Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Rules and Regulations 24871 

unnecessary or contrary to the public 

interest. This determination must be 

supported by a brief statement. 5 U.S.C. 

808(2). As stated previously, EPA has 

made such a good cause finding, 

including the reasons therefore, and 

established an effective date of June 5, 

2008. EPA will submit a report 

containing this rule and other required 

information to the U.S. Senate, the U.S. 

House of Representatives, and the 

Comptroller General of the United 

States prior to publication of the rule in 

the Federal Register. These corrections 

to the General Provisions of 40 CFR part 

63 is not a ‘‘major rule’’ as defined by 

5 U.S.C. 804(2). 

List of Subjects in 40 CFR Parts 60, 61, 

62 and 63 

Environmental protection, Air 

pollution control, Reporting and 

recordkeeping requirements. 

Dated: April 28, 2008. 

Carol Rushin, 

Acting Regional Administrator, Region 8. 

■ 40 CFR parts 60, 61, 62, and 63 are 

amended as follows: 

PART 60—[AMENDED] 

■ 1. The authority citation for part 60 

continues to read as follows: 

Authority: 42 U.S.C. 7401 et seq. 

Subpart A—General Provisions 

■ 2. Section 60.4 is amended by revising 

the address for Region VIII in paragraph 

(a) to read as follows: 

§ 60.4 Address. 

(a) * * * 

Region VIII (Colorado, Montana, 

North Dakota, South Dakota, Utah, 

Wyoming) Director, Air and Toxics 

Technical Enforcement Program, Office 

of Enforcement, Compliance and 

Environmental Justice, Mail Code 

8ENF–AT, 1595 Wynkoop Street, 

Denver, CO 80202–1129. 

* * * * * 

PART 61—[AMENDED] 

■ 3. The authority citation for part 61 

continues to read as follows: 

Authority: 42 U.S.C. 7401 et seq. 

Subpart A—General Provisions 

■ 4. Section 61.04 is amended by 

revising the address for Region VIII in 

paragraph (a) to read as follows: 

§ 61.04 Address. 

(a) * * * 

Region VIII (Colorado, Montana, 

North Dakota, South Dakota, Utah, 

Wyoming) Director, Air and Toxics 

Technical Enforcement Program, Office 

of Enforcement, Compliance and 

Environmental Justice, Mail Code 

8ENF–AT, 1595 Wynkoop Street, 

Denver, CO 80202–1129. 

* * * * * 

PART 62—[AMENDED] 

■ 5. The authority citation for part 62 

continues to read as follows: 

Authority: 42 U.S.C. 7401 et seq. 

Subpart A—General Provisions 

■ 6. In § 62.10 the table is amended by 

revising the entry for Region VIII to read 

as follows: 

§ 62.10 Submission to Administrator. 

* * * * * 

Region and jurisdiction covered Address 

* * * * * * * 

VIII—Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming Director, Air Program, Office of Partnerships and Regulatory Assistance, Mail Code 8P–AR, 1595 Wynkoop Street, Denver, CO 80202–

1129 

* * * * * * * 

PART 63—[AMENDED] 

■ 7. The authority citation for part 63 

continues to read as follows: 

Authority: 42 U.S.C. 7401 et seq. 

Subpart A—General Provisions 

■ 8. Section 63.13 is amended by 

revising the address for Region VIII in 

paragraph (a) to read as follows: 

§ 63.13 Addresses of State air pollution 

control agencies and EPA Regional Offices. 

(a) * * * 

EPA Region VIII (Colorado, Montana, 

North Dakota, South Dakota, Utah, 

Wyoming) Director, Air and Toxics 

Technical Enforcement Program, Office 

of Enforcement, Compliance and 

Environmental Justice, Mail Code 

8ENF–AT, 1595 Wynkoop Street, 

Denver, CO 80202–1129. 

* * * * * 

[FR Doc. E8–9963 Filed 5–5–08; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 412 

[CMS–1493–IFC] 

RIN 0938–AP33 

Medicare Program; Changes for LongTerm Care Hospitals Required by 

Certain Provisions of the Medicare, 

Medicaid, SCHIP Extension Act of 

2007: 3-Year Delay in the Application 

of Payment Adjustments for Short Stay 

Outliers and Changes to the Standard 

Federal Rate 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Interim final rule with comment 

period. 

SUMMARY: This interim final rule with 

comment period implements certain 

provisions of section 114 of the 

Medicare, Medicaid, and SCHIP 

Extension Act of 2007 relating to long 

term care hospitals (LTCHs). These 

provisions include a 3-year delay in the 

application of certain provisions of the 

payment adjustment for short-stay 

outliers and revisions to the RY 2008 

standard Federal rate. 

DATES: Effective date: The provisions of 

§ 412.1 and § 412.500 are effective June 

5, 2008. The provisions of 

§ 412.529(c)(1) through (c)(3) are 

effective on December 29, 2007. In 

accordance with section 1871(e)(1)(A)(i) 

and (ii) of the Social Security Act (the 

Act), the Secretary has determined that 

retroactive application of the provisions 

of § 412.529(c)(1) through (c)(3) is 

necessary to comply with the statute 

and that failure to apply the changes 

retroactively would be contrary to 

public interest. Also, in accordance with 

section 1871(e)(1)(A)(ii) of the Act, the 

technical corrections to § 412.529(f) 


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24872 Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Rules and Regulations 

(redesignated from § 412.529(c)(4)) are 

effective on December 29, 2007. In 

accordance with section 

1871(e)(1)(A)(ii) of the Act, the 

Secretary has determined that failure to 

apply the technical corrections in 

§ 412.529(f) retroactively would be 

contrary to public interest. Additionally, 

in accordance with section 

1871(e)(1)(A)(i) and (ii) of the Act, the 

provisions of § 412.523 are effective 

April 1, 2008. Also, in accordance with 

section 1871(e)(1)(A)(ii) of the Act, the 

fixed loss-amount provision in section 

II.D.2. of this preamble which revises 

the fixed-loss amount for discharge 

occurring on or after April 1, 2008, and 

through June 30, 2008, is effective April 

1, 2008. 

Comment date: To be assured 

consideration, comments must be 

received at one of the addresses 

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

June 30, 2008. 

ADDRESSES: In commenting, please refer 

to file code CMS–1493–IFC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the instructions for ‘‘Comment or 

Submission’’ and enter the filecode to 

find the document accepting comments. 

2. By regular mail. You may mail 

written comments (one original and two 

copies) to the following address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–1493–

IFC, P.O. Box 8013, Baltimore, MD 

21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments (one 

original and two copies) to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1493–IFC, Mail Stop C4–26–05, 

7500 Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to either of the 

following addresses: 

a. Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201. 

(Because access to the interior of the 

HHH Building is not readily available to 

persons without Federal Government 

identification, commenters are 

encouraged to leave their comments in 

the CMS drop slots located in the main 

lobby of the building. A stamp-in clock 

is available for persons wishing to retain 

a proof of filing by stamping in and 

retaining an extra copy of the comments 

being filed.) 

b. 7500 Security Boulevard, 

Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786–

7195 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this 

document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: Tzvi 

Hefter, (410) 786–4487, General 

information. Michele Hudson, (410) 

786–5490, General information. 

Elizabeth Truong, (410) 786–6005, 

Federal rate update and short stay 

outlier. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on the Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

I. Background 

A. Legislative and Regulatory Authority 

Section 123 of the Medicare, 

Medicaid, and SCHIP [State Children’s 

Health Insurance Program] Balanced 

Budget Refinement Act of 1999 (BBRA) 

(Pub. L. 106–113), as amended by 

section 307(b) of the Medicare, 

Medicaid, and SCHIP Benefits 

Improvement and Protection Act of 

2000 (BIPA) (Pub. L. 106–554), provides 

for payment for both the operating and 

capital-related costs of hospital 

inpatient stays in long-term care 

hospitals (LTCHs) under Medicare Part 

A based on prospectively set rates. The 

Medicare prospective payment system 

(PPS) for LTCHs applies to hospitals 

described in section 1886(d)(1)(B)(iv) of 

the Social Security Act (the Act), 

effective for cost reporting periods 

beginning on or after October 1, 2002. 

Section 1886(d)(1)(B)(iv)(I) of the Act 

defines a LTCH as ‘‘a hospital which has 

an average inpatient length of stay (as 

determined by the Secretary) of greater 

than 25 days.’’ Section 

1886(d)(1)(B)(iv)(II) of the Act also 

provides an alternative definition of 

LTCHs: specifically, a hospital that first 

received payment under section 1886(d) 

of the Act in 1986 and has an average 

inpatient length of stay (LOS) (as 

determined by the Secretary of Health 

and Human Services (the Secretary)) of 

greater than 20 days and has 80 percent 

or more of its annual Medicare inpatient 

discharges with a principal diagnosis 

that reflects a finding of neoplastic 

disease in the 12-month cost reporting 

period ending in fiscal year (FY) 1997. 

Section 307(b)(1) of the BIPA, among 

other things, mandates that the 

Secretary shall examine, and may 

provide for, adjustments to payments 

under the LTCH PPS, including 

adjustments to diagnosis related group 

(DRG) weights, area wage adjustments, 

geographic reclassification, outliers, 

updates, and a disproportionate share 

adjustment. 

In the August 30, 2002 Federal 

Register, we issued a final rule that 

implemented the LTCH PPS authorized 

under BBRA and BIPA (67 FR 55954). 

This system uses information from 

LTCH patient records to classify 

patients into distinct long-term care 

diagnosis-related groups (LTC–DRGs) 

based on clinical characteristics and 

expected resource needs. Payments are 

calculated for each LTC–DRG and 

provisions are made for appropriate 

payment adjustments. Payment rates 

under the LTCH PPS are updated 

annually and published in the Federal 

Register. 


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Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Rules and Regulations 24873 

In the August 30, 2002 final rule, we 

also presented an in-depth discussion of 

the LTCH PPS, including the patient 

classification system, relative weights, 

payment rates, additional payments 

(short-stay outliers), and the budget 

neutrality requirements mandated by 

section 123 of the BBRA. The same final 

rule that established regulations for the 

LTCH PPS under 42 CFR part 412, 

subpart O, also contained LTCH 

provisions related to covered inpatient 

services, limitation on charges to 

beneficiaries, medical review 

requirements, furnishing of inpatient 

hospital services directly or under 

arrangement, and reporting and 

recordkeeping requirements. We refer 

readers to the August 30, 2002 final rule 

for a comprehensive discussion of the 

research and data that supported the 

establishment of the LTCH PPS (67 FR 

55954). 

In the June 6, 2003 Federal Register, 

we published a final rule that set forth 

the FY 2004 annual update of the 

payment rates for the Medicare PPS for 

inpatient hospital services furnished by 

LTCHs (68 FR 34122). It also changed 

the annual period for which the 

payment rates are effective. The annual 

updated rates are now effective from 

July 1 through June 30 instead of from 

October 1 through September 30. We 

refer to the July through June time 

period as a ‘‘long-term care hospital rate 

year’’ (LTCH PPS rate year (RY)). In 

addition, we changed the publication 

schedule for the annual update to allow 

for an effective date of July 1. The 

payment amounts and factors used to 

determine the annual update of the 

LTCH PPS Federal rate are based on a 

LTCH PPS rate year. While the LTCH 

payment rate update is effective July 1, 

the annual update of the DRG 

classifications and relative weights for 

LTCHs are linked to the annual 

adjustments of the acute care hospital 

inpatient DRGs and are effective each 

October 1. 

The most recent annual update to the 

LTCH PPS was presented in the RY 

2008 LTCH PPS final rule (72 FR 26870 

through 27029). In that final rule, among 

other things, we established a 0.71 

percent update to the Federal rate for 

RY 2008, as well as revising the existing 

payment formula for certain short-stay 

outlier (SSO) cases and the 

establishment of a payment adjustment 

policy applicable to LTCH and LTCH 

satellite facility discharges that were 

admitted from hospitals that are not colocated with the LTCH or LTCH satellite 

facility and that exceed a certain 

percentage threshold. In addition, in the 

January 29, 2008 Federal Register, we 

presented the annual proposed rule for 

RY 2009. Among other things, this 

proposed rule presented a proposed 

update for RY 2009 and other proposed 

payment rate and policy changes. 

On December 29, 2007 the Medicare, 

Medicaid, and SCHIP Extension Act 

(MMSEA) (Pub. L. 110–173) was 

enacted. Specifically, section 114 of 

MMSEA, entitled ‘‘Long-term care 

hospitals,’’ made a number of changes 

affecting payments to LTCHs for 

inpatient services. Several of the 

provisions of section 114 of MMSEA are 

discussed in this interim final rule with 

comment period. 

B. Criteria for Classification as a LTCH 

Under the existing regulations at 

§ 412.23(e)(1) and (e)(2)(i), which 

implement section 1886(d)(1)(B)(iv)(I) of 

the Act, to qualify to be paid under the 

LTCH PPS, a hospital must have a 

provider agreement with Medicare and 

must have an average Medicare 

inpatient LOS of greater than 25 days. 

Alternatively, § 412.23(e)(2)(ii) states 

that for cost reporting periods beginning 

on or after August 5, 1997, a hospital 

that was first excluded from the PPS in 

1986 and can demonstrate that at least 

80 percent of its annual Medicare 

inpatient discharges in the 12-month 

cost reporting period ending in FY 1997 

have a principal diagnosis that reflects 

a finding of neoplastic disease must 

have an average inpatient LOS for all 

patients, including both Medicare and 

non-Medicare inpatients, of greater than 

20 days. 

Section 412.23(e)(3) currently 

provides that, subject to the provisions 

of paragraphs (e)(3)(ii) through (e)(3)(iv) 

of this section, the average Medicare 

inpatient LOS, specified under 

§ 412.23(e)(2)(i) is calculated by 

dividing the total number of covered 

and noncovered days of stay for 

Medicare inpatients (less leave or pass 

days; that is, days where the inpatient 

is not occupying a bed but has not been 

discharged) by the number of total 

Medicare discharges for the hospital’s 

most recent complete cost reporting 

period. Currently, § 412.23 also provides 

that subject to the provisions of 

paragraphs (e)(3)(ii) through (e)(3)(iv) of 

this section, the average inpatient LOS 

specified under § 412.23(e)(2)(ii) is 

calculated by dividing the total number 

of days for all patients, including both 

Medicare and non-Medicare inpatients 

(less leave or pass days) by the number 

of total discharges for the hospital’s 

most recent complete cost reporting 

period. The fiscal intermediaries (FIs) or 

Medicare Administrative Contractors 

(MACs) verify that LTCHs meet the 

average LOS requirements. We note that 

the inpatient days of a patient who is 

admitted to a LTCH without any 

remaining Medicare days of coverage, 

regardless of the fact that the patient is 

a Medicare beneficiary, will not be 

included in the above calculation. 

Because Medicare would not be paying 

for any of the patient’s treatment, data 

on the patient’s stay would not be 

included in the Medicare claims 

processing systems. As described in 

§ 409.61, in order for both covered and 

noncovered days of a LTCH 

hospitalization to be included, a patient 

admitted to the LTCH must have at least 

1 remaining-benefit day. (For a more 

detailed explanation, see the June 6, 

2003 final rule (68 FR 34123).) 

The FI’s or MAC’s determination of 

whether or not a hospital qualifies as an 

LTCH is based on the hospital’s 

discharge data from the hospital’s most 

recent complete cost reporting period as 

specified in § 412.23(e)(3) and is 

effective at the start of the hospital’s 

next cost reporting period as specified 

in § 412.22(d). However, if the hospital 

does not meet the average LOS 

requirement as specified in 

§ 412.23(e)(2)(i) and (ii), the hospital 

may provide the FI or MAC with data 

indicating a change in the ALOS by the 

same method for the period of at least 

5 months of the immediately preceding 

6-month period (69 FR 25676). Our 

interpretation of existing § 412.23(e)(3) 

is to allow hospitals to submit data 

using a period of at least 5 months of the 

most recent data from the immediately 

preceding 6-month period. 

II. Provisions of This Interim Final Rule 

With Comment Period 

Section 114 of MMSEA made a 

number of changes affecting payments 

to long-term care hospitals (LTCHs) for 

inpatient services. This interim final 

rule with comment period will 

implement the following provisions 

affecting LTCH PPS payments: 

• Modification of payment 

adjustments to certain SSO cases. 

Section 114(c)(3) of MMSEA specifies 

that the refinement of the SSO policy 

implemented in RY 2008 shall not apply 

for a 3-year period beginning with 

discharges occurring on or after 

December 29, 2007. Specifically, the 

fourth SSO payment option in 

§ 412.529(c)(3)(i) shall not apply for a 3- 

year period, as discussed in section II.B. 

of this interim final rule with comment 

period. 

• Revision to the RY 2008 rate 

provision. Section 114(e)(1) of MMSEA 

provides that the base rate for RY 2008 

‘‘shall be the same as the base rate for 

discharges for the hospital occurring 

during the rate year ending in 2007.’’

Furthermore, in accordance with section 


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24874 Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Rules and Regulations 

114(e)(2) of MMSEA, the revised rate 

will not be applicable to discharges 

occurring on or after July 1, 2007 and 

before April 1, 2008. (See section II.C. 

of this interim final rule with comment 

period.) 

We also note that section 114(c)(4) of 

MMSEA specifies that for a 3-year 

period beginning on December 29, 2007, 

the Secretary shall not make the onetime prospective adjustment to the 

LTCH PPS payment rates provided for 

in existing § 412.523(d)(3). Since under 

existing regulations the one-time 

prospective adjustment would have 

impacted the update to the standard 

Federal rate for RY 2009, we have 

addressed this provision in the LTCH 

PPS RY 2009 January 29, 2008 proposed 

rule (73 FR 5353 through 5360). While 

we did not propose the one-time 

prospective adjustment in the RY 2009 

proposed rule, we provided a possible 

methodology for determining whether 

the one-time prospective adjustment 

would be warranted. We solicited 

comments on the methodology and 

indicated that we would take these 

comments into consideration in 

proposing to implement a one-time 

prospective adjustment on or after 

December 29, 2010, consistent with the 

requirements of section 114(c)(4) of 

MMSEA. Additionally, section 114(d) of 

MMSEA established a 3-year 

moratorium on the establishment and 

classification of new LTCHs, LTCH 

satellite facilities, and on any increase 

in beds in existing LTCHs and LTCH 

satellite facilities, with certain 

exceptions. Section 114(c)(1) and (2) of 

MMSEA established a 3-year delay in 

the application of certain payment 

policies which apply a payment 

adjustment for LTCH patients admitted 

from certain referring hospitals that 

exceed various percentage thresholds. 

These provisions will be addressed in a 

separate rulemaking. 

We would also note that section 114 

of MMSEA included additional 

provisions focusing on LTCHs not 

directly related to payment policy that 

are not in this interim final rule with 

comment period are as follows: 

• Section 1861 of the Act is amended 

by adding a new paragraph (ccc) 

defining LTCHs. 

• The Secretary is directed to conduct 

a study and submit a report to the 

Congress within 18 months after the 

date of enactment of MMSEA. The 

Secretary will conduct a study on the 

establishment of national LTCH facility 

and patient criteria. 

• The Secretary is directed to provide 

an expanded review of medical 

necessity for LTCH admission and 

continued stay. 

A. Scope of the LTCH Regulations and 

Section 114 of MMSEA 

Section 114(e)(1) of MMSEA amended 

section 1886 of the Act by adding a new 

subsection m. New section 1886(m)(1) 

of the Act provides that for provisions 

related to the establishment and 

implementation of a prospective 

payment system for payments under 

this title for inpatient hospital services 

furnished by a long-term care hospital 

described in subsection (d)(1)(B)(iv) (see 

section 123 of BBRA and section 307(b) 

of BIPA.) In addition, it added new 

section 1886(m)(2) of the Act, which 

pertains to the standard Federal rate for 

RY 2008. We are revising our 

regulations at § 412.1(a)(4) and 

§ 412.500, which contain the scope of 

the long-term care hospital regulations 

to reference the statutory authority 

provided by section 114 of MMSEA and 

to reference the amendment to section 

1886 of the Act. 

B. Short Stay Outlier (SSO) Cases 

1. Background 

In the RY 2003 LTCH PPS final rule 

(67 FR 55995), we established at 

§ 412.529 a special payment policy for 

short-stay outlier (SSO) cases, SSO cases 

are cases with a covered LOS that is less 

than or equal to five-sixths of the 

geometric average LOS for each LTC–

DRG. When we established the SSO 

policy, we explained that ‘‘[a] short stay 

outlier case may occur when a 

beneficiary receives less than the full 

course of treatment at the LTCH before 

being discharged’’ (67 FR 55995). 

Therefore, under the LTCH PPS, we 

implemented a special payment 

adjustment for SSO cases. Under the 

SSO policy established in the RY 2003 

LTCH PPS final rule (67 FR 55995 

through 56000), for LTCH PPS 

discharges with a covered LOS of up to 

and including five-sixths the geometric 

average LOS for the LTC–DRG, we 

adjusted the per discharge payment 

under the LTCH PPS by the least of the 

following three options: (1) 120 percent 

of the estimated cost of the case; (2) 120 

percent of the LTC–DRG specific per 

diem amount multiplied by the covered 

LOS of that discharge; or (3) the full 

LTC–DRG payment. 

Generally LTCHs are defined by 

statute as having an average LOS of 

greater than 25 days. We believe that 

since a SSO case may occur when a 

beneficiary receives less than the full 

course of treatment at the LTCH before 

being discharged, the full LTC–DRG 

payment would generally not be 

appropriate. Accordingly, based on an 

evaluation of data from more than 3 

years of the LTCH PPS which revealed 

that a large percentage of SSOs had a 

covered LOS of 14 days or less, we 

further revised our payment policy for 

SSO cases in the RY 2007 and RY 2008 

LTCH PPS final rules (71 FR 27845 

through 27870 and 72 FR 26904 through 

26918) for LTCHs defined by section 

1886(d)(1)(B)(iv)(I) of the Act. However, 

as we discussed in detail in the RY 2007 

and RY 2008 LTCH PPS final rules (71 

FR 27863 and 72 FR 26907), we did not 

believe that it was appropriate to apply 

our RY 2007 and RY 2008 SSO policy 

revisions, discussed below, to the 

unique situation of a LTCHs defined by 

section 1886(d)(1)(B)(iv)(II) of the Act. 

For RY 2007, consistent with the 

Secretary’s broad authority ‘‘to provide 

for appropriate adjustments to the longterm hospital payment system * * *’’

established under section 123 of the 

BBRA as amended by section 307(b)(1) 

of BIPA, we reduced the cost-based 

option of the SSO policy adjustment to 

100 percent of the estimated costs of the 

case for discharges occurring on or after 

July 1, 2006. Furthermore, in the RY 

2007 LTCH PPS final rule, we added a 

fourth payment option to the SSO 

policy, following an analysis of the FY 

2004 MedPAR data that indicated that 

even under the existing SSO policy, 

LTCHs were admitting short stay 

patients that we believe could have 

continued treatment at the acute care 

hospitals (paid for under the IPPS). 

Furthermore, we believe that these types 

of admissions (that is, of patients from 

acute care hospitals that result in short 

stay cases at the LTCH) could result in 

unnecessary and inappropriate 

admissions to LTCHs. This fourth 

payment alternative is a blend of an 

LTCH PPS amount that is comparable to 

the IPPS per diem payment amount, and 

the 120 percent of the LTC–DRG per 

diem payment amount. Specifically, the 

blended payment is based on a 

percentage of an IPPS comparable 

amount computed as a per diem and 

capped at the full IPPS-comparable 

amount, and a percentage of a payment 

based on 120 percent of the LTC–DRG 

per diem amount so that as the length 

of the stay increases, the percentage of 

the IPPS comparable per diem amount 

will decrease and the percentage based 

on 120 percent of the LTC–DRG per 

diem specific amount will increase. 

This reflects our belief that as the length 

of a SSO stay increases, the case begins 

to resemble a more ‘‘typical’’ LTCH stay 

and, therefore, it is appropriate that 

incrementally, payment should be based 

more on what would otherwise be 

payable under the LTCH PPS and less 

on the ‘‘IPPS-comparable’’ amount. 

(Specifics of calculating the ‘‘IPPSVerDate Aug<31>2005 16:31 May 05, 2008 Jkt 214001 PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 E:\FR\FM\06MYR1.SGM 06MYR1

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Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Rules and Regulations 24875 

comparable’’ amount are set forth in 

considerable detail in the RY 2007 

LTCH PPS final rule (71 FR 27852 

through 27853).) 

In the RY 2008 LTCH PPS final rule 

(72 FR 26904 through 26918), we further 

revised the SSO policy based upon 

additional analysis of the FY 2005 

MedPAR data. Specifically, our analysis 

revealed that 42 percent of LTCH SSO 

discharges, or approximately 19,750 

cases, had covered lengths of stay that 

were less than or equal to the ALOS 

plus one standard deviation of an IPPS 

discharge for the same DRG as the LTC–

DRG to which the case was assigned. 

(For additional discussion of this 

specific determination, see the RY 2008 

LTCH PPS final rule (72 FR 26905).) At 

that time, we stated that we believed 

that the 42 percent of LTCH SSO cases 

in the RY 2005 MedPAR files with LOS 

that are equal to or less than the IPPS 

average LOS plus one standard 

deviation for the same DRGs under the 

IPPS appeared to be comparable to 

typical stays at acute care hospitals. 

For this subgroup of SSO cases, we 

stated that even with the blend option, 

we believe that payment in excess of 

what Medicare would have paid under 

the IPPS is inappropriate. (We note that 

in the FY 2008 IPPS final rule (72 FR 

47130) the Medicare severity-diagnosis 

related groups (MS–DRGs) and the 

Medicare severity-long-term carediagnosis related groups (MS–LTC–

DRGs) were adopted for the IPPS and 

the LTCH PPS, respectively. Therefore, 

for SSO policies that are applicable to 

LTCH discharges occurring on or after 

October 1, 2007, all references to DRGs 

and LTC–DRGs should be understood to 

represent MS–DRGs and MS–LTC–DRGs 

(see § 412.503). Accordingly, in the RY 

2008 LTCH PPS final rule we 

established an alternative fourth 

payment option for SSO cases under the 

LTCH PPS for discharges occurring on 

or after July 1, 2007. Specifically, the 

covered LOS of a SSO case which has 

been assigned to a particular MS–LTC–

DRG is compared to the average LOS 

plus one standard deviation for the 

same DRG under the IPPS, which we 

call ‘‘IPPS comparable threshold.’’ For 

example, if the covered LOS of the 

LTCH SSO case is equal to or less than 

the average LOS plus one standard 

deviation for the same DRG under the 

IPPS, the LTCH SSO case would be 

within the ‘‘IPPS comparable threshold’’

(72 FR 26870 and 26906). We note that 

the ‘‘IPPS-comparable threshold’’ is 

only applicable if a particular stay is a 

SSO, that is, with a covered LOS equal 

to or less than five-sixth of the average 

LOS of the applicable MS–LTC–DRG. 

Thus, for a LTCH SSO case that is 

within the ‘‘IPPS comparable 

threshold,’’ the fourth payment option 

would be based on an amount 

comparable to the hospital IPPS per 

diem amount determined under 

§ 412.529(d)(4). For a SSO case with a 

covered LOS that exceeds the ‘‘IPPScomparable’’ threshold, the fourth 

payment option continues to be the 

‘‘blend’’ established in RY 2007, 

described above. For all SSO cases, the 

first three SSO payment options are the 

same. To summarize, as established in 

§ 412.529, for each SSO case treated at 

a LTCH defined under section 

1886(d)(1)(B)(iv)(I), Medicare will pay 

the least of the following: 

• 100 percent of the estimated cost of 

the case. 

• 120 percent of the LTC–DRG 

specific per diem amount multiplied by 

the covered LOS of the particular case. 

• The full LTC–DRG. 

• Comparing the covered LOS for a 

SSO case and the ‘‘IPPS comparable 

threshold’’ one of the following: 

++ The blend of the 120 percent of 

the LTC–DRG specific per diem amount 

and an amount comparable to the IPPS 

per diem amount specified in 

§ 412.529(c)(2)(iv), for cases where the 

covered LOS for a SSO case is greater 

than the ‘‘IPPS comparable threshold’’. 

++ An amount comparable to the 

hospital IPPS per diem amount 

determined under § 412.529(d)(4) for 

cases where the covered LOS for a SSO 

is less than or equal to the ‘‘IPPS 

comparable threshold.’’ We note that the 

revisions of the SSO policy payment 

options that were finalized beginning in 

RY 2007, (that is, the ‘‘blend’’ and 

reduction of the 120 percent of the 

estimated cost to 100 percent), and RY 

2008 (the ‘‘IPPS-comparable’’ threshold 

option) were not applied to the unique 

situation of a hospital designated as a 

LTCH by the Congress under section 

1886(d)(1)(B)(iv)(II) of the Act, that is, (a 

‘‘subclause (II)’’ LTCH) (71 FR 27863 

and 72 FR 26907). 

2. Change to the SSO Policy Due to the 

Medicare, Medicaid, and SCHIP 

Extension Act of 2007 

Section 114(c)(3) of MMSEA provides 

that ‘‘[t]he Secretary shall not apply, for 

the 3-year period beginning on the date 

of the enactment of this Act, the 

amendments finalized on May 11, 2007 

(72 Federal Register 26904, 26992) 

made to the short-stay outlier payment 

provision for long-term care hospitals 

contained in section 412.529(c)(3)(i) of 

title 42, Code of Federal Regulations, or 

any similar provision.’’ Accordingly, for 

discharges beginning on or after 

December 29, 2007 and before December 

29, 2010, the fourth SSO payment 

option based on the ‘‘IPPS comparable 

threshold’’ as discussed above shall not 

apply. Specifically, during the 3-year 

period specified above, for each SSO 

case treated at a LTCH defined under 

section 1886(d)(1)(B)(iv)(I) of the Act, 

Medicare will pay the least of: (1) 100 

percent of the estimated cost of the case; 

(2) 120 percent of the LTC–DRG specific 

per diem amount multiplied by the 

covered LOS of the particular case; (3) 

the full LTC–DRG; or (4) the blend of 

the 120 percent of the LTC–DRG 

specific per diem amount and an 

amount comparable to the IPPS per 

diem amount specified in 

§ 412.529(c)(2)(iv). 

Accordingly, we are amending the 

appropriate regulations pertaining to the 

payment of SSO to implement section 

114(c)(3) of MMSEA. Specifically, we 

made several heading changes and 

redesignated paragraph (c)(4), which 

refers to the policy for reconciliation of 

SSO payments, as the new paragraph (f). 

We note that we have not made any 

substantive changes to the policy for 

reconciliation of SSO payment (other 

than those associated with 

implementing section 114(c)(3) of 

MMSEA) and that the redesignation of 

the paragraph (c)(4) as (f), in addition 

the heading changes are simply 

reorganizational changes intended to 

make the regulations in this section 

more accessible. We also note that in 

amending the regulations, we 

discovered that several citations under 

existing paragraph (c)(4) were incorrect, 

originating from the RY 2008 final rule 

when we redesignated this paragraph 

from (c)(3) to (c)(4) (which was also an 

organizational change and not a 

substantive policy change to the policy 

on reconciliation of SSO payment) but 

inadvertently did not change the 

citations to correspond to the 

redesignation. In this interim final rule 

with comment period, we have 

corrected the citations in the 

redesignated paragraph (f). 

C. Standard Federal Rate for the 2008 

LTCH PPS Rate Year 

1. Background 

As specified at § 412.523(c)(3)(ii), for 

LTCH PPS rate years beginning RY 2004 

through RY 2006, we updated the 

standard Federal rate by a factor to 

adjust for the most recent estimate of the 

increases in prices of an appropriate 

market basket of goods and services for 

LTCHs. When we moved the date of the 

annual update of the LTCH PPS from 

October 1 to July l in the RY 2004 LTCH 

PPS final rule (68 FR 34126 through 

34128), we revised § 412.523(c)(3) 

accordingly. 


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In the RY 2007 LTCH PPS final rule 

(71 FR 27818), we explained that rather 

than solely using the most recent 

estimate of the LTCH PPS market basket 

as the basis of the update factor for the 

Federal rate at RY 2007, we believed it 

is appropriate to adjust the Federal rate 

to account for the changes in case mix 

that are due to changes in coding 

practices (rather than an increase in 

patient severity) as indicated by our 

ongoing monitoring activities. We 

established at § 412.523(c)(3)(iii) that 

the update to the standard Federal rate 

for the 2007 LTCH PPS rate year was 

zero percent, based on the most recent 

estimate of the LTCH PPS market basket 

at the time and an adjustment to 

account for changes in case-mix in prior 

periods that are due to changes in 

coding practices, rather than increased 

patient severity, in FY 2004. Therefore, 

effective from July 1, 2006 through June 

30, 2007, the standard rate was $38,086 

(71 FR 27818). For the following year, 

we also considered changes in case mix 

in 2005 as opposed to 2004 that were 

due to changes in coding practices 

(rather than increased patient severity) 

in establishing the update to the Federal 

rate for the 2008 LTCH PPS rate year. In 

the RY 2008 LTCH final rule (72 FR 

26887 through 26890), we adjusted the 

Federal rate based on the most recent 

estimate of market basket (3.2 percent) 

and an adjustment to account for 

changes in coding practices (2.49 

percent) in FY 2005. Accordingly, we 

established at § 412.523(c)(3)(iv) that the 

update to the standard Federal rate for 

RY 2008 was 0.71 percent and we 

established the LTCH PPS standard 

Federal rate, effective from July 1, 2007 

through June 30, 2008, at $38,356.45 

(see 72 FR 26890). 

2. Section 114(e)(1) and (2) of the 

Medicare, Medicaid, and SCHIP 

Extension Act of 2007 

Section 114(e)(1) of MMSEA revises 

the base rate for RY 2008. Specifically, 

section 114(e)(1) of Public Law 110–173 

adds a new subsection 1886(m)(2) of the 

Act, which provides that the base rate 

for RY 2008 ‘‘shall be the same as the 

base rate for discharges for the hospital 

occurring during the rate year ending in 

2007.’’ In addition, section 114(e)(2) of 

Public Law 110–173 indicates that 

section 1886(m)(2) of the Act ‘‘shall not 

apply to discharges occurring on or after 

July 1, 2007, and before April 1, 2008’’

(that is, the first 9 months of RY 2008). 

We note that the statute uses the term 

‘‘base rate,’’ which is an undefined term 

in both section 1886(m) of the Act and 

in 42 CFR Part 412, subpart O. As we 

explained in the LTCH PPS RY 2009 

proposed rule (73 FR 5361), we are 

interpreting that term to be the standard 

Federal rate because we believe 

Congress meant to eliminate the 0.71 

percent update from the RY 2008 

standard Federal rate. Under this 

interpretation, the standard Federal rate 

for RY 2008 would be the same as the 

standard Federal rate for RY 2007, that 

is, the 0.71 percent update finalized in 

the RY 2008 LTCH PPS final rule would 

be reversed. 

We do not believe that the term ‘‘base 

rate’’ could refer to the ‘‘unadjusted 

rate’’ because the unadjusted rate for RY 

2008 would be updated by the current 

year’s update factor in order to 

determine the standard Federal rate for 

RY 2008 (that is, to determine the 

standard Federal rate for any given rate 

year, the previous year’s standard 

Federal rate, referred herein as the 

‘‘unadjusted rate,’’ is updated by the 

current year’s update factor) and doing 

so would result in the same Federal rate 

for RY 2008 as was adopted in the RY 

2008 final rule. To illustrate 

mathematically, if ‘‘base rate’’ is 

interpreted to mean ‘‘unadjusted rate,’’

the ‘‘unadjusted rate’’ for RY 2008 

($38,086.04) would be the same as the 

RY 2007 ‘‘unadjusted rate’’ ($38,086.04). 

The RY 2008 ‘‘unadjusted rate’’ of 

$38,086.04 would subsequently be 

updated by the 0.71 percent update 

factor finalized in the RY 2008 final 

rule, resulting in a standard Federal rate 

for RY 2008 of $38,356.45, which is the 

same standard Federal rate that was 

originally finalized in the RY 2008 final 

rule. If we adopted this interpretation, 

we believe that LTCH PPS payments 

would be unaffected by section 114(e)(1) 

of MMSEA. Therefore, we believe that 

the term ‘‘base rate’’ used in section 

114(e)(1) of MMSEA refers to the 

standard Federal rate. In subsequent 

sections of this preamble, we are using 

the term standard Federal rate instead of 

‘‘base rate’’ when referencing the 

provision in section 114(e)(1) of 

MMSEA in order to avoid further 

confusion. 

In the RY 2008 LTCH PPS final rule 

(72 FR 26890), we established a 

standard Federal rate of $38,356.45 for 

the 2008 LTCH PPS rate year that was 

based on the best available data and 

policies established in that final rule. As 

discussed above, section 114(e) of 

MMSEA revises the standard Federal 

rate for RY 2008 while specifying that 

this rate ‘‘shall not apply to discharges 

occurring on or after July 1, 2007, and 

before April 1, 2008’’ (that is, the first 

9 months of RY 2008). Specifically, 

section 114(e)(1) of MMSEA provides 

that under the new section 1886(m)(2) 

of the Act, the standard Federal rate for 

RY 2008 shall be the same as the 

standard Federal rate for RY 2007. The 

standard Federal rate for RY 2007 was 

$38,086.04 (71 FR 27818). Thus, to 

implement 114(e)(1) of the MMSEA, we 

are establishing through this interim 

final rule with comment period that the 

RY 2008 standard Federal rate is 

$38,086.04 (the same as the standard 

Federal rate for 2007). However, section 

114(e)(2) of MMSEA specifically delays 

the application of the revised RY 2008 

standard Federal rate. Specifically, 

section 114(e)(2) of MMSEA states that 

the revised RY 2008 standard Federal 

rate ‘‘shall not apply to discharges 

occurring on or after July 1, 2007, and 

before April 1, 2008.’’ Therefore, LTCH 

payments for discharges occurring on or 

after July 1, 2007 through March 31, 

2008, will continue to include an 

adjustment of 0.71 percent, that is, 

payments are based on the standard 

Federal rate in § 412.523(c)(3)(iii) as 

updated by 0.71 percent. Accordingly, 

for discharges occurring on or after 

April 1, 2008 through June 30, 2008, the 

revised RY 2008 standard Federal rate of 

$38,086.04 is applied, while payments 

for discharges occurring from July 1, 

2007 through March 31, 2008 are 

determined based on the standard 

Federal rate in § 412.523(c)(3)(iii) 

increased by 0.71 percent that is, 

$38,356.45. We are revising 

§ 412.523(c)(iv) to conform to the 

revision of the standard Federal rate for 

RY 2008 under section 114(e) of 

MMSEA and to specify how payments 

are determined during RY 2008. 

Furthermore, section 114(e) of 

MMSEA affects the high cost outlier 

fixed-loss amount currently in effect 

since it revises the standard Federal rate 

for RY 2008 and the standard Federal 

rate is used to determine the fixed-loss 

amount. Specifically, the current fixedloss amount was determined based on a 

standard Federal rate of $38,356.45. (See 

the RY 2008 LTCH PPS final rule (72 FR 

26896 through 26899), as amended by 

the RY 2008 correction notice (72 FR 

36613), for a discussion of the 

methodology and data used to 

determine the current fixed-loss amount 

for RY 2008.) Since for discharges 

occurring on or after April 1, 2008 

through June 30, 2008, payments will be 

based on the revised RY 2008 standard 

Federal rate of $38,086.04, consistent 

with the existing regulations at 

§ 412.525(a), in order to maintain 

estimated total payments for high cost 

outlier cases at 8 percent of the 

estimated total payments, we are 

revising the high cost outlier fixed-loss 

amount. Accordingly, under the broad 

authority conferred on the Secretary by 

section 123 of the BBRA, as amended by 


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Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Rules and Regulations 24877 

section 307(b) of BIPA, to make 

appropriate adjustments to the LTCH 

PPS, the revised high cost outlier fixedloss amount effective for discharges 

occurring on or after April 1, 2008 

through June 30, 2008 is $20,707. This 

revised fixed-loss amount was 

determined using the same data and 

methodology presented in the RY 2008 

LTCH PPS final rule and takes into 

account the revised RY 2008 standard 

Federal rate as provided for in the 

MMSEA (discussed above). 

We note that in the RY 2009 LTCH 

PPS proposed rule (73 FR 5362), 

consistent with our historical practice, 

we proposed to update the standard 

Federal rate from the previous year 

(which is $38,086.04 due to section 

114(e) of MMSEA, as explained above) 

to determine the proposed standard 

Federal rate for RY 2009. 

III. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the ‘‘DATES’’ section 

of this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

IV. Waiver of Proposed Rulemaking 

We ordinarily publish a notice of 

proposed rulemaking and invite public 

comment on a proposed rule in 

accordance with 5 U.S.C. section 553(b) 

of the Administrative Procedure Act 

(APA). In addition, section 1871(b)(1) 

provides that the Secretary shall provide 

for notice of the proposed regulation in 

the Federal Register and a period of not 

less than 60 days for public comment 

thereon. Section 1871(b)(2) provides for 

an exception to the requirement that the 

Secretary provide for notice of a 

proposed rulemaking and a period of 

not less than 60 days for public 

comment. Specifically, section 

1871(b)(2)(B) of the Act provides an 

exception to these requirements when a 

law establishes a specific deadline for 

the implementation of a provision and 

the deadline is less than 150 days after 

the date of the enactment of the statute 

in which the deadline is contained. 

Here, various provisions of the MMSEA 

addressed in this interim final rule with 

comment period, changed existing 

LTCH PPS policies (it affected the shortstay outlier policy in § 412.529 and 

revised the RY 2008 standard Federal 

rate. Such changes were required to be 

implemented: (1) Beginning December 

29, 2007 (section 114(c)(3) of MMSEA), 

and (2) were effective for RY 2008 on 

April 1, 2008 (section 114(e)(2) of 

MMSEA). Thus, the statute’s deadline 

for implementation of the MMSEArelated policies contained in this 

interim final regulation was less than 

150 days after the date of the enactment 

of the statute in which the deadline was 

contained. Therefore, under the 

authority of section 1871(b)(2)(B) of the 

Act, we are waiving notice and 

comment procedures for the MMSEA 

policy changes pertaining to the shortstay outlier policy, and the revised RY 

2008 standard Federal rate. 

Moreover, we also find good cause to 

waive the requirement for publication of 

a notice of proposed rulemaking and 

comment on the grounds that it is 

unnecessary, impracticable and contrary 

to the public interest under the 

authority of 5 U.S.C. 553(b)(B). In 

general, this interim final rule with 

comment period sets forth three 

nondiscretionary provisions of the 

MMSEA with respect to short-stay 

outliers and the rate for RY 2008. 

Therefore, we believe pursuing notice 

and comment is unnecessary. Moreover, 

because that process would prevent 

timely implementation of 

congressionally mandated policy 

changes that are to be effective, as 

described previously in this section, we 

believe notice and comment procedures 

are impracticable and contrary to the 

public interest. In addition, notice and 

comment would delay significantly the 

issuance of essential guidance to the 

public which is necessary to assist them 

in making complex, time-sensitive 

business decisions of significant 

financial consequence with respect to 

their efforts to comply with section 114 

of the MMSEA. Failure to provide this 

guidance would impede such business 

decisions. This regulation also makes 

three changes that are outside of the 

MMSEA mandated changes discussed 

above. Specifically, this regulation 

makes minor technical corrections to 

two incorrect cites that are embedded in 

§ 412.529 and it revises the fixed-loss 

amount for the period April 1, 2008, 

through June 30, 2008. With respect to 

the technical corrections of the two 

embedded cites in § 412.529, notice and 

comment is also unnecessary. The 

revisions do not represent changes to 

our policy, and the public interest 

would, as a result, be best served by the 

timely correction of these technical 

errors. A delay in the applicability of 

the nonsubstantive changes would be 

contrary to the public interest because 

the incorrect cites, if left in place, result 

in confusion with respect to the 

calculation of cost-to-charge ratios. We 

also find good cause to waive notice and 

comment procedures on the revised 

fixed-loss amount for the period April 1, 

2008, through June 30, 2008. The fixedloss amount under the LTCH PPS is 

directly affected by the statutorily 

mandated change to the standard 

Federal rate for RY 2008 cited above. 

The existing regulations limit estimated 

high cost outlier payments under the 

LTCH PPS to 8 percent of total 

estimated LTCH PPS payments. 

Accordingly, in order to assure that 

estimated high cost outlier payments are 

maintained at this 8 percent target, in 

conjunction with the Congressionally 

mandated change in the LTCH PPS 

payments (that is, the standard Federal 

rate) that applies April 1, 2008, it would 

be contrary to the public interest if we 

did not make this conforming change to 

the high cost outlier fixed-loss amount, 

which lowers the fixed-loss amount for 

the period April 1, 2008, through June 

30, 2008. 

Section 1871(e)(1)(A) of the Act 

provides that a substantive change in 

regulations, manual instructions, 

interpretative rules, statements of 

policy, or guidelines of general 

applicability under this title shall not be 

applied (by extrapolation or otherwise) 

retroactively to items and services 

furnished before the effective date of the 

change unless the Secretary determines 

that (i) such retroactive application is 

necessary to comply with statutory 

requirements; or (ii) failure to apply the 

change retroactively would be contrary 

to the public interest. As explained in 

the paragraph above, the MMSEA 

requires the Secretary to implement 

various policy changes 

contemporaneously with the enactment 

of the MMSEA on December 29, 2007. 

Therefore, under the authority of section 

1871(e)(1)(A)(i) of the Act, we are 

making the provisions of this interim 

final rule with comment period that 

implement section 114(c)(3) of MMSEA 

retroactive to December 29, 2007. 

Additionally, as explained previously, 

the Secretary also finds that it would be 

contrary to the public interest if these 

provisions were not made effective on 

December 29, 2007, as explained above. 

Also, as explained in the previous 

paragraph, section 114(e)(1) of MMSEA 

requires the Secretary to revise standard 

Federal rate for RY 2008. However, the 

Secretary shall not apply such revised 

rate to discharges occurring on or after 

July 1, 2007, and before April 1, 2008 

(section 114(e)(2) of the Act). 

Consequently, the regulations 

implementing section 114(e)(2) of 

MMSEA must be effective for a period 

predating this interim final rule with 

comment period under the authority of 


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24878 Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Rules and Regulations 

section 1871(e)(1)(A)(i) of the Act 

(specifically, beginning April 1, 2008). 

As explained previously, it would also 

be contrary to the public interest if these 

policies were not effective April 1, 2008. 

In general, many of the provisions of 

the MMSEA implemented in this 

interim final regulation are beneficial to 

LTCHs. If those MMSEA provisions of 

this regulation were not effective under 

the timeframes noted above, most 

LTCHs would be deprived the full 

benefit of these provisions. With respect 

to the minor technical corrections to 

§ 412.529, failure to make these 

nonsubstantive changes applicable 

beginning on December 29, 2007, would 

be contrary to the public interest 

because of the confusion that could 

result from the incorrect citations in 

§ 412.529. It is in the public interest to 

make the correction to prevent 

confusion among long-term care 

hospitals attempting to calculate cost-tocharge ratios. It is also contrary to the 

public interest as described above to not 

make the change to the fixed-loss 

amount applicable beginning April 1, 

2008. Therefore, under the authority of 

section 1871(e)(1)(A)(ii) of the Act, we 

are making these changes effective 

under the timeframes noted above. For 

the same reasons noted above, we find 

good cause under section 553(d)(3) of 

the APA to waive the 30-day delay in 

the effective date. 

V. Collection of Information 

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, and including 

automated collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

Section 412.529(f)(4) states that for 

discharges occurring on or after October 

1, 2006, short-stay outlier payments are 

subject to certain provisions. 

Specifically, § 412.529(f)(4)(i) states that 

a hospital may also request that its fiscal 

intermediary use a different (higher or 

lower) cost-to-charge ratio and this 

request must be approved by the 

appropriate CMS Regional Office. 

The burden associated with this 

requirement is the time and effort 

necessary for a hospital to collect 

supporting evidence for submission, to 

draft the request for alternative cost-tocharge ratio, and to submit the request 

along with the supporting evidence to 

the appropriate CMS Regional Office. 

While this requirement is subject to the 

PRA, the burden is currently approved 

under OMB control number 0938–1020 

with an expiration date of June 30, 2010. 

TABLE 3.—ESTIMATED ANNUAL REPORTING AND RECORDKEEPING BURDEN

Regulation section(s) OMB Control 

No. Respondents Responses Burden per response (hours) 

Total annual 

burden (hours) 

§ 412.529(f) .......................................................................... 0938–1020 18 18 8 144 

Total .............................................................................. ........................ ........................ ........................ ........................ 144 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Mail copies to the address specified 

in the ADDRESSES section of this 

proposed rule and to the Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Room 10235, New Executive Office 

Building, Washington, DC 20503, Attn: 

Carolyn L. Raffaelli, CMS Desk Officer, 

CMS–1493–IFC, 

Carolyn_L._Raffaelli@omb.eop.gov. Fax 

(202) 395–6974. 

VI. Regulatory Impact Analysis 

We have examined the impacts of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), Executive Order 13132 on 

Federalism, and the Congressional 

Review Act (5 U.S.C. 804 (2)). 

Executive Order 12866 (as amended 

by Executive Order 13258) directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). 

As stated in section II.C. of this 

preamble, section 114(e)(1) of the 

Medicare, Medicaid, and SCHIP 

Extension Act of 2007 at the new 

1886(m)(2) of the Act revises the 

standard Federal rate for RY 2008 by 

providing that ‘‘for discharges occurring 

during the rate year ending in 2008 for 

a hospital, the base rate for such 

discharges for the hospital shall be the 

same as the base rate for discharges for 

the hospital occurring during the rate 

year ending in 2007’’ (in other words, 

the standard Federal rate for RY 2008 is 

the same as the standard Federal rate for 

2007). Thus, the standard Federal rate 

for RY 2008 is established in section 

II.C. of this interim final rule with 

comment period at $38,086.04 (the same 

as the standard Federal rate for 2007). 

However, as we discussed in section 

II.D. of this interim final rule with 

comment period, section 114(e)(2) of the 

MMSEA specifically indicates that this 

rate ‘‘shall not apply to discharges 

occurring on or after July 1, 2007, and 

before April 1, 2008.’’ Therefore, 

payments for discharges occurring on or 

after July 1, 2007 through March 31, 

2008, are based on $38,356.45 (as 

established in the RY 2008 LTCH PPS 

final rule), while for discharges 

occurring on or after April 1, 2008 

through June 30, 2008, payments are 

based on the RY 2008 standard Federal 

rate which is $38,086.04. CMS’ Office of 

the Actuary (OACT) estimates a 


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Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Rules and Regulations 24879 

projected decrease of approximately $5 

million in estimated aggregate LTCH 

PPS payments for RY 2008 resulting 

from the change in payments for 

discharges occurring on or after April 1, 

2008 through June 30, 2008. 

Additionally, as discussed in section 

II.B. of this interim final rule with 

comment period, section 114(c)(3) of 

MMSEA requires a 3-year suspension of 

our implementation of the revision to 

the SSO policy at § 412.529(c)(3)(i) that 

was finalized in the RY 2008 final rule. 

OACT estimates that the SSO provision 

included in the MMSEA will result in 

a projected increase in estimated 

aggregate LTCH PPS payments for RY 

2008 of $20 million. Consequently, we 

estimate the combined impact on 

estimated aggregate LTCH PPS 

payments for RY 2008 from the MMSEA 

provisions that are presented in this 

interim final rule with comment period 

to be approximately $15 million. 

Because the combined distributional 

effects and estimated changes to the 

Medicare program payments would not 

be greater than $100 million, this 

interim final rule with comment period 

would not be considered a major 

economic rule, as defined in this 

section. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses. For purposes of the RFA, 

small entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $6.5 million to $31.5 million in any 

1 year. (For further information, see the 

Small Business Administration’s 

regulation at 70 FR 72577, December 6, 

2005.) Individuals and States are not 

included in the definition of a small 

entity. Because we lack data on 

individual hospital receipts, we cannot 

determine the number of small 

proprietary LTCHs. Therefore, we 

assume that all LTCHs are considered 

small entities for the purpose of this 

impact discussion. Medicare FIs and 

MACs are not considered to be small 

entities. As we discuss in detail 

throughout the preamble of this interim 

final rule with comment period, we 

believe that the provisions specified by 

the MMSEA presented in this rule 

would result in an increase in estimated 

aggregate LTCH PPS payments. 

Accordingly, the Secretary certifies that 

this interim final rule with comment 

period would not have a significant 

economic impact on a substantial 

number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area for 

Medicare payment regulations and has 

fewer than 100 beds. As stated above, 

implementing the provisions specified 

by the MMSEA that are discussed in 

this rule would result in an increase in 

estimated aggregate LTCH PPS 

payments; therefore, we believe this rule 

will not have a significant impact on 

small rural hospitals. Accordingly, the 

Secretary certifies that this interim final 

rule with comment period would not 

have a significant economic impact on 

the operations of a substantial number 

of small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2008, that threshold level is currently 

approximately $130 million. This 

interim final rule with comment period 

would not mandate any requirements 

for State, local, or tribal governments, 

nor would it result in expenditures by 

the private sector of $130 million or 

more in any 1 year. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Since this regulation does not impose 

any costs on State or local governments, 

the requirements of Executive Order 

13132 are not applicable. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 412 

Administrative practice and 

procedure, Health facilities, Medicare, 

Puerto Rico, Reporting and 

recordkeeping requirements. 

■ For the reasons stated in the preamble 

of this interim final rule with comment 

period, the Centers for Medicare & 

Medicaid Services is amending 42 CFR 

Chapter IV as follows: 

PART 412—PROSPECTIVE PAYMENT 

SYSTEMS FOR INPATIENT HOSPITAL 

SERVICES 

■ 1. The authority citation for part 412 

is revised to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

■ 2. In § 412.1 paragraph (a)(4) is revised 

to read as follows: 

§ 412.1 Scope of part. 

(a) * * * 

(4) This part implements the 

following regarding long-term care 

hospitals—

(i) Section 123 of Public Law 106–

113, which provides for the 

establishment of a prospective payment 

system for the costs of inpatient hospital 

services furnished to Medicare 

beneficiaries by long-term care hospitals 

described in section 1886(d)(1)(B)(iv) of 

the Act, for cost reporting periods 

beginning on or after October 1, 2002. 

(ii) The provisions of section 307(b) of 

Public Law 106–554, which state that 

the Secretary shall examine and may 

provide for appropriate adjustments to 

the long-term care hospital prospective 

payment system, including adjustments 

to diagnosis-related group (DRG) 

weights, area wage adjustments, 

geographic reclassification, outlier 

adjustments, updates, and 

disproportionate share adjustments 

consistent with section 1886(d)(5)(F) of 

the Act. 

(iii) Section 114 of Public Law 110–

173, which contains several provisions 

regarding long-term care hospitals, 

including the—

(A) Amendment of section 1886 of the 

Act to add a new subsection (m) that 

references section 123 of Public Law 

106–113 and section 307(b) of Public 

Law 106–554 for the establishment and 

implementation of a prospective 

payment system for payments under 

title XVIII for inpatient hospital services 

furnished by a long-term care hospital 

described in section 1886(d)(1)(B)(iv) of 

the Act. 

(B) Revision of the standard Federal 

rate for RY 2008. 

* * * * * 

■ 3. Section 412.500 is amended by 

revising paragraph (a) to read as follows: 

§ 412.500 Basis and scope of subpart. 

(a) Basis. This subpart implements the 

following: 

(1) Section 123 of Public Law 106–

113, which provides for the 

implementation of a prospective 

payment system for long-term care 

hospitals described in section 

1886(d)(1)(B)(iv) of the Act. 


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24880 Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Rules and Regulations 

(2) Section 307 of Public Law 106–

554, which states that the Secretary 

shall examine and may provide for 

appropriate adjustments to that system, 

including adjustments to DRG weights, 

area wage adjustments, geographic 

reclassification, outliers, updates, and 

disproportionate share adjustments 

consistent with section 1886(d)(5)(F) of 

the Act. 

(3) Section 114 of Public Law 110–

173, which contains several provisions 

regarding long-term care hospitals, 

including the—

(i) Amendment of section 1886 of the 

Act to add a new subsection (m) that 

references section 123 of Public Law 

106–113 and section 307(b) of Public 

Law 106–554 for the establishment and 

implementation of a prospective 

payment system for payments under 

title XVIII for inpatient hospital services 

furnished by a long-term care hospital 

described in section 1886(d)(1)(B)(iv) of 

the Act; and 

(ii) Revision of the standard Federal 

rate for RY 2008. 

* * * * * 

■ 4. Section 412.523 is amended by 

revising paragraph (c)(3)(iv) to read as 

follows: 

§ 412.523 Methodology for calculating the 

Federal prospective payment rates. 

* * * * * 

(c) * * * 

(3) * * * 

(iv) For long-term care hospital 

prospective payment system rate year 

beginning July 1, 2007 and ending June 

30, 2008. 

(A) The standard Federal rate for longterm care hospital prospective payment 

system rate year beginning July 1, 2007 

and ending June 30, 2008 is the same as 

the standard Federal rate for the 

previous long-term care hospital 

prospective payment system rate year. 

The standard Federal rate is adjusted, as 

appropriate, as described in paragraph 

(d) of this section. 

(B) With respect to discharges 

occurring on or after July 1, 2007 and 

before April 1, 2008, payments are 

based on the standard Federal rate in 

paragraph (c)(3)(iii) of this section 

updated by 0.71 percent. 

* * * * * 

■ 5. Section 412.529 is amended by—

■ A. Revising paragraphs (c)(1) through 

(c)(3). 

■ B. Redesignating paragraph (c)(4) as 

paragraph (f). 

■ C. Revising newly redesignated 

paragraph (f). 

§ 412.529 Special payment provision for 

short-stay outliers. 

* * * * * 

(c) * * * 

(1) Discharges occurring before July 1, 

2006. For discharges from long-term 

care hospitals described under 

§ 412.23(e)(2)(i), occurring before July 1, 

2006, the LTCH prospective payment 

system adjusted payment amount for a 

short-stay outlier case is the least of the 

following amounts: 

(i) One hundred and twenty (120) 

percent of the LTC–DRG specific per 

diem amount determined under 

paragraph (d)(1) of this section. 

(ii) One hundred and twenty (120) 

percent of the estimated cost of the case 

determined under paragraph (d)(2) of 

this section. 

(iii) The Federal prospective payment 

for the LTC–DRG determined under 

paragraph (d)(3) of this section. 

(2) Discharges occurring on or after 

July 1, 2006 and before July 1, 2007 and 

discharges occurring on or after 

December 29, 2007 and before 

December 29, 2010. For discharges from 

long-term care hospitals described 

under § 412.23(e)(2)(i) occurring on or 

after July 1, 2006 and before July 1, 2007 

and discharges occurring on or after 

December 29, 2007 and before December 

29, 2010, the LTCH prospective 

payment system adjusted payment 

amount for a short-stay outlier case is 

the least of the following amounts: 

(i) One hundred and twenty (120) 

percent of the LTC–DRG specific per 

diem amount determined under 

paragraph (d)(1) of this section. 

(ii) One hundred (100) percent of the 

estimated cost of the case determined 

under paragraph (d)(2) of this section. 

(iii) The Federal prospective payment 

for the LTC–DRG as determined under 

paragraph (d)(3) of this section. 

(iv) An amount payable under subpart 

O computed as a blend of an amount 

comparable to the hospital inpatient 

prospective payment system per diem 

amount determined under paragraph 

(d)(4)(i) of this section and the 120 

percent of the LTC–DRG specific per 

diem payment amount determined 

under paragraph (d)(1) of this section. 

(A) The blend percentage applicable 

to the 120 percent of the LTC–DRG 

specific per diem payment amount 

determined under paragraph (d)(1) of 

this section is determined by dividing 

the covered length-of-stay of the case by 

the lesser of five-sixths of the geometric 

average length of stay of the LTC–DRG 

or 25 days, not to exceed 100 percent. 

(B) The blend percentage of the 

amount determined under paragraph 

(d)(4)(i) of this section is determined by 

subtracting the percentage determined 

in paragraph (A) from 100 percent. 

(3) Discharges occurring on or after 

July 1, 2007 and before December 29, 

2007 and discharges occurring on or 

after December 29, 2010. For discharges 

from long-term care hospitals described 

under § 412.23(e)(2)(i) occurring on or 

after July 1, 2007 and before December 

29, 2007 and discharges occurring on or 

after December 29, 2010, the LTCH 

prospective payment system adjusted 

payment amount for a short-stay outlier 

case is adjusted by either of the 

following: 

(i) If the covered length of stay of the 

case assigned to a particular LTC–DRG 

is less than or equal to one standard 

deviation from the geometric ALOS of 

the same DRG under the inpatient 

prospective payment system (the IPPScomparable threshold), the LTCH 

prospective payment system adjusted 

payment amount for such a case is the 

least of the following amounts: 

(A) One hundred and twenty (120) 

percent of the LTC–DRG specific per 

diem amount determined under 

paragraph (d)(1) of this section. 

(B) One hundred (100) percent of the 

estimated cost of the case determined 

under paragraph (d)(2) of this section. 

(C) The Federal prospective payment 

for the LTC–DRG as determined under 

paragraph (d)(3) of this section. 

(D) An amount payable under subpart 

O of this part comparable to the hospital 

inpatient prospective payment system 

per diem amount determined under 

paragraph (d)(4) of this section. 

(ii) If the covered length of stay of the 

case assigned to a particular LTC–DRG 

is greater than one standard deviation 

from the geometric ALOS of the same 

DRG under the inpatient prospective 

payment system (the IPPS-comparable 

threshold), the LTCH prospective 

payment system adjusted payment 

amount for such a case is determined 

under paragraph (c)(2) of this section. 

* * * * * 

(f) Reconciliation of short-stay outlier 

payments. Payments are reconciled in 

accordance with one of the following: 

(1) Discharges occurring on or after 

October 1, 2002, and before August 8, 

2003. For discharges occurring on or 

after October 1, 2002, and before August 

8, 2003, no reconciliations are made to 

short-stay outlier payments upon cost 

report settlement to account for 

differences between cost-to-charge ratio 

and the actual cost-to-charge ratio of the 

case. 

(2) Discharges occurring on or after 

August 8, 2003, and before October 1, 

2006. For discharges occurring on or 

after August 8, 2003, and before October 

1, 2006, short-stay outlier payments are 

subject to the provisions of 

§ 412.84(i)(1), (i)(3), and (i)(4) and (m) 

for adjustments of cost-to-charge ratios. 


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Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Rules and Regulations 24881 

(3) Discharges occurring on or after 

October 1, 2003, and before October 1, 

2006. For discharges occurring on or 

after October 1, 2003, and before 

October 1, 2006, short-stay outlier 

payments are subject to the provisions 

of § 412.84(i)(2) for adjustments to costto-charge ratios. 

(4) Discharges occurring on or after 

October 1, 2006. For discharges 

occurring on or after October 1, 2006, 

short-stay outlier payments are subject 

to the following provisions: 

(i) CMS may specify an alternative to 

the cost-to-charge ratio otherwise 

applicable under paragraph (f)(4)(ii) of 

this section. A hospital may also request 

that its fiscal intermediary use a 

different (higher or lower) cost-to-charge 

ratio based on substantial evidence 

presented by the hospital. This request 

must be approved by the appropriate 

CMS Regional Office. 

(ii) The cost-to-charge ratio applied at 

the time a claim is processed is based 

on either the most recent settled cost 

report or the most recent tentatively 

settled cost report, whichever is from 

the latest cost reporting period. 

(iii) The fiscal intermediary may use 

a statewide average cost-to-charge ratio, 

which CMS establishes annually, if it is 

unable to determine an accurate cost-tocharge ratio for a hospital in one of the 

following circumstances: 

(A) A new hospital that has not yet 

submitted its first Medicare cost report. 

(For this purpose, a new hospital is 

defined as an entity that has not 

accepted assignment of an existing 

hospital’s provider agreement in 

accordance with § 489.18 of this 

chapter.) 

(B) A hospital whose cost-to-charge 

ratio is in excess of 3 standard 

deviations above the corresponding 

national geometric mean. CMS 

establishes and publishes this mean 

annually. 

(C) Any other hospital for which data 

to calculate a cost-to-charge ratio are not 

available. 

(iv) Any reconciliation of outlier 

payments is based on the cost-to-charge 

ratio calculated based on a ratio of costs 

to charges computed from the relevant 

cost report and charge data determined 

at the time the cost report coinciding 

with the discharge is settled. 

(v) At the time of any reconciliation 

under paragraph (f)(4)(iv) of this section, 

outlier payments may be adjusted to 

account for the time value of any 

underpayments or overpayments. Any 

adjustment is based upon a widely 

available index to be established in 

advance by the Secretary, and is applied 

from the midpoint of the cost reporting 

period to the date of reconciliation. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: April 4, 2008. 

Kerry Weems, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: April 30, 2008. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. 08–1217 Filed 5–1–08; 4:00 pm] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

48 CFR Part 3036 

[Docket No. DHS–2007–0024] 

RIN 1601–AA44 

Department of Homeland Security 

Acquisition Regulation; One-Step 

Turnkey Design-Build Contracts for 

United States Coast Guard (HSAR 

Case 2007–002) 

AGENCY: Department of Homeland 

Security. 

ACTION: Final rule. 

SUMMARY: The Department of Homeland 

Security (DHS or Department) is 

amending the Homeland Security 

Acquisition Regulation (HSAR) to 

incorporate delegation of one-step 

turnkey design-build authority from the 

Secretary of Homeland Security to the 

United States Coast Guard (USCG or 

Coast Guard). This rule implements 

changes that result from the USCG 

Authorization Act for Fiscal Year 2006. 

DATES: Effective May 6, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Kathy Strouss, Department of Homeland 

Security, Office of the Chief 

Procurement Officer, Acquisition Policy 

and Legislation, (202) 447–5300. 

SUPPLEMENTARY INFORMATION: 

I. Background 

II. Discussion of Public Comments 

III. Regulatory Analyses 

A. Executive Order 12866 Assessment 

B. Regulatory Flexibility Act 

I. Background 

Under the United States Coast Guard 

(USCG) Authorization Act for Fiscal 

Year 2006, the Secretary of Homeland 

Security was authorized to use one-step 

turnkey design-build procedures when 

entering into construction contracts. See 

Public Law 109–241, sec. 205. On July 

13, 2007, DHS published a proposed 

rule, which would amend the 

Department of Homeland Security 

Acquisition Regulation (HSAR) to 

incorporate the delegation of turnkey 

design-build authority from the 

Secretary of Homeland Security to the 

United States Coast Guard. See 72 FR 

38548. DHS adopts the proposed rule as 

a final rule without change. 

II. Discussion of Public Comments 

DHS received public comments from 

6 sources on the proposed rule. The 

public comments received and the 

responses are summarized below: 

Comment: Several comments were 

opposed to this HSAR revision, which 

would incorporate the delegation of 

one-step turnkey design-build 

procedures authority from the Secretary 

of Homeland Security to the United 

States Coast Guard. Most commenters 

fully understood that DHS issued the 

proposed rule to implement changes 

enacted by Congress in section 205 of 

Public Law 109–241; however, the 

commenters still urged DHS not to 

adopt the proposed regulation, believing 

instead that the Department should 

continue to follow the two-phase 

design-build procedures laid out in the 

Federal Acquisition Reform Act (FARA) 

of 1996. 

Response: DHS disagrees. The Coast 

Guard has studied the one-step turnkey 

design-build process and is fully 

convinced that it is in the best interest 

of both the Coast Guard and the 

government to adopt this streamlined 

acquisition method. The Coast Guard 

delegation of one-step turnkey designbuild authority is consistent with 

section 205 of Public Law 109–241. 

Each construction acquisition is unique, 

and one-step turnkey design-build 

methods will be used where it is 

reasonable, prudent, and offers the best 

contracting strategy for the Coast Guard. 

Comment: Other comments fully 

supported the adoption of a universal 

design-build methodology for all federal 

design-build projects. The commenters 

wrote, however, that the adoption of a 

turnkey design-build (one-step) method 

would unnecessarily confuse the private 

sector with conflicting procurement 

methodologies. 

Response: DHS disagrees. The private 

sector is very familiar with one-step 

turnkey design-build and has been using 

the process for years. The private sector 

has gained experience with one-step 

design-build use at other federal 

agencies, such as the Department of 

Defense (DoD) and the Department of 

Transportation. 

Comment: One commenter reminded 

DHS that the Federal Acquisition 

Regulation (FAR) Part 36 governs the 

use of two-phase design-build 


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