents and nonprimary care residents have two separate PRAs beginning in FY 1994: one for primary care and one for nonprimary care. Section 1886(h)(2) of the Act was further amended by section 311 of Public Law 106-113 to establish a methodology for the use of a national average PRA in computing direct GME payments for cost reporting periods beginning on or after October 1, 2000, and on or before September 30, 2005. Generally, section 1886(h)(2) of the Act establishes a “floor” and a “ceiling” based on a locality-adjusted, updated, weighted average PRA. Each hospital's PRA is compared to the floor and ceiling to determine whether its PRA should be revised. PRAs that are below the floor, that is, 70 percent of the locality-adjusted, updated, weighted average PRA, would be revised to equal 70 percent of the locality-adjusted, updated, weighted average PRA. PRAs that exceed the ceiling, that is, 140 percent of the locality-adjusted, updated, weighted average PRA, would, depending on the fiscal year, either be frozen and not increased for inflation, or increased by a reduced inflation factor. We implemented section 311 of Public Law 106-113 in the hospital inpatient prospective payment system final rule published on August 1, 2000 (65 FR 47090). In that final rule, we set forth the methodology for calculating the weighted average PRA and outlined the steps for determining whether a hospital's PRA would be revised. 2. Amendments Made by Section 511 of Public Law 106-554 (§ 413.86(e)(4)(ii)(C) and (e)(5)(iv)) Section 511 of Public Law 106-554 amended section 1886(h)(2)(D)(iii) of the Act by increasing the floor to 85 percent of the locality-adjusted national average PRA. In general, section 511 provides that, effective for cost reporting periods beginning on or after October 1, 2001, and before October 1, 2002, PRAs that are below 85 percent of the respective locality-adjusted national average PRA would be increased to equal 85 percent of that locality-adjusted national average PRA. Accordingly, we are proposing to implement section 511 by revising § 413.86(e)(4)(ii)(C)(
                        *1*) to incorporate this change and by outlining the methodology for determining whether a hospital's PRA(s) will be adjusted in FY 2002 relative to the increased floor of the locality-adjusted national average PRA. In the August 1, 2000 final rule (65 FR 47091 and 47092), as implemented at 
                        ( print page 22697)
                        § 413.86(e)(4), we determined, in accordance with section 311 of Public Law 106-113, that the weighted average PRA for cost reporting periods ending during FY 1997 is $68,464. We described the procedures for updating the weighted average PRA of $68,464 for inflation to FY 2001 and for adjusting this average for the locality of each individual hospital. We then outlined the steps for comparing each hospital's PRA(s) to the locality-adjusted national average PRA to determine if, for cost reporting periods beginning on or after October 1, 2000, and before October 1, 2001, the PRAs should be revised to equal the 70-percent floor. In accordance with section 511 of Public Law 106-554, in this proposed rule, we are proposing that, for cost reporting periods beginning during FY 2002, the FY 2002 PRAs of hospitals that are below 85 percent of the respective locality-adjusted national average PRA for FY 2002 be increased to equal 85 percent of that locality-adjusted national average PRA. Specifically, to determine which PRAs (primary care and nonprimary care separately) for each hospital are below the 85-percent floor, each hospital's locality-adjusted national average PRA for FY 2002 is multiplied by 85 percent. This resulting number is then compared to each hospital's PRA that is updated for inflation to FY 2002. If the hospital's PRA would be less than 85 percent of the locality-adjusted national average PRA, the individual PRA is 
                        *replaced*
                         with 85 percent of the locality-adjusted national average PRA for that cost reporting period, and in future years the new PRA would be updated for inflation by the Consumer Price Index for All Urban Consumers (CPI-U) as compiled by the Bureau of Labor Statistics. There may be some hospitals with both primary care and nonprimary care PRAs that are below the floor, and both PRAs are, therefore, replaced with 85 percent of the locality-adjusted national average PRA. In these situations, the hospitals would receive a single PRA; a distinction between PRAs would no longer be made for differences in inflation (under § 413.86(e)(3)(ii)). On the other hand, hospitals may have primary care PRAs that are above the floor, and nonprimary care PRAs that are below the floor. In these situations, only the nonprimary care PRAs would be revised to equal 85 percent of the locality adjusted national average PRA, and the prior year primary care PRAs would be updated for inflation by the CPI-U. For example, if the FY 2002 locality-adjusted national average PRA for Area X is $100,000, then 85 percent of that amount is $85,000. If, in Area X, Hospital A has a primary care FY 2002 PRA of $84,000 and a nonprimary care FY 2002 PRA of $82,000, both of Hospital A's FY 2002 PRAs are replaced by the $85,000 floor. Thus, $85,000 is the amount that would be used to determine Hospital A's direct GME payments for both primary care and nonprimary care FTEs in its cost reporting period beginning in FY 2002, and the $85,000 PRA would be updated for inflation by the CPI-U in subsequent years. However, Hospital B, also located in Area X, has a primary care FY 2002 PRA of $86,000 and a nonprimary care FY 2002 PRA of $84,000. Thus, for Hospital B, only the nonprimary care PRA of $84,000 is replaced by the $85,000 floor. This new PRA of $85,000 would be updated for inflation by the CPI-U in subsequent years. Hospital B's primary care PRA of $86,000 and its nonprimary care PRA of $85,000 would be used to determine its direct GME payments in its cost reporting period beginning in FY 2002. We note that section 511 of Public Law 106-554 only affects hospitals with PRAs below the 85-percent floor, and does not affect hospitals with PRAs that are either between the floor and ceiling or exceed the ceiling. Thus, with the exception of the change in the floor as provided by section 511, the policy regarding the use of a national average PRA for making direct GME payments remains as implemented in the regulations at § 413.86(e)(4). We are proposing to amend § 413.86(e)(4)(ii)(C)(
                        *1*) to add the rules implementing section 1886(h)(2)(D)(iii) of the Act as amended by section 511 of Public Law 106-554. We also are proposing to amend § 413.86(e)(5) regarding the determination of base year PRAs for new teaching hospitals for cost reporting periods beginning during FYs 2001 through 2005. In the August 1, 2000 final rule, we made a conforming change to § 413.86(e)(5) to account for situations in which hospitals do not have a 1984 base year PRA and establish a PRA in a cost reporting period beginning on or after October 1, 2000. Existing § 413.86(e)(5)(iv) specifies that the new base year PRAs of such hospitals are subject to the regulations regarding the floor and the ceiling of the locality-adjusted national average PRA. Although the determination of new base year PRAs is subject to the national average methodology, it is not necessary to include this provision in the regulations. Therefore, we are proposing to remove § 413.86(e)(5)(iv). We would like to clarify that, for purposes of calculating a base year PRA for a new teaching hospital, when calculating the weighted mean value of PRAs of hospitals located in the same geographic area or the weighted mean value of the PRAs in the hospital's census region (as defined in § 412.62(f)(1)(i)), the PRAs used in the weighted average calculation must not be less than the floors for cost reporting periods beginning during FY 2001 or FY 2002, or if they exceed the ceiling, they must either be frozen for FYs 2001 and 2002 or updated with the CPI-U minus 2 percent for FYs 2003 through 2005. In addition, existing § 413.86(e)(5) provides that the PRA for a new teaching hospital is based on the 
                        *lower of*
                         the hospital's actual costs incurred in connection with the GME program or the weighted mean value of PRAs. For cost reporting periods beginning during FYs 2001 and 2005, the PRA for a new teaching hospital also would be subject to the floor and the ceiling of the national average PRA methodology. If a hospital's actual costs of the GME program during its cost reporting period beginning during FY 2001 or FY 2002 are 
                        *less*
                         than the floors, the hospital's PRA would 
                        *not*
                         be based on the actual costs. Instead, it would be equal to 70 percent in FY 2001, or 85 percent during FY 2002, of the locality-adjusted national average PRA. The floor applies to hospitals with existing PRAs in FYs 2001 and 2002, or to hospitals that are establishing new base year PRAs in FYs 2001 and 2002. We are proposing to clarify that if a hospital establishes a new base year PRA in a cost reporting period beginning 
                        *after*
                         FY 2002, its PRA would 
                        *not*
                         be increased to equal the floor if it is less than the floor. Similarly, the ceiling applies to hospitals with existing PRAS in FYs 2001 through 2005, or to hospitals that are establishing new base year PRAs in FYs 2001 through 2005. 3. Determining the 3-Year Rolling Average for Direct GME Payments (§ 413.86(g)(4) and (g)(5)) Section 1886(h)(4)(G)(iii) of the Act, as added by section 4623 of Public Law 106-33, provides that for the hospital's first cost reporting period beginning on or after October 1, 1997, the hospital's weighted FTE count for direct GME payment purposes equals the average of the weighted FTE count for that cost reporting period and the preceding cost reporting period. For cost reporting periods beginning on or after October 1, 1998, section 1886(h)(4)(G) of the Act requires that hospitals' direct medical education weighted FTE count for payment purposes equal the average of the actual weighted FTE count for the payment year cost reporting period and 
                        ( print page 22698)
                        the preceding two cost reporting periods (rolling average). This provision phases in the associated reduction in payment over a 3-year period for hospitals that are reducing their number of residents. In the August 29, 1997 final rule with comment period (62 FR 46004), we revised § 413.86(g)(5) accordingly, and outlined the methodology for determining a hospital's direct GME payment. Based on what we explained in the 1997 final rule, for cost reporting periods beginning on or after October 1, 1997, we would determine a hospital's direct GME payment as follows: *Step 1.*
                         Determine the average of the weighted FTE counts for the payment year cost reporting period and the prior two immediately preceding cost reporting periods (with exception of the hospital's first cost reporting period beginning on or after October 1, 1997, which will be based on the average of the weighted average for that cost reporting period and the immediately preceding cost reporting period). *Step 2.*
                         Determine the hospital's direct GME amount without regard to the FTE cap (before determining Medicare's share). That is, take the sum of (a) the product of the primary care PRA and the primary care weighted FTE count in the current payment year, and (b) the product of the nonprimary care PRA and the nonprimary care weighted FTE count in the current payment year. *Step 3.*
                         Divide the hospital's direct GME amount by the total number of FTE residents (including the effect of weighting factors) for the cost reporting period to determine the weighted average PRA (this amount reflects the FTE weighted average of the primary and nonprimary care PRAs) for the cost reporting period. *Step 4.*
                         Multiply the weighted average PRA for the cost reporting period by the 3-year average weighted count to determine the hospital's allowable direct GME costs. This product is then multiplied by the hospital's Medicare patient load for the cost reporting period to determine Medicare's direct GME payment to the hospital. Steps 2 and 3 above describe the methodology for combining a hospital's primary care PRA and nonprimary care PRA to determine the hospital's single weighted average PRA for the payment year cost reporting period. (This step accounts for hospitals that were training residents in both primary care and nonprimary care residency programs in FYs 1994 and 1995, when, as described in § 413.86(e)(3)(ii), each hospital's PRA for the previous cost reporting period was not adjusted for any resident FTEs who were not either a primary care resident or an obstetrics or a gynecology resident. As a result, such hospitals have two PRAs for direct GME payment; one for primary care and obstetrics and gynecology residents, and one for all other, or nonprimary care, residents. Hospitals that train either only primary care (including obstetrics and gynecology) residents or only nonprimary care residents follow the methodology described above, with the exception of combining two PRAs). Step 4 then dictates that the resulting average PRA is multiplied by the 3-year rolling average, which, in turn, is multiplied by the hospital's Medicare patient load in the current year to determine Medicare's direct GME payment to the hospital for that cost reporting period. In implementing this provision in the August 29, 1997 final rule with comment period, we believed that the methodology described above was appropriate because it was consistent with the methodology described under section 1886(h)(3)(B) of the Act. This section specifies that, in order to arrive at the average PRA, or “aggregate approved amount,” HCFA must multiply a hospital's PRA by the “weighted average number of [FTE] residents * * * in the hospital's approved medical residency training programs 
                        *in that period*
                        ” (emphasis added). We also believed the methodology outlined above and in the August 29, 1997 rule was appropriate because it was consistent with the intent of the statute that, after October 1, 1997, direct GME payments should be based on a rolling average. Specifically, section 4623 of Public Law 106-33 provides that, “For cost reporting periods beginning on or after October 1, 1997 * * * 
                        *the total number of full-time equivalent residents for determining a hospital's graduate medical education payment shall equal the average*
                         of the actual full-time equivalent resident counts for the cost reporting period and the preceding two cost reporting periods” (emphasis added). Thus, while the statute does not include a specific methodology for computing the direct GME payments, it clearly indicates that the payment should be based on a 3-year average of the weighted number of residents, 
                        *not*
                         the weighted number of residents in the current payment year cost reporting period. As stated above, Congress provided that the direct GME payments should be made based on a 3-year average of the weighted number of residents in order to phase in the associated reduction in payment over a 3-year period for hospitals that are reducing the number of residents they are training. However, in steps 2 and 3 above, when combining a hospital's primary care PRA and nonprimary care PRA, we weight the respective PRAs by 
                        *current year*
                         residents. This introduces the number of residents that a hospital is training in the 
                        *current cost reporting period*
                         into the payment formula. A payment formula that incorporates the number of current year residents “dilutes” the effect of the rolling average as related to direct GME payments. After further consideration, we believe that, consistent with the statute, the formula should be based on rolling average counts of residents. We are proposing an alternative methodology in which the direct GME payment would be the sum of (a) the product of the primary care PRA and the primary care and obstetrics and gynecology rolling average, and (b) the product of the nonprimary care PRA and the nonprimary care rolling average. (This sum would then be multiplied by the Medicare patient load.) We note that IME payments would not be affected because, although they also are based on a 3-year rolling average, there is no distinction between primary care and nonprimary care residents. The new methodology would be effective for cost reporting periods beginning on or after October 1, 2001. The proposed methodology for determining a hospital's direct GME payment is as follows: *Step 1.*
                         Determine that the hospital's total unweighted FTE counts in the payment year cost reporting period and the prior two immediately preceding cost reporting periods for all residents in allopathic and osteopathic medicine do not exceed the hospital's FTE cap for these residents in accordance with § 413.86(g)(4). If the hospital's total unweighted FTE count in a cost reporting period exceeds its cap, the hospital's weighted FTE count, for primary care and obstetrics and gynecology residents and nonprimary care residents, respectively, will be reduced in the same proportion that the number of these FTE residents for that cost reporting period exceeds the unweighted FTE count in the cap. The proportional reduction is calculated 
                        *for primary care and obstetrics and gynecology residents and nonprimary care residents separately*
                         in the following manner: (FTE cap/unweighted total FTEs in the cost reporting period) × (weighted primary care and obstetrics and gynecology FTEs in the cost reporting period) plus (FTE cap/unweighted total FTEs in the cost reporting period) × (weighted nonprimary care FTEs in the cost reporting period). 
 
 Add the two products to determine the hospital's reduced cap. *Step 2.*
                         Determine the 3-year average of the weighted FTE count for primary care and obstetrics and gynecology residents in the payment year cost reporting period and the two immediately preceding cost reporting periods. Determine the 3-year average of the weighted FTE count for nonprimary care residents in the payment year cost reporting period and the two immediately preceding cost reporting periods. *Step 3.*
                         Determine the product of the primary care PRA and the primary care and obstetrics and gynecology 3-year average from step 2. Determine the product of the nonprimary care PRA and the nonprimary care 3-year average from step 2. *Step 4.*
                         Sum the products of step 3. *Step 5.*
                         Multiply the sum from step 4 by the hospital's Medicare patient load for the cost reporting period to determine Medicare's direct GME payment to the hospital. Existing § 413.86(g)(5) specifies that residents in new programs are excluded from the rolling average calculation for a period of years equal to the minimum accredited length for the type of program, and are added to the payment formula after applying the averaging rules. Accordingly, for hospitals that qualify for an adjustment to their FTE caps for residents training in new programs under § 413.86(g)(6), primary care and obstetrics and gynecology residents in new programs would be added to the quotient of the primary care and obstetrics and gynecology 3-year average, and nonprimary care residents in new programs would be added to the quotient of the nonprimary care 3-year average. The sums of the respective 3-year averages and new residents would then be multiplied by the respective PRAs. The following example illustrates the determination of direct GME payment under the proposed rolling average methodology for an existing teaching hospital with no new programs: *Example:*
                         Assume a hospital with a cost reporting period ending September 30, 1996 (beginning October 1, 1995) had 100 unweighted FTE residents and 90 weighted FTE residents. The hospital's FTE cap is 100 unweighted residents. *Step 1.*
                         In its cost reporting period beginning in FY 2000, it had 100 unweighted residents and 90 weighted residents (50 primary care and 40 nonprimary care). The hospital had 90 unweighted residents and 85 weighted residents (50 primary care and 35 nonprimary care) for its cost reporting period beginning in FY 2001.
                    In its cost reporting period beginning in FY 2002, the hospital had 80 unweighted residents and 80 weighted residents (50 primary care and 30 nonprimary care). *Step 2.*
                         The 3-year average of weighted primary care and obstetrics and gynecology residents is (50 + 50 + 50)/3 = 50. The 3-year average of weighted nonprimary care residents is (40 + 35 + 30)/3 = 35. *Step 3.*
                         Primary care: $80,000 PRA × 50 weighted primary care and obstetrics and gynecology FTEs = $4,000,000. Nonprimary care: $78,000 × 35 weighted nonprimary care FTEs = $2,730,000. *Step 4.*
                         $4,000,000 + $2,730,000 = $6,730,000. *Step 5.*
                         If the hospital's Medicare patient load for the payment cost reporting period is .20, Medicare's direct GME payment would be $6,730,000  × .20 = $1,346,000. Whether the proposed methodology results in a payment difference for a hospital is dependent upon whether or not the number and mix (primary care and nonprimary care) of FTEs changes in a 3-year period. If the number and mix of FTEs does not change in a 3-year period, there would be no difference in a direct GME payment amount derived using the proposed methodology versus the existing methodology. For example, if a hospital has 90 weighted FTEs (50 primary care and 40 nonprimary care) in the current year and the 2 previous years (using the PRAs and the Medicare patient load from the example above), the payment amounts derived from the existing methodology and the proposed methodology would be equal. If the number and mix of FTEs varies from year to year, there will be a difference in the results of the two methodologies. In some instances the existing methodology would result in a higher payment, and in other instances the proposed methodology would result in a higher payment. In the example above, the hospital has reduced its number of weighted residents by 5 FTEs in FYs 2001 and 2002. Calculating this hospital's direct GME payment amount using the existing methodology (using the PRAs and the Medicare patient load from the example) would result in a payment of $1,347,250, which is $1,250 more than $1,346,000, the amount calculated in the example using the proposed methodology. In a scenario where a hospital makes larger reductions to the number of FTEs, the proposed methodology may be more beneficial. For example, using the PRAs and the Medicare patient load from the example above, assume a hospital has 90 weighted FTEs (50 primary care and 40 nonprimary care) in FY 2000, 85 weighted FTEs (50 primary care and 35 nonprimary care) in FY 2001, and 70 weighted FTEs (35 primary care and 35 nonprimary care) in FY 2002. If the proposed methodology is used, the payment amount of $1,292,050 would be calculated, which is $1,666 more than $1,290,386, the amount calculated if the existing methodology is used. We are proposing to revise § 413.86(g)(4) to specify that, effective for cost reporting periods beginning on or after October 1, 2001, if the hospital's total unweighted FTE count in a cost reporting period exceeds its cap, the hospital's weighted FTE count, for primary care and obstetrics and gynecology residents and nonprimary care residents, respectively, will be reduced in the same proportion that the number of these FTE residents for that cost reporting period exceeds the unweighted FTE count in the cap. We also are proposing to revise § 413.86(g)(5) to specify that, effective for cost reporting periods beginning on or after October 1, 2001, the direct GME payment will be calculated using two separate rolling averages, one for primary care and obstetrics and gynecology residents and one for nonprimary care residents. 4. Counting Research Time as Direct and Indirect GME Costs (§§ 412.105 and 413.86) It has come to our attention that there appears to be some confusion in the provider community as to whether the time that residents spend performing research is countable for the purposes of direct and indirect GME reimbursement. Although we are not proposing to make any policy changes in this proposed rule, we would like to reiterate our longstanding policy regarding time that residents spend in research and propose to incorporate this policy in the IME regulations. Section 413.86(f) specifies that, for the purposes of determining the total number of FTE residents for the direct GME payment, residents in an approved program working in all areas of the hospital complex may be counted. Accordingly, the time the residents spend performing research as part of an approved program anywhere in the hospital complex may be counted for direct GME payment purposes. If the requirements listed at §§ 413.86(f)(3) and (f)(4) are met, a hospital may also count the time residents spend doing research in non-hospital settings for direct GME payment. For purposes of determining the IME payment, § 412.105(f)(ii) specifies that 
                        ( print page 22700)
                        the time residents spend training in parts of the hospital that are subject to the inpatient prospective payment system, in the outpatient departments, or (effective on or after October 1, 1997, in accordance with §§ 413.86(f)(3) and (f)(4)) in nonhospital settings, may be counted. Section 2405.3.F.2. of the Provider Reimbursement Manual (PRM) further states that a resident must not be counted for the IME adjustment if the resident is engaged exclusively in research. Resident time spent “exclusively” in research means that the research is not associated with the treatment or diagnosis of a particular patient of the hospital. Therefore, although the research component may be part of an approved program, 
                        *the time that residents devote specifically to performing research that is not related to delivering patient care,*
                        whether it occurs in the hospital complex or in non-hospital settings, 
                        *may not be counted for IME payment purposes.*
                         “Exclusively research” time is not allowable for IME purposes irrespective of whether the resident is engaged only in research or spends only part of his or her time on research. Accordingly, time spent exclusively in research over the course of a program year should be subtracted from the total FTE for that year. For example, if a resident is required to spend 3 months in a particular program year engaged in research activities unrelated to delivering patient care, that amount of time should be subtracted from the total FTE, whether or not the research time is fulfilled in one block of time, or is distributed throughout the training year. We note that in order to count residents for both direct GME and IME payment purposes, the residents' training must be part of an approved program. 
                        *This applies whether or not the residents are doing work that is clinical in nature.*
                         There are situations where residents have completed their residency program requirements but remain for an additional period of time to continue their training (that is, to conduct research or other activities) outside the context of a formally organized approved program. As we explained in the September 29, 1989 final rule (54 FR 40306), these residents are 
                        *not*
                         countable for direct GME or IME reimbursement. Rather, patient care services provided by these residents should be paid as Part B services. We are proposing to amend § 412.105(f)(1)(iii) to add a paragraph (B) to incorporate language that reflects this policy. 5. Temporary Adjustments to FTE Cap To Reflect Residents Affected by Residency Program Closure In the July 30, 1999 hospital inpatient prospective payment system final rule (64 FR 41522), we indicated that we would allow a temporary adjustment to a hospital's FTE resident cap under limited circumstances and if certain criteria are met when a hospital assumes the training of additional residents because of another hospital's closure. We made this change because hospitals had indicated a reluctance to accept additional residents from a closed hospital without a temporary adjustment to their caps. When we proposed this change 2 years ago, we received several comments suggesting that we include lost accreditation of a program (that is, a program's closure) in the temporary adjustment policy. We explained in our response to these comments (64 FR 41522) that we did not believe it was appropriate to expand our policy to cover any acts other than a hospital's closure. We made this decision because, unless the hospital terminates its Medicare agreement, the hospital would retain its statutory FTE cap and could affiliate with other hospitals to enable the residents to finish their training. It has come to our attention that, despite a hospital's ability to affiliate with other hospitals when it shuts down a residency program, some hospitals for various reasons do not affiliate before their programs close, particularly when the program closes abruptly towards the end of the program year (the deadline to submit Medicare affiliation agreements is July 1 of the upcoming program year). Therefore, we are proposing that if a hospital that closes its residency training program agrees to temporarily reduce its FTE cap, another hospital(s) may receive a temporary adjustment to its FTE cap to reflect residents added because of the closure of the former hospital's residency training program. For purposes of this proposed policy on closed programs, we are proposing to define “closure of a hospital residency training program” as when the hospital ceases to offer training for residents in a particular approved medical residency training program (proposed § 413.86(g)(8)(i)(B)). The methodology for adjusting the caps for the “receiving hospital” and the “hospital that closed its program” is described below. a. 
                        *Receiving hospital.*
                        We are proposing that a hospital(s) may receive a temporary adjustment to its (or their) FTE cap to reflect residents added because of the closure of another hospital's residency training program if— The hospital is training additional residents from the residency training program of a hospital that closed its program; and
                    No later that 60 days after the hospital begins to train the residents, the hospital submits to its fiscal intermediary a request for a temporary adjustment to its FTE cap, documents that the hospital is eligible for this temporary adjustment by identifying the residents who have come from another hospital's closed program and have caused the hospital to exceed its cap, specifies the length of time the adjustment is needed, and submits to its fiscal intermediary a copy of the FTE cap reduction statement by the hospital closing the program, as specified in paragraph (g)(8)(iii)(B)(*2*). In general, the above criteria we are proposing for the temporary adjustment are reflective of the criteria for the temporary adjustment for taking on the training of displaced residents from closed hospitals. We note that we are proposing that more than one hospital would be eligible to apply for the temporary adjustment, because residents from one closed program may go to different hospitals, or they may finish their training at more than one hospital. We also note that only to the extent a hospital would exceed its FTE cap by training displaced residents would it be eligible for the temporary adjustment. Finally, we note that we are proposing that hospitals that meet the above proposed criteria would be eligible to receive temporary adjustments (for cost reporting periods beginning on or after October 1, 2001, for direct GME and with discharges beginning on or after October 1, 2001 for IME) for training the displaced residents from programs that closed even before the effective date of this policy. We mention this because hospitals may have closed programs in the recent past and the residents from the closed programs may not have completed their training as of the effective date of this policy. For instance, if a 5-year residency program, such as surgery, closed on July 1, 1997, the 5th program year residents may still be training during this residency year (2001). We are proposing that if both the receiving hospital(s) and the hospital that closed the program in this example follow the criteria described in this preamble, the receiving hospital may receive a temporary adjustment to its FTE cap for 9 months (October 1, 2001 through June 30, 2002) to accommodate the 5th year surgery residents. However, we note that hospitals would not be 
                        ( print page 22701)
                        eligible to receive a temporary adjustment for training the residents until the effective date of this rule. b. 
                        *Hospital that closed its program(s).*
                        We are proposing that a hospital that agrees to train residents who have been displaced by the closure of another hospital's program may receive a temporary FTE cap adjustment only if the hospital with the closed program(s)— Temporarily reduces its FTE cap by the number of FTE residents in each program year training in the program at the time of the program's closure. The yearly reduction would be determined by deducting the number of those residents who would have been training in the program year during each year had the program not closed; and
                    No later than 60 days after the residents who were in the closed program begin training at another hospital, submits to its fiscal intermediary a statement signed and dated by its representative that specifies that it agrees to the temporary reduction in its FTE cap to allow the hospital training the displaced residents to obtain a temporary adjustment to its cap; identifies the residents who were training at the time of the program's closure; identifies the hospitals to which the residents are transferring once the program closes; and specifies the reduction for the applicable program years. Unlike the closed hospital policy at § 413.86(g)(8), we are proposing under this closed program policy (which we are proposing to amend § 413.86(g)(8) to include), that in order for the receiving hospital(s) to qualify for a temporary adjustment to its FTE cap, the hospitals that are closing their programs would need to reduce their FTE cap for the duration of time the displaced residents would need to finish their training. We are proposing this change because, as explained below, the hospital that closes the program still has the FTE slots in its cap, even if the hospital chooses not to fill the slots with residents. We believe it is inappropriate to allow an increase to the receiving hospital's cap without an attendant decrease to the cap of the hospital with the closed program, even if the increase is only temporary. We note that even under this proposed closed program policy, the hospital that closes its program may choose instead to affiliate with another hospital by July 1 of the next residency year so that the residents can more easily finish their training. We are proposing that the cap reduction for the hospital with the closed program would be based on the number of FTE residents in each program year who were in the program at the program's closure, and who began training at another hospital, rather than the count of residents each year at the hospital(s) receiving the temporary adjustment(s). We believe it would be too burdensome administratively to require the hospital closing the program to keep track of the status of the residents when they are training at other hospitals. For instance, Joe Smith, a resident who is a PGY 1 when Hospital X closes its pathology residency program, may then finish his training at Hospital Y. The resident trains for one year at Hospital Y as a PGY 2, but decides to drop out of the program before finishing. It would be burdensome to require Hospital X to keep track of Joe Smith's status while he is training at Hospital Y for purposes of the reduction in Hospital X's cap. Therefore, we are proposing to “freeze” the basis for the reduction of the FTE cap of the hospital that closed the program based on the count and status of the residents when the hospital closes the program. *Example:*
                        Hospital A, which has a direct GME FTE cap of 20 FTEs and an IME FTE cap of 18 FTEs, is experiencing financial difficulties and decides to close down its internal medicine residency training program effective June 30, 2002. As of June 30, 2002, Hospital A is training 2 PGY 1s, 4 PGY 2s, and 6 PGY 3s in its internal medicine program. Hospitals B, C, and D take on the training of the displaced residents. These hospitals are eligible to receive temporary adjustments to their FTE caps if they follow the proposed criteria stated above. In order for Hospitals B, C, and D to receive the temporary adjustments, however, Hospital A must agree to reduce its FTE cap. According to the proposed criteria stated above, Hospital A's reduction would be: July 1, 2002 through June 30, 2003 Direct GME FTE cap: 14 FTEs, (20 FTEs cap—2 PGY 2s—4 PGY 3s) IME FTE cap: 12 FTEs (18 FTEs—2 PGY 2s—4 PGY 3s) We note that no downward adjustment for the 6 PGY 3s for either cap is necessary since these residents will have completed their training in that program by the July 1, 2000 through June 30, 2003 program year. July 1, 2003 through June 30, 2004 Direct GME FTE cap: 18 FTEs (20 FTEs cap—2 PGY 3s) IME FTE cap: 16 FTEs (18 FTEs cap—2 PGY 3s) July 1, 2004 through June 30, 2005 Direct GME FTE cap: 20 FTEs IME FTE cap: 18 FTEs We also are proposing to revise § 412.105(f)(1)(ix) to make the provision relating to the adjustment to FTE caps to reflect residents affected by closure of hospitals' medical residency training programs applicable to determining the IME payment. 6. Conforming Change to Regulations Governing Payment to Federally Qualified Health Centers (§ 405.2468(f)) We have discovered a technical error in the regulations at § 405.2468(f) regarding payment to federally qualified health centers (FQHCs) and rural health centers (RHCs) for the costs of graduate medical education. Specifically, § 405.2468(f)(6)(ii)(D) provides that “The costs associated with activities described in § 413.85(d) of this chapter” are not allowable graduate medical education costs. We recently amended § 413.85 in a final rule (66 FR 3358, January 12, 2001) regarding Medicare pass-through payment for approved nursing and allied health education programs. However, we inadvertently did not make a conforming change to § 405.2468(f)(6)(ii)(D). Section 405.2468(f)(6)(ii)(D) should read “The costs associated with activities described in § 413.85(h) of this chapter.” We are proposing to revise § 405.2468(f)(6)(ii)(D) to reflect this change. V. Proposed Changes to the Prospective Payment System for Capital-Related Costs A. End of the Transition Period Federal fiscal year (FY) 2001 is the last year of the 10-year transition period established to phase in the prospective payment system for hospital capital-related costs. For the readers' benefit in this proposed rule, we are providing a summary of the statutory basis for the system, the development and evolution of the system, the methodology used to determine capital-related payments to hospitals, and the policy for providing exceptions payments during the transition period. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services “in accordance with a prospective payment system established by the Secretary.” Under the statute, the Secretary has broad authority in establishing and implementing the capital prospective payment system. We initially implemented the capital prospective payment system in the August 30, 1991 final rule (56 FR 43409), in which we 
                        ( print page 22702)
                        established a 10-year transition period to change the payment methodology for Medicare inpatient capital-related costs from a reasonable cost-based methodology to a prospective methodology (based fully on the Federal rate). The 10-year transition period established to phase in the prospective payment system for capital-related costs is effective for cost reporting periods beginning on or after October 1, 1991 (FY 1992) and before October 1, 2001 (FY 2002). Beginning in FY 2001, the last year of the 10-year transition period for the prospective payment system for hospital capital-related costs, capital prospective payment system payments are based solely on the Federal rate for the vast majority of hospitals. Since FY 2001 is the final year of the capital transition period, we will no longer determine a hospital-specific rate for FY 2002 in section IV. of the Addendum of this proposed rule. For cost reporting periods beginning on or after October 1, 2001, payment for capital-related costs for all hospitals, except those defined as new hospitals under § 412.30(b), will be determined based solely on the capital standard Federal rate. Generally, during the transition period, inpatient capital-related costs are paid on a per discharge basis, and the amount of payment depended on the relationship between the hospital-specific rate and the Federal rate during the hospital's base year. A hospital with a base year hospital-specific rate lower than the Federal rate is paid under the fully prospective payment methodology during the transition period. This method is based on a dynamic blend percentage of the hospital's hospital-specific rate and the applicable Federal rate for each year during the transition period. A hospital with a base period hospital-specific rate greater than the Federal rate is paid under the hold-harmless payment methodology during the transition period. During the transition period, a hospital paid under the hold-harmless payment methodology receives the higher of (1) a blended payment of 85 percent of reasonable cost for old capital plus an amount for new capital based on a portion of the Federal rate; or (2) a payment based on 100 percent of the adjusted Federal rate. The amount recognized as old capital is generally limited to the allowable Medicare capital-related costs that were in use for patient care as of December 31, 1990. Under limited circumstances, capital-related costs for assets obligated as of December 31, 1990, but put in use for patient care after December 31, 1990, also may be recognized as old capital if certain conditions were met. These costs are known as obligated capital costs. New capital costs are generally defined as allowable Medicare capital-related costs for assets put in use for patient care after December 31, 1990. Hospitals that are defined as “new” for the purposes of capital payments during the transition period (see § 412.300(b)) will continue to be paid according to the applicable payment methodology outlined in § 412.324. During the transition period, new hospitals are exempt from the prospective payment system for capital-related costs for their first 2 years of operation and are paid 85 percent of their reasonable capital-related costs during that period. The hospital's first 12-month cost reporting period (or combination of cost reporting periods covering at least 12 months), beginning at least 1 year after the hospital accepts its first patient, serves as the hospital's base period. Those base year costs qualify as old capital and are used to establish its hospital-specific rate used to determine its payment methodology under the capital prospective payment system. Effective with the third year of operation, the hospital will be paid under either the fully prospective methodology or the hold-harmless methodology. If the fully prospective methodology is applicable, the hospital is paid using the appropriate transition blend of its hospital-specific rate and the Federal rate for that fiscal year until the conclusion of the transition period, at which time the hospital will be paid based on 100 percent of the Federal rate. If the hold-harmless methodology is applicable, the hospital will receive hold-harmless payment for assets in use during the base period for 8 years, which may extend beyond the transition period. The basic methodology for determining capital prospective payments based on the Federal rate is set forth in § 412.312. For the purpose of calculating payments for each discharge, the standard Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG Weight) × (GAF) × (Large Urban Add-on, if applicable) × (COLA Adjustment for Hospitals Located in Alaska and Hawaii) × (1 + DSH Adjustment Factor + IME Adjustment Factor) Hospitals may also receive outlier payments for those cases that qualify under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments. In accordance with section 1886(d)(9)(A) of the Act, under the prospective payment system for inpatient operating costs, hospitals located in Puerto Rico are paid for operating costs under a special payment formula. Prior to FY 1998, hospitals in Puerto Rico were paid a blended rate that consisted of 75 percent of the applicable standardized amount specific to Puerto Rico hospitals and 25 percent of the applicable national average standardized amount. However, effective October 1, 1997, under amendments to the Act enacted by section 4406 of Public Law 105-33, operating payments to hospitals in Puerto Rico are based on a blend of 50 percent of the applicable standardized amount specific to Puerto Rico hospitals and 50 percent of the applicable national average standardized amount. In conjunction with this change to the operating blend percentage, effective with discharges on or after October 1, 1997, we compute capital payments to hospitals in Puerto Rico based on a blend of 50 percent of the Puerto Rico rate and 50 percent of the Federal rate as specified in the regulations at § 412.374. For capital-related costs, we compute a separate payment rate specific to Puerto Rico hospitals using the same methodology used to compute the national Federal rate for capital-related costs. In the August 30, 1991 final rule (56 FR 43409), we established a capital exceptions policy, which provided for exceptions payments during the transition period (§ 412.348). Section 412.348 provides that, during the transition period, a hospital may receive additional payment under the exceptions process when its regular payments are less than a minimum percentage, established by class of hospital, of the hospital's reasonable capital-related costs. The amount of the exceptions payment is the difference between the hospital's minimum payment level and the payments the hospital would have received under the capital prospective payment system in the absence of an exceptions payment. The comparison is made on a cumulative basis for all cost reporting periods during which the hospital has been subject to the capital prospective payment transition rules. The minimum payment percentages throughout the transition period for regular capital exceptions payments by class of hospitals are: For sole community hospitals, 90 percent;
                    For urban hospitals with at least 100 beds that have a disproportionate share patient percentage of at least 20.2( print page 22703)
                        percent or that received more than 30 percent of their net inpatient care revenues from State or local governments for indigent care, 80 percent;
                    For all other hospitals, 70 percent of the hospital's reasonable inpatient capital-related costs. The provision for regular exceptions payments expires at the end of the transition period, that is, on September 30, 2001. Capital prospective payment system payments are no longer adjusted to reflect regular exceptions payments at § 412.348 after that date. Accordingly, for cost reporting periods beginning on or after October 1, 2001, all hospitals other than those defined as “new” under § 412.300(b) will receive only the per discharge payment based on the Federal rate for capital costs (plus any applicable DSH or IME and outlier adjustments) unless a hospital qualifies for a special exceptions payment under § 412.348(g). B. Special Exceptions Process In the August 30, 1991 final rule (56 FR 43409), we established a capital exceptions policy at § 412.348, which provided for 
                        *regular*
                         exception payments during the transition period. In the September 1, 1994 final rule (59 FR 45385), we added the 
                        *special*
                         exceptions process, describing it as “* * * narrowly defined, focusing on a small group of hospitals who found themselves in a disadvantaged position. The target hospitals were those who had an immediate and imperative need to begin major renovations or replacements just after the beginning of the capital prospective payment system. These hospitals would not be eligible for protection under the old capital and obligated capital provisions, and would not have been allowed any time to accrue excess capital prospective payments to fund these projects.” Under the special exceptions provisions at § 412.348(g), an additional payment may be made through the 10th year beyond the end of the capital prospective payment system transition period for eligible hospitals that meet (1) a project need requirement as described at § 412.348(g)(2), which, in the case of certain urban hospitals, includes an excess capacity test; and (2) a project size requirement as described at § 412.348(g)(5). Eligible hospitals include sole community hospitals, urban hospitals with at least 100 beds that have a disproportionate share percentage of at least 20.2 percent, and hospitals with a combined Medicare and Medicaid inpatient utilization of at least 70 percent. When we established the special exceptions process, we selected the hospital's cost reporting period beginning before October 1, 2001, as the project completion date in order to limit cost-based exceptions payments to a period of not more than 10 years beyond the end of the transition to the fully Federal capital prospective payment system. Therefore, hospitals are eligible to receive special exceptions payments for the 10 years after the cost reporting year in which they complete their project. Generally, if a project is completed in the hospital cost reporting period ending September 29, 2002, exceptions payments would continue through September 29, 2012. In addition, we believe that, for projects completed after the deadline, hospitals would have had the opportunity to reserve their prior years' capital prospective payment system payments for financing projects. We note that the August 1, 2000 final rule (65 FR 47095) incorrectly stated that special exceptions payments could extend through September 30, 2011; the date should have been September 29, 2012. For each cost reporting period, the amount of the special exceptions payment is determined by comparing the cumulative payments made to the hospital under the capital payment system to the cumulative minimum payment levels applicable to the hospital for each cost reporting period subject to the prospective payment system. This comparison is offset or reduced by (1) any amount by which the hospital's cumulative payments exceed its cumulative minimum payments under the regular exceptions process for all cost reporting periods during which the hospital has been subject to the capital prospective payment system; and (2) any amount by which the hospital's current year Medicare inpatient operating and capital prospective payment system payments (excluding 75 percent of its operating DSH payments) exceed its Medicare inpatient operating and capital costs (or its Medicare inpatient margin). During the capital prospective payment system transition period, the minimum payment level under the regular exceptions process varied by class of hospital as set forth in § 412.348(c) and described in section V.A. of this preamble. After the transition period and for the duration of the special exceptions provision, the minimum payment level is 70 percent as set forth in § 412.348(g)(6). In the July 31, 1998 final rule (63 FR 40999), we stated that a few hospitals had expressed concern with the required completion date of October 1, 2001, and other qualifying criteria for the special exceptions payment. Therefore, we solicited certain information from hospitals on major capital construction projects that might qualify for the capital special exceptions payments so we could determine if any changes in the special exceptions criteria or process were necessary. In the May 7, 1999 proposed rule (64 FR 24736), we reported that four hospitals had responded timely to our solicitation with information on their major capital construction projects. The hospitals submitted information about their location, the cost of the project, the date that the certificate of need approval was received, the start date of the project, and the anticipated completion date. Some hospitals also suggested changing a number of the requirements of the special exception provision. When we issued the May 7, 1999 proposed rule, we had no specific proposal to revise the special exceptions process. However, we invited comments and suggestions from hospitals and other interested parties on the revision to the special exceptions process (64 FR 24738). We noted that, because the capital special exceptions process is budget neutral, any liberalization of the policy would require a commensurate reduction in the capital rate paid to all hospitals. That is, we will continue to make an adjustment to the capital Federal rate in a budget neutral manner to pay for exceptions as long as an exceptions policy is in force, just as we have for regular exceptions during the transition period. We also stated that, based on the comments we received, we may make changes to the special exceptions criteria in the final regulation or propose changes in the FY 2001 proposed rule. In the July 30, 1999 final rule (64 FR 41526), we responded to the six comments we received on potential changes to the special exceptions process. In that same final rule, we also described our attempt to obtain information on hospital projects that might qualify for special exceptions payments in order to assess the impact of the recommended changes to the existing policy. In conjunction with the most recent cost report data readily available at that time (FY 1996), we attempted to estimate which of the hospital construction projects might qualify for special exception payments under the existing policy and how that universe of hospitals might change as a result of the recommended revisions to the special exceptions criteria. Because exception payments to a hospital for a given cost reporting period are based on a percentage of the 
                        ( print page 22704)
                        capital costs incurred during the cost reporting period, we were unable to determine a precise estimate of the amount of payments to hospitals that might be eligible for special exceptions. In addition, hospitals are not eligible for special exception payments until the assets are put into use for patient care. Once eligibility for special exceptions payment has been demonstrated, it is some time before completed and settled cost reports are available to determine these payments. Based on our research, we determined that it is difficult to predict whether particular hospitals will be able to meet all of the special exceptions eligibility criteria (DSH percentage, completion date, project size, and project need requirements) as well as qualify to receive special exception payments after taking into account the appropriate offsets, such as inpatient operating and capital margins. However, we believe that any changes to the special exceptions policy may affect a significant number of hospitals. Based on our belief that these changes may have an impact on a significant number of hospitals, our evaluation of the comments, and careful consideration of all the issues, we stated in the July 30, 1999 final rule that the more appropriate forum for addressing changes to the capital special exceptions policy is the legislative process in Congress rather than the regulation process (64 FR 41528). As we also indicated in the July 30, 1999 final rule (64 FR 41526), we have little information about the number of hospitals that may qualify for special exceptions payments or the projected dollar amount of special exception payments, because no hospitals are currently being paid under the special exceptions process. Until FY 2002, the special exceptions provision pays either the same as the regular exceptions process or less for high DSH and sole community hospitals. In accordance with § 412.348(g)(7), a qualifying hospital may receive additional payments for up to 10 years from the year in which it completes a project that meets the project need and project size requirements of the special exception provision in §§ 412.348(g)(2) through (g)(5). Because a qualifying project under the special exceptions provision at § 412.348(g) must be completed (put into use for patient care) by the end of the hospital's last cost reporting period beginning before the end of the transition period (September 30, 2001), a hospital may receive special exception payments for 10 years through September 30, 2012. For example, an eligible hospital that completes a qualifying project in October 1993 (FY 1994) will be eligible to receive special exception payments up through FY 2003 (September 30, 2003). In order to assist our fiscal intermediaries in determining the end of the 10-year period in which an eligible hospital will no longer be entitled to receive special exception payments, we are proposing to add a new § 412.348(g)(9) to require that hospitals eligible for special exception payments under § 412.348(g) submit documentation to the intermediary indicating the completion date of their project (the date the project was put in use for patient care) that meets the project need and project size requirements outlined in §§ 412.348(g)(2) through (g)(5). We are proposing that, in order for an eligible hospital to receive special exception payments, this documentation would have to be submitted in writing to the intermediary by the later of October 1, 2001, or within 3 months of the end of the hospital's last cost reporting period beginning before October 1, 2001, during which a qualifying project was completed. For example, if a hospital completed a qualifying project in March 1995, it would be required to submit documentation to the intermediary by October 1, 2001. If a hospital with a 12-month cost reporting period beginning on July 1 completed a qualifying project in November 2001, it would be required to submit documentation to the intermediary no later than September 30, 2002, which is 3 months after the end of its 12-month cost reporting period that began on July 1, 2001. C. Exceptions Minimum Payment Level Section 412.348(h) limits the estimated aggregate amount of exceptions payments under both the regular exceptions and special exceptions process to no more than 10 percent of the total estimated capital prospective payment system payments in a given fiscal year. Consistent with the requirements for regular exceptions at § 412.348(c), we are proposing that if we estimate that special exception payments would exceed 10 percent of total capital prospective payment system payments for a given fiscal year, we will adjust the minimum payment level of 70 percent by one percentage point increments until the estimated payments are within the 10-percent limit. For example, we could set the minimum payment level at 69 percent to ensure that estimated aggregate special exceptions payments do not exceed 10 percent of estimated total capital prospective payment system payments. If the estimate of aggregate special exceptions payments were still projected to exceed 10 percent of total capital prospective payment system payments, we would continue reducing the minimum payment level by one percentage point increments until the requirements in § 412.348(h) were satisfied. We are proposing to revise § 412.348(g)(6) accordingly to reflect this policy. D. Exceptions Adjustment Factor Section 412.308(c)(3) requires that the standard capital Federal rate be reduced by an adjustment factor equal to the estimated proportion of additional payments for both regular exceptions and special exceptions under § 412.348 relative to total capital prospective payment system payments. In estimating the proportion of regular exceptions payments to total capital prospective payment system payments during the transition period, we used the model originally developed for determining budget neutrality (described in Appendix B of this proposed rule) to determine the exception adjustment factor, which was applied to both the Federal and hospital-specific rates. Below we describe our proposed methodology for determining the special exceptions adjustment used in establishing the Federal capital rate. Under the special exceptions provision specified at § 412.348(g)(1), eligible hospitals include SCHs, urban hospitals with at least 100 beds that have a disproportionate share percentage of at least 20.2 percent or qualify for DSH payments under § 412.106(c)(2), and hospitals with a combined Medicare and Medicaid inpatient utilization of at least 70 percent. An eligible hospital may receive special exception payments if it meets (1) a project need requirement as described at § 412.348(g)(2), which, in the case of certain urban hospitals, includes an excess capacity test; (2) an age of assets test as described at § 412.348(g)(3); and (3) a project size requirement as described at § 412.348(g)(5). In order to determine the estimated proportion of special exceptions payments to total capital payments, we attempted to identify the universe of eligible hospitals that may potentially qualify for special exception payments. First, we identified hospitals that met the eligibility requirements at § 412.348(g)(1). Then we determined each hospital's average fixed asset age in the earliest available cost report starting in FY 1992 and later. For each of those hospitals, we calculated the average fixed asset age by dividing the 
                        ( print page 22705)
                        accumulated depreciation by the current year's depreciation. In accordance with § 412.348(g)(3), a hospital must have an average age of buildings and fixed assets above the 75th percentile of all hospitals in the first year of capital prospective payment system. In the September 1, 1994 final rule (59 FR 45385), we stated that, based on the June 1994 update of the cost report files in HCRIS, the 75th percentile for buildings and fixed assets for FY 1992 was 16.4 years. However, we noted that we would make a final determination of that value on the basis of more complete cost report information at a later date. In the August 29, 1997 final rule (62 FR 46012), based on the December 1996 update of HCRIS and the removal of outliers, we finalized the 75th percentile for buildings and fixed assets for FY 1992 as 15.4 years. Thus, we eliminated any hospitals from the potential universe of hospitals that may qualify for special exception payments if its average age of fixed assets did not exceed 15.4 years. For the hospitals remaining in the potential universe, we estimated project-size by using the fixed capital acquisitions shown on Worksheet A7 from the following HCRIS cost reports updated through December 2000. PPS year
Cost reports periods beginning inIX
FY 1992X
FY 1993XI
FY 1994XII
FY 1995XIII
FY 1996XIV
FY 1997XV
FY 1998XVI
FY 1999
 Because the project phase-in may overlap 2 cost reporting years, we added together the fixed acquisitions from sequential pairs of cost reports to determine project size. Under § 412.348(g)(5), the project-size must meet the following requirements: (1) $200 million; or (2) 100 percent of its operating cost during the first 12-month cost reporting period beginning on or after October 1, 1991. We calculated the operating costs from the earliest available cost report starting in FY 1992 and later by subtracting inpatient capital costs from inpatient costs (for all payers). We did not subtract the direct medical education costs as those costs are not available on every update of the HCRIS minimum data set. If the hospital met the project size requirement, we assumed that it also met the project need requirements at § 412.348(g)(2) and the excess capacity test for urban hospitals at § 412.348(g)(4). Because we estimate that so few hospitals will qualify for special exceptions, projecting costs, payments, and margins would result in high statistical variance. Consequently, we decided to model the effects of special exceptions using historical data based on hospitals' actual cost experiences. If we determined that a hospital may qualify for special exceptions, we modeled special exceptions payments from the project start date through the last available cost report (FY 1999). For purposes of modeling we used the cost and payment data on the cost reports from HCRIS assuming that special exceptions would begin at the start of the qualifying project. In other words, when modeling costs and payment data, we ignored any regular exception payments that these hospitals may otherwise have received as if there had not been regular exceptions during the transition period. In projecting an eligible hospital's special exception payments, we applied the 70-percent minimum payment level, the cumulative comparison of current year capital prospective payment system payments and costs, and the cumulative operating margin offset (excluding 75 percent of operating DSH payments). Because hospitals may receive regular exception payments up through the end of their last cost reporting period beginning before October 1, 2001, hospitals with cost reporting periods beginning on a day other than October 1 will continue to receive regular exception payments until the end of their FY 2002 cost reporting period. Therefore, these hospitals will only receive special exception payments for the remainder of Federal FY year 2002. Consequently, the special exceptions payments made in FY 2002 will be less than for subsequent years since they are only being paid a special exception payment for a portion of FY 2002. Our modeling of special exception payments produced the following results: Cost report
Number of hospitals eligible for special exceptions
Special exceptions as a fraction of capital payments to all hospitals
Special exceptions as a fraction of capital payments to all hospitals weighted by portion of FY 2002 for which special exceptions are paidPPS IXPPS XPPS XI
3PPS XII
6
0.0002
0.0001PPS XIII
8
0.0001
0.0000PPS XIV
14
0.0002
0.0001PPS XV
18
0.0016
0.0002PPS XVI
22
0.0011
0.0008
 Currently, the PPS XVI cost reports in HCRIS are incomplete because there is a 2-year lag time between the end of a hospital's cost reporting period and the submission and processing of the cost reports for HCRIS. In particular, hospitals whose cost reporting periods begin July 1 are missing. We expect more hospitals to qualify for special exceptions once data from later HCRIS updates are available. In addition, hospitals still have two more cost reporting periods (PPS XVII and PPS XVIII) to complete their projects in order to be eligible for special exceptions. We estimate that about 30 additional hospitals could qualify for special exceptions. Thus, we project 
                        ( print page 22706)
                        that special exception payments as a fraction of capital payments to all hospitals could be approximately 0.0025. However, after weighting this amount to account for the FY 2002 phase-in of special exception payments, we project that this factor would be approximately 0.0012. Because special exceptions are budget neutral, we propose to offset the Federal capital rate by 0.12 percent for special exceptions for FY 2002. Therefore, the proposed exceptions adjustment factor would equal 0.9988 (1 minus 0.0012) to account for special exception payments in FY 2002. We will revise this projection of the special exception adjustment factor in the final rule based on the latest available data. VI. Proposed Changes for Hospitals and Hospital Units Excluded From the Prospective Payment System A. Limits on and Adjustments to the Target Amounts for Excluded Hospitals and Units (§§ 413.40(b)(4) and (g)) 1. Updated Caps for Existing Hospitals and Units Section 1886(b)(3) of the Act (as amended by section 4414 of Public Law 105-33) established caps on the target amounts for certain existing hospitals and units excluded from the prospective payment system for cost reporting periods beginning on or after October 1, 1997 through September 30, 2002. The caps on the target amounts apply to the following three classes of excluded hospitals: psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals. In addition, section 4416 of Public Law 105-33 limited payments for psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals that first received payments on or after October 1, 1997. Payment for these hospitals and units is limited to the lesser of the hospital's operating costs per case or 110 percent of the national median of target amounts for the same class of hospitals for cost reporting periods ending during FY 1996, updated and adjusted for differences in area wage levels. A discussion of how the caps on the target amounts and the payment limitation were calculated can be found in the August 29, 1997 final rule with comment period (62 FR 46018); the May 12, 1998 final rule (63 FR 26344); the July 31, 1998 final rule (63 FR 41000), and the July 30, 1999 final rule (64 FR 41529). For purposes of calculating the caps for existing facilities, the statute required the Secretary to estimate the national 75th percentile of the target amounts for each class of hospital (psychiatric, rehabilitation, or long-term care) for cost reporting periods ending during FY 1996 without adjusting for differences in area wage levels. Under section 1886(b)(3)(H)(iii) of the Act, the resulting amounts are updated by the market basket percentage to the applicable fiscal year. Section 121 of Public Law 106-113 amended section 1886(b)(3)(H) of the Act to also provide for an appropriate wage adjustment to the caps on the target amounts for existing psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals, effective for cost reporting periods beginning on or after October 1, 1999, through September 30, 2002. On August 1, 2000, we published an interim final rule with comment period that implemented this provision for cost reporting periods beginning on or after October 1, 1999 and before October 1, 2000 (65 FR 47026) and a final rule that implemented this provision for cost reporting periods beginning on or after October 1, 2000 (65 FR 47054). This proposed rule addresses the wage adjustment to the caps and payment limitations for cost reporting periods beginning on or after October 1, 2001. For purposes of calculating the caps, section 1886(b)(3)(H)(ii) of the Act requires the Secretary to first “estimate the 75th percentile of the target amounts for such hospitals within such class for cost reporting periods ending during fiscal year 1996.” Furthermore, section 1886(b)(3)(H)(iii), as added by Public Law 106-113, requires the Secretary to also provide for existing hospitals “an appropriate adjustment to the labor-related portion of the amount determined under such subparagraph to take into account the differences between average wage-related costs in the area of the hospital and the national average of such costs within the same class of hospital.” Consistent with the broad authority conferred on the Secretary by section 1886(b)(3)(H)(iii) of the Act to determine the appropriate wage adjustment, we account for differences in wage-related costs by adjusting the caps to account for the following: First, we adjust each hospital's target amount to account for area differences in wage-related costs. For each class of hospitals (psychiatric, rehabilitation, and long-term care), we determine the labor-related portion of each hospital's FY 1996 target amount by multiplying its target amount by the actuarial estimate of the labor-related portion of costs (or 0.71553). Similarly, we determine the nonlabor-related portion of each hospital's FY 1996 target amount by multiplying its target amount by the actuarial estimate of the nonlabor-related portion of costs (or 0.28447). Next, we account for wage differences among hospitals within each class by dividing the labor-related portion of each hospital's target amount by the hospital's wage index under the hospital inpatient prospective payment system. Within each class, each hospital's wage-neutralized target amount was calculated by adding the wage-neutralized labor-related portion of its target amount and the nonlabor-related portion of its target amount. Then, the wage-neutralized target amounts for hospitals within each class were arrayed in order to determine the national 75th percentile caps on the target amounts for each class. Taking into account the national 75th percentile of the target amounts for cost reporting periods ending during FY 1996 (wage-neutralized using the FY 2000 acute care wage index), the wage adjustment provided for under Public Law 106-113, and the applicable update factor based on the market basket percentage increase for FY 2001, in the August 1, 2000 final rule (65 FR 47096), we established the FY 2001 caps on the target amounts as follows: Class of excluded hospital or unit
FY 2001 labor-related share
FY 2001 nonlabor-related sharePsychiatric
$8,131
$3,233Rehabilitation
15,164
6,029Long Term Care
29,284
11,642
 In reviewing our methodology for wage neutralizing the hospital specific target amounts, it appears that we incorrectly used the FY 2000 hospital inpatient prospective payment system wage index published in Tables 4A and 4B of the July 30, 1999 final rule (64 FR 41585 through 41593), which is based on wage data after taking into account geographic reclassification under section 1886(d)(8) of the Act. We are proposing to revise the methodology of wage neutralizing the hospital-specific target amounts using pre-reclassified wage data. We propose to recalculate the limit for new excluded hospitals and units, as well as calculate the cap for existing excluded hospitals and units, using the pre-reclassification wage index. The pre-reclassification wage index is the same wage index used under the prospective payment system for skilled nursing facilities (SNFs) and was included in Table 7 of the July 30, 1999 SNF final rule (64 FR 41690). (We note that both SNFs and ambulatory surgical centers use the prospective payment system inpatient wage index 
                        ( print page 22707)
                        without regard to the prospective payment system reclassification as a proxy for variations in local costs.) As we stated in the August 1, 2000 final rule, long-term care hospitals, rehabilitation hospitals and units, and psychiatric hospitals and units that are exempt from the prospective payment system are not subject to the prospective payment system hospital reclassification system under section 1886(d)(10)(A) of the Act. This section establishes the MGCRB for the purpose of evaluating applications from short-term, acute care providers. There is no equivalent statutory mandate for HCFA to develop an alternative board for long-term care hospitals, psychiatric hospitals and units, and rehabilitation hospitals and units. In addition, while it would be feasible to allow units physically located in prospective payment system hospitals that have been reclassified by the MGCRB to use the wage index for the area to which that hospital has been reclassified, at the present time there is no process in place to make reclassification determinations for freestanding excluded providers. There are approximately 1,000 freestanding excluded providers. Therefore, in the interest of equity, we believe that, in determining a hospital's wage-adjusted cap on its target amount, it is appropriate for excluded hospitals and units to use the wage index associated with the area in which they are physically located (MSA or rural area) and the prospective payment system reclassification under section 1886(d)(10) of the Act is not applicable. This policy is also consistent with the policy for SNFs and ambulatory surgical centers that use the acute care, inpatient hospital prospective payment system wage index and that does not allow for reclassifications since there is no analogous determinations process to the MGCRB. The MGCRB only has authority over the prospective payment system for acute care hospitals. Therefore, based on the broad authority conferred on the Secretary by section 1886(b)(3)(H)(iii) of the Act to determine the appropriate wage adjustment to the caps, we have determined the labor-related and nonlabor-related portions of the proposed caps on the target amounts for FY 2002 using the methodology outlined above. Class of excluded hospital or unit
FY 2002 proposed labor-related share
FY 2002 proposed nonlabor-related sharePsychiatric
$8,404
$3,341Rehabilitation
15,689
6,237Long-Term Care
31,399
12,483
 These labor-related and nonlabor-related portions of the proposed caps on the target amounts for FY 2002 are based on the current estimate of the market basket increase for excluded hospitals and units for FY 2002 of 3.0 percent and reflect the change in applying the pre-reclassified hospital inpatient prospective payment system wage index as discussed above. Furthermore, in accordance with section 307(a) of Public Law 106-554, which amended section 1886(b)(3) of the Act, the labor-related and nonlabor-related portions of the proposed cap for long-term care hospitals for FY 2002 are increased by 2 percent. We are providing a further discussion of this provision in an interim final rule with comment period that will implement provisions of Public Law 106-554 for FY 2001 and for periods in FY 2001 from April 1, 2001 through September 30, 2001 (HCFA-1178-IFC). Finally, to determine payments described in § 413.40(c), the cap on the hospital's target amount per discharge is determined by adding the hospital's nonlabor-related portion of the national 75th percentile cap to its wage-adjusted, labor-related portion of the national 75th percentile cap. A hospital's wage-adjusted, labor-related portion of the target amount is calculated by multiplying the labor-related portion of the national 75th percentile cap for the hospital's class by the hospital's applicable wage index. For FY 2002, a hospital's applicable wage index is the pre-reclassified wage index under the hospital inpatient prospective payment system (see § 412.63). The proposed wage index values are computed based on the same data used to compute the proposed FY 2002 wage index values for the hospital inpatient prospective payment system without taking into account changes in geographic reclassification under section 1886(d)(8)(B) of the Act for certain rural hospitals or reclassifications based on MGCRB decisions or the Secretary's decisions under sections 1886(d)(8) through (d)(10) of the Act. For cost reporting periods beginning on or after October 1, 2001 and before October 1, 2002, the pre-reclassified wage index is in Tables 4G and 4H of this proposed rule. A hospital's applicable wage index corresponds to the area in which the hospital or unit is physically located (MSA or rural area). 2. New Excluded Hospitals and Units a. Updated Caps (§ 413.40(f)) Section 1886(b)(7) of the Act establishes a payment methodology for new psychiatric hospitals and units, new rehabilitation hospitals and units, and new long-term care hospitals. Under the statutory methodology, for a hospital that is within a class of hospitals specified in the statute and first receives payments as a hospital or unit excluded from the prospective payment system on or after October 1, 1997, the amount of payment will be determined as follows: For the first two 12-month cost reporting periods, the amount of payment is the lesser of (1) the operating costs per case; or (2) 110 percent of the national median of target amounts for the same class of hospitals for cost reporting periods ending during FY 1996, updated to the first cost reporting period in which the hospital receives payments as adjusted for differences in area wage levels. As discussed earlier, in reviewing our methodology for wage neutralizing the hospital-specific target amounts, it appears we incorrectly used the FY 2000 hospital inpatient prospective payment system wage index published in Tables 4A and 4B of the July 30, 1999 final rule, which is based on wage data after taking into account geographic reclassifications under section 1886(d)(8) of the Act. Therefore, we also are proposing to revise the methodology of wage neutralizing the hospital-specific target amounts using pre-reclassified wage data in our calculation of the limit for new excluded hospitals and units. The proposed amounts included in the following table reflect the updated and recalculated 110 percent of the wage neutralized national median target amounts for each class of excluded hospitals and units for cost reporting periods beginning during FY 2002. These figures are updated to reflect the projected market basket increase of 3.0 percent. For a new provider, the labor-related share of the target amount is multiplied by the appropriate geographic area wage index, without regard to prospective payment system reclassifications, and added to the nonlabor-related share in order to determine the per case limit on payment under the statutory payment methodology for new providers. Class of excluded hospital or unit
FY 2002 proposed labor-related share
FY 2002 proposed nonlabor-related sharePsychiatric
$6,795
$2,701Rehabilitation
13,425
5,337( print page 22708)Long-Term Care
16,651
6,620
 b. Changes in Type of Hospital Classification (§§ 412.23 and 412.25) Section 1886(b)(3) of the Act (as amended by section 4414 of Public Law 105-33) establishes caps on the target amounts for existing psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals for cost reporting periods beginning on or after October 1, 1997 through September 30, 2002. Section 4416 of Public Law 105-33 amended section 1886(b)(7) of the Act to provide for a limitation on payment for new excluded psychiatric hospitals and units, new rehabilitation hospitals and units, and new long-term care hospitals. Since the establishment of the caps on target amounts and the payment limitations, there has been an increase in the number of hospitals requesting a change from one classification type to another (for example, from rehabilitation to long-term care). Regulations at § 412.22(d) state that “For purposes of exclusion from the prospective payment systems under this subpart, the status of each currently participating hospital (excluded or not excluded) is determined at the beginning of each cost reporting period and is effective for the entire cost reporting period. Any changes in the status of the hospital are made only at the start of a cost reporting period.” Even though the existing regulations directly address only a hospital that changes from a prospective payment system hospital to an excluded hospital, our longstanding policy has been that a change of any classification type can be effective only at the beginning of the provider's cost reporting period. Although the existing regulations do not directly address changes in a classification type of excluded hospital, we believe that a change from one classification type of excluded hospital to another type of excluded hospital is analogous to a change from a prospective payment system hospital to an excluded hospital. Therefore, we believe it would be consistent with our longstanding policy to amend our regulations to specify that a change from one excluded hospital classification type to another type is allowed only at the beginning of the hospital's cost reporting period. The rationale underlying our present policy of requiring that these types of changes should only be effective at the beginning of the cost reporting period is the need to avoid any undue (and possibly significant) administrative burden that could result from doing otherwise (for example, cost allocation, cost reporting requirements, certification issues). If we were to accept changes in an excluded hospital's classification type from one type of classification to another, other than at the beginning of the cost reporting period, the hospital would need to file a terminating cost report with respect to its original classification as well as file a separate cost report for the remainder of the cost reporting period with respect to its new classification. Filing these cost reports would involve gathering the appropriate cost data, allocating the data, and apportioning the data between the two hospital classes. Additionally, we would have to validate the cost reports. To allow these types of changes in the middle of a cost reporting period would result in a significant administrative burden. We would point out that this burden is applicable equally for either a change from a prospective payment system hospital to an excluded hospital, or a change from one excluded hospital classification type to another classification type. Therefore, we are proposing to amend the regulations to provide that the effective date of any of these classification changes is only at the beginning of a provider's cost reporting period (proposed § 412.23(i), for excluded hospitals, and proposed § 412.25(f), for excluded units). 3. Effective Date of Exclusion of Long-Term Care Hospitals Existing regulations at § 412.23(e) require a newly established long-term care hospital to operate for at least 6 months with an average length of stay in excess of 25 days in order to qualify for exclusion from the inpatient hospital prospective payment system as a long-term care hospital. Other regulations at § 412.22(d) allow changes in a hospital's status from not excluded to excluded to occur only at the start of a cost reporting period. These two regulations, taken together, typically require a hospital to operate for at least 6 months under the prospective payment system before becoming eligible for payment at the more favorable rate under section 1886(b)(3) of the Act. These regulations were challenged in litigation by a chain organization that operates a large number of long-term care hospitals (
                        *Transitional Hospital Corporation of Louisiana, Inc.*
                        v. 
                        *Shalala*, 222 F.3d 1019 (D.C. Cir. 2000) (
                        *THC*)). Although the court of appeals in this case found that the Secretary has ample authority to adopt current regulatory provisions, it also concluded that the Secretary has not adequately considered other policy options. Consequently, it remanded the case to the agency for the agency to consider whether it wanted to continue its existing policy or adopt a policy of either “self-certification” or “retroactive adjustment.” Generally, under a self-certification approach, hospitals that have not yet demonstrated the required average length of stay would be excluded from the prospective payment system based on a commitment to maintain such a length of stay. Under a retroactive adjustment approach, a hospital's long-term care classification would be made effective with the beginning of the 6-month period in which it demonstrated the required average length of stay. Payments for that period initially would be made under the prospective payment system and then adjusted retroactively to amounts payable for an excluded long-term care hospital once length of stay was successfully established. As directed by the court of appeals, we are reviewing the issues raised in this case in light of the court's decision, and are specifically considering the options of self-certification and retroactive adjustment. Our current proposals and the alternatives we considered before arriving at them are set forth below. To assist us in completing the review process, we are requesting public comment on our proposals, taking into account the following considerations. a. Demonstrating Required Average Length of Stay Although we understand that we have discretion to select other policy options, we are proposing to continue our policy of requiring hospitals seeking long-term care hospital classification to demonstrate the required average length of stay based on 6 months of data, instead of permitting these hospitals to “self-certify” the required average length of stay. We note that the statute provides the agency with broad authority to determine the methodology by which facilities can qualify for exclusion as long-term care hospitals (section 1886(d)(1)(B)(iv)(I) of the Act specifies that “a hospital which has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days” qualifies for exclusion as a long-term care hospital). As the court of appeals decided, the parenthetical phrase 
                        *as determined by the Secretary*
                         “gives the Secretary considerable leeway to determine whether to require 
                        ( print page 22709)
                        prospective, contemporaneous, or retrospective evaluation and payment.” (
                        *THC*
                         at 1026.) Although we have considered the self-certification option, we do not believe that it is appropriate to permit long-term care hospitals to self-certify. Long-term care hospitals “are licensed as acute care hospitals in the States in which they operate [and] their only distinguishing characteristic is their long average length of stay” (ProPAC March 1, 1997 Report and Recommendations to the Congress, Recommendation 30). For this reason, and because average length of stay can be difficult, if not impossible, to forecast when a new hospital first opens its doors for service, it would not be appropriate to allow new hospitals to self-certify that they will have an average length of stay exceeding 25 days. Requiring newly participating hospitals to collect at least 6 months of length of stay data before permitting them to qualify as long-term care hospitals is consistent with treatment of other types of excluded hospitals in the regulations. Like long-term care hospitals, children's hospitals, which by statute are also excluded from the prospective payment system, also have just one distinguishing characteristic from acute care hospitals; namely, having inpatients who are predominantly individuals under 18 years of age (section 1886(d)(1)(B)(iii) of the Act). As with long-term care hospitals, we do not permit children's hospitals to self-certify that they will meet this requirement as to a future cost reporting period (§ 412.23(d)). Although we permit rehabilitation hospitals to self-certify that they meet certain elements of the definition for such a hospital, important differences between rehabilitation hospitals and long-term care hospitals render such a scheme inappropriate for the latter. The differences in the two types of excluded hospitals begin with the statute, which excludes from the prospective payment system “a rehabilitation hospital (as defined by the Secretary)” and “a hospital which has an average inpatient length of stay (as defined by the Secretary) of greater than 25 days”; that is, a long-term care hospital (sections 1886(d)(1)(B)(ii) and 1886(d)(1)(B)(iv)(I) of the Act). Thus, Congress delegated broad authority to the Secretary to define rehabilitation hospitals, but provided the definition of long-term care hospitals in the statute itself (and then, as discussed above, gave the agency broad authority to determine how to apply that definition). In exercising our authority to define a rehabilitation hospital, we promulgated regulations that contain several defining features that a facility must possess to be considered such a hospital, as opposed to the one statutorily mandated feature (average length of stay) that defines long-term care hospitals (§ 412.23(b)). The requirements that a rehabilitation hospital must meet include a showing that 75 percent of its patients are of a certain type, the existence of a preadmission screening process, assurance that patients will receive close medical supervision and that the hospital will furnish certain types of therapy through the use of qualified personnel, the presence of a director of rehabilitation with certain qualifications, evidence of a plan of treatment for each inpatient that is established and monitored by a physician, and the use of a coordinated interdisciplinary team approach in the rehabilitation of each patient (§ 412.23(b)(1) through (b)(7)). With the exception of the “75 percent rule,” all of these requirements are “characteristics of the patients and types of services that the facility furnishes” that “can be assessed at a given point in time” (ProPAC March 1, 1997 Report and Recommendations to the Congress, Recommendation 30). Thus, rehabilitation hospitals are defined primarily by static and observable features, most of which can be accurately assessed when a new rehabilitation hospital is first certified under the Medicare program. As a result, the regulations permit a new rehabilitation hospital to provide written certification that it will meet the 75 percent rule, provided we find that it also meets the six other elements of the definition of a rehabilitation facility (§ 412.23(b)(8)). The hospital's demonstrated ability to meet the six remaining requirements provides an adequate level of assurance that the hospital will also meet the 75-percent requirement if it so certifies. No such assurance is available, however, regarding whether a hospital might, during a future period, meet the sole requirement for qualification as a long-term care hospital—the average length of stay of its patients. b. Effective Date of Exclusion From the Prospective Payment System Because we propose to continue our policy of not allowing a hospital to self-certify the required average length of stay in order to be paid as an excluded long-term care hospital, it is necessary to consider the effective date of excluded status for a hospital that has demonstrated the required average length of stay. We considered making long-term care classification effective retroactively with the beginning of the 6-month period in which the hospital demonstrated the required average length of stay. Doing so would mean, for example, that a hospital that admitted its first patient on January 1, 2001, and demonstrated that its average length of stay exceeded 25 days for the period January 1 through June 30, and that was approved for long-term care classification on July 15, would be paid for its discharges from January 1, 2001 forward as an excluded long-term care hospital rather than under the prospective payment system, as long as it continued to demonstrate the requisite average length of stay. However, we believe that such retroactive application of excluded status is inappropriate. For the reasons below, we are proposing to continue our policy that a hospital's payment as a long-term care hospital would be effective with the beginning of the hospital's cost reporting period that follows the determination to classify the hospital as a long-term care hospital. From the first rulemaking implementing the inpatient acute hospital prospective payment system payment methodology, the agency has generally applied decisions regarding various elements of the prospective payment system payment methodology prospectively only, and the courts have upheld that action. (
                        *THC*
                         at 1022 (“status” decisions regarding whether a hospital is subject to or excluded from the prospective payment system); 
                        *County of Los Angeles*
                         v. 
                        *Shalala*
                         192 F.3d 1005 (D.C. Cir. 1999) (decisions regarding criteria for receipt of “outlier” payments); 
                        *Methodist Hospital of Sacramento*
                         v. 
                        *Shalala,*
                         38 F.3d 1225 (D.C. Cir. 1994) (decisions to revise “wage index” component of the prospective payment system payment rate); 
                        *Hennepin County*
                         v. 
                        *Sullivan,*
                         883 F.2d 85, 91 (D.C. Cir. 1989) (“there is nothing inherently arbitrary or capricious about an agency's decision to apply new data prospectively only”); 57 FR 39746 and 39798 (1992).) For the same reasons that existed in the cases cited above, we believe that prospective implementation of the statutory exclusion for long-term care hospitals is fully consistent with Congress' goals in enacting the prospective payment system. It allows both the hospital and us to know with certainty at the beginning of each cost reporting period of the hospital whether the hospital is subject to or excluded from the prospective payment system for that cost reporting period and thus 
                        ( print page 22710)
                        promotes certainty and predictability of payment for both providers and the agency. 
                        *County of Los Angeles*
                         at 1019; 
                        *Methodist Hospital of Sacramento*
                         at 1232 (“because the Secretary's prospectivity policy permits hospitals to rely with certainty on one additional element in the PPS calculation rate * * * the Secretary could reasonably conclude that it will promote efficient and realistic cost saving targets”). Moreover, retroactive application of a prospective payment system excluded status decision would entail a significant administrative burden as it would require reprocessing of large numbers of a hospital's claims for hospital inpatient services. See 49 FR 234 and 271 (1984) (making retroactive changes in decisions regarding providers' status as “sole community hospitals” would require us “to reprocess every inpatient hospital claim submitted for the hospital and make adjustment payments at the new rate). It is reasonable to conclude that such a burden outweighs any “increase in accuracy that would result” from retroactive application of decisions regarding long-term care hospital exclusions (
                        *Methodist Hospital of Sacramento*
                         at 1233). Finally, we apply our prospective-only policy evenhandedly, regardless of whether it results in a hospital's being subject to, or excluded from, the prospective payment system. Thus, retroactive adjustments in hospitals' status are as likely to hurt providers that slip below the required average length of stay during a cost reporting period as they are to help them by furnishing reimbursement for a past period in which they met that requirement (
                        *Methodist Hospital of Sacramento*
                         at 1232, 1233). Any adverse effect of the prospective only policy that might be perceived by new long-term care facilities is also lessened by the availability of a short initial cost reporting period and outlier payments for extraordinarily lengthy cases during the initial period when the hospital is subject to the prospective payment system. In addition to believing that it is appropriate to make payment as a long-term care hospital effective prospectively rather than retroactively, we believe it is also appropriate to continue our policy of making payment effective with the beginning of the hospital's next cost reporting period rather than as of the date of approval of long-term care status. This policy is consistent with how we treat changes in status (that is, from excluded to nonexcluded or from nonexcluded to excluded) for all types of hospitals. As we explain in more detail in section VI.A.2.b of this proposed rule, the rationale for requiring changes in a hospital's status, or changes in a hospital's classification (that is, from one type of excluded hospital to another), only at the start of the hospital's cost reporting period is to alleviate the administrative burden and potential confusion that would result from doing otherwise. As noted earlier, we request public comments on the proposals described above. 4. Development of Prospective Payment System for Inpatient Rehabilitation Hospitals and Units Section 1886(j) of the Act, as added by section 4421 of Public Law 105-33, provided the phase-in of a case-mix adjusted prospective payment system for inpatient rehabilitation services (freestanding hospitals and units) for cost reporting periods beginning on or after October 1, 2000 and before October 1, 2002, with a fully implemented system for cost reporting periods beginning on or after October 1, 2002. Section 1886(j) of the Act was amended by section 125 of Public Law 106-113 to require the Secretary to use the discharge as the payment unit under the prospective payment system for inpatient rehabilitation services and to establish classes of patient discharges by functional-related groups. Section 305 of Public Law 106-554 further amended section 1886(j) of the Act to allow hospitals to elect to be paid the full Federal prospective payment rather than the transitional period payments specified in the Act. On November 3, 2000, we issued a notice of proposed rulemaking in the 
                        **Federal Register**
                         (65 FR 66303) on the proposed establishment of the prospective payment system for inpatient rehabilitation facilities, to be effective on April 1, 2001. Due to the scope and complexity of the proposed system and requests from the public for more time to comment on the proposed rule, we extended the public comment period for an additional 30 days, from January 3, 2001 to February 1, 2001. As a result of the extension of the comment period, it would have been technically impossible to publish a final rule 60 days prior to implementing the prospective payment system for rehabilitation facilities by April l. We anticipate publication of a final rule in May 2001 and intend to announce our plans for implementation at that time. B. Critical Access Hospitals (CAHs) 1. Exclusion of CAHs From Payment Window Requirements Section 1886 of the Act specifies the requirements governing payment to full-service hospitals for the operating costs of inpatient hospital services under both the inpatient hospital prospective payment system and the limits on the target amounts for hospitals excluded from the prospective payment system. “Operating costs of inpatient hospital services” are defined in section 1886(a)(3) of the Act, which provides in part that costs of certain services provided to a beneficiary during the 3 days (or in the case of an excluded hospital or unit, during the 1 day) immediately preceding the patient's admission are to be included in the payments for costs under the inpatient hospital prospective payment system, or the target amount for excluded hospitals and units. This part of the definition is sometimes referred to as the “payment window” requirement. Regulations implementing the payment window requirement are found at § 412.2(c)(5) for hospitals subject to the prospective payment system, and § 413.40(c)(2) for hospitals excluded from the prospective payment system. Payment to CAHs for inpatient services is not made under section 1886 of the Act, nor are CAHs considered to be hospitals excluded from the inpatient hospital Prospective Payment System. Instead, payment is made on a reasonable cost basis, as mandated by section 1814(l) of the Act. Neither section 1814(l) nor section 1861(v) of the Act (which defines “reasonable cost”) requires application of the payment window to services furnished on an outpatient basis immediately before admission to a CAH. Therefore, we have determined that the payment window provision does not apply to CAHs. To clarify this point and avoid possible misapplication of the payment window, we are proposing to amend § 413.70(a)(l) to provide that the requirements of §§ 412.2(c)(5) and 413.40(c)(2) do not apply to CAHs. 2. Availability of CRNA Pass-Through for CAHs Generally, anesthesia services furnished to a hospital patient by a certified registered nurse anesthetist (CRNA) must be billed to the Part B carrier and payment is made under the applicable fee schedule provisions of § 414.60. However, certain rural hospitals that furnish no more than 500 surgical procedures requiring anesthesia per year and meet other specified requirements are exempted from the fee 
                        ( print page 22711)
                        schedule. These hospitals are paid on a reasonable cost basis for their costs of anesthesia services furnished by qualified nonphysician anesthetists. The exemption is provided in accordance with section 9320(k) of the Omnibus Budget Reconciliation Act of 1986 (Public Law 99-509) (as added by section 608(c)(2) of the Family Support Act of 1988 (Public Law 100-185), as amended by section 6132 of the Omnibus Budget Reconciliation Act of 1989 (Public Law 101-239)). HCFA has codified this exemption at § 412.113(c). Although § 412.113(c) does not specifically extend eligibility for the pass-through payment for CRNAs to CAHs, some CAHs have pointed out that they are similar to the rural hospitals that are eligible for this payment, in that they also furnish low volumes of surgical procedures requiring anesthesia and could face the same problem of potentially inadequate payment for CRNA services if they are not allowed to qualify for the pass-through payment. We share this concern. We recognize that the legislation cited above, which provides the legal basis for the pass-through payments, refers only to “hospitals,” not to CAHs. Moreover, section 1861(e) of the Act states that “the term “hospital” does not include, unless the context otherwise requires, a critical access hospital * * *.” It is clear from section 1861(e) of the Act that CAHs are not to be considered hospitals under the Medicare law for most purposes. However, the reference to “context” in the provision indicates that CAHs may be classified as hospitals where, in specific contexts, it would be consistent with the purpose of the legislation to do so. We believe this is the case with the statutory provisions authorizing pass-through payments for CRNA costs. The purpose of the pass-through legislation is to provide small rural hospitals with low surgical volumes with relief from the difficulties they might otherwise have in furnishing CRNA services for their patients. CAHs are by definition limited'service facilities located in rural areas and, as such, they serve a population much like those served by hospitals eligible for the pass-through payments. In some cases, an institution that now participates as a CAH may even have been eligible for the pass-through payments when it participated as a hospital. Such an institution would clearly be disadvantaged if it were to lose this status. Thus, in accordance with section 1861(e) of the Act and in light of the context of the pass-through legislation cited above, we consider CAHs to be “hospitals” for purposes of extending eligibility for the CRNA pass-through payments to them. Therefore, we are proposing to add a new § 413.70(a)(3) and revise §§ 413.70(a)(2), (b)(1), and (b)(6) to permit CAHs that meet the criteria for the pass-through payments in § 412.113(c) to qualify for pass-through payments for the costs of anesthesia services for both inpatient and outpatient surgeries, on the same basis as full service rural hospitals. As an unrelated technical correction, we are proposing to revise § 413.70(b)(2)(i)(C) to delete the incorrect reference to § 413.130(j)(2) and replace it with a reference to reduction in capital costs under § 413.130(j). We also are proposing to revise § 412.113(c) by changing the term “hospital” to “hospital or CAH”. 3. Payment to CAHs for Emergency Room On-Call Physicians (Proposed § 413.70(b)(4)) Under section 1834(g) of the Act, Medicare payment to a CAH for facility services to Medicare outpatients is the reasonable costs of the CAH in providing such services. The term “reasonable cost” is defined in section 1861(v) of the Act and in regulations at 42 CFR Part 413, including, with specific reference to CAHs, § 413.70. Consistent with the general policies stated in section 2109 of the Medicare Provider Reimbursement Manual (PRM), Part I (HCFA Publication 15-1), the reasonable cost of CAH services to outpatients may include reasonable costs of compensating physicians who are on standby status in the emergency room (that is, physicians who are present and ready to treat patients if necessary). However, under existing policy, the reasonable cost of CAH services to outpatients may not include any costs of compensating physicians who are not present in the facility but are on call. Section 204 of Public Law 106-554 further amended section 1834(g) of the Act (as amended by section 201 of Public Law 106-554) by adding a new paragraph (5). New section 1834(g)(5) of the Act provides that, in determining the reasonable costs of outpatient CAH services under sections 1834(g)(1) and 1834(g)(2)(A) of the Act, the Secretary shall recognize as allowable costs amounts (as defined by the Secretary) for reasonable compensation and related costs for emergency room physicians who are on call (as defined by the Secretary) but who are not present on the premises of the CAH involved, are not otherwise furnishing physicians' services, and are not on call at any other provider or facility. The provisions of section 204 of Public Law 106-554 are effective for cost reporting periods beginning on or after October 1, 2001. To implement the provisions of section 1834(g)(5) of the Act, we are proposing to add a new paragraph (4) to § 413.70(b). The proposed § 413.70(b)(4) would permit the reasonable costs of CAH outpatient services to include the reasonable compensation and related costs of emergency room on-call physicians under the terms and conditions specified in the statute. As directed in the statute, under § 413.70(b)(4)(ii)(A) of this proposed rule, we are defining “amounts for reasonable compensation and related costs” as those allowable costs of compensating emergency room physicians for being on call, to the extent these costs are found to be reasonable under the rules in § 413.70(b)(2). In addition, as specified under § 413.70(b)(4)(ii)(A) of this proposed rule, we are defining an “emergency room physician who is on call” as a doctor of medicine or osteopathy with training or experience in emergency care who is immediately available by telephone or radio contact, and who is available on site within the timeframes specified in our existing regulations under § 485.618(d). Existing § 485.618(d) specifies that the physician must be available on site (1) within 30 minutes, on a 24-hour a day basis, if the CAH is located in an area other than an area described in item (2); or (2) within 60 minutes, on a 24-hour a day basis, if all of the following requirements are met: The CAH is located in an area designated as a frontier area (that is, an area with fewer than six residents per square mile based on the latest population data published by the Bureau of the Census) or in an area that meets criteria for a remote location adopted by the State in its rural health care plan, and approved by HCFA, under section 1820(b) of the Act.
                    The State has determined under criteria in its rural health care plan that allowing an emergency response time longer than 30 minutes is the only feasible method of providing emergency care to residents of the area served by the CAH.
                    The State maintains documentation showing that the response time of up to 60 minutes at a particular CAH it designates is justified because other available alternatives would increase the time needed to stabilize a patient in an emergency. We also believe that it is essential that physicians who are paid to be in on-call status in fact come to the facility when 
                        ( print page 22712)
                        summoned. Therefore, we are proposing to specify that costs of on-call emergency room physicians are allowable only if the costs are incurred under written contracts that require them to come to the CAH when their presence is medically required. 4. Treatment of Ambulance Services Furnished by Certain Critical Access Hospitals (Proposed § 413.70(b)(5)) Under section 1861(s)(7) of the Act, Medicare Part B covers and pays for ambulance services, to the extent prescribed in regulations, when the use of other methods of transportation would be contraindicated. Various Congressional reports indicate that Congress intended that (1) the ambulance benefit cover transportation services only if other means of transportation are contraindicated by the beneficiary's medical condition; and (2) only ambulance services to local facilities be covered unless necessary services are not available locally, in which case, transportation to the nearest facility furnishing those services is covered. (H.R. Rept. No. 89-213, 89th Cong., 1st Sess. at 37 (1995) and S. Rept. No. 89-404, 89th Cong., 1st Sess., Pt. I, at 43 (1995).) The Medicare program currently pays for ambulance services on a reasonable cost basis when furnished by a provider and on a reasonable charge basis when furnished by a supplier. (The term “provider” includes all Medicare-participating institutional providers that submit claims for Medicare ambulance services (hospitals, CAHs, SNFs, and home health agencies). The term “supplier” means an entity that is independent of any provider. The reasonable charge methodology that is the basis of payment for ambulance services is determined by the lowest of the customary, prevailing, actual, or inflation indexed charge. Section 4531(a)(1) of Public Law 105-33 amended section 1861(v)(1) of the Act and imposed an additional per trip limitation on reasonable cost payment to hospitals and CAHs for ambulance service. As amended, the statute provides that, in determining the reasonable cost of ambulance services furnished by a provider of services, the Secretary shall not recognize the cost per trip in excess of the prior year's reasonable cost per trip updated by an inflation factor. This trip limit provision was first effective for services furnished during Federal fiscal year 1998 (October 1, 1997 through September 30, 1998). Section 205 of Public Law 106-554 amended section 1834(l) of the Act by adding a new paragraph (8) to that section. New section 1834(l)(8) provides that the Secretary is to pay the reasonable costs incurred in furnishing ambulance services if such services are furnished by a CAH (as defined in section 1861(mm)(1) of the Act), or by an entity owned or operated by the CAH. This provision in effect eliminates any trip limit that CAHs had been subject to as a result of section 1861(v)(1) of the Act, as amended by Public Law 105-33. However, section 205 further states that in order to receive reasonable cost reimbursement for the furnishing of ambulance services, the CAH or entity must be the only provider or supplier of ambulance services located within a 35-mile drive of the CAH. Section 205 is effective for services furnished on or after December 21, 2000, the date of enactment of Public Law 106-554. To implement the provisions of section 1834(l)(8) of the Act, we are proposing to add a new paragraph (5) to § 413.70(b). Proposed § 413.70(b)(5) would permit a CAH, or an entity owned or operated by a CAH, to be paid for furnishing ambulance services on a reasonable cost basis if the CAH or entity is the only provider or supplier of ambulance services within a 35-mile drive of the CAH. In determining whether there is any other provider or supplier of ambulance services within a 35-mile drive of a CAH or entity, we would first identify the site where the nearest other ambulance provider or supplier garages its vehicles, and then determine whether that site is within 35 miles, calculated as the shortest distance in miles measured over improved roads. An improved road for this purpose would be defined as any road that is maintained by a local, State, or Federal government entity, and is available for use by the general public. Consistent with the change we are proposing in § 412.92(c)(1) relating to SCH determinations (as explained in section IV. of this preamble), we would consider improved roads to include the paved surface up to the front entrance of the hospital and, for purposes of § 413.70(b)(5), the front entrance of the garage. 5. Qualified Practitioners for Preanesthesia and Postanesthesia Evaluation in CAHs Section 1820 of the Act sets forth the conditions for designating certain hospitals as CAHs. Implementing regulations for section 1820 of the Act are located in 42 CFR part 485, Subpart F. Among the conditions of participation regulations for CAHs in subpart F is the condition for surgical services (§ 485.639). Existing § 485.639 specifies that preanesthesia and postanesthesia services in a CAH can only be performed by a doctor of medicine or an osteopathic practitioner; a doctor of dental surgery or dental medicine; or a doctor of podiatric medicine. This Medicare condition of participation requirement regarding preanesthesia and postanesthesia evaluations for CAHs differs from, and is more restrictive than, the current requirement for acute care hospitals in general. In an acute care hospital, the CRNA is listed among the practitioners who may perform the preanesthesia and postanesthesia evaluations. Our principal consideration in regulating providers is to ensure patient safety and high quality patient outcomes. As circumstances and health care environments change, we reassess regulations and propose changes accordingly. When the regulations for the initial Rural Primary Care Hospital (RPCH) program (which later became the CAH program) were adopted, RPCHs were limited to patient stays of no more than 72 hours and to bed counts of no more than 6 acute care beds. We initially viewed RPCHs as very limited-service facilities that would be unlikely to perform any surgery beyond what might be done in a physician's office; therefore, we did not have a condition of participation for surgery. Section 102(a)(1) of the Social Security Amendments of 1994, Public Law 103-432, specifically authorized surgical care in RPCHs. In June 1995, we proposed a surgical condition of participation that incorporated the ambulatory surgery center (ASC) standards. We expected that the types of procedures done in a RPCH would most likely be those that could be done in ASCs. At the time, we received no comments in response to the proposed standards and therefore adopted them in the final RPCH conditions of participation that were published on September 1, 1995 (60 FR 45851). In 1997, the RPCH (now CAH) program was expanded through a statutory change to include all States and to allow for an increase in bed size and length of stay (August 29, 1997 final rule, 62 FR 46035). Since that time, the program's original conditions of participation have been revised to remove possible barriers to access to care. One example of this effort is the final rule to eliminate the Federal requirement for physician supervision of CRNAs in CAHs as well as acute care hospitals and ASCs that was published in the 
                        **Federal Register**
                         on January 18, 2001 (66 FR 96570). Recently, provider and medical groups have suggested that CAHs may 
                        ( print page 22713)
                        be at risk of losing the ability to provide access to appropriate surgical services without the full support of available CRNAs. They indicated that the existing regulations place the responsibility of the preanesthesia and postanesthesia evaluations on the operating practitioner, thereby creating a higher standard for CAHs than for other hospitals. In an effort to eliminate or minimize potential access issues in rural areas and to recognize the CAH's program expansion, we are proposing to revise § 485.639(b) to allow CRNAs to perform preanesthesia and postanesthesia evaluations in a CAH. As with any licensed independent health care provider, the proposed change would not permit CRNAs to practice beyond his or her licensed scope of practice or the approved policies and procedures of the CAH. 6. Clarification of Location Requirements for CAHs Under section 1820(c)(2)(B)(i) of the Act, a facility seeking designation by the State as a CAH must meet two distinct types of location requirements. First, the facility must either be actually located in a county or equivalent unit of local government in a rural area, as defined in section 1886(d)(2)(D) of the Act, or it must be located in an urban area as defined in section 1886(d)(2)(D) of the Act, but be treated as being located in a rural area under section 1886(d)(8)(E) of the Act. Second, the facility must also be located more than a 35-mile drive (or, in the case of mountainous terrain or in areas with only secondary roads available, a 15-mile drive) from a hospital or similar facility described in section 1820(c) of the Act, or it must be certified by the State as being a necessary provider of health care services to residents in the area. Implementing regulations for these provisions were published in an interim final rule with comment period in the 
                        **Federal Register**
                         on August 1, 2000 (65 FR 47026) and are set forth at § 485.610(b). Recently, concern has been expressed that § 485.610(b) does not accurately reflect the fact that a facility may satisfy the “rural location” requirement either by actually being located in a rural area or by being located in an urban area but qualifying for treatment as rural under section 1886(d)(8)(E) of the Act. In addition, we have received questions as to whether a potential CAH must meet both the rural location requirement and the requirement for location relative to other facilities (or certification by the State as a “necessary provider”). To avoid any further confusion, and ensure that our regulations reflect the provisions of the law accurately, we are proposing to revise § 485.610(b) to clarify that a potential CAH must either be actually located in a rural area, or be treated as being rural under section 1886(d)(8)(E) of the Act. In addition, we are proposing to place the provisions of the existing § 485.610(b)(5) in a newly created paragraph (c) entitled, “Location relative to other facilities or necessary provider certification”. We are proposing to relocate this provision in order to clarify that these criteria are separate from the rural location criteria. These proposed changes do not reflect any change in policy; they are merely an attempt to improve the clarity of the regulations. VII. MedPAC Recommendations We have reviewed the March 1, 2001 report submitted by MedPAC to Congress and have given it careful consideration in conjunction with the proposals set forth in this document. Recommendation 5A concerning the update factor for inpatient hospital operating costs and for hospitals and hospital distinct-part units excluded from the prospective payment system are discussed in Appendix D to this proposed rule. Other MedPAC recommendations and our responses are set forth below. A. Accounting for New Technology in Hospital Prospective Payment Systems (Recommendations 3D and 3E) *Recommendation 3D:*
                         For the inpatient payment system, the Secretary should develop formalized procedures for expeditiously assigning codes, updating relative weights, and investigating the need for patient classification changes to recognize the costs of new and substantially improved technologies. *Response:*
                         Section 533 of Public Law 106-554 directs the Secretary to develop a mechanism for ensuring adequate payment under the hospital inpatient prospective payment system for new medical services and technologies, and to report to Congress on ways to more expeditiously incorporate new services and technologies into that system. The discussion relating to new medical services and technologies is found in section II.D. of this proposed rule and addresses MedPAC's concern regarding the process of assigning new codes. In addition, MedPAC acknowledges, and we agree, that the process of updating the relative weights has an established track record. MedPAC states that a more formal system for assigning codes and investigating the need for DRG changes would have enabled the current system to more adequately respond to new technology. Although we believe the current process for assigning new codes has the advantage of being well-understood, the proposed new process we described in section II. of this proposed rule should improve the ability of the system to respond to the introduction of new technology. *Recommendation 3E:*
                         Additional payments in the inpatient payment system should be limited to new or substantially improved technologies that add significantly to the cost of care in a diagnosis related group and should be made on a budget-neutral basis. *Response:*
                         Section 533 of Public Law 106-554 directed the Secretary to establish a mechanism to make these payments beginning with discharges on or after October 1, 2001, and we are proposing implementation of this provision under section IV.F. of this proposed rule. B. Occupational-Mix Adjusted Wage Index for FY 2005 (Recommendation 4) *Recommendation:*
                         To implement an occupation-mix adjusted wage index in FY 2005, the Secretary should collect data on wage rates by occupation in the fiscal year 2002 Medicare cost reports. Hospital-specific wage rates for each occupation should be supplemented by data on the mix of occupations for each provider type. The Secretary also should continue to improve the accuracy of the wage index by investigating differences in wages across areas for each type of provider and in the substitution of one occupation for another. *Response:*
                         We are proposing to collect occupational mix data from hospitals through a supplemental survey to the cost report for cost reporting periods beginning during FY 2001. A more complete discussion of our proposed methodology can be found in section III. of this proposed rule. C. Financial Performance and Inpatient Payment Issues (Recommendations 5B, 5C, and 5D) *Recommendation 5B:*
                         In collecting sample patient-level data, HCFA should seek to balance the goals of minimizing payment errors and furthering understanding of the effects of coding on case-mix change. *Response:*
                         The sample data referred to by MedPAC is the Payment Error Prevention Program (PEPP) Surveillance Sample. These data are collected to monitor the payment error rate for Medicare inpatient prospective payment system services and provide outcome data to measure PROs' performance in 
                        ( print page 22714)
                        reducing payment errors in their respective States. This information can be appropriately weighted to reflect the true distribution of DRGs nationally. The sample data supplant the DRG validation sample that MedPAC used in its original 1996 through 1998 estimates. The current PEPP Surveillance Sample doubles the size of the earlier DRG validation sample. It is comprised of approximately 60,000 cases per year. We believe this is a sufficient number of cases to both monitor case-mix index changes and PRO performance on payment error reduction. *Recommendation 5C:*
                         Although the Benefits Improvement and Protection Act of 2000 improved the equity of the hospital disproportionate share adjustment, Congress still needs to reform this adjustment by: Including the costs of all poor patients in calculating low-income shares used to distribute disproportionate share payments; and
                    Using the same formula to distribute payments to all hospitals covered by prospective payment. *Response:*
                         HCFA is participating a Medicare Technical Advisory Group workgroup concerning technical issues related to the collection of uncompensated care data relative to the Medicare disproportionate share formula. A worksheet and instructions to collect these data will be sent out for prior consultation this summer for revisions to the cost reports applicable for cost reporting periods beginning on or after October 1, 2001. *Recommendation 5E:*
                         The Congress should protect urban hospitals from the adverse effect of nearby hospitals being reclassified to areas with higher wage indexes by computing each area's wage index as if none of the hospitals located in the area had been reassigned. *Response:*
                         With this rule, HCFA has proposed to include the wage data for a reclassified hospital in both the area to which it is reclassified and the area where the hospital is physically located. We agree with MedPAC and believe that this will provide consistency and predictability in hospital reclassification and wage indices. D. Specialties With Training Beyond the Initial Residency Period (Recommendation 10) *Recommendation:*
                         The Congress should eliminate the weighting factors that currently determine Medicare's direct graduate medical education payments and count all residencies equally through completion of residents' first specialty or combined program and subspecialty if one is pursued. Residents training longer than the minimum number of years required for board eligibility in a specialty, combined program, or subspecialty should not be included in hospitals' direct graduate medical education resident counts. These policy changes should be implemented in a budget-neutral manner through adjustments to the per resident payment amounts. *Response:*
                         Currently, Medicare payments to hospitals for direct GME is dependent, in part, on the initial residency period of the residents. Generally, the initial residency period is defined at § 413.86(g)(1) as the minimum number of years required for board eligibility, not to exceed 5 years. For purposes of determining the direct GME payment, residents are weighted at 1.0 FTE within the initial residency period, and at .5 FTE beyond the initial residency period. The limitation on the initial residency period was designed by Congress to limit full Medicare direct GME payment to the time required to train in a single specialty. MedPAC states that Medicare's current direct GME payment policy of limiting full funding to the first specialty in which a resident trains provides a disincentive for hospitals to offer training in subspecialties or combined programs, and therefore, may influence hospitals' decisions on the types of residents that they train. MedPAC believes that Medicare should not influence workforce policy and recommends that the disincentive be removed to make Medicare payments policies neutral with regard to programs with prerequisites, subspecialties, and combined programs. Accordingly, MedPAC recommends that Congress eliminate the weighting factors associated with direct GME payment so that all residents would be counted for full direct GME payment through the completion of their first specialty, combined program, or subspecialty. Residents training beyond the minimum number of years required for board eligibility in a specialty, combined program, or subspecialty should not be counted for purposes of the direct GME payment. MedPAC also believes that eliminating the weighting factors could potentially increase Medicare's direct GME payments by approximately 5 to 8 percent. Therefore, MedPAC recommends that hospitals' per resident amounts (PRAs), which are used to calculate the direct GME payment, be reduced so that this change can be implemented, to the extent possible, in a budget-neutral manner. MedPAC explains that, although further research is needed, it appears that hospitals with substantial subspecialty training (that is, at least 15 percent of the resident mix) would likely see a small net increase in payments, despite the reduction to the PRAs, while hospitals that do not have subspecialty training would likely see a small decrease in payments. In response to MedPAC's recommendation, we question MedPAC's estimate that eliminating the weighting factors could increase Medicare direct GME payments by only 5 to 8 percent. We believe that subspecialty training constitutes a significant portion of all GME programs, and, consequently, the elimination of the weighting factors could potentially increase payments by far more than 8 percent. If budget neutrality is to be maintained, this could mean that the attendant reductions to the PRAs could be much greater than MedPAC might assume. For those teaching hospitals that have substantial subspecialty training, there is no guarantee that the decreases in the PRAs will be offset by the increases in the direct GME payments due to the elimination of the weighting factors. While the recommendation would remove the existing disincentive for training in subspecialties, we believe the reductions to the PRAs, whether they are minimal or more significant, will be far more detrimental to the smaller teaching hospitals that have little or no subspecialty training. Many of these hospitals provide care to beneficiaries in rural, underserved areas and in nonhospital settings. We believe these conditions may discourage the expansion of residency training in these areas. It may be inappropriate to limit the direct GME funding to such hospitals, considering Congress' initiatives to encourage residency training in rural, underserved areas and in nonhospital settings. We also are unclear as to how MedPAC would implement the proposed reduction to the PRAs. MedPAC did not explain in its recommendation how it would propose to do this. VIII. Other Required Information A. Requests for Data From the Public In order to respond promptly to public requests for data related to the prospective payment system, we have established a process under which commenters can gain access to raw data on an expedited basis. Generally, the data are available in computer tape or cartridge format; however, some files are available on diskette as well as on the Internet at http://www.hcfa.gov/​stats/​pubfiles.html. Data files, and the cost for each, are listed below. Anyone wishing to purchase data tapes, cartridges, or 
                        ( print page 22715)
                        diskettes should submit a written request along with a company check or money order (payable to HCFA-PUF) to cover the cost to the following address: Health Care Financing Administration, Public Use Files, Accounting Division, P.O. Box 7520, Baltimore, Maryland 21207-0520, (410) 786-3691. Files on the Internet may be downloaded without charge. 1. Expanded Modified MedPAR-Hospital (National) The Medicare Provider Analysis and Review (MedPAR) file contains records for 100 percent of Medicare beneficiaries using hospital inpatient services in the United States. (The file is a Federal fiscal year file, that is, discharges occurring October 1 through September 30 of the requested year.) The records are stripped of most data elements that would permit identification of beneficiaries. The hospital is identified by the 6-position Medicare billing number. The file is available to persons qualifying under the terms of the Notice of Proposed New Routine Uses for an Existing System of Records published in the 
                        **Federal Register**
                         on December 24, 1984 (49 FR 49941), and amended by the July 2, 1985 notice (50 FR 27361). The national file consists of approximately 11 million records. Under the requirements of these notices, an agreement for use of HCFA Beneficiary Encrypted Files must be signed by the purchaser before release of these data. For all files requiring a signed agreement, please write or call to obtain a blank agreement form before placing an order. Two versions of this file are created each year. They support the following: Notice of Proposed Rulemaking (NPRM) published in the**Federal Register**
                        . This file, scheduled to be available by the end of April, is derived from the MedPAR file with a cutoff of 3 months after the end of the fiscal year (December file).
                    Final Rule published in the**Federal Register**
                        . The FY 2000 MedPAR file used for the FY 2002 final rule will be cut off 6 months after the end of the fiscal year (March file) and is scheduled to be available by the end of April. Media: Tape/Cartridge File Cost: $3,655.00 per fiscal year Periods Available: FY 1988 through FY 2000 2. Expanded Modified MedPAR-Hospital (State) The State MedPAR file contains records for 100 percent of Medicare beneficiaries using hospital inpatient services in a particular State. The records are stripped of most data elements that will permit identification of beneficiaries. The hospital is identified by the 6-position Medicare billing number. The file is available to persons qualifying under the terms of the Notice of Proposed New Routine Uses for an Existing System of Records published in the December 24, 1984 
                        **Federal Register**
                         notice, and amended by the July 2, 1985 notice. This file is a subset of the Expanded Modified MedPAR-Hospital (National) as described above. Under the requirements of these notices, an agreement for use of HCFA Beneficiary Encrypted Files must be signed by the purchaser before release of these data. Two versions of this file are created each year. They support the following: NPRM published in the**Federal Register**
                        . This file, scheduled to be available by the end of April, is derived from the MedPAR file with a cutoff of 3 months after the end of the fiscal year (December file).
                    Final Rule published in the**Federal Register**
                        . The FY 2000 MedPAR file used for the FY 2002 final rule will be cut off 6 months after the end of the fiscal year (March file) and is scheduled to be available by the end of April. Media: Tape/Cartridge File Cost: $1,130.00 per State per year Periods Available: FY 1988 through FY 2000 3. HCFA Wage Data This file contains the hospital hours and salaries for FY 1998 used to create the proposed FY 2002 prospective payment system wage index. The file will be available by the beginning of February for the NPRM and the beginning of May for the final rule. Processing year
Wage data year
PPS fiscal year2001
1998
20022000
1997
20011999
1996
20001998
1995
19991997
1994
19981996
1993
19971995
1992
19961994
1991
19951993
1990
19941992
1989
19931991
1988
1992
 These files support the following: NPRM published in the**Federal Register**
                        .
                    Final Rule published in the**Federal Register**
                        . Media: Diskette/most recent year on the Internet File Cost: $165.00 per year Periods Available: FY 2002 PPS Update 4. HCFA Hospital Wages Indices (Formerly: Urban and Rural Wage Index Values Only) This file contains a history of all wage indices since October 1, 1983. Media: Diskette/most recent year on the Internet File Cost: $165.00 per year Periods Available: FY 2002 PPS Update 5. PPS SSA/FIPS MSA State and County Crosswalk This file contains a crosswalk of State and county codes used by the Social Security Administration (SSA) and the Federal Information Processing Standards (FIPS), county name, and a historical list of Metropolitan Statistical Area (MSA). Media: Diskette/Internet File Cost: $165.00 per year Periods Available: FY 2002 PPS Update 6. Reclassified Hospitals New Wage Index (Formerly: Reclassified Hospitals by Provider Only) This file contains a list of hospitals that were reclassified for the purpose of assigning a new wage index. Two versions of these files are created each year. They support the following: NPRM published in the**Federal Register**
                        .
                    Final Rule published in the**Federal Register**
                        . Media: Diskette/Internet File Cost: $165.00 per year Periods Available: FY 2002 PPS Update 7. PPS-IV to PPS-XII Minimum Data Set The Minimum Data Set contains cost, statistical, financial, and other information from Medicare hospital cost reports. The data set includes only the most current cost report (as submitted, final settled, or reopened) submitted for a Medicare participating hospital by the Medicare fiscal intermediary to HCFA. This data set is updated at the end of each calendar quarter and is available on the last day of the following month. Media: Tape/Cartridge File Cost: $770.00 per year Periods beginning 
                                 on or after
And beforePPS-IV
10/01/86
10/01/87PPS-V
10/01/87
10/01/88PPS-VI
10/01/88
10/01/89PPS-VII
10/01/89
10/01/90PPS-VIII
10/01/90
10/01/91PPS-IX
10/01/91
10/01/92PPS-X
10/01/92
10/01/93PPS-XI
10/01/93
10/01/94PPS-XII
10/01/94
10/01/95
 
 
 Note: The PPS-XIII, PPS-XIV, PPS-XV, and PPS-XVI Minimum Data Sets are part of the PPS-XIII, PPS-XIV, PPS-XV, and PPS XVI Hospital Data Set Files. 8. PPS-IX to PPS-XII Capital Data Set The Capital Data Set contains selected data for capital-related costs, interest expense and related information and complete balance sheet data from the Medicare hospital cost report. The data set includes only the most current cost report (as submitted, final settled or reopened) submitted for a Medicare certified hospital by the Medicare fiscal intermediary to HCFA. This data set is updated at the end of each calendar quarter and is available on the last day of the following month. Media: Tape/Cartridge File Cost: $770.00 per year Periods beginning on or after
And beforePPS-IX
10/01/91
10/01/92PPS-X
10/01/92
10/01/93PPS-XI
10/01/93
10/01/94PPS-XII
10/01/94
10/01/95
 Note: The PPS-XIII, PPS-XIV, PPS-XV, and PPS-XVI Capital Data Sets are part of the PPS-XIII, PPS-XIV, PPS-XV, and PPS-XVI Hospital Data Set Files. 9. PPS-XIII to PPS-XVI Hospital Data Set The file contains cost, statistical, financial, and other data from the Medicare Hospital Cost Report. The data set includes only the most current cost report (as submitted, final settled, or reopened) submitted for a Medicare-certified hospital by the Medicare fiscal intermediary to HCFA. The data set are updated at the end of each calendar quarter and is available on the last day of the following month. Media: Diskette/Internet File Cost: $2,500.00 Periods beginning on or after
And beforePPS-XIII
10/01/95
10/01/96PPS-XIV
10/01/96
10/01/97PPS-XV
10/01/97
10/01/98PPS-XVI
10/01/98
10/01/99
 10. Provider-Specific File This file is a component of the PRICER program used in the fiscal intermediary's system to compute DRG payments for individual bills. The file contains records for all prospective payment system eligible hospitals, including hospitals in waiver States, and data elements used in the prospective payment system recalibration processes and related activities. Beginning with December 1988, the individual records were enlarged to include pass-through per diems and other elements. Media: Diskette/Internet File Cost: $265.00 Periods Available: FY 2002 PPS Update 11. HCFA Medicare Case-Mix Index File This file contains the Medicare case-mix index by provider number as published in each year's update of the Medicare hospital inpatient prospective payment system. The case-mix index is a measure of the costliness of cases treated by a hospital relative to the cost of the national average of all Medicare hospital cases, using DRG weights as a measure of relative costliness of cases. Two versions of this file are created each year. They support the following: NPRM published in the**Federal Register**
                        .
                    Final rule published in the**Federal Register**
                        . Media: Diskette/most recent year on Internet Price: $165.00 per year/per file Periods Available: FY 1985 through FY 2000 12. DRG Relative Weights (Formerly Table 5 DRG) This file contains a listing of DRGs, DRG narrative description, relative weights, and geometric and arithmetic mean lengths of stay as published in the 
                        **Federal Register**
                        . The hard copy image has been copied to diskette. There are two versions of this file as published in the 
                        **Federal Register:** NPRM.
                    Final rule. Media: Diskette/Internet File Cost: $165.00 Periods Available: FY 2002 PPS Update 13. PPS Payment Impact File This file contains data used to estimate payments under Medicare's hospital inpatient prospective payment systems for operating and capital-related costs. The data are taken from various sources, including the Provider-Specific File, Minimum Data Sets, and prior impact files. The data set is abstracted from an internal file used for the impact analysis of the changes to the prospective payment systems published in the 
                        **Federal Register**
                        . This file is available for release 1 month after the proposed and final rules are published in the 
                        **Federal Register**
                        . Media: Diskette/Internet File Cost: $165.00 Periods Available: FY 2002 PPS Update 14. AOR/BOR Tables This file contains data used to develop the DRG relative weights. It contains mean, maximum, minimum, standard deviation, and coefficient of variation statistics by DRG for length of stay and standardized charges. The BOR tables are “Before Outliers Removed” and the AOR is “After Outliers Removed.” (Outliers refers to statistical outliers, not payment outliers.) Two versions of this file are created each year. They support the following: NPRM published in the**Federal Register**
                        .
                    Final rule published in the**Federal Register**
                        . Media: Diskette/Internet File Cost: $165.00 Periods Available: FY 2002 PPS Update For further information concerning these data tapes, contact the HCFA Public Use Files Hotline at (410) 786-3691. Commenters interested in obtaining or discussing any other data used in constructing this rule should contact Stephen Phillips at (410) 786-4531. B. Information Collection Requirements Under the Paperwork Reduction Act of 1995, we are required to provide 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: The need for the information collection and its usefulness in carrying out the proper functions of our agency.
                    The accuracy of our estimate of the information collection burden.
                    The quality, utility, and clarity of the information to be collected.
                    Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. We are soliciting public comments on each of these issues for the sections that contain information collection requirements. 
                        ( print page 22717) Proposed New § 412.230(e)(2)(ii) Criteria for an Individual Hospital Seeking Redesignation to Another Rural Area or an Urban Area; Proposed New § 412.232(d)(2)(ii) Criteria for All Hospitals in a Rural County Seeking Urban Redesignation; Proposed New § 412.235 Criteria for All Hospitals in a State Seeking a Statewide Wage Index; and Proposed Revised § 412.273 Withdrawing an Application or Terminating an Approved 3-Year Reclassification Proposed §§ 412.230(e)(2)(ii) and 412.232(d)(2)(ii) specify that, for hospital-specific data for wage index changes for redesignations effective beginning FY 2003, the hospital must provide a 3-year average of its average hourly wages using data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes. For other data, the hospital must provide a weighted 3-year average of the average hourly wage in the area in which the hospital is located and a weighted 3-year average of the average hourly wage in the area to which the hospital seeks reclassification. Proposed new § 412.235 specifies that in order for all prospective payment system hospitals in a State to use a statewide wage index, the hospitals as a group must submit an application to the MGCRB for a decision for reclassifications for wage index purposes. The proposed changes to § 412.273 would incorporate proposed revised procedures for hospitals that request withdraw of their wage index application or termination of their wage index reclassification. These proposed changes, discussed in detail in section IV.E. of this proposed rule, implement sections 304(a) and (b) of Public Law 106-554. The information collection requirements associated with a hospital's application to the MGCRB for geographic reclassifications, including reclassifications for wage index purposes and the required submittal of wage data, that are codified in Part 412 are currently approved by OMB under OMB Approval Number 0938-0573, with an expiration date of September 30, 2002. Proposed § 412.348(g)(9) Exception Payments As discussed in section V. of this proposed rule, Medicare makes special exceptions payments for capital-related costs through the 10th year beyond the end of the capital prospective payment system transition period for eligible hospitals that complete a project that meets certain requirements specified in § 412.348. In order to assist our fiscal intermediaries in determining the end of the 10-year period in which an eligible hospital will no longer be entitled to receive special exception payments, we are proposing to add a new § 412.348(g)(9) to require that hospitals eligible for special exception payments under § 412.348(g) submit documentation to the intermediary indicating the completion date of their project (the date the project was put in use for patient care) that meets the project need and project size requirements outlined in §§ 412.348(g)(2) through (g)(5). We are proposing that, in order for an eligible hospital to receive special exception payments, this documentation would have to be submitted in writing to the intermediary by the later of October 1, 2001, or within 3 months of the end of the hospital's last cost reporting period beginning before October 1, 2001, during which a qualifying project was completed. We estimate that the information collection requirement of preparing and submitting the documentation on a hospital's capital project would impose a burden of approximately 1 hour for approximately 30 hospitals. If you comment on these information collection and recordkeeping requirements, please mail copies directly to the following addresses: Health Care Financing Administration, Office of Information Services, Security and Standards Group, Division of HCFA Enterprise Standards Room N2-14-26, 7500 Security Boulevard, Baltimore, Maryland 21244-1850, Attn: John Burke HCFA-1158-P; and Office of Information and Regulatory Affairs, Office of Management and Budget, Room 3001, New Executive Office Building, Washington, DC 20503, Attn: Allison Herron Eydt, HCFA Desk Officer. These new information collection and recordkeeping requirements have been submitted to the Office of Management and Budget (OMB) for review under the authority of PRA. We have submitted a copy of the proposed rule to OMB for its review of the information collection requirements. These requirements will not be effective until they have been approved by OMB. C. Public 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, in preparing the final rule, we will consider all comments concerning the provisions of this proposed rule that we receive by the date and time specified in the 
                        **DATES**
                         section of this preamble and respond to those comments in the preamble to that rule. We emphasize that section 1886(e)(5) of the Act requires the final rule for FY 2002 to be published by August 1, 2001, and we will consider only those comments that deal specifically with the matters discussed in this proposed rule. List of Subjects 42 CFR Part 405 Administrative practice and procedure
Health facilities
Health professions
Kidney diseases
Medicare
Reporting and recordkeeping requirements
Rural areas
X-rays 42 CFR Part 412 Administrative practice and procedure
Health facilities
Medicare
Puerto Rico
Reporting and recordkeeping requirements 42 CFR Part 413 Health facilities
Kidney diseases
Medicare
Puerto Rico
Reporting and recordkeeping requirements 42 CFR Part 485 Grant programs-health
Health facilities
Medicaid
Medicare
Reporting and recordkeeping requirements 42 CFR Part 486 Health professions
Medicare
Organ procurement
X-rays
 42 CFR Chapter IV is proposed to be amended as set forth below: PART 405—FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED A. Part 405 is amended as set forth below: 1. The authority citation for Part 405 continues to read as follows: Authority:
                            Secs. 1102, 1861, 1862(a), 1871, 1874, 1881, and 1886(k) of the Social Security Act (42 U.S.C. 1302, 1395x, 1395y(a), 1395hh, 1395kk, 1395rr, and 1395ww(k), and sec. 353 of the Public Health Service Act (42 U.S.C. 263a). 2. In § 405.2468, paragraph (f)(6)(ii) is republished and paragraph (f)(6)(ii)(D) is revised to read as follows. § 405.2468
  
 (f) 
                                *Graduate medical education.*
                                 * * * (6) * * * 
                                ( print page 22718) (ii) The following costs are not allowable graduate medical education costs: 
 (D) The costs associated with activities described in § 413.85(h) of this chapter.
 PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES B. Part 412 is amended as follows: 1. The authority citation for Part 412 continues to read as follows: Authority:
                            Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 2. Section 412.2 is amended as follows: a. The introductory text of paragraph (e) is republished. b. Paragraph (e)(4) is revised. c. The introductory text of paragraph (f) is republished. d. A new paragraph (f)(9) is added. § 412.2
  
 (e) 
                                *Excluded costs*. The following inpatient hospital costs are excluded from the prospective payment amounts and are paid on a reasonable cost basis: 
 (4) The acquisition costs of hearts, kidneys, livers, lungs, pancreas, and intestines (or multivisceral organs) incurred by approved transplantation centers. 
 (f) 
                                *Additional payments to hospitals*. In addition to payments based on the prospective payment system rates for inpatient operating and inpatient capital-related costs, hospitals receive payments for the following: 
 (9) Special additional payment for certain new technology as specified in § 412.87 and 412.88 of Subpart F. 3. Section 412.23 is amended by adding a new paragraph (i) to read as follows:
 § 412.23
  
 (i) 
                                *Changes in classification of hospitals*. For purposes of exclusions from the prospective payment system, the classification of a hospital is effective for the hospital's entire cost reporting period. Any changes in the classification of a hospital are made only at the start of a cost reporting period. 4. Section 412.25 is amended by adding a new paragraph (f) to read as follows:
 § 412.25
  
 (f) 
                                *Changes in classification of hospital units.*
                                 For purposes of exclusions from the prospective payment system under this section, the classification of a hospital unit is effective for the unit's entire cost reporting period. Any changes in the classification of a hospital unit is made only at the start of a cost reporting period. 5. Section 412.63 is amended by revising paragraphs (t) and (u) to read as follows:
 § 412.63
  
 (t) 
                                *Applicable percentage change for fiscal years 2002 and 2003.*
                                 The applicable percentage change for fiscal years 2002 and 2003 is the percentage increase in the market basket index for prospective payment hospitals (as defined in § 413.40(a) of this subchapter) minus 0.55 percentage points for hospitals in all areas. (u) 
                                *Applicable percentage change for fiscal year 2004 and for subsequent fiscal years.*
                                 The applicable percentage change for fiscal year 2004 and for subsequent years is the percentage increase in the market basket index for prospective payment hospitals (as defined in § 413.40(a) of this subchapter) for hospitals in all areas. 
 6. The title of Subpart F is revised to read as follows:
 Subpart F—Payment for Outlier Cases and Special Treatment Payment for New Technology
 7. A new undesignated center heading is added after the Subpart F heading and before § 412.80; the section heading of § 412.80 is revised; and a new paragraph (a)(3) is added to read as follows: Payment for Outlier Cases § 412.80
  (a) 
                                *Basic rule*. 
 (3) 
                                *Discharges occurring on or after October 1, 2001.*
                                 For discharges occurring on or after October 1, 2001, except as provided in paragraph (b) of this section concerning transfers, HCFA provides for additional payment, beyond standard DRG payments and beyond additional payments for new medical services or technology specified in §§ 412.87 and 412.88, to a hospital for covered inpatient hospital services furnished to a Medicare beneficiary if the hospital's charges for covered services, adjusted to operating costs and capital costs by applying cost-to-charge ratios as described in § 412.84(h), exceed the DRG payment for the case (plus payments for indirect costs of graduate medical education (§ 412.105), payments for serving a disproportionate share of low-income patients (§ 412.106), and additional payments for new medical services or technologies) plus a fixed dollar amount (adjusted for geographic variation in costs) as specified by HCFA. 
 8. A new undesignated center heading and §§ 412.87 and 412.88 are added immediately following § 412.86, to read as follows: Additional Special Payment for Certain New Technology
 § 412.87
  (a) 
                                *Basis.*
                                 Sections 412.87 and 412.88 implement sections 1886(d)(5)(K) and 1886(d)(5)(L) of the Act, which authorizes the Secretary to establish a mechanism to recognize the costs of new medical services and technologies under the hospital inpatient prospective payment system. (b) 
                                *Eligibility criteria.*
                                 For discharges occurring on or after October 1, 2001, HCFA provides for additional payments (as specified in § 412.88) beyond the standard DRG payments and outlier payments to a hospital for discharges involving covered inpatient hospital services that are new medical services and technologies, if the following conditions are met: (1) A new medical service or technology represents an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. HCFA will determine whether a new medical service or technology meets this criterion and announce the results of its determinations in the 
                                **Federal Register**
                                 as a part of its annual updates and changes to the hospital inpatient prospective payment system. (2) A medical service or technology may be considered new within 2 or 3 years after it becomes available on the market (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration). After HCFA has recalibrated the DRGs, based on 
                                ( print page 22719)
                                available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered “new” under the criterion of this section. (3) The DRG prospective payment rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate, based on application of a threshold amount to estimated costs incurred with respect to such discharges. To determine whether the payment would be adequate, HCFA will determine whether the costs of the cases involving a new medical service or technology will exceed a threshold amount set at one standard deviation beyond the mean standardized charge for all cases in the DRG to which the new medical service or technology is assigned (or the case-weighted average of all relevant DRGs if the new medical service or technology occurs in many different DRGs). Standardized charges reflect the actual charges of a case adjusted by the prospective payment system payment factors applicable to an individual hospital, such as the wage index, the indirect medical education adjustment factor, and the disproportionate share adjustment factor.
 § 412.88
  (a) For discharges involving new medical services or technologies that meet the criteria specified in § 412.87, Medicare payment will be: (1) The standard DRG payment; plus (2) If the costs of the discharge (determined by applying cost-to-charge ratios as described in § 412.84(h)) exceed the standard DRG payment, an additional amount equal to the lesser of— (i) 50 percent of the costs of the new medical service or technology; or (ii) 50 percent of the amount by which the costs of the case exceed the standard DRG payment. (b) Unless a discharge case qualifies for outlier payment under § 412.84, Medicare will not pay any additional amount beyond the DRG payment plus 50 percent of the estimated costs of the new medical service or technology. 9. Section 412.92 is amended as follows: a. Paragraph (b)(1)(iii)(A) is amended by revising the phrase “50 mile radius” to read “35 mile radius.” b. Paragraph (c)(1) is revised.
 § 412.92
  
 (c) 
                                *Terminology.*
                                 * * * (1) The term 
                                *miles*
                                 means the shortest distance in miles measured over improved roads. An improved road for this purpose is any road that is maintained by a local, State, or Federal government entity and is available for use by the general public. An improved road includes the paved surface up to the front entrance of the hospital. 
 10. Section 412.105 is amended as follows: a. The introductory text of paragraph (a) is republished. b. Paragraph (a)(1) is revised. c. Paragraph (d)(3)(vi) is revised. d. A new paragraph (d)(3)(vii) is added. e. Paragraph (f)(1)(ii)(C) is revised. f. Paragraph (f)(1)(iii) is revised. g. Paragraph (f)(1)(v) is amended by adding four sentences at the end. h. Paragraph (f)(1)(ix) is revised.
 § 412.105
  
 (a) 
                                *Basic data.*
                                 HCFA determines the following for each hospital: (1) The hospital's ratio of full-time equivalent residents, except as limited under paragraph (f) of this section, to the number of beds (as determined under paragraph (b) of this section). Except for the special circumstances for affiliated groups and new programs described in paragraphs (f)(1)(vi) and (f)(1)(vii) of this section, for a hospital's cost reporting periods beginning on or after October 1, 1997, this ratio may not exceed the ratio for the hospital's most recent prior cost reporting period after accounting for the cap on the number of full-time equivalent residents as described in paragraph (f)(1)(iv) of this section. The exception for new programs described in paragraph (f)(1)(vii) of this section applies for the period of years equal to the minimum accredited length for that type of program. 
 (d) 
                                *Determination of education adjustment factor.* 
 (3) * * * (vi) For discharges occurring during fiscal year 2002, 1.6. (vii) For discharges occurring on or after October 1, 2002, 1.35. 
 (f) 
                                *Determining the total number of full-time equivalent residents for cost reporting periods beginning on or after July 1, 1991.* (1) * * * (ii) * * * (C) Effective for discharges occurring on or after October 1, 1997, the time spent by a resident in a non-hospital setting in patient care activities under an approved medical residency training program is counted towards the determination of full-time equivalency if the criteria set forth in § 413.86(f)(3) or § 413.86 (f)(4), as applicable, are met. (iii) (A) Full-time equivalent status is based on the total time necessary to fill a residency slot. No individual may be counted as more than one full-time equivalent. If a resident is assigned to more than one hospital, the resident counts as a partial full-time equivalent based on the proportion of time worked in any of the areas of the hospital listed in paragraph (f)(1)(ii) of this section, to the total time worked by the resident. A part-time resident or one working in an area of the hospital other than those listed under paragraph (f)(1)(ii) of this section (such as a freestanding family practice center or an excluded hospital unit) would be counted as a partial full-time equivalent based on the proportion of time assigned to an area of the hospital listed in paragraph (f)(1)(ii) of this section, compared to the total time necessary to fill a full-time residency slot. (B) The time spent by a resident in research that is not associated with the treatment or diagnosis of a particular patient of the hospital is not countable. 
 (v) * * * If a hospital qualified for an adjustment to the limit established under paragraph (f)(1)(iv) of this section for new medical residency programs created under paragraph (f)(1)(vii) of this section, the count of residents participating in new medical residency training programs above the number included in the hospital's FTE count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in this paragraph for a period of years. Residents participating in new medical residency training programs are included in the hospital's FTE count before applying the averaging rules after the period of years has expired. For purposes of this paragraph, the period of years equals the minimum accredited length for the type of program. The period of years begins when the first resident begins training. 
 (ix) A hospital may receive a temporary adjustment to its full-time equivalent cap to reflect residents added because of another hospital's closure if the hospital meets the criteria specified in §§ 413.86(g)(8)(i) and (g)(8)(ii) of this 
                                ( print page 22720)
                                subchapter. If a hospital that closes its residency training program agrees to temporarily reduce its FTE cap according to the criteria specified in §§ 413.86(g)(8)(i) and (g)(8)(iii)(B) of this subchapter, another hospital(s) may receive a temporary adjustment to its FTE cap to reflect residents added because of the closure of the residency training program if the criteria specified in §§ 413.86(g)(8)(i) and (g)(8)(iii)(A) of this subchapter are met. 
 11. Section 412.106 is amended by revising the heading of paragraph (e) and paragraph (e)(5) to read as follows:
 § 412.106
  
 (e) 
                                *Reduction in payments beginning FY 1998*. * * * (5) For FY 2002, 3 percent.
 § 412.113
  12. In § 412.113(c), including the heading for paragraph (c), the term “hospital”, wherever it appears, is revised to read “hospital or CAH” (16 times). 13. Section 412.230 is amended by revising paragraph (e)(2) to read as follows:
 § 412.230
  
 (e) 
                                *Use of urban or other rural area's wage index*. 
 (2) 
                                *Appropriate wage data*. For a wage index change, the hospital must submit appropriate wage data as follows: (i) For redesignations effective through FY 2002: (A) For hospital-specific data, the hospital must provide data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes during the fiscal year prior to the fiscal year for which the hospital requests reclassification. (B) For data for other hospitals, the hospital must provide data concerning the average hourly wage in the area in which the hospital is located and the average hourly wage in the area to which the hospital seeks reclassification. The wage data are taken from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes during the fiscal year prior to the fiscal year for which the hospital requests reclassification. (C) If the hospital is requesting reclassification under paragraph (e)(1)(iv)(B) of this section, the hospital must provide occupational-mix data to demonstrate the average occupational mix for each employment category in the area to which it seeks reclassification. Occupational-mix data can be obtained from surveys conducted by the American Hospital Association. (ii) For redesignations effective beginning FY 2003: (A) For hospital-specific data, the hospital must provide a weighted 3-year average of its average hourly wages using data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes. (B) For data for other hospitals, the hospital must provide a weighted 3-year average of the average hourly wage in the area in which the hospital is located and a weighted 3-year average of the average hourly wage in the area to which the hospital seeks reclassification. The wage data are taken from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes. 
 14. Section 412.232 is amended by revising paragraph (d)(2) to read as follows:
 § 412.232
  
 (d) 
                                *Appropriate data*. 
 (2) 
                                *Appropriate wage data*. The hospitals must submit appropriate data as follows: (i) For redesignations effective through FY 2002: (A) For hospital-specific data, the hospitals must provide data from the HCFA wage survey used to construct the wage index in effect for prospective payment purposes during the fiscal year prior to the fiscal year for which the hospitals request reclassification. (B) For data for other hospitals, the hospitals must provide the following: (
                                *1*) The average hourly wage in the adjacent area, which is taken from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes during the fiscal year prior to the fiscal year for which the hospitals request reclassification. (
                                *2*) Occupational-mix data to demonstrate the average occupational mix for each employment category in the adjacent area. Occupational-mix data can be obtained from surveys conducted by the American Hospital Association. (ii) For redesignations effective beginning FY 2003: (A) For hospital-specific data, the hospital must provide a weighted 3-year average of its average hourly wages using data from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes. (B) For data for other hospitals, the hospital must provide a weighted 3-year average of the average hourly wage in the area in which the hospital is located and a weighted 3-year average of the average hourly wage in the area to which the hospital seeks reclassification. The wage data are taken from the HCFA hospital wage survey used to construct the wage index in effect for prospective payment purposes. 15. Section 412.235 is added to read as follows:
 § 412.235
  (a) 
                                *General criteria*. For all prospective payment system hospitals in a State to be redesignated to a statewide wage index, the following conditions must be met: (1) All prospective payment system hospitals in the State must apply as a group for reclassification to a statewide wage index through a signed single application. (2) All prospective payment system hospitals in the State must agree to the reclassification to a statewide wage index through a signed affidavit on the application. (3) All prospective payment system hospitals in the State must agree, through an affidavit, to withdrawal of an application or to termination of an approved statewide wage index reclassification. (4) All hospitals in the State must waive their rights to any wage index classification that they would otherwise receive absent the statewide wage index classification, including a wage index that any of the hospitals might have received through individual geographic reclassification. (5) New hospitals that open within the State prior to the deadline for submitting an application for a statewide wage index reclassification (September 1), regardless of whether a group application has already been filed, must agree to the use of the statewide wage index as part of the group application. New hospitals that open within the State after the deadline for submitting a statewide wage index reclassification application or during the approved reclassification period will be considered a party to the statewide 
                                ( print page 22721)
                                wage index application and reclassification. (b) 
                                *Effect on payments*. (1) An individual hospital within the State may receive a wage index that could be higher or lower under the statewide wage index reclassification in comparison to its otherwise redesignated wage index. (2) Any new prospective payment system hospital that opens in the State during the effective period of an approved statewide wage index reclassification will be designated to receive the statewide wage index for the duration of that period. (3) A hospital located in an area outside a State in which all participating hospitals have received an approved statewide wage index reclassification may apply to be reclassified into the statewide wage index area. In that case, such a hospital that is reclassified into a statewide wage index area will receive a wage index calculated based on the statewide wage index reclassification. (c) 
                                *Terms of the decision*. (1) A decision by the MGCRB on an application for a statewide wage index reclassification will be effective for 3 years beginning with discharges occurring on the first day (October 1) of the second Federal fiscal year following the Federal fiscal year in which the hospitals filed a complete application. (2) The procedures and timeframes specified in § 412.273 apply to withdrawals of applications for redesignation to a statewide wage index and terminations of approved statewide wage index reclassifications, including the requirement that, to withdraw an application or terminate an approved reclassification, the request must be made in writing by all hospitals that are party to the application, except hospitals reclassified into the State for purposes of receiving the statewide wage index. 16. Section 412.273 is amended as follows: a. The title of the section is revised. b. Paragraphs (b) and (c) are redesignated as paragraphs (c) and (d), respectively. c. A new paragraph (b) is added. d. Redesignated paragraph (c) is revised.
 § 412.273
  
 (b) 
                                *Request for termination of approved 3-year wage index reclassifications*. (1) A hospital, or a group of hospitals, that has been issued a decision on its application for a 3-year reclassification for wage index purposes only or for redesignation to a statewide wage index and has not withdrawn that application under the procedures specified in paragraph (a) of this section may request termination of its approved 3-year wage index reclassification under the following conditions: (i) The request to terminate must be received by the MGCRB within 45 days of the publication of the annual notice of proposed rulemaking concerning changes to the inpatient hospital prospective payment system and proposed payment rates for the fiscal year for which the termination is to apply. (ii) A request to terminate a 3-year reclassification will be effective only for the full fiscal year(s) remaining in the 3-year period at the time the request is received. Requests for terminations for part of a fiscal year will not be considered. (2) 
                                *Reapplication within the approved 3-year period.* (i) If a hospital elects to withdraw its wage index application after the MGCRB has issued its decision, it may terminate its withdrawal in a subsequent fiscal year and request the MGCRB to reinstate its wage index reclassification for the remaining fiscal year(s) of the 3-year period. (ii) A hospital may apply for reclassification for purposes of the wage index to a different area (that is, an area different from the one to which it was originally reclassified for the 3-year period). If the application is approved, the reclassification will be effective for 3 years. (c) 
                                *Written request only.*
                                 A request to withdraw an application or terminate an approved reclassification must be made in writing to the MGCRB by all hospitals that are party to the application or reclassification. 
 17. Section 412.274 is amended by revising paragraph (b) to read as follows:
 § 412.274
  
 (b) 
                                *Effective date and term of the decision.*
                                (1) A standardized amount classification change is effective for one year beginning with discharges occurring on the first day (October 1) of the second Federal fiscal year following the Federal fiscal year in which the complete application is filed and ending effective at the end of that Federal fiscal year (the end of the next September 30). (2) A wage index classification change is effective for 3 years beginning with discharges occurring on the first day (October 1) of the second Federal fiscal year in which the complete application is filed. 
 18. Section 412.348 is amended by revising paragraph (g)(6) and adding a new paragraph (g)(9) to read as follows:
 § 412.348
  
 (g) 
                                *Special exceptions process.*
                                 * * * (6) 
                                *Minimum payment level.* (i) The minimum payment level for qualifying hospitals will be 70 percent. (ii) HCFA will adjust the minimum payment level in one percentage point increments as necessary to satisfy the requirement specified in paragraph (h) of this section that total estimated payments under the exceptions process not exceed 10 percent of the total estimated capital prospective payment system payments for the same fiscal year. 
 (9) 
                                *Notification requirement.*
                                 Eligible hospitals must submit documentation to the intermediary indicating the completion date of a project that meets the project need requirement under paragraph (g)(2) of this section, the project size requirement under paragraph (g)(5) of this section, and, in the case of certain urban hospitals, an excess capacity test under paragraph (g)(4) of this section, by the later of October 1, 2001 or within 3 months of the end of the hospital's last cost reporting period beginning before October 1, 2001, during which a qualifying project was completed.
 PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES C. Part 413 is amended as follows: 1. The authority citation for Part 413 is revised to read as follows: Authority:
                            Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and (n), 1871, 1881, 1883, and 1886 of the Social Security Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 1395hh, 1395rr, 1395tt, and 1395ww). 2. Section 413.70 is amended as follows: a. Paragraph (a)(1) introductory text is republished. b. A new paragraph (a)(1)(iv) is added. c. Paragraph (a)(2) is revised. d. A new paragraph (a)(3) is added. e. Paragraph (b)(1) is revised.
                            ( print page 22722) f. Paragraph (b)(2)(i)(C) is revised. g. New paragraphs (b)(4), (b)(5) and (b)(6) are added. § 413.70
  (a) 
                                *Payment for inpatient services furnished by a CAH.* (1) Payment for inpatient services of a CAH is the reasonable costs of the CAH in providing CAH services to its inpatients, as determined in accordance with section 1861(v)(1)(A) of the Act and the applicable principles of cost reimbursement in this part and in Part 415 of this chapter, except that the following payment principles are excluded when determining payment for CAH inpatient services: 
 (iv) The payment window provisions for preadmission services, specified in § 412.2(c)(5) of this subchapter and § 413.40(c)(2). (2) Except as specified in paragraph (a)(3) of this section, payment to a CAH for inpatient services does not include any costs of physician services or other professional services to CAH inpatients, and is subject to the Part A hospital deductible and coinsurance, as determined under subpart G of part 409 of this chapter. (3) If a CAH meets the criteria in § 412.113(c) of this subchapter for pass-through of costs of anesthesia services furnished by qualified nonphysician anesthetists employed by the CAH or obtained under arrangements, payment to the CAH for the costs of those services is made in accordance with § 412.113(c). (b) 
                                *Payment for outpatient services furnished by CAH.*
                                —(1) 
                                *General.*
                                 (i) Unless the CAH elects to be paid for services to its outpatients under the method specified in paragraph (b)(3) of this section, the amount of payment for outpatient services of a CAH is the amount determined under paragraph (b)(2) of this section. (ii) Except as specified in paragraph (b)(6) of this section, payment to a CAH for outpatient services does not include any costs of physician services or other professional services to CAH outpatients. 
 (2) 
                                *Reasonable costs for facility services.* (i) * * * (C) Any type of reduction to operating or capital costs under § 413.124 or § 413.130(j). 
 (4) 
                                *Costs of emergency room on-call physicians.*
                                 (i) Effective for cost reporting periods beginning on or after October 1, 2001, the reasonable costs of outpatient CAH services under paragraph (b) of this section may include amounts for reasonable compensation and related costs for an emergency room physician who is on call but who is not present on the premises of the CAH involved, is not otherwise furnishing physicians' services, and is not on call at any other provider or facility. (ii) For purposes of this paragraph (b)(4)— (A) “Amounts for reasonable compensation and related costs” means all allowable costs of compensating emergency room physicians who are on call to the extent the costs are found to be reasonable under the rules specified in paragraph (b)(2) of this section and the applicable sections of Part 413. Costs of compensating emergency room physicians are allowable only if the costs are incurred under written contracts that require the physician to come to the CAH when the physician's presence is medically required. (B) An “emergency room physician who is on call' means a doctor of medicine or osteopathy with training or experience in emergency care who is immediately available by telephone or radio contact, and is available on site within the timeframes specified in § 485.618(d) of this chapter. (5) 
                                *Costs of ambulance services.*
                                 (i) Effective for services furnished on or after December 21, 2000, payment for ambulance services furnished by a CAH or an entity that is owned and operated by a CAH is the reasonable costs of the CAH or the entity in furnishing those services, but only if the CAH or the entity is the only provider or supplier of ambulance services located within a 35-mile drive of the CAH or the entity. (ii) For purposes of paragraph (b)(5) of this section, the distance between the CAH or the entity and the other provider or supplier of ambulance services will be determined as the shortest distance in miles measured over improved roads between the CAH or the entity and the site at which the vehicles of the closest provider or supplier of ambulance services are garaged. An improved road for this purpose is any road that is maintained by a local, State, or Federal government entity and is available for use by the general public. An improved road will be considered to include the paved surface up to the front entrance of the hospital and the front entrance of the garage. (6) If a CAH meets the criteria in § 412.113(c) of this subchapter for pass-through of costs of anesthesia services furnished by nonphysician anesthetists employed by the CAH or obtained under arrangement, payment to the CAH for the costs of those services is made in accordance with § 412.113(c). 
 3. Section 413.86 is amended as follows: a. Paragraph (e)(4)(ii)(C)(1) is revised. b. Paragraph (e)(5)(iv) is removed. c. Paragraph (g)(4) is revised. d. Paragraph (g)(5) is revised. e. Paragraph (g)(8) is revised.
 § 413.86
  
 (e) 
                                *Determining per residents amounts for the base period.*
                                 * * * (4) * * * (ii) * * * (C) 
                                *Determining necessary revisions to the per resident amount.*
                                 * * * (
                                *1*) Floor. (
                                *i*) For cost reporting periods beginning on or after October 1, 2000, and before October 1, 2001, if the hospital's per resident amount would otherwise be less than 70 percent of the locality-adjusted national average per resident amount for FY 2001 (as determined under paragraph (e)(4)(ii)(B) of this section), the per resident amount is equal to 70 percent of the locality-adjusted national average per resident amount for FY 2001. (
                                *ii*) For cost reporting periods beginning on or after October 1, 2001, and before October 1, 2002, if the hospital's per resident amount would otherwise be less than 85 percent of the locality-adjusted national average per resident amount for FY 2002 (as determined under paragraph (e)(4)(ii)(B) of this section), the per resident amount is equal to 85 percent of the locality-adjusted national average per resident amount for FY 2002. (
                                *iii*) For subsequent cost reporting periods beginning on or after October 1, 2002, the hospital's per resident amount is updated using the methodology specified under paragraph (e)(3)(i) of this section. 
 (g) 
                                *Determining the weighted number of FTE residents.*
                                 * * * (4) For purposes of determining direct graduate medical education payments— (i) For cost reporting periods beginning on or after October 1, 1997, a hospital's unweighted FTE count for residents in allopathic and osteopathic medicine may not exceed the hospital's unweighted FTE count (or, effective for cost reporting periods beginning on or after April 1, 2000, 130 percent of the unweighted FTE count for a hospital located in a rural area) for these residents for the most recent cost reporting period ending on or before December 31, 1996. 
                                ( print page 22723) (ii) If a hospital's number of FTE residents in a cost reporting period beginning on or after October 1, 1997, and before October 1, 2001, exceeds the limit described in this paragraph (g), the hospital's total weighted FTE count (before application of the limit) will be reduced in the same proportion that the number of FTE residents for that cost reporting period exceeds the number of FTE residents for the most recent cost reporting period ending on or before December 31, 1996. (iii) If the hospital's number of FTE residents in a cost reporting period beginning on or after October 1, 2001 exceeds the limit described in this paragraph (g), the hospital's weighted FTE count (before application of the limit), for primary care and obstetrics and gynecology residents and nonprimary care residents, respectively, will be reduced in the same proportion that the number of FTE residents for that cost reporting period exceeds the number of FTE residents for the most recent cost reporting period ending on or before December 31, 1996. (iv) Hospitals that are part of the same affiliated group may elect to apply the limit on an aggregate basis. (v) The fiscal intermediary may make appropriate modifications to apply the provisions of this paragraph (g)(4) based on the equivalent of a 12-month cost reporting period. (5) For purposes of determining direct graduate medical education payment— (i) For the hospital's first cost reporting period beginning on or after October 1, 1997, the hospital's weighted FTE count is equal to the average of the weighted FTE count for the payment year cost reporting period and the preceding cost reporting period. (ii) For cost reporting periods beginning on or after October 1, 1998, and before October 1, 2001, the hospital's weighted FTE count is equal to the average of the weighted FTE count for the payment year cost reporting period and the preceding two cost reporting periods. (iii) For cost reporting periods beginning on or after October 1, 2001, the hospital's weighted FTE count for primary care and obstetrics and gynecology residents is equal to the average of the weighted primary care and obstetrics and gynecology counts for the payment year cost reporting period and the preceding two cost reporting periods, and the hospital's weighted FTE count for nonprimary care residents is equal to the average of the weighted nonprimary care FTE counts for the payment year cost reporting period and the preceding two cost reporting periods. (iv) The fiscal intermediary may make appropriate modifications to apply the provisions of this paragraph (g)(5) based on the equivalent of 12-month cost reporting periods. (v) If a hospital qualifies for an adjustment to the limit established under paragraph (g)(4) of this section for new medical residency programs created under paragraph (g)(6) of this section, the count of the residents participating in new medical residency training programs above the number included in the hospital's FTE count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in this paragraph (g)(5) for a period of years. Residents participating in new medical residency training programs are included in the hospital's FTE count before applying the averaging rules after the period of years has expired. For purposes of this paragraph (g)(5), the period of years equals the minimum accredited length for the type of program. The period of years begins when the first resident begins training. 
 (8) 
                                *Closure of hospital or hospital residency program.* (i) 
                                *Definitions.*
                                For purposes of this paragraph (g)(8)— (A) “Closure of a hospital” means the hospital terminates its Medicare agreement under the provisions of § 489.52 of this chapter. (B) “Closure of a hospital residency training program” means the hospital ceases to offer training for residents in a particular approved medical residency training program. (ii) 
                                *Closure of a hospital.*
                                A hospital may receive a temporary adjustment to its FTE cap to reflect residents added because of another hospital's closure if the hospital meets the following criteria: (A) The hospital is training additional residents from a hospital that closed on or after July 1, 1996. (B) No later than 60 days after the hospital begins to train the residents, the hospital submits a request to its fiscal intermediary for a temporary adjustment to its FTE cap, documents that the hospital is eligible for this temporary adjustment by identifying the residents who have come from the closed hospital and have caused the hospital to exceed its cap, and specifies the length of time the adjustment is needed. (iii) 
                                *Closure of a hospital's residency training program.*
                                If a hospital that closes its residency training program voluntarily agrees to temporarily reduce its FTE cap according to the criteria specified in paragraph (g)(8)(iii)(B) of this section, another hospital(s) may receive a temporary adjustment to its FTE cap to reflect residents added because of the closure of the residency training program if the criteria specified in paragraph (g)(8)(iii)(A) of this section are met. (A) 
                                *Receiving hospital(s).*
                                A hospital may receive a temporary adjustment to its FTE cap to reflect residents added because of the closure of another hospital's residency training program if— (
                                *1*) The hospital is training additional residents from the residency training program of a hospital that closed a program; and (
                                *2*) No later than 60 days after the hospital begins to train the residents, the hospital submits to its fiscal intermediary a request for a temporary adjustment to its FTE cap, documents that it is eligible for this temporary adjustment by identifying the residents who have come from another hospital's closed program and have caused the hospital to exceed its cap, specifies the length of time the adjustment is needed, and submits to its fiscal intermediary a copy of the FTE reduction statement by the hospital that closed its program, as specified in paragraph (g)(8)(iii)(B)(
                                *2*) of this section. (B) 
                                *Hospital that closed its program(s).*
                                A hospital that agrees to train residents who have been displaced by the closure of another hospital's program may receive a temporary FTE cap adjustment only if the hospital with the closed program— (
                                *1*) Temporarily reduces its FTE cap based on the FTE residents in each program year training in the program at the time of the program's closure. This yearly reduction in the FTE cap will be determined based on the number of those residents who would have been training in the program during that year had the program not closed; and (
                                *2*) No later than 60 days after the residents who were in the closed program begin training at another hospital, submit to its fiscal intermediary a statement signed and dated by its representative that specifies that it agrees to the temporary reduction in its FTE cap to allow the hospital training the displaced residents to obtain a temporary adjustment to its cap; identifies the residents who were in training at the time of the program's closure; identifies the hospitals to which the residents are transferring once the program closes; and specifies the reduction for the applicable program years.
 PART 485—CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS D. Part 485 is amended as follows: 1. The authority citation for part 485 continues to read as follows: Authority:
                            Secs. 1102 and 1871 of the Act (42 U.S.C. 1302 and 1395hh). 2. Section 485.610 is amended by revising paragraph (b) and adding a new paragraph (c) to read as follows: § 485.610
  
 (b) 
                                *Standard: Location in a rural area or treatment as rural.*
                                The CAH meets the requirements of either paragraph (b)(1) or (b)(2) of this section. (1) The CAH meets the following requirements: (i) The CAH is located outside any area that is a Metropolitan Statistical Area, as defined by the Office of Management and Budget, or that has been recognized as urban under § 412.62(f) of this chapter; (ii) The CAH is not deemed to be located in an urban area under § 412.63(b) of this chapter; and (iii) The CAH has not been classified as an urban hospital for purposes of the standardized payment amount by HCFA or the Medicare Geographic Classification Review Board under § 412.230(e) of this chapter, and is not among a group of hospitals that have been redesignated to an adjacent urban area under § 412.232 of this chapter. (2) The CAH is located within a Metropolitan Statistical Area, as defined by the Office of Management and Budget, but is being treated as being located in a rural area in accordance with § 412.103 of this chapter. (c) 
                                *Standard: Location relative to other facilities or necessary provider certification.*
                                 The CAH is located more than a 35-mile drive (or, in the case of mountainous terrain or in areas with only secondary roads available, a 15-mile drive) from a hospital or another CAH, or the CAH is certified by the State as being a necessary provider of health care services to residents in the area. 3. Section 485.639 is amended by revising paragraph (b) to read as follows:
 § 485.639
  
 (b) 
                                *Anesthetic risk and evaluation.*
                                 (1) A qualified practitioner, as specified in paragraph (a) of this section, must examine the patient immediately before surgery to evaluate the risk of the procedure to be performed. (2) A qualified practitioner, as specified in paragraph (c) of this section, must examine each patient before surgery to evaluate the risk of anesthesia. (3) Before discharge from the CAH, each patient must be evaluated for proper anesthesia recovery by a qualified practitioner, as specified in paragraph (c) of this section. 
 4. Section 485.643 is amended by revising paragraph (f) to read as follows:
 § 485.643
  
 (f) For purposes of these standards, the term “organ” means a human kidney, liver, heart, lung, pancreas, or intestines (or multivisceral organs).
 PART 486—CONDITIONS FOR COVERAGE OF SPECIALIZED SERVICES FURNISHED BY SUPPLIERS F. Part 486 is amended as follows: 1. The authority citation for Part 486 continues to read as follows: Authority:
                            Sections 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 2. Section 486.302 is amended by revising the definition of “organ” to read as follows: § 486.302
  
 “Organ” means a human kidney, liver, heart, lung, pancreas, or intestines (or multivisceral organs).
 (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare—Supplementary Medical Insurance Program) Dated: March 15, 2001. Michael McMullan, Acting Deputy Administrator, Health Care Financing Administration. Dated: April 3, 2001. Tommy G. Thompson, Secretary.
 Editorial Note: The following Addendum and appendixes will not appear in the Code of Federal Regulations. Addendum—Proposed Schedule of Standardized Amounts Effective With Discharges Occurring On or After October 1, 2001 and Update Factors and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning On or After October 1, 2001 I. Summary and Background In this Addendum, we are setting forth the proposed amounts and factors for determining prospective payment rates for Medicare inpatient operating costs and Medicare inpatient capital-related costs. We are also setting forth proposed rate-of-increase percentages for updating the target amounts for hospitals and hospital units excluded from the prospective payment system. For discharges occurring on or after October 1, 2001, except for SCHs, MDHs, and hospitals located in Puerto Rico, each hospital's payment per discharge under the prospective payment system will be based on 100 percent of the Federal national rate. SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal national rate, the updated hospital-specific rate based on FY 1982 cost per discharge, the updated hospital-specific rate based on FY 1987 cost per discharge, or, if qualified, 50 percent of the updated hospital-specific rate based on FY 1996 cost per discharge, plus the greater of 50 percent of the updated FY 1982 or FY 1987 hospital-specific rate or 50 percent of the Federal DRG payment rate. Section 213 of Public Law 106-554 amended section 1886(b)(3) of the Act to allow all SCHs to rebase their hospital-specific rate based on their FY 1996 cost per discharge. Under section 1886(d)(5)(G) of the Act, MDHs are paid based on the Federal national rate or, if higher, the Federal national rate plus 50 percent of the difference between the Federal national rate and the updated hospital-specific rate based on FY 1982 or FY 1987 cost per discharge, whichever is higher. For hospitals in Puerto Rico, the payment per discharge is based on the sum of 50 percent of a Puerto Rico rate and 50 percent of a Federal national rate. (See section II.D.3. of this Addendum for a complete description.) As discussed below in section II. of this Addendum, we are proposing to make changes in the determination of the prospective payment rates for Medicare inpatient operating costs for FY 2002. The changes, to be applied prospectively, would affect the calculation of the Federal rates. In section III. of this Addendum, we discuss our proposed changes for 
                            ( print page 22725)
                            determining the prospective payment rates for Medicare inpatient capital-related costs for FY 2002. Section IV. of this Addendum sets forth our proposed changes for determining the rate-of-increase limits for hospitals excluded from the prospective payment system for FY 2002. The tables to which we refer in the preamble to this proposed rule are presented at the end of this Addendum in section V. II. Proposed Changes to Prospective Payment Rates for Inpatient Operating Costs for FY 2002 The basic methodology for determining prospective payment rates for inpatient operating costs is set forth at § 412.63. The basic methodology for determining the prospective payment rates for inpatient operating costs for hospitals located in Puerto Rico is set forth at §§ 412.210 and 412.212. Below, we discuss the proposed factors used for determining the prospective payment rates. The Federal and Puerto Rico rate changes, once issued as final, will be effective with discharges occurring on or after October 1, 2001. In summary, the proposed standardized amounts set forth in Tables 1A and 1C of section V. of this Addendum reflect— Updates of 2.55 percent for all areas (that is, the market basket percentage increase of 3.1 percent minus 0.55 percentage points);
                        An adjustment to ensure budget neutrality of hospital geographic reclassification, as provided for under sections 1886(d)(4)(C)(iii) and (d)(3)(E) of the Act, by applying new budget neutrality adjustment factors to the large urban and other standardized amounts;
                        An adjustment to ensure budget neutrality as provided for in section 1886(d)(8)(D) of the Act by removing the FY 2001 budget neutrality factor and applying a revised factor;
                        An adjustment to apply the revised outlier offset by removing the FY 2001 outlier offsets and applying a new offset; and
                        An adjustment in the Puerto Rico standardized amounts to reflect the application of a Puerto Rico-specific wage index. A. Calculation of Adjusted Standardized Amounts 1. Standardization of Base-Year Costs or Target Amounts Section 1886(d)(2)(A) of the Act required the establishment of base-year cost data containing allowable operating costs per discharge of inpatient hospital services for each hospital. The preamble to the September 1, 1983 interim final rule (48 FR 39763) contains a detailed explanation of how base-year cost data were established in the initial development of standardized amounts for the prospective payment system and how they are used in computing the Federal rates. Section 1886(d)(9)(B)(i) of the Act required us to determine the Medicare target amounts for each hospital located in Puerto Rico for its cost reporting period beginning in FY 1987. The September 1, 1987 final rule (52 FR 33043, 33066) contains a detailed explanation of how the target amounts were determined and how they are used in computing the Puerto Rico rates. The standardized amounts are based on per discharge averages of adjusted hospital costs from a base period or, for Puerto Rico, adjusted target amounts from a base period, updated and otherwise adjusted in accordance with the provisions of section 1886(d) of the Act. Sections 1886(d)(2)(B) and (d)(2)(C) of the Act required us to update base-year per discharge costs for FY 1984 and then standardize the cost data in order to remove the effects of certain sources of cost variations among hospitals. These effects include case-mix, differences in area wage levels, cost-of-living adjustments for Alaska and Hawaii, indirect medical education costs, and payments to hospitals serving a disproportionate share of low-income patients. Under sections 1886(d)(2)(H) and (d)(3)(E) of the Act, in making payments under the prospective payment system, the Secretary estimates from time to time the proportion of costs that are wages and wage-related costs. Since October 1, 1997, when the market basket was last revised, we have considered 71.1 percent of costs to be labor-related for purposes of the prospective payment system. The average labor share in Puerto Rico is 71.3 percent. We are proposing to revise the discharge-weighted national standardized amount for Puerto Rico to reflect the proportion of discharges in large urban and other areas from the FY 2000 MedPAR file. 2. Computing Large Urban and Other Area Averages Sections 1886(d)(2)(D) and (d)(3) of the Act require the Secretary to compute two average standardized amounts for discharges occurring in a fiscal year: one for hospitals located in large urban areas and one for hospitals located in other areas. In addition, under sections 1886(d)(9)(B)(iii) and (d)(9)(C)(i) of the Act, the average standardized amount per discharge must be determined for hospitals located in large urban and other areas in Puerto Rico. Hospitals in Puerto Rico are paid a blend of 50 percent of the applicable Puerto Rico standardized amount and 50 percent of a national standardized payment amount. Section 1886(d)(2)(D) of the Act defines “urban area” as those areas within a Metropolitan Statistical Area (MSA). A “large urban area” is defined as an urban area with a population of more than 1 million. In addition, section 4009(i) of Public Law 100-203 provides that a New England County Metropolitan Area (NECMA) with a population of more than 970,000 is classified as a large urban area. As required by section 1886(d)(2)(D) of the Act, population size is determined by the Secretary based on the latest population data published by the Bureau of the Census. Urban areas that do not meet the definition of a “large urban area” are referred to as “other urban areas.” Areas that are not included in MSAs are considered “rural areas” under section 1886(d)(2)(D) of the Act. Payment for discharges from hospitals located in large urban areas will be based on the large urban standardized amount. Payment for discharges from hospitals located in other urban and rural areas will be based on the other standardized amount. Based on 1999 population estimates published by the Bureau of the Census, 63 areas meet the criteria to be defined as large urban areas for FY 2002. These areas are identified in Table 4A. 3. Updating the Average Standardized Amounts Under section 1886(d)(3)(A) of the Act, we update the average standardized amounts each year. In accordance with section 1886(d)(3)(A)(iv) of the Act, we are proposing to update the large urban areas' and the other areas' average standardized amounts for FY 2002 using the applicable percentage increases specified in section 1886(b)(3)(B)(i) of the Act. Section 1886(b)(3)(B)(i)(XVII) of the Act as amended by section 301 of Public Law 106-554 specifies that the update factor for the standardized amounts for FY 2002 is equal to the market basket percentage increase minus 0.55 percentage points for hospitals in all areas. Section 301 also established that the update factor for FY 2003 is equal to the market basket percentage increase minus 0.55 percentage points. We are proposing to revise § 412.63 to reflect these changes. The percentage change in the market basket reflects the average change in the price of goods and services purchased by hospitals to furnish inpatient care. The most recent forecast of the hospital 
                            ( print page 22726)
                            market basket increase for FY 2002 is 3.1 percent. Thus, for FY 2002, the proposed update to the average standardized amounts equals 2.55 percent for hospitals in all areas. As in the past, we are adjusting the FY 2001 standardized amounts to remove the effects of the FY 2001 geographic reclassifications and outlier payments before applying the FY 2002 updates. That is, we are increasing the standardized amounts to restore the reductions that were made for the effects of geographic reclassification and outliers. We then apply the new offsets to the standardized amounts for outliers and geographic reclassifications for FY 2002. Although the update factors for FY 2002 are set by law, we are required by section 1886(e)(3) of the Act to report to the Congress our initial recommendation of update factors for FY 2002 for both prospective payment hospitals and hospitals excluded from the prospective payment system. For general information purposes, we have included the report to Congress as Appendix C to this proposed rule. Our proposed recommendation on the update factors (which is required by sections 1886(e)(4)(A) and (e)(5)(A) of the Act) is set forth as Appendix D to this proposed rule. 4. Other Adjustments to the Average Standardized Amounts a. 
                            *Recalibration of DRG Weights and Updated Wage Index—Budget Neutrality Adjustment.*
                             Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in FY 1991, the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. As discussed in section II. of the preamble, we normalized the recalibrated DRG weights by an adjustment factor, so that the average case weight after recalibration is equal to the average case weight prior to recalibration. Section 1886(d)(3)(E) of the Act requires us to update the hospital wage index on an annual basis beginning October 1, 1993. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. To comply with the requirement of section 1886(d)(4)(C)(iii) of the Act that DRG reclassification and recalibration of the relative weights be budget neutral, and the requirement in section 1886(d)(3)(E) of the Act that the updated wage index be budget neutral, we used FY 2000 discharge data to simulate payments and compared aggregate payments using the FY 2001 relative weights and wage index to aggregate payments using the proposed FY 2002 relative weights and wage index. The same methodology was used for the FY 2001 budget neutrality adjustment. (See the discussion in the September 1, 1992 final rule (57 FR 39832).) Based on this comparison, we computed a budget neutrality adjustment factor equal to 0.992493. We also adjust the Puerto Rico-specific standardized amounts for the effect of DRG reclassification and recalibration. We computed a budget neutrality adjustment factor for Puerto Rico-specific standardized amounts equal to 0.994677. These budget neutrality adjustment factors are applied to the standardized amounts without removing the effects of the FY 2001 budget neutrality adjustments. We do not remove the prior budget neutrality adjustment because estimated aggregate payments after the changes in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year adjustment, we would not satisfy this condition. In addition, we are proposing to apply these same adjustment factors to the hospital-specific rates that are effective for cost reporting periods beginning on or after October 1, 2001. (See the discussion in the September 4, 1990 final rule (55 FR 36073).) b. 
                            *Reclassified Hospitals—Budget Neutrality Adjustment.*
                            Section 1886(d)(8)(B) of the Act provides that, effective with discharges occurring on or after October 1, 1988, certain rural hospitals are deemed urban. In addition, section 1886(d)(10) of the Act provides for the reclassification of hospitals based on determinations by the Medicare Geographic Classification Review Board (MGCRB). Under section 1886(d)(10) of the Act, a hospital may be reclassified for purposes of the standardized amount or the wage index, or both. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the prospective payment system after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. To calculate this budget neutrality factor, we used FY 2000 discharge data to simulate payments, and compared total prospective payments (including indirect medical education and disproportionate share hospital payments) prior to any reclassifications to total prospective payments after reclassifications. Based on these simulations, we are applying an adjustment factor of 0.991054 to ensure that the effects of reclassification are budget neutral. The adjustment factor is applied to the standardized amounts after removing the effects of the FY 2001 budget neutrality adjustment factor. We note that the proposed FY 2002 adjustment reflects wage index and standardized amount reclassifications approved by the MGCRB or the Administrator as of February 28, 2001, and the effects of section 304 of Public Law 106-554 to extend wage index reclassifications for 3 years. The effects of any additional reclassification changes resulting from appeals and reviews of the MGCRB decisions for FY 2002 or from a hospital's request for the withdrawal of a reclassification request will be reflected in the final budget neutrality adjustment published in the final rule for FY 2002. c. 
                            *Outliers.*
                            Section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for “outlier” cases, cases involving extraordinarily high costs (cost outliers). Section 1886(d)(3)(B) of the Act requires the Secretary to adjust both the large urban and other area national standardized amounts by the same factor to account for the estimated proportion of total DRG payments made to outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act requires the Secretary to adjust the large urban and other standardized amounts applicable to hospitals in Puerto Rico to account for the estimated proportion of total DRG payments made to outlier cases. Furthermore, under section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year must be projected to be not less than 5 percent nor more than 6 percent of total payments based on DRG prospective payment rates. i. 
                            *FY 2002 outlier thresholds.*
                            For FY 2001, the fixed loss cost outlier threshold was equal to the prospective payment rate for the DRG plus the IME and DSH payments plus $17,550 (16,036 for hospitals that have not yet entered the prospective payment system for capital-related costs). The marginal cost factor for cost outliers (the percent of costs paid after costs for the case exceed the threshold) was 80 percent. We applied an outlier adjustment to the FY 2001 standardized amounts of 0.948908 for the large urban and other areas rates and 0.9409 for the capital Federal rate. For FY 2002, we propose to establish a fixed loss cost outlier threshold equal to the prospective payment rate for the 
                            ( print page 22727)
                            DRG plus the IME and DSH payments plus $21,000. The capital prospective payment system is fully phased in, effective FY 2002. Therefore, we no longer are establishing a separate threshold for hospitals that have not yet entered the prospective payment system for capital-related costs. We propose to maintain the marginal cost factor for cost outliers at 80 percent. To calculate FY 2002 outlier thresholds, we simulated payments by applying FY 2002 rates and policies to the December 2000 update of the FY 2000 MedPAR file and the December 2000 update of the provider-specific file. As we have explained in the past, to calculate outlier thresholds, we apply a cost inflation factor to update costs for the cases used to simulate payments. For FY 2000, we used a cost inflation factor of zero percent. For FY 2001, we used a cost inflation factor (or cost adjustment factor) of 1.8 percent. To set the proposed FY 2002 outlier thresholds, we are using a 2-year cost inflation factor of 5.5 percent (to inflate FY 2000 charges to FY 2002). This factor reflects our analysis of the best available cost report data as well as calculations (using the best available data) indicating that the percentage of actual outlier payments for FY 2000 is higher than we projected before the beginning of FY 2000, and that the percentage of actual outlier payments for FY 2001 will likely be higher than we projected before the beginning of FY 2001. The calculations of “actual” outlier payments are discussed further below. ii. 
                            *Other changes concerning outliers.*
                            In accordance with section 1886(d)(5)(A)(iv) of the Act, we calculated proposed outlier thresholds so that outlier payments are projected to equal 5.1 percent of total payments based on DRG prospective payment rates. In accordance with section 1886(d)(3)(E), we reduced the proposed FY 2002 standardized amounts by the same percentage to account for the projected proportion of payments paid to outliers. As stated in the September 1, 1993 final rule (58 FR 46348), we establish outlier thresholds that are applicable to both inpatient operating costs and inpatient capital-related costs. When we modeled the combined operating and capital outlier payments, we found that using a common set of thresholds resulted in a higher percentage of outlier payments for capital-related costs than for operating costs. We project that the proposed thresholds for FY 2002 will result in outlier payments equal to 5.1 percent of operating DRG payments and 5.7 percent of capital payments based on the Federal rate. The proposed outlier adjustment factors to be applied to the standardized amounts for FY 2002 are as follows: Operating 
                                     standardized  
                                     amounts
Capital federal rateNational
0.948910
0.974711Puerto Rico
0.942593
0.970336
 We apply the proposed outlier adjustment factors after removing the effects of the FY 2001 outlier adjustment factors on the standardized amounts. Table 8A in section V. of this Addendum contains the updated Statewide average operating cost-to-charge ratios for urban hospitals and for rural hospitals to be used in calculating cost outlier payments for those hospitals for which the fiscal intermediary is unable to compute a reasonable hospital-specific cost-to-charge ratio. These Statewide average ratios would replace the ratios published in the August 1, 2000 final rule (65 FR 47054). Table 8B contains comparable statewide average capital cost-to-charge ratios. These average ratios would be used to calculate cost outlier payments for those hospitals for which the fiscal intermediary computes operating cost-to-charge ratios lower than 0.1908357 or greater than 1.3133937 and capital cost-to-charge ratios lower than 0.0120498 or greater than 0.1668928. This range represents 3.0 standard deviations (plus or minus) from the mean of the log distribution of cost-to-charge ratios for all hospitals. We note that the cost-to-charge ratios in Tables 8A and 8B would be used during FY 2002 when hospital-specific cost-to-charge ratios based on the latest settled cost report are either not available or outside the three standard deviations range. iii. 
                            *FY 2000 and FY 2001 outlier payments.*
                             In the August 1, 2000 final rule (65 FR 47054), we stated that, based on available data, we estimated that actual FY 2000 outlier payments would be approximately 6.2 percent of actual total DRG payments. This was computed by simulating payments using the March 2000 update of the FY 1999 bill data available at the time. That is, the estimate of actual outlier payments did not reflect actual FY 2000 bills but instead reflected the application of FY 2000 rates and policies to available FY 1999 bills. Our current estimate, using available FY 2000 bills, is that actual outlier payments for FY 2000 were approximately 7.4 percent of actual total DRG payments. We note that the MedPAR file for FY 2000 discharges continues to be updated. Thus, the data indicate that, for FY 2000, the percentage of actual outlier payments relative to actual total payments is higher than we projected before FY 2000 (and thus exceeds the percentage by which we reduced the standardized amounts for FY 2000). In fact, the data indicate that the proportion of actual outlier payments for FY 2000 exceeds 6.0 percent. Nevertheless, consistent with the policy and statutory interpretation we have maintained since the inception of the prospective payment system, we do not plan to recoup money and make retroactive adjustments to outlier payments for FY 2000. We currently estimate that actual outlier payments for FY 2001 will be approximately 5.9 percent of actual total DRG payments, 0.8 percent higher than the 5.1 percent we projected in setting outlier policies for FY 2001. This estimate is based on simulations using the December 2000 update of the provider-specific file and the December 2000 update of the FY 2000 MedPAR file (discharge data for FY 2000 bills). We used these data to calculate an estimate of the actual outlier percentage for FY 2001 by applying FY 2001 rates and policies to available FY 2000 bills. 5. FY 2002 Standardized Amounts The adjusted standardized amounts are divided into labor and nonlabor portions. Table 1A contains the two national standardized amounts that we are proposing to be applicable to all hospitals, except hospitals in Puerto Rico. Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto Rico payment rate is based on the discharge-weighted average of the national large urban standardized amount and the national other standardized amount (as set forth in Table 1A). The labor and nonlabor portions of the national average standardized amounts for Puerto Rico hospitals are set forth in Table 1C. This table also includes the Puerto Rico standardized amounts. B. Adjustments for Area Wage Levels and Cost of Living Tables 1A and 1C, as set forth in this Addendum, contain the proposed labor-related and nonlabor-related shares that would be used to calculate the prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico. This section addresses two types of adjustments to the standardized amounts that are made in determining the prospective payment rates as described in this Addendum. 
                            ( print page 22728) 1. Adjustment for Area Wage Levels Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that we make an adjustment to the labor-related portion of the prospective payment rates to account for area differences in hospital wage levels. This adjustment is made by multiplying the labor-related portion of the adjusted standardized amounts by the appropriate wage index for the area in which the hospital is located. In section III. of this preamble, we discuss the data and methodology for the proposed FY 2002 wage index. The proposed wage index is set forth in Tables 4A, 4B, 4C, and 4F of this Addendum. 2. Adjustment for Cost-of-Living in Alaska and Hawaii Section 1886(d)(5)(H) of the Act authorizes an adjustment to take into account the unique circumstances of hospitals in Alaska and Hawaii. Higher labor-related costs for these two States are taken into account in the adjustment for area wages described above. For FY 2002, we propose to adjust the payments for hospitals in Alaska and Hawaii by multiplying the nonlabor portion of the standardized amounts by the appropriate adjustment factor contained in the table below. If the Office of Personnel Management releases revised cost-of-living adjustment factors before July 1, 2001, we will publish them in the final rule and use them in determining FY 2002 payments. Table of Cost-of-Living Adjustment Factors, Alaska and Hawaii Hospitals
Alaska—All areas
1.25Hawaii:County of Honolulu
1.1650County of Hawaii
1.2325County of Kauai
1.2325County of Maui
1.2375County of Kalawao
1.2375(The above factors are based on data obtained from the U.S. Office of Personnel Management.)
 C. DRG Relative Weights As discussed in section II. of the preamble, we have developed a classification system for all hospital discharges, assigning them into DRGs, and have developed relative weights for each DRG that reflect the resource utilization of cases in each DRG relative to Medicare cases in other DRGs. Table 5 of section V. of this Addendum contains the relative weights that we are proposing to use for discharges occurring in FY 2002. These factors have been recalibrated as explained in section II. of the preamble. D. Calculation of Prospective Payment Rates for FY 2002 General Formula for Calculation of Prospective Payment Rates for FY 2002 The prospective payment rate for all hospitals located outside of Puerto Rico, except SCHs and MDHs, equals the Federal rate. The prospective payment rate for SCHs equals whichever of the following rates yields the greatest aggregate payment: the Federal national rate, the updated hospital-specific rate based on FY 1982 cost per discharge, the updated hospital-specific rate based on FY 1987 cost per discharge, or, if qualified, 50 percent of the updated hospital-specific rate based on FY 1996 cost per discharge, plus the greater of 50 percent of the updated FY 1982 or FY 1987 hospital-specific rate or 50 percent of the Federal DRG payment rate. Section 213 of Public Law 106-554 amended section 1886(b)(3) of the Act to allow all SCHs to rebase their hospital-specific rate based on their FY 1996 cost per discharge. The prospective payment rate for MDHs equals 100 percent of the Federal rate, or, if the greater of the updated FY 1982 hospital-specific rate or the updated FY 1987 hospital-specific rate is higher than the Federal rate, 100 percent of the Federal rate plus 50 percent of the difference between the applicable hospital-specific rate and the Federal rate. The prospective payment rate for Puerto Rico equals 50 percent of the Puerto Rico rate plus 50 percent of a discharge-weighted average of the national large urban standardized amount and the Federal national other standardized amount. 1. Federal Rate For discharges occurring on or after October 1, 2001 and before October 1, 2002, except for SCHs, MDHs, and hospitals in Puerto Rico, the hospital's payment is based exclusively on the Federal national rate. The payment amount is determined as follows: Step 1—Select the appropriate national standardized amount considering the type of hospital and designation of the hospital as large urban or other (see Table 1A in section V. of this Addendum). Step 2—Multiply the labor-related portion of the standardized amount by the applicable wage index for the geographic area in which the hospital is located (see Tables 4A, 4B, and 4C of section V. of this Addendum). Step 3—For hospitals in Alaska and Hawaii, multiply the nonlabor-related portion of the standardized amount by the appropriate cost-of-living adjustment factor. Step 4—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount (adjusted, if appropriate, under Step 3). Step 5—Multiply the final amount from Step 4 by the relative weight corresponding to the appropriate DRG (see Table 5 of section V. of this Addendum). 2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs) Section 1886(b)(3)(C) of the Act provides that SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal national rate, the updated hospital-specific rate based on FY 1982 cost per discharge, the updated hospital-specific rate based on FY 1987 cost per discharge, or, if qualified, 50 percent of the updated hospital-specific rate based on FY 1996 cost per discharge, plus the greater of 50 percent of the updated FY 1982 or FY 1987 hospital-specific rate or 50 percent of the Federal DRG payment rate. Section 1886(d)(5)(G) of the Act provides that MDHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal rate or the Federal rate plus 50 percent of the difference between the Federal rate and the greater of the updated hospital-specific rate based on FY 1982 and FY 1987 cost per discharge. Hospital-specific rates have been determined for each of these hospitals based on either the FY 1982 cost per discharge, the FY 1987 cost per discharge or, for qualifying SCHs, the FY 1996 cost per discharge. For a more detailed discussion of the calculation of the hospital-specific rates, we refer the reader to the September 1, 1983 interim final rule (48 FR 39772); the April 20, 1990 final rule with comment (55 FR 15150); the September 4, 1990 final rule (55 FR 35994); and the August 1, 2000 final rule (65 FR 47082). a. 
                            *Updating the FY 1982, FY 1987, and FY 1996 Hospital-Specific Rates for FY 2002.*
                             We are proposing to increase the hospital-specific rates by 2.55 percent (the hospital market basket percentage increase minus 0.55 percentage points) for SCHs and MDHs for FY 2002. Section 1886(b)(3)(C)(iv) of the Act provides that the update factor applicable to the hospital-specific rates for SCHs equal the update factor provided under section 1886(b)(3)(B)(iv) of the Act, which, for SCHs in FY 2002, 
                            ( print page 22729)
                            is the market basket rate of increase minus 0.55 percentage points. Section 1886(b)(3)(D) of the Act provides that the update factor applicable to the hospital-specific rates for MDHs equals the update factor provided under section 1886(b)(3)(B)(iv) of the Act, which, for FY 2002, is the market basket rate of increase minus 0.55 percentage points. b. 
                            *Calculation of Hospital-Specific Rate.*
                             For SCHs, the applicable FY 2002 hospital-specific rate would be based on the following: the hospital-specific rate calculated using the greater of the FY 1982 or FY 1987 costs, increased by the applicable update factor of 2.55 percent; or, if the hospital-specific rate based on cost per case in FY 1996 is greater than the hospital-specific rate using either the FY 1982 or the FY 1987 costs, the greater of 50 percent of the hospital-specific rate based on the FY 1982 or FY 1987 costs, increased by the applicable update factor, or 50 percent of the Federal rate plus 50 percent of its rebased FY 1996 hospital-specific rate updated through FY 2002. For MDHs, the applicable FY 2002 hospital-specific rate would be calculated by increasing the hospital's hospital-specific rate for the preceding fiscal year by the applicable update factor of 2.55 percent, which is the same as the update for all prospective payment hospitals. In addition, for both SCHs and MDHs, the hospital-specific rate would be adjusted by the budget neutrality adjustment factor (that is, by 0.992493) as discussed in section II.A.4.a. of this Addendum. The resulting rate is used in determining the payment under which rate an SCH or a MDH is paid for its discharges beginning on or after October 1, 2001. 3. General Formula for Calculation of Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning On or After October 1, 2001 and Before October 1, 2002 a. 
                            *Puerto Rico Rate.*
                             The Puerto Rico prospective payment rate is determined as follows: Step 1—Select the appropriate adjusted average standardized amount considering the large urban or other designation of the hospital (see Table 1C of section V. of the Addendum). Step 2—Multiply the labor-related portion of the standardized amount by the appropriate Puerto Rico-specific wage index (see Table 4F of section V. of the Addendum). Step 3—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount. Step 4—Multiply the result in Step 3 by 50 percent. Step 5—Multiply the amount from Step 4 by the appropriate DRG relative weight (see Table 5 of section V. of the Addendum). b. 
                            *National Rate.*
                             The national prospective payment rate is determined as follows: Step 1—Multiply the labor-related portion of the national average standardized amount (see Table 1C of section V. of the Addendum) by the appropriate national wage index (see Tables 4A and 4B of section V. of the Addendum). Step 2—Add the amount from Step 1 and the nonlabor-related portion of the national average standardized amount. Step 3—Multiply the result in Step 2 by 50 percent. Step 4—Multiply the amount from Step 3 by the appropriate DRG relative weight (see Table 5 of section V. of the Addendum). The sum of the Puerto Rico rate and the national rate computed above equals the prospective payment for a given discharge for a hospital located in Puerto Rico. III. Proposed Changes to Payment Rates for Inpatient Capital-Related Costs for FY 2002 The prospective payment system for hospital inpatient capital-related costs was implemented for cost reporting periods beginning on or after October 1, 1991. Effective with that cost reporting period and during a 10-year transition period extending through FY 2001, hospital inpatient capital-related costs are paid on the basis of an increasing proportion of the capital prospective payment system Federal rate and a decreasing proportion of a hospital's historical costs for capital. The basic methodology for determining Federal capital prospective rates is set forth at §§ 412.308 through 412.352. Below we discuss the factors that we used to determine the proposed Federal for FY 2002. The rates, which will be effective for discharges occurring on or after October 1, 2001. As we stated in section V of the preamble of this proposed rule, we are no longer determining an update to the capital hospital-specific rate, since FY 2001 is the last year of the 10-year transition period, and beginning in FY 2002 all hospitals (except those defined as “new” under § 412.300) will be paid based on 100 percent of the capital Federal rate. For FY 1992, we computed the standard Federal payment rate for capital-related costs under the prospective payment system by updating the FY 1989 Medicare inpatient capital cost per case by an actuarial estimate of the increase in Medicare inpatient capital costs per case. Each year after FY 1992, we update the standard Federal rate, as provided in § 412.308(c)(1), to account for capital input price increases and other factors. Also, § 412.308(c)(2) provides that the Federal rate is adjusted annually by a factor equal to the estimated proportion of outlier payments under the Federal rate to total capital payments under the Federal rate. In addition, § 412.308(c)(3) requires that the Federal rate be reduced by an adjustment factor equal to the estimated proportion of payments for (regular and special) exceptions under § 412.348. Furthermore, § 412.308(c)(4)(ii) requires that the Federal rate be adjusted so that the annual DRG reclassification and the recalibration of DRG weights and changes in the geographic adjustment factor are budget neutral. For FYs 1992 through 1995, § 412.352 required that the Federal rate also be adjusted by a budget neutrality factor so that aggregate payments for inpatient hospital capital costs were projected to equal 90 percent of the payments that would have been made for capital-related costs on a reasonable cost basis during the fiscal year. That provision expired in FY 1996. Section 412.308(b)(2) describes the 7.4 percent reduction to the rate that was made in FY 1994, and § 412.308(b)(3) describes the 0.28 percent reduction to the rate made in FY 1996 as a result of the revised policy of paying for transfers. In the FY 1998 final rule with comment period (62 FR 45966), we implemented section 4402 of Public Law 105-33, which requires that for discharges occurring on or after October 1, 1997, and before October 1, 2002, the unadjusted standard Federal rate is reduced by 17.78 percent. A small part of that reduction will be restored effective October 1, 2002. To determine the appropriate budget neutrality adjustment factor and the regular exceptions payment adjustment, we developed a dynamic model of Medicare inpatient capital-related costs, that is, a model that projects changes in Medicare inpatient capital-related costs over time. With the expiration of the budget neutrality provision, the model is still used to estimate the regular exceptions payment adjustment and other factors. The model and its application are described in greater detail in Appendix B of this proposed rule. In accordance with section 1886(d)(9)(A) of the Act, under the prospective payment system for inpatient operating costs, hospitals located in Puerto Rico are paid for operating costs under a special payment 
                            ( print page 22730)
                            formula. Prior to FY 1998, hospitals in Puerto Rico were paid a blended rate that consisted of 75 percent of the applicable standardized amount specific to Puerto Rico hospitals and 25 percent of the applicable national average standardized amount. However, effective October 1, 1997, as a result of section 4406 of Public Law 105-33, operating payments to hospitals in Puerto Rico are based on a blend of 50 percent of the applicable standardized amount specific to Puerto Rico hospitals and 50 percent of the applicable national average standardized amount. In conjunction with this change to the operating blend percentage, effective with discharges on or after October 1, 1997, we compute capital payments to hospitals in Puerto Rico based on a blend of 50 percent of the Puerto Rico rate and 50 percent of the Federal rate. Section 412.374 provides for the use of this blended payment system for payments to Puerto Rico hospitals under the prospective payment system for inpatient capital-related costs. Accordingly, for capital-related costs, we compute a separate payment rate specific to Puerto Rico hospitals using the same methodology used to compute the national Federal rate for capital. A. Determination of Federal Inpatient Capital-Related Prospective Payment Rate Update In the August 1, 2000 final rule (65 FR 47122), we established a Federal rate of $382.03 for FY 2001. In a separate interim final rule with comment, as a result of implementing section 301(a) of Public Law 106-554 we are establishing a Federal rate of $380.85 for discharges occurring on or after April 1, 2001 and before October 1, 2001. In accordance with section 547 of Public Law 106-554, the special increases and adjustments provided by Public Law 106-554 effective between April and October 2001 do not apply for discharges occurring after FY 2001 and should not be included in determining the payment rates in subsequent years. Thus, the adjustments and rates published in the August 1, 2000 final rule were used in determining the proposed FY 2002 rates. As a result of the changes we are proposing to the factors used to establish the Federal rate in this addendum, the proposed FY 20021 Federal rate is $389.09. In the discussion that follows, we explain the factors that were used to determine the proposed FY 2002 Federal rate. In particular, we explain why the proposed FY 2002 Federal rate has increased 1.85 percent compared to the FY 2001 Federal rate (published in the August 1, 2000 final rule (65 FR 47122)). We also estimate aggregate capital payments will increase by 3.80 percent during this same period. This increase is primarily due to the increase in the number of hospital admissions and the increase in case-mix. This increase in capital payments is less than last year (5.48 percent) because with the end of the transition period the remaining hold harmless hospitals receiving “cost-based” payments will begin being paid based on 100 percent of the Federal rate. Total payments to hospitals under the prospective payment system are relatively unaffected by changes in the capital prospective payments. Since capital payments constitute about 10 percent of hospital payments, a 1 percent change in the capital Federal rate yields only about 0.1 percent change in actual payments to hospitals. Aggregate payments under the capital prospective payment transition system are estimated to increase in FY 2002 compared to FY 2001. 1. Standard Federal Rate Update a. 
                            *Description of the Update Framework.*
                             Under § 412.308(c)(1), the standard Federal rate is updated on the basis of an analytical framework that takes into account changes in a capital input price index and other factors. The update framework consists of a capital input price index (CIPI) and several policy adjustment factors. Specifically, we have adjusted the projected CIPI rate of increase as appropriate each year for case-mix index-related changes, for intensity, and for errors in previous CIPI forecasts. The proposed update factor for FY 2002 under that framework is 1.1 percent. This proposal is based on a projected 0.5 percent increase in the CIPI, a 0.3 percent adjustment for intensity, a 0.0 percent adjustment for case-mix, a 0.0 percent adjustment for the FY 2000 DRG reclassification and recalibration, and a forecast error correction of 0.3 percent. We explain the basis for the FY 2002 CIPI projection in section II.D. of this Addendum. Below we describe the policy adjustments that have been applied. The case-mix index is the measure of the average DRG weight for cases paid under the prospective payment system. Because the DRG weight determines the prospective payment for each case, any percentage increase in the case-mix index corresponds to an equal percentage increase in hospital payments. The case-mix index can change for any of several reasons: The average resource use of Medicare patients changes (“real” case-mix change);
                        Changes in hospital coding of patient records result in higher weight DRG assignments (“coding effects”); and
                        The annual DRG reclassification and recalibration changes may not be budget neutral (“reclassification effect”). We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients as opposed to changes in coding behavior that result in assignment of cases to higher weighted DRGs but do not reflect higher resource requirements. In the update framework for the prospective payment system for operating costs, we adjust the update upwards to allow for real case-mix change, but remove the effects of coding changes on the case-mix index. We also remove the effect on total payments of prior changes to the DRG classifications and relative weights, in order to retain budget neutrality for all case-mix index-related changes other than patient severity. (For example, we are adjustinged for the effects of the FY 2000 DRG reclassification and recalibration as part of our FY 2002 update recommendation.) We have adopted this case-mix index adjustment in the capital update framework as well. For FY 2002, we are projecting a 1.0 percent increase in the case-mix index. We estimate that real case-mix increase will equal 1.0 percent in FY 2002. Therefore, the proposed net adjustment for case-mix change in FY 2002 is 0.0 percentage points. We estimate that FY 2000 DRG reclassification and recalibration will result in a 0.0 percent change in the case-mix when compared with the case-mix index that would have resulted if we had not made the reclassification and recalibration changes to the DRGs. Therefore, we are making a 0.0 percent adjustment for DRG reclassification and recalibration in the update recommendation for FY 2002. The capital update framework contains an adjustment for forecast error. The input price index forecast is based on historical trends and relationships ascertainable at the time the update factor is established for the upcoming year. In any given year there may be unanticipated price fluctuations that may result in differences between the actual increase in prices and the forecast used in calculating the update factors. In setting a prospective payment rate under the framework, we make an adjustment for forecast error only if our estimate of the change in the capital input price index for any year is off by 0.25 percentage points or more. There is a 2-year lag between the forecast and the measurement of the forecast error. A 
                            ( print page 22731)
                            forecast error of 0.3 percentage points was calculated for the FY 2000 update. That is, current historical data indicate that the FY 2000 CIPI used in calculating the forecasted FY 2000 update factor (0.6 percent) understated the actual realized price increases (0.9 percent) by 0.3 percent. This under-prediction was due to prices from municipal bond yields declining slower than expected. Therefore, we are making a 0.3 percent adjustment for forecast error in the update for FY 2002. Under the capital prospective payment system framework, we also make an adjustment for changes in intensity. We calculate this adjustment using the same methodology and data as in the framework for the operating prospective payment system. The intensity factor for the operating update framework reflects how hospital services are utilized to produce the final product, that is, the discharge. This component accounts for changes in the use of quality-enhancing services, changes in within-DRG severity, and expected modification of practice patterns to remove cost-ineffective services. We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services), and changes in real case-mix. The use of total charges in the calculation of the proposed intensity factor makes it a total intensity factor, that is, charges for capital services are already built into the calculation of the factor. Therefore, we have incorporated the intensity adjustment from the operating update framework into the capital update framework. Without reliable estimates of the proportions of the overall annual intensity increases that are due, respectively, to ineffective practice patterns and to the combination of quality-enhancing new technologies and within-DRG complexity, we assume, as in the revised operating update framework, that one-half of the annual increase is due to each of these factors. The capital update framework thus provides an add-on to the input price index rate of increase of one-half of the estimated annual increase in intensity to allow for within-DRG severity increases and the adoption of quality-enhancing technology. For FY 2002, we have developed a Medicare-specific intensity measure based on a 5-year average using FY 1996 through 2000 data. In determining case-mix constant intensity, we found that observed case-mix increase was 1.6 percent in FY 1996, 0.3 percent in FY 1997, −0.4 percent in FY 1998, and −0.3 in FY 1999, and −0.7 percent in FY 2000. Since we found an increase in case-mix of 1.6 for FY 1996, which was outside of the range of 1.0 to 1.4 percent, we estimate that real case-mix increase was 1.0 to 1.4 percent for that year. The estimate of 1.0 to 1.4 percent is supported by past studies of case-mix change by the RAND Corporation. The most recent study was “Has DRG Creep Crept Up? Decomposing the Case Mix Index Change Between 1987 and 1988” by G. M. Carter, J. P. Newhouse, and D. A. Relles, R-4098-HCFA/ProPAC (1991). The study suggested that real case-mix change was not dependent on total change, but was usually a fairly steady 1.0 to 1.4 percent per year. We use 1.4 percent as the upper bound because the RAND study did not take into account that hospitals may have induced doctors to document medical records more completely in order to improve payment. Following that study, we consider up to 1.4 percent of observed case-mix change as real for FY 1996 through FY 2000. Based on this analysis, we believe that all of the observed case-mix increase for FY 1997, FY 1998, and FY 1999, and FY 2000 is real. The increases for FY 1996 was in excess of our estimate of real case-mix increase. We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services), and changes in real case-mix. Based upon an upper limit of 1.0 percent real case-mix increase, we estimate that case-mix constant intensity increased by an average 0.3 percent during FYs 1996 through 2000, for a cumulative increase of 1.4 percent given estimates of real case-mix of 1.0 percent for FY 1996, 0.3 percent for FY 1997, −0.4 for FY 1998, and −0.3 for FY 1999, and −0.7 percent for FY 2000. Based upon an upper limit of 1.4 percent real case-mix increase, we estimate that case-mix constant intensity increase by an average 0.2 percent during FYs 1996 through 2000, for a cumulative increase of 1.2 percent, given that real case-mix increase was 1.4 percent for FY 1996, 0.3 percent for FY 1997, −0.4 for FY 1998, −0.3 for FY 1999, and −0.7 percent for FY 2000. Since we estimate that intensity has increased during that period, we are recommending a 0.3 percent intensity adjustment for FY 2002. b. 
                            *Comparison of HCFA and MedPAC Update Recommendations.*
                             In its March 2001 Report to Congress, MedPAC presented a combined operating and capital update for hospital inpatient prospective payment system payments for FY 2002. Currently, section 1886(b)(3)(B)(i)(XVII) of the Act sets forth the FY 2002 percentage increase in the prospective payment system operating cost standardized amounts. The prospective payment system capital update is set at the discretion of the Secretary under the framework outlined in § 412.308(c)(1). For FY 2002, MedPAC's update framework supports a combined operating and capital update for hospital inpatient prospective payment system payments of 1.5 percent to 3.0 percent (or between the increase in the combined operating and capital market basket minus 1.3 percentage points and the increase in the combined operating and capital market basket plus 0.2 percentage points). MedPAC also notes that while the number of hospitals with negative inpatient hospital margins have increased in FY 1999 (from 33.7 percent in FY 1998 to 36.7 percent in FY 1999 (page 71)), overall high inpatient Medicare margins generally offset hospital losses on other lines of Medicare services. MedPAC continues to project substantially improved hospital total margins for FY 2000 based on performance in the first half of the fiscal year (page 72). MedPAC's FY 2002 combined operating and capital update framework uses a weighted average of HCFA's forecasts of the operating (PPS Input Price Index) and capital (CIPI) market baskets. This combined market basket is used to develop an estimate of the change in overall operating and capital prices. MedPAC calculated a combined market basket forecast by weighting the operating market basket forecast by 0.92 and the capital market basket forecast by 0.08, since operating costs are estimated to represent 92 percent of total hospital costs (capital costs are estimated to represent the remaining 8 percent of total hospital costs). MedPAC's combined market basket for FY 2002 is estimated to increase by 2.8 percent, based on HCFA's December 2000 forecasted operating market basket increase of 3.0 percent and HCFA's December 2000 forecasted capital market basket increase of 0.8 percent. *Response:*
                             As we stated in the August 1, 2000 final rule (65 FR 47119), our long-term goal is to develop a single update framework for operating and capital prospective payments and that we would begin development of a unified framework. However, we have not yet developed such a single framework as the actual operating system update has been determined by Congress through FY 2003 (as amended by Public Law 106-554). In the meantime, we intend to maintain as much consistency as possible with the current operating framework in order to 
                            ( print page 22732)
                            facilitate the eventual development of a unified framework. Our recommendation for updating the prospective payment system capital Federal rate is supported by the following analyses that measure changes in scientific and technological advances, practice pattern changes, changes in case-mix, the effect of reclassification and recalibration, and forecast error correction. MedPAC recommends a 1.5 to 3.0 percent combined operating and capital update for hospital inpatient prospective payments. Under our existing capital update framework, we are recommending a 1.1 percent update to the capital Federal rate. For purposes of comparing HCFA's capital update recommendation and MedPAC's update recommendation for FY 2002, we have isolated the capital component of MedPAC's combined market basket forecast, which was based on HCFA's December 2000 CIPI forecast of 0.8 percent. As a result, MedPAC's update recommendation for FY 2002 for capital payments is between −0.9 percent and 0.6 percent (see Table 1). There are some differences between HCFA's and MedPAC's update frameworks, which account for the difference in the respective update recommendations. In its combined FY 2002 update recommendation, MedPAC uses HCFA's capital input price index (the CIPI) as the starting point for estimating the change in prices since the previous year. HCFA's CIPI includes price measures for interest expense, which are an indicator of the interest rates facing hospitals during their capital purchasing decisions. Previously, MedPAC's capital market basket did not include interest expense; instead it included a financing policy adjustment when necessary to account for the prolonged changes in interest rates. HCFA's CIPI is vintage-weighted, meaning that it takes into account price changes from past purchases of capital when determining the current period update. In the past, MedPAC's capital market basket was not vintage-weighted, and only accounted for the current year price changes. Beginning last year, both HCFA's and MedPAC's FY 2002 update frameworks use HCFA's CIPI. MedPAC used HCFA's December 2000 CIPI in preparing its FY 2002 recommendation, which was forecast at 0.8 percent. Currently, the CIPI is forecast at 0.5 percent (March 2001). MedPAC and HCFA also differ in the adjustments they make to their price indices. (See Table 1 for a comparison of HCFA and MedPAC's update recommendations.) MedPAC makes an adjustment for scientific and technological advances, which is offset by a fixed standard for productivity growth and one-time factors. HCFA has not adopted a separate adjustment for capital science and technology or productivity and efficiency. In addition, MedPAC includes, when appropriate, an adjustment for one-time factors expected to affect costs in FY 2002 and the removal of the adjustment for FY 2002 one-time factors in its science and technology adjustment. MedPAC concluded that a one-time adjustment of 0.5 percent for the Health Insurance Portability and Accountability Act of 1996 (HIPAA) regulatory requirements be reflected in its FY 2002 payment update. Additionally, since MedPAC believes that the costs associated with one-time factors should not be built permanently into the rates, it recommended that the FY 2002 payment rates be reduced by 0.5 percent to offset the increase it recommended in the FY 2000 update for the costs associated with year 2000 (Y2K) computer improvements. Thus, MedPAC's combined FY 2002 adjustment for science and technological advances is 0.0 percent to 0.5 percent. Instead, we have identified a total intensity factor, which reflects scientific and technological advances, but we have not identified an adequate total productivity measure. MedPAC also includes a site-of-care substitution adjustment (unbundling of the payment unit) to account for the decline in the average length of Medicare acute inpatient stays. This adjustment is designed to shift funding along with associated costs when Medicare patients are discharged to postacute settings that replace acute impatient days. Other factors, such as technological advances that allow for a decreased need in follow-up care and BBA mandated policy on payment for transfer cases that limits payments within certain DRGs, are reflected in the site-of-care substitution adjustment as well. We agree with MedPAC that the site-of-care substitution effect is real and believe that it is factored into our intensity recommendation. For FY 2002, MedPAC recommends a −2.0 to −1.0 percent combined adjustment for site-of-care substitutions. MedPAC recommends a 0.0 to a 0.5 percent combined adjustment for scientific and technological advances, which was offset by a fixed productivity standard of 0.5 percent and a 0.0 percent adjustment for one-time factors for FY 2002. We recommend a 0.3 intensity adjustment. Additionally, MedPAC includes an adjustment for Medicare policy changes affecting financial status in its section of factors affecting current level of payments in its FY 2002 update recommendation. While MedPAC's update framework has not considered such costs in the past, MedPAC believes that it is appropriate to account for significant costs incurred as a result of new Medicare policy. For FY 2002, MedPAC believes that legislated updates will match cost growth and that the overall net affects of legislative changes (from Public Law 105-33, Public Law 106-113, and Public Law 106-554) will be small. Thus, it did not recommend any additional allowance for these costs for FY 2002. Accordingly, MedPAC recommended a 0.0 percent adjustment for Medicare policy changes. MedPAC makes a two-part adjustment for case-mix changes, which takes into account changes in case-mix in the past year. It recommends a 0.0 percent combined adjustment for DRG coding change and a 0.0 percent combined adjustment for within-DRG complexity change. This results in a combined total case-mix adjustment of 0.0 percent. We recommend a 0.0 adjustment for case-mix, since we are projecting a 1.0 percent increase in case-mix index and we estimate that real case-mix increase will equal 1.0 percent in FY 2002. We recommend a 0.3 percent adjustment for forecast error correction. MedPAC's combined FY 2002 update recommendation includes a 0.7 percent adjustment for forecast error correction. However, it noted that this forecast error adjustment is a result of the difference between the forecasted FY 2000 operating market basket of 2.9 percent and the actual FY 2000 operating market basket increase of 3.6 percent. The FY 2000 capital market basket was forecast at 0.6 percent, while the actual observed increase equaled 0.9 percent for capital costs. Therefore, we have included 0.3 percent adjustment for FY 2000 forecast error correction in the comparison of MedPAC's and HCFA's update recommendations for FY 2002 shown below in Table 1. We applied MedPAC's ratio of hospital capital costs to total hospital costs (8 percent) to the adjustment factors in its update framework for comparison with HCFA's capital update framework. The net result of these adjustments is that MedPAC has recommended a −0.9 to 0.6 percent update to the capital Federal rate for FY 2002. MedPAC believes that the annual updates to the capital and operating payments under the prospective payment system should not differ substantially, even though they are determined separately, since they correspond to costs generated by providing the same inpatient hospital 
                            ( print page 22733)
                            services to the same Medicare patients. We describe the basis for our 1.1 percent total capital update for FY 2002 in the preceding section. Our recommendation of 1.1 percent is 0.5 percent higher than the upper limit of the range recommended by MedPAC due to MedPAC's −2.0 to −1.0 percent combined (operating and capital) adjustment for unbundling of the payment unit for FY 2002. If we had applied only the portion of that adjustment attributable to capital-related services, our proposed update recommendation would most likely have fallen with in the range of MedPAC's update recommendation for capital for FY 2002. While in previous years, our update recommendation has fallen within the range recommended by MedPAC, since MedPAC has developed its combined operating and capital update recommendation beginning in FY 2001, we have only been outside of that range by 0.5 percent. For FY 2001, our update recommendation of 0.9 percent was only 0.5 percentage points below MedPAC's lower limit of its FY 2002 recommendation. Table 1.—HCFA's FY 2002 Update Factor and MedPAC's Recommendation
HCFA's update factor
MedPAC's recommendationCapital Input Price Index
0.5
0.81Policy Adjustment Factors:Intensity
0.3
(2
                                    )Science and Technology

0.0 to 0.5.Real within DRG Change

(3
                                    )Site-of-Care Substitution

−2.0 to −1.0.One-Time Factors
(4
                                    )
0.0Subtotal
0.3
−2.0 to −0.5.Medicare Policy Change;

0.0Case-Mix Adjustment Factors:Projected Case-Mix Change
−1.0Real Across DRG Change
1.0Coding Change

0.0Real within DRG Change
(4
                                    )
0.0Subtotal
0.0
0.0Effect of FY 2000 Reclassification and Recalibration
0.0Forecast Error Correction
0.3
0.3Total Update
1.1
−0.9 to 0.6.1
                                 Used HCFA's December 2000 capital marker basket forecast in its combined update recommendation.2
                                 Included in MedPAC's productivity offset in its science and technology adjustment.3
                                 Included in MedPAC's case-mix adjustment.4
                                 Included in HCFA's intensity factor.
 2. Outlier Payment Adjustment Factor Section 412.312(c) establishes a unified outlier methodology for inpatient operating and inpatient capital-related costs. A single set of thresholds is used to identify outlier cases for both inpatient operating and inpatient capital-related payments. Section 412.308(c)(2) provides that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of capital-related outlier payments to total inpatient capital-related PPS payments. The outlier thresholds are set so that operating outlier payments are projected to be 5.1 percent of total operating DRG payments. In the August 1, 2000 final rule, we estimated that outlier payments for capital in FY 2001 would equal 5.91 percent of inpatient capital-related payments based on the Federal rate (65 FR 47121). Accordingly, we applied an outlier adjustment factor of 0.9409 to the Federal rate. Based on the thresholds as set forth in section II.A.4.d. of this Addendum, we estimate that outlier payments for capital will equal 5.74 percent of inpatient capital-related payments based on the Federal rate in FY 2002. Therefore, we are proposing an outlier adjustment factor of 0.9426 to the Federal rate. Thus, the projected percentage of capital outlier payments to total capital standard payments for FY 2002 is lower than the percentage for FY 2001. The outlier reduction factors are not built permanently into the rates; that is, they are not applied cumulatively in determining the Federal rate. As explained previously, in accordance with section 547 of Public Law 106-554, the proposed FY 2002 rates are based on the FY 2001 adjustments and rates published in the August 1, 2000 final rule (65 FR 47122). Therefore, the proposed net change in the outlier adjustment to the Federal rate for FY 2002 is 1.0018 (0.9426/0.9409). The outlier adjustment increases the FY 2002 Federal rate by 0.18 percent compared with the FY 2001 outlier adjustment. 3. Budget Neutrality Adjustment Factor for Changes in DRG Classifications and Weights and the Geographic Adjustment Factor Section 412.308(c)(4)(ii) requires that the Federal rate be adjusted so that aggregate payments for the fiscal year based on the Federal rate after any changes resulting from the annual DRG reclassification and recalibration and changes in the geographic adjustment factor (GAF) are projected to equal aggregate payments that would have been made on the basis of the Federal rate without such changes. We use the actuarial model, described in Appendix B of this proposed rule, to estimate the aggregate payments that would have been made on the basis of the Federal rate without changes in the DRG classifications and weights and in the GAF. We also use the model to estimate aggregate payments that would be made on the basis of the Federal rate as a result of those changes. We then use 
                            ( print page 22734)
                            these figures to compute the adjustment required to maintain budget neutrality for changes in DRG weights and in the GAF. For FY 2001, we calculated a GAF/DRG budget neutrality factor of 0.9979. For FY 2002, we are proposing a GAF/DRG budget neutrality factor of 0.9913. The GAF/DRG budget neutrality factors are built permanently into the rates; that is, they are applied cumulatively in determining the Federal rate. This follows from the requirement that estimated aggregate payments each year be no more than they would have been in the absence of the annual DRG reclassification and recalibration and changes in the GAF. As explained previously, in accordance with section 547 of Public Law 106-554, the proposed FY 2002 adjustments and rates are based on the FY 2001 adjustment and rates published in the August 1, 2000 final rule (65 FR 47122). The proposed incremental change in the adjustment from FY 2001 to FY 2002 is 0.9913. The proposed cumulative change in the rate due to this adjustment is 0.9906 (the product of the incremental factors for FY 1993, FY 1994, FY 1995, FY 1996, FY 1997, FY 1998, FY 1999, FY 2000, FY 2001 and the proposed incremental factor for FY 2002: 0.9980 × 1.0053 × 0.9998 × 0.9994 × 0.9987 × 0.9989 × 1.0028 × 0.9985 × 0.9979 × 0.9913 = 0.9906). This proposed factor accounts for DRG reclassifications and recalibration and for changes in the GAF. It also incorporates the effects on the GAF of FY 2002 geographic reclassification decisions made by the MGCRB compared to FY 2001 decisions. However, it does not account for changes in payments due to changes in the DSH and IME adjustment factors or in the large urban add-on. 4. Exceptions Payment Adjustment Factor Section 412.308(c)(3) requires that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of additional payments for exceptions under § 412.348 relative to total capital payments payments under the hospital-specific rate and Federal rate. We use the model originally developed for determining the budget neutrality adjustment factor to determine the regular exceptions payment adjustment factor. We describe that model in Appendix B to this proposed rule. An adjustment for regular exceptions is necessary for determining the FY 2002 rates because we will continue to pay regular exceptions for cost reporting periods beginning before October 1, 2001 but ending in FY 2002 in accordance with § 412.312(c)(3). In FY 2003 and later, no payments will be made under the regular exceptions provision, hence we will only compute a budget neutrality adjustment under § 412.348(d) for special exceptions. We describe the proposed methodology to determine to special exceptions adjustment in section V.D. of this proposed rule. For FY 2002, the exceptions adjustment is a combination of the adjustment that would be made under the regular exceptions provision and under the special exceptions provision under § 412.348(g). For FY 2001, we estimated that exceptions payments would equal 2.15 percent of aggregate payments based on the Federal rate and the hospital-specific rate. Therefore, we applied an exceptions reduction factor of 0.9785 (1−0.0215) in determining the Federal rate. For this proposed rule, we estimate that regular exceptions payments for FY 2002 will equal 0.63 percent of aggregate payments based on the Federal rate we estimate that special exceptions payments for FY 2002 will equal 0.12 percent of aggregate payments based on the Federal rate. Therefore, we estimate that total exceptions payments for FY 2002 will equal 0.75 percent (0.63 + 0.12 = 0.75) of aggregate payments based on the Federal rate and we are proposing an exceptions payment reduction factor of 0.9925 (1 − 0.0075) to the Federal rate for FY 2002. The proposed exceptions reduction factor for FY 2002 is 1.43 percent higher than the factor for FY 2001 published in the August 1, 2000 final rule. This increase is primarily due to the expiration of the regular exceptions provision and the narrowly defined nature of the special exceptions policy. The exceptions reduction factors are not built permanently into the rates; that is, the factors are not applied cumulatively in determining the Federal rate. As explained previously, in accordance with section 547 of Public Law 106-554, the proposed FY 2002 adjustments and rates are based on the FY 2001 adjustments and rates published in the August 1, 2000 final rule (65 FR 47122). Therefore, the proposed net adjustment to the FY 2002 Federal rate is 0.9925/0.9785, or 1.0143. 5. Standard Capital Federal Rate for FY 2002 For FY 2001, the capital Federal rate was $383.06 for discharges occurring between October 1, 2000 and April 1, 2001. As a result of implementing section 301(a) of Public Law 106-554, for discharges occurring from April to October 2001, the capital Federal rate was $380.85. However, as explained previously, in accordance with section 547 of Public Law 106-554, the proposed FY 2002 adjustments and rates are based on the FY 2001 adjustments and rates published in the August 1, 2000 final rule (65 FR 47122). As a result of changes we are proposing to the factors used to establish the Federal rate, the proposed FY 2002 Federal rate is $389.09. The proposed Federal rate for FY 2002 was calculated as follows: The proposed FY 2002 update factor is 1.0110; that is, the proposed update is 1.10 percent.
                        The proposed FY 2002 budget neutrality adjustment factor that is applied to the standard Federal payment rate for changes in the DRG relative weights and in the GAF is 0.9913.
                        The proposed FY 2002 outlier adjustment factor is 0.9426.
                        The proposed FY 2002 (regular and special) exceptions payments adjustment factor is 0.9925. Since the Federal rate has already been adjusted for differences in case-mix, wages, cost-of-living, indirect medical education costs, and payments to hospitals serving a disproportionate share of low-income patients, we propose to make no additional adjustments in the standard Federal rate for these factors other than the budget neutrality factor for changes in the DRG relative weights and the GAF. We are providing a chart that shows how each of the factors and adjustments for FY 2002 affected the computation of the proposed FY 2002 Federal rate in comparison to the FY 2001 Federal rate. The proposed FY 2002 update factor has the effect of increasing the Federal rate by 1.10 percent compared to the FY 2001 rate published in the August 1, 2000 final rule, while the proposed geographic and DRG budget neutrality factor has the effect of decreasing the Federal rate by 0.87 percent. The proposed FY 2002 outlier adjustment factor has the effect of increasing the Federal rate by 0.18 percent compared to the FY 2001 rate published in the August 1, 2000 final rule. The proposed FY 2002 (regular and special) exceptions reduction factor has the effect of increasing the Federal rate by 1.43 percent compared to the exceptions reduction for FY 2001. The combined effect of all the proposed changes is to increase the proposed Federal rate by 1.85 percent compared to the Federal rate for FY 2001. 
                            ( print page 22735) Comparison of Factors and Adjustments: FY 2001 Federal Rate and Proposed FY 2002 Federal Rate
FY 2001
Proposed FY 2002
Change
Percent changeUpdate factor 1
1.0090
1.0110
1.0110
1.10GAF/DRG Adjustment Factor 1
0.9979
0.9913
0.9913
−0.87Outlier Adjustment Factor 2
0.9409
0.9426
1.0018
0.18Exceptions Adjustment Factor 2
0.9785
0.9925
1.0143
1.43Federal Rate
$382.03
$38.09
1.018
1.851
                                 The update factor and the GAF/DRG budget neutrality factors are built permanently into the rates. Thus, for example, the incremental change from FY 2000 to FY 2001 resulting from the application of the 0.9913 GAF/DRG budget neutrality factor for FY 2001 is 0.9913.2
                                 The outlier reduction factor and the exceptions reduction factor are not built permanently into the rates; that is, these factors are not applied cumulatively in determining the rates. Thus, for example, the net change resulting from the application of the FY 2001 outlier reduction factor is 0.9426/0.9409, or 1.0018.
 6. Special Rate for Puerto Rico Hospitals As explained at the beginning of section IV of this Addendum, hospitals in Puerto Rico are paid based on 50 percent of the Puerto Rico rate and 50 percent of the Federal rate. The Puerto Rico rate is derived from the costs of Puerto Rico hospitals only, while the Federal rate is derived from the costs of all acute care hospitals participating in the prospective payment system (including Puerto Rico). To adjust hospitals' capital payments for geographic variations in capital costs, we apply a GAF to both portions of the blended rate. The GAF is calculated using the operating prospective payment system wage index and varies depending on the MSA or rural area in which the hospital is located. We use the Puerto Rico wage index to determine the GAF for the Puerto Rico part of the capital-blended rate and the national wage index to determine the GAF for the national part of the blended rate. Because we implemented a separate GAF for Puerto Rico in FY 1998, we also apply separate budget neutrality adjustments for the national GAF and for the Puerto Rico GAF. However, we apply the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. The Puerto Rico GAF budget neutrality factor is 0.99941, while the DRG adjustment is 0.9943, for a combined cumulative adjustment of 0.9937. In computing the payment for a particular Puerto Rico hospital, the Puerto Rico portion of the rate (50 percent) is multiplied by the Puerto Rico-specific GAF for the MSA in which the hospital is located, and the national portion of the rate (50 percent) is multiplied by the national GAF for the MSA in which the hospital is located (which is computed from national data for all hospitals in the United States and Puerto Rico). In FY 1998, we implemented a 17.78 percent reduction to the Puerto Rico rate as a result of Public Law 105-33. For FY 2001, before application of the GAF, the special rate for Puerto Rico hospitals was $185.06. As explained previously, in accordance with section 547 of Public Law 106-554, the proposed FY 2002 adjustments and rates are based on the FY 2001 rates published in the August 1, 2000 final rule. With the changes we are proposing to the factors used to determine the rate, the proposed FY 2002 special rate for Puerto Rico is $188.67. B. Calculation of Inpatient Capital-Related Prospective Payments for FY 2002 With the end of the capital prospective payment system transition period, all hospitals (except those defined as “new” under § 412.300(b)) will be paid based on 100 percent of the Federal rate in FY 2002. The applicable Federal rate was determined by making adjustments as follows: For outliers, by dividing the standard Federal rate by the outlier reduction factor for that fiscal year; and
                        For the payment adjustments applicable to the hospital, by multiplying the hospital's GAF, disproportionate share adjustment factor, and IME adjustment factor, when appropriate. For purposes of calculating payments for each discharge during FY 2002, the standard Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (Large Urban Add-on, if applicable) × (COLA adjustment for hospitals located in Alaska and Hawaii) × (1 + Disproportionate Share Adjustment Factor + IME Adjustment Factor, if applicable). The result is the adjusted Federal rate. Hospitals also may receive outlier payments for those cases that qualify  under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments. The proposed outlier thresholds for FY 2002 are in section II.A.4.c. of this Addendum. For FY 2002, a case qualifies as a cost outlier if the cost for the case (after standardization for the indirect teaching adjustment and disproportionate share adjustment) is greater than the prospective payment rate for the DRG plus $20,900. During the capital prospective payment system transition period, a hospital also may receive an additional payment under the regular an exceptions process through its cost reporting period beginning before October 1, 2001 but ending in FY 2002 if its total inpatient capital-related payments are less than a minimum percentage of its allowable Medicare inpatient capital-related costs. The minimum payment level is established by class of hospital under § 412.348(c). Under § 412.348(d), the amount of a regular exceptions payment is determined by comparing the cumulative payments made to the hospital under the capital prospective payment system to the cumulative minimum payment levels applicable to the hospital for each cost reporting period subject to that system. Any amount by which the hospital's cumulative payments exceed its cumulative minimum payment is deducted from the additional payment that would otherwise be payable for a cost reporting period. An eligible hospital may qualify for a special exception payment under § 412.348(g) through the 10th year beyond the end of the capital transition period if meets (1) a project need requirement described at § 412.348(g)(2), which in the case of certain urban hospitals includes an excess capacity test; and (2) a project size requirement as described at § 412.348(g)(5). Eligible hospitals include sole community hospitals, urban hospitals with at lest 100 beds that have a DSH percentage of at least 
                            ( print page 22736)
                            20.2 percent, and hospitals that have a combined Medicare and Medicaid inpatient utilization of at least 70 percent. Under § 412.348(g)(8), the amount of a special exceptions payment is determined by comparing the cumulative payments made to the hospital under the capital prospective payment system to the cumulative minimum payment level. This amount is offset by (1) any amount by which a hospital's cumulative capital payments exceed its cumulative minimum payment levels applicable under the regular exceptions process for cost reporting periods beginning during which the hospital has been subject to capital PPS; and (2) any amount by which a hospital's current year operating and capital payments (excluding 75 percent of operating DSH payments) exceed its operating and capital costs. The minimum payment level is 70 percent for all eligible hospitals under § 412.348(g). New hospitals as defined under § 412.300 are exempted from the capital prospective payment system for their first 2 years of operation and are paid 85 percent of their reasonable costs during that period. A new hospital's old capital costs are its allowable costs for capital assets that were put in use for patient care on or before the later of December 31, 1990, or the last day of the hospital's base year cost reporting period, and are subject to the rules pertaining to old capital and obligated capital as of the applicable date. Effective with the third year of operation, we will pay the hospital under either the fully prospective methodology, using the appropriate transition blend in that Federal fiscal year, or the hold-harmless methodology. If the hold-harmless methodology is applicable, the hold-harmless payment for assets in use during the base period would extend for 8 years, even if the hold-harmless payments extend beyond the normal transition period. C. Capital Input Price Index 1. Background Like the operating input price index, the capital input price index (CIPI) is a fixed-weight price index that measures the price changes associated with costs during a given year. The CIPI differs from the operating input price index in one important aspect—the CIPI reflects the vintage nature of capital, which is the acquisition and use of capital over time. Capital expenses in any given year are determined by the stock of capital in that year (that is, capital that remains on hand from all current and prior capital acquisitions). An index measuring capital price changes needs to reflect this vintage nature of capital. Therefore, the CIPI was developed to capture the vintage nature of capital by using a weighted-average of past capital purchase prices up to and including the current year. Using Medicare cost reports, American Hospital Association (AHA) data, and Securities Data Company data, a vintage-weighted price index was developed to measure price increases associated with capital expenses. We periodically update the base year for the operating and capital input prices to reflect the changing composition of inputs for operating and capital expenses. Currently, the CIPI is based to FY 1992 and was last rebased in 1997. The most recent discussion of the cost category weights in the CIPI was in the final rule with comment period for FY 1998 published on August 29, 1997 (62 FR 46050). 2. Forecast of the CIPI for Federal Fiscal Year 2001 We are forecasting the CIPI to increase 0.9 percent for FY 2002. This reflects a projected 1.5 percent increase in vintage-weighted depreciation prices (building and fixed equipment, and movable equipment) and a 3.5 percent increase in other capital expense prices in FY 2002, partially offset by a 1.3 percent decline in vintage-weighted interest rates in FY 2002. The weighted average of these three factors produces the 0.9 percent increase for the CIPI as a whole. IV. Proposed Changes to Payment Rates for Excluded Hospitals and Hospital Units: Rate-of-Increase Percentages The inpatient operating costs of hospitals and hospital units excluded from the prospective payment system are subject to rate-of-increase limits established under the authority of section 1886(b) of the Act, which is implemented in regulations at § 413.40. Under these limits, a hospital-specific target amount (expressed in terms of the inpatient operating cost per discharge) is set for each hospital, based on the hospital's own historical cost experience trended forward by the applicable rate-of-increase percentages (update factors). In the case of a psychiatric hospital or hospital unit, a rehabilitation hospital or hospital unit, or a long-term care hospital, the target amount may not exceed the updated figure for the 75th percentile of target amounts adjusted to take into account differences between average wage-related costs in the area of the hospital and the national average of such costs within the same class of hospital for hospitals and units in the same class (psychiatric, rehabilitation, and long-term care) for cost reporting periods ending during FY 1996. The target amount is multiplied by the number of Medicare discharges in a hospital's cost reporting period, yielding the ceiling on aggregate Medicare inpatient operating costs for the cost reporting period. Each hospital-specific target amount is adjusted annually, at the beginning of each hospital's cost reporting period, by an applicable update factor. Section 1886(b)(3)(B) of the Act, which is implemented in regulations at § 413.40(c)(3)(vii), provides that for cost reporting periods beginning on or after October 1, 1998 and before October 1, 2002, the update factor for a hospital or unit depends on the hospital's or hospital unit's costs in relation to the ceiling for the most recent cost reporting period for which information is available. For hospitals with costs exceeding the ceiling by 10 percent or more, the update factor is the market basket increase. For hospitals with costs exceeding the ceiling by less than 10 percent, the update factor is the market basket minus .25 percent for each percentage point by which costs are less than 10 percent over the ceiling. For hospitals with costs equal to or less than the ceiling but greater than 66.7 percent of the ceiling, the update factor is the greater of 0 percent or the market basket minus 2.5 percent. For hospitals with costs that do not exceed 66.7 percent of the ceiling, the update factor is 0. The most recent forecast of the market basket increase for FY 2002 for hospitals and hospital units excluded from the prospective payment system is 3.0 percent. Therefore, the update to a hospital's target amount for its cost reporting period beginning in FY 2002 would be between 0.5 and 3.0 percent, or 0 percent, depending on the hospital's or unit's costs in relation to its rate-of-increase limit. In addition, § 413.40(c)(4)(iii) requires that for cost reporting periods beginning on or after October 1, 1998 and before October 1, 2002, the target amount for each psychiatric hospital or hospital unit, rehabilitation hospital or hospital unit, and long-term care hospital cannot exceed a cap on the target amounts for hospitals in the same class. Section 1886(b)(3)(H) of the Act, as amended by section 121 of Public Law 106-113, provides for an appropriate wage adjustment to the caps on the target amounts for psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals, effective for cost reporting periods beginning on or after October 1, 1999, through September 30, 2002. On August 
                            ( print page 22737)
                            1, 2000, we published an interim final rule with comment period that implemented this provision for cost reporting periods beginning on or after October 1, 1999 and before October 1, 2000 (65 FR 47026) and a final rule that implemented the provision for cost reporting periods beginning on or after October 1, 2000 and before October 1, 2001 (65 FR 47054). This proposed rule addresses the wage adjustment to the caps for cost reporting periods beginning on or after October 1, 2001. As discussed in section VI. of the preamble of this proposed rule, the cap on the target amount per discharge is determined by adding the hospital's nonlabor-related portion of the national 75th percentile cap to its wage-adjusted, labor-related portion of the national 75th percentile cap (the labor-related portion of costs equals 0.71553 and the nonlabor-related portion of costs equals 0.28447). A hospital's wage-adjusted, labor-related portion of the target amount is calculated by multiplying the labor-related portion of the national 75th percentile cap for the hospital's class by the wage index under the hospital inpatient prospective payment system (see § 412.63), without taking into account reclassifications under sections 1886(d)(8)(B) and (d)(10) of the Act. As discussed in section VI. of the preamble of this proposed rule, we are proposing to make an adjustment to the caps on target amounts for new and existing excluded hospitals and units. In calculating the wage-adjusted caps on target amounts for new and existing excluded and units for FY 2001, we inadvertently made an error. In wage neutralizing FY 1996 target amounts, we used the FY 2000 hospital inpatient prospective payment system wage index published in Tables 4A and 4B of the July 30, 1999 final rule (64 FR 41585 through 41593), which is based on wage data after taking into account geographic reclassifications under section 1886(d)(8) of the Act. We are proposing to use pre-reclassified wage data in our recalculation of the caps for FY 2002. We propose to recalculate the limits for new excluded hospitals and units, as well as calculate the cap for existing excluded hospitals and units using the same wage index used under the prospective payment system for skilled nursing facilities (SNF) as shown in Table 7 of the July 30, 1999 SNF final rule (64 FR 41690). We do not anticipate a significant impact on overall payments to these hospitals and units. Section 307(a) of Public Law 106-554 amended section 1886(b)(3) of the Act to provide for a 2-percent increase to the wage-adjusted 75th percentile cap on the target amount for long-term care hospitals, effective for cost reporting periods beginning during FY 2001. This provision is applicable to long-term care hospitals that were subject to the cap for existing excluded hospitals and units, as specified in § 413.40(c). In addition to the increase to the cap on target amounts for long-term care hospitals, section 307(a) of Public Law 106-554 amended section 1886(b)(3)(A) of the Act to make the section applicable to all long-term care hospitals, effective for cost reporting periods beginning during FY 2001. This provision requires a revision to the determination of each long-term care hospital's FY 2001 target amount as specified in § 413.40(c)(4). For cost reporting periods beginning during FY 2001, the hospital-specific target amount otherwise determined for a long-term care hospital as specified under § 413.40(c)(4)(ii) is multiplied by 1.25 (that is, increased by 25 percent). However, the revised FY 2001 target amount for a long-term care hospital cannot exceed its wage-adjusted national cap as required by section 1886(b)(3) of the Act, as amended by section 307(a) of Public Law 106-554. For cost reporting periods beginning in FY 2002, the proposed caps are as follows: Class of excluded hospital or unit
Labor-related share
Nonlabor-related sharePsychiatric
$8,404
$3,341Rehabilitation
15,689
6,237Long-Term Care
31,399
12,483
 Regulations at § 413.40(d) specify the formulas for determining bonus and relief payments for excluded hospitals and specify established criteria for an additional bonus payment for continuous improvement. Regulations at § 413.40(f)(2)(ii) specify the payment methodology for new hospitals and hospital units (psychiatric, rehabilitation, and long-term care) effective October 1, 1997. V. Tables This section contains the tables referred to throughout the preamble to this proposed rule and in this Addendum.  For purposes of this proposed rule, and to avoid confusion, we have retained the designations of Tables 1 through 5 that were first used in the September 1, 1983 initial prospective payment final rule (48 FR 39844).  Tables 1A, 1C, 1D, 2, 3A, 3B, 4A, 4B, 4C, 4F, 4G, 4H, 5, 6A, 6B, 6C, 6D, 6E, 6F, 6G, 6H, 7A, 7B, 8A, and 8B are presented below.  The tables presented below are as follows:
 Table 1A—National Adjusted Operating Standardized Amounts, Labor/Nonlabor Table 1C—Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor Table 1D—Capital Standard Federal Payment Rate Table 2—Hospital Average Hourly Wage for Federal Fiscal Years 2000 (1996 Wage Data), 2001 (1997 Wage Data) and 2002 (1998 Wage Data) Wage Indexes and 3-Year Average of Hospital Average Hourly Wages Table 3A—3-Year Average Hourly Wage for Urban Areas Table 3B—3-Year Average Hourly Wage for Rural Areas Table 4A—Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas Table 4B—Wage Index and Capital Geographic Adjustment Factor (GAF) for Rural Areas Table 4C—Wage Index and Capital Geographic Adjustment Factor (GAF) for Hospitals That Are Reclassified Table 4F—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) Table 4G—Pre-Reclassified Wage Index for Urban Areas Table 4H—Pre-Reclassified Wage Index for Rural Areas Table 5—List of Diagnosis Related Groups (DRGs), Relative Weighting Factors, Geometric and Arithmetic Mean Length of Stay Table 6A—New Diagnosis Codes Table 6B—New Procedure Codes Table 6C—Invalid Diagnosis Codes Table 6D—Invalid Procedure Codes Table 6E—Revised Diagnosis Code Titles Table 6F—Revised Procedure Code Titles Table 6G—Additions to the CC Exclusions List Table 6H—Deletions to the CC Exclusions List Table 7A—Medicare Prospective Payment System Selected Percentile Lengths of Stay FY 2000 MedPAR Update 12/00 GROUPER V18.0 Table 7B—Medicare Prospective Payment System Selected Percentile Lengths of Stay FY 2000 MedPAR Update 12/00 GROUPER V20.0 Table 8A—Statewide Average Operating Cost-to-Charge Ratios for Urban and Rural Hospitals (Case Weighted) March 2001 Table 8B—Statewide Average Capital Cost-to-Charge Ratios (Case Weighted) March 2001
                        ( print page 22738) Table 1A.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor
Large urban areas
Other areasLabor-related
Nonlabor-related
Labor-related
Nonlabor-related$2,940.89
$1,195.38
$2,894.33
$1,176.46
 Table 1C.—Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor
Large urban areas
Other areasLabor
Nonlabor
Labor
NonlaborNational
$2,915.45
$1,185.04
$2,915.45
$1,185.04Puerto Rico
1,414.18
569.25
1,391.79
560.23
 Table 1D.—Capital Standard Federal Payment Rate
RateNational
$389.09Puerto Rico
188.67
 
 
 Table 2.—Hospital Average Hourly Wage for Federal Fiscal Years 2000 (1996 Wage Data), 2001 (1997 Wage Data) and 2002 (1998 Wage Data) Wage Indexes and 3-Year Average of Hospital Average Hourly Wages
Provider No.
Average 
                                 hourly wage  
                                 FFY 2000
Average 
                                 hourly wage  
                                 FFY 2001
Average** 
                                 hourly wage  
                                 FFY 2002
Average*** 
                                 hourly wage  
                                 (3 years)010001
15.8484
16.4088
17.1352
16.4665010004
15.0194
17.9732
19.0010
17.1863010005
16.2615
17.5985
18.6554
17.4986010006
17.3081
16.7480
17.3537
17.1306010007
14.8048
15.4798
15.6788
15.3288010008
17.6549
14.7443
17.4728
16.6080010009
17.5328
18.7731
18.4390
18.2439010010
15.9090
16.4468
16.4664
16.2848010011
20.6261
20.7972
21.9311
21.1001010012
19.2992
17.7171
15.8686
17.5430010015
18.3461
15.4510
18.7062
17.3913010016
16.1311
17.2473
18.6772
17.4112010018
18.9617
17.6449
18.9388
18.5180010019
15.4910
16.3493
17.0672
16.3245010021
14.6297
16.2919
15.1241
15.3000010022
20.5050
18.5879
17.6435
18.8422010023
16.2581
16.1025
16.3209
16.2283010024
16.0263
16.2900
16.2974
16.2091010025
14.5311
15.1356
15.1548
14.9441010027
14.9278
11.7900
16.8595
14.1053010029
16.4103
17.6461
18.3605
17.4403010031
18.0194
18.7835
18.5180
18.4445010032
12.6540
12.5995
15.3590
13.6017010033
19.6797
20.3923
21.1818
20.4188010034
14.7342
15.0959
15.3639
15.0606010035
17.4788
20.1853
16.0377
17.7343010036
17.2880
17.8140
17.0366
17.3872010038
18.3309
18.2671
19.6098
18.7632010039
18.8080
20.1045
20.3406
19.7778010040
19.1030
18.9376
19.9152
19.2851010043
16.2022
30.7489
18.6640
19.9982010044
17.0229
22.0091
24.0265
20.8906010045
15.0065
15.2200
17.0417
15.7248010046
17.1822
17.3970
18.9737
17.8750010047
16.3803
13.3521
15.4332
15.2044010049
14.4823
14.7590
15.5246
14.9487010050
15.4159
18.5163
17.3895
17.0820( print page 22739)010051
9.9390
11.9275
11.8108
11.1940010052
13.8649
16.5486
18.0653
16.1248010053
13.1778
14.6267
15.5649
14.5406010054
17.1246
18.5103
19.5148
18.4901010055
18.1930
18.9526
18.8590
18.6711010058
12.7809
16.1702
16.9715
15.1274010059
18.1886
19.1286
18.8020
18.7124010061
15.9215
14.9547
14.5003
15.1112010062
13.5690
14.7732
12.3259
13.5151010064
20.8966
20.4139
19.5256
20.2712010065
15.6357
16.4049
16.8752
16.3279010066
12.0681
15.4317
13.1559
13.4757010068
18.7367
12.0525
12.9616
14.2644010069
13.5684
13.8636
14.7211
14.0429010072
14.3481
14.9526
16.2339
15.1957010073
12.8328
13.8601
14.1273
13.6015010078
17.7110
17.9202
18.1028
17.9134010079
16.8701
16.4421
14.5611
15.8427010080
13.8473
*
*
13.8473010081
16.9823
18.9474
17.2996
17.7081010083
16.2146
16.8933
18.0312
17.0916010084
18.7794
18.4965
18.7769
18.6812010085
18.8696
18.4744
19.6888
19.0044010086
14.9255
16.6694
16.5711
16.0968010087
18.3889
19.0033
17.3321
18.3237010089
16.6090
16.8042
17.7800
17.0521010090
18.1121
18.3866
18.9445
18.4882010091
16.3620
13.9405
17.0799
15.6820010092
16.4980
16.9900
17.8144
17.1322010094
18.5603
*
*
18.5603010095
11.8993
12.4525
12.2597
12.2090010097
12.8955
13.0413
12.7286
12.8889010098
14.2787
15.9165
14.0300
14.6833010099
15.9309
15.9874
15.5619
15.8073010100
15.4826
17.2011
17.7237
16.8503010101
15.4173
15.3859
14.4460
15.0721010102
12.7251
13.7933
13.8136
13.4259010103
19.3115
17.9358
16.6514
17.9628010104
18.0997
17.7126
15.9964
17.2534010108
20.7914
17.9017
19.4617
19.3047010109
14.0870
15.3107
14.6834
14.6934010110
15.9066
15.6317
15.8283
15.7917010112
15.1056
15.1401
16.8271
15.6716010113
17.2440
16.9683
13.9413
15.9844010114
17.2612
15.2454
17.0136
16.4485010115
13.7524
14.6268
14.9632
14.4787010118
16.6889
18.8477
17.0834
17.5145010119
18.1707
18.8024
20.7741
19.7059010120
17.0332
17.2336
18.2567
17.5146010121
15.1806
14.6444
14.5262
14.8160010123
18.1604
16.7344
19.2140
17.9949010124
16.2666
16.2846
16.7465
16.4273010125
14.4153
15.5304
16.0136
15.3557010126
17.6405
19.5710
19.1065
18.7347010127
19.6095
19.5190
18.2786
19.1726010128
12.5747
14.5056
14.4322
13.6385010129
14.4267
14.7286
16.1733
15.1385010130
16.3465
16.6809
18.1314
16.9797010131
17.9076
17.8260
20.1883
18.6602010134
10.7817
18.8835
19.9856
15.8677010137
15.9348
12.1217
20.4561
15.8609010138
12.1295
12.8675
14.5254
13.1763010139
19.9487
19.0001
20.6815
19.8355( print page 22740)010143
15.7144
16.7911
17.6212
16.7651010144
17.1211
17.1320
17.7580
17.3377010145
20.7460
20.8434
20.5895
20.7209010146
18.8561
18.5198
19.1415
18.8309010148
14.6443
12.2214
15.8349
13.9784010149
17.0836
18.6333
18.0156
17.9216010150
16.9749
17.8951
18.8977
17.9203010152
17.3835
17.8306
18.2173
17.8172010155
16.7028
9.0300
15.0689
12.5183010158
*
17.3227
18.3957
17.8637020001
27.9690
28.1747
27.4110
27.8426020002
26.9145
24.5815
25.1987
25.5092020004
26.3979
30.5667
25.4679
27.5927020005
29.0068
30.2920
29.2378
29.5337020006
26.7706
31.2404
28.1417
28.8630020007
24.9555
27.8319
32.3852
28.0097020008
30.4712
29.4146
30.8691
30.2487020009
23.1801
20.1930
18.4660
20.3801020010
18.6417
23.6727
22.7559
21.4818020011
29.4697
30.4727
28.0658
29.3006020012
23.9259
24.8543
25.5320
24.7635020013
26.8172
23.8847
28.1557
26.0576020014
24.0932
27.3823
24.9201
25.4246020017
24.9714
26.8319
27.6501
26.5037020024
22.7263
24.0872
25.3205
24.0621020025
27.1529
21.7557
20.2583
22.6334030001
19.8695
20.3673
21.7869
20.6506030002
21.6263
21.5977
21.8375
21.6886030003
23.6722
23.4833
22.6804
23.3063030004
17.7333
14.0711
15.5478
15.4308030006
17.6409
18.2668
19.7289
18.5307030007
18.5602
19.6708
21.5169
19.9379030008
*
22.2758
22.2190
22.2524030009
17.9343
18.1794
18.7557
18.2786030010
18.7997
19.0907
19.5123
19.1422030011
20.0784
19.2973
19.4310
19.5785030012
19.4245
18.9918
20.6585
19.6997030013
21.0182
20.7458
19.6369
20.4298030014
19.4697
19.9315
19.7966
19.7342030016
20.5606
19.3967
19.4785
19.8559030017
20.4185
22.8765
21.7938
21.6805030018
18.9115
20.2032
20.8980
20.0193030019
19.9211
21.7005
21.2540
20.9846030022
15.7886
19.2966
17.3485
17.0947030023
22.4365
23.6697
24.1678
23.4686030024
21.6692
22.2541
22.6199
22.1974030025
17.6759
12.7254
11.9894
13.7385030027
17.5796
15.7554
17.6555
16.9563030030
21.6249
20.8303
21.6932
21.3795030033
16.8396
20.0044
20.2820
18.9069030034
19.0868
16.8241
20.8689
18.8279030035
19.7153
19.2781
20.0226
19.6580030036
18.9449
20.7567
21.6371
20.4743030037
21.4376
22.8266
23.7615
22.6712030038
22.0777
22.6776
22.9822
22.5885030040
17.9722
18.5456
19.7636
18.7537030041
17.4389
15.8921
18.8717
17.2718030043
20.7721
20.9341
20.5598
20.7468030044
16.4654
16.8649
17.6575
17.0214030047
19.6916
22.6401
21.4412
21.2271030049
19.0896
19.0881
19.3580
19.1639030054
14.4861
15.3338
15.0657
14.9801030055
18.2751
16.3613
20.2991
18.2684( print page 22741)030059
21.7100
24.0465
22.6279
22.7570030060
16.7661
19.2461
18.6313
18.2043030061
17.3470
18.9063
19.9047
18.7238030062
17.4825
17.6738
18.0603
17.7568030064
18.5391
19.5673
19.9437
19.3687030065
19.9277
20.5130
20.7838
20.4254030067
15.6207
14.4446
17.2778
15.7364030068
17.3482
17.3614
17.7208
17.4823030069
19.0013
19.0961
21.0936
19.7255030080
19.9865
20.5144
20.6581
20.3684030083
23.6433
23.3355
23.5229
23.4991030085
17.8402
21.0954
20.8611
19.9420030086
18.5030
19.5436
*
19.0352030087
20.0469
21.4084
21.9465
21.1838030088
19.5772
19.8682
20.4978
20.0029030089
19.9018
20.4019
20.9516
20.4404030092
21.5628
20.6986
21.8308
21.3646030093
19.4688
19.7262
20.4314
19.9052030094
19.4773
21.6218
22.8123
21.4086030095
14.2499
13.7293
13.7664
13.9087030099
18.0747
16.1541
18.2263
17.4781030100
*
*
23.7609
23.7609030101
*
*
19.2547
19.2547030102
*
*
18.2413
18.2413040001
15.5735
15.1624
16.9178
15.8741040002
14.0865
13.0592
15.1107
14.0333040003
14.0027
14.2089
15.5740
14.5731040004
17.2926
17.8476
17.9034
17.6718040005
12.8825
13.2597
11.1318
12.3937040007
19.5299
21.9583
18.6998
19.9568040008
12.6974
15.3040
14.7985
14.3087040010
17.6231
18.6023
19.4913
18.6031040011
12.2654
14.5319
16.0995
14.1756040014
15.3853
17.6340
18.1434
17.0051040015
14.6045
16.5891
15.5207
15.5649040016
17.5431
19.0295
20.2321
18.9152040017
14.9533
13.5098
15.4686
14.6576040018
17.5602
17.6027
18.7463
17.9749040019
25.7080
22.6769
23.4163
23.8479040020
14.8059
16.4827
18.9844
16.6335040021
16.4628
17.6398
19.6835
17.8176040022
16.0006
17.0397
14.8398
15.8797040024
15.7282
14.4541
17.6523
15.9585040025
10.9496
11.5079
13.4705
11.8847040026
18.2398
19.5563
19.7924
19.1863040027
14.5406
16.0975
17.4431
16.0716040028
12.8409
14.6584
13.9946
13.7921040029
17.7777
17.8787
21.1370
18.9480040030
14.1541
13.5428
11.2402
12.7784040032
13.3280
13.7030
13.2872
13.4471040035
11.2123
12.8300
10.9569
11.6408040036
17.9080
18.9757
20.0835
18.9954040037
13.4815
14.6559
14.0941
14.0704040039
13.8386
14.3576
14.7177
14.3115040040
17.4283
18.0895
19.1984
18.2668040041
13.3613
15.9896
16.4624
15.2103040042
14.6641
15.2142
15.2057
15.0333040044
11.4422
12.6275
13.3501
12.5381040045
18.7724
14.9429
16.2469
16.4870040047
16.3948
16.8654
17.5336
16.9538040048
15.8203
*
*
15.8203040050
11.7934
13.3818
14.0036
13.0341040051
16.2803
15.8627
16.6039
16.2390( print page 22742)040053
15.8193
16.3610
15.0219
15.7502040054
15.0412
15.3219
14.2577
14.8844040055
16.1029
17.1269
17.7214
16.9813040058
15.6706
17.6766
16.4278
16.6344040060
11.4686
12.8148
17.9805
13.6105040062
17.2757
18.2048
17.8902
17.8204040064
12.4007
10.7255
11.5029
11.4801040066
17.6429
18.3377
17.8338
17.9377040067
13.4930
14.6014
14.4741
14.1956040069
16.1147
17.5052
17.0026
16.8681040070
15.4757
16.9027
16.9700
16.4358040071
16.3022
16.9610
17.2834
16.8497040072
15.8425
16.0895
17.4822
16.4893040074
17.3819
18.3224
18.7542
18.1968040075
12.7496
13.3623
14.0975
13.3977040076
18.5512
19.0732
20.5840
19.3801040077
12.4625
12.9211
13.9114
13.0965040078
17.8573
18.7600
18.5821
18.4100040080
15.7397
19.2461
19.3707
18.0636040081
10.6791
11.3169
11.1332
11.0311040082
16.5127
16.2152
15.1331
15.9302040084
17.2469
17.2613
17.7295
17.4070040085
15.7765
16.8957
16.5216
16.3838040088
15.6710
17.9636
17.1624
16.9372040090
17.5503
17.8282
19.0824
18.0989040091
17.0444
19.8700
20.1378
18.8893040093
12.9010
12.3537
13.9741
13.0114040100
14.9688
14.7587
15.6833
15.1704040105
14.2409
15.3319
14.3896
14.6616040106
15.4000
15.6545
18.1341
16.4515040107
19.6184
18.8120
17.8628
18.6841040109
13.9807
14.6266
16.6278
15.0815040114
18.3133
18.8743
21.1110
19.3778040116
19.5695
20.2716
*
19.9151040118
17.4300
19.3720
18.2123
18.3407040119
15.3847
15.5338
16.7730
15.9002040124
17.2547
19.1349
19.2889
18.5723040126
11.6845
12.5368
11.6517
11.9404040132
13.1760
17.5179
10.3875
13.4483040134
*
18.0787
19.0185
18.5701040135
*
22.6761
23.0084
22.8797050002
27.6006
37.8295
36.9630
33.5586050006
19.5272
19.5594
18.2061
19.0382050007
29.5398
30.7126
30.8676
30.4910050008
25.8570
26.2458
26.3682
26.1654050009
26.2506
26.8159
28.0701
27.0878050013
24.8541
23.2201
28.0569
25.1985050014
24.5302
22.8478
23.6745
23.6450050015
25.3838
26.2481
27.7731
26.4938050016
20.1542
20.5566
21.2045
20.6377050017
23.6639
23.9625
24.4598
24.0349050018
14.6622
15.4721
15.2903
15.1444050021
28.5003
25.8966
*
27.2682050022
22.9583
24.0318
24.5254
23.8802050024
20.3427
21.3989
22.4274
21.4070050025
21.9952
23.3896
23.9879
23.0936050026
28.6850
27.8736
27.0130
27.8531050028
16.4531
16.4671
17.6138
16.8496050029
23.2911
25.1259
24.6839
24.3441050030
21.0096
20.9812
21.5621
21.1955050032
22.5868
25.2010
24.3598
24.0616050033
24.5609
24.9328
31.7747
27.1293050036
20.4703
21.2420
20.1678
20.6131( print page 22743)050038
27.8274
28.6528
29.9698
28.8293050039
22.2524
22.7117
22.5974
22.5195050040
30.6664
32.1287
30.4110
31.0613050042
22.2343
24.8067
24.5260
23.8317050043
33.2286
32.9958
33.8255
33.3456050045
20.7307
19.8831
21.1474
20.5973050046
31.3831
25.3185
25.2005
27.4555050047
29.4412
29.9255
29.9580
29.7840050051
17.8401
17.8945
18.7809
18.1179050054
19.3686
20.7212
22.0982
20.7075050055
29.0872
29.3984
29.2730
29.2593050056
23.8507
27.4321
23.8058
24.9609050057
21.7581
21.1554
20.7050
21.1842050058
25.7261
23.1641
23.3009
23.9601050060
20.9219
20.7747
20.5450
20.7207050061
23.7443
23.5454
24.5488
23.9503050063
23.0724
24.8851
25.7593
24.5061050065
21.1848
24.0420
24.3835
23.0762050066
21.4187
16.5725
16.1649
17.6784050067
21.3029
23.1966
25.8857
23.3989050068
28.4804
20.6851
19.3615
22.4409050069
29.2980
25.9420
24.6153
26.4351050070
32.5964
32.5166
33.0195
32.7172050071
33.1379
33.1850
33.3740
33.2367050072
32.9660
33.2858
38.5136
34.8941050073
34.6111
33.3922
31.4874
33.0669050075
33.5246
33.9095
32.6142
33.3899050076
33.8835
27.7797
32.7847
31.3195050077
23.2986
24.1019
24.2083
23.8775050078
22.8023
23.0736
24.3150
23.3638050079
34.4253
33.2432
30.0167
32.3461050082
21.7004
22.1009
23.7617
22.5498050084
23.0966
23.5866
25.4517
24.0054050088
24.0634
20.8406
24.9641
23.1779050089
20.0194
20.9117
21.9331
20.9434050090
23.8969
23.4097
23.9183
23.7390050091
22.2220
25.2792
23.7713
23.6457050092
15.3841
16.7969
17.1211
16.4241050093
24.0837
25.2130
25.6647
24.9860050095
33.3761
33.6718
32.5552
33.2492050096
21.6752
20.0487
22.7394
21.3870050097
22.6147
16.7054
22.5991
20.1968050099
24.2921
24.8091
23.5693
24.1958050100
30.0552
29.8758
25.0335
28.0584050101
30.0132
31.0264
31.8957
30.9871050102
21.2947
22.2937
24.0014
22.4745050103
25.3384
24.7932
25.4133
25.1832050104
25.4407
25.5797
26.8367
25.9399050107
21.7649
21.2690
22.2019
21.7497050108
25.2116
23.5564
25.1307
24.5504050109
26.4768
*
*
26.4768050110
20.1769
20.1870
19.9589
20.1175050111
21.7397
21.5487
20.7897
21.3840050112
26.2922
25.3015
26.8182
26.1335050113
27.7805
28.8420
28.5224
28.4025050114
25.9073
24.7286
26.6757
25.7599050115
21.0499
21.3291
23.0182
21.8124050116
25.5919
25.2130
24.9196
25.2412050117
20.4379
23.3612
22.2123
21.9903050118
23.9976
23.7698
23.7129
23.8243050121
18.8818
19.5252
18.4827
18.9563050122
*
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26.9546
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24.5069
23.3667( print page 22744)050125
24.0434
29.6147
32.0230
28.3742050126
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23.9247
24.6752
24.1448050127
19.7654
22.1937
20.9157
20.9577050128
24.1801
25.7240
26.6132
25.5185050129
27.1586
26.5030
23.0719
25.3795050131
29.0570
31.0732
32.5462
30.8106050132
22.9139
24.0834
24.0173
23.6527050133
24.4011
24.9746
23.2093
24.1354050135
27.0341
23.2361
24.7157
24.9796050136
24.4336
24.7921
24.4162
24.5396050137
30.0725
32.6507
31.5620
31.4326050138
37.4088
37.3286
40.3920
38.3945050139
31.3785
32.9351
30.3774
31.5037050140
33.6644
34.1499
31.6524
33.0748050144
25.7483
27.8751
27.4069
26.9409050145
33.0620
32.3857
34.5185
33.3152050148
21.0584
21.9211
20.0971
20.9748050149
23.3754
24.6078
26.8674
24.8666050150
23.4777
24.9073
24.6596
24.3771050152
27.7504
34.0766
33.3305
31.5833050153
29.5915
30.5714
32.3389
30.8441050155
22.9420
21.0257
25.3354
22.9852050158
27.9789
27.5623
28.6071
28.0313050159
25.2105
23.2912
22.5313
23.6099050167
21.6778
21.9128
21.8796
21.8226050168
25.2504
23.3511
25.1937
24.5830050169
24.6361
22.3888
24.8407
23.8796050170
22.1989
23.9574
24.3654
23.4164050172
17.6976
20.1841
19.6120
19.1630050173
23.3255
24.5545
24.8694
24.1923050174
31.2136
30.2140
30.1320
30.4943050175
27.7875
27.2806
24.7548
26.2477050177
20.2485
21.7943
21.1396
21.0728050179
19.2861
21.7175
23.8868
21.4573050180
32.1883
31.8947
33.3257
32.5107050183
19.9765
20.3638
*
20.1665050186
21.9062
22.4155
23.6288
22.6119050188
27.4364
28.0918
28.2364
27.9460050189
23.2415
22.8687
27.4071
24.6245050191
26.7297
20.8321
25.2399
24.1511050192
17.8095
18.6701
14.0828
16.5416050193
23.7260
22.6316
24.9444
23.7567050194
28.2701
29.7371
29.3310
29.0932050195
34.7789
35.5621
36.9068
35.7823050196
16.6866
18.5180
18.2411
17.8430050197
31.4513
35.7449
32.0779
32.9661050204
24.3944
23.6105
22.7099
23.5849050205
21.1545
23.6831
24.1691
23.0778050207
20.8576
21.6214
22.9941
21.8243050211
31.2175
31.6084
31.7280
31.5153050213
20.7338
21.4806
21.4438
21.1694050214
20.8704
21.7335
24.0276
22.1888050215
28.4058
29.8563
32.4402
30.1364050217
19.8913
19.6010
20.2042
19.9076050219
25.4730
21.7444
21.2458
22.6404050222
27.0713
27.4809
26.9958
27.1794050224
23.7942
23.5316
23.5101
23.6043050225
20.7978
23.3480
21.6206
21.8948050226
26.9297
27.7315
24.4443
26.2380050228
30.3772
34.0711
34.2596
32.7722050230
25.3640
27.7357
26.6291
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25.5798
26.1508
26.7319
26.1758050232
23.3849
24.3072
24.5245
24.0793( print page 22745)050233
31.3954
*
*
31.3954050234
*
*
28.5188
25.7035050235
25.8595
25.2527
27.0922
26.0726050236
26.2723
26.9803
25.9458
26.4027050238
24.0043
24.2922
24.5823
24.2994050239
20.4071
22.6625
21.9889
21.6674050240
25.2540
26.3657
26.7736
26.0561050241
27.2198
26.3740
29.8345
27.7426050242
30.1432
31.1576
31.9079
31.0590050243
22.9123
28.9635
26.4627
26.1049050245
24.3969
23.8124
23.2716
23.7873050248
27.4214
26.2015
27.6457
27.0910050251
18.4990
21.6574
23.6360
21.1907050253
20.0658
16.0701
16.7540
17.4281050254
19.6899
19.3126
20.1176
19.7146050256
23.5302
23.6887
23.4835
23.5723050257
19.5923
15.2306
15.0481
16.3402050260
23.5201
23.2421
27.4234
24.5032050261
20.4496
20.0552
20.1040
20.2029050262
29.0054
28.8785
29.5550
29.1532050264
29.4542
32.1312
36.0219
32.4654050267
24.7464
26.2264
26.0401
25.6690050270
23.7260
24.0439
25.3757
24.3521050272
21.4374
22.4247
23.1111
22.3118050274
21.1943
20.0422
*
20.6204050276
28.5051
29.8624
33.3302
30.5715050277
22.3125
20.0520
26.0822
22.5131050278
23.8434
24.7787
23.9289
24.1853050279
21.0570
20.8444
21.8949
21.2309050280
24.4267
25.2149
25.4011
25.0356050281
18.5907
19.6888
24.2251
20.7934050282
24.4593
28.8261
25.4428
26.2214050283
27.8763
29.7734
31.7669
30.1598050286
17.8045
16.5708
18.5915
17.4822050289
26.7185
34.1393
30.4750
30.2632050290
26.3745
28.6231
29.6796
28.2631050291
26.4908
30.2748
28.3483
28.3026050292
22.4878
21.6243
20.8410
21.6183050293
19.1761
22.2963
24.1875
21.4642050295
20.7393
21.2892
21.5335
21.1814050296
25.3166
27.2948
28.3906
27.0098050298
20.5181
24.4477
23.2006
22.6781050299
25.7697
26.4543
25.5035
25.9187050300
22.7423
23.5116
25.9228
24.1102050301
26.0355
22.5201
21.1403
23.0323050302
29.2007
*
*
29.2007050305
32.7082
34.5185
36.7908
34.7340050307
27.9830
17.2147
*
21.7503050308
28.4019
29.3803
28.9284
28.9113050309
24.4034
23.7884
25.3515
24.5133050310
20.6181
*
*
20.6181050312
23.7936
26.7617
26.0015
25.5439050313
23.1009
21.7577
25.6827
23.5594050315
21.9227
24.7086
22.7359
23.0264050317
19.4479
21.6937
*
20.5789050320
30.6054
30.4101
32.4809
31.1252050324
26.2735
26.6049
25.3694
26.0738050325
23.2355
24.4862
23.6327
23.7872050327
22.8511
23.9484
25.6450
24.1469050328
23.1889
*
*
23.1889050329
21.4125
19.7455
15.1669
18.2146050331
25.5252
22.2536
25.0230
24.1261050333
20.1468
19.4589
19.1449
19.5671( print page 22746)050334
32.0169
34.2330
34.2557
33.5307050335
20.2013
23.0258
22.9926
22.0827050336
20.0980
20.7979
21.3402
20.7523050342
19.3524
20.1841
20.8255
20.1210050343
17.3394
17.2085
*
17.2799050348
20.7505
23.8779
25.1085
23.3219050349
15.0515
14.9754
15.0667
15.0310050350
25.0676
24.8340
26.4161
25.4163050351
24.6936
25.4791
24.8121
24.9948050352
23.5927
26.1380
26.0974
25.3078050353
23.2468
23.0564
23.2699
23.1944050355
17.1597
17.2778
21.0969
18.0157050357
23.6411
22.6545
24.5345
23.6386050359
20.4005
17.7907
21.7548
19.8316050360
31.7608
31.3526
31.7583
31.6236050366
21.3442
23.7528
19.6823
21.4770050367
29.4763
28.2805
30.7328
29.5063050369
24.2604
27.0548
26.2234
25.8174050373
26.6548
26.9776
28.0655
27.2088050376
25.3036
26.5840
28.5679
26.7332050377
25.6401
17.1764
17.0012
20.1035050378
22.2363
25.9810
26.9101
24.8709050379
15.4994
15.2022
17.8958
16.1098050380
30.5790
31.4343
31.9578
31.3600050382
26.1465
26.1398
25.9244
26.0725050385
25.9188
24.6083
20.1687
23.1378050388
13.7863
19.1512
22.0122
17.5709050390
22.5668
25.0426
24.2700
23.9349050391
22.4881
18.9266
20.0615
20.3952050392
21.9324
21.6729
22.9430
22.1487050393
23.1387
25.6964
24.1981
24.3082050394
22.2424
23.0604
23.1526
22.8333050396
23.6322
24.0636
25.3729
24.3512050397
20.7698
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20.6397
20.5453050401
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18.9557050404
19.2754
17.3396
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17.4356050406
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17.3407050407
30.1222
29.9642
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30.2996050410
16.4735
17.6769
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17.8663050411
32.2364
34.8899
32.2157
33.0639050414
24.4243
24.2060
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33.4842050426
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24.5630
23.4427050433
16.8035
17.4643
18.9021
17.7004050434
15.6348
19.7591
*
17.6624050435
32.9865
25.6676
23.3426
26.8858050436
16.3594
14.8121
*
15.5729050438
24.0828
25.0138
22.5006
23.8790050440
21.1100
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22.6946
22.4056050441
28.7067
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24.6741
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22.3422
21.1378050447
18.4183
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17.6229
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18.1585
18.5890050457
31.2489
34.4949
32.1910
32.6376050459
37.0914
*
*
37.0914050464
22.3142
25.3292
25.7710
24.4665050468
23.1701
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22.8998050469
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17.0353
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24.2887
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22.4754
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23.2552050477
27.7855
27.9595
27.5819
27.7866050478
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24.5401
26.3306
24.6133050481
26.8293
28.9722
27.7973
27.8692050482
16.9268
18.1217
16.0114
17.0134050483
21.6038
22.7182
*
22.1632050485
23.1933
24.1983
24.6906
24.0174050486
24.4967
*
*
24.4967050488
32.8620
34.6939
31.7481
33.0979050491
25.1011
26.8703
27.4600
26.4606050492
21.4156
19.5457
20.5030
20.4277050494
25.4078
29.2621
29.1296
27.9125050496
33.0168
32.5168
34.9704
33.4862050497
*
13.8110
15.4115
14.5264050498
24.8445
24.9677
26.1716
25.3085050502
22.6253
22.3788
24.3517
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34.3138
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34.3098050515
35.0412
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32.6021
34.2147050516
25.1850
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20.3733
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21.1081050522
31.7326
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27.0845
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*
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*
*
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*
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*
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*
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*
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*
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*
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*
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*
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*
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*
*
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*
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16.4887
17.3945
18.0851
17.3336520054
15.9873
15.1747
16.6782
15.9073520057
18.3186
19.0872
19.6305
19.0102520058
18.1264
19.7283
21.2500
19.7133520059
19.8530
20.9913
21.5796
20.8254520060
17.1675
17.9258
18.7639
17.9403520062
17.8000
19.1482
19.7038
18.8681520063
20.7744
19.6136
20.5262
20.3055520064
21.4586
22.7423
22.0878
22.0905520066
22.4419
22.8837
23.9506
23.0411520068
18.0798
18.9943
19.6855
18.9053520069
17.9133
20.2934
20.1770
19.3716520070
17.8192
18.5938
19.2094
18.5389520071
18.7861
18.7304
19.1628
18.8949520074
18.6923
20.4601
20.9007
20.0036520075
19.0891
19.8457
20.5199
19.8188520076
16.5072
17.6088
19.5360
17.8404520077
15.5427
17.7830
18.7119
17.3266520078
20.5559
21.3380
20.5439
20.8226520082
16.7417
17.7405
*
17.1848520083
22.5715
23.8849
23.5787
23.3411( print page 22818)520084
18.9475
20.8427
23.3327
20.9981520087
19.3942
20.3624
20.6863
20.1537520088
20.1529
20.6312
21.8931
20.8632520089
20.6110
21.5456
22.1055
21.4053520090
18.0026
18.9343
19.8314
18.9411520091
20.0693
20.9927
20.9440
20.6686520092
17.5577
17.6500
18.6248
17.9402520094
19.7791
20.3611
20.6179
20.2438520095
18.5066
20.3269
18.6425
19.1370520096
19.2980
19.7757
20.6668
19.9365520097
19.6470
20.2354
20.8016
20.2268520098
20.0289
22.3348
23.4707
21.9054520100
18.3788
18.3832
19.4788
18.7419520101
17.8453
19.5186
19.9875
19.1542520102
19.8354
20.1898
21.0138
20.3351520103
21.2324
19.4809
20.0842
20.2050520107
20.5441
20.3747
21.7907
20.8828520109
18.6322
19.1303
19.7609
19.1753520110
20.0319
20.4494
21.0055
20.5065520111
17.2388
17.7834
17.7673
17.6163520112
18.1827
19.1797
18.5706
18.6454520113
20.5925
21.1485
21.8852
21.2341520114
17.3799
16.6616
17.8476
17.2735520115
17.3755
18.2980
19.2248
18.2555520116
18.5698
19.8509
20.6922
19.7165520117
17.4242
18.5414
18.3963
18.1365520118
12.4422
4.2326
14.8626
13.8369520120
15.6205
18.7437
*
17.3887520121
17.5851
19.7305
20.8492
19.5992520122
16.7552
16.2436
16.9335
16.6326520123
17.4135
17.3980
17.7986
17.5610520124
16.3902
17.2619
17.9205
17.1864520130
15.1639
15.6845
17.1679
16.0030520131
18.8043
18.7295
20.2591
19.2549520132
17.2759
15.6379
18.1630
16.9564520134
17.6094
18.0953
18.8150
18.1846520135
14.4748
15.8246
17.3476
15.9083520136
19.9935
19.8480
20.4404
20.0986520138
20.8922
21.2260
22.5103
21.5421520139
21.2797
20.9988
21.4042
21.2251520140
21.4175
21.5207
22.0849
21.6757520141
16.9543
*
*
16.9543520142
17.7003
20.5858
21.9432
19.9586520144
16.6231
18.5701
19.9120
18.4107520145
17.2356
18.2654
18.7958
18.1015520146
15.7318
17.9585
18.2370
17.3448520148
16.9293
17.2421
19.1502
17.8057520149
13.3032
14.1901
12.8928
13.4360520151
18.0771
17.3267
18.7070
18.0230520152
21.3333
19.5858
22.5980
21.0747520153
15.4467
15.9753
17.0863
16.1441520154
17.9229
18.5403
19.5994
18.6875520156
19.8396
21.3377
20.9638
20.7243520157
17.2784
17.1974
19.6008
18.0185520159
18.7423
18.6760
17.7649
18.3871520160
18.8444
19.4173
20.1406
19.4824520161
18.5742
19.4905
18.7197
18.9334520170
22.5033
21.5233
21.0637
21.6831520171
15.7316
17.4560
18.0785
17.1053520173
20.1410
21.3016
20.5744
20.6635520177
21.7609
22.7221
22.9673
22.4954520178
17.0411
18.6936
20.9010
18.7748520188
*
13.9135
*
13.9135( print page 22819)530002
17.5888
19.3273
21.1066
19.4048530003
15.7813
16.2139
15.9523
15.9820530004
16.1862
15.0497
13.3788
14.7758530005
15.1487
13.3529
15.3255
14.5529530006
19.3403
18.5894
19.1305
19.0082530007
18.0601
18.5161
17.7897
18.1450530008
22.9625
18.8349
19.0113
20.0471530009
19.4478
22.5009
21.7795
21.2113530010
18.9317
21.6092
14.1699
17.7467530011
17.4412
18.7354
19.4606
18.5542530012
19.4829
18.9923
21.1854
19.8564530014
17.3158
18.0869
18.5571
17.9899530015
22.6465
22.4568
23.4040
22.8118530016
17.7084
18.1562
19.3205
18.4153530017
13.7131
16.3478
17.7736
15.9421530018
17.8699
18.3783
19.5986
18.6254530019
16.7630
18.5430
20.1097
18.3351530022
17.8781
18.5002
19.6136
18.7082530023
20.7527
20.1948
20.0677
20.3449530025
20.3200
21.2598
22.0300
21.1974530026
18.9175
17.0118
19.8969
18.4992530027
29.7722
18.1664
25.5067
22.9705530029
17.7993
16.5092
19.3361
17.7626530031
13.3775
18.3322
20.1734
17.2600530032
20.2143
21.0361
20.0132
20.4281* Wage data not available for the provider that year.** For Federal Fiscal Year 2002 only, the average hourly wage is based upon data on file as of February 15, 2001. It does not reflect changes processed after that date.*** The 3-year average hourly wage is weighted by salaries and hours.
 Table 3A.—3-Year Average Hourly Wage for Urban Areas
[Based on salaries and hours computed for Federal fiscal years 2000, 2001, and 2002]
Urban area
Average hourly wageAbilene, TX
17.6806Aguadilla, PR
9.2769Akron, OH
21.5297Albany, GA
22.3923Albany-Schenectady-Troy, NY
18.7002Albuquerque, NM
19.8373Alexandria, LA
17.4211Allentown-Bethlehem-Easton, PA
21.3670Altoona, PA
20.1636Amarillo, TX
18.6302Anchorage, AK
27.5223Ann Arbor, MI
24.5218Anniston, AL
18.1347Appleton-Oshkosh-Neenah, WI
19.6303Arecibo, PR
10.1229Asheville, NC
19.9864Athens, GA
21.2433Atlanta, GA
21.9106Atlantic-Cape May, NJ
24.4342Auburn-Opelika, AL
17.4403Augusta-Aiken, GA-SC
20.3525Austin-San Marcos, TX
20.2151Bakersfield, CA
20.7098Baltimore, MD
20.9279Bangor, ME
20.7547Barnstable-Yarmouth, MA
29.3802Baton Rouge, LA
18.6271Beaumont-Port Arthur, TX
18.6898Bellingham, WA
25.1714Benton Harbor, MI
18.7937Bergen-Passaic, NJ
25.5796Billings, MT
21.1153Biloxi-Gulfport-Pascagoula, MS
17.8351Binghamton, NY
18.8043Birmingham, AL
18.8368Bismarck, ND
16.8910Bloomington, IN
18.7924Bloomington-Normal, IL
19.1663Boise City, ID
19.6729Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH
24.5501Boulder-Longmont, CO
21.3227Brazoria, TX
18.3793Bremerton, WA
23.7403Brownsville-Harlingen-San Benito, TX
19.2833Bryan-College Station, TX
18.7394Buffalo-Niagara Falls, NY
20.6480Burlington, VT
22.4607Caguas, PR
10.2778Canton-Massillon, OH
19.0700Casper, WY
19.8564Cedar Rapids, IA
19.1268Champaign-Urbana, IL
19.9316Charleston-North Charleston, SC
19.7508Charleston, WV
20.0108Charlotte-Gastonia-Rock Hill, NC-SC
20.3826Charlottesville, VA
23.1481Chattanooga, TN-GA
20.9509Cheyenne, WY
17.9899Chicago, IL
23.8495Chico-Paradise, CA
21.8173Cincinnati, OH-KY-IN
20.5080Clarksville-Hopkinsville, TN-KY
17.8563Cleveland-Lorain-Elyria, OH
20.7803Colorado Springs, CO
20.7284Columbia, MO
19.2453Columbia, SC
20.5806Columbus, GA-AL
18.4599Columbus, OH
21.1200Corpus Christi, TX
18.5130Corvallis, OR
24.7413Cumberland, MD-WV
18.4566Dallas, TX
20.9635Danville, VA
18.9744Davenport-Moline-Rock Island, IA-IL
19.0733( print page 22820)Dayton-Springfield, OH
20.3789Daytona Beach, FL
19.7030Decatur, AL
18.8129Decatur, IL
17.6940Denver, CO
22.1471Des Moines, IA
19.3257Detroit, MI
22.6805Dothan, AL
17.1181Dover, DE
21.6106Dubuque, IA
18.6795Duluth-Superior, MN-WI
22.1000Dutchess County, NY
22.7121Eau Claire, WI
19.2432El Paso, TX
19.8290Elkhart-Goshen, IN
20.3382Elmira, NY
18.4943Enid, OK
18.0515Erie, PA
19.4310Eugene-Springfield, OR
23.8559Evansville, Henderson, IN-KY
17.5189Fargo-Moorhead, ND-MN
19.3632Fayetteville, NC
19.0183Fayetteville-Springdale-Rogers, AR
16.7888Flagstaff, AZ-UT
22.9479Flint, MI
23.9198Florence, AL
16.9094Florence, SC
18.9644Fort Collins-Loveland, CO
22.4773Fort Lauderdale, FL
22.1771Fort Myers-Cape Coral, FL
19.9058Fort Pierce-Port St. Lucie, FL
21.3915Fort Smith, AR-OK
17.3369Fort Walton Beach, FL
19.5052Fort Wayne, IN
19.4642Fort Worth-Arlington, TX
20.8053Fresno, CA
21.9101Gadsden, AL
18.7282Gainesville, FL
23.1249Galveston-Texas City, TX
21.5574Gary, IN
20.5266Glens Falls, NY
18.3428Goldsboro, NC
18.4900Grand Forks, ND-MN
19.5346Grand Junction, CO
20.1153Grand Rapids-Muskegon-Holland, MI
22.0624Great Falls, MT
20.7979Greeley, CO
21.0411Green Bay, WI
19.9641Greensboro-Winston-Salem-High Point, NC
20.0548Greenville, NC
20.8376Greenville-Spartanburg-Anderson, SC
19.7086Hagerstown, MD
19.2372Hamilton-Middletown, OH
19.7210Harrisburg-Lebanon-Carlisle, PA
20.6541Hartford, CT
24.9991Hattiesburg, MS
16.3812Hickory-Morganton-Lenoir, NC
19.9779Honolulu, HI
25.2556Houma, LA
17.3111Houston, TX
20.7505Huntington-Ashland, WV-KY-OH
21.1928Huntsville, AL
19.2325Indianapolis, IN
21.1949Iowa City, IA
21.1012Jackson, MI
19.7797Jackson, MS
18.6455Jackson, TN
19.1864Jacksonville, FL
19.6584Jacksonville, NC
16.8680Jamestown, NY
17.1876Janesville-Beloit, WI
20.9802Jersey City, NJ
24.8343Johnson City-Kingsport-Bristol, TN-VA
18.5293Johnstown, PA
19.0781Jonesboro, AR
16.9923Joplin, MO
17.7354Kalamazoo-Battlecreek, MI
22.4822Kankakee, IL
20.0356Kansas City, KS-MO
20.4279Kenosha, WI
20.4490Killeen-Temple, TX
19.9750Knoxville, TN
19.0855Kokomo, IN
19.9881La Crosse, WI-MN
19.8516Lafayette, LA
18.3710Lafayette, IN
19.3581Lake Charles, LA
16.7150Lakeland-Winter Haven, FL
19.6666Lancaster, PA
20.1757Lansing-East Lansing, MI
21.3476Laredo, TX
17.5925Las Cruces, NM
18.7690Las Vegas, NV-AZ
24.0639Lawrence, KS
18.1884Lawton, OK
19.7127Lewiston-Auburn, ME
19.7957Lexington, KY
18.9597Lima, OH
20.0697Lincoln, NE
21.3984Little Rock-North Little Rock, AR
19.2004Longview-Marshall, TX
18.7809Los Angeles-Long Beach, CA
26.0786Louisville, KY-IN
20.4511Lubbock, TX
18.6166Lynchburg, VA
19.4241Macon, GA
19.2084Madison, WI
21.9843Mansfield, OH
18.7455Mayaguez, PR
10.2295McAllen-Edinburg-Mission, TX
18.1641Medford-Ashland, OR
22.6022Melbourne-Titusville-Palm Bay, FL
20.8444Memphis, TN-AR-MS
19.0229Merced, CA
21.5061Miami, FL
21.8283Middlesex-Somerset-Hunterdon, NJ
24.6509Milwaukee-Waukesha, WI
21.3110Minneapolis-St. Paul, MN-WI
23.8021Missoula, MT
20.0852Mobile, AL
17.4552Modesto, CA
22.6578Monmouth-Ocean, NJ
24.1662Monroe, LA
18.0030Montgomery, AL
16.5093Muncie, IN
22.6571Myrtle Beach, SC
18.6825Naples, FL
20.9923Nashville, TN
20.6183Nassau-Suffolk, NY
30.2198New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT
26.6547New London-Norwich, CT
26.0295New Orleans, LA
19.8085New York, NY
31.0941Newark, NJ
25.6043Newburgh, NY-PA
23.8506Norfolk-Virginia Beach-Newport News, VA-NC
18.4034Oakland, CA
32.8350Ocala, FL
20.5545Odessa-Midland, TX
19.5695Oklahoma City, OK
18.8746Olympia, WA
23.8947Omaha, NE-IA
21.4322Orange County, CA
24.7717Orlando, FL
20.8479Owensboro, KY
17.7880Panama City, FL
19.7652Parkersburg-Marietta, WV-OH
17.9669Pensacola, FL
18.0417Peoria-Pekin, IL
18.6783Philadelphia, PA-NJ
23.6329Phoenix-Mesa, AZ
20.7971Pine Bluff, AR
16.8497Pittsburgh, PA
20.9887Pittsfield, MA
22.3291Pocatello, ID
19.9570Ponce, PR
11.0089Portland, ME
20.7444Portland-Vancouver, OR-WA
23.9502Providence-Warwick, RI
23.3619Provo-Orem, UT
21.5657Pueblo, CO
19.0481Punta Gorda, FL
20.1726Racine, WI
20.1696Raleigh-Durham-Chapel Hill, NC
21.0052Rapid City, SD
18.9541Reading, PA
17.8899Redding, CA
24.6813Reno, NV
22.8615Richland-Kennewick-Pasco, WA
24.4034Richmond-Petersburg, VA
20.8459Riverside-San Bernardino, CA
24.1711Roanoke, VA
18.3527Rochester, MN
24.8162Rochester, NY
19.9290Rockford, IL
19.3616Rocky Mount, NC
19.3552Sacramento, CA
26.0254Saginaw-Bay City-Midland, MI
20.6078St. Cloud, MN
21.3050St. Joseph, MO
19.6144St. Louis, MO-IL
19.5920Salem, OR
21.8859Salinas, CA
31.8419Salt Lake City-Ogden, UT
21.4139San Angelo, TX
17.4362San Antonio, TX
18.2088San Diego, CA
25.4124San Francisco, CA
30.6978San Jose, CA
29.9903San Juan-Bayamon, PR
10.2202( print page 22821)San Luis Obispo-Atascadero-Paso Robles, CA
23.3041Santa Barbara-Santa Maria-Lompoc, CA
23.3594Santa Cruz-Watsonville, CA
30.3548Santa Fe, NM
22.5866Santa Rosa, CA
27.7113Sarasota-Bradenton, FL
21.5493Savannah, GA
20.9278Scranton-Wilkes Barre-Hazleton, PA
17.9530Seattle-Bellevue-Everett, WA
24.0679Sharon, PA
17.4923Sheboygan, WI
18.1442Sherman-Denison, TX
19.5991Shreveport-Bossier City, LA
19.4652Sioux City, IA-NE
18.6963Sioux Falls, SD
19.3356South Bend, IN
21.7219Spokane, WA
23.1813Springfield, IL
18.6860Springfield, MO
18.1563Springfield, MA
23.1451State College, PA
19.7984Steubenville-Weirton, OH-WV
18.6797Stockton-Lodi, CA
23.2294Sumter, SC
17.6174Syracuse, NY
20.3619Tacoma, WA
25.1530Tallahassee, FL
18.3753Tampa-St. Petersburg-Clearwater, FL
19.5103Terre Haute, IN
18.3195Texarkana, AR-Texarkana, TX
17.9743Toledo, OH
21.2747Topeka, KS
19.8271Trenton, NJ
21.9528Tucson, AZ
19.1755Tulsa, OK
18.4006Tuscaloosa, AL
17.6510Tyler, TX
20.1434Utica-Rome, NY
18.2674Vallejo-Fairfield-Napa, CA
28.6820Ventura, CA
24.2443Victoria, TX
17.9789Vineland-Millville-Bridgeton, NJ
22.7446Visalia-Tulare-Porterville, CA
21.3962Waco, TX
17.7862Washington, DC-MD-VA-WV
23.8268Waterloo-Cedar Falls, IA
18.0820Wausau, WI
20.4556West Palm Beach-Boca Raton, FL
21.2892Wheeling, OH-WV
16.9419Wichita, KS
20.5727Wichita Falls, TX
16.8194Williamsport, PA
18.2904Wilmington-Newark, DE-MD
23.9928Wilmington, NC
20.9815Yakima, WA
22.3174Yolo, CA
21.5151York, PA
18.9397Youngstown-Warren, OH
20.9566Yuba City, CA
23.0076Yuma, AZ
20.4298
 Table 3B.—3-Year Average Hourly Wage for Rural Areas
[Based on salaries and hours computed for Federal fiscal years 2000, 2001, and 2002]
Nonurban area
Average hourly wageAlabama
16.1119Alaska
26.3477Arizona
18.5108Arkansas
16.0724California
21.4448Colorado
19.2806Connecticut
26.3210Delaware
20.0732Florida
19.2209Georgia
17.8809Hawaii
23.8315Idaho
18.9021Illinois
17.5886Indiana
18.6071Iowa
17.4515Kansas
16.5492Kentucky
17.3334Louisiana
16.4052Maine
18.8730Maryland
18.9527Massachusetts
24.6681Michigan
19.4455Minnesota
19.2586Mississippi
16.1955Missouri
16.7949Montana
18.5783Nebraska
17.6014Nevada
20.3129New Hampshire
21.4174New Jersey 1New Mexico
18.5917New York
18.5351North Carolina
18.3321North Dakota
16.8478Ohio
18.8435Oklahoma
16.1793Oregon
21.7904Pennsylvania
18.4680Puerto Rico
9.5092Rhode Island 1South Carolina
18.2462South Dakota
16.6515Tennessee
16.8980Texas
16.3672Utah
19.5943Vermont
20.4055Virginia
17.7547Washington
22.5228West Virginia
17.6572Wisconsin
19.3313Wyoming
19.16751
                             All counties within the State are classified as urban.
 Table 4A.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas
Urban area 
                                 (Constituent counties)
Wage 
                                 index
GAF0040 Abilene, TX
0.8118
0.8669Taylor, TX0060 Aguadilla, PR
0.4738
0.5996Aguada, PRAguadilla, PRMoca, PR0080 Akron, OH
0.9924
0.9948Portage, OHSummit, OH0120 Albany, GA
1.0675
1.0457Dougherty, GALee, GA0160 Albany-Schenectady-Troy, NY
0.8597
0.9017Albany, NYMontgomery, NYRensselaer, NYSaratoga, NYSchenectady, NYSchoharie, NY0200 Albuquerque, NM
0.9855
0.9900Bernalillo, NMSandoval, NMValencia, NM0220 Alexandria, LA
0.8137
0.8683Rapides, LA0240 Allentown-Bethlehem-Easton, PA
0.9443
0.9615Carbon, PALehigh, PANorthampton, PA0280 Altoona, PA
0.9225
0.9463Blair, PA0320 Amarillo, TX
0.8706
0.9095Potter, TXRandall, TX0380 Anchorage, AK
1.2605
1.1718Anchorage, AK0440 Ann Arbor, MI
1.1220
1.0820Lenawee, MILivingston, MIWashtenaw, MI0450 Anniston, AL
0.8360
0.8846Calhoun, AL0460 Appleton-Oshkosh-Neenah, WI
0.9203
0.9447Calumet, WIOutagamie, WIWinnebago, WI0470 Arecibo, PR
0.4683
0.5948Arecibo, PRCamuy, PRHatillo, PR0480 Asheville, NC
0.9307
0.9520Buncombe, NCMadison, NC0500 Athens, GA
0.9956
0.9970Clarke, GAMadison, GAOconee, GA0520 1
                                 Atlanta, GA
1.0176
1.0120Barrow, GABartow, GACarroll, GACherokee, GAClayton, GACobb, GACoweta, GADeKalb, GADouglas, GAFayette, GA( print page 22822)Forsyth, GAFulton, GAGwinnett, GAHenry, GANewton, GAPaulding, GAPickens, GARockdale, GASpalding, GAWalton, GA0560 Atlantic-Cape May, NJ
1.1349
1.0905Atlantic, NJCape May, NJ0580 Auburn-Opelika, AL
0.8325
0.8820Lee, AL0600 Augusta-Aiken, GA-SC
1.0090
1.0062Columbia, GAMcDuffie, GARichmond, GAAiken, SCEdgefield, SC0640 1
                                 Austin-San Marcos, TX
0.9327
0.9534Bastrop, TXCaldwell, TXHays, TXTravis, TXWilliamson, TX0680 2
                                 Bakersfield, CA
0.9870
0.9911Kern, CA0720 1
                                 Baltimore, MD
0.9723
0.9809Anne Arundel, MDBaltimore, MDBaltimore City, MDCarroll, MDHarford, MDHoward, MDQueen Anne's, MD0733 Bangor, ME
0.9559
0.9696Penobscot, ME0743 Barnstable-Yarmouth, MA
1.3539
1.2306Barnstable, MA0760 Baton Rouge, LA
0.8258
0.8772Ascension, LAEast Baton Rouge, LALivingston, LAWest Baton Rouge, LA0840 Beaumont-Port Arthur, TX
0.8508
0.8953Hardin, TXJefferson, TXOrange, TX0860 Bellingham, WA
1.1963
1.1306Whatcom, WA0870 2
                                 Benton Harbor, MI
0.9115
0.9385Berrien, MI0875 1
                                 Bergen-Passaic, NJ
1.1669
1.1115Bergen, NJPassaic, NJ0880 Billings, MT
0.9623
0.9740Yellowstone, MT0920 Biloxi-Gulfport-Pascagoula, MS
0.8538
0.8974Hancock, MSHarrison, MSJackson, MS0960 Binghamton, NY
0.8595
0.9015Broome, NYTioga, NY1000 Birmingham, AL
0.8648
0.9053Blount, ALJefferson, ALSt. Clair, ALShelby, AL1010 2
                                 Bismarck, ND
0.7965
0.8557Burleigh, NDMorton, ND1020 2
                                 Bloomington, IN
0.8757
0.9131Monroe, IN1040 Bloomington-Normal, IL
0.8545
0.8979McLean, IL1080 Boise City, ID
0.9190
0.9438Ada, IDCanyon, ID1123 1,
                                 2
                                 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH (MA Hospitals)
1.1586
1.1061Bristol, MAEssex, MAMiddlesex, MANorfolk, MAPlymouth, MASuffolk, MAWorcester, MAHillsborough, NHMerrimack, NHRockingham, NHStrafford, NH1123 1
                                 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH (NH Hospitals)
1.1483
1.0993Bristol, MAEssex, MAMiddlesex, MANorfolk, MAPlymouth, MASuffolk, MAWorcester, MAHillsborough, NHMerrimack, NHRockingham, NHStrafford, NH1125 Boulder-Longmont, CO
0.9836
0.9887Boulder, CO1145 Brazoria, TX
0.8299
0.8801Brazoria, TX1150 Bremerton, WA
1.0882
1.0596Kitsap, WA1240 Brownsville-Harlingen-San Benito, TX
0.8783
0.9150Cameron, TX1260 Bryan-College Station, TX
0.9296
0.9512Brazos, TX1280 1
                                 Buffalo-Niagara Falls, NY
0.9405
0.9589Erie, NYNiagara, NY1303 Burlington, VT
0.9826
0.9881Chittenden, VTFranklin, VTGrand Isle, VT1310 Caguas, PR
0.5158
0.6355Caguas, PRCayey, PRCidra, PRGurabo, PRSan Lorenzo, PR1320 Canton-Massillon, OH
0.9059
0.9346Carroll, OHStark, OH1350 Casper, WY
0.9606
0.9728Natrona, WY1360 Cedar Rapids, IA
0.8711
0.9098Linn, IA1400 Champaign-Urbana, IL
0.9264
0.9490Champaign, IL1440 Charleston-North Charleston, SC
0.9293
0.9510Berkeley, SCCharleston, SCDorchester, SC1480 Charleston, WV
0.9369
0.9563Kanawha, WVPutnam, WV1520 1
                                 Charlotte-Gastonia-Rock Hill, NC-SC
0.9469
0.9633Cabarrus, NCGaston, NCLincoln, NCMecklenburg, NCRowan, NCStanly, NCUnion, NCYork, SC1540 Charlottesville, VA
1.0688
1.0466Albemarle, VACharlottesville City, VAFluvanna, VAGreene, VA1560 Chattanooga, TN-GA
0.9446
0.9617Catoosa, GADade, GAWalker, GAHamilton, TNMarion, TN1580 2
                                 Cheyenne, WY
0.8855
0.9201Laramie, WY1600 1
                                 Chicago, IL
1.1011
1.0682Cook, ILDeKalb, ILDuPage, IL( print page 22823)Grundy, ILKane, ILKendall, ILLake, ILMcHenry, ILWill, IL1620 Chico-Paradise, CA
0.9909
0.9938Butte, CA1640 1
                                 Cincinnati, OH-KY-IN
0.9574
0.9706Dearborn, INOhio, INBoone, KYCampbell, KYGallatin, KYGrant, KYKenton, KYPendleton, KYBrown, OHClermont, OHHamilton, OHWarren, OH1660 Clarksville-Hopkinsville, TN-KY
0.8481
0.8933Christian, KYMontgomery, TN1680 1
                                 Cleveland-Lorain-Elyria, OH
0.9496
0.9652Ashtabula, OHCuyahoga, OHGeauga, OHLake, OHLorain, OHMedina, OH1720 Colorado Springs, CO
0.9754
0.9831El Paso, CO1740 Columbia, MO
0.8787
0.9153Boone, MO1760 Columbia, SC
0.9589
0.9717Lexington, SCRichland, SC1800 Columbus, GA-AL
0.8471
0.8926Russell, ALChattahoochee, GAHarris, GAMuscogee, GA1840 1
                                 Columbus, OH
0.9724
0.9810Delaware, OHFairfield, OHFranklin, OHLicking, OHMadison, OHPickaway, OH1880 Corpus Christi, TX
0.8203
0.8731Nueces, TXSan Patricio, TX1890 Corvallis, OR
1.1781
1.1188Benton, OR1900 2
                                 Cumberland, MD-WV (MD Hospitals)
0.8962
0.9277Allegany, MDMineral, WV1900 Cumberland, MD-WV (WV Hospital)
0.8402
0.8876Allegany, MDMineral, WV1920 1
                                 Dallas, TX
0.9506
0.9659Collin, TXDallas, TXDenton, TXEllis, TXHenderson, TXHunt, TXKaufman, TXRockwall, TX1950 Danville, VA
0.8641
0.9048Danville City, VAPittsylvania, VA1960 Davenport-Moline-Rock Island, IA-IL
0.8790
0.9155Scott, IAHenry, ILRock Island, IL2000 Dayton-Springfield, OH
0.9323
0.9531Clark, OHGreene, OHMiami, OHMontgomery, OH2020 Daytona Beach, FL
0.9069
0.9353Flagler, FLVolusia, FL2030 Decatur, AL
0.8817
0.9174Lawrence, ALMorgan, AL2040 2
                                 Decatur, IL
0.8140
0.8686Macon, IL2080 1
                                 Denver, CO
1.0289
1.0197Adams, COArapahoe, CODenver, CODouglas, COJefferson, CO2120 Des Moines, IA
0.8881
0.9219Dallas, IAPolk, IAWarren, IA2160 1
                                 Detroit, MI
1.0478
1.0325Lapeer, MIMacomb, MIMonroe, MIOakland, MISt. Clair, MIWayne, MI2180 Dothan, AL
0.8005
0.8587Dale, ALHouston, AL2190 Dover, DE
1.0453
1.0308Kent, DE2200 Dubuque, IA
0.8617
0.9031Dubuque, IA2240 Duluth-Superior, MN-WI
1.0401
1.0273St. Louis, MNDouglas, WI2281 Dutchess County, NY
1.0639
1.0433Dutchess, NY2290 2
                                 Eau Claire, WI
0.9121
0.9389Chippewa, WIEau Claire, WI2320 El Paso, TX
0.9162
0.9418El Paso, TX2330 Elkhart-Goshen, IN
0.9646
0.9756Elkhart, IN2335 Elmira, NY
0.8530
0.8968Chemung, NY2340 Enid, OK
0.8454
0.8914Garfield, OK2360 Erie, PA
0.8911
0.9241Erie, PA2400 Eugene-Springfield, OR
1.1485
1.0995Lane, OR2440 2
                                 Evansville-Henderson, IN-KY (IN Hospitals)
0.8757
0.9131Posey, INVanderburgh, INWarrick, INHenderson, KY2440 2
                                 Evansville-Henderson, IN-KY (KY Hospitals)
0.8019
0.8597Posey, INVanderburgh, INWarrick, INHenderson, KY2520 Fargo-Moorhead, ND-MN
0.9374
0.9567Clay, MNCass, ND2560 Fayetteville, NC
0.9132
0.9397Cumberland, NC2580 Fayetteville-Springdale-Rogers, AR
0.7587
0.8277Benton, ARWashington, AR2620 Flagstaff, AZ-UT
1.0678
1.0459Coconino, AZKane, UT2640 Flint, MI
1.0920
1.0621Genesee, MI2650 Florence, AL
0.7927
0.8529Colbert, ALLauderdale, AL2655 Florence, SC
0.8843
0.9192Florence, SC2670 Fort Collins-Loveland, CO
1.0161
1.0110Larimer, CO2680 1
                                 Ft. Lauderdale, FL
1.0906
1.0612Broward, FL2700 Fort Myers-Cape Coral, FL
0.9380
0.9571Lee, FL2710 Fort Pierce-Port St. Lucie, FL
1.0067
1.0046Martin, FLSt. Lucie, FL2720 Fort Smith, AR-OK
0.8076
0.8639( print page 22824)Crawford, ARSebastian, ARSequoyah, OK2750 2
                                 Fort Walton Beach, FL
0.8733
0.9114Okaloosa, FL2760 Fort Wayne, IN
0.9186
0.9435Adams, INAllen, INDe Kalb, INHuntington, INWells, INWhitley, IN2800 1
                                 Forth Worth-Arlington, TX
0.9452
0.9621Hood, TXJohnson, TXParker, TXTarrant, TX2840 Fresno, CA
0.9972
0.9981Fresno, CAMadera, CA2880 Gadsden, AL
0.8845
0.9194Etowah, AL2900 Gainesville, FL
1.2133
1.1416Alachua, FL2920 Galveston-Texas City, TX
1.0271
1.0185Galveston, TX2960 Gary, IN
0.9571
0.9704Lake, INPorter, IN2975 2
                                 Glens Falls, NY
0.8530
0.8968Warren, NYWashington, NY2980 Goldsboro, NC
0.8810
0.9169Wayne, NC2985 Grand Forks, ND-MN
0.9173
0.9426Polk, MNGrand Forks, ND2995 Grand Junction, CO
0.9816
0.9874Mesa, CO3000 1
                                 Grand Rapids-Muskegon-Holland, MI
1.0161
1.0110Allegan, MIKent, MIMuskegon, MIOttawa, MI3040 Great Falls, MT
0.9301
0.9516Cascade, MT3060 Greeley, CO
0.9604
0.9727Weld, CO3080 Green Bay, WI
0.9440
0.9613Brown, WI3120 1
                                 Greensboro-Winston-Salem-High Point, NC
0.9616
0.9735Alamance, NCDavidson, NCDavie, NCForsyth, NCGuilford, NCRandolph, NCStokes, NCYadkin, NC3150 Greenville, NC
0.9963
0.9975Pitt, NC3160 Greenville-Spartanburg-Anderson, SC
0.9110
0.9382Anderson, SCCherokee, SCGreenville, SCPickens, SCSpartanburg, SC3180 2
                                 Hagerstown, MD
0.8962
0.9277Washington, MD3200 Hamilton-Middletown, OH
0.9269
0.9493Butler, OH3240 Harrisburg-Lebanon-Carlisle, PA
0.9311
0.9523Cumberland, PADauphin, PALebanon, PAPerry, PA3283 1,
                                 2
                                 Hartford, CT
1.2357
1.1560Hartford, CTLitchfield, CTMiddlesex, CTTolland, CT3285 2
                                 Hattiesburg, MS
0.7612
0.8296Forrest, MSLamar, MS3290 Hickory-Morganton-Lenoir, NC
0.9517
0.9667Alexander, NCBurke, NCCaldwell, NCCatawba, NC3320 Honolulu, HI
1.1658
1.1108Honolulu, HI3350 Houma, LA
0.8043
0.8615Lafourche, LATerrebonne, LA3360 1
                                 Houston, TX
0.9604
0.9727Chambers, TXFort Bend, TXHarris, TXLiberty, TXMontgomery, TXWaller, TX3400 Huntington-Ashland, WV-KY-OH
0.9700
0.9794Boyd, KYCarter, KYGreenup, KYLawrence, OHCabell, WVWayne, WV3440 Huntsville, AL
0.8854
0.9200Limestone, ALMadison, AL3480 1
                                 Indianapolis, IN
0.9771
0.9843Boone, INHamilton, INHancock, INHendricks, INJohnson, INMadison, INMarion, INMorgan, INShelby, IN3500 Iowa City, IA
0.9973
0.9982Johnson, IA3520 Jackson, MI
0.9387
0.9576Jackson, MI3560 Jackson, MS
0.8589
0.9011Hinds, MSMadison, MSRankin, MS3580 Jackson, TN
0.9117
0.9387Madison, TNChester, TN3600 1
                                 Jacksonville, FL
0.9040
0.9332Clay, FLDuval, FLNassau, FLSt. Johns, FL3605 2
                                 Jacksonville, NC
0.8632
0.9042Onslow, NC3610 2
                                 Jamestown, NY
0.8530
0.8968Chautauqua, NY3620 Janesville-Beloit, WI
0.9840
0.9890Rock, WI3640 Jersey City, NJ
1.1216
1.0818Hudson, NJ3660 Johnson City-Kingsport-Bristol, TN-VA
0.8540
0.8976Carter, TNHawkins, TNSullivan, TNUnicoi, TNWashington, TNBristol City, VAScott, VAWashington, VA3680 Johnstown, PA
0.8959
0.9275Cambria, PASomerset, PA3700 Jonesboro, AR
0.8523
0.8963Craighead, AR3710 Joplin, MO
0.8736
0.9116Jasper, MONewton, MO3720 Kalamazoo-Battlecreek, MI
1.0696
1.0472Calhoun, MIKalamazoo, MIVan Buren, MI3740 Kankakee, IL
0.9268
0.9493Kankakee, IL3760 1
                                 Kansas City, KS-MO
0.9430
0.9606Johnson, KSLeavenworth, KSMiami, KSWyandotte, KSCass, MOClay, MOClinton, MOJackson, MO( print page 22825)Lafayette, MOPlatte, MORay, MO3800 Kenosha, WI
0.9678
0.9778Kenosha, WI3810 2
                                 Killeen-Temple, TX
0.7673
0.8341Bell, TXCoryell, TX3840 Knoxville, TN
0.8904
0.9236Anderson, TNBlount, TNKnox, TNLoudon, TNSevier, TNUnion, TN3850 Kokomo, IN
0.9290
0.9508Howard, INTipton, IN3870 La Crosse, WI-MN
0.9328
0.9535Houston, MNLa Crosse, WI3880 Lafayette, LA
0.8600
0.9019Acadia, LALafayette, LASt. Landry, LASt. Martin, LA3920 Lafayette, IN
0.9165
0.9420Clinton, INTippecanoe, IN3960 Lake Charles, LA
0.7810
0.8443Calcasieu, LA3980 Lakeland-Winter Haven, FL
0.9167
0.9422Polk, FL4000 Lancaster, PA
0.9413
0.9594Lancaster, PA4040 Lansing-East Lansing, MI
0.9653
0.9761Clinton, MIEaton, MIIngham, MI4080 Laredo, TX
0.7877
0.8492Webb, TX4100 2
                                 Las Cruces, NM
0.8835
0.9187Dona Ana, NM4120 1
                                 Las Vegas, NV-AZ
1.1238
1.0832Mohave, AZClark, NVNye, NV4150 Lawrence, KS
0.8756
0.9130Douglas, KS4200 Lawton, OK
0.8783
0.9150Comanche, OK4243 Lewiston-Auburn, ME
0.9451
0.9621Androscoggin, ME4280 Lexington, KY
0.8850
0.9197Bourbon, KYClark, KYFayette, KYJessamine, KYMadison, KYScott, KYWoodford, KY4320 Lima, OH
0.9558
0.9695Allen, OHAuglaize, OH4360 Lincoln, NE
1.0272
1.0185Lancaster, NE4400 Little Rock-North Little Rock, AR
0.9053
0.9341Faulkner, ARLonoke, ARPulaski, ARSaline, AR4420 Longview-Marshall, TX
0.8439
0.8903Gregg, TXHarrison, TXUpshur, TX4480 1
                                 Los Angeles-Long Beach, CA
1.2071
1.1376Los Angeles, CA4520 1
                                 Louisville, KY-IN
0.9596
0.9722Clark, INFloyd, INHarrison, INScott, INBullitt, KYJefferson, KYOldham, KY4600 Lubbock, TX
0.8547
0.8981Lubbock, TX4640 Lynchburg, VA
0.9208
0.9451Amherst, VABedford, VABedford City, VACampbell, VALynchburg City, VA4680 Macon, GA
0.9077
0.9358Bibb, GAHouston, GAJones, GAPeach, GATwiggs, GA4720 Madison, WI
1.0462
1.0314Dane, WI4800 Mansfield, OH
0.8827
0.9181Crawford, OHRichland, OH4840 Mayaguez, PR
0.4917
0.6150Anasco, PRCabo Rojo, PRHormigueros, PRMayaguez, PRSabana Grande, PRSan German, PR4880 McAllen-Edinburg-Mission, TX
0.8433
0.8898Hidalgo, TX4890 Medford-Ashland, OR
1.0433
1.0295Jackson, OR4900 Melbourne-Titusville-Palm Bay, FL
0.9883
0.9920Brevard, Fl4920 1
                                 Memphis, TN-AR-MS
0.9435
0.9610Crittenden, ARDeSoto, MSFayette, TNShelby, TNTipton, TN4940 Merced, CA
0.9870
0.9911Merced, CA5000 1
                                 Miami, FL
0.9934
0.9955Dade, FL5015 1
                                 Middlesex-Somerset-Hunterdon, NJ
1.1952
1.1299Hunterdon, NJMiddlesex, NJSomerset, NJ5080 1
                                 Milwaukee-Waukesha, WI
0.9898
0.9930Milwaukee, WIOzaukee, WIWashington, WIWaukesha, WI5120 1
                                 Minneapolis-St. Paul, MN-WI
1.1000
1.0674Anoka, MNCarver, MNChisago, MNDakota, MNHennepin, MNIsanti, MNRamsey, MNScott, MNSherburne, MNWashington, MNWright, MNPierce, WISt. Croix, WI5140 Missoula, MT
0.9453
0.9622Missoula, MT5160 Mobile, AL
0.7766
0.8410Baldwin, ALMobile, AL5170 Modesto, CA
1.0945
1.0638Stanislaus, CA5190 1
                                 Monmouth-Ocean, NJ
1.1514
1.1014Monmouth, NJOcean, NJ5200 Monroe, LA
0.8296
0.8799Ouachita, LA5240 Montgomery, AL
0.7502
0.8213Autauga, ALElmore, ALMontgomery, AL5280 Muncie, IN
0.9689
0.9786Delaware, IN5330 Myrtle Beach, SC
0.8855
0.9201Horry, SC5345 Naples, FL
0.9566
0.9701Collier, FL5360 1
                                 Nashville, TN
0.9602
0.9726Cheatham, TNDavidson, TNDickson, TNRobertson, TNRutherford TNSumner, TN( print page 22826)Williamson, TNWilson, TN5380 1
                                 Nassau-Suffolk, NY
1.3841
1.2493Nassau, NYSuffolk, NY5483 1
                                 2
                                 New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT
1.2357
1.1560Fairfield, CTNew Haven, CT5523 12
                                 New London-Norwich, CT
1.2357
1.1560New London, CT5560 1
                                 New Orleans, LA
0.9054
0.9342Jefferson, LAOrleans, LAPlaquemines, LASt. Bernard, LASt. Charles, LASt. James, LASt. John The Baptist, LASt. Tammany, LA5600 1
                                 New York, NY
1.3923
1.2544Bronx, NYKings, NYNew York, NYPutnam, NYQueens, NYRichmond, NYRockland, NYWestchester, NY5640 1
                                 Newark, NJ
1.2004
1.1332Essex, NJMorris, NJSussex, NJUnion, NJWarren, NJ5660 Newburgh, NY-PA
1.1235
1.0830Orange, NYPike, PA5720 1
                                 Norfolk-Virginia Beach-Newport News, VA-NC
0.8630
0.9040Currituck, NCChesapeake City, VAGloucester, VAHampton City, VAIsle of Wight, VAJames City, VAMathews, VANewport News City, VANorfolk City, VAPoquoson City, VAPortsmouth City, VASuffolk City, VAVirginia Beach City VAWilliamsburg City, VAYork, VA5775 1
                                 Oakland, CA
1.5416
1.3450Alameda, CAContra Costa, CA5790 Ocala, FL
0.9579
0.9710Marion, FL5800 Odessa-Midland, TX
0.9017
0.9316Ector, TXMidland, TX5880 1
                                 Oklahoma City, OK
0.8728
0.9110Canadian, OKCleveland, OKLogan, OKMcClain, OKOklahoma, OKPottawatomie, OK5910 Olympia, WA
1.1481
1.0992Thurston, WA5920 Omaha, NE-IA
0.9696
0.9791Pottawattamie, IACass, NEDouglas, NESarpy, NEWashington, NE5945 1
                                 Orange County, CA
1.1354
1.0909Orange, CA5960 1
                                 Orlando, FL
0.9464
0.9630Lake, FLOrange, FLOsceola, FLSeminole, FL5990 Owensboro, KY
0.8346
0.8835Daviess, KY6015 Panama City, FL
0.9166
0.9421Bay, FL6020 Parkersburg-Marietta, WV-OH (WV Hospitals)
0.8192
0.8723Washington, OHWood, WV6020 2
                                 Parkersburg-Marietta, WV-OH (OH Hospitals)
0.8761
0.9134Washington, OHWood, WV6080 2
                                 Pensacola, FL
0.8733
0.9114Escambia, FLSanta Rosa, FL6120 Peoria-Pekin, IL
0.8883
0.9221Peoria, ILTazewell, ILWoodford, IL6160 1
                                 Philadelphia, PA-NJ
1.0626
1.0425Burlington, NJCamden, NJGloucester, NJSalem, NJBucks, PAChester, PADelaware, PAMontgomery, PAPhiladelphia, PA6200 1
                                 Phoenix-Mesa, AZ
0.9654
0.9762Maricopa, AZPinal, AZ6240 Pine Bluff, AR
0.7837
0.8463Jefferson, AR6280 1
                                 Pittsburgh, PA
0.9714
0.9803Allegheny, PABeaver, PAButler, PAFayette, PAWashington, PAWestmoreland, PA6323 2
                                 Pittsfield, MA
1.1586
1.1061Berkshire, MA6340 Pocatello, ID
0.9557
0.9694Bannock, ID6360 Ponce, PR
0.5278
0.6456Guayanilla, PRJuana Diaz, PRPenuelas, PRPonce, PRVillalba, PRYauco, PR6403 Portland, ME
0.9501
0.9656Cumberland, MESagadahoc, MEYork, ME6440 1
                                 Portland-Vancouver, OR-WA
1.1291
1.0867Clackamas, ORColumbia, ORMultnomah, ORWashington, ORYamhill, ORClark, WA6483 1
                                 Providence-Warwick-Pawtucket, RI
1.0781
1.0528Bristol, RIKent, RINewport, RIProvidence, RIWashington, RI6520 Provo-Orem, UT
0.9967
0.9977Utah, UT6560 2
                                 Pueblo, CO
0.8909
0.9239Pueblo, CO6580 Punta Gorda, FL
0.8818
0.9175Charlotte, FL6600 Racine, WI
0.9441
0.9614Racine, WI6640 1
                                 Raleigh-Durham-Chapel Hill, NC
0.9901
0.9932Chatham, NCDurham, NCFranklin, NCJohnston, NCOrange, NCWake, NC6660 Rapid City, SD
0.8971
0.9283Pennington, SD6680 2
                                 Reading, PA
0.8473
0.8927Berks, PA6690 Redding, CA
1.1222
1.0822Shasta, CA6720 Reno, NV
1.0456
1.0310Washoe, NV( print page 22827)6740 Richland-Kennewick-Pasco, WA
1.1086
1.0732Benton, WAFranklin, WA6760 Richmond-Petersburg, VA
0.9712
0.9802Charles City County, VAChesterfield, VAColonial Heights City, VADinwiddie, VAGoochland, VAHanover, VAHenrico, VAHopewell City, VANew Kent, VAPetersburg City, VAPowhatan, VAPrince George, VARichmond City, VA6780 1
                                 Riverside-San Bernardino, CA
1.1012
1.0682Riverside, CASan Bernardino, CA6800 2
                                 Roanoke, VA
0.8473
0.8927Botetourt, VARoanoke, VARoanoke City, VASalem City, VA6820 Rochester, MN
1.1595
1.1067Olmsted, MN6840 1
                                 Rochester, NY
0.9238
0.9472Genesee, NYLivingston, NYMonroe, NYOntario, NYOrleans, NYWayne, NY6880 Rockford, IL
0.9194
0.9441Boone, ILOgle, ILWinnebago, IL6895 Rocky Mount, NC
0.9197
0.9443Edgecombe, NCNash, NC6920 1
                                 Sacramento, CA
1.1809
1.1206El Dorado, CAPlacer, CASacramento, CA6960 Saginaw-Bay City-Midland, MI
0.9662
0.9767Bay, MIMidland, MISaginaw, MI6980 St. Cloud, MN
1.0040
1.0027Benton, MNStearns, MN7000 St. Joseph, MO
0.9113
0.9384Andrew, MOBuchanan, MO7040 1
                                 St. Louis, MO-IL
0.9024
0.9321Clinton, ILJersey, ILMadison, ILMonroe, ILSt. Clair, ILFranklin, MOJefferson, MOLincoln, MOSt. Charles, MOSt. Louis, MOSt. Louis City, MOWarren, MO7080 2
                                 Salem, OR
1.0156
1.0107Marion, ORPolk, OR7120 Salinas, CA
1.4854
1.3112Monterey, CA7160 1
                                 Salt Lake City-Ogden, UT
0.9976
0.9984Davis, UTSalt Lake, UTWeber, UT7200 San Angelo, TX
0.8288
0.8793Tom Green, TX7240 1
                                 San Antonio, TX
0.8333
0.8826Bexar, TXComal, TXGuadalupe, TXWilson, TX7320 1
                                 San Diego, CA
1.1480
1.0991San Diego, CA7360 1
                                 San Francisco, CA
1.4319
1.2787Marin, CASan Francisco, CASan Mateo, CA7400 1
                                 San Jose, CA
1.4249
1.2744Santa Clara, CA7440 1
                                 San Juan-Bayamon, PR
0.4812
0.6060Aguas Buenas, PRBarceloneta, PRBayamon, PRCanovanas, PRCarolina, PRCatano, PRCeiba, PRComerio, PRCorozal, PRDorado, PRFajardo, PRFlorida, PRGuaynabo, PRHumacao, PRJuncos, PRLos Piedras, PRLoiza, PRLuguillo, PRManati, PRMorovis, PRNaguabo, PRNaranjito, PRRio Grande, PRSan Juan, PRToa Alta, PRToa Baja, PRTrujillo Alto, PRVega Alta, PRVega Baja, PRYabucoa, PR7460 San Luis Obispo-Atascadero-Paso Robles, CA
1.1117
1.0752San Luis Obispo, CA7480 Santa Barbara-Santa Maria-Lompoc, CA
1.0927
1.0626Santa Barbara, CA7485 Santa Cruz-Watsonville, CA
1.4049
1.2621Santa Cruz, CA7490 Santa Fe, NM
1.0312
1.0213Los Alamos, NMSanta Fe, NM7500 Santa Rosa, CA
1.2727
1.1796Sonoma, CA7510 Sarasota-Bradenton, FL
1.0118
1.0081Manatee, FLSarasota, FL7520 Savannah, GA
0.9349
0.9549Bryan, GAChatham, GAEffingham, GA7560 2
                                 Scranton—Wilkes-Barre—Hazleton, PA
0.8473
0.8927Columbia, PALackawanna, PALuzerne, PAWyoming, PA7600 1
                                 Seattle-Bellevue-Everett, WA
1.1056
1.0712Island, WAKing, WASnohomish, WA7610 2
                                 Sharon, PA
0.8473
0.8927Mercer, PA7620 2
                                 Sheboygan, WI
0.9121
0.9389Sheboygan, WI7640 Sherman-Denison, TX
0.9163
0.9419Grayson, TX7680 Shreveport-Bossier City, LA
0.9165
0.9420Bossier, LACaddo, LAWebster, LA7720 Sioux City, IA-NE
0.8868
0.9210Woodbury, IADakota, NE7760 Sioux Falls, SD
0.9245
0.9477Lincoln, SDMinnehaha, SD7800 South Bend, IN
1.0303
1.0207St. Joseph, IN7840 Spokane, WA
1.0791
1.0535Spokane, WA7880 Springfield, IL
0.8502
0.8948Menard, ILSangamon, IL7920 Springfield, MO
0.8666
0.9066Christian, MO( print page 22828)Greene, MOWebster, MO8003 2
                                 Springfield, MA
1.1586
1.1061Hampden, MAHampshire, MA8050 State College, PA
0.9239
0.9472Centre, PA8080 2
                                 Steubenville-Weirton, OH-WV (OH Hospitals)
0.8761
0.9134Jefferson, OHBrooke, WVHancock, WV8080 Steubenville-Weirton, OH-WV (WV Hospitals)
0.8737
0.9117Jefferson, OHBrooke, WVHancock, WV8120 Stockton-Lodi, CA
1.1114
1.0750San Joaquin, CA8140 2
                                 Sumter, SC
0.8606
0.9023Sumter, SC8160 Syracuse, NY
0.9247
0.9478Cayuga, NYMadison, NYOnondaga, NYOswego, NY8200 Tacoma, WA
1.1751
1.1168Pierce, WA8240 2
                                 Tallahassee, FL
0.8733
0.9114Gadsden, FLLeon, FL8280 1
                                 Tampa-St. Petersburg-Clearwater, FL
0.9095
0.9371Hernando, FLHillsborough, FLPasco, FLPinellas, FL8320 2
                                 Terre Haute, IN
0.8757
0.9131Clay, INVermillion, INVigo, IN8360 Texarkana, AR-Texarkana, TX
0.8414
0.8885Miller, ARBowie, TX8400 Toledo, OH
0.9815
0.9873Fulton, OHLucas, OHWood, OH8440 Topeka, KS
0.9015
0.9315Shawnee, KS8480 Trenton, NJ
1.0172
1.0117Mercer, NJ8520 Tucson, AZ
0.9002
0.9305Pima, AZ8560 Tulsa, OK
0.8949
0.9268Creek, OKOsage, OKRogers, OKTulsa, OKWagoner, OK8600 Tuscaloosa, AL
0.8265
0.8777Tuscaloosa, AL8640 Tyler, TX
0.9109
0.9381Smith, TX8680 2
                                 Utica-Rome, NY
0.8530
0.8968Herkimer, NYOneida, NY8720 Vallejo-Fairfield-Napa, CA
1.3535
1.2303Napa, CASolano, CA8735 Ventura, CA
1.1088
1.0733Ventura, CA8750 Victoria, TX
0.8354
0.8841Victoria, TX8760 Vineland-Millville-Bridgeton, NJ
1.0473
1.0322Cumberland, NJ8780 2
                                 Visalia-Tulare-Porterville, CA
0.9870
0.9911Tulare, CA8800 Waco, TX
0.8268
0.8779McLennan, TX8840 1
                                 Washington, DC-MD-VA-WV
1.1176
1.0791District of Columbia, DCCalvert, MDCharles, MDFrederick, MDMontgomery, MDPrince Georges, MDAlexandria City, VAArlington, VAClarke, VACulpeper, VAFairfax, VAFairfax City, VAFalls Church City, VAFauquier, VAFredericksburg City, VAKing George, VALoudoun, VAManassas City, VAManassas Park City, VAPrince William, VASpotsylvania, VAStafford, VAWarren, VABerkeley, WVJefferson, WV8920 Waterloo-Cedar Falls, IA
0.8608
0.9024Black Hawk, IA8940 Wausau, WI
0.9516
0.9666Marathon, WI8960 1
                                 West Palm Beach-Boca Raton, FL
0.9785
0.9852Palm Beach, FL9000 2
                                 Wheeling, WV-OH (WV Hospitals)
0.8145
0.8689Belmont, OHMarshall, WVOhio, WV9000 2
                                 Wheeling, WV-OH (OH Hospitals)
0.8761
0.9134Belmont, OHMarshall, WVOhio, WV9040 Wichita, KS
0.9541
0.9683Butler, KSHarvey, KSSedgwick, KS9080 Wichita Falls, TX
0.8015
0.8594Archer, TXWichita, TX9140 Williamsport, PA
0.8503
0.8949Lycoming, PA9160 Wilmington-Newark, DE-MD
1.0757
1.0512New Castle, DECecil, MD9200 Wilmington, NC
0.9971
0.9980New Hanover, NCBrunswick, NC9260 Yakima, WA
1.0690
1.0468Yakima, WA9270 2
                                 Yolo, CA
0.9870
0.9911Yolo, CA9280 2
                                 York, PA
0.8473
0.8927York, PA9320 Youngstown-Warren, OH
0.9480
0.9641Columbiana, OHMahoning, OHTrumbull, OH9340 Yuba City, CA
1.0479
1.0326Sutter, CAYuba, CA9360 Yuma, AZ
0.8904
0.9236Yuma, AZ1
                             Large Urban Area2
                             Hospitals geographically located in the area are assigned the statewide rural wage index for FY 2002.
 Table 4B.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Rural Areas
Nonurban area
Wage 
                                 index
GAFAlabama
0.7483
0.8199Alaska
1.2006
1.1334Arizona
0.8747
0.9124Arkansas
0.7561
0.8258California
0.9870
0.9911Colorado
0.8909
0.9239Connecticut
1.2357
1.1560Delaware
0.9487
0.9646Florida
0.8733
0.9114Georgia
0.8341
0.8832Hawaii
1.1235
1.0830Idaho
0.8820
0.9176Illinois
0.8140
0.8686Indiana
0.8757
0.9131Iowa
0.8194
0.8725( print page 22829)Kansas
0.7850
0.8472Kentucky
0.8019
0.8597Louisiana
0.7755
0.8402Maine
0.8714
0.9100Maryland
0.8962
0.9277Massachusetts
1.1586
1.1061Michigan
0.9115
0.9385Minnesota
0.9109
0.9381Mississippi
0.7612
0.8296Missouri
0.7838
0.8464Montana
0.8642
0.9049Nebraska
0.8233
0.8753Nevada
0.9785
0.9852New Hampshire
0.9914
0.9941New Jersey 1New Mexico
0.8835
0.9187New York
0.8530
0.8968North Carolina
0.8632
0.9042North Dakota
0.7965
0.8557Ohio
0.8761
0.9134Oklahoma
0.7646
0.8321Oregon
1.0156
1.0107Pennsylvania
0.8473
0.8927Puerto Rico
0.4654
0.5923Rhode Island 1South Carolina
0.8606
0.9023South Dakota
0.7934
0.8534Tennessee
0.7901
0.8510Texas
0.7673
0.8341Utah
0.9156
0.9414Vermont
0.9576
0.9708Virginia
0.8473
0.8927Washington
1.0301
1.0205West Virginia
0.8145
0.8689Wisconsin
0.9121
0.9389Wyoming
0.8855
0.92011
                             All counties within the State are classified as urban.
 Table 4C.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Hospitals That Are Reclassified
Area
Wage 
                                 index
GAFAbilene, TX
0.8118
0.8669Akron, OH
0.9924
0.9948Albany, GA
1.0675
1.0457Albuquerque, NM
0.9748
0.9827Alexandria, LA
0.8137
0.8683Allentown-Bethlehem-Easton, PA
0.9443
0.9615Altoona, PA
0.9225
0.9463Amarillo, TX
0.8485
0.8936Anchorage, AK
1.2605
1.1718Ann Arbor, MI
1.1220
1.0820Anniston, AL
0.7922
0.8526Asheville, NC
0.9307
0.9520Athens, GA
0.9818
0.9875Atlanta, GA
1.0066
1.0045Augusta-Aiken, GA-SC
1.0090
1.0062Austin-San Marcos, TX
0.9327
0.9534Barnstable-Yarmouth, MA
1.3415
1.2229Baton Rouge, LA
0.8258
0.8772Bellingham, WA
1.1427
1.0957Benton Harbor, MI
0.9115
0.9385Bergen-Passaic, NJ
1.1669
1.1115Billings, MT
0.9623
0.9740Biloxi-Gulfport-Pascagoula, MS
0.8198
0.8728Binghamton, NY
0.8595
0.9015Birmingham, AL
0.8648
0.9053Bismarck, ND
0.7965
0.8557Bloomington-Normal, IL
0.8545
0.8979Boise City, ID
0.9190
0.9438Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH
1.1483
1.0993Burlington, VT
0.9606
0.9728Caguas, PR
0.4993
0.6215Casper, WY
0.9454
0.9623Champaign-Urbana, IL
0.9264
0.9490Charleston-North Charleston, SC
0.9293
0.9510Charleston, WV
0.8991
0.9298Charlotte-Gastonia-Rock Hill, NC-SC
0.9469
0.9633Chattanooga, TN-GA
0.9207
0.9450Chicago, IL
1.0887
1.0599Cincinnati, OH-KY-IN
0.9574
0.9706Clarksville-Hopkinsville, TN-KY
0.8481
0.8933Cleveland-Lorain-Elyria, OH
0.9496
0.9652Columbia, MO
0.8787
0.9153Columbia, SC
0.9264
0.9490Columbus, GA-AL
0.8471
0.8926Columbus, OH
0.9724
0.9810Corpus Christi, TX
0.8203
0.8731Dallas, TX
0.9506
0.9659Davenport-Moline-Rock Island, IA-IL
0.8790
0.9155Dayton-Springfield, OH
0.9323
0.9531Denver, CO
1.0289
1.0197Des Moines, IA
0.8881
0.9219Dothan, AL
0.8005
0.8587Dover, DE
0.9957
0.9971Duluth-Superior, MN-WI
1.0299
1.0204Eau Claire, WI
0.9121
0.9389Elkhart-Goshen, IN
0.9516
0.9666Erie, PA
0.8780
0.9148Eugene-Springfield, OR
1.1073
1.0723Fargo-Moorhead, ND-MN
0.9247
0.9478Fayetteville, NC
0.8970
0.9283Flagstaff, AZ-UT
1.0222
1.0151Flint, MI
1.0920
1.0621Florence, AL
0.7927
0.8529Florence, SC
0.8843
0.9192Fort Collins-Loveland, CO
1.0161
1.0110Ft. Lauderdale, FL
1.0906
1.0612Fort Pierce-Port St. Lucie, FL
1.0067
1.0046Fort Smith, AR-OK
0.7889
0.8501Fort Walton Beach, FL
0.8547
0.8981Fort Wayne, IN
0.9059
0.9346Forth Worth-Arlington, TX
0.9452
0.9621Gadsden, AL
0.8446
0.8908Gainesville, FL
1.1855
1.1236Grand Forks, ND-MN (ND Hospitals)
0.9022
0.9319Grand Forks, ND-MN (MN Hospital)
0.9109
0.9381Grand Junction, CO
0.9816
0.9874Grand Rapids-Muskegon-Holland, MI
1.0052
1.0036Great Falls, MT
0.9301
0.9516Greeley, CO
0.9604
0.9727Green Bay, WI
0.9440
0.9613Greensboro-Winston-Salem-High Point, NC
0.9474
0.9637Greenville, NC
0.9751
0.9829Greenville-Spartanburg-Anderson, SC
0.9110
0.9382Harrisburg-Lebanon-Carlisle, PA
0.9068
0.9352Hartford, CT
1.1586
1.1061Hattiesburg, MS
0.7612
0.8296Hickory-Morganton-Lenoir, NC
0.9517
0.9667Honolulu, HI
1.1658
1.1108Houston, TX
0.9604
0.9727Huntington-Ashland, WV-KY-OH
0.9286
0.9505Huntsville, AL
0.8657
0.9060Indianapolis, IN
0.9666
0.9770Iowa City, IA
0.9820
0.9876Jackson, MS
0.8589
0.9011Jackson, TN
0.8945
0.9265Jacksonville, FL
0.9040
0.9332Johnson City-Kingsport-Bristol, TN-VA
0.8540
0.8976Jonesboro, AR
0.8093
0.8651Joplin, MO
0.8560
0.8990Kalamazoo-Battlecreek, MI
1.0537
1.0365Kansas City, KS-MO
0.9430
0.9606Knoxville, TN
0.8904
0.9236Kokomo, IN
0.9290
0.9508Lafayette, LA
0.8430
0.8896Lansing-East Lansing, MI
0.9653
0.9761Las Vegas, NV-AZ
1.1238
1.0832Lawton, OK
0.8372
0.8854Lexington, KY
0.8675
0.9072Lima, OH
0.9558
0.9695Lincoln, NE
0.9945
0.9962Little Rock-North Little Rock, AR
0.8938
0.9260Longview-Marshall, TX
0.8439
0.8903Los Angeles-Long Beach, CA
1.2071
1.1376Louisville, KY-IN
0.9481
0.9642Lubbock, TX
0.8547
0.8981Lynchburg, VA
0.8897
0.9231Macon, GA
0.9077
0.9358Madison, WI
1.0462
1.0314Mansfield, OH
0.8827
0.9181Medford-Ashland, OR
1.0156
1.0107Melbourne-Titusville-Palm Bay, FL
0.9883
0.9920Memphis, TN-AR-MS
0.9152
0.9411Miami, FL
0.9934
0.9955( print page 22830)Milwaukee-Waukesha, WI
0.9898
0.9930Minneapolis-St. Paul, MN-WI
1.1000
1.0674Missoula, MT
0.9273
0.9496Mobile, AL
0.7766
0.8410Modesto, CA
1.0945
1.0638Monmouth-Ocean, NJ
1.1514
1.1014Monroe, LA
0.8191
0.8723Montgomery, AL
0.7502
0.8213Myrtle Beach, SC
0.8663
0.9064Nashville, TN
0.9433
0.9608New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT
1.2357
1.1560New London-Norwich, CT
1.1578
1.1055New Orleans, LA
0.9054
0.9342New York, NY
1.3923
1.2544Newark, NJ
1.2004
1.1332Newburgh, NY-PA
1.0838
1.0567Norfolk-Virginia Beach-Newport News, VA-NC
0.8632
0.9042Oakland, CA
1.5313
1.3388Odessa-Midland, TX (TX Hospitals)
0.8769
0.9140Odessa-Midland, TX (NM Hospitals)
0.8835
0.9187Oklahoma City, OK
0.8728
0.9110Omaha, NE-IA
0.9696
0.9791Orange County, CA
1.1354
1.0909Orlando, FL
0.9464
0.9630Peoria-Pekin, IL
0.8883
0.9221Philadelphia, PA-NJ
1.0626
1.0425Pine Bluff, AR
0.7837
0.8463Pittsburgh, PA
0.9550
0.9690Pittsfield, MA
1.0018
1.0012Pocatello, ID
0.9264
0.9490Portland, ME
0.9501
0.9656Portland-Vancouver, OR-WA
1.1291
1.0867Provo-Orem, UT
0.9840
0.9890Raleigh-Durham-Chapel Hill, NC
0.9901
0.9932Rapid City, SD
0.8849
0.9197Reading, PA
0.8473
0.8927Redding, CA
1.1222
1.0822Reno, NV
1.0456
1.0310Richland-Kennewick-Pasco, WA
1.0478
1.0325Richmond-Petersburg, VA
0.9712
0.9802Roanoke, VA
0.8468
0.8924Rochester, MN
1.1595
1.1067Rockford, IL
0.9080
0.9360Sacramento, CA
1.1809
1.1206Saginaw-Bay City-Midland, MI
0.9662
0.9767St. Cloud, MN
1.0040
1.0027St. Joseph, MO
0.8953
0.9271St. Louis, MO-IL
0.8911
0.9241Salinas, CA
1.4738
1.3042Salt Lake City-Ogden, UT
0.9976
0.9984San Diego, CA
1.1480
1.0991Santa Fe, NM
1.0013
1.0009Santa Rosa, CA
1.2408
1.1592Sarasota-Bradenton, FL
1.0118
1.0081Savannah, GA
0.9349
0.9549Seattle-Bellevue-Everett, WA
1.1056
1.0712Sherman-Denison, TX
0.8899
0.9232Shreveport-Bossier City, LA
0.9165
0.9420Sioux City, IA-NE
0.8868
0.9210Sioux Falls, SD
0.9037
0.9330South Bend, IN
1.0176
1.0120Spokane, WA
1.0663
1.0449Springfield, IL
0.8502
0.8948Springfield, MO
0.8454
0.8914Stockton-Lodi, CA
1.1114
1.0750Syracuse, NY
0.9247
0.9478Tampa-St. Petersburg-Clearwater, FL
0.9095
0.9371Texarkana, AR-Texarkana, TX
0.8414
0.8885Toledo, OH
0.9815
0.9873Topeka, KS
0.8850
0.9197Tucson, AZ
0.9002
0.9305Tulsa, OK
0.8815
0.9173Tuscaloosa, AL
0.8265
0.8777Tyler, TX
0.8905
0.9237Victoria, TX
0.8212
0.8738Waco, TX
0.8268
0.8779Washington, DC-MD-VA-WV
1.1024
1.0690Waterloo-Cedar Falls, IA
0.8608
0.9024Wausau, WI
0.9516
0.9666West Palm Beach-Boca Raton, FL
0.9785
0.9852Wichita, KS
0.9218
0.9458Wichita Falls, TX
0.8015
0.8594Wilmington-Newark, DE-MD
1.0757
1.0512Rural Alabama
0.7483
0.8199Rural Florida
0.8733
0.9114Rural Illinois (IA Hospital)
0.8194
0.8725Rural Illinois (MO Hospital)
0.8140
0.8686Rural Kentucky
0.8019
0.8597Rural Louisiana
0.7755
0.8402Rural Michigan
0.9115
0.9385Rural Minnesota
0.9109
0.9381Rural Missouri (AK Hospital)
0.7838
0.8464Rural Missouri (KS Hospital)
0.7850
0.8472Rural Montana
0.8642
0.9049Rural Nebraska
0.8233
0.8753Rural Nevada
0.9219
0.9458Rural Oregon
1.0156
1.0107Rural Texas
0.7673
0.8341Rural Washington
1.0301
1.0205Rural Wisconsin
0.9121
0.9389Rural Wyoming
0.8855
0.9201
 Table 4F.—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF)
Area
Wage
                                 index
GAF
Wage index— Reclass. hospitals
GAF— Reclass. hospitalsAguadilla, PR
0.9666
0.9770Arecibo, PR
0.9555
0.9693Caguas, PR
1.0523
1.0355
1.0188
1.0128Mayaguez, PR
1.0031
1.0021Ponce, PR
1.0768
1.0520San Juan-Bayamon, PR
0.9817
0.9874Rural Puerto Rico
0.9495
0.9651
 
 
 Table 4G.—Pre-Reclassified Wage Index for Urban Areas
Urban area 
                                 (Constituent counties)
Wage 
                                 index0040 Abilene, TX
0.8057Taylor, TX0060 Aguadilla, PR
0.4738Aguada, PRAguadilla, PRMoca, PR0080 Akron, OH
0.9924Portage, OHSummit, OH0120 Albany, GA
1.0675Dougherty, GALee, GA0160 Albany-Schenectady-Troy, NY
0.8597Albany, NYMontgomery, NYRensselaer, NYSaratoga, NYSchenectady, NYSchoharie, NY0200 Albuquerque, NM
0.9855Bernalillo, NMSandoval, NMValencia, NM0220 Alexandria, LA
0.8121Rapides, LA0240 Allentown-Bethlehem-Easton, PA
0.9443Carbon, PALehigh, PANorthampton, PA0280 Altoona, PA
0.9225Blair, PA0320 Amarillo, TX
0.8706Potter, TXRandall, TX0380 Anchorage, AK
1.2454Anchorage, AK0440 Ann Arbor, MI
1.1220Lenawee, MILivingston, MIWashtenaw, MI0450 Anniston, AL
0.8360Calhoun, AL0460 Appleton-Oshkosh-Neenah, WI
0.9203Calumet, WIOutagamie, WIWinnebago, WI0470 Arecibo, PR
0.4683Arecibo, PRCamuy, PRHatillo, PR0480 Asheville, NC
0.9307Buncombe, NCMadison, NC0500 Athens, GA
0.9956Clarke, GAMadison, GAOconee, GA0520 Atlanta, GA
1.0176Barrow, GABartow, GACarroll, GACherokee, GAClayton, GACobb, GACoweta, GADeKalb, GADouglas, GAFayette, GAForsyth, GAFulton, GAGwinnett, GAHenry, GANewton, GAPaulding, GAPickens, GARockdale, GASpalding, GAWalton, GA0560 Atlantic-Cape May, NJ
1.1349Atlantic, NJCape May, NJ0580 Auburn-Opelika, AL
0.8325Lee, AL0600 Augusta-Aiken, GA-SC
1.0090Columbia, GAMcDuffie, GARichmond, GAAiken, SCEdgefield, SC0640 Austin-San Marcos, TX
0.9327Bastrop, TXCaldwell, TXHays, TXTravis, TXWilliamson, TX0680 Bakersfield, CA
0.9387Kern, CA0720 Baltimore, MD
0.9723Anne Arundel, MDBaltimore, MDBaltimore City, MDCarroll, MDHarford, MDHoward, MDQueen Anne's, MD0733 Bangor, ME
0.9559Penobscot, ME0743 Barnstable-Yarmouth, MA
1.3539Barnstable, MA0760 Baton Rouge, LA
0.8258Ascension, LAEast Baton Rouge, LALivingston, LAWest Baton Rouge, LA0840 Beaumont-Port Arthur, TX
0.8508Hardin, TXJefferson, TXOrange, TX0860 Bellingham, WA
1.1963Whatcom, WA0870 Benton Harbor, MI
0.8912Berrien, MI0875 Bergen-Passaic, NJ
1.1549Bergen, NJPassaic, NJ0880 Billings, MT
0.9623Yellowstone, MT0920 Biloxi-Gulfport-Pascagoula, MS
0.8538Hancock, MSHarrison, MSJackson, MS0960 Binghamton, NY
0.8595Broome, NYTioga, NY1000 Birmingham, AL
0.8648Blount, ALJefferson, ALSt. Clair, ALShelby, AL1010 Bismarck, ND
0.7955Burleigh, NDMorton, ND1020 Bloomington, IN
0.8689Monroe, IN1040 Bloomington-Normal, IL
0.8448McLean, IL1080 Boise City, ID
0.9151Ada, IDCanyon, ID1123 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH (NH Hospitals)
1.1483Bristol, MAEssex, MAMiddlesex, MANorfolk, MAPlymouth, MASuffolk, MAWorcester, MAHillsborough, NHMerrimack, NHRockingham, NHStrafford, NH1125 Boulder-Longmont, CO
0.9836Boulder, CO1145 Brazoria, TX
0.8299Brazoria, TX1150 Bremerton, WA
1.0882Kitsap, WA1240 Brownsville-Harlingen-San Benito, TX
0.8783Cameron, TX1260 Bryan-College Station, TX
0.9296Brazos, TX1280 Buffalo-Niagara Falls, NY
0.9405Erie, NYNiagara, NY1303 Burlington, VT
0.9826Chittenden, VTFranklin, VTGrand Isle, VT1310 Caguas, PR
0.5158Caguas, PRCayey, PRCidra, PRGurabo, PRSan Lorenzo, PR1320 Canton-Massillon, OH
0.9059Carroll, OHStark, OH1350 Casper, WY
0.9606Natrona, WY1360 Cedar Rapids, IA
0.8711Linn, IA1400 Champaign-Urbana, IL
0.9264Champaign, IL1440 Charleston-North Charleston, SC
0.9293Berkeley, SCCharleston, SCDorchester, SC1480 Charleston, WV
0.9369Kanawha, WVPutnam, WV1520 Charlotte-Gastonia-Rock Hill, NC-SC
0.9400( print page 22832)Cabarrus, NCGaston, NCLincoln, NCMecklenburg, NCRowan, NCStanly, NCUnion, NCYork, SC1540 Charlottesville, VA
1.0688Albemarle, VACharlottesville City, VAFluvanna, VAGreene, VA1560 Chattanooga, TN-GA
0.9446Catoosa, GADade, GAWalker, GAHamilton, TNMarion, TN1580 Cheyenne, WY
0.8414Laramie, WY1600 Chicago, IL
1.1011Cook, ILDeKalb, ILDuPage, ILGrundy, ILKane, ILKendall, ILLake, ILMcHenry, ILWill, IL1620 Chico-Paradise, CA
0.9909Butte, CA1640 Cincinnati, OH-KY-IN
0.9574Dearborn, INOhio, INBoone, KYCampbell, KYGallatin, KYGrant, KYKenton, KYPendleton, KYBrown, OHClermont, OHHamilton, OHWarren, OH1660 Clarksville-Hopkinsville, TN-KY
0.8433Christian, KYMontgomery, TN1680 Cleveland-Lorain-Elyria, OH
0.9496Ashtabula, OHCuyahoga, OHGeauga, OHLake, OHLorain, OHMedina, OH1720 Colorado Springs, CO
0.9754El Paso, CO1740 Columbia, MO
0.8787Boone, MO1760 Columbia, SC
0.9589Lexington, SCRichland, SC1800 Columbus, GA-AL
0.8471Russell, ALChattahoochee, GAHarris, GAMuscogee, GA1840 Columbus, OH
0.9724Delaware, OHFairfield, OHFranklin, OHLicking, OHMadison, OHPickaway, OH1880 Corpus Christi, TX
0.8203Nueces, TXSan Patricio, TX1890 Corvallis, OR
1.1781Benton, OR1900 Cumberland, MD-WV (WV Hospital)
0.8402Allegany, MDMineral, WV1920 Dallas, TX
0.9506Collin, TXDallas, TXDenton, TXEllis, TXHenderson, TXHunt, TXKaufman, TXRockwall, TX1950 Danville, VA
0.8641Danville City, VAPittsylvania, VA1960 Davenport-Moline-Rock Island, IA-IL
0.8790Scott, IAHenry, ILRock Island, IL2000 Dayton-Springfield, OH
0.9323Clark, OHGreene, OHMiami, OHMontgomery, OH2020 Daytona Beach, FL
0.9069Flagler, FLVolusia, FL2030 Decatur, AL
0.8817Lawrence, ALMorgan, AL2040 Decatur, IL
0.8056Macon, IL2080 Denver, CO
1.0289Adams, COArapahoe, CODenver, CODouglas, COJefferson, CO2120 Des Moines, IA
0.8881Dallas, IAPolk, IAWarren, IA2160 Detroit, MI
1.0478Lapeer, MIMacomb, MIMonroe, MIOakland, MISt. Clair, MIWayne, MI2180 Dothan, AL
0.7959Dale, ALHouston, AL2190 Dover, DE
1.0453Kent, DE2200 Dubuque, IA
0.8617Dubuque, IA2240 Duluth-Superior, MN-WI
1.0401St. Louis, MNDouglas, WI2281 Dutchess County, NY
1.0639Dutchess, NY2290 Eau Claire, WI
0.8893Chippewa, WIEau Claire, WI2320 El Paso, TX
0.9162El Paso, TX2330 Elkhart-Goshen, IN
0.9646Elkhart, IN2335 Elmira, NY
0.8530Chemung, NY2340 Enid, OK
0.8454Garfield, OK2360 Erie, PA
0.8911Erie, PA2400 Eugene-Springfield, OR
1.1485Lane, OR2440 Evansville-Henderson, IN-KY (IN Hospitals)
0.7808Posey, INVanderburgh, INWarrick, INHenderson, KY2520 Fargo-Moorhead, ND-MN
0.9374Clay, MNCass, ND2560 Fayetteville, NC
0.9132Cumberland, NC2580 Fayetteville-Springdale-Rogers, AR
0.7587Benton, ARWashington, AR2620 Flagstaff, AZ-UT
1.0678Coconino, AZKane, UT2640 Flint, MI
1.0920Genesee, MI2650 Florence, AL
0.7875Colbert, ALLauderdale, AL2655 Florence, SC
0.8843Florence, SC2670 Fort Collins-Loveland, CO
1.0161Larimer, CO2680 Ft. Lauderdale, FL
1.0407Broward, FL2700 Fort Myers-Cape Coral, FL
0.9380Lee, FL2710 Fort Pierce-Port St. Lucie, FL
1.0067Martin, FLSt. Lucie, FL2720 Fort Smith, AR-OK
0.8076Crawford, ARSebastian, ARSequoyah, OK2750 Fort Walton Beach, FL
0.8695Okaloosa, FL2760 Fort Wayne, IN
0.9186Adams, INAllen, INDe Kalb, INHuntington, INWells, INWhitley, IN2800 Forth Worth-Arlington, TX
0.9452Hood, TXJohnson, TX( print page 22833)Parker, TXTarrant, TX2840 Fresno, CA
0.9972Fresno, CAMadera, CA2880 Gadsden, AL
0.8845Etowah, AL2900 Gainesville, FL
1.2133Alachua, FL2920 Galveston-Texas City, TX
1.0271Galveston, TX2960 Gary, IN
0.9571Lake, INPorter, IN2975 Glens Falls, NY
0.8432Warren, NYWashington, NY2980 Goldsboro, NC
0.8810Wayne, NC2985 Grand Forks, ND-MN
0.9173Polk, MNGrand Forks, ND2995 Grand Junction, CO
0.9579Mesa, CO3000 Grand Rapids-Muskegon-Holland, MI
1.0161Allegan, MIKent, MIMuskegon, MIOttawa, MI3040 Great Falls, MT
0.8972Cascade, MT3060 Greeley, CO
0.9604Weld, CO3080 Green Bay, WI
0.9269Brown, WI3120 Greensboro-Winston-Salem-High Point, NC
0.9616Alamance, NCDavidson, NCDavie, NCForsyth, NCGuilford, NCRandolph, NCStokes, NCYadkin, NC3150 Greenville, NC
0.9963Pitt, NC3160 Greenville-Spartanburg-Anderson, SC
0.9096Anderson, SCCherokee, SCGreenville, SCPickens, SCSpartanburg, SC3180 Hagerstown, MD
0.8462Washington, MD3200 Hamilton-Middletown, OH
0.9269Butler, OH3240 Harrisburg-Lebanon-Carlisle, PA
0.9311Cumberland, PADauphin, PALebanon, PAPerry, PA3283 Hartford, CT
1.1536Hartford, CTLitchfield, CTMiddlesex, CTTolland, CT3285 2
                                 Hattiesburg, MS
0.7559Forrest, MSLamar, MS3290 Hickory-Morganton-Lenoir, NC
0.9517Alexander, NCBurke, NCCaldwell, NCCatawba, NC3320 Honolulu, HI
1.1653Honolulu, HI3350 Houma, LA
0.8043Lafourche, LATerrebonne, LA3360 Houston, TX
0.9604Chambers, TXFort Bend, TXHarris, TXLiberty, TXMontgomery, TXWaller, TX3400 Huntington-Ashland, WV-KY-OH
0.9700Boyd, KYCarter, KYGreenup, KYLawrence, OHCabell, WVWayne, WV3440 Huntsville, AL
0.8854Limestone, ALMadison, AL3480 Indianapolis, IN
0.9771Boone, INHamilton, INHancock, INHendricks, INJohnson, INMadison, INMarion, INMorgan, INShelby, IN3500 Iowa City, IA
0.9973Johnson, IA3520 Jackson, MI
0.9387Jackson, MI3560 Jackson, MS
0.8589Hinds, MSMadison, MSRankin, MS3580 Jackson, TN
0.9117Madison, TNChester, TN3600 Jacksonville, FL
0.9040Clay, FLDuval, FLNassau, FLSt. Johns, FL3605 Jacksonville, NC
0.7710Onslow, NC3610 Jamestown, NY
0.8143Chautauqua, NY3620 Janesville-Beloit, WI
0.9840Rock, WI3640 Jersey City, NJ
1.1216Hudson, NJ3660 Johnson City-Kingsport-Bristol, TN-VA
0.8540Carter, TNHawkins, TNSullivan, TNUnicoi, TNWashington, TNBristol City, VAScott, VAWashington, VA3680 Johnstown, PA
0.8959Cambria, PASomerset, PA3700 Jonesboro, AR
0.8523Craighead, AR3710 Joplin, MO
0.8736Jasper, MONewton, MO3720 Kalamazoo-Battlecreek, MI
1.0696Calhoun, MIKalamazoo, MIVan Buren, MI3740 Kankakee, IL
0.9268Kankakee, IL3760 Kansas City, KS-MO
0.9430Johnson, KSLeavenworth, KSMiami, KSWyandotte, KSCass, MOClay, MOClinton, MOJackson, MOLafayette, MOPlatte, MORay, MO3800 Kenosha, WI
0.9678Kenosha, WI3810 Killeen-Temple, TX
0.7376Bell, TXCoryell, TX3840 Knoxville, TN
0.8904Anderson, TNBlount, TNKnox, TNLoudon, TNSevier, TNUnion, TN3850 Kokomo, IN
0.9232Howard, INTipton, IN3870 La Crosse, WI-MN
0.9328Houston, MNLa Crosse, WI3880 Lafayette, LA
0.8600Acadia, LALafayette, LASt. Landry, LASt. Martin, LA3920 Lafayette, IN
0.9165Clinton, INTippecanoe, IN3960 Lake Charles, LA
0.7810Calcasieu, LA3980 Lakeland-Winter Haven, FL
0.9167Polk, FL4000 Lancaster, PA
0.9413Lancaster, PA4040 Lansing-East Lansing, MI
0.9653Clinton, MIEaton, MIIngham, MI4080 Laredo, TX
0.7877Webb, TX( print page 22834)4100 Las Cruces, NM
0.8721Dona Ana, NM4120 Las Vegas, NV-AZ
1.1238Mohave, AZClark, NVNye, NV4150 Lawrence, KS
0.8756Douglas, KS4200 Lawton, OK
0.8783Comanche, OK4243 Lewiston-Auburn, ME
0.9451Androscoggin, ME4280 Lexington, KY
0.8850Bourbon, KYClark, KYFayette, KYJessamine, KYMadison, KYScott, KYWoodford, KY4320 Lima, OH
0.9558Allen, OHAuglaize, OH4360 Lincoln, NE
1.0272Lancaster, NE4400 Little Rock-North Little Rock, AR
0.9053Faulkner, ARLonoke, ARPulaski, ARSaline, AR4420 Longview-Marshall, TX
0.8322Gregg, TXHarrison, TXUpshur, TX4480 Los Angeles-Long Beach, CA
1.2062Los Angeles, CA4520 1
                                 Louisville, KY-IN
0.9596Clark, INFloyd, INHarrison, INScott, INBullitt, KYJefferson, KYOldham, KY4600 Lubbock, TX
0.8547Lubbock, TX4640 Lynchburg, VA
0.9208Amherst, VABedford, VABedford City, VACampbell, VALynchburg City, VA4680 Macon, GA
0.9064Bibb, GAHouston, GAJones, GAPeach, GATwiggs, GA4720 Madison, WI
1.0456Dane, WI4800 Mansfield, OH
0.8809Crawford, OHRichland, OH4840 Mayaguez, PR
0.4917Anasco, PRCabo Rojo, PRHormigueros, PRMayaguez, PRSabana Grande, PRSan German, PR4880 McAllen-Edinburg-Mission, TX
0.8433Hidalgo, TX4890 Medford-Ashland, OR
1.0433Jackson, OR4900 Melbourne-Titusville-Palm Bay, FL
0.9857Brevard, FL4920 Memphis, TN-AR-MS
0.9435Crittenden, ARDeSoto, MSFayette, TNShelby, TNTipton, TN4940 Merced, CA
0.9870Merced, CA5000 Miami, FL
0.9934Dade, FL5015 Middlesex-Somerset-Hunterdon, NJ
1.1952Hunterdon, NJMiddlesex, NJSomerset, NJ5080 Milwaukee-Waukesha, WI
0.9898Milwaukee, WIOzaukee, WIWashington, WIWaukesha, WI5120 Minneapolis-St. Paul, MN-WI
1.1000Anoka, MNCarver, MNChisago, MNDakota, MNHennepin, MNIsanti, MNRamsey, MNScott, MNSherburne, MNWashington, MNWright, MNPierce, WISt. Croix, WI5140 Missoula, MT
0.9453Missoula, MT5160 Mobile, AL
0.7754Baldwin, ALMobile, AL5170 Modesto, CA
1.0945Stanislaus, CA5190 Monmouth-Ocean, NJ
1.0930Monmouth, NJOcean, NJ5200 Monroe, LA
0.8296Ouachita, LA5240 Montgomery, AL
0.7502Autauga, ALElmore, ALMontgomery, AL5280 Muncie, IN
0.9689Delaware, IN5330 Myrtle Beach, SC
0.8855Horry, SC5345 Naples, FL
0.9566Collier, FL5360 Nashville, TN
0.9602Cheatham, TNDavidson, TNDickson, TNRobertson, TNRutherford TNSumner, TNWilliamson, TNWilson, TN5380 Nassau-Suffolk, NY
1.3841Nassau, NYSuffolk, NY5483 New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT
1.2267Fairfield, CTNew Haven, CT5523 New London-Norwich, CT
1.1578New London, CT5560 New Orleans, LA
0.9054Jefferson, LAOrleans, LAPlaquemines, LASt. Bernard, LASt. Charles, LASt. James, LASt. John The Baptist, LASt. Tammany, LA5600 New York, NY
1.3893Bronx, NYKings, NYNew York, NYPutnam, NYQueens, NYRichmond, NYRockland, NYWestchester, NY5640 Newark, NJ
1.2004Essex, NJMorris, NJSussex, NJUnion, NJWarren, NJ5660 Newburgh, NY-PA
1.1235Orange, NYPike, PA5720 Norfolk-Virginia Beach-Newport News, VA-NC
0.8629Currituck, NCChesapeake City, VAGloucester, VAHampton City, VAIsle of Wight, VAJames City, VAMathews, VANewport News City, VANorfolk City, VAPoquoson City, VAPortsmouth City, VASuffolk City, VAVirginia Beach City VAWilliamsburg City, VAYork, VA5775 Oakland, CA
1.5416Alameda, CAContra Costa, CA5790 Ocala, FL
0.9579Marion, FL5800 Odessa-Midland, TX
0.9017Ector, TXMidland, TX5880 Oklahoma City, OK
0.8728Canadian, OK( print page 22835)Cleveland, OKLogan, OKMcClain, OKOklahoma, OKPottawatomie, OK5910 Olympia, WA
1.1481Thurston, WA5920 Omaha, NE-IA
0.9696Pottawattamie, IACass, NEDouglas, NESarpy, NEWashington, NE5945 Orange County, CA
1.1242Orange, CA5960 Orlando, FL
0.9464Lake, FLOrange, FLOsceola, FLSeminole, FL5990 Owensboro, KY
0.8346Daviess, KY6015 Panama City, FL
0.9166Bay, FL6020 Parkersburg-Marietta, WV-OH
0.8192Washington, OHWood, WV6080 Pensacola, FL
0.8367Escambia, FLSanta Rosa, FL6120 Peoria-Pekin, IL
0.8883Peoria, ILTazewell, ILWoodford, IL6160 Philadelphia, PA-NJ
1.0626Burlington, NJCamden, NJGloucester, NJSalem, NJBucks, PAChester, PADelaware, PAMontgomery, PAPhiladelphia, PA6200 Phoenix-Mesa, AZ
0.9654Maricopa, AZPinal, AZ6240 Pine Bluff, AR
0.7837Jefferson, AR6280 Pittsburgh, PA
0.9714Allegheny, PABeaver, PAButler, PAFayette, PAWashington, PAWestmoreland, PA6323 Pittsfield, MA
1.0396Berkshire, MA6340 Pocatello, ID
0.9557Bannock, ID6360 Ponce, PR
0.5278Guayanilla, PRJuana Diaz, PRPenuelas, PRPonce, PRVillalba, PRYauco, PR6403 Portland, ME
0.9501Cumberland, MESagadahoc, MEYork, ME6440 Portland-Vancouver, OR-WA
1.1263Clackamas, ORColumbia, ORMultnomah, ORWashington, ORYamhill, ORClark, WA6483 Providence-Warwick-Pawtucket, RI
1.0781Bristol, RIKent, RINewport, RIProvidence, RIWashington, RI6520 Provo-Orem, UT
0.9967Utah, UT6560 Pueblo, CO
0.8704Pueblo, CO6580 Punta Gorda, FL
0.8818Charlotte, FL6600 Racine, WI
0.9441Racine, WI6640 Raleigh-Durham-Chapel Hill, NC
0.9901Chatham, NCDurham, NCFranklin, NCJohnston, NCOrange, NCWake, NC6660 Rapid City, SD
0.8971Pennington, SD6680 Reading, PA
0.6780Berks, PA6690 Redding, CA
1.1222Shasta, CA6720 Reno, NV
1.0456Washoe, NV6740 Richland-Kennewick-Pasco, WA
1.1086Benton, WAFranklin, WA6760 Richmond-Petersburg, VA
0.9712Charles City County, VAChesterfield, VAColonial Heights City, VADinwiddie, VAGoochland, VAHanover, VAHenrico, VAHopewell City, VANew Kent, VAPetersburg City, VAPowhatan, VAPrince George, VARichmond City, VA6780 Riverside-San Bernardino, CA
1.1012Riverside, CASan Bernardino, CA6800 Roanoke, VA
0.8468Botetourt, VARoanoke, VARoanoke City, VASalem City, VA6820 Rochester, MN
1.1595Olmsted, MN6840 Rochester, NY
0.9238Genesee, NYLivingston, NYMonroe, NYOntario, NYOrleans, NYWayne, NY6880 Rockford, IL
0.9194Boone, ILOgle, ILWinnebago, IL6895 Rocky Mount, NC
0.9197Edgecombe, NCNash, NC6920 Sacramento, CA
1.1809El Dorado, CAPlacer, CASacramento, CA6960 Saginaw-Bay City-Midland, MI
0.9662Bay, MIMidland, MISaginaw, MI6980 St. Cloud, MN
0.9966Benton, MNStearns, MN7000 St. Joseph, MO
0.9113Andrew, MOBuchanan, MO7040 St. Louis, MO-IL
0.9024Clinton, ILJersey, ILMadison, ILMonroe, ILSt. Clair, ILFranklin, MOJefferson, MOLincoln, MOSt. Charles, MOSt. Louis, MOSt. Louis City, MOWarren, MO7080 Salem, OR
1.0127Marion, ORPolk, OR7120 Salinas, CA
1.4854Monterey, CA7160 Salt Lake City-Ogden, UT
0.9976Davis, UTSalt Lake, UTWeber, UT7200 San Angelo, TX
0.8288Tom Green, TX7240 San Antonio, TX
0.8333Bexar, TXComal, TXGuadalupe, TXWilson, TX7320 San Diego, CA
1.1480San Diego, CA7360 San Francisco, CA
1.4319Marin, CASan Francisco, CASan Mateo, CA7400 San Jose, CA
1.4249Santa Clara, CA7440 San Juan-Bayamon, PR
0.4812Aguas Buenas, PRBarceloneta, PRBayamon, PR( print page 22836)Canovanas, PRCarolina, PRCatano, PRCeiba, PRComerio, PRCorozal, PRDorado, PRFajardo, PRFlorida, PRGuaynabo, PRHumacao, PRJuncos, PRLos Piedras, PRLoiza, PRLuguillo, PRManati, PRMorovis, PRNaguabo, PRNaranjito, PRRio Grande, PRSan Juan, PRToa Alta, PRToa Baja, PRTrujillo Alto, PRVega Alta, PRVega Baja, PRYabucoa, PR7460 San Luis Obispo-Atascadero-Paso Robles, CA
1.1117San Luis Obispo, CA7480 Santa Barbara-Santa Maria-Lompoc, CA
1.0927Santa Barbara, CA7485 Santa Cruz-Watsonville, CA
1.4049Santa Cruz, CA7490 Santa Fe, NM
1.0312Los Alamos, NMSanta Fe, NM7500 Santa Rosa, CA
1.2727Sonoma, CA7510 Sarasota-Bradenton, FL
1.0118Manatee, FLSarasota, FL7520 Savannah, GA
0.9349Bryan, GAChatham, GAEffingham, GA7560 Scranton—Wilkes-Barre—Hazleton, PA
0.8071Columbia, PALackawanna, PALuzerne, PAWyoming, PA7600 Seattle-Bellevue-Everett, WA
1.1040Island, WAKing, WASnohomish, WA7610 Sharon, PA
0.8013Mercer, PA7620 Sheboygan, WI
0.8524Sheboygan, WI7640 Sherman-Denison, TX
0.9163Grayson, TX7680 Shreveport-Bossier City, LA
0.9165Bossier, LACaddo, LAWebster, LA7720 Sioux City, IA-NE
0.8868Woodbury, IADakota, NE7760 Sioux Falls, SD
0.9245Lincoln, SDMinnehaha, SD7800 South Bend, IN
1.0303St. Joseph, IN7840 Spokane, WA
1.0791Spokane, WA7880 Springfield, IL
0.8502Menard, ILSangamon, IL7920 Springfield, MO
0.8666Christian, MOGreene, MOWebster, MO8003 Springfield, MA
1.0747Hampden, MAHampshire, MA8050 State College, PA
0.9239Centre, PA8080 Steubenville-Weirton, OH-WV (WV Hospitals)
0.8737Jefferson, OHBrooke, WVHancock, WV8120 Stockton-Lodi, CA
1.0939San Joaquin, CA8140 Sumter, SC
0.7884Sumter, SC8160 Syracuse, NY
0.9243Cayuga, NYMadison, NYOnondaga, NYOswego, NY8200 Tacoma, WA
1.1751Pierce, WA8240 Tallahassee, FL
0.8402Gadsden, FLLeon, FL8280 Tampa-St. Petersburg-Clearwater, FL
0.8994Hernando, FLHillsborough, FLPasco, FLPinellas, FL8320 Terre Haute, IN
0.8498Clay, INVermillion, INVigo, IN8360 Texarkana, AR-Texarkana, TX
0.8414Miller, ARBowie, TX8400 Toledo, OH
0.9815Fulton, OHLucas, OHWood, OH8440 Topeka, KS
0.9015Shawnee, KS8480 Trenton, NJ
1.0172Mercer, NJ8520 Tucson, AZ
0.8990Pima, AZ8560 Tulsa, OK
0.8949Creek, OKOsage, OKRogers, OKTulsa, OKWagoner, OK8600 Tuscaloosa, AL
0.8265Tuscaloosa, AL8640 Tyler, TX
0.9109Smith, TX8680 Utica-Rome, NY
0.8425Herkimer, NYOneida, NY8720 Vallejo-Fairfield-Napa, CA
1.3535Napa, CASolano, CA8735 Ventura, CA
1.1088Ventura, CA8750 Victoria, TX
0.8354Victoria, TX8760 Vineland-Millville-Bridgeton, NJ
1.0473Cumberland, NJ8780 Visalia-Tulare-Porterville, CA
0.9706Tulare, CA8800 Waco, TX
0.8249McLennan, TX8840 Washington, DC-MD-VA-WV
1.1176District of Columbia, DCCalvert, MDCharles, MDFrederick, MDMontgomery, MDPrince Georges, MDAlexandria City, VAArlington, VAClarke, VACulpeper, VAFairfax, VAFairfax City, VAFalls Church City, VAFauquier, VAFredericksburg City, VAKing George, VALoudoun, VAManassas City, VAManassas Park City, VAPrince William, VASpotsylvania, VAStafford, VAWarren, VABerkeley, WVJefferson, WV8920 Waterloo-Cedar Falls, IA
0.8134Black Hawk, IA8940 Wausau, WI
0.9455Marathon, WI8960 West Palm Beach-Boca Raton, FL
0.9785Palm Beach, FL9000 Wheeling, WV-OH
0.8077Belmont, OHMarshall, WVOhio, WV9040 Wichita, KS
0.9541Butler, KSHarvey, KSSedgwick, KS9080 Wichita Falls, TX
0.7933Archer, TXWichita, TX9140 Williamsport, PA
0.8503Lycoming, PA9160 Wilmington-Newark, DE-MD
1.0757( print page 22837)New Castle, DECecil, MD9200 Wilmington, NC
0.9971New Hanover, NCBrunswick, NC9260 Yakima, WA
1.0690Yakima, WA9270 Yolo, CA
0.9830Yolo, CA9280 York, PA
0.7840York, PA9320 Youngstown-Warren, OH
0.9480Columbiana, OHMahoning, OHTrumbull, OH9340 Yuba City, CA
1.0479Sutter, CAYuba, CA9360 Yuma, AZ
0.8904Yuma, AZ
 Table 4H.—Pre-Reclassified Wage Index for Rural Areas
Nonurban area
Wage indexAlabama
0.7420Alaska
1.2006Arizona
0.8747Arkansas
0.7561California
0.9870Colorado
0.8909Connecticut
1.2357Delaware
0.9487Florida
0.8709Georgia
0.8341Hawaii
1.1235Idaho
0.8820Illinois
0.8140Indiana
0.8757Iowa
0.8194Kansas
0.7850Kentucky
0.8019Louisiana
0.7649Maine
0.8714Maryland
0.8962Massachusetts
1.1586Michigan
0.9106Minnesota
0.9109Mississippi
0.7612Missouri
0.7826Montana
0.8642Nebraska
0.8233Nevada
0.9785New Hampshire
0.9914New Jersey 1New Mexico
0.8835New York
0.8530North Carolina
0.8634North Dakota
0.7965Ohio
0.8761Oklahoma
0.7646Oregon
1.0150Pennsylvania
0.8473Puerto Rico
0.4654Rhode Island 1South Carolina
0.8606South Dakota
0.7934Tennessee
0.7901Texas
0.7671Utah
0.9156Vermont
0.9576Virginia
0.8473Washington
1.0301West Virginia
0.8145Wisconsin
0.9118Wyoming
0.88551
                             All counties within the State are classified as urban.
 
 
 Table 5.—List of Diagnosis Related Groups (DRGs), Relative Weighting Factors, Geometric and Arithmetic Mean Length of Stay
DRG
MDC
Type
DRG title
Relative 
                                 weights
Geometric 
                                 mean LOS
Arithmetric 
                                 mean LOS1
01
SURG
CRANIOTOMY AGE 
                                >
                                17 EXCEPT FOR TRAUMA
3.2546
7.6
10.22
01
SURG
CRANIOTOMY FOR TRAUMA AGE 
                                >
                                17
3.3742
8.8
11.13
01
SURG
* CRANIOTOMY AGE 0-17
1.9527
12.7
12.74
01
SURG
SPINAL PROCEDURES
2.4074
5.5
8.15
01
SURG
EXTRACRANIAL VASCULAR PROCEDURES
1.3612
2.3
3.26
01
SURG
CARPAL TUNNEL RELEASE
.7238
2.1
3.07
01
SURG
PERIPH & CRANIAL NERVE & OTHER NERV SYST PROC W CC
2.6736
8.5
11.38
01
SURG
PERIPH & CRANIAL NERVE & OTHER NERV SYST PROC W/O CC
1.3727
2.3
3.49
01
MED
SPINAL DISORDERS & INJURIES
1.3411
5.3
7.010
01
MED
NERVOUS SYSTEM NEOPLASMS W CC
1.2655
5.5
7.211
01
MED
NERVOUS SYSTEM NEOPLASMS W/O CC
.8455
3.3
4.312
01
MED
DEGENERATIVE NERVOUS SYSTEM DISORDERS
.8985
4.9
6.313
01
MED
MULTIPLE SCLEROSIS & CEREBELLAR ATAXIA
.8107
4.5
5.514
01
MED
SPECIFIC CEREBROVASCULAR DISORDERS EXCEPT TIA
1.1667
4.8
6.115
01
MED
TRANSIENT ISCHEMIC ATTACK & PRECEREBRAL OCCLUSIONS
.7349
3.0
3.716
01
MED
NONSPECIFIC CEREBROVASCULAR DISORDERS W CC
1.1833
5.1
6.517
01
MED
NONSPECIFIC CEREBROVASCULAR DISORDERS W/O CC
.6706
2.7
3.518
01
MED
CRANIAL & PERIPHERAL NERVE DISORDERS W CC
.9762
4.6
5.819
01
MED
CRANIAL & PERIPHERAL NERVE DISORDERS W/O CC
.6770
3.1
3.920
01
MED
NERVOUS SYSTEM INFECTION EXCEPT VIRAL MENINGITIS
2.7628
9.0
11.421
01
MED
VIRAL MENINGITIS
1.4606
5.6
7.122
01
MED
HYPERTENSIVE ENCEPHALOPATHY
1.0073
4.0
5.123
01
MED
NONTRAUMATIC STUPOR & COMA
.8101
3.4
4.424
01
MED
SEIZURE & HEADACHE AGE 
                                >
                                17 W CC
1.0182
4.0
5.325
01
MED
SEIZURE & HEADACHE AGE 
                                >
                                17 W/O CC
.5945
2.7
3.326
01
MED
SEIZURE & HEADACHE AGE 0-17
.5846
2.3
2.827
01
MED
TRAUMATIC STUPOR & COMA, COMA 
                                >
                                1 HR
1.3456
3.7
5.628
01
MED
TRAUMATIC STUPOR & COMA, COMA <1 HR AGE 
                                >
                                17 W CC
1.3526
5.2
6.829
01
MED
TRAUMATIC STUPOR & COMA, COMA <1 HR AGE 
                                >
                                17 W/O CC
.6903
3.0
3.830
01
MED
* TRAUMATIC STUPOR & COMA, COMA <1 HR AGE 0-17
.3303
2.0
2.031
01
MED
CONCUSSION AGE 
                                >
                                17 W CC
.9098
3.5
4.8( print page 22838)32
01
MED
CONCUSSION AGE 
                                >
                                17 W/O CC
.5191
2.0
2.633
01
MED
* CONCUSSION AGE 0-17
.2075
1.6
1.634
01
MED
OTHER DISORDERS OF NERVOUS SYSTEM W CC
1.0065
4.2
5.435
01
MED
OTHER DISORDERS OF NERVOUS SYSTEM W/O CC
.5886
2.7
3.536
02
SURG
RETINAL PROCEDURES
.6586
1.2
1.537
02
SURG
ORBITAL PROCEDURES
1.1220
2.9
4.338
02
SURG
PRIMARY IRIS PROCEDURES
.4730
2.0
2.639
02
SURG
LENS PROCEDURES WITH OR WITHOUT VITRECTOMY
.5882
1.5
1.940
02
SURG
EXTRAOCULAR PROCEDURES EXCEPT ORBIT AGE 
                                >
                                17
.8274
2.4
3.641
02
SURG
* EXTRAOCULAR PROCEDURES EXCEPT ORBIT AGE 0-17
.3362
1.6
1.642
02
SURG
INTRAOCULAR PROCEDURES EXCEPT RETINA, IRIS & LENS
.6273
1.6
2.343
02
MED
HYPHEMA
.4570
2.8
3.344
02
MED
ACUTE MAJOR EYE INFECTIONS
.6556
4.3
5.245
02
MED
NEUROLOGICAL EYE DISORDERS
.6765
2.7
3.346
02
MED
OTHER DISORDERS OF THE EYE AGE 
                                >
                                17 W CC
.7983
3.9
5.047
02
MED
OTHER DISORDERS OF THE EYE AGE 
                                >
                                17 W/O CC
.5013
2.6
3.448
02
MED
* OTHER DISORDERS OF THE EYE AGE 0-17
.2962
2.9
2.949
03
SURG
MAJOR HEAD & NECK PROCEDURES
1.7590
3.8
5.250
03
SURG
SIALOADENECTOMY
.8139
1.5
1.951
03
SURG
SALIVARY GLAND PROCEDURES EXCEPT SIALOADENECTOMY
.7928
1.8
2.752
03
SURG
CLEFT LIP & PALATE REPAIR
.7608
1.5
1.953
03
SURG
SINUS & MASTOID PROCEDURES AGE 
                                >
                                17
1.1741
2.3
3.754
03
SURG
* SINUS & MASTOID PROCEDURES AGE 0-17
.4801
3.2
3.255
03
SURG
MISCELLANEOUS EAR, NOSE, MOUTH & THROAT PROCEDURES
.8500
1.8
2.756
03
SURG
RHINOPLASTY
.8771
2.0
2.757
03
SURG
T&A PROC, EXCEPT TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE 
                                >
                                17
1.1547
2.8
4.258
03
SURG
* T&A PROC, EXCEPT TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE 0-17
.2726
1.5
1.559
03
SURG
TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE 
                                >
                                17
.8324
1.9
2.860
03
SURG
* TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE 0-17
.2076
1.5
1.561
03
SURG
MYRINGOTOMY W TUBE INSERTION AGE 
                                >
                                17
1.3536
3.2
5.662
03
SURG
* MYRINGOTOMY W TUBE INSERTION AGE 0-17
.2940
1.3
1.363
03
SURG
OTHER EAR, NOSE, MOUTH & THROAT O.R. PROCEDURES
1.3658
3.3
4.764
03
MED
EAR, NOSE, MOUTH & THROAT MALIGNANCY
1.2289
4.8
6.965
03
MED
DYSEQUILIBRIUM
.5321
2.4
2.966
03
MED
EPISTAXIS
.5538
2.6
3.367
03
MED
EPIGLOTTITIS
.7556
3.0
3.768
03
MED
OTITIS MEDIA & URI AGE 
                                >
                                17 W CC
.6687
3.6
4.369
03
MED
OTITIS MEDIA & URI AGE 
                                >
                                17 W/O CC
.4988
2.8
3.470
03
MED
OTITIS MEDIA & URI AGE 0-17
.4556
2.5
3.071
03
MED
LARYNGOTRACHEITIS
.6714
3.1
4.072
03
MED
NASAL TRAUMA & DEFORMITY
.6722
2.9
3.773
03
MED
OTHER EAR, NOSE, MOUTH & THROAT DIAGNOSES AGE 
                                >
                                17
.8016
3.6
4.774
03
MED
* OTHER EAR, NOSE, MOUTH & THROAT DIAGNOSES AGE 0-17
.3341
2.1
2.175
04
SURG
MAJOR CHEST PROCEDURES
3.2016
8.8
10.876
04
SURG
OTHER RESP SYSTEM O.R. PROCEDURES W CC
2.9628
10.0
12.677
04
SURG
OTHER RESP SYSTEM O.R. PROCEDURES W/O CC
1.2254
4.1
5.478
04
MED
PULMONARY EMBOLISM
1.3317
6.3
7.279
04
MED
RESPIRATORY INFECTIONS & INFLAMMATIONS AGE 
                                >
                                17 W CC
1.7116
7.6
9.380
04
MED
RESPIRATORY INFECTIONS & INFLAMMATIONS AGE 
                                >
                                17 W/O CC
.9285
5.0
6.081
04
MED
* RESPIRATORY INFECTIONS & INFLAMMATIONS AGE 0-17
1.5125
6.1
6.182
04
MED
RESPIRATORY NEOPLASMS
1.4325
6.0
7.683
04
MED
MAJOR CHEST TRAUMA W CC
.9783
4.8
5.984
04
MED
MAJOR CHEST TRAUMA W/O CC
.5455
2.9
3.585
04
MED
PLEURAL EFFUSION W CC
1.2505
5.5
6.986
04
MED
PLEURAL EFFUSION W/O CC
.6776
3.0
3.887
04
MED
PULMONARY EDEMA & RESPIRATORY FAILURE
1.4280
5.5
6.988
04
MED
CHRONIC OBSTRUCTIVE PULMONARY DISEASE
.9137
4.5
5.489
04
MED
SIMPLE PNEUMONIA & PLEURISY AGE 
                                >
                                17 W CC
1.0636
5.3
6.390
04
MED
SIMPLE PNEUMONIA & PLEURISY AGE 
                                >
                                17 W/O CC
.6385
3.7
4.391
04
MED
SIMPLE PNEUMONIA & PLEURISY AGE 0-17
.8141
3.9
4.892
04
MED
INTERSTITIAL LUNG DISEASE W CC
1.2313
5.6
6.893
04
MED
INTERSTITIAL LUNG DISEASE W/O CC
.7311
3.5
4.294
04
MED
PNEUMOTHORAX W CC
1.2011
5.4
6.995
04
MED
PNEUMOTHORAX W/O CC
.5833
3.2
3.9( print page 22839)96
04
MED
BRONCHITIS & ASTHMA AGE 
                                >
                                17 W CC
.7638
4.1
4.997
04
MED
BRONCHITIS & ASTHMA AGE 
                                >
                                17 W/O CC
.5664
3.2
3.898
04
MED
BRONCHITIS & ASTHMA AGE 0-17
.7073
3.1
4.499
04
MED
RESPIRATORY SIGNS & SYMPTOMS W CC
.6971
2.6
3.3100
04
MED
RESPIRATORY SIGNS & SYMPTOMS W/O CC
.5206
1.8
2.2101
04
MED
OTHER RESPIRATORY SYSTEM DIAGNOSES W CC
.8605
3.6
4.7102
04
MED
OTHER RESPIRATORY SYSTEM DIAGNOSES W/O CC
.5226
2.1
2.7103
PRE
SURG
HEART TRANSPLANT
19.8195
38.6
57.5104
05
SURG
CARDIAC VALVE & OTH MAJOR CARDIOTHORACIC PROC W CARD CATH
7.7605
13.2
15.3105
05
SURG
CARDIAC VALVE & OTH MAJOR CARDIOTHORACIC PROC W/O CARD CATH
5.6465
8.8
10.4106
05
SURG
CORONARY BYPASS W PTCA
7.4382
10.7
12.3107
05
SURG
CORONARY BYPASS W CARDIAC CATH
5.3005
9.7
10.9108
05
SURG
OTHER CARDIOTHORACIC PROCEDURES
5.4994
9.2
11.2109
05
SURG
CORONARY BYPASS W/O PTCA OR CARDIAC CATH
3.8957
7.0
8.0110
05
SURG
MAJOR CARDIOVASCULAR PROCEDURES W CC
4.1492
8.1
10.2111
05
SURG
MAJOR CARDIOVASCULAR PROCEDURES W/O CC
2.2835
4.3
5.1112
05
SURG
NO LONGER VALID
.0000
.0
.0113
05
SURG
AMPUTATION FOR CIRC SYSTEM DISORDERS EXCEPT UPPER LIMB & TOE
2.6625
9.8
12.8114
05
SURG
UPPER LIMB & TOE AMPUTATION FOR CIRC SYSTEM DISORDERS
1.6689
7.2
9.3115
05
SURG
PRM CARD PACEM IMPL W AMI, HRT FAIL OR SHK, OR AICD LEAD OR GN
3.3784
7.2
9.2116
05
SURG
OTHER PERMANENT CARDIAC PACEMAKER IMPLANT
2.2011
3.6
4.8117
05
SURG
CARDIAC PACEMAKER REVISION EXCEPT DEVICE REPLACEMENT
1.3197
2.8
4.4118
05
SURG
CARDIAC PACEMAKER DEVICE REPLACEMENT
1.4322
1.8
2.7119
05
SURG
VEIN LIGATION & STRIPPING
1.3557
3.3
5.3120
05
SURG
OTHER CIRCULATORY SYSTEM O.R. PROCEDURES
2.3452
6.7
9.9121
05
MED
CIRCULATORY DISORDERS W AMI & MAJOR COMP, DISCHARGED ALIVE
1.5799
5.6
6.9122
05
MED
CIRCULATORY DISORDERS W AMI W/O MAJOR COMP, DISCHARGED ALIVE
1.0268
3.2
3.9123
05
MED
CIRCULATORY DISORDERS W AMI, EXPIRED
1.5882
3.2
5.0124
05
MED
CIRCULATORY DISORDERS EXCEPT AMI, W CARD CATH & COMPLEX DIAG
1.4057
3.6
4.6125
05
MED
CIRCULATORY DISORDERS EXCEPT AMI, W CARD CATH W/O COMPLEX DIAG
1.0395
2.2
2.8126
05
MED
ACUTE & SUBACUTE ENDOCARDITIS
2.6700
10.5
12.9127
05
MED
HEART FAILURE & SHOCK
1.0110
4.5
5.6128
05
MED
DEEP VEIN THROMBOPHLEBITIS
.7343
5.2
5.9129
05
MED
CARDIAC ARREST, UNEXPLAINED
1.0273
1.7
2.8130
05
MED
PERIPHERAL VASCULAR DISORDERS W CC
.9401
5.0
6.1131
05
MED
PERIPHERAL VASCULAR DISORDERS W/O CC
.5775
3.8
4.5132
05
MED
ATHEROSCLEROSIS W CC
.6490
2.5
3.1133
05
MED
ATHEROSCLEROSIS W/O CC
.5567
1.9
2.3134
05
MED
HYPERTENSION
.5829
2.7
3.4135
05
MED
CARDIAC CONGENITAL & VALVULAR DISORDERS AGE 
                                >
                                17 W CC
.9117
3.7
4.8136
05
MED
CARDIAC CONGENITAL & VALVULAR DISORDERS AGE 
                                >
                                17 W/O CC
.5606
2.2
2.8137
05
MED
* CARDIAC CONGENITAL & VALVULAR DISORDERS AGE 0-17
.8150
3.3
3.3138
05
MED
CARDIAC ARRHYTHMIA & CONDUCTION DISORDERS W CC
.8231
3.3
4.2139
05
MED
CARDIAC ARRHYTHMIA & CONDUCTION DISORDERS W/O CC
.4973
2.1
2.5140
05
MED
ANGINA PECTORIS
.5367
2.2
2.7141
05
MED
SYNCOPE & COLLAPSE W CC
.7231
3.0
3.8142
05
MED
SYNCOPE & COLLAPSE W/O CC
.5392
2.2
2.7143
05
MED
CHEST PAIN
.5198
1.7
2.1144
05
MED
OTHER CIRCULATORY SYSTEM DIAGNOSES W CC
1.1995
4.3
5.8145
05
MED
OTHER CIRCULATORY SYSTEM DIAGNOSES W/O CC
.5919
2.2
2.8146
06
SURG
RECTAL RESECTION W CC
2.7740
9.6
10.8147
06
SURG
RECTAL RESECTION W/O CC
1.6036
6.2
6.7148
06
SURG
MAJOR SMALL & LARGE BOWEL PROCEDURES W CC
3.5315
11.1
13.1149
06
SURG
MAJOR SMALL & LARGE BOWEL PROCEDURES W/O CC
1.5103
6.2
6.7150
06
SURG
PERITONEAL ADHESIOLYSIS W CC
2.9493
10.5
12.2151
06
SURG
PERITONEAL ADHESIOLYSIS W/O CC
1.3502
5.3
6.3152
06
SURG
MINOR SMALL & LARGE BOWEL PROCEDURES W CC
1.9465
7.4
8.7( print page 22840)153
06
SURG
MINOR SMALL & LARGE BOWEL PROCEDURES W/O CC
1.1614
5.1
5.6154
06
SURG
STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE 
                                >
                                17 W CC
4.3487
11.9
14.7155
06
SURG
STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE 
                                >
                                17 W/O CC
1.3356
3.5
4.5156
06
SURG
* STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE 0-17
.8392
6.0
6.0157
06
SURG
ANAL & STOMAL PROCEDURES W CC
1.2606
4.4
5.9158
06
SURG
ANAL & STOMAL PROCEDURES W/O CC
.6237
2.0
2.5159
06
SURG
HERNIA PROCEDURES EXCEPT INGUINAL & FEMORAL AGE 
                                >
                                17 W CC
1.3620
4.2
5.4160
06
SURG
HERNIA PROCEDURES EXCEPT INGUINAL & FEMORAL AGE 
                                >
                                17 W/O CC
.7678
2.2
2.7161
06
SURG
INGUINAL & FEMORAL HERNIA PROCEDURES AGE 
                                >
                                17 W CC
1.1388
3.2
4.5162
06
SURG
INGUINAL & FEMORAL HERNIA PROCEDURES AGE 
                                >
                                17 W/O CC
.6145
1.6
1.9163
06
SURG
* HERNIA PROCEDURES AGE 0-17
.6885
2.1
2.1164
06
SURG
APPENDECTOMY W COMPLICATED PRINCIPAL DIAG W CC
2.3980
7.8
9.0165
06
SURG
APPENDECTOMY W COMPLICATED PRINCIPAL DIAG W/O CC
1.3000
4.5
5.0166
06
SURG
APPENDECTOMY W/O COMPLICATED PRINCIPAL DIAG W CC
1.4919
4.2
5.4167
06
SURG
APPENDECTOMY W/O COMPLICATED PRINCIPAL DIAG W/O CC
.8778
2.2
2.6168
03
SURG
MOUTH PROCEDURES W CC
1.3056
3.6
5.2169
03
SURG
MOUTH PROCEDURES W/O CC
.6981
1.8
2.3170
06
SURG
OTHER DIGESTIVE SYSTEM O.R. PROCEDURES W CC
3.0651
9.6
12.7171
06
SURG
OTHER DIGESTIVE SYSTEM O.R. PROCEDURES W/O CC
1.1773
3.9
5.0172
06
MED
DIGESTIVE MALIGNANCY W CC
1.3972
5.9
7.6173
06
MED
DIGESTIVE MALIGNANCY W/O CC
.6929
2.9
3.9174
06
MED
G.I. HEMORRHAGE W CC
.9915
4.1
5.1175
06
MED
G.I. HEMORRHAGE W/O CC
.5435
2.6
3.0176
06
MED
COMPLICATED PEPTIC ULCER
1.0908
4.4
5.6177
06
MED
UNCOMPLICATED PEPTIC ULCER W CC
.8938
3.9
4.8178
06
MED
UNCOMPLICATED PEPTIC ULCER W/O CC
.6424
2.7
3.2179
06
MED
INFLAMMATORY BOWEL DISEASE
1.0861
5.1
6.4180
06
MED
G.I. OBSTRUCTION W CC
.9581
4.6
5.7181
06
MED
G.I. OBSTRUCTION W/O CC
.5245
3.0
3.5182
06
MED
ESOPHAGITIS, GASTROENT & MISC DIGEST DISORDERS AGE 
                                >
                                17 W CC
.7959
3.6
4.6183
06
MED
ESOPHAGITIS, GASTROENT & MISC DIGEST DISORDERS AGE 
                                >
                                17 W/O CC
.5586
2.4
3.0184
06
MED
ESOPHAGITIS, GASTROENT & MISC DIGEST DISORDERS AGE 0-17
.4123
2.5
3.0185
03
MED
DENTAL & ORAL DIS EXCEPT EXTRACTIONS & RESTORATIONS, AGE 
                                >
                                17
.8675
3.6
4.8186
03
MED
* DENTAL & ORAL DIS EXCEPT EXTRACTIONS & RESTORATIONS, AGE 0-17
.3199
2.9
2.9187
03
MED
DENTAL EXTRACTIONS & RESTORATIONS
.7960
3.2
4.2188
06
MED
OTHER DIGESTIVE SYSTEM DIAGNOSES AGE 
                                >
                                17 W CC
1.1234
4.6
6.0189
06
MED
OTHER DIGESTIVE SYSTEM DIAGNOSES AGE 
                                >
                                17 W/O CC
.5791
2.5
3.3190
06
MED
OTHER DIGESTIVE SYSTEM DIAGNOSES AGE 0-17
1.1905
4.5
7.5191
07
SURG
PANCREAS, LIVER & SHUNT PROCEDURES W CC
4.6065
12.1
15.5192
07
SURG
PANCREAS, LIVER & SHUNT PROCEDURES W/O CC
1.8181
6.0
7.0193
07
SURG
BILIARY TRACT PROC EXCEPT ONLY CHOLECYST W OR W/O C.D.E. W CC
3.5045
11.6
13.6194
07
SURG
BILIARY TRACT PROC EXCEPT ONLY CHOLECYST W OR W/O C.D.E. W/O CC
1.7226
6.3
7.3195
07
SURG
CHOLECYSTECTOMY W C.D.E. W CC
3.0850
9.4
10.9196
07
SURG
CHOLECYSTECTOMY W C.D.E. W/O CC
1.6183
5.3
6.1197
07
SURG
CHOLECYSTECTOMY EXCEPT BY LAPAROSCOPE W/O C.D.E. W CC
2.5761
8.1
9.6198
07
SURG
CHOLECYSTECTOMY EXCEPT BY LAPAROSCOPE W/O C.D.E. W/O CC
1.2114
4.2
4.7199
07
SURG
HEPATOBILIARY DIAGNOSTIC PROCEDURE FOR MALIGNANCY
2.4813
8.3
10.8200
07
SURG
HEPATOBILIARY DIAGNOSTIC PROCEDURE FOR NON-MALIGNANCY
3.1972
8.5
12.0201
07
SURG
OTHER HEPATOBILIARY OR PANCREAS O.R. PROCEDURES
3.8125
12.4
15.6202
07
MED
CIRRHOSIS & ALCOHOLIC HEPATITIS
1.3280
5.5
7.0203
07
MED
MALIGNANCY OF HEPATOBILIARY SYSTEM OR PANCREAS
1.3598
5.7
7.3204
07
MED
DISORDERS OF PANCREAS EXCEPT MALIGNANCY
1.2076
4.9
6.2( print page 22841)205
07
MED
DISORDERS OF LIVER EXCEPT MALIG,CIRR,ALC HEPA W CC
1.2206
5.2
6.7206
07
MED
DISORDERS OF LIVER EXCEPT MALIG,CIRR,ALC HEPA W/O CC
.7345
3.3
4.1207
07
MED
DISORDERS OF THE BILIARY TRACT W CC
1.1138
4.3
5.5208
07
MED
DISORDERS OF THE BILIARY TRACT W/O CC
.6397
2.4
3.0209
08
SURG
MAJOR JOINT & LIMB REATTACHMENT PROCEDURES OF LOWER EXTREMITY
1.9943
4.6
5.1210
08
SURG
HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE 
                                >
                                17 W CC
1.7528
6.1
6.9211
08
SURG
HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE 
                                >
                                17 W/O CC
1.2261
4.6
5.0212
08
SURG
* HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE 0-17
.8428
11.1
11.1213
08
SURG
AMPUTATION FOR MUSCULOSKELETAL SYSTEM & CONN TISSUE DISORDERS
1.9283
7.7
10.0214
08
SURG
NO LONGER VALID
.0000
.0
.0215
08
SURG
NO LONGER VALID
.0000
.0
.0216
08
SURG
BIOPSIES OF MUSCULOSKELETAL SYSTEM & CONNECTIVE TISSUE
2.3133
8.5
10.9217
08
SURG
WND DEBRID & SKN GRFT EXCEPT HAND, FOR MUSCSKELET & CONN TISS DIS
3.1808
11.0
15.1218
08
SURG
LOWER EXTREM & HUMER PROC EXCEPT HIP, FOOT, FEMUR AGE 
                                >
                                17 W CC
1.5448
4.7
5.7219
08
SURG
LOWER EXTREM & HUMER PROC EXCEPT HIP, FOOT, FEMUR AGE 
                                >
                                17 W/O CC
.9972
2.8
3.3220
08
SURG
* LOWER EXTREM & HUMER PROC EXCEPT HIP, FOOT, FEMUR AGE 0-17
.5814
5.3
5.3221
08
SURG
NO LONGER VALID
.0000
.0
.0222
08
SURG
NO LONGER VALID
.0000
.0
.0223
08
SURG
MAJOR SHOULDER/ELBOW PROC, OR OTHER UPPER EXTREMITY PROC W CC
.9734
2.1
2.9224
08
SURG
SHOULDER, ELBOW OR FOREARM PROC, EXC MAJOR JOINT PROC, W/O CC
.7724
1.6
1.9225
08
SURG
FOOT PROCEDURES
1.1177
3.8
5.3226
08
SURG
SOFT TISSUE PROCEDURES W CC
1.5897
5.2
7.3227
08
SURG
SOFT TISSUE PROCEDURES W/O CC
.7937
2.1
2.8228
08
SURG
MAJOR THUMB OR JOINT PROC, OR OTH HAND OR WRIST PROC W CC
1.0885
2.7
4.0229
08
SURG
HAND OR WRIST PROC, EXCEPT MAJOR JOINT PROC, W/O CC
.7168
1.9
2.5230
08
SURG
LOCAL EXCISION & REMOVAL OF INT FIX DEVICES OF HIP & FEMUR
1.3559
3.9
5.8231
08
SURG
LOCAL EXCISION & REMOVAL OF INT FIX DEVICES EXCEPT HIP & FEMUR
1.4317
3.6
5.4232
08
SURG
ARTHROSCOPY
.9556
1.8
2.9233
08
SURG
OTHER MUSCULOSKELET SYS & CONN TISS O.R. PROC W CC
2.0909
6.2
8.4234
08
SURG
OTHER MUSCULOSKELET SYS & CONN TISS O.R. PROC W/O CC
1.2075
2.7
3.6235
08
MED
FRACTURES OF FEMUR
.7548
4.1
5.4236
08
MED
FRACTURES OF HIP & PELVIS
.6882
3.9
4.9237
08
MED
SPRAINS, STRAINS, & DISLOCATIONS OF HIP, PELVIS & THIGH
.5323
3.0
3.7238
08
MED
OSTEOMYELITIS
1.4035
7.3
9.3239
08
MED
PATHOLOGICAL FRACTURES & MUSCULOSKELETAL & CONN TISS MALIGNANCY
1.0017
5.4
6.7240
08
MED
CONNECTIVE TISSUE DISORDERS W CC
1.3701
5.6
7.2241
08
MED
CONNECTIVE TISSUE DISORDERS W/O CC
.6337
3.3
4.0242
08
MED
SEPTIC ARTHRITIS
1.0920
5.7
7.2243
08
MED
MEDICAL BACK PROBLEMS
.7299
4.0
4.9244
08
MED
BONE DISEASES & SPECIFIC ARTHROPATHIES W CC
.7150
4.1
5.1245
08
MED
BONE DISEASES & SPECIFIC ARTHROPATHIES W/O CC
.4655
2.9
3.6246
08
MED
NON-SPECIFIC ARTHROPATHIES
.5711
3.2
4.0247
08
MED
SIGNS & SYMPTOMS OF MUSCULOSKELETAL SYSTEM & CONN TISSUE
.5594
2.8
3.5248
08
MED
TENDONITIS, MYOSITIS & BURSITIS
.8148
4.1
5.1249
08
MED
AFTERCARE, MUSCULOSKELETAL SYSTEM & CONNECTIVE TISSUE
.6767
2.7
3.9250
08
MED
FX, SPRN, STRN & DISL OF FOREARM, HAND, FOOT AGE 
                                >
                                17 W CC
.6809
3.5
4.3251
08
MED
FX, SPRN, STRN & DISL OF FOREARM, HAND, FOOT AGE 
                                >
                                17 W/O CC
.4555
2.4
2.9( print page 22842)252
08
MED
* FX, SPRN, STRN & DISL OF FOREARM, HAND, FOOT AGE 0-17
.2525
1.8
1.8253
08
MED
FX, SPRN, STRN & DISL OF UPARM, LOWLEG EX FOOT AGE 
                                >
                                17 W CC
.7398
4.0
5.0254
08
MED
FX, SPRN, STRN & DISL OF UPARM, LOWLEG EX FOOT AGE 
                                >
                                17 W/O CC
.4297
2.8
3.3255
08
MED
* FX, SPRN, STRN & DISL OF UPARM, LOWLEG EX FOOT AGE 0-17
.2941
2.9
2.9256
08
MED
OTHER MUSCULOSKELETAL SYSTEM & CONNECTIVE TISSUE DIAGNOSES
.8170
4.2
5.5257
09
SURG
TOTAL MASTECTOMY FOR MALIGNANCY W CC
.8801
2.2
2.8258
09
SURG
TOTAL MASTECTOMY FOR MALIGNANCY W/O CC
.6970
1.7
1.9259
09
SURG
SUBTOTAL MASTECTOMY FOR MALIGNANCY W CC
.8736
1.8
2.7260
09
SURG
SUBTOTAL MASTECTOMY FOR MALIGNANCY W/O CC
.6431
1.3
1.4261
09
SURG
BREAST PROC FOR NON-MALIGNANCY EXCEPT BIOPSY & LOCAL EXCISION
.9218
1.7
2.3262
09
SURG
BREAST BIOPSY & LOCAL EXCISION FOR NON-MALIGNANCY
.8377
3.0
4.2263
09
SURG
SKIN GRAFT &/OR DEBRID FOR SKN ULCER OR CELLULITIS W CC
2.1570
9.4
12.7264
09
SURG
SKIN GRAFT &/OR DEBRID FOR SKN ULCER OR CELLULITIS W/O CC
1.1826
6.0
7.7265
09
SURG
SKIN GRAFT &/OR DEBRID EXCEPT FOR SKIN ULCER OR CELLULITIS W CC
1.6900
5.2
7.6266
09
SURG
SKIN GRAFT &/OR DEBRID EXCEPT FOR SKIN ULCER OR CELLULITIS W/O CC
.8435
2.5
3.4267
09
SURG
PERIANAL & PILONIDAL PROCEDURES
.9421
3.3
4.5268
09
SURG
SKIN, SUBCUTANEOUS TISSUE & BREAST PLASTIC PROCEDURES
1.2255
2.5
3.6269
09
SURG
OTHER SKIN, SUBCUT TISS & BREAST PROC W CC
1.8049
6.9
9.3270
09
SURG
OTHER SKIN, SUBCUT TISS & BREAST PROC W/O CC
.8020
2.6
3.8271
09
MED
SKIN ULCERS
1.1503
6.5
8.3272
09
MED
MAJOR SKIN DISORDERS W CC
1.0243
5.2
6.7273
09
MED
MAJOR SKIN DISORDERS W/O CC
.5658
3.4
4.2274
09
MED
MALIGNANT BREAST DISORDERS W CC
1.1892
5.5
7.2275
09
MED
MALIGNANT BREAST DISORDERS W/O CC
.6594
3.0
4.6276
09
MED
NON-MALIGANT BREAST DISORDERS
.6954
4.0
5.0277
09
MED
CELLULITIS AGE 
                                >
                                17 W CC
.8585
5.1
6.1278
09
MED
CELLULITIS AGE 
                                >
                                17 W/O CC
.5638
3.9
4.6279
09
MED
* CELLULITIS AGE 0-17
.6610
4.2
4.2280
09
MED
TRAUMA TO THE SKIN, SUBCUT TISS & BREAST AGE 
                                >
                                17 W CC
.6940
3.5
4.4281
09
MED
TRAUMA TO THE SKIN, SUBCUT TISS & BREAST AGE 
                                >
                                17 W/O CC
.4591
2.5
3.1282
09
MED
* TRAUMA TO THE SKIN, SUBCUT TISS & BREAST AGE 0-17
.2557
2.2
2.2283
09
MED
MINOR SKIN DISORDERS W CC
.7154
3.8
4.9284
09
MED
MINOR SKIN DISORDERS W/O CC
.4216
2.5
3.2285
10
SURG
AMPUTAT OF LOWER LIMB FOR ENDOCRINE, NUTRIT, & METABOL DISORDERS
2.1315
9.1
11.4286
10
SURG
ADRENAL & PITUITARY PROCEDURES
2.2277
5.3
6.9287
10
SURG
SKIN GRAFTS & WOUND DEBRID FOR ENDOC, NUTRIT & METAB DISORDERS
1.9616
8.9
11.7288
10
SURG
O.R. PROCEDURES FOR OBESITY
2.1682
4.9
6.0289
10
SURG
PARATHYROID PROCEDURES
.9529
1.9
3.0290
10
SURG
THYROID PROCEDURES
.8853
1.7
2.3291
10
SURG
THYROGLOSSAL PROCEDURES
.5910
1.5
1.8292
10
SURG
OTHER ENDOCRINE, NUTRIT & METAB O.R. PROC W CC
2.7588
9.1
11.9293
10
SURG
OTHER ENDOCRINE, NUTRIT & METAB O.R. PROC W/O CC
1.2638
4.5
6.0294
10
MED
DIABETES AGE 
                                >
                                35
.7623
3.8
4.9295
10
MED
DIABETES AGE 0-35
.7468
3.1
3.9296
10
MED
NUTRITIONAL & MISC METABOLIC DISORDERS AGE 
                                >
                                17 W CC
.8632
4.3
5.5297
10
MED
NUTRITIONAL & MISC METABOLIC DISORDERS AGE 
                                >
                                17 W/O CC
.5070
2.9
3.5298
10
MED
NUTRITIONAL & MISC METABOLIC DISORDERS AGE 0-17
.3944
2.2
2.9299
10
MED
INBORN ERRORS OF METABOLISM
.8939
4.3
5.6300
10
MED
ENDOCRINE DISORDERS W CC
1.1234
5.3
6.6301
10
MED
ENDOCRINE DISORDERS W/O CC
.6063
3.0
3.8302
11
SURG
KIDNEY TRANSPLANT
3.2881
7.9
9.3303
11
SURG
KIDNEY, URETER & MAJOR BLADDER PROCEDURES FOR NEOPLASM
2.4853
7.5
9.0304
11
SURG
KIDNEY, URETER & MAJOR BLADDER PROC FOR NON-NEOPL W CC
2.4558
7.4
9.7305
11
SURG
KIDNEY, URETER & MAJOR BLADDER PROC FOR NON-NEOPL W/O CC
1.1486
3.1
3.8( print page 22843)306
11
SURG
PROSTATECTOMY W CC
1.3006
4.3
6.2307
11
SURG
PROSTATECTOMY W/O CC
.6054
1.9
2.3308
11
SURG
MINOR BLADDER PROCEDURES W CC
1.6788
4.8
6.9309
11
SURG
MINOR BLADDER PROCEDURES W/O CC
.8935
1.8
2.3310
11
SURG
TRANSURETHRAL PROCEDURES W CC
1.1342
3.3
4.7311
11
SURG
TRANSURETHRAL PROCEDURES W/O CC
.5952
1.5
1.8312
11
SURG
URETHRAL PROCEDURES, AGE 
                                >
                                17 W CC
1.0749
3.3
4.8313
11
SURG
URETHRAL PROCEDURES, AGE 
                                >
                                17 W/O CC
.6598
1.8
2.3314
11
SURG
* URETHRAL PROCEDURES, AGE 0-17
.4927
2.3
2.3315
11
SURG
OTHER KIDNEY & URINARY TRACT O.R. PROCEDURES
2.1396
4.8
8.2316
11
MED
RENAL FAILURE
1.3732
5.6
7.3317
11
MED
ADMIT FOR RENAL DIALYSIS
.6157
2.0
2.9318
11
MED
KIDNEY & URINARY TRACT NEOPLASMS W CC
1.1710
5.0
6.5319
11
MED
KIDNEY & URINARY TRACT NEOPLASMS W/O CC
.5918
2.1
2.8320
11
MED
KIDNEY & URINARY TRACT INFECTIONS AGE 
                                >
                                17 W CC
.8610
4.6
5.6321
11
MED
KIDNEY & URINARY TRACT INFECTIONS AGE 
                                >
                                17 W/O CC
.5592
3.3
3.9322
11
MED
KIDNEY & URINARY TRACT INFECTIONS AGE 0-17
.5234
3.6
4.3323
11
MED
URINARY STONES W CC, &/OR ESW LITHOTRIPSY
.7969
2.5
3.3324
11
MED
URINARY STONES W/O CC
.4447
1.6
1.9325
11
MED
KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE 
                                >
                                17 W CC
.6332
3.1
4.0326
11
MED
KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE 
                                >
                                17 W/O CC
.4118
2.1
2.7327
11
MED
KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE 0-17
.3741
2.8
3.2328
11
MED
URETHRAL STRICTURE AGE 
                                >
                                17 W CC
.7216
2.9
3.8329
11
MED
URETHRAL STRICTURE AGE 
                                >
                                17 W/O CC
.4388
1.6
2.0330
11
MED
* URETHRAL STRICTURE AGE 0-17
.3174
1.6
1.6331
11
MED
OTHER KIDNEY & URINARY TRACT DIAGNOSES AGE 
                                >
                                17 W CC
1.0625
4.6
6.0332
11
MED
OTHER KIDNEY & URINARY TRACT DIAGNOSES AGE 
                                >
                                17 W/O CC
.6057
2.6
3.4333
11
MED
OTHER KIDNEY & URINARY TRACT DIAGNOSES AGE 0-17
.8056
4.0
5.4334
12
SURG
MAJOR MALE PELVIC PROCEDURES W CC
1.4761
4.0
4.5335
12
SURG
MAJOR MALE PELVIC PROCEDURES W/O CC
1.1081
3.0
3.2336
12
SURG
TRANSURETHRAL PROSTATECTOMY W CC
.9149
2.9
3.9337
12
SURG
TRANSURETHRAL PROSTATECTOMY W/O CC
.5769
1.9
2.2338
12
SURG
TESTES PROCEDURES, FOR MALIGNANCY
1.2150
3.7
5.6339
12
SURG
TESTES PROCEDURES, NON-MALIGNANCY AGE 
                                >
                                17
1.2384
3.5
5.5340
12
SURG
* TESTES PROCEDURES, NON-MALIGNANCY AGE 0-17
.2820
2.4
2.4341
12
SURG
PENIS PROCEDURES
1.2740
1.9
3.1342
12
SURG
CIRCUMCISION AGE 
                                >
                                17
.7866
2.6
3.6343
12
SURG
* CIRCUMCISION AGE 0-17
.1533
1.7
1.7344
12
SURG
OTHER MALE REPRODUCTIVE SYSTEM O.R. PROCEDURES FOR MALIGNANCY
1.1746
1.6
2.4345
12
SURG
OTHER MALE REPRODUCTIVE SYSTEM O.R. PROC EXCEPT FOR MALIGNANCY
1.2518
3.9
5.6346
12
MED
MALIGNANCY, MALE REPRODUCTIVE SYSTEM, W CC
1.0311
4.9
6.4347
12
MED
MALIGNANCY, MALE REPRODUCTIVE SYSTEM, W/O CC
.5701
2.3
3.0348
12
MED
* BENIGN PROSTATIC HYPERTROPHY W CC
.7105
6.2
6.2349
12
MED
* BENIGN PROSTATIC HYPERTROPHY W/O CC
.4357
4.9
4.9350
12
MED
INFLAMMATION OF THE MALE REPRODUCTIVE SYSTEM
.7173
3.8
4.6351
12
MED
* STERILIZATION, MALE
.2352
1.3
1.3352
12
MED
OTHER MALE REPRODUCTIVE SYSTEM DIAGNOSES
.6878
3.0
4.2353
13
SURG
PELVIC EVISCERATION, RADICAL HYSTERECTOMY & RADICAL VULVECTOMY
1.8386
5.4
6.8354
13
SURG
UTERINE,ADNEXA PROC FOR NON-OVARIAN/ADNEXAL MALIG W CC
1.5275
5.1
6.1355
13
SURG
UTERINE,ADNEXA PROC FOR NON-OVARIAN/ADNEXAL MALIG W/O CC
.9039
3.1
3.3356
13
SURG
FEMALE REPRODUCTIVE SYSTEM RECONSTRUCTIVE PROCEDURES
.7469
2.0
2.3357
13
SURG
UTERINE & ADNEXA PROC FOR OVARIAN OR ADNEXAL MALIGNANCY
2.4424
7.5
9.2358
13
SURG
UTERINE & ADNEXA PROC FOR NON-MALIGNANCY W CC
1.1910
3.7
4.4359
13
SURG
UTERINE & ADNEXA PROC FOR NON-MALIGNANCY W/O CC
.8191
2.6
2.8360
13
SURG
VAGINA, CERVIX & VULVA PROCEDURES
.8530
2.4
2.9361
13
SURG
LAPAROSCOPY & INCISIONAL TUBAL INTERRUPTION
1.0927
2.2
3.0362
13
SURG
* ENDOSCOPIC TUBAL INTERRUPTION
.3006
1.4
1.4363
13
SURG
D&C, CONIZATION & RADIO-IMPLANT, FOR MALIGNANCY
.8149
2.6
3.6364
13
SURG
D&C, CONIZATION EXCEPT FOR MALIGNANCY
.8190
2.9
4.1( print page 22844)365
13
SURG
OTHER FEMALE REPRODUCTIVE SYSTEM O.R. PROCEDURES
2.0115
5.8
8.1366
13
MED
MALIGNANCY, FEMALE REPRODUCTIVE SYSTEM W CC
1.2739
5.6
7.4367
13
MED
MALIGNANCY, FEMALE REPRODUCTIVE SYSTEM W/O CC
.5582
2.4
3.2368
13
MED
INFECTIONS, FEMALE REPRODUCTIVE SYSTEM
1.1384
5.6
7.0369
13
MED
MENSTRUAL & OTHER FEMALE REPRODUCTIVE SYSTEM DISORDERS
.5584
2.5
3.4370
14
SURG
CESAREAN SECTION W CC
1.0417
4.6
6.1371
14
SURG
CESAREAN SECTION W/O CC
.6848
3.3
3.7372
14
MED
VAGINAL DELIVERY W COMPLICATING DIAGNOSES
.5578
2.6
3.3373
14
MED
VAGINAL DELIVERY W/O COMPLICATING DIAGNOSES
.3764
2.0
2.3374
14
SURG
VAGINAL DELIVERY W STERILIZATION &/OR D&C
.7103
2.6
3.2375
14
SURG
VAGINAL DELIVERY W O.R. PROC EXCEPT STERIL &/OR D&C
.6081
2.1
2.3376
14
MED
POSTPARTUM & POST ABORTION DIAGNOSES W/O O.R. PROCEDURE
.4954
2.5
3.2377
14
SURG
POSTPARTUM & POST ABORTION DIAGNOSES W O.R. PROCEDURE
1.6465
3.7
5.6378
14
MED
ECTOPIC PREGNANCY
.7984
2.0
2.4379
14
MED
THREATENED ABORTION
.4502
2.4
3.5380
14
MED
ABORTION W/O D&C
.4196
1.6
2.1381
14
SURG
ABORTION W D&C, ASPIRATION CURETTAGE OR HYSTEROTOMY
.6654
1.8
2.5382
14
MED
FALSE LABOR
.1607
1.2
1.3383
14
MED
OTHER ANTEPARTUM DIAGNOSES W MEDICAL COMPLICATIONS
.4856
2.8
3.8384
14
MED
OTHER ANTEPARTUM DIAGNOSES W/O MEDICAL COMPLICATIONS
.3412
1.6
2.2385
15
MED
* NEONATES, DIED OR TRANSFERRED TO ANOTHER ACUTE CARE FACILITY
1.3696
1.8
1.8386
15
MED
* EXTREME IMMATURITY OR RESPIRATORY DISTRESS SYNDROME, NEONATE
4.5165
17.9
17.9387
15
MED
* PREMATURITY W MAJOR PROBLEMS
3.0846
13.3
13.3388
15
MED
* PREMATURITY W/O MAJOR PROBLEMS
1.8612
8.6
8.6389
15
MED
FULL TERM NEONATE W MAJOR PROBLEMS
2.0857
7.9
13.7390
15
MED
NEONATE W OTHER SIGNIFICANT PROBLEMS
1.1337
3.5
4.3391
15
MED
* NORMAL NEWBORN
.1519
3.1
3.1392
16
SURG
SPLENECTOMY AGE 
                                >
                                17
3.3890
8.3
10.8393
16
SURG
* SPLENECTOMY AGE 0-17
1.3416
9.1
9.1394
16
SURG
OTHER O.R. PROCEDURES OF THE BLOOD AND BLOOD FORMING ORGANS
1.8266
5.1
8.1395
16
MED
RED BLOOD CELL DISORDERS AGE 
                                >
                                17
.8194
3.5
4.7396
16
MED
RED BLOOD CELL DISORDERS AGE 0-17
1.0480
3.9
5.0397
16
MED
COAGULATION DISORDERS
1.2664
4.2
5.6398
16
MED
RETICULOENDOTHELIAL & IMMUNITY DISORDERS W CC
1.3049
5.1
6.4399
16
MED
RETICULOENDOTHELIAL & IMMUNITY DISORDERS W/O CC
.6690
3.0
3.7400
17
SURG
LYMPHOMA & LEUKEMIA W MAJOR O.R. PROCEDURE
2.9273
7.4
10.5401
17
SURG
LYMPHOMA & NON-ACUTE LEUKEMIA W OTHER O.R. PROC W CC
2.9814
9.9
12.8402
17
SURG
LYMPHOMA & NON-ACUTE LEUKEMIA W OTHER O.R. PROC W/O CC
1.1619
3.1
4.4403
17
MED
LYMPHOMA & NON-ACUTE LEUKEMIA W CC
1.8486
6.8
9.0404
17
MED
LYMPHOMA & NON-ACUTE LEUKEMIA W/O CC
.8711
3.4
4.6405
17
MED
* ACUTE LEUKEMIA W/O MAJOR O.R. PROCEDURE AGE 0-17
1.9021
4.9
4.9406
17
SURG
MYELOPROLIF DISORD OR POORLY DIFF NEOPL W MAJ O.R.PROC W CC
2.9692
8.4
11.0407
17
SURG
MYELOPROLIF DISORD OR POORLY DIFF NEOPL W MAJ O.R.PROC W/O CC
1.2484
3.8
4.7408
17
SURG
MYELOPROLIF DISORD OR POORLY DIFF NEOPL W OTHER O.R.PROC
2.2150
6.0
9.2409
17
MED
RADIOTHERAPY
1.1469
4.9
6.3410
17
MED
CHEMOTHERAPY W/O ACUTE LEUKEMIA AS SECONDARY DIAGNOSIS
.9972
3.3
4.1411
17
MED
HISTORY OF MALIGNANCY W/O ENDOSCOPY
.4401
1.8
2.3412
17
MED
HISTORY OF MALIGNANCY W ENDOSCOPY
.6073
1.9
2.4413
17
MED
OTHER MYELOPROLIF DIS OR POORLY DIFF NEOPL DIAG W CC
1.3898
6.1
7.8414
17
MED
OTHER MYELOPROLIF DIS OR POORLY DIFF NEOPL DIAG W/O CC
.7422
3.5
4.5415
18
SURG
O.R. PROCEDURE FOR INFECTIOUS & PARASITIC DISEASES
3.8811
12.6
16.2416
18
MED
SEPTICEMIA AGE 
                                >
                                17
1.6209
6.4
8.1417
18
MED
SEPTICEMIA AGE 0-17
.8498
4.5
5.3418
18
MED
POSTOPERATIVE & POST-TRAUMATIC INFECTIONS
1.0452
5.3
6.6( print page 22845)419
18
MED
FEVER OF UNKNOWN ORIGIN AGE 
                                >
                                17 W CC
.8617
4.0
5.0420
18
MED
FEVER OF UNKNOWN ORIGIN AGE 
                                >
                                17 W/O CC
.6114
3.0
3.6421
18
MED
VIRAL ILLNESS AGE 
                                >
                                17
.6646
3.2
3.9422
18
MED
VIRAL ILLNESS & FEVER OF UNKNOWN ORIGIN AGE 0-17
.4800
2.6
3.2423
18
MED
OTHER INFECTIOUS & PARASITIC DISEASES DIAGNOSES
1.8405
6.7
9.0424
19
SURG
O.R. PROCEDURE W PRINCIPAL DIAGNOSES OF MENTAL ILLNESS
2.4350
10.7
15.6425
19
MED
ACUTE ADJUSTMENT REACTION & PSYCHOSOCIAL DYSFUNCTION
.6799
3.2
4.2426
19
MED
DEPRESSIVE NEUROSES
.5276
3.5
4.7427
19
MED
NEUROSES EXCEPT DEPRESSIVE
.5438
3.6
5.0428
19
MED
DISORDERS OF PERSONALITY & IMPULSE CONTROL
.7200
5.0
7.6429
19
MED
ORGANIC DISTURBANCES & MENTAL RETARDATION
.8357
5.2
6.8430
19
MED
PSYCHOSES
.7653
6.7
8.9431
19
MED
CHILDHOOD MENTAL DISORDERS
.6309
5.0
6.8432
19
MED
OTHER MENTAL DISORDER DIAGNOSES
.7068
3.4
5.1433
20
MED
ALCOHOL/DRUG ABUSE OR DEPENDENCE, LEFT AMA
.2852
2.3
3.2434
20
MED
NO LONGER VALID
.0000
.0
.0435
20
MED
NO LONGER VALID
.0000
.0
.0436
20
MED
NO LONGER VALID
.0000
.0
.0437
20
MED
NO LONGER VALID
.0000
.0
.0438
20

NO LONGER VALID
.0000
.0
.0439
21
SURG
SKIN GRAFTS FOR INJURIES
1.9350
6.7
9.5440
21
SURG
WOUND DEBRIDEMENTS FOR INJURIES
2.0732
7.1
10.3441
21
SURG
HAND PROCEDURES FOR INJURIES
.9273
2.3
3.3442
21
SURG
OTHER O.R. PROCEDURES FOR INJURIES W CC
2.5349
6.8
9.6443
21
SURG
OTHER O.R. PROCEDURES FOR INJURIES W/O CC
.9896
2.7
3.6444
21
MED
TRAUMATIC INJURY AGE 
                                >
                                17 W CC
.7244
3.4
4.4445
21
MED
TRAUMATIC INJURY AGE 
                                >
                                17 W/O CC
.4713
2.4
3.0446
21
MED
* TRAUMATIC INJURY AGE 0-17
.2949
2.4
2.4447
21
MED
ALLERGIC REACTIONS AGE 
                                >
                                17
.4851
1.9
2.5448
21
MED
* ALLERGIC REACTIONS AGE 0-17
.0970
2.9
2.9449
21
MED
POISONING & TOXIC EFFECTS OF DRUGS AGE 
                                >
                                17 W CC
.8306
2.8
3.9450
21
MED
POISONING & TOXIC EFFECTS OF DRUGS AGE 
                                >
                                17 W/O CC
.4161
1.6
2.0451
21
MED
* POISONING & TOXIC EFFECTS OF DRUGS AGE 0-17
.2618
2.1
2.1452
21
MED
COMPLICATIONS OF TREATMENT W CC
1.0125
3.8
5.2453
21
MED
COMPLICATIONS OF TREATMENT W/O CC
.4997
2.2
2.8454
21
MED
OTHER INJURY, POISONING & TOXIC EFFECT DIAG W CC
.8713
3.4
4.9455
21
MED
OTHER INJURY, POISONING & TOXIC EFFECT DIAG W/O CC
.4617
1.9
2.6456
22

NO LONGER VALID
.0000
.0
.0457
22
MED
NO LONGER VALID
.0000
.0
.0458
22
SURG
NO LONGER VALID
.0000
.0
.0459
22
SURG
NO LONGER VALID
.0000
.0
.0460
22
MED
NO LONGER VALID
.0000
.0
.0461
23
SURG
O.R. PROC W DIAGNOSES OF OTHER CONTACT W HEALTH SERVICES
1.1994
2.5
4.6462
23
MED
REHABILITATION
1.2033
10.4
12.3463
23
MED
SIGNS & SYMPTOMS W CC
.6818
3.4
4.3464
23
MED
SIGNS & SYMPTOMS W/O CC
.4630
2.5
3.1465
23
MED
AFTERCARE W HISTORY OF MALIGNANCY AS SECONDARY DIAGNOSIS
.6065
2.5
3.6466
23
MED
AFTERCARE W/O HISTORY OF MALIGNANCY AS SECONDARY DIAGNOSIS
.6630
2.5
4.2467
23
MED
OTHER FACTORS INFLUENCING HEALTH STATUS
.5762
2.7
4.1468


EXTENSIVE O.R. PROCEDURE UNRELATED TO PRINCIPAL DIAGNOSIS
3.8458
11.3
14.5469


** PRINCIPAL DIAGNOSIS INVALID AS DISCHARGE DIAGNOSIS
.0000
.0
.0470


** UNGROUPABLE
.0000
.0
.0471
08
SURG
BILATERAL OR MULTIPLE MAJOR JOINT PROCS OF LOWER EXTREMITY
2.9929
5.0
5.7472
22
SURG
NO LONGER VALID
.0000
.0
.0473
17
SURG
ACUTE LEUKEMIA W/O MAJOR O.R. PROCEDURE AGE 
                                >
                                17
3.9044
9.7
15.0474
04
SURG
NO LONGER VALID
.0000
.0
.0475
04
MED
RESPIRATORY SYSTEM DIAGNOSIS WITH VENTILATOR SUPPORT
3.9155
10.0
12.7476

SURG
PROSTATIC O.R. PROCEDURE UNRELATED TO PRINCIPAL DIAGNOSIS
2.2902
10.0
12.3( print page 22846)477

SURG
NON-EXTENSIVE O.R. PROCEDURE UNRELATED TO PRINCIPAL DIAGNOSIS
1.9571
6.7
9.3478
05
SURG
OTHER VASCULAR PROCEDURES W CC
2.4276
5.9
8.2479
05
SURG
OTHER VASCULAR PROCEDURES W/O CC
1.4024
2.8
3.7480
PRE
SURG
LIVER TRANSPLANT
10.6132
17.7
22.8481
PRE
SURG
BONE MARROW TRANSPLANT
7.8889
23.4
25.6482
PRE
SURG
TRACHEOSTOMY FOR FACE, MOUTH & NECK DIAGNOSES
3.8343
11.4
14.3483
PRE
SURG
TRACHEOSTOMY EXCEPT FOR FACE, MOUTH & NECK DIAGNOSES
15.2827
34.0
41.0484
24
SURG
CRANIOTOMY FOR MULTIPLE SIGNIFICANT TRAUMA
5.1265
11.5
14.5485
24
SURG
LIMB REATTACHMENT, HIP AND FEMUR PROC FOR MULTIPLE SIGNIFICANT TRA
3.1094
8.5
10.3486
24
SURG
OTHER O.R. PROCEDURES FOR MULTIPLE SIGNIFICANT TRAUMA
5.2547
11.0
14.3487
24
MED
OTHER MULTIPLE SIGNIFICANT TRAUMA
1.9199
6.3
8.2488
25
SURG
HIV W EXTENSIVE O.R. PROCEDURE
5.1474
15.0
19.8489
25
MED
HIV W MAJOR RELATED CONDITION
1.8802
7.0
9.4490
25
MED
HIV W OR W/O OTHER RELATED CONDITION
1.0475
4.3
5.8491
08
SURG
MAJOR JOINT & LIMB REATTACHMENT PROCEDURES OF UPPER EXTREMITY
1.6364
3.0
3.5492
17
MED
CHEMOTHERAPY W ACUTE LEUKEMIA AS SECONDARY DIAGNOSIS
4.8853
13.6
19.0493
07
SURG
LAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W CC
1.8468
4.9
6.3494
07
SURG
LAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W/O CC
.9800
1.9
2.5495
PRE
SURG
LUNG TRANSPLANT
8.8879
13.8
16.2496
08
SURG
COMBINED ANTERIOR/POSTERIOR SPINAL FUSION
5.6865
8.5
10.3497
08
SURG
SPINAL FUSION EXCEPT CERVICAL W CC
3.1996
5.8
6.8498
08
SURG
SPINAL FUSION EXCEPT CERVICAL W/O CC
2.2996
3.9
4.3499
08
SURG
BACK & NECK PROCEDURES EXCEPT SPINAL FUSION W CC
1.4471
3.8
5.0500
08
SURG
BACK & NECK PROCEDURES EXCEPT SPINAL FUSION W/O CC
.9375
2.2
2.6501
08
SURG
KNEE PROCEDURES W PDX OF INFECTION W CC
2.7466
9.8
12.0502
08
SURG
KNEE PROCEDURES W PDX OF INFECTION W/O CC
1.5591
5.9
6.9503
08
SURG
KNEE PROCEDURES W/O PDX OF INFECTION
1.2336
3.3
4.2504
22
SURG
EXTENSIVE 3RD DEGREE BURNS W SKIN GRAFT
13.8097
28.2
33.6505
22
MED
EXTENSIVE 3RD DEGREE BURNS W/O SKIN GRAFT
1.4893
2.0
3.4506
22
SURG
FULL THICKNESS BURN W SKIN GRAFT OR INHAL INJ W CC OR SIG TRAUMA
4.9149
15.7
19.9507
22
SURG
FULL THICKNESS BURN W SKIN GRFT OR INHAL INJ W/O CC OR SIG TRAUMA
1.8331
7.2
9.2508
22
MED
FULL THICKNESS BURN W/O SKIN GRFT OR INHAL INJ W CC OR SIG TRAUMA
1.2966
6.0
8.3509
22
MED
FULL THICKNESS BURN W/O SKIN GRFT OR INH INJ W/O CC OR SIG TRAUMA
.7323
3.7
4.9510
22
MED
NON-EXTENSIVE BURNS W CC OR SIGNIFICANT TRAUMA
1.3509
5.8
8.0511
22
MED
NON-EXTENSIVE BURNS W/O CC OR SIGNIFICANT TRAUMA
.7558
3.6
5.1512
PRE
SURG
SIMULTANEOUS PANCREAS/KIDNEY TRANSPLANT
6.6413
13.4
16.5513
PRE
SURG
PANCREAS TRANSPLANT
6.6497
10.3
13.4514
05
SURG
CARDIAC DEFIBRILLATOR IMPLANT W CARDIAC CATH
6.4169
6.8
9.0515
05
SURG
CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH
5.0652
4.3
6.8516
05
SURG
PERCUTANEOUS CARDIOVASC PROC W AMI
2.7250
4.1
5.0517
05
SURG
PERC CARDIO PROC W CORONARY ARTERY STENT W/O AMI
2.1497
1.9
2.7518
05
SURG
PERC CARDIO PROC W/O CORONARY ARTERY STENT OR AMI
1.6673
2.5
3.6519
08
SURG
CERVICAL SPINAL FUSION W CC
2.2654
3.4
5.1520
08
SURG
CERVICAL SPINAL FUSION W/O CC
1.5709
2.0
2.8521
20
MED
ALCOHOL/DRUG ABUSE OR DEPENDENCE W CC
.7354
4.2
5.4522
20
MED
ALC/DRUG ABUSE OR DEPEND W REHABILITATION THERAPY W/O CC
.6631
9.0
10.7523
20
MED
ALC/DRUG ABUSE OR DEPEND W/O REHABILITATION THERAPY W/O CC
.3983
3.5
4.3* MEDICARE DATA HAVE BEEN SUPPLEMENTED BY DATA FROM 19 STATES FOR LOW VOLUME DRGS.** DRGS 469 AND 470 CONTAIN CASES WHICH COULD NOT BE ASSIGNED TO VALID DRGS.NOTE: GEOMETRIC MEAN IS USED ONLY TO DETERMINE PAYMENT FOR TRANSFER CASES.NOTE: ARITHMETIC MEAN IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY.NOTE: RELATIVE WEIGHTS ARE BASED ON MEDICARE PATIENT DATA AND MAY NOT BE APPROPRIATE FOR OTHER PATIENTS.
 
 
  Table 6A.—New Diagnosis Codes
Diagnosis code
Description
CC
MDC
DRG256.31
Premature menopause
N
13
358, 359, 369256.39
Other ovarian failure
N
13
358, 359, 369277.7
Dysmetabolic Syndrome X
N
10
299464.00
Acute laryngitis, without mention of obstruction
N
3 
                                 pre
68, 69, 70 
                                 482464.01
Acute laryngitis, with obstruction
N
3 
                                 pre
68, 69, 70 
                                 482464.50
Unspecified supraglottis, without mention of obstruction
N
3 
                                 pre
68, 69, 70 
                                 482464.51
Unspecified supraglottis, with obstruction
N
3 
                                 pre
68, 69, 70 
                                 482521.00
Unspecified dental caries
N
3 
                                 pre
185, 186, 187 
                                 482521.01
Dental caries limited to enamel
N
3 
                                 pre
185, 186, 187 
                                 482521.02
Dental caries extending into dentine
N
3 
                                 pre
185, 186, 187 
                                 482521.03
Dental caries extending into pulp
N
3 
                                 pre
185, 186, 187 
                                 482521.04
Arrested dental caries
N
3 
                                 pre
185, 186, 187 
                                 482521.05
Odontoclasia
N
3 
                                 pre
185, 186, 187 
                                 482521.09
Other dental caries
N
3 
                                 pre
185, 186, 187 
                                 482525.10
Unspecified acquired absence of teeth
N
3 
                                 pre
185, 186, 187 
                                 482525.11
Loss of teeth due to trauma
N
3 
                                 pre
185, 186, 187 
                                 482525.12
Loss of teeth due to periodontal disease
N
3 
                                 pre
182, 183, 184 
                                 482525.13
Loss of teeth due to caries
N
3 
                                 pre
185, 186, 187 
                                 482525.19
Other loss of teeth
N
3 
                                 pre
185, 186, 187 
                                 482530.12
Acute esophagitis
N
6
182, 183, 184564.00
Unspecified constipation
N
6
182, 183, 184564.01
Slow transit constipation
N
6
182, 183, 184564.02
Outlet dysfunction constipation
N
6
182, 183, 184564.09
Other constipation
N
6
182, 183, 184602.3
Dysplasia of prostate
N
12
352608.82
Hematospermia
N
12
352608.87
Retrograde ejaculation
N
12
352692.76
Sunburn of second degree
N
9
283, 284692.77
Sunburn of third degree
N
9
283, 284718.70
Developmental dislocation of joint, site unspecified
N
8
256718.71
Developmental dislocation of joint, shoulder region
N
8
256718.72
Developmental dislocation of joint, upper arm
N
8
256718.73
Developmental dislocation of joint, forearm
N
8
256718.74
Developmental dislocation of joint, hand
N
8
256718.75
Developmental dislocation of joint, pelvic region and thigh
N
8
256718.76
Developmental dislocation of joint, lower leg
N
8
256718.77
Developmental dislocation of joint, ankle and foot
N
8
256718.78
Developmental dislocation of joint, other specified sites
N
8
256718.79
Developmental dislocation of joint, multiple sites
N
8
256733.93
Stress fracture of tibia or fibula
Y
8
239733.94
Stress fracture of the metatarsals
Y
8
239733.95
Stress fracture of other bone
Y
8
239772.10
Intraventricular hemorrhage, unspecified grade
Y
15
387, 389772.11
Intraventricular hemorrhage, Grade I
Y
15
387, 389772.12
Intraventricular hemorrhage, Grade II
Y
15
387, 389772.13
Intraventricular hemorrhage, Grade III
Y
15
387, 389772.14
Intraventricular hemorrhage, Grade IV
Y
15
387, 389779.7
Perventricular leukomalacia
Y
15
387, 389793.80
Unspecified abnormal mammogram
N
9
276793.81
Mammographic microcalcification
N
9
276793.89
Other abnormal findings on radiological examination breast
N
9
276840.7
Superior glenoid labrum lesions (SLAP)
N
8 
                                 24
253, 254, 255 
                                 487( print page 22848)997.71
Vascular complications of mesenteric artery
Y
6 
                                 15
188, 189, 190 
                                 
                                    387,1
                                     389 1997.72
Vascular complications of renal artery
Y
11 
                                 15
331, 332, 333 
                                 
                                    387,1
                                     389 1997.79
Vascular complications of other vessels
Y
5 
                                 15
130, 131 
                                 
                                    387,1
                                     389 1V10.53
Personal history of malignant neoplasm, renal pelvis
N
17
411, 412V45.84
Dental restoration status
N
23
467V49.82
Dental sealant status
N
23
467V83.01
Asymptomatic hemophilia A carrier
N
23
467V83.02
Symptomatic hemophilia A carrier
N
23
467
 Table 6B.—New Procedure Codes
Procedure code
Description
OR
MDC
DRG37.28
Intracardiac echocardiography
N44.32
Percutaneous [endoscopic] gastrojejunostomy
Y
6 
                                 7  
                                 10  
                                 17
154-156 
                                 201  
                                 288  
                                 400, 406, 40767.51
Transabdominal cerclage of cervix
Y
13 
                                 14  
                                 21  
                                 24
360 
                                 372, 373  
                                 442, 443  
                                 48667.59
Other repair of internal cervical os
Y
13 
                                 14  
                                 21  
                                 24
360 
                                 372, 373  
                                 442, 443  
                                 48675.38
Fetal pulse oximetry
N81.30
Refusion of spine, not otherwise specified
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 497, 498  
                                 442, 443  
                                 48681.31
Refusion of Atlas-axis spine
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 497, 498  
                                 442, 443  
                                 48681.32
Refusion of other cervical spine, anterior technique
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 496, 519, 520  
                                 442, 443  
                                 48681.33
Refusion of other cervical spine, posterior technique
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 496, 519, 520  
                                 442, 443  
                                 48681.34
Refusion of dorsal and dorsolumbar spine, anterior technique
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 496, 497, 498  
                                 442, 443  
                                 48681.35
Refusion of dorsal and dorsolumbar spine, posterior technique
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 496, 497, 498  
                                 442, 443  
                                 48681.36
Refusion of lumbar and lumbosacral spine, anterior technique
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 496, 497, 498  
                                 442, 443  
                                 48681.37
Refusion of lumbar and lumbosacral spine, lateral transverse process technique
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 496, 497, 498  
                                 442, 443  
                                 48681.38
Refusion of lumbar and lumbosacral spine, posterior technique
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 496, 497, 498  
                                 442, 443  
                                 486( print page 22849)81.39
Refusion of spine, not elsewhere classified
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 497, 498  
                                 442, 443  
                                 48697.44
Nonoperative removal of heart assist system
N
 Table 6C.—Invalid Diagnosis Codes
Diagnosis code
Description
CC
MDC
DRG256.3
Other ovarian failure
N
13
358, 359, 369464.0
Acute laryngitis
N
3 
                                 pre
68, 69, 70 
                                 482521.0
Dental caries
N
3 
                                 pre
185, 186, 187 
                                 482525.1
Loss of teeth due to accident, extraction, or local periodontal disease
N
3 
                                 pre
185, 186, 187 
                                 482564.0
Constipation
N
6
182, 183, 184772.1
Intraventricular hemorrhage
Y
15
387,389793.8
Nonspecific abnormal findings on radiological and other examinations of body structure, breast
N
9
276
 Table 6D.—Invalid Procedure Codes
Procedure code
Description
OR
MDC
DRG67.5
Repair of internal cervical os
Y
13 
                                 14  
                                 21  
                                 24
360 
                                 372, 373  
                                 442, 442  
                                 48681.09
Refusion of spine, any level or technique
Y
1 
                                 8  
                                 21  
                                 24
4 
                                 497, 498  
                                 442, 443  
                                 486
 Table 6E.—Revised Diagnosis Code Titles
Diagnosis code
Description
CC
MDC
DRG411.81
Acute coronary occlusion without myocardial infarction
Y
5
124, 140493.00
Extrinsic asthma without mention of status asthmaticus or acute exacerbation or unspecified
N
4
96, 97, 98493.10
Intrinsic asthma without mention of status asthmaticus or acute exacerbation or unspecified
N
4
96, 97, 98493.20
Chronic obstructive asthma without mention of status asthmaticus or acute exacerbation or unspecified
Y
4
88493.90
Asthma, unspecified without mention of status asthmaticus or acute exacerbation or unspecified
N
4
96, 97, 98V70.7
Examination of participant in clinical trial
N
23
467
 Table 6F.—Revised Procedure Codes
Procedure 
                                 code
Description
OR
MDC
DRG75.34
Other fetal monitoring
N
 
 
 Table 6G.—Additions to the CC Exclusions List
CCs that are added to the list are in Table 6F-Additions to the CC Exclusions List. Each of the principal diagnoses is shown with an asterisk, and the revisions to the CC Exclusions List are provided in an indented column immediately following the affected principal diagnosis.
*25631
80600
82010
80637
80606
82021
77212
772102580
80601
82011
80638
80607
82022
77213
772112581
80602
82012
80639
80608
82030
77214
772122588
80603
82013
8064
80609
82031
7797
772132589
80604
82019
8065
80610
82032
*7729
77214*25639
80605
82020
80660
80611
8208
77210
77972580
80606
82021
80661
80612
8209
77211
*77692581
80607
82022
80662
80613
82100
77212
772102588
80608
82030
80669
80614
82101
77213
772112589
80609
82031
80670
80615
82110
77214
77212*6023
80610
82032
80671
80616
82111
7797
772135960
80611
8208
80672
80617
*7720
*7760
772145996
80612
8209
80679
80618
77210
77210
77976010
80613
82100
8068
80619
77211
77211
*77976012
80614
82101
8069
80620
77212
77212
77226013
80615
82110
8080
80621
77213
77213
77976021
80616
82111
8082
80622
77214
77214
*779878820
80617
*73394
8083
80623
7797
7797
7721078829
80618
73310
80843
80624
*77210
*7761
77211*60887
80619
73311
80849
80625
77210
77210
772125970
80620
73312
80851
80626
77211
77211
772135994
80621
73313
80852
80627
77212
77212
77214*73310
80622
73314
80853
80628
77213
77213
779773393
80623
73315
80859
80629
77214
77214
*997273394
80624
73316
8088
80630
7722
7797
9977173395
80625
73319
8089
80631
7797
*7762
99772*73311
80626
73393
82000
80632
*77211
77210
9977973393
80627
73394
82001
80633
77210
77211
*9977173394
80628
73395
82002
80634
77211
77212
5364073395
80629
8058
82003
80635
77212
77213
53641*73312
80630
8059
82009
80636
77213
77214
5364273393
80631
80600
82010
80637
77214
7797
5364973394
80632
80601
82011
80638
7722
*7763
5696273395
80633
80602
82012
80639
7797
77210
9974*73313
80634
80603
82013
8064
*77212
77211
9977173393
80635
80604
82019
8065
77210
77212
9977273394
80636
80605
82020
80660
77211
77213
9977973395
80637
80606
82021
80661
77212
77214
*99772*73314
80638
80607
82022
80662
77213
7797
997573393
80639
80608
82030
80669
77214
*7764
9977173394
8064
80609
82031
80670
7722
77210
9977273395
8065
80610
82032
80671
7797
77211
99779*73315
80660
80611
8208
80672
*77213
77212
*9977973393
80661
80612
8209
80679
77210
77213
997273394
80662
80613
82100
8068
77211
77214
9977173395
80669
80614
82101
8069
77212
7797
99772*73316
80670
80615
82110
8080
77213
*7765
9977973393
80671
80616
82111
8082
77214
77210
*9979173394
80672
80617
*73395
8083
7722
77211
9977173395
80679
80618
73310
80843
7797
77212
99772*73319
8068
80619
73311
80849
*77214
77213
9977973393
8069
80620
73312
80851
77210
77214
*9979973394
8080
80621
73313
80852
77211
7797
9977173395
8082
80622
73314
80853
77212
*7766
99772*73393
8083
80623
73315
80859
77213
77210
9977973310
80843
80624
73316
8088
77214
77211
*9988173311
80849
80625
73319
8089
7722
77212
9977173312
80851
80626
73393
82000
7797
77213
9977273313
80852
80627
73394
82001
*7722
77214
9977973314
80853
80628
73395
82002
77210
7797
*9988373315
80859
80629
8058
82003
77211
*7767
9977173316
8088
80630
8059
82009
77212
77210
9977273319
8089
80631
80600
82010
77213
77211
9977973393
82000
80632
80601
82011
77214
77212
*9988973394
82001
80633
80602
82012
7797
77213
9977173395
82002
80634
80603
82013
*7728
77214
997728058
82003
80635
80604
82019
77210
7797
997798059
82009
80636
80605
82020
77211
*7768
*9989997719977299779
 
 
 Table 6H.—Deletions to the CC Exclusions List
CCs that are deleted from the list are in Table 6G—Deletions to the CC Exclusions List. Each of the principal diagnoses is shown with an asterisk, and the revisions to the CC Exclusions List are provided in an indented column immediately following the affected principal diagnosis.
*25632580258125882589*77207721*772177217722*77227721*77287721*77297721*77607721*77617721*77627721*77637721*77647721*77657721*77667721*77677721*77687721*77697721*77987721
 
 
 Table 7A.—Medicare Prospective Payment System, Selected Percentile Lengths of Stay
[FY2000 MEDPAR update 12/00 Grouper V18.0]
DRG
Number 
                                 discharges
Arithmetic 
                                 mean LOS
10th 
                                 percentile
25th 
                                 percentile
50th 
                                 percentile
75th 
                                 percentile
90th 
                                 percentile1
33822
8.9935
2
3
6
12
192
6772
9.9778
3
5
8
13
203
2
43.5000
35
35
52
52
524
6035
7.1639
1
2
5
9
155
93311
3.1649
1
1
2
3
76
366
2.9672
1
1
2
4
67
12470
9.9739
2
4
7
12
208
4164
3.2759
1
1
2
4
79
1610
6.3491
1
3
5
8
1310
17577
6.5503
2
3
5
8
1311
3128
4.0767
1
2
3
5
812
46758
5.8962
2
3
4
7
1113
6415
5.2011
2
3
4
6
914
319523
5.8762
2
3
5
7
1115
145366
3.5498
1
2
3
4
716
11155
6.0293
2
3
5
7
1217
3519
3.3231
1
2
3
4
618
25961
5.4162
2
3
4
7
1019
8638
3.6972
1
2
3
5
720
5629
10.1482
3
5
8
13
2021
1309
6.5516
2
3
5
8
1322
2535
4.8174
1
2
4
6
923
9464
4.1855
1
2
3
5
824
52753
4.9830
1
2
4
6
1025
25370
3.2236
1
2
3
4
626
31
2.7097
1
1
2
3
627
3441
5.0584
1
1
3
6
1128
11316
6.2100
1
3
5
8
1329
4486
3.6097
1
2
3
5
730
1
1.0000
1
1
1
1
131
3488
4.4903
1
2
3
5
832
1738
2.5621
1
1
2
3
533
1
1.0000
1
1
1
1
134
20249
5.0786
1
2
4
6
1035
5728
3.3959
1
2
3
4
636
3190
1.4649
1
1
1
1
237
1452
4.0296
1
1
2
5
938
102
2.6569
1
1
2
3
539
912
1.9079
1
1
1
2
440
1545
3.4252
1
1
2
4
742
2223
2.2852
1
1
1
3
543
85
3.1882
1
2
3
4
644
1238
4.9548
2
3
4
6
945
2444
3.1678
1
2
3
4
646
3051
4.6834
1
2
4
6
947
1281
3.2560
1
1
3
4
649
2241
4.8104
1
2
3
6
950
2488
1.9425
1
1
1
2
351
203
2.6995
1
1
1
2
652
220
1.9318
1
1
1
2
353
2478
3.5557
1
1
2
4
854
2
1.5000
1
1
2
2
255
1505
2.7442
1
1
1
3
656
503
2.7256
1
1
2
3
557
708
3.9492
1
1
2
5
959
107
2.7850
1
1
2
3
560
2
3.5000
2
2
5
5
561
231
5.0996
1
1
2
6
1262
3
1.3333
1
1
1
2
263
2934
4.3889
1
2
3
5
864
3033
6.1800
1
2
4
8
1365
34466
2.8420
1
1
2
4
566
6978
3.1635
1
1
2
4
667
495
3.5960
1
2
3
4
768
16724
4.1158
1
2
3
5
769
5435
3.2736
1
2
3
4
670
24
2.9167
1
2
2
4
571
82
3.8049
1
2
3
4
772
883
3.5663
1
2
3
4
673
6630
4.4065
1
2
3
6
9( print page 22853)75
39010
9.9124
3
5
7
12
1976
38998
11.2677
3
5
9
14
2177
2352
4.9184
1
2
4
7
1078
32087
6.7848
3
4
6
8
1179
169783
8.4892
3
4
7
11
1680
9018
5.6618
2
3
5
7
1081
4
18.2500
3
3
4
8
5882
61883
6.9447
2
3
5
9
1483
6446
5.5496
2
3
4
7
1084
1508
3.3455
1
2
3
4
685
20572
6.3122
2
3
5
8
1286
2118
3.6643
1
2
3
5
787
60110
6.2840
1
3
5
8
1288
389694
5.1207
2
3
4
6
989
525838
5.9470
2
3
5
7
1190
53895
4.1549
2
3
4
5
791
54
4.5185
2
2
3
5
1092
13774
6.3499
2
3
5
8
1293
1672
4.0353
1
2
3
5
794
12030
6.2988
2
3
5
8
1295
1595
3.7179
1
2
3
5
796
61986
4.6292
2
3
4
6
897
31444
3.6560
1
2
3
5
798
18
4.2222
1
2
2
4
699
18996
3.1991
1
1
2
4
6100
7619
2.1869
1
1
2
3
4101
19997
4.3938
1
2
3
5
9102
5146
2.6570
1
1
2
3
5103
475
46.6021
9
13
25
60
98104
36578
11.3165
7
11
28
60
98105
29726
9.2831
5
6
8
15
98106
3401
11.4963
5
7
10
14
20107
87868
10.3783
5
7
9
12
17108
6048
10.2116
3
5
8
13
19109
60265
7.6926
4
5
6
9
12110
52595
9.2013
2
5
7
11
18111
8545
4.7604
1
2
5
6
8113
42250
12.1885
3
6
9
15
24114
8712
8.3768
2
4
7
10
16115
14329
8.1687
1
4
7
11
16116
330888
3.6061
2
9
7
11
16117
3717
4.1512
1
1
2
5
9118
7667
2.6849
1
1
1
3
6119
1307
4.8829
1
1
3
6
12120
35929
8.1178
1
2
5
10
16121
162112
6.3821
2
3
5
8
12122
78969
3.7027
1
2
3
5
7123
40659
4.5833
1
1
3
6
11124
132801
4.3427
1
2
3
5
8125
80169
2.7657
1
1
2
4
5126
5150
11.6882
3
6
9
14
22127
678903
5.2745
2
3
4
7
10128
9424
5.6175
2
4
5
7
9129
4140
2.7621
1
1
1
3
6130
86009
5.6760
2
3
5
7
10131
28236
4.2426
1
2
4
6
7132
147648
3.0002
1
1
2
4
6133
8321
2.3367
1
1
2
3
4134
36118
3.2406
1
2
3
4
6135
7266
4.5531
1
2
3
6
9136
1221
2.7158
1
1
2
3
5138
194087
3.9932
1
2
3
5
8139
82604
2.5072
1
1
2
3
5140
69724
2.6533
1
1
2
3
5141
90403
3.6691
1
2
3
5
7142
45776
2.6508
1
1
2
3
5143
203918
2.1253
1
1
2
3
4144
81577
5.3196
1
2
4
7
11145
7224
2.7460
1
1
2
3
5146
10683
10.2826
5
7
9
12
17( print page 22854)147
2629
6.4196
3
5
6
8
9148
129247
12.1904
5
7
10
15
22149
18462
6.5184
4
5
6
8
9150
19795
11.2770
4
7
10
14
20151
4814
5.8286
2
3
5
8
10152
4381
8.1438
3
5
7
9
14153
2083
5.3711
3
4
5
7
8154
28660
13.1491
4
7
10
16
25155
6596
4.2179
1
2
3
6
8156
4
7.5000
1
1
5
6
18157
7903
5.3790
1
2
4
7
11158
4630
2.5395
1
1
2
3
5159
16309
4.9926
1
2
4
6
10160
11655
2.6619
1
1
2
3
5161
11119
4.2027
1
1
3
5
9162
7199
1.9267
1
1
1
2
4163
5
4.4000
1
1
3
4
13164
4824
8.4279
4
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6
10516


1
2
3
6
10517


1
2
3
6
10518


1
2
3
6
10519


1
2
3
6
10520


1
2
3
6
10521


1
2
3
6
10522


1
2
3
6
10523


1
2
3
6
1010811358
 
 
 Table 7B.—Medicare Prospective Payment System, Selected Percentile Lengths of Stay
[FY2000 MEDPAR update 12/00 Grouper V19.0]
DRG
Number 
                                 discharges
Arithmetic 
                                 mean LOS
10th 
                                 percentile
25th 
                                 percentile
50th 
                                 percentile
75th 
                                 percentile
90th 
                                 percentile1
33822
8.9935
2
3
6
12
192
6772
9.9778
3
5
8
13
203
2
43.5000
35
35
52
52
524
6035
7.1639
1
2
5
9
155
93311
3.1649
1
1
2
3
76
366
2.9672
1
1
2
4
67
12470
9.9739
2
4
7
12
208
4164
3.2759
1
1
2
4
79
1610
6.3491
1
3
5
8
1310
17577
6.5503
2
3
5
8
1311
3128
4.0767
1
2
3
5
812
46758
5.8962
2
3
4
7
1113
6415
5.2011
2
3
4
6
914
319523
5.8762
2
3
5
7
1115
145366
3.5498
1
2
3
4
716
11155
6.0293
2
3
5
7
1217
3519
3.3231
1
2
3
4
618
25961
5.4162
2
3
4
7
1019
8638
3.6972
1
2
3
5
720
5629
10.1482
3
5
8
13
2021
1309
6.5516
2
3
5
8
1322
2535
4.8174
1
2
4
6
923
9464
4.1855
1
2
3
5
824
52753
4.9830
1
2
4
6
1025
25370
3.2236
1
2
3
4
626
31
2.7097
1
1
2
3
627
3441
5.0584
1
1
3
6
1128
11316
6.2100
1
3
5
8
1329
4486
3.6097
1
2
3
5
730
1
1.0000
1
1
1
1
131
3488
4.4903
1
2
3
5
832
1738
2.5621
1
1
2
3
533
1
1.0000
1
1
1
1
134
20249
5.0786
1
2
4
6
1035
5728
3.3959
1
2
3
4
636
3190
1.4649
1
1
1
1
237
1452
4.0296
1
1
2
5
938
102
2.6569
1
1
2
3
539
912
1.9079
1
1
1
2
440
1545
3.4252
1
1
2
4
742
2223
2.2852
1
1
1
3
543
85
3.1882
1
2
3
4
644
1238
4.9548
2
3
4
6
945
2444
3.1678
1
2
3
4
646
3051
4.6834
1
2
4
6
947
1281
3.2560
1
1
3
4
649
2241
4.8104
1
2
3
6
950
2488
1.9425
1
1
1
2
351
203
2.6995
1
1
1
2
652
220
1.9318
1
1
1
2
353
2478
3.5557
1
1
2
4
854
2
1.5000
1
1
2
2
255
1505
2.7442
1
1
1
3
656
503
2.7256
1
1
2
3
557
708
3.9492
1
1
2
5
959
107
2.7850
1
1
2
3
560
2
3.5000
2
2
5
5
561
231
5.0996
1
1
2
6
1262
3
1.3333
1
1
1
2
263
3003
4.4409
1
2
3
5
964
3033
6.1800
1
2
4
8
1365
34466
2.8420
1
1
2
4
566
6978
3.1635
1
1
2
4
667
495
3.5960
1
2
3
4
768
16724
4.1158
1
2
3
5
769
5435
3.2736
1
2
3
4
670
24
2.9167
1
2
2
4
571
82
3.8049
1
2
3
4
772
883
3.5663
1
2
3
4
673
6630
4.4065
1
2
3
6
9( print page 22860)75
39010
9.9124
3
5
7
12
1976
38998
11.2677
3
5
9
14
2177
2352
4.9184
1
2
4
7
1078
32087
6.7848
3
4
6
8
1179
169783
8.4892
3
4
7
11
1680
9018
5.6618
2
3
5
7
1081
4
18.2500
3
3
4
8
5882
61883
6.9447
2
3
5
9
1483
6446
5.5496
2
3
4
7
1084
1508
3.3455
1
2
3
4
685
20572
6.3122
2
3
5
8
1286
2118
3.6643
1
2
3
5
787
60110
6.2840
1
3
5
8
1288
389694
5.1207
2
3
4
6
989
525838
5.9470
2
3
5
7
1190
53895
4.1549
2
3
4
5
791
54
4.5185
2
2
3
5
1092
13774
6.3499
2
3
5
8
1293
1672
4.0353
1
2
3
5
794
12030
6.2988
2
3
5
8
1295
1595
3.7179
1
2
3
5
796
61986
4.6292
2
3
4
6
897
31444
3.6560
1
2
3
5
798
18
4.2222
1
2
2
4
699
18996
3.1991
1
1
2
4
6100
7619
2.1869
1
1
2
3
4101
19997
4.3938
1
2
3
5
9102
5146
2.6570
1
1
2
3
5103
475
46.6021
9
13
25
60
98104
19650
14.1922
6
8
12
17
25105
25952
9.7562
4
6
8
11
17106
3401
11.4963
5
7
10
14
20107
87868
10.3783
5
7
9
12
17108
6047
10.2128
3
5
8
13
19109
60265
7.6926
4
5
6
9
12110
52587
9.2019
2
5
7
11
18111
8545
4.7604
1
2
5
6
8113
42250
12.1885
3
6
9
15
24114
8712
8.3768
2
4
7
10
16115
14329
8.1687
1
4
7
11
16116
91838
4.4683
1
2
3
6
9117
3717
4.1512
1
1
2
5
9118
7667
2.6849
1
1
1
3
6119
1307
4.8829
1
1
3
6
12120
37500
8.5321
1
2
6
11
19121
162112
6.3821
2
3
5
8
12122
78969
3.7027
1
2
3
5
7123
40659
4.5833
1
1
3
6
11124
132801
4.3427
1
2
3
5
8125
80169
2.7657
1
1
2
4
5126
5150
11.6882
3
6
9
14
22127
678903
5.2745
2
3
4
7
10128
9424
5.6175
2
4
5
7
9129
4140
2.7621
1
1
1
3
6130
86009
5.6760
2
3
5
7
10131
28236
4.2426
1
2
4
6
7132
147648
3.0002
1
1
2
4
6133
8321
2.3367
1
1
2
3
4134
36118
3.2406
1
2
3
4
6135
7266
4.5531
1
2
3
6
9136
1221
2.7158
1
1
2
3
5138
194087
3.9932
1
2
3
5
8139
82604
2.5072
1
1
2
3
5140
69724
2.6533
1
1
2
3
5141
90403
3.6691
1
2
3
5
7142
45776
2.6508
1
1
2
3
5143
203918
2.1253
1
1
2
3
4144
81577
5.3196
1
2
4
7
11145
7224
2.7460
1
1
2
3
5146
10683
10.2826
5
7
9
12
17( print page 22861)147
2629
6.4196
3
5
6
8
9148
129247
12.1904
5
7
10
15
22149
18462
6.5184
4
5
6
8
9150
19795
11.2770
4
7
10
14
20151
4814
5.8286
2
3
5
8
10152
4381
8.1438
3
5
7
9
14153
2083
5.3711
3
4
5
7
8154
28660
13.1491
4
7
10
16
25155
6596
4.2179
1
2
3
6
8156
4
7.5000
1
1
5
6
18157
7903
5.3790
1
2
4
7
11158
4630
2.5395
1
1
2
3
5159
16309
4.9926
1
2
4
6
10160
11655
2.6619
1
1
2
3
5161
11119
4.2027
1
1
3
5
9162
7199
1.9267
1
1
1
2
4163
5
4.4000
1
1
3
4
13164
4824
8.4279
4
5
7
10
15165
2066
4.8049
2
3
5
6
8166
3532
5.0337
2
2
4
6
10167
3269
2.5990
1
2
2
3
5168
1327
4.7641
1
2
3
6
10169
834
2.3405
1
1
2
3
5170
10975
11.1690
2
5
8
14
22171
1284
4.6597
1
2
4
6
9172
30412
6.9363
2
3
5
9
14173
2685
3.6648
1
1
3
5
7174
240400
4.7974
2
3
4
6
9175
32375
2.9414
1
2
3
4
5176
15101
5.2286
2
3
4
6
10177
9190
4.5348
2
2
4
6
8178
3597
3.0703
1
2
3
4
6179
12291
5.9729
2
3
5
7
11180
85599
5.3567
2
3
4
7
10181
26315
3.4185
1
2
3
4
6182
243506
4.3356
1
2
3
5
8183
83969
2.9155
1
1
2
4
5184
79
2.9620
1
2
2
4
6185
4760
4.5210
1
2
3
6
9186
3
9.3333
1
1
9
18
18187
646
3.9164
1
1
3
5
8188
75558
5.5580
1
2
4
7
11189
11984
3.1542
1
1
2
4
6190
49
7.0204
2
3
4
5
8191
8867
13.7982
4
6
10
17
27192
1105
6.5122
2
4
6
8
11193
5258
12.5369
5
7
10
16
22194
718
6.7869
2
4
6
8
12195
4327
10.1470
4
6
9
12
17196
1162
5.7212
2
4
5
7
10197
18754
8.9335
3
5
7
11
16198
5751
4.5416
2
3
4
6
8199
1704
9.5827
2
4
7
13
20200
1063
10.3518
1
3
7
13
22201
1430
13.8098
3
6
11
18
27202
25975
6.4045
2
3
5
8
13203
29017
6.6364
2
3
5
9
13204
57319
5.7964
2
3
4
7
11205
22900
6.1735
2
3
5
8
12206
1948
3.9168
1
2
3
5
7207
30817
5.0832
1
2
4
6
10208
10061
2.8946
1
1
2
4
6209
343375
5.0786
3
3
4
6
8210
120891
6.8189
3
4
6
8
11211
31665
4.9325
3
4
4
6
7212
6
13.5000
1
4
4
29
29213
9144
8.9604
2
4
7
11
18216
5956
9.6949
2
4
8
12
20217
16333
13.1971
3
5
9
16
28218
21296
5.4123
2
3
4
7
10( print page 22862)219
19530
3.2240
1
2
3
4
6220
6
4.0000
1
1
3
7
7223
13251
2.8497
1
1
2
3
6224
11112
1.9343
1
1
2
2
3225
5734
4.8575
1
2
3
6
11226
5148
6.5874
1
2
4
8
14227
4695
2.7242
1
1
2
3
5228
2340
3.7970
1
1
2
5
8229
1108
2.4838
1
1
2
3
5230
2365
5.2592
1
2
3
6
11231
11343
4.9395
1
2
3
6
11232
807
2.8872
1
1
1
3
7233
5059
7.5181
2
3
6
10
15234
3168
3.4419
1
1
3
4
7235
5036
5.0473
1
2
4
6
9236
38265
4.8164
1
3
4
6
9237
1687
3.5033
1
2
3
4
6238
7930
8.5212
3
4
6
10
16239
49088
6.2151
2
3
5
8
12240
11318
6.6744
2
3
5
8
13241
3168
3.8570
1
2
3
5
7242
2434
6.6348
2
3
5
8
13243
87407
4.6676
1
2
4
6
9244
12162
4.8047
1
2
4
6
9245
5130
3.4458
1
2
3
4
6246
1386
3.8117
1
2
3
5
7247
16832
3.3990
1
1
3
4
7248
10529
4.8161
1
2
4
6
9249
11336
3.6591
1
1
2
4
8250
3456
4.1062
1
2
3
5
7251
2406
2.8579
1
1
2
4
5253
19677
4.7732
1
3
4
6
9254
10449
3.1906
1
2
3
4
6255
1
3.0000
3
3
3
3
3256
6054
5.0766
1
2
4
6
10257
16333
2.7359
1
1
2
3
5258
15978
1.9342
1
1
2
2
3259
3773
2.6801
1
1
1
2
6260
4896
1.4167
1
1
1
2
2261
1844
2.2749
1
1
1
3
5262
612
3.9477
1
1
3
5
8263
18146
12.0208
3
5
8
14
24264
3608
7.4088
2
4
6
9
14265
3681
6.8036
1
2
4
8
14266
2698
3.3039
1
1
2
4
7267
233
4.2060
1
1
3
6
9268
878
3.4989
1
1
2
4
7269
7390
8.2441
1
3
6
10
17270
2623
3.5783
1
1
2
5
8271
9621
7.6144
2
4
6
9
14272
5459
6.1597
2
3
5
8
12273
1286
4.0420
1
2
3
5
8274
2334
6.5900
1
3
5
8
13275
246
4.3130
1
1
3
5
9276
1177
4.6669
1
2
4
6
8277
85183
5.7309
2
3
5
7
10278
33396
4.4205
2
3
4
6
8279
3
2.3333
1
1
2
4
4280
15577
4.1954
1
2
3
5
8281
7128
3.0464
1
1
3
4
6282
3
1.6667
1
1
2
2
2283
5629
4.5756
1
2
4
6
9284
1868
3.1124
1
1
2
4
6285
6195
10.3080
3
5
8
13
20286
2070
6.4396
2
3
5
7
13287
5676
10.5374
3
5
7
12
21288
2639
5.7704
2
3
4
6
9289
4765
3.0002
1
1
2
3
7290
8753
2.3103
1
1
2
2
4291
65
1.8462
1
1
1
2
3( print page 22863)292
4654
10.4850
2
4
8
13
21293
624
5.5096
1
2
4
7
12294
87857
4.6066
1
2
4
6
9295
3277
3.7376
1
2
3
5
7296
235003
5.1556
2
2
4
6
10297
43573
3.4124
1
2
3
4
6298
86
2.8256
1
1
2
3
5299
1178
5.2199
1
2
4
7
10300
15999
6.1363
2
3
5
8
12301
3208
3.6234
1
2
3
4
7302
7703
8.8384
4
5
7
10
15303
19452
8.4231
4
5
7
10
15304
11765
8.7340
2
4
6
11
18305
2984
3.6384
1
2
3
5
7306
7320
5.6291
1
2
3
8
13307
2082
2.2517
1
1
2
3
4308
7463
6.1733
1
2
4
8
14309
4096
2.2954
1
1
2
3
4310
23873
4.4002
1
1
3
6
10311
7963
1.8339
1
1
1
2
3312
1487
4.4654
1
1
3
6
10313
591
2.3316
1
1
1
3
5315
30147
7.0663
1
1
4
9
16316
104601
6.6228
2
3
5
8
13317
1507
2.8779
1
1
2
3
6318
5584
5.9979
1
3
5
8
12319
422
2.7725
1
1
2
3
6320
186678
5.3171
2
3
4
6
10321
30428
3.7951
1
2
3
5
7322
61
4.1475
2
2
3
5
8323
17241
3.2172
1
1
2
4
7324
7479
1.8826
1
1
1
2
3325
8160
3.8241
1
2
3
5
7326
2676
2.6648
1
1
2
3
5327
11
3.0909
1
1
3
4
5328
663
3.6305
1
1
3
5
8329
77
2.0130
1
1
1
2
4331
46045
5.5426
1
3
4
7
11332
4930
3.2917
1
1
2
4
7333
281
5.0569
1
2
4
6
10334
8654
4.4386
2
3
4
5
7335
10721
3.1791
2
2
3
4
5336
9563
3.7848
1
2
3
4
8337
3041
2.1500
1
1
2
3
3338
1226
5.1117
1
2
3
7
11339
1344
4.9821
1
1
3
7
12340
1
1.0000
1
1
1
1
1341
2738
3.1088
1
1
1
3
6342
298
3.4094
1
1
2
4
7344
3502
2.3829
1
1
1
2
5345
410
5.1244
1
2
3
6
10346
4441
5.8726
1
3
4
7
12347
365
2.9479
1
1
2
4
6350
6270
4.3933
1
2
4
5
8352
756
3.9577
1
2
3
5
8353
2533
6.4212
2
3
5
7
12354
7562
5.8375
3
3
4
7
11355
5504
3.2862
2
3
3
4
5356
25128
2.2924
1
1
2
3
4357
5548
8.4874
3
4
7
10
16358
20294
4.3121
2
3
3
5
7359
29890
2.7295
2
2
3
3
4360
15941
2.8557
1
2
2
3
5361
378
2.9233
1
1
2
3
5363
2862
3.4693
1
2
2
3
7364
1644
3.8534
1
1
3
5
8365
1722
7.2410
1
3
5
9
16366
4410
6.7329
1
3
5
8
14367
583
3.0617
1
1
2
4
6368
3110
6.4810
2
3
5
8
12( print page 22864)369
3133
3.2515
1
1
2
4
7370
1095
5.8429
3
3
4
5
10371
1307
3.6526
2
3
3
4
5372
927
3.2891
1
2
2
3
5373
3734
2.2499
1
2
2
3
3374
120
3.1583
1
2
2
3
4375
10
2.3000
1
2
2
3
4376
247
3.0931
1
2
2
4
6377
48
5.0000
1
1
3
6
12378
157
2.4140
1
1
2
3
4379
337
3.4303
1
1
2
4
6380
58
2.1207
1
1
1
2
5381
152
2.5132
1
1
1
3
5382
45
1.2889
1
1
1
1
2383
1707
3.5817
1
1
2
4
7384
114
2.1842
1
1
1
3
5385
1
1.0000
1
1
1
1
1389
15
11.7333
1
3
6
10
24390
14
4.0000
1
2
3
6
7391
1
4.0000
4
4
4
4
4392
2323
9.6750
3
4
7
12
20394
1870
7.1428
1
2
4
8
16395
86911
4.4001
1
2
3
6
9396
15
4.6667
1
2
4
6
7397
17554
5.1878
1
2
4
7
10398
17526
5.9417
2
3
5
7
11399
1721
3.5758
1
2
3
5
7400
6444
9.1189
1
3
6
12
20401
5581
11.2575
2
5
9
15
23402
1498
4.1128
1
1
3
6
9403
31732
8.0627
2
3
6
10
17404
4639
4.2720
1
2
3
6
9406
2513
9.8607
3
4
7
12
20407
720
4.4417
1
2
4
5
8408
2178
8.0317
1
2
5
10
18409
2822
5.9072
2
3
4
6
12410
33412
3.9069
1
2
4
5
6411
13
2.3077
1
1
2
2
5412
29
2.4483
1
1
2
3
4413
6419
7.0662
2
3
5
9
14414
767
4.2529
1
2
3
5
9415
38683
14.2779
4
6
11
18
28416
183557
7.3848
2
4
6
9
14417
16
5.0000
2
2
4
6
9418
22822
6.1160
2
3
5
7
11419
15294
4.7204
2
2
4
6
9420
3109
3.5002
1
2
3
4
6421
11464
3.7872
1
2
3
5
7422
80
3.0625
1
2
3
4
6423
7452
8.1162
2
3
6
10
16424
1275
13.4204
2
5
9
16
26425
15710
3.9945
1
2
3
5
8426
4443
4.4510
1
2
3
5
9427
1633
4.6418
1
2
3
6
9428
835
6.8192
1
2
4
8
14429
25967
6.3055
2
3
5
7
12430
58669
8.0151
2
3
6
10
16431
313
6.2045
1
3
5
7
11432
469
4.7271
1
2
3
5
9433
5418
3.0945
1
1
2
4
6439
1343
8.4080
1
3
5
10
19440
5131
9.0209
2
3
6
11
20441
601
3.2313
1
1
2
4
7442
15366
8.4839
1
3
6
10
18443
3730
3.4399
1
1
3
4
7444
5185
4.1338
1
2
3
5
8445
2427
2.9250
1
1
2
4
5447
5451
2.4748
1
1
2
3
5449
28048
3.7457
1
1
3
5
8450
6867
2.0051
1
1
1
2
4( print page 22865)451
3
1.3333
1
1
1
2
2452
22666
4.8553
1
2
3
6
10453
5068
2.8035
1
1
2
3
6454
3940
4.5652
1
2
3
5
9455
931
2.5994
1
1
2
3
5461
3490
4.3739
1
1
2
5
11462
12994
11.2271
4
6
9
14
21463
21790
4.1239
1
2
3
5
8464
6533
2.9963
1
1
2
4
6465
154
3.4481
1
1
2
4
7466
1470
3.9925
1
1
2
5
9467
534
3.8390
1
1
2
4
8468
56874
12.7662
3
6
10
16
25471
11639
5.5322
3
4
4
6
9473
7599
12.5038
1
3
7
18
32475
107089
11.1800
2
5
9
15
22476
4126
10.8924
2
5
9
14
21477
24823
8.1004
1
3
6
11
17478
106997
7.3166
1
3
5
9
15479
24939
3.5376
1
1
3
5
7480
540
20.1370
7
9
13
25
43481
377
23.9310
10
18
22
27
38482
5686
12.9474
4
7
10
15
25483
42087
39.0295
14
22
33
49
70484
313
12.6773
2
6
10
17
26485
2880
9.5955
4
5
7
11
18486
1856
12.4402
1
5
10
16
25487
3339
7.3612
1
3
6
10
15488
770
17.0078
3
7
13
22
36489
14005
8.4383
2
3
6
10
17490
5378
5.3405
1
2
4
6
10491
12205
3.4483
2
2
3
4
6492
2672
15.6662
3
5
8
25
34493
54859
5.7621
1
3
5
7
11494
29900
2.4482
1
1
2
3
5495
153
15.0261
7
9
12
18
26496
1468
9.5320
4
5
7
12
19497
17184
6.5116
3
4
5
7
11498
12708
4.1701
2
3
4
5
6499
30284
4.6986
1
2
3
6
9500
43962
2.6146
1
1
2
3
5501
2180
10.9670
4
6
8
13
21502
586
6.5648
3
4
5
8
11503
5551
3.9996
1
2
3
5
7504
114
29.5877
9
14
24
41
54505
145
3.3517
1
1
1
3
7506
915
17.4000
4
8
14
22
35507
290
8.2621
2
4
7
11
18508
657
7.4718
2
3
5
9
15509
176
4.5455
1
2
4
6
9510
1619
7.1779
2
3
5
9
15511
602
4.7591
1
2
3
6
10512
328
15.2439
7
8
11
17
28513
112
12.6161
6
7
8
12
20514
16927
7.9786
2
3
6
10
16515
3774
6.0297
1
1
4
8
14516
75742
4.7497
2
2
4
6
9517
171198
2.7066
1
1
2
3
6518
47731
3.4397
1
1
2
4
8519
5448
4.7412
1
2
3
6
11520
10509
2.7887
1
1
2
3
6521
22732
5.0204
1
2
4
6
9522
11649
9.7928
3
5
8
12
20523
14818
4.1079
1
2
3
5
710916166
 
 
 Table 8A.—Statewide Average Operating Cost-to-Charge Ratios for Urban and Rural Hospitals (Case Weighted) March 2001
State
Urban
RuralALABAMA
0.344
0.410ALASKA
0.417
0.696ARIZONA
0.356
0.491ARKANSAS
0.466
0.446CALIFORNIA
0.339
0.436COLORADO
0.422
0.577CONNECTICUT
0.497
0.506DELAWARE
0.511
0.450DISTRICT OF COLUMBIA
0.508FLORIDA
0.352
0.369GEORGIA
0.459
0.470HAWAII
0.413
0.554IDAHO
0.545
0.561ILLINOIS
0.406
0.502INDIANA
0.524
0.533IOWA
0.486
0.612KANSAS
0.421
0.635KENTUCKY
0.479
0.492LOUISIANA
0.410
0.488MAINE
0.615
0.543MARYLAND
0.759
0.819MASSACHUSETTS
0.512
0.571MICHIGAN
0.460
0.563MINNESOTA
0.494
0.589MISSISSIPPI
0.452
0.447MISSOURI
0.405
0.479MONTANA
0.537
0.594NEBRASKA
0.449
0.610NEVADA
0.306
0.498NEW HAMPSHIRE
0.549
0.581NEW JERSEY
0.394NEW MEXICO
0.466
0.491NEW YORK
0.528
0.609NORTH CAROLINA
0.516
0.464NORTH DAKOTA
0.620
0.654OHIO
0.501
0.570OKLAHOMA
0.409
0.494OREGON
0.613
0.595PENNSYLVANIA
0.398
0.525PUERTO RICO
0.486
0.583RHODE ISLAND
0.520SOUTH CAROLINA
0.440
0.463SOUTH DAKOTA
0.529
0.638TENNESSEE
0.438
0.453TEXAS
0.402
0.494UTAH
0.497
0.586VERMONT
0.572
0.599VIRGINIA
0.454
0.494WASHINGTON
0.583
0.638WEST VIRGINIA
0.568
0.527WISCONSIN
0.525
0.611WYOMING
0.522
0.717
 Table 8B.—Statewide Average Capital Cost-to-Charge Ratios (Case Weighted) March 2001
State
RatioALABAMA
0.044ALASKA
0.058ARIZONA
0.037ARKANSAS
0.049CALIFORNIA
0.034COLORADO
0.045CONNECTICUT
0.036DELAWARE
0.051DISTRICT OF COLUMBIA
0.040FLORIDA
0.043GEORGIA
0.051HAWAII
0.038IDAHO
0.046ILLINOIS
0.040INDIANA
0.056IOWA
0.050KANSAS
0.050KENTUCKY
0.046LOUISIANA
0.048MAINE
0.040MARYLAND
0.013MASSACHUSETTS
0.053MICHIGAN
0.044MINNESOTA
0.047MISSISSIPPI
0.044MISSOURI
0.044MONTANA
0.058NEBRASKA
0.054NEVADA
0.030NEW HAMPSHIRE
0.061NEW JERSEY
0.036NEW MEXICO
0.045NEW YORK
0.051NORTH CAROLINA
0.046NORTH DAKOTA
0.072OHIO
0.048OKLAHOMA
0.046OREGON
0.046PENNSYLVANIA
0.039PUERTO RICO
0.045RHODE ISLAND
0.029SOUTH CAROLINA
0.046SOUTH DAKOTA
0.059TENNESSEE
0.049TEXAS
0.046UTAH
0.047VERMONT
0.052VIRGINIA
0.055WASHINGTON
0.063WEST VIRGINIA
0.045WISCONSIN
0.051WYOMING
0.065
 Appendix A—Regulatory Impact Analysis I. Introduction 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, we consider all hospitals to be small entities. We estimate the total impact of these changes for FY 2002 payments compared to FY 2001 payments to be approximately a $1.7 billion increase. Therefore, we have prepared an impact analysis for this proposed rule. 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 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital with fewer than 100 beds that is located outside of a Metropolitan Statistical Area (MSA) or New England County Metropolitan Area (NECMA). Section 601(g) of the Social Security Amendments of 1983 (Public Law 98-21) designated hospitals in certain New England counties as belonging to the adjacent NECMA. Thus, for purposes of the hospital inpatient prospective payment systems, we classify these hospitals as urban hospitals. It is clear that the changes being proposed in this document would affect both a substantial number of small rural hospitals as well as other classes of hospitals, and the effects on some may be significant. Therefore, the discussion below, in combination with the rest of this proposed rule, constitutes a combined regulatory impact analysis and regulatory flexibility analysis. We have reviewed this proposed rule under the threshold criteria of Executive Order 13132, Federalism, and have determined that the proposed rule will not have any negative impact on the rights, roles, and responsibilities of State, local, or tribal governments. Section 202 of the Unfunded Mandate Reform Act of 1995 (Public Law 104-4) also requires that agencies assess anticipated costs and benefits before issuing any proposed rule (or a final rule that has been preceded by a proposed rule) that may result in an expenditure in any one year by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million. This proposed rule would not mandate any requirements for State, local, or tribal governments. In accordance with the provisions of Executive Order 12866, this proposed rule was reviewed by the Office of Management and Budget. II. Objectives The primary objective of the hospital inpatient prospective payment system is to create incentives for hospitals to operate efficiently and minimize unnecessary costs while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs. In addition, we share national goals of preserving the Medicare Trust Fund. We believe the proposed changes would further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries. We expect that these proposed changes would ensure that the outcomes of this payment system are reasonable and equitable while avoiding or minimizing unintended adverse consequences. III. Limitations of Our Analysis As has been the case in our previously published regulatory impact analyses, the following quantitative analysis presents the projected effects of our proposed policy changes, as well as statutory changes 
                            ( print page 22867)
                            effective for FY 2002, on various hospital groups. We estimate the effects of individual policy changes by estimating payments per case while holding all other payment policies constant. We use the best data available, but we do not attempt to predict behavioral responses to our policy changes, and we do not make adjustments for future changes in such variables as admissions, lengths of stay, or case-mix. As we have done in previous proposed rules, we are soliciting comments and information about the anticipated effects of these changes on hospitals and our methodology for estimating them. IV. Hospitals Included In and Excluded From the Prospective Payment System The prospective payment systems for hospital inpatient operating and capital-related costs encompass nearly all general, short-term, acute care hospitals that participate in the Medicare program. There were 44 Indian Health Service hospitals in our database, which we excluded from the analysis due to the special characteristics of the prospective payment method for these hospitals. Among other short-term, acute care hospitals, only the 67 such hospitals in Maryland remain excluded from the prospective payment system under the waiver at section 1814(b)(3) of the Act. Thus, as of February 2001, we have included 4,583 hospitals in our analysis. This represents about 80 percent of all Medicare-participating hospitals. The majority of this impact analysis focuses on this set of hospitals. The remaining 20 percent are specialty hospitals that are excluded from the prospective payment system and continue to be paid on the basis of their reasonable costs (subject to a rate-of-increase ceiling on their inpatient operating costs per discharge). These hospitals include psychiatric, rehabilitation, long-term care, children's, and cancer hospitals. The impacts of our final policy changes on these hospitals are discussed below. V. Impact on Excluded Hospitals and Units As of February 2001, there were 1,058 specialty hospitals excluded from the prospective payment system and instead paid on a reasonable cost basis subject to the rate-of-increase ceiling under § 413.40. Broken down by specialty, there were 517 psychiatric, 203 rehabilitation, 253 long-term care, 75 children's, and 10 cancer hospitals. In addition, there were 1,457 psychiatric units and 925 rehabilitation units in hospitals otherwise subject to the prospective payment system. These excluded units are also paid in accordance with § 413.40. Under § 413.40(a)(2)(i)(A), the rate-of-increase ceiling is not applicable to the 67 specialty hospitals and units in Maryland that are paid in accordance with the waiver at section 1814(b)(3) of the Act. As required by section 1886(b)(3)(B) of the Act, the update factor applicable to the rate-of-increase limit for excluded hospitals and units for FY 2002 would be between 0.5 and 3.0 percent, or 0 percent, depending on the hospital's or unit's costs in relation to its limit for the most recent cost reporting period for which information is available. The impact on excluded hospitals and units of the update in the rate-of-increase limit depends on the cumulative cost increases experienced by each excluded hospital or unit since its applicable base period. For excluded hospitals and units that have maintained their cost increases at a level below the percentage increases in the rate-of-increase limits since their base period, the major effect will be on the level of incentive payments these hospitals and units receive. Conversely, for excluded hospitals and units with per-case cost increases above the cumulative update in their rate-of-increase limits, the major effect will be the amount of excess costs that would not be reimbursed. We note that, under § 413.40(d)(3), an excluded hospital or unit whose costs exceed 110 percent of its rate-of-increase limit receives its rate-of-increase limit plus 50 percent of the difference between its reasonable costs and 110 percent of the limit, not to exceed 110 percent of its limit. In addition, under the various provisions set forth in § 413.40, certain excluded hospitals and units can obtain payment adjustments for justifiable increases in operating costs that exceed the limit. At the same time, however, by generally limiting payment increases, we continue to provide an incentive for excluded hospitals and units to restrain the growth in their spending for patient services. VI. Graduate Medical Education Impact A. National Average Per Resident Amount (PRA) As discussed in detail in section IV.G.2. of this proposed rule, we are proposing to implement section 511 of Public Law 106-554, which increases the floor of the locality-adjusted national average (PRA for the purposes of computing direct GME payments for cost reporting periods beginning during FY 2002. The national average PRA payment methodology, as provided in section 311 of Public Law 106-113, establishes a “floor” and “ceiling” based on a locality-adjusted, updated national average PRA for cost reporting periods beginning on or after October 1, 2000 and before October 1, 2005. Section 511 of Public Law 106-554 increased the floor from 70 percent to equal 85 percent of a locality-adjusted national average PRA for FY 2002. For this purpose rule, we have calculated an estimated impact of this proposed policy on teaching hospital's PRAs for FY 2002, making assumptions about update factors and geographic adjustment factors (GAF) for each hospital. Generally, using FY 1997 data, we calculated a floor based on 70 percent of the national average PRA and a floor based on 85 percent of the national average PRA. We then determined the amount of direct GME payments that would have been paid had the floor remained at 70 percent of the national average PRA. Next, we determined the amount of direct GME payments that would be paid with the floor increased to equal 85 percent of the national average PRA. We subtracted the difference between the two and inflated the difference to FY 2002 to determine the impact of this provision. The figures we use in this impact, except for the FY 1997 weighted PRA of $68,464, are estimations and are for demonstrative purposes only. Hospitals must use the methodology stated in section IV.G. of this proposed rule to revise (if appropriate) their individual PRAs. In calculating this impact, we used Medicare cost report data for all cost reports ending in FY 1997. We excluded hospitals that file manual cost reports because we did not have access to their Medicare utilization data. We also excluded all teaching hospitals in Maryland, because these hospitals are paid on a Medicare waiver outside of the prospective payment system, and those hospitals' PRAs do not determine their level of direct GME payments. For hospitals that had two cost reporting periods ending in FY 1997, we used the later of the two periods. A total of 1,231 teaching hospitals were included in the analysis. Using the FY 1997 weighted average PRA of $68,464, we determined an 85 percent floor of $58,194 for FY 1997. We then determined that, for cost reporting periods ending in FY 1997, approximately 562 hospitals had PRAs that were below $58,194 (336 hospitals of these hospitals had PRAs that were below the 70-percent floor, and 226 hospitals had PRAs that were above the 70-percent floor but below the 85-percent floor). The estimated total cost to the Medicare program in FY 2002 of replacing the PRAs of the 562 hospitals with the 85-percent floor is $104.4 million. B. Closed Training Programs or Hospitals That Close Their Training Programs As discussed in IV.G.5, of this proposed rule, we are proposing to allow a hospital to receive a temporary adjustment to its FTE cap to reflect residents added because of the closure of another hospital's GME program if the hospital that closed its program agrees to temporarily reduce its FTE cap. We have calculated an estimated impact on the Medicare program for FY 2002 as a result of this proposal. We used the best available cost report data from the FY 1997 HCRIS in our analysis. We estimate that approximately 5 to 10 programs, each with an average of 25 residents, close each year without advance warning, displacing the residents before they complete their training. Therefore, the number of residents displaced each year could be between 125 and 250. We estimated the impact of this proposed change based on direct GME and IME payment amounts in FY 1997 to determine a total GME amount and updated the total with the CPI-U for FY 2002. At most, the estimated impact for this proposed provision for FY 2002 is moving payments of between $10 and $20 million among different hospitals. This would result from redirecting these payments from the hospital that closed its program to the hospital(s) that takes on the residents. VII. Quantitative Impact Analysis of the Proposed Policy Changes Under the Prospective Payment System for Operating Costs A. Basis and Methodology of Estimates In this proposed rule, we are announcing policy changes and payment rate updates for 
                            ( print page 22868)
                            the prospective payment systems for operating and capital-related costs. We have prepared separate impact analyses of the proposed changes to each system. This section deals with changes to the operating prospective payment system. The data used in developing the quantitative analyses presented below are taken from the FY 2000 MedPAR file and the most current provider-specific file that is used for payment purposes. Although the analyses of the changes to the operating prospective payment system do not incorporate cost data, the most recently available hospital cost report data were used to categorize hospitals. Our analysis has several qualifications. First, we do not make adjustments for behavioral changes that hospitals may adopt in response to these proposed policy changes. Second, due to the interdependent nature of the prospective payment system, it is very difficult to precisely quantify the impact associated with each proposed change. Third, we draw upon various sources for the data used to categorize hospitals in the tables. In some cases, particularly the number of beds, there is a fair degree of variation in the data from different sources. We have attempted to construct these variables with the best available source overall. For individual hospitals, however, some miscategorizations are possible. Using cases in the FY 2000 MedPAR file, we simulated payments under the operating prospective payment system given various combinations of payment parameters. Any short-term, acute care hospitals not paid under the general prospective payment systems (Indian Health Service hospitals and hospitals in Maryland) are excluded from the simulations. Payments under the capital prospective payment system, or payments for costs other than inpatient operating costs, are not analyzed here. Estimated payment impacts of proposed FY 2001 changes to the capital prospective payment system are discussed in section IX. of this Appendix. The proposed changes discussed separately below are the following: The effects of the annual reclassification of diagnoses and procedures and the recalibration of the diagnosis-related group (DRG) relative weights required by section 1886(d)(4)(C) of the Act.
                        The effects of changes in hospitals' wage index values reflecting wage data from hospitals' cost reporting periods beginning during FY 1998, compared to the FY 1997 wage data.
                        The effects of our proposal to increase the accuracy of the wage index calculation by changing the overhead allocation method used so that the salaries and hours of lower-range, overhead employees and the overhead wage-related costs associated with the excluded areas of the hospital are more accurately removed when calculating the overhead costs attributable to wages.
                        The effects of our proposal to include the contract labor costs of laboratories and pharmacies from Worksheet S-3 Part II Lines 9.01 and 9.02 in the wage index calculation.
                        The combined effects of our proposed changes to the wage index data and calculations and the changes in the DRG recalibration.
                        The effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB) that will be effective in FY 2002 not including the effects of our proposed policy to hold-harmless other hospitals in an urban area where certain hospitals are reclassified elsewhere by including the wage data of reclassified hospitals in their geographic area as well as the area to which they are reclassified.
                        The effects of geographic reclassifications by the MGCRB that will be effective in FY 2002 including the effects of our proposed policy to hold-harmless other hospitals in an urban area where certain hospitals are reclassified elsewhere by including the wage data of reclassified hospitals in their geographic area as well as the area to which they are reclassified.
                        The total change in payments based on FY 2002 policies relative to payments based on FY 2001 policies. To illustrate the impacts of the FY 2002 proposed changes, our analysis begins with a FY 2002 baseline simulation model using: the FY 2001 DRG GROUPER (version 18.0); the FY 2001 wage index; and no MGCRB reclassifications. Outlier payments are set at 5.1 percent of total DRG plus outlier payments. Each proposed and statutory policy change is then added incrementally to this baseline model, finally arriving at an FY 2002 model incorporating all of the changes. This allows us to isolate the effects of each change. Our final comparison illustrates the percent change in payments per case from FY 2001 to FY 2002. Five factors have significant impacts here. The first is the update to the standardized amounts. In accordance with section 1886(d)(3)(A)(iv) of the Act, as amended by section 301 of Public Law 106-554, we are proposing to update the large urban and the other areas average standardized amounts for FY 2002 using the most recently forecasted hospital market basket increase for FY 2002 of 3.1 percent minus 0.55 percentage points (for an update of 2.55 percent). Under section 1886(b)(3) of the Act, the updates to the hospital-specific amounts for sole community hospitals (SCHs) and for Medicare-dependent small rural hospitals (MDHs) is equal to the market basket increase of 3.1 percent minus 0.55 percentage points (for an update of 2.55 percent). A second significant factor that impacts changes in hospitals' payments per case from FY 2001 to FY 2002 is the change in MGCRB status from one year to the next. That is, hospitals reclassified in FY 2001 that are no longer reclassified in FY 2002 may have a negative payment impact going from FY 2001 to FY 2002; conversely, hospitals not reclassified in FY 2001 that are reclassified in FY 2002 may have a positive impact. In some cases, these impacts can be quite substantial, so if a relatively small number of hospitals in a particular category lose their reclassification status, the percentage change in payments for the category may be below the national mean. This effect may be alleviated somewhat by section 304(a) of Public Law 106-554, which provided that reclassifications for purposes of the wage index are for a 3 year period. A third significant factor is that we currently estimate that actual outlier payments during FY 2001 will be 5.9 percent of actual total DRG payments. When the FY 2001 final rule was published, we projected FY 2001 outlier payments would be 5.1 percent of total DRG plus outlier payments; the standardized amounts were offset correspondingly. The effects of the higher than expected outlier payments during FY 2001 (as discussed in the Addendum to this proposed rule) are reflected in the analyses below comparing our current estimates of FY 2001 payments per case to estimated FY 2002 payments per case. Fourth, section 213 of Public Law 106-554 provided that all SCHs may receive payment on the basis of their costs per case during their cost reporting period that began during 1996. For FY 2001, eligible SCHs that are rebased receive a hospital-specific rate comprised of the greater of 50-percent of the higher of their FY 1982 or FY 1987 hospital-specific rate or 50-percent of the federal rate, and 50-percent of their FY 1996 hospital-specific rate. Fifth, sections 302 and 303 of Public Law 106-554 affect payments for indirect medical education (IME) and disproportionate share hospitals (DSH), respectively. These sections increased IME and DSH payments during FY 2001 (effective with discharges on or after April 1, 2001). For FY 2002, section 302 established IME payments at the same level as FY 2001 (6.5 percent), and section 303 established DSH payments at the adjustment the hospital would otherwise receive minus 3 percent. Table I demonstrates the results of our analysis. The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals. The top row of the table shows the overall impact on the 4,795 hospitals included in the analysis. This number is 93 fewer hospitals than were included in the impact analysis in the FY 2001 final rule (65 FR 47191). The next four rows of Table I contain hospitals categorized according to their geographic location (all urban (which is further divided into large urban and other urban) and rural). There are 2,721 hospitals located in urban areas (MSAs or NECMAs) included in our analysis. Among these, there are 1,563 hospitals located in large urban areas (populations over 1 million), and 1,158 hospitals in other urban areas (populations of 1 million or fewer). In addition, there are 2,074 hospitals in rural areas. The next two groupings are by bed-size categories, shown separately for urban and rural hospitals. The final groupings by geographic location are by census divisions, also shown separately for urban and rural hospitals. The second part of Table I shows hospital groups based on hospitals' FY 2002 payment classifications, including any reclassifications under section 1886(d)(10) of the Act. For example, the rows labeled urban, large urban, other urban, and rural show that the number of hospitals paid based on these categorizations (after consideration of geographic reclassifications) are 2,766, 1,643, 1,123, and 2,029, respectively. The next three groupings examine the impacts of the proposed changes on hospitals 
                            ( print page 22869)
                            grouped by whether or not they have residency programs (teaching hospitals that receive an IME adjustment) or receive DSH payments, or some combination of these two adjustments. There are 3,674 non-teaching hospitals in our analysis, 881 teaching hospitals with fewer than 100 residents, and 240 teaching hospitals with 100 or more residents. In the DSH categories, hospitals are grouped according to their DSH payment status, and whether they are considered urban or rural after MGCRB reclassifications. Hospitals in the rural DSH categories, therefore, represent hospitals that were not reclassified for purposes of the standardized amount or for purposes of the DSH adjustment. (They may, however, have been reclassified for purposes of the wage index.) We note that section 211 of Public Law 106-554 reduced the qualifying DSH threshold to 15 percent for all hospitals (this threshold previously applied to urban hospitals with 100 or more beds and rural hospitals with 500 or more beds). Consequently, many more hospitals qualify for DSH. In the FY 2001 final rule, there were 3,070 hospitals that did not receive a DSH adjustment (65 FR 47192). In Table I, that number declines to 1,879. The number of urban hospitals with fewer than 100 beds receiving DSH increases from 72 prior to section 211 to 325 after its implementation. Among rural hospitals with fewer than 100 beds, 103 received DSH prior to section 211; for FY 2002 that number increases to 443. The next category groups hospitals considered urban after geographic reclassification, in terms of whether they receive the IME adjustment, the DSH adjustment, both, or neither. The next five rows examine the impacts of the proposed changes on rural hospitals by special payment groups (SCHs, rural referral centers (RRCs), and MDHs), as well as rural hospitals not receiving a special payment designation. The RRCs (165), SCHs (667), MDHs (328), and SCH and RRCs that are not included in the SCH or the RRC categories (69) shown here were not reclassified for purposes of the standardized amount. There are 20 RRCs, 1 MDH, 5 SCHs and 2 SCH and RRCs that will be reclassified as urban for the standardized amount in FY 2002 and, therefore, are not included in these rows. The next two groupings are based on type of ownership and the hospital's Medicare utilization expressed as a percent of total patient days. These data are taken primarily from the FY 1999 Medicare cost report files, if available (otherwise FY 1998 data are used). Data needed to determine ownership status or Medicare utilization percentages were unavailable for 46 and 78 hospitals, respectively. For the most part, these are new hospitals. The next series of groupings concern the geographic reclassification status of hospitals. The first grouping displays all hospitals that were reclassified by the MGCRB for FY 2002. The next two groupings separate the hospitals in the first group by urban and rural status. The final row in Table I contains hospitals located in rural counties but deemed to be urban under section 1886(d)(8)(B) of the Act. Table I.—Impact Analysis of Changes for FY 2002 Operating Prospective Payment System
[Percent changes in payments per case]
Number of hosps.1
                                      
                                     (0)
DRG re-calib.2
                                      
                                     (1)
New wage data 3
                                      
                                     (2)
New overhead alloc.4
                                      
                                     (3)
Include contract labor 5
                                      
                                     (4)
DRG & WI changes 6
                                      
                                     (5)
MCGRB reclassification 7
                                      
                                     (6)
Reclassification hold-harmless 
                                     
                                        policy 8
                                          
                                     
                                     (7)
All FY 2001 changes 9
                                      
                                     (8)By Geographic Location:All hospitals
4,795
0.5
0.2
0.0
0.0
0.0
−0.2
0.2
1.9Urban hospitals
2,721
0.6
0.2
0.0
0.0
0.0
−0.7
0.2
1.7Large urban areas (populations over 1 million)
1,563
0.7
−0.1
0.0
0.0
−0.1
−0.8
0.3
1.5Other urban areas (populations of 1 million of fewer)
1,158
0.5
0.6
0.0
0.0
0.2
−0.5
0.1
2.0Rural hospitals
2,074
−0.1
0.5
0.1
0.1
−0.2
2.7
0.1
3.2Bed Size (Urban):0-99 beds
712
−0.1
0.3
0.0
0.0
−0.4
−0.8
0.2
2.1100-199 beds
943
0.4
0.2
0.0
0.0
−0.2
−0.7
0.3
1.6200-299 beds
530
0.6
0.3
0.0
0.1
0.1
−0.7
0.3
1.8300-499 beds
391
0.7
0.1
0.0
0.0
0.0
−0.7
0.2
1.6500 or more beds
145
1.0
0.0
0.0
0.0
0.2
−0.6
0.1
1.5Bed Size (Rural):0-49 beds
1,209
−0.4
0.5
0.1
0.1
−0.5
0.4
0.0
3.050-99 beds
520
−0.2
0.5
0.1
0.1
−0.4
1.1
0.0
3.3100-149 beds
204
−0.1
0.6
0.1
0.1
−0.1
3.2
0.2
3.0150-199 beds
75
0.1
0.4
0.1
0.1
−0.1
5.2
0.2
3.4200 or more beds
66
0.3
0.4
0.1
0.1
0.0
5.2
0.1
3.6Urban by Region:New England
139
0.6
2.2
−0.1
0.0
1.3
−0.2
0.0
1.7Middle Atlantic
417
0.7
−1.2
−0.1
0.0
−1.4
−0.8
0.6
0.2South Atlantic
395
0.7
0.9
0.0
0.0
0.9
−0.8
0.3
2.8East North Central
462
0.5
0.1
0.0
0.1
−0.2
−0.6
0.1
1.6East South Central
160
0.6
1.1
0.1
0.0
1.1
−0.7
0.0
3.0West North Central
189
0.6
0.5
0.1
0.1
0.3
−0.7
0.0
2.0West South Central
342
0.7
−0.8
0.0
0.0
−0.9
−0.7
0.0
0.7Mountain
137
0.6
0.9
0.0
0.0
0.7
−0.7
0.0
2.4Pacific
434
0.7
0.4
0.1
0.0
0.4
−0.8
0.2
2.2Puerto Rico
46
0.4
1.3
0.1
0.0
1.0
−0.5
−0.3
2.6Rural by Region:( print page 22870)New England
49
0.0
0.6
0.1
0.0
−0.1
3.0
0.1
3.7Middle Atlantic
74
0.0
−0.2
0.0
0.0
−1.0
2.5
0.0
2.2South Atlantic
267
0.1
0.6
0.1
0.1
0.0
2.9
0.1
3.6East North Central
273
−0.2
0.6
0.0
0.1
−0.3
2.2
0.2
2.8East South Central
263
0.0
0.5
0.1
0.1
−0.2
3.3
0.0
3.6West North Central
479
−0.3
0.8
0.2
0.1
−0.1
2.1
0.1
2.5West South Central
331
−0.1
0.7
0.1
0.1
0.0
3.5
0.1
4.2Mountain
194
−0.1
0.4
0.2
0.0
−0.4
1.9
0.0
2.9Pacific
139
0.0
−0.2
0.1
0.1
−0.9
2.3
0.1
2.7Puerto Rico
5
−0.3
3.9
0.1
0.0
2.9
1.9
−0.8
8.4By Payment Classification:Urban hospitals
2,766
0.6
0.2
0.0
0.0
0.0
−0.7
0.2
1.7Large urban areas (populations over 1 million)
1,643
0.7
−0.1
0.0
0.0
−0.1
−0.7
0.3
1.5Other urban areas (populations of 1 million of fewer)
1,123
0.5
0.6
0.0
0.0
0.2
−0.6
0.1
2.0Rural areas
2,029
−0.1
0.5
0.1
0.1
−0.2
2.5
0.0
3.2Teaching Status:Non-teaching
3,674
0.3
0.4
0.0
0.0
−0.1
0.2
0.2
2.2Fewer than 100 Residents
881
0.6
0.3
0.0
0.0
0.1
−0.6
0.2
1.9100 or more Residents
240
1.0
−0.2
0.0
0.0
0.0
−0.5
0.1
1.3Urban DSH:Non-DSH
1,879
0.4
0.2
0.0
0.0
−0.1
−0.2
0.3
1.7100 or more beds
1,378
0.7
0.2
0.0
0.0
0.1
−0.7
0.2
1.7Less than 100 beds
325
0.0
0.4
0.1
0.0
−0.3
−0.8
0.3
3.3Rural DSH:Sole Community (SCH)
540
−0.2
0.4
0.1
0.0
−0.5
0.4
0.0
3.1Referral Center (RRC)
157
0.2
0.5
0.1
0.1
0.0
5.3
0.1
3.7Other Rural:100 or more beds
73
−0.1
0.7
0.1
0.1
−0.1
1.3
0.1
3.2Less than 100 beds
443
−0.2
0.5
0.1
0.1
−0.4
0.6
0.0
4.3Urban teaching and DSH:Both teaching and DSH
754
0.8
0.1
0.0
0.0
0.0
−0.7
0.2
1.6Teaching and no DSH
295
0.7
0.2
0.0
0.1
0.0
−0.6
0.3
1.6No teaching and DSH
949
0.4
0.4
0.0
0.0
0.1
−0.6
0.3
2.0No teaching and no DSH
768
0.3
0.2
0.0
0.0
−0.2
−0.6
0.3
1.5Rural Hospital Types:Non special status hospitals
800
−0.3
0.7
0.1
0.1
−0.2
0.9
0.0
3.6RRC
165
0.2
0.5
0.1
0.1
0.0
6.3
0.1
3.6SCH
667
−0.2
0.4
0.1
0.0
−0.5
0.4
0.0
2.5( print page 22871)Medicare-dependent hospitals (MDH)
328
−0.3
0.5
0.1
0.1
−0.5
0.5
0.0
3.2SCH and RRC
69
0.1
0.4
0.0
0.0
−0.3
2.5
0.0
2.7Type of Ownership:Voluntary
2,785
0.6
0.2
0.0
0.0
−0.1
−0.3
0.2
1.8Proprietary
777
0.6
0.2
0.1
0.0
0.1
−0.3
0.2
2.0Government
1,187
0.5
0.6
0.1
0.0
0.3
0.1
0.1
2.5Unknown
46
0.3
1.3
0.0
0.0
0.7
−1.7
1.0
2.6Medicare Utilization as a Percent of Inpatient Days:0-25
396
0.9
0.2
0.0
0.0
0.4
−0.5
0.1
2.225-50
1,886
0.7
0.1
0.0
0.0
0.0
−0.6
0.2
1.750-65
1,843
0.4
0.4
0.0
0.0
0.0
0.1
0.2
2.2Over 65
592
0.2
0.2
0.0
0.1
−0.2
0.2
0.3
1.9Unknown
78
0.5
−2.1
−0.1
0.0
−2.4
−0.7
0.1
−1.1Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY 2002Reclassifications:All Reclassified Hospitals
636
0.3
0.6
0.0
0.1
0.2
4.5
0.3
2.9Standardized Amount Only
74
0.1
0.7
0.0
0.0
0.0
1.9
1.0
4.0Wage Index Only
391
0.3
0.5
0.1
0.1
0.1
5.3
0.1
2.5Both
58
0.4
0.7
0.0
0.1
0.4
4.1
0.6
0.0Nonreclassified Hospitals
4,246
0.6
0.2
0.0
0.0
0.0
−0.8
0.2
1.9All Reclassified Urban Hospitals
119
0.7
0.8
0.0
0.1
0.6
2.8
0.4
2.0Urban Nonreclassified Hospitals
18
0.2
0.5
0.0
0.0
−0.2
−1.2
1.9
−0.6Standardized Amount Only
81
0.8
0.7
0.0
0.1
0.6
3.3
0.1
2.2Wage Index Only
20
0.5
1.4
0.0
0.1
1.1
1.9
2.1
2.5Both
2,564
0.6
0.2
0.0
0.0
0.0
−0.9
0.2
1.6All Reclassified Rural Hospitals
517
0.1
0.5
0.1
0.1
−0.1
5.6
0.2
3.6Standardized Amount Only
19
−0.2
0.5
0.1
0.0
−0.5
3.9
1.5
2.0Wage Index Only
475
0.1
0.5
0.1
0.1
−0.1
5.5
0.1
3.6Both
23
0.1
0.8
0.1
0.1
0.2
7.7
1.5
4.2Rural Nonreclassified Hospitals
1,554
−0.3
0.5
0.1
0.1
−0.4
−0.6
0.0
2.8Other Reclassified Hospitals (Section 1886(D)(8)(B))
41
−0.1
−6.1
0.1
0.1
0.4
0.3
0.1
3.91
                                 Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the national total. Discharge data are from FY 2000, and hospital cost report data are from reporting periods beginning in FY 1999 and FY 1998.2
                                 This column displays the payment impact of the recalibration of the DRG weights based on FY 2000 MedPAR data and the DRG reclassification changes, in accordance with section 1886(d)(4)(C) of the Act.3
                                 This column shows the payment effects of updating the data used to calculate the wage index with data from the FY 1998 cost reports.4
                                 This column displays the impact of removing the salaries and hours of lower-range, overhead employees and the overhead wage-related costs associated with the excluded areas of the hospital from the wage index calculation.5
                                 This column displays the impact of including contract pharmacy and contract laboratory costs and hours in the wage index calculation. 
                                ( print page 22872)6
                                 This column displays the combined impact of the reclassification and recalibration of the DRGs, the updated and revised wage data used to calculate the wage index, the revised overhead allocation, the laboratory and pharmacy contract labor costs, and the budget neutrality adjustment factor for these two changes, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act. Thus, it represents the combined impacts shown in columns 1, 2 3, and 4, and the FY 2002 budget neutrality factor of .992394.7
                                 Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB). The effects demonstrate the FY 2002 payment impact of going from no reclassifications to the reclassifications scheduled to be in effect for FY 2002. Reclassification for prior years has no bearing on the payment impacts shown here.8
                                 Shown here are the effects of geographic reclassifications by the MGCRB including the effects of our proposed policy to hold-harmless other hospitals in an urban area where certain hospitals are reclassified elsewhere by including the wage data of reclassified hospitals in their geographic area as well as the area to which they are reclassified.9
                                 This column shows changes in payments from FY 2001 to FY 2002. It incorporates all of the changes displayed in columns 5, 6, and 7 (the changes displayed in columns 1, 2, 3, and 4 are included in column 5). It also displays the impact of the FY 2002 update, changes in hospitals' reclassification status in FY 2002 compared to FY 2001, and the difference in outlier payments from FY 2001 to FY 2002. It also reflects section 213 of Public Law 106-554, which permitted all SCHs to rebase for a 1996 hospital-specific rate. The sum of these columns may be different from the percentage changes shown here due to rounding and interactive effects.
 B. Impact of the Proposed Changes to the DRG Reclassifications and Recalibration of Relative Weights (Column 1) In column 1 of Table I, we present the combined effects of the DRG reclassifications and recalibration, as discussed in section II. of the preamble to this proposed rule. Section 1886(d)(4)(C)(i) of the Act requires us to annually make appropriate classification changes and to recalibrate the DRG weights in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. We compared aggregate payments using the FY 2001 DRG relative weights (GROUPER version 18) to aggregate payments using the proposed FY 2002 DRG relative weights (GROUPER version 19). Overall payments increase 0.5 percent due to the DRG reclassification and recalibration. We note that, consistent with section 1886(d)(4)(C)(iii) of the Act, we have applied a budget neutrality factor to ensure that the overall payment impact of the DRG changes is budget neutral. This budget neutrality factor of 0.992493 is applied to payments in Column 5. The DRG changes we are proposing in this proposed rule would result in higher payments to urban hospitals (0.6 percent) and somewhat lower payments to rural hospitals (-0.1). The changes also would result in higher payments to larger hospitals than to smaller hospitals. This impact is consistent for both urban and rural bed size groups. This distributional impact likely results from the changes we are proposing to major diagnostic category (MDC) 5 “Diseases and Disorders of the Circulatory System.” As described in section II., we are proposing to remove cardiac defribrillator cases from DRGs 104 and 105, and create two new DRGs for these cases. In addition, we are proposing to revise the basis of the DRG assignment for cases involving percutaneous transluminal coronary angioplasty based on whether the patient experienced an acute myocardial infarction. Because MDC 5 is a high volume category, refining the categorizations of these cases has a noticeable impact. C. Impact of Updating the Wage Data and the Proposed Changes to the Wage Index Calculation (Columns 2, 3 & 4) Section 1886(d)(3)(E) of the Act requires that, beginning October 1, 1993, we annually update the wage data used to calculate the wage index. In accordance with this requirement, the proposed wage index for FY 2002 is based on data submitted for hospital cost reporting periods beginning on or after October 1, 1997 and before October 1, 1998. As with column 1, the impact of the new data on hospital payments is isolated in column 2 by holding the other payment parameters constant in the two simulations. That is, column 2 shows the percentage changes in payments when going from a model using the FY 2001 wage index (based on FY 1997 wage data before geographic reclassifications to a model using the FY 2002 pre-reclassification wage index based on FY 1998 wage data). The wage data collected on the FY 1998 cost reports are similar to the data used in the calculation of the FY 2001 wage index. For a thorough discussion of the data used to calculate the wage index, see section III.B of this proposed rule. The results indicate that the new wage data are estimated to provide a 0.2 percent increase for hospital payments overall (prior to applying the budget neutrality factor, see column 5). Rural hospitals appear to experience the greatest benefit from the update to the 1998 wage data, with an increase of 0.5 percent. Rural hospitals in Nevada, Connecticut and Arizona experience wage index increases of more than 5 percent. Rural hospitals in Puerto Rico experience a 3.9 percent increase. Urban hospitals as a group are not significantly affected by the updated wage data. While large urban hospitals appear to experience a 0.1 percent decline, estimated payments to urban hospitals overall showed an increase of 0.2 percent. Payments in other urban areas increase by 0.6 percent. Among urban census divisions, the New England division experiences a 2.2 percent increase, Middle Atlantic a 1.2 percent decrease, East South Central a 1.1 percent increase, and Puerto Rico a 1.3 percent increase. Columns 3 and 4, respectively, show that the proposed change to the overhead calculation and the proposal to include contract labor costs in the wage index discussed in detail in Section III.C. of this proposed rule both appear to have negligible impacts on hospital payments overall. Urban hospitals as a group are not effected by these proposals as there is a 0.0 percent impact to their payments from each proposed change. Rural hospitals, however, do appear to benefit slightly from these changes, as evidenced by the estimated 0.1 percent increase in payments to this group. We note that the wage data used for the proposed wage index are based upon the data available as of February 22, 2001 and, therefore, do not reflect revision requests received and processed by the fiscal intermediaries after that date. To the extent these requests are granted by hospitals' fiscal intermediaries, these revisions will be reflected in the final rule. In addition, we continue to verify the accuracy of the data for hospitals with extraordinary changes in their data from the prior year. The following chart compares the shifts in wage index values for labor market areas for FY 2001 relative to FY 2002. This chart demonstrates the impact of the proposed changes for the FY 2002 wage index relative to the FY 2001 wage index. The majority of labor market areas (318) experience less than a 5-percent change. A total of 36 labor market areas experience an increase of more than 5 percent with 4 having an increase greater than 10 percent. A total of 13 areas experience decreases of more than 5-percent. Of those, 4 decline by 10 percent or more. Percentage change in area wage index 
                                     values
Number of labor market areasFY 2001
FY 2002Increase more than 10 percent
1
4Increase more than 5 percent and less than 10 percent
20
36Increase or decrease less than 5 percent
339
318Decrease more than 5 percent and less than 10 percent
14
13Decrease more than 10 percent
1
4
 Among urban hospitals, 163 would experience an increase of between 5 and 10 percent and 16 more than 10 percent. A total of 33 rural hospitals have increases greater than 5 percent, but none greater than 10 percent. On the negative side, 121 urban hospitals have decreases in their wage index values of at least 5 percent but less than 10 percent. Five urban hospitals have decreases in their wage index values greater than 10 percent. There are no rural hospitals with decreases in their wage index values greater than 5 percent or with increases of more than 10 percent. The following chart shows the projected impact for urban and rural hospitals. 
                            ( print page 22873) Percentage change in area wage index values
Number of hospitalsUrban
RuralIncrease more than 10 percent
16
0Increase more than 5 percent and less than 10 percent
101
15Increase or decrease less than 5 percent
2,395
2,135Decrease more than 5 percent and less than 10 percent
121
0Decrease more than 10 percent
5
0
 D. Combined Impact of DRG and Wage Index Changes—Including Budget Neutrality Adjustment (Column 5) The impact of DRG reclassifications and recalibration on aggregate payments is required by section 1886(d)(4)(C)(iii) of the Act to be budget neutral. In addition, section 1886(d)(3)(E) of the Act specifies that any updates or adjustments to the wage index are to be budget neutral. As noted in the Addendum to this proposed rule, we compared simulated aggregate payments using the FY 2001 DRG relative weights and wage index to simulated aggregate payments using the proposed FY 2002 DRG relative weights and blended wage index. Based on this comparison, we computed a wage and recalibration budget neutrality factor of 0.992493. In Table I, the combined overall impacts of the effects of both the DRG reclassifications and recalibration and the updated wage index are shown in column 5. The 0.0 percent impact for all hospitals demonstrates that these changes, in combination with the budget neutrality factor, are budget neutral. For the most part, the changes in this column are the sum of the changes in columns 1, 2, 3 and 4, minus approximately 0.7 percent attributable to the budget neutrality factor. There may be some variation of plus or minus 0.1 percent due to rounding. E. Impact of MGCRB Reclassifications (Columns 6 & 7) Our impact analysis to this point has assumed hospitals are paid on the basis of their actual geographic location (with the exception of ongoing policies that provide that certain hospitals receive payments on bases other than where they are geographically located, such as hospitals in rural counties that are deemed urban under section 1886(d)(8)(B) of the Act). The changes in column 5 reflect the per case payment impact of moving from this baseline to a simulation incorporating the MGCRB decisions for FY 2002. The changes in column 6 add in the post-reclassified wage index values resulting from the proposed change to include the wage data for a reclassified hospital in both the area to which it is reclassified and the area where the hospital is physically located. As noted below, these decisions affect hospitals' standardized amount and wage index area assignments. By February 28 of each year, the MGCRB makes reclassification determinations that will be effective for the next fiscal year, which begins on October 1. The MGCRB may approve a hospital's reclassification request for the purpose of using the other area's standardized amount, wage index value, or both. The proposed FY 2002 wage index values incorporate all of the MGCRB's reclassification decisions for FY 2002. The wage index values also reflect any decisions made by the HCFA Administrator through the appeals and review process for MGCRB decisions as of February 28, 2001. Additional changes that result from the Administrator's review of MGCRB decisions or a request by a hospital to withdraw its application will be reflected in the final rule for FY 2002. The overall effect of geographic reclassification is required by section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, we applied an adjustment of 0.991054 to ensure that the effects of reclassification are budget neutral. (See section II.A.4.b. of the Addendum to this proposed rule.) This results in a larger budget neutrality offset than the FY 2001 factor of 0.993187. This larger offset is accounted for by the extension of wage index reclassifications for 3 years as a result of section 304 of Public Law 106-554, and our proposed policy to hold-harmless the calculation of urban areas' wage indexes for reclassifications out of the area (see Column 7). We have identified 162 hospitals that were reclassified for FY 2001 but not FY 2002, that will nonetheless continue to be reclassified due to section 304 of Public Law 106-554. As a group, rural hospitals benefit from geographic reclassification. Their payments rise 2.7 percent in Column 6. Payments to urban hospitals decline 0.7 percent. Hospitals in other urban areas see a decrease in payments of 0.5 percent, while large urban hospitals lose 0.8 percent. Among urban hospital groups (that is, bed size, census division, and special payment status), payments generally decline. A positive impact is evident among most of the rural hospital groups. The smallest increase among the rural census divisions is 1.9 percent for Mountain and Puerto Rico regions. The largest increases are in rural West South Central and New England. These regions receive increases of 3.5 and 3.0 percent respectively. Among all the hospitals that were reclassified for FY 2002, the MGCRB changes are estimated to provide a 4.5 percent increase in payments. Urban hospitals reclassified for FY 2002 are anticipated to receive an increase of 2.8 percent, while rural reclassified hospitals are expected to benefit from the MGCRB changes with a 5.6 percent increase in payments. Overall, among hospitals that were reclassified for purposes of the standardized amount only, a payment increase of 3.3 percent is expected, while those reclassified for purposes of the wage index only show a 1.9 percent increase in payments. Payments to urban and rural hospitals that did not reclassify are expected to decrease slightly due to the MGCRB changes, decreasing by 1.2 for urban hospitals and 0.6 for rural hospitals. Those hospitals located in rural counties but deemed to be urban under section 1886(d)(8)(B) of the Act are expected to receive an increase in payments of 0.3 percent. Column 7 shows the impacts of our proposed policy to include the wage data for a reclassified hospital in both the area to which it is reclassified and the area where the hospital is physically located. This change affects overall payments by 0.2 percent, partially accounting for the larger budget neutrality factor compared to FY 2001. The payment impacts are generally largest in urban hospital groups, with the largest impact, 0.6 percent, experienced by urban hospitals in the Middle Atlantic census division. The foregoing analysis was based on MGCRB and HCFA Administrator decisions made by February 28, 2001. As previously noted, there may be changes to some MGCRB decisions through the appeals, review, and applicant withdrawal process. The outcome of these cases will be reflected in the analysis presented in the final rule. F. All Changes (Column 8) Column 8 compares our estimate of payments per case, incorporating all changes reflected in this proposed rule for FY 2002 (including statutory changes), to our estimate of payments per case in FY 2001. It includes the effects of the 2.55 percent update to the standardized amounts and the hospital-specific rates for MDHs and SCHs. It also reflects the 0.8 percentage point difference between the projected outlier payments in FY 2001 (5.1 percent of total DRG payments) and the current estimate of the percentage of actual outlier payments in FY 2001 (5.9 percent), as described in the introduction to this Appendix and the Addendum to this proposed rule. We also note that section 211 of Public Law 106-554 changed the criteria for hospitals to qualify for DSH payment status. Since more hospitals are now eligible to receive DSH payments for the full FY 2002, as opposed to for just the second 6 months of FY 2001, DSH payments to providers in FY 2002 would increase and this change is also captured in column 8. Section 213 of Public Law 106-554 provided that all SCHs may elect to receive payment on the basis of their costs per case during their cost reporting period that began during 1996. For FY 2002, eligible SCHs that rebase receive a hospital-specific rate comprised of 50 percent of the higher of their FY 1982 or FY 1987 hospital-specific rate or their Federal rate, and 50 percent of their 1996 hospital-specific rate. The impact of this provision is modeled in column 8 as well. There might also be interactive effects among the various factors comprising the payment system that we are not able to isolate. For these reasons, the values in column 7 may not equal the sum of the changes in columns 5 and 6, plus the other impacts that we are able to identify. Hospitals in urban areas experience a 1.7 percent increase in payments per case compared to FY 2001. The 0.7 percent 
                            ( print page 22874)
                            negative impact due to reclassification is offset by a similar negative impact for FY 2001 of 0.4 percent (65 FR 47196). Hospitals in rural areas, meanwhile, experience a 3.2 percent payment increase. This is primarily due to the change in the DSH threshold to 15 percent for all hospitals enacted by section 211 of Public Law 106-554 and effective for discharges on or after April 1, 2001, and the positive effect of the reclassification changes (2.7 percent increase, plus an additional 0.1 percent increase from the proposal to include the wage data for a reclassified hospital in both the area to which it is reclassified and the area where the hospital is physically located). The impact of lowering the DSH threshold is demonstrated in Column 8, although we would note that the estimated FY 2001 payments do reflect 6 months of payments to hospitals affected by this change. The impacts are seen in the rows displaying urban hospitals with fewer than 100 beds receiving DSH (3.3 percent increase), and all rural DSH categories. Among urban census divisions, payments increased between 0.2 and 3.0 percent between FY 2001 and FY 2002. The rural census division experiencing the smallest increase in payments was the Mid-Atlantic region (2.2 percent). The largest increases by rural hospitals is in Puerto Rico, where payments appear to increase by 8.4 percent and West South Central, where payments appear to increase by 4.2 percent. Rural New England and South Atlantic regions also benefited with 3.7 and 3.6 percent respectively. Among special categories of rural hospitals, those hospitals receiving payment under the hospital-specific methodology (SCHs, MDHs, and SCH/RRCs) experience payment increases of 3.1 percent, 3.7 percent, and 3.2 percent, respectively. This outcome is primarily related to the fact that, for hospitals receiving payments under the hospital-specific methodology, there are no outlier payments. Therefore, these hospitals do not experience negative payment impacts from the decline in outlier payments from FY 2001 to FY 2002 (from 5.9 percent of total DRG plus outlier payments to 5.1 percent) as do hospitals paid based on the national standardized amounts. Among hospitals that were reclassified for FY 2002, hospitals overall are estimated to receive a 2.9 percent increase in payments. Urban hospitals reclassified for FY 2002 are anticipated to receive an increase of 2.0 percent, while rural reclassified hospitals are expected to benefit from reclassification with a 3.6 percent increase in payments. Overall, among hospitals reclassified for purposes of the standardized amount, only a payment increase of 4.0 percent is expected, while those hospitals reclassified for purposes of the wage index only show an expected 2.5 percent increase in payments. Those hospitals located in rural counties but deemed to be urban under section 1886(d)(8)(B) of the Act are expected to receive an increase in payments of 3.9 percent. Table II.—Impact Analysis of Changes for FY 2001 Operating Prospective Payment System
[Payments per case]
Number 
                                     of hosps.  
                                     (1)
Average FY 2001 
                                     
                                        payment per case 1
                                          
                                     
                                     (2)
Average FY 2001 
                                     
                                        payment per case 1
                                          
                                     
                                     (3)
All FY 2001 
                                     changes  
                                     (4)By Geographic Location:All hospitals
4,795
6,969
7,100
1.9Urban hospitals
2,721
7,548
7,674
1.7Large urban areas (populations over 1 million)
1,563
8,087
8,207
1.5Other urban areas (populations of 1 million of fewer)
1,158
6,854
6,989
2.0Rural hospitals
2,074
4,705
4,856
3.2Bed Size (Urban):0-99 beds
712
5,114
5,220
2.1100-199 beds
943
6,294
6,397
1.6200-299 beds
530
7,192
7,320
1.8300-499 beds
391
8,127
8,261
1.6500 or more beds
145
9,946
10,099
1.5Bed Size (Rural):0-49 beds
1,209
3,922
4,041
3.050-99 beds
520
4,410
4,554
3.3100-149 beds
204
4,780
4,922
3.0150-199 beds
75
5,291
5,470
3.4200 or more beds
66
5,961
6,173
3.6Urban by Region:New England
139
8,077
8,214
1.7Middle Atlantic
417
8,561
8,579
0.2South Atlantic
395
7,183
7,386
2.8East North Central
462
7,210
7,323
1.6East South Central
160
6,771
6,973
3.0West North Central
189
7,287
7,430
2.0West South Central
342
7,039
7,087
0.7Mountain
137
7,282
7,454
2.4Pacific
434
8,840
9,037
2.2Puerto Rico
46
3,235
3,319
2.6Rural by Region:New England
49
5,615
5,821
3.7Middle Atlantic
74
5,052
5,165
2.2South Atlantic
267
4,871
5,046
3.6East North Central
273
4,743
4,875
2.8East South Central
263
4,398
4,556
3.6West North Central
479
4,506
4,620
2.5West South Central
331
4,177
4,351
4.2Mountain
194
5,020
5,166
2.9Pacific
139
5,762
5,920
2.7Puerto Rico
5
2,529
2,742
8.4By Payment Classification:Urban hospitals
2,766
7,526
7,652
1.7( print page 22875)Large urban areas (populations over 1 million)
1,643
8,002
8,121
1.5Other urban areas (populations of 1 million of fewer)
1,123
6,870
7,008
2.0Rural areas
2,029
4,687
4,838
3.2Teaching Status:Non-teaching
3,674
5,605
5,728
2.2Fewer than 100 Residents
881
7,309
7,445
1.9100 or more Residents
240
11,258
11,410
1.3Urban DSH:Non-DSH
1,879
6,354
6,461
1.7100 or more beds
1,378
8,129
8,267
1.7Less than 100 beds
325
4,925
5,089
3.3Rural DSH:Sole Community (SCH)
540
4,295
4,427
3.1Referral Center (RRC)
157
5,521
5,723
3.7Other Rural:100 or more beds
73
4,304
4,441
3.2Less than 100 beds
443
3,928
4,095
4.3Urban teaching and DSH:Both teaching and DSH
754
9,091
9,238
1.6Teaching and no DSH
295
7,562
7,683
1.6No teaching and DSH
949
6,298
6,424
2.0No teaching and no DSH
768
5,932
6,022
1.5Rural Hospital Types:Non special status hospitals
800
4,042
4,186
3.6RRC
165
5,434
5,630
3.6SCH
667
4,562
4,676
2.5Medicare-dependent hospitals (MDH)
328
3,844
3,966
3.2SCH and RRC
69
5,649
5,803
2.7Type of Ownership:Voluntary
2,785
7,136
7,261
1.8Proprietary
777
6,580
6,712
2.0Government
1,187
6,486
6,651
2.5Unknown
46
6,283
6,449
2.6Medicare Utilization as a Percent of Inpatient Days:0-25
396
9,504
9,713
2.225-50
1,886
8,030
8,164
1.750-65
1,843
6,012
6,142
2.2Over 65
592
5,393
5,497
1.9Unknown
78
10,244
10,132
−1.1Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY 2002 Reclassifications:All Reclassified Hospitals
636
6,153
6,334
2.9Standardized Amount Only
74
5,200
5,407
4.0Wage Index Only
391
6,004
6,152
2.5Both
58
6,818
6,816
0.0All Nonreclassified Hospitals
4,246
7,105
7,236
1.9All Urban Reclassified Hospitals
119
8,253
8,415
2.0Urban Nonreclassified Hospitals
18
6,176
6,136
−0.6Standardized Amount Only
81
8,946
9,141
2.2Wage Index Only
20
6,193
6,346
2.5Both
2,564
7,531
7,654
1.6All Reclassified Rural Hospitals
517
5,277
5,466
3.6Standardized Amount Only
19
4,658
4,750
2.0Wage Index Only
475
5,283
5,472
3.6Both
23
5,396
5,622
4.2Rural Nonreclassified Hospitals
1,554
4,153
4,268
2.8Other Reclassified Hospitals (Section 1886(D)(8)(B))
41
4,841
5,032
3.91
                                 These payment amounts per case do not reflect any estimates of annual case-mix increase.
 Table II presents the projected impact of the proposed changes for FY 2002 for urban and rural hospitals and for the different categories of hospitals shown in Table I. It compares the estimated payments per case for FY 2001 with the average estimated per case payments for FY 2002, as calculated under our models. Thus, this table presents, in terms of the average dollar amounts paid per discharge, the combined effects of the changes presented in Table I. The percentage changes shown in the last column of Table II equal the percentage changes in average payments from column 8 of Table I. 
                            ( print page 22876) VIII. Impact for Critical Access Hospitals (CAHs) There are approximately 365 facilities that qualify as CAHs. These CAHs are paid based on reasonable costs for their services to inpatients and outpatients. We examined several parts of the proposed rule, as discussed in detail in section VI.B. of the preamble, for their potential impact on CAHs. A. Exclusion of CAHs From Payment Window Requirements In this proposed rule, we are proposing to clarify the policy that CAHs are not subject to the payment window provisions of section 1886(a)(3) of the Act. Existing regulations do not require that these provisions be applied to CAHs, and we are not aware of specific situations in which they are now being applied. Consequently, we do not expect any increase or decrease in Medicare spending based on this clarification. B. Availability of CRNA Pass-Through for CAHs Under existing § 412.113(c), CRNA pass-through payment is available only to hospitals that either qualified for the pass-through of costs of anesthesia services furnished in calendar year 1989, or employed or contracted with a qualified nonphysician anesthetist as of January 1, 1988, to perform anesthesia services. We are proposing that certain CAHs that meet the pass-through criteria would qualify for pass-through payments. Under the existing criterion, the only facilities that could qualify for the pass-through as CAHs are those that would have qualified for the pass-through if they had elected to continue participating in Medicare as hospitals rather than converting to CAH status. We do not expect any increase or decrease in Medicare spending based on the proposed change in the regulations. C. Payment for Emergency Room On-Call Physicians In accordance with the amendments made by section 204 of Public Law 106-544, we are proposing to recognize as allowable costs, amounts for reasonable compensation and related costs for emergency room physicians who are on call but who are not present on the premises of a CAH. We expect that at least some CAHs will elect to compensate emergency room physicians for being on call, and that as a result, Medicare spending for CAH services will increase. However, we do not have information to develop a reliable estimate of how many CAHs will make this election, or how much physician compensation costs they will incur for on call time. D. Treatment of Ambulance Services Furnished by Certain CAHs In accordance with the provisions of section 205 of Public Law 106-554, we are proposing to amend the existing CAH regulations to provide for payment to CAHs for the reasonable costs of ambulance services furnished by a CAH or an entity owned or operated by the CAH if certain statutory requirements are met. We expect that at least some CAHs or entities owned or operated by CAHs will be able to qualify for payment for their ambulance services. To the extent that CAHs or CAH owned or operated entities furnish these services under the conditions specified in the law, ambulance services will be paid for at higher rates than would otherwise apply. As a result, Medicare spending for ambulance services will increase. However, we do not have sufficient information or data to develop a reliable estimate of how many CAHs or entities will qualify or the dollar amount of ambulance service costs they will incur. E. Qualified Practitioners for Preanesthesia and Postanesthesia Evaluations in CAHs As discussed in section VI.B. of this proposed rule, in an effort to eliminate or minimize potential issues relating to beneficiary access to medical services in rural areas, we are proposing to allow CRNAs who administer the anesthesia to conduct the preanesthesia and postanesthesia evaluations in a CAH. As with any licensed independent health care provider, the proposed change would not permit CRNAs to practice beyond his or her licensed scope of practice. We believe that this proposal would increase flexibility of providers in furnishing medical services in rural areas. However, we do not have information or data to develop a reliable estimate of how many CRNAs would be used to conduct preanesthesia and postanesthesia evaluations in CAHs or what the associated costs would be. IX. Impact of Proposed Changes in the Capital Prospective Payment System A. General Considerations We now have cost report data for the 8th year of the capital prospective payment system (cost reports beginning in FY 1999) available through the December 2000 update of the HCRIS. We also have updated information on the projected aggregate amount of obligated capital approved by the fiscal intermediaries. However, our impact analysis of payment changes for capital-related costs is still limited by the lack of hospital-specific data on several items. These are the hospital's projected new capital costs for each year, its projected old capital costs for each year, and the actual amounts of obligated capital that will be put in use for patient care and recognized as Medicare old capital costs in each year. The lack of this information affects our impact analysis in the following ways: Major investment in hospital capital assets (for example, in building and major fixed equipment) occurs at irregular intervals. As a result, there can be significant variation in the growth rates of Medicare capital-related costs per case among hospitals. We do not have the necessary hospital-specific budget data to project the hospital capital growth rate for individual hospitals.
                        Our policy of recognizing certain obligated capital as old capital makes it difficult to project future capital-related costs for individual hospitals. Under § 412.302(c), a hospital is required to notify its intermediary that it has obligated capital by the later of October 1, 1992, or 90 days after the beginning of the hospital's first cost reporting period under the capital prospective payment system. The intermediary must then notify the hospital of its determination whether the criteria for recognition of obligated capital have been met by the later of the end of the hospital's first cost reporting period subject to the capital prospective payment system or 9 months after the receipt of the hospital's notification. The amount that is recognized as old capital is limited to the lesser of the actual allowable costs when the asset is put in use for patient care or the estimated costs of the capital expenditure at the time it was obligated. We have substantial information regarding fiscal intermediary determinations of projected aggregate obligated capital amounts. However, we still do not know when these projects will actually be put into use for patient care, the actual amount that will be recognized as obligated capital when the project is put into use, or the Medicare share of the recognized costs. Therefore, we do not know actual obligated capital commitments for purposes of the FY 2002 capital cost projections. In Appendix B of this proposed rule, we discuss the assumptions and computations that we employ to generate the amount of obligated capital commitments for use in the FY 2002 capital cost projections. In Table III of this section, we present the redistributive effects that are expected to occur between “hold-harmless” hospitals and “fully prospective” hospitals in FY 2002. In addition, we have integrated sufficient hospital-specific information into our actuarial model to project the impact of the proposed FY 2002 capital payment policies by the standard prospective payment system hospital groupings. While we now have actual information on the effects of the transition payment methodology and interim payments under the capital prospective payment system and cost report data for most hospitals, we still need to randomly generate numbers for the change in old capital costs, new capital costs for each year, and obligated amounts that will be put in use for patient care services and recognized as old capital each year. We continue to be unable to predict accurately FY 2002 capital costs for individual hospitals, but with the most recent data on hospitals' experience under the capital prospective payment system, there is adequate information to estimate the aggregate impact on most hospital groupings. B. Projected Impact Based on the Proposed FY 2002 Actuarial Model 1. Assumptions In this impact analysis, we model dynamically the impact of the capital prospective payment system from FY 2001 to FY 2002 using a capital cost model. The FY 2002 model, as described in Appendix B of this proposed rule, integrates actual data from individual hospitals with randomly generated capital cost amounts. We have capital cost data from cost reports beginning in FY 1989 through FY 1999 as reported on the December 2000 update of HCRIS, interim payment data for hospitals already receiving capital prospective payments through PRICER, and data reported by the intermediaries that include the hospital-
                            ( print page 22877)
                            specific rate determinations that have been made through January 1, 2001 in the provider-specific file. We used these data to determine the proposed FY 2002 capital rates. However, we do not have individual hospital data on old capital changes, new capital formation, and actual obligated capital costs. We have data on costs for capital in use in FY 1999, and we age that capital by a formula described in Appendix B. Therefore, we need to randomly generate only new capital acquisitions for any year after FY 1999. All Federal rate payment parameters are assigned to the applicable hospital. We will continue to pay regular exceptions during cost reporting periods beginning before October 1, 2001 but ending in FY 2002. However, in FY 2003 and later, payments will no longer be made under the regular exceptions provision, hence, we will no longer require the actuarial model described in Appendix B of this proposed rule. For purposes of this impact analysis, the proposed FY 2002 actuarial model includes the following assumptions: Medicare inpatient capital costs per discharge will change at the following rates during these periods: Average Percentage Change in Capital Costs Per Discharge
Fiscal year
Percentage change2000
1.392001
1.372002
2.58
 We estimate that the Medicare case-mix index will increase by 0.0 percent in FY 2001 and will increase by 1.0 percent in FY 2002.
                        The Federal capital rate and the hospital-specific rate were updated beginning in FY 1996 by an analytical framework that considers changes in the prices associated with capital-related costs and adjustments to account for forecast error, changes in the case-mix index, allowable changes in intensity, and other factors. The proposed FY 2002 update is 1.1 percent (see section IV. of the Addendum to this proposed rule). 2. Results We have used the actuarial model to estimate the change in payment for capital-related costs from FY 2001 to FY 2002. Table III shows the effect of the capital prospective payment system on low capital cost hospitals and high capital cost hospitals. We consider a hospital to be a low capital cost hospital if, based on a comparison of its initial hospital-specific rate and the applicable Federal rate, it will be paid under the fully prospective payment methodology. A high capital cost hospital is a hospital that, based on its initial hospital-specific rate and the applicable Federal rate, will be paid under the hold-harmless payment methodology. We are no longer displaying a column for the hospital-specific payments in Table III since the FY 2001 transition blend percentage for fully prospective hospitals is 100 percent of the Federal rate and zero percent of the hospital-specific rate, and all hospitals (except those defined as “new” under § 412.300) are paid based on 100 percent of the Federal rate for FY 2002. Based on our actuarial model, the breakdown of hospitals is as follows: Capital Transition Payment Methodology for FY 2002
Type of hospital
Percent of hospitals
Percent of discharges
Percent of capital costs
Percent of capital paymentsLow Cost Hospital
66
62
57
61High Cost Hospital
34
38
43
39
 A low capital cost hospital may request to have its hospital-specific rate redetermined based on old capital costs in the current year, through the later of the hospital's cost reporting period beginning in FY 1994 or the first cost reporting period beginning after obligated capital comes into use (within the limits established in § 412.302(c) for putting obligated capital into use for patient care). If the redetermined hospital-specific rate is greater than the adjusted Federal rate, these hospitals will be paid under the hold-harmless payment methodology. Regardless of whether the hospital became a hold-harmless payment hospital as a result of a redetermination, we continue to show these hospitals as low capital cost hospitals in Table III. Assuming no behavioral changes in capital expenditures, Table III displays the percentage change in payments from FY 2001 to FY 2002 using the above described actuarial model. With the proposed Federal rate, we estimate aggregate Medicare capital payments will increase by 3.80 percent in FY 2002. This increase is somewhat lower than last year's (5.48 percent) due in part to the fact that because the transition period ends after FY 2001, there is no longer an increase in the Federal blend percentage, which increased from 90 to 100 percent from FY 2000 to FY 2001, for fully prospective hospitals. Table III.—Impact of Proposed Changes for FY 2002 on Payments per Discharge
Number of 
                                     hospitals
Discharges
Adjusted 
                                     Federal  
                                     payment
Average 
                                     Federal  
                                     percent
Hold 
                                     harmless  
                                     payment
Exceptions 
                                     payment
Total 
                                     payment
Percent 
                                     change over  
                                     FY 2001FY 2001 Payments per DischargeLow Cost Hospitals
3,128
6,718,804
$626.20
99.70
$2.38
$5.69
$634.27Fully Prospective
2,945
6,231,764
627.54
100.00

5.09
632.63100% Federal Rate
163
451,843
627.89
100.00

7.75
635.64Hold Harmless
20
35,197
367.32
50.30
454.71
85.44
907.47High Cost Hospitals
1,577
4,110,246
636.96
97.69
19.34
10.64
666.93100% Federal Rate
1,386
3,744,619
648.86
100.00

8.82
657.68Hold Harmless
191
365,627
515.12
75.29
217.38
29.23
761.73Total Hospitals
4,705
10,829,050
630.28
98.92
8.82
7.57
646.67FY 2002 Payments per DischargeLow Cost Hospitals
3,128
6,826,288
647.17
100.00

3.19
650.36
2.54( print page 22878)Fully Prospective
2,945
6,331,437
646.59
100.00

2.96
649.55
2.68100% Federal Rate
183
494,852
654.56
100.00

6.11
660.67
3.94High Cost Hospitals
1,577
4,176,324
671.77
100.00

5.72
677.49
1.58100% Federal Rate
1,577
4,176,324
671.77
100.00

5.72
677.49
3.01Total Hospitals
4,705
11,002,612
656.51
100.00

4.15
660.66
2.16
 We project that low capital cost hospitals paid under the fully prospective payment methodology will experience an average increase in payments per case of 2.54 percent, and high capital cost hospitals will experience an average increase of 1.58 percent. These results are due to the fact that there is no longer an increase in the Federal blend percentage with the conclusion of the capital transition period in FY 2001 for fully prospective hospitals. Beginning FY 2002, all hospitals (except those defined as “new” under § 412.300) are paid based on 100 percent of the Federal rate for FY 2002. For hospitals paid under the fully prospective payment methodology, the Federal rate payment percentage remains at 100 percent from FY 2001 (last year of the transition period) since they no longer receive payments based on the hospital-specific rate. The Federal rate payment percentage in FY 2001 for hospitals paid under the hold-harmless payment methodology is based on the hospital's ratio of new capital costs to total capital costs. The average Federal rate payment percentage for high cost hospitals receiving a hold-harmless payment for old capital in FY 2001 will increase from 75.29 percent to 100 percent since the transition period will have ended. All hold-harmless hospitals will be paid based on 100 percent of the Federal rate in FY 2002. We estimate that high cost hospitals (paid based on 100 percent of the Federal rate) will receive a decrease in exceptions payments from $8.82 per discharge in FY 2001 to $5.72 per discharge in FY 2002. This is primarily due to the expiration of the regular exceptions provision in FY 2002. We are no longer presenting the average hospital-specific rate payment per discharge in Table III because the FY 2001 transition blend percentage for fully prospective hospitals is 100 percent of the Federal rate and zero percent of the hospital-specific rate, and all hospitals (except those defined as “new” under § 412.300) will be paid based on 100 percent of the Federal rate for FY 2002. As stated previously, we will continue to pay regular exceptions for cost reporting periods beginning before October 1, 2001, but ending in FY 2002. However, in FY 2003 and later, regular exception payments will no longer be made under the regular exceptions provision, however, eligible hospitals could receive special exception payments under § 412.348(g). We estimate that regular exceptions payments will decrease from 1.17 percent of total capital payments in FY 2001 to 0.63 percent of payments in FY 2002. These results are primarily due to the expiration of the regular exceptions after FY 2001 and the limited nature of the special exceptions policy in FY 2002. The projected distribution of the exception payments is shown in the chart below: Estimated FY 2002 Exceptions Payments
Type of hospital
Number of hospitals
Percent of exceptions paymentsLow Capital Cost
122
48High Capital Cost
116
52Total
238
100
 In the past we presented a cross-sectional summary of hospital groupings by the capital prospective payment transition period methodology generated by our actuarial model (Appendix B). We are no longer including such a comparison since all hospitals (except those defined as “new” under § 412.300) will be paid based on 100 percent of the Federal rate in FY 2002 with the conclusion of the 10-year capital transition period. C. Cross-Sectional Analysis of Changes in Aggregate Payments We used our FY 2002 actuarial model to estimate the potential impact of our proposed changes for FY 2002 on total capital payments per case, using a universe of 4,705 hospitals. The individual hospital payment parameters are taken from the best available data, including: The January 1, 2001 update to the provider-specific file, cost report data, and audit information supplied by intermediaries. In Table IV we present the results of the cross-sectional analysis using the results of our actuarial model and the aggregate impact of the proposed FY 2002 payment policies. As we explain in Appendix B of this proposed rule, we were not able to use 90 of the 4,795 hospitals in our database due to insufficient (missing or unusable) data. Consequently, the payment methodology distribution is based on 4,705 hospitals. These data should be fully representative of the payment methodologies that will be applicable to hospitals. Columns 3 and 4 show estimates of payments per case under our model for FY 2001 and FY 2002. Column 5 shows the total percentage change in payments from FY 2001 to FY 2002. Column 6 presents the percentage change in payments that can be attributed to Federal rate changes alone. Federal rate changes represented in Column 6 include the 1.85 percent increase in the Federal rate, a 1.0 percent increase in case mix, changes in the adjustments to the Federal rate (for example, the effect of the new hospital wage index on the geographic adjustment factor), and reclassifications by the MGCRB. Column 5 includes the effects of the Federal rate changes represented in Column 6. Column 5 also reflects the effects of all other changes, including the change for all hold-harmless hospitals being paid based on 100 percent of the Federal rate, and changes in exception payments. The comparisons are provided by: (1) Geographic location, (2) region, and (3) payment classification. The simulation results show that, on average, capital payments per case can be expected to increase 2.2 percent in FY 2002. The results show that the effect of the Federal rate change alone is to increase payments by 3.0 percent. In addition to the increase attributable to the Federal rate change, a 0.8 percent decrease is attributable to the effects of all other changes. Our comparison by geographic location shows an overall increase in payments to hospitals in all areas. This comparison also shows that urban and rural hospitals will experience slightly different rates of increase in capital payments per case (2.3 percent and 1.2 percent, respectively). This difference is due to the lower rate of decrease for urban hospitals relative to rural hospitals (0.7 percent and 1.7 percent, respectively) from the effect of all other changes. Urban hospitals will gain approximately the same as rural hospitals (3.0 percent versus 2.9 percent, respectively) from the effects of Federal rate changes alone. Most regions are estimated to receive increases in total capital payments per case, partly due to the fact that payments to all hospitals (except those defined as “new” under § 412.300) will be based on 100 percent of the Federal rate in FY 2002. Changes by region vary from a minimum 
                            ( print page 22879)
                            maximum decrease of 0.6 percent (Mountain urban region) to a maximum increase of 3.0 percent (New England urban rural region). By type of ownership, voluntary hospitals are projected to have the largest rate of increase of total payment changes (2.5 percent, a 3.0 percent increase due to the Federal rate changes, and a 0.5 percent decrease from the effects of all other changes). Similarly, payments to government hospitals will increase 2.2 percent (a 3.0 percent increase due to Federal rate changes, and a 0.8 percent decrease from the effects of all other changes), while payments to proprietary hospitals will increase 0.5 percent (a 2.9 percent increase due to Federal rate changes, and a 2.4 percent decrease from the effects of all other changes). This 2.4 percent decrease from all other changes is primarily due to the estimated decrease in exceptions payments and the change for all hold-harmless hospitals being paid based on 100 percent of the Federal rate. Section 1886(d)(10) of the Act established the MGCRB. Hospitals may apply for reclassification for purposes of the standardized amount, wage index, or both and for purposes of DSH for FYs 1999 through 2001. Although the Federal capital rate is not affected, a hospital's geographic classification for purposes of the operating standardized amount does affect a hospital's capital payments as a result of the large urban adjustment factor and the disproportionate share adjustment for urban hospitals with 100 or more beds. Reclassification for wage index purposes also affects the geographic adjustment factor, since that factor is constructed from the hospital wage index. To present the effects of the hospitals being reclassified for FY 2001 compared to the effects of reclassification for FY 2000, we show the average payment percentage increase for hospitals reclassified in each fiscal year and in total. For FY 2001 reclassifications, we indicate those hospitals reclassified for standardized amount purposes only, for wage index purposes only, and for both purposes. The reclassified groups are compared to all other nonreclassified hospitals. These categories are further identified by urban and rural designation. Hospitals reclassified for FY 2001 as a whole are projected to experience a 2.0 percent increase in payments (a 3.0 percent increase attributable to Federal rate changes and a 1.0 percent decrease attributable to the effects of all other changes). Payments to nonreclassified hospitals will increase slightly more (2.2 percent) than reclassified hospitals (2.0 percent) overall. Payments to nonreclassified hospitals will increase the same as reclassified hospitals from the Federal rate changes (3.0 percent), and they will lose less from the effects of all other changes (0.8 percent compared to 1.0 percent, respectively). Table IV.—Comparison of Total Payments Per Case
[FY 2001 Payments Compared to FY 2002 Payments]
Number of 
                                     hospitals
Average FY 2001 payments/case
Average FY 2002 
                                     payments/case
All 
                                     changes
Portion 
                                     attributable to Federal  
                                     rate changeBy Geographic Location:All hospitals
4,705
647
661
2.2
3.0Large urban areas (populations over 1 million)
1,519
749
766
2.3
3.0Other urban areas (populations of 1 million or fewer)
1,125
635
650
2.4
3.0Rural areas
2,061
439
444
1.2
2.9Urban hospitals
2,644
699
716
2.3
3.00-99 beds
654
522
507
-2.8
2.8100-199 beds
927
596
607
1.8
2.9200-299 beds
528
667
684
2.6
3.0300-499 beds
390
739
762
3.1
3.0500 or more beds
145
902
925
2.6
2.9Rural hospitals
2,061
439
444
1.2
2.90-49 beds
1,200
369
372
1.0
2.950-99 beds
516
412
416
1.0
2.9100-149 beds
204
452
457
1.1
2.9150-199 beds
75
485
495
2.2
2.9200 or more beds
66
548
553
1.0
3.0By Region:Urban by Region
2,644
699
716
2.3
3.0New England
138
745
768
3.0
3.0Middle Atlantic
407
782
800
2.4
2.9South Atlantic
393
669
684
2.2
3.0East North Central
448
672
690
2.7
3.0East South Central
156
638
655
2.7
2.9West North Central
181
688
708
2.9
3.0West South Central
321
665
673
1.3
2.9Mountain
127
702
698
-0.6
2.9Pacific
427
787
808
2.7
3.0Puerto Rico
46
295
304
3.1
3.1Rural by Region
2,061
439
444
1.2
2.9New England
49
522
534
2.3
3.0Middle Atlantic
73
463
469
1.5
2.9South Atlantic
267
457
458
0.1
2.9East North Central
273
449
455
1.4
2.9East South Central
260
410
415
1.2
2.9West North Central
477
422
428
1.4
2.9West South Central
325
390
398
2.1
2.9Mountain
193
466
467
0.1
2.8Pacific
139
520
530
2.0
3.0By Payment Classification:All hospitals
4,705
647
661
2.2
3.0Large urban areas (populations over 1 million)
1,599
742
759
2.3
3.0Other urban areas (populations of 1 million or fewer)
1,090
636
651
2.4
3.0Rural areas
2,016
437
442
1.2
2.9( print page 22880)Teaching Status:Non-teaching
3,586
533
540
1.3
2.9Fewer than 100 Residents
879
675
695
2.9
3.0100 or more Residents
240
999
1,026
2.7
2.9Urban DSH:100 or more beds
1,374
734
752
2.4
3.0Less than 100 beds
317
489
491
0.4
2.8Rural DSH:Sole Community (SCH/EACH)
540
395
390
-1.3
2.8Referral Center (RRC/EACH)
157
504
511
1.4
2.9Other Rural:100 or more beds
73
409
419
2.4
2.9Less than 100 beds
439
369
380
2.8
3.0Urban teaching and DSH:Both teaching and DSH
753
814
836
2.7
3.0Teaching and no DSH
294
717
740
3.3
3.0No teaching and DSH
938
585
595
1.7
2.9No teaching and no DSH
704
590
595
0.9
2.9Rural Hospital Types:Non special status hospitals
788
384
394
2.8
3.0RRC/EACH
165
504
517
2.6
3.0SCH/EACH
667
423
417
-1.5
2.8Medicare-dependent hospitals (MDH)
327
363
365
0.7
2.9SCH, RRC and EACH
69
510
508
-0.4
2.8Hospitals Reclassified by the Medicare Geographic Classification Review Board:Reclassification Status During FY01 and FY02:
482
564
576
2.1
3.0Reclassified During FY02 Only
153
571
580
1.6
2.9FY02 Reclassifications:All Reclassified Hospitals
635
566
577
2.0
3.0All Nonreclassified Hospitals
4,157
659
674
2.2
3.0All Urban Reclassified Hospitals
119
741
763
2.9
3.0Urban Nonreclassified Hospitals
2,487
699
715
2.3
3.0All Reclassified Rural Hospitals
516
492
499
1.4
2.9Rural Nonreclassified Hospitals
1,542
388
392
0.9
2.9Other Reclassified Hospitals (Section 1886(D)(8)(B)).
41
461
455
-1.3
2.9Type of Ownership:Voluntary
2,769
660
677
2.5
3.0Proprietary
755
639
642
0.5
2.9Government
1,179
581
594
2.2
3.0Medicare Utilization as a Percent of Inpatient Days:0-25
389
825
846
2.5
3.025-50
1,872
736
755
2.5
3.050-65
1,832
568
580
2.2
3.0Over 65
585
522
519
-0.7
2.9
 Appendix B: Technical Appendix on the Capital Cost Model and Required Adjustments Under section 1886(g)(1)(A) of the Act, we set capital prospective payment rates for FY 1992 through FY 1995 so that aggregate prospective payments for capital costs were projected to be 10 percent lower than the amount that would have been payable on a reasonable cost basis for capital-related costs in that year. To implement this requirement, we developed the capital acquisition model to determine the budget neutrality adjustment factor. Even though the budget neutrality requirement expired effective with FY 1996, we must continue to determine the recalibration and geographic reclassification budget neutrality adjustment factor and the reduction in the Federal and hospital-specific rates for exceptions payments. To determine these factors, we must continue to project capital costs and payments. We will continue to pay regular exceptions for cost reporting periods beginning before October 1, 2001 but ending in FY 2002. In FY 2003 and later, no payments will be made under the regular exceptions policy, hence we will not compute a budget neutrality factor for regular exceptions in FY 2003 and later. As described in section V.D. of the preamble of this proposed rule, the budget neutrality adjustment for special exceptions will be based on historical costs. Consequently, there will be no need to estimate capital costs with the capital acquisition model. We will not publish this appendix after the final rule for the FY 2002 capital rates. We used the capital acquisition model from the start of prospective payments for capital costs through FY 1997. We now have 8 years of cost reports under the capital prospective payment system. For FY 1998, we developed a new capital cost model to replace the capital acquisition model. This revised model makes use of the data from these cost reports. The following cost reports are used in the capital cost model for this proposed rule: the December 31, 2000 update of the cost reports for PPS-IX (cost reporting periods beginning in FY 1992), PPS-X (cost reporting periods beginning in FY 1993), PPS-XI (cost reporting periods beginning in FY 1994), PPS-XII (cost reporting periods beginning in FY 1995), PPS-XIII (cost reporting periods beginning in FY 1996), PPS-XIV (cost reporting periods beginning in FY 1997), 
                            ( print page 22881)
                            PPS-XV (cost reporting periods beginning in FY 1998), and PPS-XVI (cost reporting periods beginning in FY 1999). In addition, to model payments, we use the January 1, 2001 update of the provider-specific file, and the March 1995 update of the intermediary audit file. Since hospitals under alternative payment system waivers (that is, hospitals in Maryland) are currently excluded from the capital prospective payment system, we excluded these hospitals from our model. We developed FY 1992 through FY 2001 hospital-specific rates using the provider-specific file and the intermediary audit file. (We used the cumulative provider-specific file, which includes all updates to each hospital's records, and chose the latest record for each fiscal year.) We checked the consistency between the provider-specific file and the intermediary audit file. We ensured that increases in the hospital-specific rates were at least as large as the published updates (increases) for the hospital-specific rates each year. We were able to match hospitals to the files as shown in the following table: Source
Number of 
                                     hospitalsNo match
4Audit file only
90Provider-specific file only
185Provider-specific and audit file
4,516Total
4,795
 One hundred eighteen of the 4,795 hospitals had unusable or missing data, or had no cost reports available. For 52 of the 118 hospitals, we were unable to determine a hospital-specific rate from the available cost reports. However, there was adequate cost information to determine that these hospitals were paid under the hold-harmless methodology. Since the hospital-specific rate is not used to determine payments for hospitals paid under the hold-harmless methodology, there was sufficient cost report information available to include these 52 hospitals in the analysis. We were able to estimate hospital-specific amounts from the cost reports as shown in the following table. Cost report
Number of 
                                     hospitalsPPS-9
1PPS-12
1PPS-13
1PPS-14
1PPS-15
2PPS-16
8Total
14
 Hence we were able to use 66 (52 plus 14) of the 118 hospitals. The remaining 52 of the 118 hospitals could not be used in the analysis because we were not able to estimate their hospital-specific amount. An additional 38 hospitals could not be used in the analysis because we could not determine their capital costs, either because we had no cost reports for them or because there was insufficient cost report data. Accordingly, we used 4,705 hospitals for the analysis. Ninety (52 plus 38) hospitals could not be used in the analysis because of insufficient (missing or unusable) information. These hospitals account for about 0.3 percent of admissions. Therefore, any effects from the elimination of their cost report data should be minimal. We analyzed changes in capital-related costs (depreciation, interest, rent, leases, insurance, and taxes) reported in the cost reports. We found a wide variance among hospitals in the growth of these costs. For hospitals with more than 100 beds, the distribution and mean of these cost increases were different for large changes in bed-size (greater than ±20 percent). We also analyzed changes in the growth in old capital and new capital for cost reports that provided this information. For old capital, we limited the analysis to decreases in old capital. We did this since the opportunity for most hospitals to treat “obligated” capital put into service as old capital has expired. Old capital costs should decrease as assets become fully depreciated and as interest costs decrease as the loan is amortized. The new capital cost model separates the hospitals into three mutually exclusive groups. Hold-harmless hospitals with data on old capital were placed in the first group. Of the remaining hospitals, those hospitals with fewer than 100 beds comprise the second group. The third group consists of all hospitals that did not fit into either of the first two groups. Each of these groups displayed unique patterns of growth in capital costs. We found that the gamma distribution is useful in explaining and describing the patterns of increase in capital costs. A gamma distribution is a statistical distribution that can be used to describe patterns of growth rates, with the greatest proportion of rates being at the low end. We use the gamma distribution to estimate individual hospital rates of increase as follows: (1) For hold-harmless hospitals, old capital cost changes were fitted to a truncated gamma distribution, that is, a gamma distribution covering only the distribution of cost decreases. New capital costs changes were fitted to the entire gamma distribution, allowing for both decreases and increases. (2) For hospitals with fewer than 100 beds (small), total capital cost changes were fitted to the gamma distribution, allowing for both decreases and increases. (3) Other (large) hospitals were further separated into three groups: Bed-size decreases over 20 percent (decrease).
                        Bed-size increases over 20 percent (increase).
                        Other (no change). Capital cost changes for large hospitals were fitted to gamma distributions for each bed-size change group, allowing for both decreases and increases in capital costs. We analyzed the probability distribution of increases and decreases in bed size for large hospitals. We found the probability somewhat dependent on the prior year change in bed size and factored this dependence into the analysis. Probabilities of bed-size change were determined. Separate sets of probability factors were calculated to reflect the dependence on prior year change in bed size (increase, decrease, and no change). The gamma distributions were fitted to changes in aggregate capital costs for the entire hospital. We checked the relationship between aggregate costs and Medicare per discharge costs. For large hospitals, there was a small variance, but the variance was larger for small hospitals. Since costs are used only for the hold-harmless methodology and to determine exceptions, we decided to use the gamma distributions fitted to aggregate cost increases for estimating distributions of cost per discharge increases. Capital costs per discharge calculated from the cost reports were increased by random numbers drawn from the gamma distribution to project costs in future years. Old and new capital were projected separately for hold-harmless hospitals. Aggregate capital per discharge costs were projected for all other hospitals. Because the distribution of increases in capital costs varies with changes in bed size for large hospitals, we first projected changes in bed size for large hospitals before drawing random numbers from the gamma distribution. Bed-size changes were drawn from the uniform distribution with the probabilities dependent on the previous year bed-size change. The gamma distribution has a shape parameter and a scaling parameter. (We used different parameters for each hospital group, and for old and new capital.) We used discharge counts from the cost reports to calculate capital cost per discharge. To estimate total capital costs for FY 2000 (the MedPAR data year) and later, we use the number of discharges from the MedPAR data. Some hospitals had considerably more discharges in FY 2000 than in the years for which we calculated cost per discharge from the cost report data. Consequently, a hospital with few cost report discharges would have a high capital cost per discharge, since fixed costs would be allocated over only a few discharges. If discharges increase substantially, the cost per discharge would decrease because fixed costs would be allocated over more discharges. If the projection of capital cost per discharge is not adjusted for increases in discharges, the projection of exceptions would be overstated. We address this situation by recalculating the cost per discharge with the MedPAR discharges if the MedPAR discharges exceed the cost report discharges by more than 20 percent. We do not adjust for increases of less than 20 percent because we have not received all of the FY 2000 discharges, and we have removed some discharges from the analysis because they are statistical outliers. This adjustment reduces our estimate of exceptions payments, and consequently, the reduction to the Federal rate for exceptions is smaller. We will continue to monitor our modeling of exceptions payments and make adjustments as needed. The average national capital cost per discharge generated by this model is the combined average of many randomly generated increases. This average must equal the projected average national capital cost per discharge, which we projected separately 
                            ( print page 22882)
                            (outside this model). We adjusted the shape parameter of the gamma distributions so that the modeled average capital cost per discharge matches our projected capital cost per discharge. The shape parameter for old capital was not adjusted since we are modeling the aging of “existing” assets. This model provides a distribution of capital costs among hospitals that is consistent with our aggregate capital projections. Once each hospital's capital-related costs are generated, the model projects capital payments. We use the actual payment parameters (for example, the case-mix index and the geographic adjustment factor) that are applicable to the specific hospital. To project capital payments, the model first assigns the applicable payment methodology (fully prospective or hold-harmless) to the hospital as determined from the provider-specific file and the cost reports. The model simulates Federal rate payments using the assigned payment parameters and hospital-specific estimated outlier payments. The case-mix index for a hospital is derived from the FY 2000 MedPAR file using the FY 2002 DRG relative weights included in section VI. of the Addendum to this proposed rule. The case-mix index is increased each year after FY 2000 based on analysis of past experiences in case-mix increases. Based on analysis of recent case-mix increases, we estimate that case-mix will increase 0.0 percent in FY 2001. We project that case-mix will increase 1.0 percent in FY 2002. (Since we are using FY 2000 cases for our analysis, the FY 2000 increase in case-mix has no effect on projected capital payments.) Changes in geographic classification and revisions to the hospital wage data used to establish the hospital wage index affect the geographic adjustment factor. Changes in the DRG classification system and the relative weights affect the case-mix index. Section 412.308(c)(4)(ii) requires that the estimated aggregate payments for the fiscal year, based on the Federal rate after any changes resulting from DRG reclassifications and recalibration and the geographic adjustment factor, equal the estimated aggregate payments based on the Federal rate that would have been made without such changes. For FY 2001, the budget neutrality adjustment factors were 0.99933 for the national rate and 1.00508 for the Puerto Rico rate. In determining these factors, we used the factors from the first half of FY 2001 (October 2000 through March 2001) published in the August 1, 2000 final rule since section 547 of Public Law 106-554 specifies that the special increases and adjustments in effect between April and October 2001 do not apply for discharges occurring after FY 2001 and should not be included in determining the payment rates in subsequent years. Since we implemented a separate geographic adjustment factor for Puerto Rico, we applied separate budget neutrality adjustments for the national geographic adjustment factor and the Puerto Rico geographic adjustment factor. We applied the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. Separate adjustments were unnecessary for FY 1998 and earlier since the geographic adjustment factor for Puerto Rico was implemented in FY 1998. To determine the factors for FY 2002, we first determined the portions of the Federal national and Puerto Rico rates that would be paid for each hospital in FY 2002 based on its applicable payment methodology. Using our model, we then compared, separately for the national rate and the Puerto Rico rate, estimated aggregate Federal rate payments based on the FY 2001 DRG relative weights and the FY 2001 geographic adjustment factor to estimated aggregate Federal rate payments based on the FY 2001 relative weights and the FY 2002 geographic adjustment factor. In making the comparison, we held the FY 2002 Federal rate portion constant and set the other budget neutrality adjustment factor and the regular and special exceptions reduction factors to 1.00. To achieve budget neutrality for the changes in the national geographic adjustment factor, we applied an incremental budget neutrality adjustment of 0.99703 for FY 2002 to the previous cumulative FY 2001 adjustment of 0.99933, yielding a cumulative adjustment of 0.99637 through FY 2002. For the Puerto Rico geographic adjustment factor, we applied an incremental budget neutrality adjustment of 0.99943 for FY 2002 to the previous cumulative FY 2001 adjustment of 1.00508, yielding a cumulative adjustment of 1.00450 through FY 2002. We then compared estimated aggregate Federal rate payments based on the FY 2001 DRG relative weights and the FY 2002 geographic adjustment factors to estimated aggregate Federal rate payments based on the FY 2002 DRG relative weights and the FY 2002 geographic adjustment factors. The incremental adjustment for DRG classifications and changes in relative weights would be 0.99428 nationally and for Puerto Rico. The cumulative adjustments for DRG classifications and changes in relative weights and for changes in the geographic adjustment factors through FY 2002 would be 0.99067 nationally and 0.99876 for Puerto Rico. The following table summarizes the adjustment factors for each fiscal year: 
                            ( print page 22883) Budget Neutrality Adjustment for DRG Reclassifications and Recalibration and the Geographic Adjustment Factors
Fiscal year
National
Puerto RicoIncremental adjustment
Incremental adjustmentGeographic adjustment factor
DRG reclassifications and recalibration
Combined
Cumulative
Geographic adjustment factor
DRG reclassifications and recalibration
Combined
Cumulative1992



1.000001993


0.99800
0.998001994


1.00531
1.003301995


0.99980
1.003101996


0.99940
1.002501997


0.99873
1.001231998


0.99892
1.00015



1.000001999
0.99944
1.00335
1.00279
1.00294
0.99898
1.00335
1.00233
1.002332000
0.99857
0.99991
0.99848
1.00142
0.99910
0.99991
0.99901
1.001342001 1
0.99846
1.00019
0.99865
0.99933
1.00365
1.00009
1.00374
1.005082001 2
3
                                     0.99771
3
                                     1.00009
3
                                     0.99780
0.99922
3
                                     1.00365
3
                                     1.00009
3
                                     1.00374
1.005082002
4
                                     0.99703
4
                                     0.99428
4
                                     0.99133
0.99067
4
                                     0.99943
4
                                     0.99428
4
                                     0.99371
0.998761
                                 Factors effective for the first half of FY 2001 (October 2000 through March 2001).2
                                 Factors effective for the second half of FY 2001 (April 2001 through September 2001).3
                                 Incremental factors are applied to FY 2000 cumulative factors.4
                                 Incremental factors are applied to the cumulative factors for the first half of FY 2001.
 
 
 The methodology used to determine the recalibration and geographic (DRG/GAF) budget neutrality adjustment factor is similar to that used in establishing budget neutrality adjustments under the prospective payment system for operating costs. One difference is that, under the operating prospective payment system, the budget neutrality adjustments for the effect of geographic reclassifications are determined separately from the effects of other changes in the hospital wage index and the DRG relative weights. Under the capital prospective payment system, there is a single DRG/GAF budget neutrality adjustment factor (the national rate and the Puerto Rico rate are determined separately) for changes in the geographic adjustment factor (including geographic reclassification) and the DRG relative weights. In addition, there is no adjustment for the effects that geographic reclassification has on the other payment parameters, such as the payments for serving low-income patients or the large urban add-on payments. In addition to computing the DRG/GAF budget neutrality adjustment factor, we used the model to simulate total payments under the prospective payment system. Additional payments under the exceptions process are accounted for through a reduction in the Federal and hospital-specific rates. For FY 2002 additional payments for the “regular” exceptions are made only for cost reporting periods that begin before October 1, 2001. The adjustment for “special” exceptions payments (see § 412.348(g)) is described in section V.D. of the preamble of this proposed rule. Therefore, we used the model to calculate the exceptions reduction factor. This exceptions reduction factor ensures that aggregate payments under the capital prospective payment system, including exceptions payments, are projected to equal the aggregate payments that would have been made under the capital prospective payment system without an exceptions process. In modeling exceptions for FY 2002, we calculated exceptions only for qualifying cost reporting periods. Since changes in the level of the payment rates change the level of payments under the exceptions process, the exceptions reduction factor must be determined through iteration. In the August 30, 1991 final rule (56 FR 43517), we indicated that we would publish each year the estimated payment factors generated by the model to determine payments for the next 5 years. Since we will no longer use the model after the final notice for the FY 2002 rates, we propose to discontinue publishing this table after the final notice for the FY 2002 rates. The table below provides the actual factors for FYs 1992 through 2001, the proposed factors for FY 2002, and the estimated factors that would be applicable through FY 2006. We caution that these are estimates for FYs 2002 and later, and are subject to revisions resulting from continued methodological refinements, receipt of additional data, and changes in payment policy. We note that in making these projections, we have assumed that the cumulative national DRG/GAF budget neutrality adjustment factor will remain at 0.99067 (0.99876 for Puerto Rico) for FY 2002 and later because we do not have sufficient information to estimate the change that will occur in the factor for years after FY 2002. The projections are as follows: Fiscal year
Update factor
Exceptions reduction factor
Budget neutrality factor
DRG/GAF adjustment 
                                     
                                        factor 1
Outlier adjustment factor
Federal rate adjustment
Federal rate (after outlier reduction)1992
N/A
0.9813
0.9602

0.9497

415.591993
6.07
.9756
.9162
.9980
.9496

417.291994
3.04
.9485
.8947
1.0053
.9454
2
                                    .9260
378.341995
3.44
.9734
.8432
.9998
.9414

376.831996
1.20
.9849
N/A
.9994
.9536
3
                                    .9972
461.961997
0.70
.9358
N/A
.9987
.9481

438.921998
0.90
9659
N/A
.9989
.9382
4
                                    .8222
371.511999
0.10
.9783
N/A
1.0028
.9392

378.102000
0.30
.9730
N/A
.9985
.9402

377.032001 5
0.90
.9785
N/A
.9979
.9409

382.032002
1.10
6
                                    .9925
N/A
0.9913
.9426

389.092003
0.60
.9975
N/A
7
                                     1.0000
7
                                    .9426
4
                                     1.0255
403.442004
0.90
.9975
N/A
1.0000
.9426

407.072005
1.10
.9975
N/A
1.0000
.9426

411.552006
1.10
.9975
N/A
1.0000
.9426

416.071
                                 Note: The incremental change over the previous year.2
                                 Note: OBRA 1993 adjustment.3
                                 Note: Adjustment for change in the transfer policy.4
                                 Note: Balanced Budget Act of 1997 adjustment.5
                                 Note: Rates are for the first half of FY 2001 (October 1, 2000 through March 31, 2001).6
                                 Note: Product of general exceptions factor (0.9937) and special exceptions factor (0.9988).7
                                 Note: Future adjustments are, for purposes of this projection, assumed to remain at the same level.
 
 
  
 
  
 
  
 
  Appendix D: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background Several provisions of the Act address the setting of update factors for inpatient services furnished in FY 2002 by hospitals subject to the prospective payment system and by hospitals or units excluded from the prospective payment system. Section 1886(b)(3)(B)(i)(XVII) of the Act, as amended by Section 301 of Public Law 106-554, sets the FY 2002 percentage increase in the operating cost standardized amounts equal to the rate of increase in the hospital market basket minus 0.55 percent for prospective payment hospitals in all areas. Section 1886(b)(3)(B)(iv) of the Act sets the FY 2002 percentage increase in the hospital-specific rates applicable to SCHs and MDHs equal to the rate set forth in section 1886(b)(3)(B)(i) of the Act, that is, the same update factor as all other hospitals subject to the prospective payment system, or the rate of increase in the market basket minus 0.55 percentage points. Under section 1886(b)(3)(B)(ii) of the Act, the FY 2002 percentage increase in the rate-of-increase limits for hospitals and units excluded from the prospective payment system ranges from the percentage increase in the excluded hospital market basket less a percentage between 0 and 2.5 percentage points, depending on the hospital's or unit's costs in relation to its limit for the most recent cost reporting period for which information is available, or 0 percentage point if costs do not exceed two-thirds of the limit. In accordance with section 1886(d)(3)(A) of the Act, we are proposing to update the standardized amounts, the hospital-specific rates, and the rate-of-increase limits for hospitals and units excluded from the prospective payment system as provided in section 1886(b)(3)(B) of the Act. Based on the first quarter 2001 forecast of the FY 2002 market basket increase of 3.1 percent for hospitals and units subject to the prospective payment system, the proposed update to the standardized amounts is 2.55 percent (that is, the market basket rate of increase minus 0.55 percent percentage points) for hospitals in both large urban and other areas. The proposed update to the hospital-specific rate applicable to SCHs and MDHs is also 2.55 percent. The proposed update for hospitals and units excluded from the prospective payment system would range from the percentage increase in the excluded hospital market basket (currently estimated at 3.0 percent) minus a percentage between 0 and 2.5 percentage points, or 0 percentage points, resulting in an increase in the rate-of-increase limit between 0.5 and 3.0 percent, or 0 percent. Section 1886(e)(4) of the Act requires that the Secretary, taking into consideration the recommendations of the Medicare Payment Advisory Commission (MedPAC), recommend update factors for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Under section 1886(e)(5) of the Act, we are required to publish the update factors recommended under section 1886(e)(4) of the Act. Accordingly, this Appendix provides the recommendations of appropriate update factors and the analysis underlying our recommendations and our response to MedPAC's recommendations concerning the update factors. In its March 1, 2001 report, MedPAC stated that the legislated update of market basket minus 0.55 percentage points would provide a reasonable level of payments to hospitals. MedPAC did not make a separate recommendation for the hospital-specific rate applicable to SCHs and MDHs. We discuss MedPAC's recommendations concerning the update factors and our responses to these recommendations in section III. below. II. Secretary's Recommendations Under section 1886(e)(4) of the Act, we are recommending that an appropriate update factor for the standardized amounts is 2.55 percentage points for hospitals located in large urban and other areas. We are also recommending an update of 2.55 percentage points to the hospital-specific rate for SCHs and MDHs. As MedPAC states in its March 2001 report, there are signs of substantial improvement in hospitals' financial performance in FY 2000 as a result of the enactment of Public Law 106-113 and Public Law 106-554. In conjunction with the various “give-back” provisions in Public Law 106-113 and Public Law 106-554 and the continuation of positive (MedPAC estimates 12 percent for FY 1999 (page 64)) Medicare 
                            ( print page 22889)
                            hospital inpatient margins, we believe these recommended update factors for FY 2002 would ensure that Medicare acts as a prudent purchaser and provide incentives to hospitals for increased efficiency, thereby contributing to the solvency of the Medicare Part A Trust Fund. We recommend that hospitals excluded from the prospective payment system receive an update of between 0.5 and 3.0 percentage points, or 0 percentage points. The update for excluded hospitals and units is equal to the increase in the excluded hospital operating market basket less a percentage between 0 and 2.5 percentage points, or 0 percentage points, depending on the hospital's or unit's costs in relation to its rate-of-increase limit for the most recent cost reporting period for which information is available. The market basket rate of increase for excluded hospitals and units is currently forecast at 3.0 percent. As required by section 1886(e)(4) of the Act, we have taken into consideration the recommendations of MedPAC in setting these recommended update factors. Our responses to the MedPAC recommendations concerning the update factors are discussed below. III. MedPAC Recommendations for Updating the Prospective Payment System Operating Standardized Amounts In its March 2001 Report to Congress, MedPAC recommended a combined operating and capital update for hospital inpatient prospective payment system payments for FY 2002. With the end of the transition to fully prospective capital payments ending with FY 2001, both operating and capital prospective system payments will be made using standard Federal rates adjusted by hospital specific payment variables. Currently, section 1886(b)(3)(B)(i)(XVII) of the Act sets forth the FY 2002 percentage increase in the prospective payment system operating cost standardized amounts. The prospective payment system capital update is set at the discretion of the Secretary under the framework outlined in § 412.308(c)(1). MedPAC's FY 2001 combined operating and capital update framework uses a weighted average of HCFA's forecasts of the operating (prospective payment system input price index) and the capital input price index. This combined market basket was used to develop an estimate of the change in overall operating and capital prices. MedPAC calculated a combined market basket forecast by weighting the operating market basket forecast by 0.92 and the capital market basket forecast by 0.08, since operating costs are estimated to represent 92 percent of total hospital costs (capital costs are estimated to represent the remaining 8 percent of total hospital costs). MedPAC's combined market basket for FY 2002 is estimated to increase by 2.8 percent, based on HCFA's December 2000 forecasted operating market basket increase of 3.0 percent and HCFA's December 2000 forecasted capital market basket increase of 0.8 percent. For FY 2002, MedPAC's update framework would support a combined operating and capital update for hospital inpatient prospective payment system payments of 1.5 percent to 3.0 percent (or between the increase in the combined operating and capital market basket minus 1.3 percentage points and the increase in the combined operating and capital market basket plus 0.2 percentage points). In its update recommendation, MedPAC studied factors affecting the adequacy of payments in FY 2001 and factors expected to affect hospital costs in FY 2002. MedPAC concluded, “there is no compelling reason to change current law setting an operating update for fiscal year 2002 of 0.55 percent below the rate of increase in the operating market basket “(page 73). MedPAC also notes that while the number of hospitals with negative inpatient hospital margins have increased in FY 1999 (from 33.7 percent in 1998 to 36.7 percent in 1999) (page 71), overall high inpatient Medicare margins generally offset hospital losses on other lines of Medicare services (page 68). MedPAC continues to project substantially improved hospital total margins for FY 2000 based on performance in the first half of the fiscal year (page 72). *Response:*
                             Our long-term goal is to develop a single update framework for operating and capital prospective payments. However, the operating system update has been determined by Congress through FY 2003 (as amended by section 301 of Public Law 106-554). In the meantime, we intend to maintain as much consistency as possible with the current operating framework in order to facilitate the eventual development of a unified framework. We agree with MedPAC's recommendation that the current law update for FY 2002 of the market basket minus 0.55 percentage points is appropriate for the operating system update. The following analyses measure changes in hospital productivity, scientific and technological advances, practice pattern changes, changes in case-mix, the effect of reclassification on recalibration, and forecast error correction. A. Productivity Service level labor productivity is defined as the ratio of total service output to full-time equivalent employees (FTEs). While we recognize that productivity is a function of many variables (for example, labor, nonlabor material, and capital inputs), we use the portion of productivity attributed to direct labor since this update framework applies to operating payment. To recognize that we are apportioning the short-run output changes to the labor input and not considering the nonlabor inputs, we weight our productivity measure by the share of direct labor services in the market basket to determine the expected effect on cost per case. Our recommendation for the service productivity component is based on historical trends in productivity and total output for both the hospital industry and the general economy, and projected levels of future hospital service output. MedPAC's predecessor, the Prospective Payment Assessment Commission (ProPAC), estimated cumulative service productivity growth to be 4.9 percent from 1985 through 1989, or 1.2 percent annually. At the same time, ProPAC estimated total output growth at 3.4 percent annually, implying a ratio of service productivity growth to output growth of 0.35. Since it is not possible at this time to develop a productivity measure specific to Medicare patients, we examined productivity (output per hour) and output (gross domestic product) for the economy. Depending on the exact time period, annual changes in productivity range from 0.3 to 0.35 percent of the change in output (that is, a 1.0 percent increase in output would be correlated with a 0.3 to 0.35 percent change in output per hour). Under our framework, the recommended update is based in part on expected productivity—that is, projected service output during the year, multiplied by the historical ratio of service productivity to total service output, multiplied by the share of direct labor in total operating inputs, as calculated in the hospital market basket. This method estimates an expected productivity improvement in the same proportion to expected total service growth that has occurred in the past and assumes that, at a minimum, growth in FTEs changes proportionally to the growth in total service output. Thus, the recommendation allows for unit productivity to be smaller than the historical averages in years that output growth is relatively low and larger in years that output growth is higher than the historical averages. Based on the above estimates from both the hospital industry and the economy, we have chosen to employ the range of ratios of productivity change to output change of 0.30 to 0.35. The expected change in total hospital service output is the product of projected growth in total admissions (adjusted for outpatient usage), projected real case-mix growth, expected quality-enhancing intensity growth, and net of expected decline in intensity due to reduction of cost-ineffective practice. Case-mix growth and intensity numbers for Medicare are used as proxies for those of the total hospital, since case-mix increases (used in the intensity measure as well) are unavailable for non-Medicare patients. Thus, expected FY 2002 hospital output growth is simply the sum of the expected change in intensity (0.3 percent), projected admissions change (1.6 percent for FY 2002), and projected real case-mix growth (1.0 percent), or 2.9 percent. The share of direct labor services in the market basket (consisting of wages, salaries, and employee benefits) is 61.4 percent. Multiplying the expected change in total hospital service output (2.9 percent) by the ratio of historical service productivity change to total service growth of 0.30 to 0.35 and by the direct labor share percentage 61.4, provides our productivity standard of −0.6 to −0.5 percent. In past years, MedPAC made an adjustment for productivity improvement to reflect the level of improvement in the production of health care services, without affecting the quality of those services. Typically, MedPAC made a downward adjustment in its framework to reflect expected improvements in hospital productivity. In its FY 2002 combined update framework, MedPAC did not make an adjustment for productivity. Instead, MedPAC believes that the costs associated with scientific and technological advances should be financed partially 
                            ( print page 22890)
                            through improvements in hospital productivity. As a result, MedPAC offset its adjustment for scientific and technological advances by a fixed standard of expected productivity growth of 0.5 percent for FY 2002. Our productivity adjustment of −0.6 to −0.5 percent is consistent with the range of MedPAC's fixed standard of expected productivity growth of 0.5 percent for FY 2002. B. Intensity We base our intensity standard on the combined effect of three separate factors: changes in the use of quality enhancing services, changes in the use of services due to shifts in within-DRG severity, and changes in the use of services due to reductions of cost-ineffective practices. For FY 2002, we recommend an adjustment of 0.2 to 0.3 percent. The basis of this recommendation is discussed below. We have no empirical evidence that accurately gauges the level of quality-enhancing technology changes. A study published in the Winter 1992 issue of the 
                            *Health Care Financing Review,*
                             “Contributions of case mix and intensity change to hospital cost increases” (pages 151-163), suggests that one-third of the intensity change is attributable to high-cost technology. The balance was unexplained but the authors speculated that it is attributable to fixed costs in service delivery. Typically, a specific new technology increases cost in some uses and decreases cost in other uses. Concurrently, health status is improved in some situations while in other situations it may be unaffected or even worsened using the same technology. It is difficult to separate out the relative significance of each of the cost-increasing effects for individual technologies. Other things being equal, per-discharge fixed costs tend to fluctuate in inverse proportion to changes in volume. Fixed costs exist whether patients are treated or not. If volume is declining, per-discharge fixed costs will rise, but the reverse is true if volume is increasing. Following methods developed by HCFA's Office of the Actuary for deriving hospital output estimates from total hospital charges, we have developed Medicare-specific intensity measures based on a 5-year average using FYs 1996 through 2000 MedPAR billing data. Case-mix constant intensity is calculated as the change in total Medicare charges per discharge adjusted for changes in the average charge per unit of service as measured by the Consumer Price Index (CPI) for hospital and related services and changes in real case-mix. Thus, in order to measure changes in intensity, one must measure changes in real case-mix. We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services), and changes in real case-mix. Without reliable estimates of the proportions of the overall annual intensity increases due, respectively, to ineffective practice patterns and to the combination of quality-enhancing new technologies and within-DRG complexity, we assume that one-half of the annual increase is due to each of these factors. For FY 2002, we have developed a Medicare-specific intensity measure based on a 5-year average using FY 1996 through 2000 data. In determining case-mix constant intensity, we estimate that real case-mix increase was 1.0 to 1.4 percent each year. The estimate for those years is supported by past studies of case-mix change by the RAND Corporation. The most recent study was “Has DRG Creep Crept Up? Decomposing the Case Mix Index Change Between 1987 and 1988” by G. M. Carter, J. P. Newhouse, and D. A. Relles, R-4098-HCFA/ProPAC (1991). The study suggested that real case-mix change was not dependent on total change, but was usually a fairly steady 1.0 to 1.4 percent per year. Following that study, we consider up to 1.4 percent of observed case-mix change as real for FY 1996 through FY 2000. We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services), and changes in real case-mix. The average percentage change in charge per discharge was 4.7 percent and the average annual change in the CPI for hospital and related services was 4.2 percent. Dividing the change in charge per discharge by the quantity of the real case-mix index change and the CPI for hospital and related services yields an average annual change in intensity of −0.9 percent. Assuming the technology/fixed cost ratio still holds (.33), technology would account for a −0.3 percent annual decline while fixed costs would account for a −0.6 percent annual decline. The decline in fixed costs per discharge makes intuitive sense as volume, measured by total discharges, has increased during the period. For FYs 1995 through 1999, observed case-mix index change ranged from a low of −0.7 percent to a high of 1.6 percent, with a 5-year average change of 0.2 percent. If we assume that the upper bound of real case-mix was 1.0 percent, we estimate that case-mix constant intensity increased by an average 0.3 percent during FYs 1996 through 2000, for a cumulative increase of 1.4 percent. If we assume that the upper bound of real case-mix increase was 1.4 percent, we estimate that case-mix constant intensity increased by an average 0.2 percent during FYs 1996 through 2000, for a cumulative increase of 1.2 percent. Thus, we are recommending an intensity adjustment for FY 2002 between 0.2 and 0.3 percent. MedPAC does not make an adjustment for intensity per se, but its combined update recommendation for FY 2002 includes two categories that we consider to be comparable with our intensity recommendation. MedPAC is recommending a 0.0 to 0.5 update for scientific and technological advances to account for anticipated uses of emerging technologies that enhance the quality of hospital services, but increase costs of hospital care. MedPAC recognized an allowance for science and technological advances of 0.5 percent to 1.0 percent. It believes that the costs associated with scientific and technological advances should be financed at least in part through improvements in hospital productivity. Hence, MedPAC offsets its allowance for science and technology by 0.5 percent for productivity. In addition, MedPAC includes, when appropriate, an adjustment for one-time factors expected to affect costs in FY 2002 and the removal of the adjustment for FY 2002 one-time factors in its science and technology adjustment. MedPAC concluded that a one-time adjustment of 0.5 percent for the Health Insurance Portability and Accountability Act of 1996 (HIPAA) regulatory requirements should be reflected in the FY 2002 payment update. Additionally, since MedPAC believes that the costs associated with one-time factors should not be built permanently into the rates, it recommended that the FY 2002 payment rates be reduced by 0.5 percent to offset the increase it recommended in the FY 2000 update for the costs associated with year 2000 (Y2K) computer improvements. Thus, MedPAC's combined FY 2002 adjustment for science and technological advances is 0.0 percent to 0.5 percent. MedPAC's recommendation also takes into account the trend of some acute care providers to shift care to a postacute care facility. While this can occur for many reasons and the shifting of costs may maintain or improve quality of care for Medicare beneficiaries, it leads to an inappropriate distribution of payments and reduces the resources available for acute care providers to pay for services to other Medicare beneficiaries. We agree with MedPAC that the site-of-care substitution effect is real and believe that it is factored into our intensity recommendation. C. Change in Case-Mix Our analysis takes into account projected changes in case-mix, adjusted for changes attributable to improved coding practices. For our FY 2002 update recommendation, we are projecting a 1.0 percent increase in the case-mix index. We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients as opposed to changes in coding behavior that result in assignment of cases to higher-weighted DRGs, but do not reflect greater resource requirements. Unlike in past years, where we differentiated between “real” case-mix increase and increases attributable to changes in coding behavior, we do not believe changes in coding behavior will impact the overall case-mix in FY 2002. As such, for FY 2002, we estimate that real case-mix is equal to projected change in case-mix. Thus, we are recommending a 0.0 percent adjustment for case-mix. MedPAC's analysis indicates that coding change has reduced case-mix index growth. In the past, MedPAC has recommended a negative adjustment when DRG coding changes has led to case-mix index growth (upcoding) and has recommended a positive adjustment when DRG coding changes have led to a decline in case-mix (downcoding). In light of evidence that coding had no significant effect on case-mix change, MedPAC recommended an adjustment of 0.0 percent for FY 2002. MedPAC also makes an adjustment for within-DRG severity. In past years, MedPAC has included an adjustment for increased case complexity not captured by the DRG classification system. MedPAC recognizes 
                            ( print page 22891)
                            that as the DRG system matures, it should account for more of the variation in costs by DRG assignment, leaving less within-DRG variation in case complexity and costliness (page 76). Therefore, MedPAC recommended an adjustment of 0.0 percent for FY 2002. D. Effect of FY 2000 DRG Reclassification and Recalibration We estimate that DRG reclassification and recalibration for FY 2000 resulted in a 0.0 percent change in the case-mix index when compared with the case-mix index that would have resulted if we had not made the reclassification and recalibration changes to the GROUPER. E. Forecast Error Correction We make a forecast error correction if the actual market basket changes differ from the forecasted market basket by 0.25 percentage points or more. There is a 2-year lag between the forecast and the measurement of forecast error. The estimated market basket percentage increase used to update the FY 2000 payment rates was 2.9 percent. Our most recent data indicates the actual FY 2000 increase was 3.6 percent. The resulting forecast error in the FY 2000 market basket rate of increase is 0.7 percentage points. This forecast error is a result of prices for wages, benefits, and chemicals increasing more rapidly than expected. Market conditions enabled hospitals to be less restrictive with pay increases than initially projected. Prices for chemicals were underestimated due to the unanticipated surge in oil prices in FY 2000. MedPAC also made a recommendation in its FY 2002 combined update framework to adjust for any error in the market basket forecasts used to set FY 2000 payment rates. It recommended a combined adjustment for FY 2000 forecast error correction of 0.7 percent. MedPAC determined this forecast error adjustment by weighting the difference between the actual and forecasted operating (92 percent) and capital (8 percent) market basket increases for FY 2000. The forecasted FY 2000 operating market basket was 2.9 percent and the actual FY 2000 operating market basket increase was 3.6 percent. The FY 2000 capital market basket was forecasted to increase by 0.6 percent and the actual market basket increase was 0.9 percent. This implies that MedPAC's combined operating and capital market basket was forecasted at 2.7 percent and the combined actual operating and capital market basket was 3.4 percent. Accordingly, MedPAC recommended a 0.7 percent forecast error correction for its FY 2002 combined update recommendation. F. Medicare Policy Change In developing its update recommendation for FY 2002, MedPAC includes an adjustment for Medicare policy changes affecting financial status in its section of factors affecting current level of payments. While MedPAC's update framework has not considered such costs in the past, MedPAC believes that it is appropriate to account for significant costs incurred as a result of new Medicare policy. For FY 2002, MedPAC believes that legislated updates will match cost growth and that the overall the net affects of legislative changes (from Public Law 105-33, Public Law 106-113, and Public Law 106-554) will be small. Thus, it did not recommend any additional allowance for these costs for FY 2002. Accordingly, MedPAC recommended a 0.0 percent adjustment for Medicare policy changes in its update framework for FY 2002. Comparison of FY 2002 Update Recommendations
HHS
MedPAC 1Market basket
MB
MB 1Policy Adjustment Factors:Productivity
−0.6 to −0.5
(2
                                    )Site-of-Service Substitution
(3
                                    )
−2.0 to − 1.0.Intensity
0.2 to 0.3Science & Technology

0.0 to 0.5.Real Within DRG Change

(4
                                    )One-Time Factors

0.0Medicare Policy Changes

0.0Subtotal
−0.4 to −0.2
−2.0 to −0.5Case-Mix Adjustment Factors:Projected Case-Mix Change
1.0Real Across DRG Change
1.0
0.0Subtotal
0.0
0.0Effect of FY 2000 DRG Reclass/Recalibration
0.0Forecast Error Correction
0.7
0.7Total Recommendation Update
MB + 0.3 to MB + 0.5
MB 1
                                     −1.3 to MB 1
                                     + 0.2.1
                                 Used HCFA's December 2000 operating and capital market basket forecast in its combined update recommendation.2
                                 Included in MedPAC's Science and Technology Adjustment.3
                                 Included in HHS' Intensity Factor.4
                                 Included in MedPAC's Case-Mix Adjustment.
 While the above analysis would suggest an update between operating market basket plus 0.3 percentage points and the operating market basket plus 0.5 percentage points, consistent with current law, we are recommending an update of market basket increase minus 0.55 percentage points (or 2.55 percent). Just as MedPAC believes that market basket minus 0.55 percentage points will provide a reasonable level of payments for FY 2002, we believe that a 2.55 update factor for FY 2002 will appropriately reflect current trends in health care delivery, including the recent decreases in the use of hospital inpatient services and the corresponding increase in the use of hospital outpatient and postacute care services. Also consistent with current law, we are recommending that the hospital-specific rates applicable to SCHs and MDHs be increased by the same update, 2.55 percentage points. As MedPAC states in its March 2001 report, there are signs of substantial improvement in hospital financial performance in FY 2000. In conjunction with the various “give-back” provisions in Public Law 106-113 and Public Law 106-554 and the continuation of positive (12 percent for FY 1999) Medicare hospital inpatient margins, we believe these recommended update factors for FY 2002 would ensure that Medicare acts as a prudent purchaser and provide incentives to hospitals for increased efficiency, thereby contributing to the solvency of the Medicare Part A Trust Fund.


BILLING CODE 4120-01-P [FR Doc. 01-11062 Filed 5-3-01; 8:45 am] BILLING CODE 4120-01-P