Federal Register / Vol. 73, No. 100 / Thursday, May 22, 2008 / Rules and Regulations 29699 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 412 

[CMS–1493–IFC2] 

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 Moratorium on the 

Establishment of New Long-Term Care 

Hospitals and Long-Term Care 

Hospital Satellite Facilities and 

Increases in Beds in Existing LongTerm Care Hospitals and Long-Term 

Care Hospital Satellite Facilities; and 

3-Year Delay in the Application of 

Certain Payment Adjustments 

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 longterm care hospitals (LTCHs) and LTCH 

satellite facilities. It implements a 3-year 

moratorium on the establishment of new 

LTCHs and LTCH satellite facilities; and 

on increases in beds in existing LTCHs 

and LTCH satellite facilities. This 

interim final rule with comment period 

also implements a 3-year delay in the 

application of certain payment policies 

which apply payment adjustments for 

discharges from LTCHs and LTCH 

satellites that were admitted from 

certain referring hospitals in excess of 

various percentage thresholds. 

DATES: Effective date: The provisions of 

this interim final rule with comment 

period 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 this interim final 

rule with comment period is necessary 

to comply with the statute and that 

failure to apply the changes 

retroactively would be contrary to 

public interest. 

Comment date: To be assured 

consideration, comments must be 

received at one of the addresses 

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

July 21, 2008. 

ADDRESSES: In commenting, please refer 

to file code CMS–1493–IFC2. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the 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–

IFC2, P.O. Box 8013, Baltimore, MD 

21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments (one 

original and two copies) to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1493–IFC2, 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 Judy Richter, (410) 786–

2590, Moratorium and 25 percent 

patient threshold adjustment. 

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 be 

also available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

I. Background 

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 


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29700 Federal Register / Vol. 73, No. 100 / Thursday, May 22, 2008 / Rules and Regulations 

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. 

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). 

The most recent annual update to the 

LTCH PPS was presented in the RY 

2009 LTCH PPS final rule (73 FR 

26788). In that final rule, among other 

things, we established a 2.7 percent 

update to the Federal rate for RY 2009, 

and presented other payment rate and 

policy changes, including revising the 

rate year to a year beginning October 1 

and ending on September 30. (The 2009 

rate year will begin on July 1, 2008 and 

end on September 30, 2009). 

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. Two 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 as a LTCH, 

a hospital must have a provider 

agreement with Medicare and must have 

an average Medicare inpatient LOS of 

greater than 25 days. Alternatively, to be 

classified as a LTCH, a hospital must 

have a provider agreement with 

Medicare and meet the average LOS 

requirement in § 412.23(e)(2)(ii). Section 

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 meets 

the LOS criteria if it has an average 

inpatient LOS for all patients, including 

both Medicare and non-Medicare 

inpatients, of greater than 20 days, and 

can also 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. 

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. The fiscal intermediaries (FIs) or 

Medicare Administrative Contractors 

(MACs) verify that LTCHs meet the 

average LOS requirements. (For a more 

detailed explanation, see the June 6, 

2003 final rule (68 FR 34123).) 

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 implements 

the following provisions affecting LTCH 

PPS payments: 

• Modification of payment 

adjustments to LTCHs and LTCH 

satellite discharges that were admitted 

from specific referring hospitals and 

that exceed various percentage 

thresholds. Sections 114(c)(1) and (2) of 

MMSEA mandates specific changes for 

3 years, beginning with cost reporting 

periods beginning on or after December 

29, 2007, with respect to existing 

§ 412.534, which governs the ‘‘25 

percent threshold’’ payment adjustment 

to LTCH hospitals-within-hospitals 

(HwHs) and LTCH satellite facilities for 

discharges that were admitted from their 

co-located hosts (established in the FY 

2005 IPPS final rule and amended in the 

RY 2008 LTCH PPS final rule), and 

existing § 412.536, which applies a 

payment adjustment policy (that was in 

transition to 25 percent prior to the 

enactment of this law) to LTCH and 

LTCH satellite facility discharges that 

were admitted from any individual 

hospital not co-located with the LTCH 

or LTCH satellite facility (established in 

the RY 2008 LTCH PPS final rule), as 

discussed in section II.B. of this interim 

final rule with comment period. 

• Moratorium on new LTCHs, LTCH 

satellite facilities, and increase in beds 

in existing LTCHs and LTCH satellite 

facilities. Section 114(d) of MMSEA 

established a 3-year moratorium 

beginning on December 29, 2007 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 of MMSEA made other 

changes affecting LTCH PPS payments. 

The following is a listing of the other 

rulemaking documents published and 

respective provisions of section 114 of 

MMSEA that were implemented: 

• In the May 1, 2008 interim final 

rule with comment period (73 FR 

24871)—

++ 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 (see 

§ 412.529(c)(3)(i)) 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) as revised in 

the RY 2008 LTCH PPS final rule shall 

not apply for a 3-year 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 


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during the rate year ending in 2007.’’

Furthermore, in accordance with section 

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. 

• In the January 29, 2008 proposed 

rule and May 9, 2008 final rule Section 

114(c)(4) of MMSEA specifies that for a 

3-year period beginning on December 

29, 2007, the Secretary shall not make 

the one-time prospective adjustment to 

the LTCH PPS payment rates provided 

for in existing § 412.523(d)(3). 

We also note that section 114 of 

MMSEA included additional provisions 

focusing on LTCHs but are not directly 

related to payment policy. The 

following is a list of those policies 

which are not included in this interim 

final rule with comment period: 

• 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. Payment Adjustment to LTCHs and 

LTCH Satellite Facilities 

The enactment of section 114(c) of 

MMSEA requires several modifications 

to payment provisions applicable to 

various types of LTCHs under the 

regulations at § 412.534 and § 412.536. 

(Throughout this section, ‘‘LTCH’’ or 

‘‘LTCH satellite facility’’ refers 

exclusively to ‘‘subclause (I)’’ LTCHs 

and LTCH satellite facilities, that is, 

LTCHs defined by section 

1886(d)(1)(B)(iv)(I) of the Act. This is 

the case because the policies established 

at § 412.534 and § 412.536 do not apply 

to a ‘‘subclause (II)’’ LTCH defined 

under section 1886(d)(1)(B)(iv)(II) (69 

FR 49205 and 72 FR 26924). Currently, 

§ 412.534 provides for a payment 

adjustment for a co-located LTCH (HwH 

or satellite), based upon the percentage 

of the HwH’s or satellite’s Medicare 

discharges that had been admitted from 

a hospital with which it is co-located 

(typically, an acute care hospital). 

As specified in the RY 2008 LTCH 

PPS final rule (72 FR 26870), § 412.534 

also applies to a ‘‘grandfathered’’ LTCH 

HwH or LTCH satellite facility, that is 

not required to meet the ‘‘separateness 

and control’’ policies at § 412.22(e) or 

(h)(2)(iii), respectively, regarding its 

relationship to the hospital with which 

it is co-located (see 72 FR 26926 through 

26928). In the RY 2008 LTCH PPS final 

rule, we also established, at § 412.536, 

an adjustment based on the percentage 

of Medicare discharges that had been 

admitted to a LTCH or LTCH satellite 

facility, from an individual referring 

hospital with which the LTCH or LTCH 

satellite facility is not co-located. When 

we extended the policy in § 412.534 to 

grandfathered LTCH HwHs and LTCH 

satellite facilities in the RY 2008 LTCH 

PPS final rule, we provided for a 

parallel 3-year transition to the full 

percentage threshold for cost reporting 

periods beginning on or after July 1, 

2007 at § 412.534(h) for ‘‘grandfathered’’

LTCHs and LTCH satellite facilities 

discharging patients admitted from their 

host hospitals and at § 412.536(f) for 

discharges that were admitted to a 

LTCH or LTCH satellite facility from 

any referring hospital with which they 

were not co-located (72 FR 26944). 

In this interim final rule with 

comment period, we are revising our 

regulations at § 412.534 and § 412.536 to 

implement the requirements of sections 

114(c)(1) and 114(c)(2) of MMSEA. 

Specifically, for cost reporting periods 

beginning on or after December 29, 2007 

and before December 29, 2010, section 

114(c)(1) of MMSEA generally exempts 

‘‘freestanding’’ LTCHs (that is, as newly 

defined in § 412.23(e)(5), a LTCH that 

meets the requirements at § 412.23(e)(1) 

and (2), and does not occupy space in 

a building also used by another hospital 

or does not occupy space in one or more 

separate or entire buildings located on 

the same campus as buildings used by 

another hospital, and is not part of a 

hospital that provides inpatient services 

in a building also used by another 

hospital and ‘‘grandfathered’’ LTCH 

HwHs (that is, ‘‘a long-term care 

hospital identified by the amendment 

made by section 4417(a) of the Balanced 

Budget Act of 1997 (Pub. L. 105–33)’’) 

from the applicable percentage 

threshold policy established at 

§ 412.536. The statutory provision also 

exempts grandfathered HwHs from the 

applicable percentage threshold at 

§ 412.534(h). Accordingly, for cost 

reporting periods beginning on or after 

December 29, 2007, for a 3-year period, 

the adjustments at § 412.536 will not 

apply to ‘‘freestanding’’ LTCHs and the 

adjustments at § 412.534 and § 412.536 

will not apply to ‘‘grandfathered’’ LTCH 

HwHs. Furthermore, the legislation 

prohibits the application of ‘‘any similar 

provisions’’ to either ‘‘freestanding’’

LTCHs or to ‘‘grandfathered’’ LTCH 

HwHs for that same 3-year period. 

Section 114(c)(2) of MMSEA also revises 

the current percentage thresholds at 

§ 412.534 for applicable LTCHs HwHs 

and LTCH satellite facilities. We are 

providing two tables to illustrate the 

statutory and regulatory changes for 

LTCHs and LTCHs satellite facilities 

associated with the implementation of 

section 114(c)(1) and (2) of MMSEA. 

Table 1 indicates the applicability of the 

specific provisions of section 114(c)(1) 

and (2) of MMSEA by type of LTCH or 

LTCH satellite facility. Table 2, 

indicates the applicability of § 412.534 

and § 412.536 by type of LTCH or LTCH 

satellite facility. 

TABLE 1.—APPLICABILITY OF SECTION 114(C)(1) AND (2) OF MMSEA BY LTCH TYPE

LTCH type 

Applicability of 

Section 

114(c)(1)(A) 

of MMSEA 

Section 

114(c)(1)(B) 

of MMSEA 

Section 

114(c)(2)(A) 

of MMSEA 

Section 

114(c)(2)(B) 

of MMSEA 

Freestanding LTCHs ................................................................................... Yes ................. N/A .................. N/A .................. N/A. 

Grandfathered HwHs (under section 4417(a) of the BBA § 412.22(f)) 1 .... N/A .................. Yes ................. N/A .................. N/A. 

Nongrandfathered HwHs Subject to Transition at § 412.534(g) 2 ............... N/A .................. N/A .................. Yes ................. Yes. 

Nongrandfathered HwHs not Subject to Transition at § 412.534(g) 3 ........ N/A .................. N/A .................. N/A .................. N/A. 

Grandfathered LTCH Satellites (§ 412.22(h)(3)(i)) 4 ................................... N/A .................. N/A .................. N/A .................. N/A. 

Nongrandfathered LTCH Satellites Subject to Transition at § 412.534(g) 5 N/A .................. N/A .................. Yes ................. Yes. 

Nongrandfathered LTCH Satellites not Subject to Transition at 

§ 412.534(g) 6.

N/A .................. N/A .................. N/A .................. N/A. 

1These are LTCH HwHs that were not required to meet the ‘‘separateness and control’’ policies at § 412.22(e) and were so classified by the 

Secretary on or before September 30, 1995. 


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2These are LTCH HwHs subject to the separateness and control policies at § 412.22(e) that were paid under the LTCH PPS as of October 1, 

2004 or an LTCH HwH paid under the LTCH PPS as of October 1, 2005 whose qualifying period began on or before October 1, 2004. 3These are LTCH HwHs subject to the separateness and control policies at § 412.22(e) not paid under the LTCH PPS as of October 1, 2004, 

or October 1, 2005 with a qualifying period that began on or before October 1, 2004. 4These are LTCH satellites not subject to the separateness and control policies at§ 412.22(h)(2)(iii) and that were structured as satellite facilities on September 30, 1999 and excluded from the IPPS on that date. 5These are LTCH satellites subject to the separateness and control policies at § 412.22(h)(2)(iii) that were paid under the LTCH PPS as of October 1, 2004. 6These are LTCH satellites subject to the separateness and control policies at § 412.22(h)(2)(iii) that were not paid under the LTCH PPS as of 

October 1, 2004. 

TABLE 2.—REVISIONS TO § 412.534 AND § 412.536 OF THE REGULATIONS IN ACCORDANCE WITH SECTION 114(C)(1) AND

(2) OF MMSEA BY LTCH TYPE

LTCH type* 

Applicability of 

§ 412.534 § 412.536 

Freestanding (as described § 412.23(e)(5) of 

the regulations).

N/A ................................................................... 3-year delay for cost reporting periods beginning on or after 12/29/2007 and before 12/ 

29/2010. (Section 114(c)(1)(A) of MMSEA). 

Nongrandfathered HwH (as described 

§ 412.23(e)(2)(i) that meet the criteria in 

§ 412.22(e)).

(1) If subject to the transition at § 412.534(g) 

(including those located in rural areas or 

co-located with an MSA-dominant hospital 

or urban-single hospital), applicable but with 

revised thresholds.

No change. Applicable subject to existing 

transition at § 412.536(f). 

(2) If not subject to the transition at 

§ 412.534(g) (including those located in 

rural areas or co-located with an MSA-dominant hospital or urban-single hospital), 

§ 412.534 is applicable with no change in 

thresholds.

Grandfathered HwH (as described in section 

4417(a) of the BBA and described in 

§ 412.23(e)(2)(i) and meets the criteria of 

§ 412.22(f) of the regulations).

3-year delay for cost reporting periods beginning on or after 12/29/2007 and before 12/ 

29/2010 (as specified in section 

114(c)(1)(B) of MMSEA.

3-year delay for cost reporting periods beginning on or after 12/29/2007 and before 12/ 

29/2010 (as specified in section 

114(c)(1)(B) of MMSEA). 

Nongrandfathered LTCH Satellite Facility (as 

described in § 412.23(e)(2)(i) and meets the 

criteria of § 412.22(h) of the regulations).

(1) If subject to the transition in § 412.534(g) 

(including those located in rural areas or 

co-located with an MSA-dominant hospital 

or urban-single hospital), is applicable but 

with revised thresholds.

No change—Applicable Subject to existing 

transition at § 412.536(f). 

(2) If not subject to the transition in 

§ 412.534(g) (including those located in 

rural areas or co-located with an MSA-dominant hospital or urban-single hospital), is 

applicable with no change in thresholds.

Grandfathered LTCH Satellite Facility (as described in § 412.23(e)(2)(i) that meets the criteria § 412.22(h)(3)(i)).Applicable—subject to transition at 

§ 412.534(h).

No change. Applicable subject to existing 

transition at § 412.536(f). 

* Neither § 412.534 or § 412.536 apply to a section 1886(d)(1)(B)(iv)(II) of the Act ‘‘subclause (II)’’ LTCH or LTCH satellite facility. 

For purposes of the requirements of 

section 114(c) of MMSEA, the 

distinction between a freestanding 

LTCH and a LTCH that is co-located as 

either an HwH or a LTCH satellite 

facility is significant. A ‘‘freestanding’’

LTCH is a LTCH which is not co-located 

with another hospital-level provider as 

either a HwH, defined at § 412.22(e), or 

as a satellite of a hospital as defined at 

§ 412.22(h)(1). A HwH is defined at 

§ 412.22(e) as ‘‘* * * a hospital that 

occupies space in a building also used 

by another hospital, or in one or more 

separate buildings located on the same 

campus as buildings used by another 

hospital * * *’’ At § 412.22(f) we 

describe ‘‘grandfathered’’ HwHs which 

meet the definition at § 412.22(e) but are 

exempt from the ‘‘separateness and 

control’’ policies at § 412.22(e)(1). The 

term ‘‘satellite facilities’’ defined at 

§ 412.22(h) which addresses satellites of 

hospitals; is ‘‘* * * a part of a hospital 

that provides inpatient services in a 

building also used by another hospital, 

or in one or more entire buildings 

located on the same campus as 

buildings used by another hospital 

***’’ For purposes of the HwH 

regulations at § 412.22(e) and the 

satellite regulations at § 412.22(h), we 

utilize the definition of ‘‘campus’’ in the 

provider-based regulations at 

§ 413.65(a)(2). Section 413.65 defines a 

campus as ‘‘the physical area 

immediately adjacent to the provider’s 

main buildings, other areas and 

structures that are not strictly 

contiguous to the main buildings but are 

located within 250 yards of the main 

buildings, and any other areas 

determined on an individual basis, by 

the CMS regional office, to be part of the 

provider’s campus.’’

Section 114(c) of MMSEA employs 

the term ‘‘freestanding’’ in identifying 

one group of LTCHs which the 

provision exempted from the 25 percent 

patient threshold adjustment for 3 years. 

The statute did not define the term 

freestanding LTCHs in section 

114(c)(1)(A) of MMSEA which pertains 

to the adjustment policy in § 412.536 or 

any similar provision. In order to 

minimize confusion and ensure the 

MMSEA is implemented consistently, 

we are adding a definition for 

freestanding LTCH to our regulations at 

§ 412.23(e)(5). The definition is 

consistent with our application of the 

concept under § 412.534 and § 412.536. 

For purposes of section 114(c) of 


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MMSEA, therefore, we are establishing 

a regulatory definition of a 

‘‘freestanding LTCH’’ at § 412.23(e)(5), 

as a hospital that meets the 

requirements of § 412.23(e)(1) and (2) 

that does not occupy space in a building 

also used by another hospital, or in one 

or more separate or entire buildings 

located on the same campus as 

buildings used by another hospital or is 

not part of a hospital that provides 

inpatient services in a building also 

used by another hospital. 

As noted above, section 114(c)(1)(B) 

of MMSEA specifies a 3-year delay, 

effective with cost reporting periods 

beginning on or after the date of 

enactment of MMSEA (that is, December 

29, 2007), in the application of ‘‘such 

section, or § 412.534 of title 42, Code of 

Federal Regulations, or any similar 

provisions to a long-term care hospital 

identified by the amendment made by 

section 4417(a) of the Balance Budget 

Act (BBA) of 1997 (Pub. L. 105–33).’’

We believe that the phrase ‘‘such 

section’’ refers to § 412.536 because this 

provision is the main topic of the 

preceding subparagraph (A). We further 

believe that the inclusion of the phrase 

‘‘or any similar provisions’’ after 

specifying § 412.534, in section 

114(c)(1)(B) of MMSEA exempts 

‘‘grandfathered’’ LTCHs from any 

regulatory scheme which would apply a 

percentage patient payment adjustment 

similar to that in § 412.534 or § 412.536 

for a 3-year period. As noted above, the 

type of LTCH identified by section 

4417(a) of the BBA is limited to a 

‘‘grandfathered’’ LTCH HwH. Section 

4417(a) of the BBA (which amended 

section 1886(d)(1)(B) of the Act) 

specifies that ‘‘[a] hospital that was 

classified by the Secretary on or before 

September 30, 1995, as a hospital 

described in clause (iv) shall continue to 

be so classified notwithstanding that it 

is located in the same building as, or on 

the same campus as, another hospital.’’

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

forth the definition of LTCHs.) Section 

4417(a) of BBA effectively exempted 

this particular group of LTCH HwHs 

from the ‘‘separateness and control’’

policies at § 412.22(e)(2) which govern 

the relationship between a HwH and the 

hospital with which it is co-located. 

These ‘‘grandfathered’’ LTCHs are 

allowed to maintain their IPPSexclusions so long as they continue to 

comply with applicable Medicare 

requirements. As noted above, section 

114(c)(1)(B) of MMSEA provides that 

the Secretary shall not apply the 

percentage thresholds established at 

§ 412.536 and § 412.534 (or any similar 

provisions) for a 3-year period, for cost 

reporting periods beginning on or after 

the date of enactment, December 29, 

2007, to ‘‘grandfathered’’ LTCH HwHs. 

Section 114(c)(1)(A) of MMSEA also 

specifies that the Secretary shall not 

apply the provisions at § 412.536 (or any 

similar provision) to ‘‘freestanding’’

LTCHs for the 3-year period for costreporting periods beginning on or after 

December 29, 2007. However, it is 

important to note that both 

‘‘grandfathered’’ LTCH HwHs and 

‘‘freestanding’’ LTCHs for cost reporting 

periods beginning before December 29, 

2007, remain subject to the applicable 

payment adjustments specified in 

§ 412.534(h) and § 412.536, for that 

particular cost reporting period. Section 

412.534(h), with respect to 

‘‘grandfathered’’ LTCHs, and § 412.536 

with respect to all LTCHs were 

implemented for cost-reporting period 

beginning on or after July 1, 2007. The 

policy modifications mandated by 

section 114(c) of MMSEA are effective’’

* * * for cost reporting periods 

beginning on or after the date of 

enactment of this Act for a 3-year 

period.’’ Therefore, a ‘‘grandfathered’’ or 

a ‘‘freestanding’’ LTCH with a cost 

reporting period that begins on or after 

July 1, 2007 but before December 29, 

2007, would be subject to the provisions 

of § 412.534 and § 412.536, as 

appropriate, until the start of its next 

cost reporting period. For example, for 

a LTCH with a cost reporting period 

beginning on July 1, 2007, the changes 

required by section 114(c) of MMSEA 

would only apply beginning on or after 

July 1, 2008. The 3 years of relief 

available to such a facility would 

continue until the end of its cost 

reporting period that began before 

December 29, 2010 (that is, the LTCH’s 

last cost reporting period affected by 

this provision would begin July 1, 2010 

and end June 30, 2011). In another 

example, for a LTCH that had a 

September 1 through August 31 cost 

reporting period, the first cost reporting 

period for which it would be granted the 

relief specified in section 114(c) of 

MMSEA, would be its cost reporting 

period beginning on September 1, 2008 

and the last cost reporting period would 

be the period beginning on September 1, 

2010 and ending on August 31, 2011. 

Although section 114(c)(1) of MMSEA 

exempts ‘‘grandfathered’’ LTCH HwHs 

from the ‘‘25 percent patient threshold 

payment adjustment’’ at § 412.534 and 

§ 412.536, a ‘‘grandfathered’’ satellite of 

a LTCH, under § 412.22(h)(3) continues 

to be subject to the applicable 

percentage thresholds outlined in 

§ 412.536 for patients admitted from any 

individual hospital with which it is not 

co-located because there are no 

exceptions under the MMSEA for such 

entities for purposes of § 412.536. Also, 

grandfathered LTCH satellites continue 

to be subject to the applicable existing 

percentage thresholds in § 412.534(h) 

for patients admitted from their colocated hospital because there are no 

exceptions for these entities under the 

MMSEA for purposes of § 412.534. The 

existing transitions to the full payment 

adjustments for ‘‘grandfathered’’ LTCH 

satellites at § 412.534(h)(2) also 

continue to apply. The revision to the 

percentages made by section 114(c)(2) of 

MMSEA were limited to a hospital a 

LTCH satellite subject to the transition 

rules at § 412.534(g). Grandfathered 

LTCH satellites are subject to the 

transition at § 412.534(h), not to those at 

§ 412.534(g). Specifically, in the case of 

a satellite of a LTCH that is described 

under paragraph (h)(1), the thresholds 

applied at (c), (d), and (e) will not be 

less than the percentage specific below: 

• For cost reporting periods 

beginning on or after July 1, 2007 and 

before July 1, 2008 a threshold of the 

lesser of 75 percent of the total number 

of Medicare discharges that were 

admitted to the LTCH satellite facility 

from its co-located hospital during the 

cost reporting period or the percentage 

of Medicare discharges that had been 

admitted to the LTCH satellite facility 

from that co-located hospital during the 

satellite’s RY 2005 cost reporting period. 

• For cost reporting periods 

beginning on or after July 1, 2008 and 

before July 1, 2009, we use the formula 

in the paragraph above except that we 

substitute 50 percent for 75 percent; and 

• For cost reporting periods 

beginning on or after July 1, 2009, the 

25 percent adjustment is applied. 

Similarly, the transition to the 

full 25 percent threshold or applicable 

threshold provided at § 412.536(f) 

continues to be applicable for 

discharges that were admitted to a 

nongrandfathered HwH or a 

nongrandfathered LTCH satellite facility 

or grandfathered satellite facility from 

any hospital with which the HwH or 

LTCH satellite facility is not co-located, 

because section 114(c)(1) of MMSEA 

provides no exceptions for such entities. 

This transition at § 412.536 parallels the 

transition at § 412.534(h)(2). 

With respect to LTCH HwHs and 

LTCH satellite facilities that are not 

grandfathered, the applicable percentage 

thresholds established at § 412.536, 

continue to apply because the MMSEA 

provides no exceptions for such entities. 

In addition, nongrandfathered HwHs 

and both grandfathered and 

nongrandfatered LTCH satellite facilities 

continue to be subject to § 412.534. 


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However, to the extent a 

nongrandfathered LTCH HwH or LTCH 

satellite facility meets the definition of 

an ‘‘applicable long-term care hospital 

or satellite facility,’’ the revised 

percentage thresholds in section 

114(c)(2)(A) and (B)(i) of MMSEA apply 

for cost reporting periods beginning on 

or after December 29, 2007 and before 

December 29, 2010. 

Specifically, section 114(c)(2)(B)(i) of 

MMSEA of 2007 modifies the 

percentage thresholds specified in 

existing § 412.534(c) from 25 percent to 

50 percent for ‘‘an applicable’’ LTCH 

HwH or LTCH satellite facility 

described below, for 3 years, for cost 

reporting periods beginning on or after 

December 29, 2007. Therefore, payment 

to an applicable LTCH or LTCH satellite 

facility which is co-located with another 

hospital shall not be subject to any 

payment adjustment under § 412.534 if 

no more than 50 percent of the 

hospital’s Medicare discharges during 

the hospital’s fiscal year (other than 

discharges described in § 412.534(c)(3)) 

are admitted from the co-located 

hospital. (We note that § 412.534(c)(3) 

expressly excludes patients who had 

achieved high cost outlier status at the 

discharging co-located hospital.) Section 

114(c)(2)(B)(ii) of MMSEA defines ‘‘an 

applicable long-term care hospital or 

satellite facility’’ as ‘‘* * * a hospital or 

satellite facility that is subject to the 

transition rules under § 412.534(g) 

***’’ The transition rules in 

§ 412.534(g) apply to LTCH HwH and 

satellites that had been paid under the 

LTCH PPS as of October 1, 2004 or a 

LTCH HwH that is paid under the LTCH 

PPS on October 1, 2005 whose 

qualifying period under § 412.23(e) 

began on or before October 1, 2004 (see 

69 FR 49206). Accordingly, an 

applicable LTCH HwH and LTCH 

satellite facility for purposes of section 

114(c)(2)(ii) of the MMSEA is ‘‘* * * a 

long-term care hospital or a satellite 

facility that is paid under the provisions 

of subpart O on October 1, 2004 or of 

a hospital that is paid under the 

provisions of subpart O and whose 

qualifying period under § 412.23(e) 

began on or before October 1, 2004 

***’’ (§ 412.534(g)). (For a more 

detailed explanation, see the FY 2005 

IPPS final rule.) 

Therefore, if a nongrandfathered 

LTCH or LTCH satellite facility does not 

meet the definition of an ‘‘applicable 

long-term care hospital or satellite 

facility’’, the thresholds established 

under existing § 412.534 are not 

modified by section 114(c)(2) of 

MMSEA. 

The revised thresholds under section 

114(c)(2)(A) of MMSEA for ‘‘applicable’’

LTCH HwHs and LTCH satellite 

facilities are as follows: The provision 

raises the existing 50 percent ceiling on 

percentage thresholds for ‘‘applicable’’

LTCH HwHs or LTCH satellite facilities 

that are located either in rural areas or 

that are co-located with an urban single 

or metropolitan statistical area (MSAdominant) hospital (under § 412.534 

(d)(1), (e)(1), and (e)(4) of the 

regulations) to 75 percent. (We note that 

§ 412.534(d)(2) and (e)(3), which 

expressly excludes patients who had 

achieved high cost outlier status at the 

discharging co-located hospital prior to 

admission to the LTCH or LTCH 

satellite from being counted towards the 

threshold has not been modified.) In 

other words, payment to an applicable 

LTCH or satellite facility which is 

located in a rural area or which is colocated with an urban single or MSA 

dominant hospital under 

§ 412.534(d)(1), (e)(1), and (e)(4) is not 

subject to any payment adjustment 

under such section if no more than 75 

percent of the hospital’s Medicare 

discharges (other than discharges 

described in § 412.534(d)(2) or (e)(3)) are 

admitted from a co-located hospital. 

Section 114(c)(2) of MMSEA also raises 

the existing 25 percent patient threshold 

payment adjustment to ‘‘applicable’’

LTCH HwHs and LTCH satellites, 

defined previously, from 25 percent to 

50 percent. Furthermore, we would also 

emphasize that since this modification 

only applies to ‘‘applicable’’ LTCHs and 

LTCH satellites, as defined in paragraph 

section 114(c)(2)(B)(ii) of MMSEA, those 

LTCH HwHs and LTCH satellites that 

were not subject to the transition policy 

set forth at § 412.534(g), will continue to 

have the existing patient percentage 

threshold applied. 

In accordance with the transition 

policy specified at § 412.534(g), for cost 

reporting periods beginning on or after 

October 1, 2007, the percentage 

threshold even for ‘‘applicable’’ LTCH 

HwHs and LTCH satellite facilities 

decreased from 50 percent to 25 percent 

for LTCH HwHs and LTCH satellite 

facilities and the thresholds for rural, 

MSA-dominant, and urban single 

LTCHs and LTCH satellite facilities 

were held at 50 percent (see 

§ 412.534(d) and (e)). Since the 

percentage threshold modifications 

established under section 114(c)(2) of 

MMSEA are implemented for cost 

reporting periods beginning on or after 

December 29, 2007, if an ‘‘applicable’’

LTCH HwH and LTCH satellite had a 

cost reporting period beginning before 

that date (specifically, a cost reporting 

period beginning on or after October 1, 

2007 and before December 29, 2007), the 

facility would be subject to the 25 

percent threshold that was in effect at 

the start of that cost reporting period or 

a 50 percent threshold if the facility was 

located in a rural area or is co-located 

with an MSA-dominant or urban single 

hospital. However, for 3 years, 

beginning with the ‘‘applicable’’ HwH’s 

or LTCH satellite’s first cost reporting 

period beginning on or after December 

29, 2007 the percentage thresholds 

increase to 50 percent and for an 

‘‘applicable’’ LTCH HwHs and satellites 

located in a rural area, or co-located 

with an MSA-dominant, or urban single 

hospital for that 3-year period, the 50 

percent threshold increases to 75 

percent. 

In compliance with section 114(c) of 

MMSEA, we have revised § 412.534 and 

§ 412.536 to implement the 3-year delay 

in the application of the percentage 

patient threshold payment adjustment 

to ‘‘freestanding and grandfathered 

LTCHs’’ and the 3-year revision in the 

percentage payment thresholds 

adjustments for ‘‘applicable’’ LTCHs 

and satellite facilities. We have also 

made technical corrections to 

§ 412.534(b) in order to clarify the 

effective dates of the percentage patient 

threshold policy for discharges from a 

LTCH HwH or from a LTCH satellite 

that were admitted from the hospital 

with which it is co-located. 

B. Moratorium on the Establishment of 

Long-Term Care Hospitals, Long-Term 

Care Hospital Satellite Facilities, and on 

the Increase in Number of Beds in 

Existing Long-Term Care Hospitals or 

Long-Term Care Hospital Satellite 

Facilities 

1. Overview 

Section 114(d) of MMSEA provides a 

3-year moratorium with two distinct 

aspects, one for the establishment of 

new LTCHs and LTCH satellite 

facilities, and the other for the increase 

of hospital beds in existing LTCHs and 

LTCH satellite facilities. Specifically, 

section 114(d)(1)(A) of MMSEA 

provides that the Secretary shall impose 

a moratorium ‘‘subject to paragraph (2), 

on the establishment and classification 

of a long-term care hospital or satellite 

facility, other than an existing long-term 

care hospital or facility.’’ Section 114 

(d)(1)(B) of MMSEA provides that, the 

Secretary shall impose a moratorium 

‘‘subject to paragraph (3), on an increase 

of long-term care hospital beds in 

existing long-term care hospitals or 

satellite facilities.’’

Sections 114(d)(2) and (d)(3) of 

MMSEA provide for exceptions to the 

moratorium imposed by section 

114(d)(1) of MMSEA. It is important to 


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note that the two categories of 

exceptions are mutually exclusive. The 

three exceptions specified in section 

114(d)(2) of MMSEA, discussed below, 

are only applicable to the moratorium 

provision at section 114(d)(1)(A) of 

MMSEA, which applies exclusively to 

the establishment and classification of a 

LTCH or LTCH satellite facility. The 

three exceptions in section 114(d)(2) do 

not apply to the moratorium on an 

increase in beds at section 114(d)(1)(B) 

of MMSEA. Similarly, the exception at 

section 114(d)(3)(A) of MMSEA only 

applies to the moratorium on increases 

in beds at existing LTCHs or LTCH 

satellites facilities, and not to the 

moratorium on the establishment of 

LTCHs and LTCH satellite facilities. 

2. Analysis of Exceptions to the 

Moratorium on the Establishment of 

New LTCHs and LTCH Satellite 

Facilities 

In section 114(d)(1)(A) of MMSEA, 

the statute specifically provides for a 3- 

year moratorium effective on the date of 

enactment of the MMSEA on the 

establishment and classification of a 

long-term care hospital or satellite 

facility, other than an existing LTCH or 

facility. (The term ‘‘existing,’’ with 

respect to a hospital or satellite facility, 

is defined in the legislation at section 

114(d)(4) of MMSEA as ‘‘a hospital or 

satellite facility that received payment 

under the provisions of subpart O of 

part 412 of title 42, Code of Federal 

Regulations, as of the date of the 

enactment of this Act.’’) The MMSEA 

was enacted on December 29, 2007. 

Therefore, the moratorium will be 

effective from December 29, 2007 

through December 28, 2010. Section 

114(d)(2) of MMSEA specifies that the 

moratorium on the establishment and 

classification of a LTCH or LTCH 

satellite facility does not apply to a 

LTCH that, as of December 29, 2007, 

met one of the following three 

exceptions: 

• The LTCH began ‘‘its qualifying 

period for payment as a long-term care 

hospital under section 412.23(e) of title 

42, Code of Federal regulations, on or 

before the date of enactment of this Act’’

(section 114(d)(2)(A)). 

• The LTCH has a binding written 

agreement with an outside, unrelated 

party for the actual construction, 

renovation, lease, or demolition for a 

LTCH and has expended before 

December 29, 2007 at least 10 percent of 

the estimated cost of the project or, if 

less, $2,500,000 (section 114(d)(2)(B)). 

• The LTCH has obtained an 

approved certificate of need in a State 

where one is required on or before 

December 29, 2007 (section 

114(d)(2)(C)). 

In implementing the provisions of 

section 114(d) of MMSEA, we found 

that, in light of the unique nature of 

LTCHs as a category of Medicare 

provider, some of the terminology in the 

provision is internally inconsistent. 

Therefore, we were required to interpret 

the provisions in the way we believe 

reasonably reconciles seemingly 

inconsistent provisions and that results 

in an application of the provisions that 

is logical and workable. We discuss our 

interpretations below. 

Specifically, section 114(d)(1)(A) of 

MMSEA indicates that the moratorium 

on the establishment and classification 

of a LTCH or satellite facility, other than 

an existing LTCH or satellite facility, is 

‘‘subject to paragraph (2).’’ In contrast 

paragraph (2) is titled, ‘‘Exception for 

Certain Long-Term Care Hospitals’’ and 

it begins with ‘‘[t]he moratorium under 

paragraph (1)(A) shall not apply to a 

long-term care hospital that as of the 

date of the enactment of this Act.’’ We 

note that the term ‘‘satellite’’ is omitted 

in paragraph (2) even though satellites 

are entities subject to the moratorium 

provision. Because section 114(d)(1)(A) 

of MMSEA appears to contemplate an 

exception to the moratorium for both 

qualifying LTCHs and qualifying 

satellite facilities, we believe that it is 

appropriate to apply paragraph (2) to 

new LTCH satellite facilities just as it 

applies to LTCHs. Our interpretation of 

the statute is premised on this 

presumption. 

An additional problem with 

paragraph (2) of section 114(d) of 

MMSEA is that a strictly literal reading 

of the statutory language in that 

paragraph presents practical challenges 

for implementation in light of the 

established LTCH classification criteria 

in section 412.23(e). 

Below, we examine the exceptions to 

the moratorium on the establishment 

and classification of a long-term care 

hospital or satellite facility in light of 

the classification criteria for LTCHs at 

§ 412.23(e) and the presumption that the 

provision allows, where practicable in 

limited situations, a new LTCH satellite 

facility to qualify for an exception under 

section 114(d)(2) of MMSEA. The first 

exception in section 114(d)(2)(A) of 

MMSEA applies to ‘‘a long-term care 

hospital that as of the date of the 

enactment of this Act* * * began its 

qualifying period for payment as a longterm care hospital under section 

412.23(e) of title 42, Code of Federal 

Regulations, on or before the date of the 

enactment of this Act.’’ We believe this 

exception regarding the qualifying 

period refers to the period established in 

our regulations at § 412.23(e)(3) during 

which the predecessor hospital is 

collecting LOS data to be used to 

demonstrate that the hospital meets the 

LOS requirements (explained in more 

detail below) to be classified as a LTCH. 

Specifically in order for a hospital to be 

designated as a LTCH, the LTCH 

classification criteria regulations at 

§ 412.23(e) stipulate the following: 

(e) Long-term care hospitals. A long-term 

care hospital must meet the requirements of 

paragraph (e)(1) and (e)(2) of this section and, 

when applicable, the additional requirement 

of § 412.22(e), to be excluded from the 

prospective payment system specified in 

§ 412.1(a)(1) and to be paid under the 

prospective payment system specified in 

§ 412.1(a)(4) and in Subpart O of this part. 

(1) Provider agreements. The hospital must 

have a provider agreement under Part 489 of 

this chapter to participate as a hospital; and 

(2) Average length of stay. (i) The hospital 

must have an average Medicare inpatient 

length of stay of greater than 25 days; * * * 

As provided by § 412.23(e)(1), the 

qualifying period for a ‘‘new’’ or 

‘‘planned’’ LTCH may not begin before 

the facility has obtained a provider 

agreement, under 42 CFR part 489, to 

participate in the Medicare program as 

a hospital. Typically, when a new 

hospital is established, after operating as 

a hospital, such a facility could present 

patient LOS data from a short (6 

months) cost report using data from at 

least 5 months of the 6-month period 

immediately preceding the start of the 

cost reporting period for which the 

hospital is seeking LTCH designation. 

In light of how we view the qualifying 

period under section 412.23(e), we note 

that it is not possible for a LTCH, as of 

the date of enactment of MMSEA, to 

begin its qualifying period as a LTCH. 

Technically, under the LTCH 

classification criteria regulations at 

412.23(e), it is an existing hospital, not 

a LTCH, that has a qualifying period for 

LTCH status. Therefore, we believe that 

the exception specified at section 

114(c)(2)(A) of MMSEA applies to an 

existing hospital that began its 

qualifying period on or before December 

29, 2007 for LTCH status. To qualify for 

the exception to the moratorium, the 

LOS data used to demonstrate that the 

hospital has an average LOS greater than 

25 days must be from its cost reporting 

period that began on or before December 

29, 2007. In addition, we note that the 

exception at section 114(d)(2)(A) of 

MMSEA would not be applicable to 

satellite facilities since there is no 

‘‘qualifying period’’ for the 

establishment of a satellite facility for 

payment as a LTCH under § 412.23(e). 

Next, under section 114(d)(2)(B) of 

MMSEA, an exception to the 


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moratorium is made for a long-term care 

hospital that, as of the date of the 

enactment of the MMSEA (December 29, 

2007), satisfies the two prongs of the 

exception: (1) it has a binding written 

agreement with an outside, unrelated 

party for the actual construction, 

renovation, lease, or demolition for a 

long-term care hospital; and (2) It has 

expended, before the date of enactment 

of this Act, at least 10 percent of the 

estimated cost of the project (or, if less, 

$2,500,000). As drafted, this provision is 

problematic in light of § 412.23(e). For 

example, where a hospital has not even 

been built, but there is a binding written 

agreement for the actual construction of 

a hospital that intends to be classified 

as a LTCH, technically it is not a LTCH 

that is party to the binding written 

agreement. In such a situation, no LTCH 

would yet exist. Prior to the existence of 

a LTCH, a hospital must first be 

established, certified, and complete the 

procedures specified in § 412.23(e) in 

order to qualify as a LTCH, at which 

point the hospital would be classified as 

a LTCH. 

In light of the LTCH classification 

criteria in § 412.23(e), and our 

presumption that new LTCH satellite 

facilities are included in the exceptions 

in section 114(d)(2) of MMSEA, the 

exception in section 114(d)(2)(B) of 

MMSEA applies in the following three 

circumstances: (1) As of the date of 

enactment of the MMSEA, an existing 

hospital (that is, one that was certified 

as a hospital as of December 29, 2007) 

that will become an LTCH has a binding 

written agreement with an outside 

unrelated party for the actual 

construction, renovation, lease, or 

demolition for converting the hospital to 

a LTCH and has expended, before 

December 29, 2007, at least 10 percent 

of the estimated cost of the project (or, 

if less, $2,500,000); (2) as of the date of 

enactment of the MMSEA, an entity that 

will develop a hospital that will 

ultimately become a LTCH has a 

binding written agreement with an 

outside unrelated party for the actual 

construction, renovation, lease, or 

demolition for a hospital and that entity 

has expended, before December 29, 

2007, at least 10 percent of the 

estimated cost of the project (or, if less, 

$2,500,000); and (3) an existing LTCH, 

as of December 29, 2007, has a binding 

written agreement with an outside 

unrelated party for the actual 

construction, renovation, lease or 

demolition for a new LTCH satellite 

facility and the LTCH has expended 

before December 29, 2007 at least 10 

percent of the estimated cost of the 

project (or, if less, $2,500,000). 

With regard to the first prong, we 

believe that the use of the term ‘‘actual’’

in the context of the ‘‘actual 

construction, renovation, lease, or 

demolition,’’ indicates that the the 

provision focuses only on the specific 

accomplishments cited in the statute 

and does not include those that are 

contemplated or have not yet been 

executed. Although we are aware that a 

hospital or entity may enter into binding 

written agreements regarding services 

and items (for example, feasibility 

studies or land purchase) and incur 

costs for those services and items prior 

to actual construction, renovation, lease 

or demolition, we believe those services 

or items are not included in the statute 

as a basis for the exception. 

With respect to the second prong, the 

statute specifies that the hospital or 

entity must have expended before 

December 29, 2007, at least 10 percent 

of the estimated cost of the project (or, 

if less, $2.5 million). By ‘‘cost of the 

project,’’ we believe the statute refers to 

the activities enumerated in the first 

prong: ‘‘The actual construction, 

renovation, lease, or demolition for a 

long-term care hospital.’’ The statute 

requires that the hospital or entity has 

spent the amount specified in the 

statute on the actual construction, 

renovation, lease, or demolition for the 

contemplated LTCH. Furthermore, 

because the statute uses the phrase ‘‘has 

expended’’ we believe that the statute 

requires that hospital or entity would 

have actually transferred funds as 

payment for the project as opposed to 

merely obligating capital and posting 

the cost of the project on its books as of 

December 29, 2007. We believe that the 

provision addressed the concept of 

‘‘obligate’’ in the first prong of the test 

where the statute specifies ‘‘a binding 

written agreement * * * for the actual 

construction, renovation, lease, or 

demolition of the long-term care 

hospital. . .’’ and there is no reason to 

believe that the second prong of the test, 

which requires the ‘‘expenditure’’ of 10 

percent of the project or if less, 

$2,500,000, was intended as a 

redundancy. The ability to post the 

expense on the hospital’s or entity’s 

books could be satisfied by merely 

having a binding written agreement 

under the first prong of section 

114(d)(2)(B) of MMSEA. The fact that a 

second requirement is included that 

involves an expenditure indicates that 

an additional threshold must be met. 

Finally, section 114(d)(2)(C) of 

MMSEA provides an exception for a 

long-term care hospital that, as of the 

date of the enactment of the Act, ‘‘has 

obtained an approved certificate of need 

in a State where one is required on or 

before the date of the enactment of this 

Act.’’ We do not believe that the 

provision limits the exception to only 

an existing long-term care hospital that 

has obtained an approved certificate of 

need to create a new satellite of the 

LTCH. We note that in many instances, 

prior to being classified as a LTCH, a 

hospital is to be built by an entity with 

the express intention of making it into 

a LTCH as soon as possible. In those 

instances, it is not uncommon for the 

entity to obtain a certificate of need 

from the State prior to the development 

of the hospital. 

We believe that the certificate of need 

exception applies to a hospital or entity 

that was actively engaged in developing 

a LTCH, as evidenced by the fact that 

either an entity that wanted to create a 

LTCH but did not exist as a hospital as 

of December 29, 2007, had obtained a 

certificate of need for a hospital by the 

date of enactment, or an existing 

hospital had obtained a certificate of 

need to convert the hospital into a new 

LTCH by that date. However, this 

exception would not apply to a hospital 

that was already in existence prior to 

the date of enactment and that had 

previously obtained an approved 

certificate of need for a hospital (other 

than a LTCH) on or before December 29, 

2007. The fact that a hospital may have 

had a certificate of need issued to it 

years before December 29, 2007, to 

operate a hospital (other than a LTCH) 

would not be a reason to grant it an 

exception, unless that certificate of need 

was specifically for a LTCH. Since the 

certificate of need process is controlled 

at the State level, in determining 

whether the hospital or entity has 

obtained an approved certificate of need 

on or before December 29, 2007, we will 

look to the State for that determination. 

2. Analysis of Exception to the 

Moratorium on the Increase in Number 

of Long-Term Care Hospital Beds in 

Existing Long-Term Care Hospitals and 

Satellite Facilities 

In section 114(d)(1)(B) of MMSEA, a 

moratorium is also imposed on existing 

LTCHs or LTCH satellite facilities for 

the 3-year period beginning December 

29, 2007 through December 28, 2010. 

The moratorium is on an increase of 

LTCH beds in existing LTCHs or LTCH 

satellite facilities. Therefore, during the 

3-year moratorium, an existing LTCH or 

LTCH satellite facility may not increase 

the number of beds in excess of the 

number of Medicare-certified beds at the 

hospital on December 29, 2007. We are 

using the number of beds certified by 

Medicare, because this number can be 

verified by CMS and its contractors and 

this is currently referenced in our 


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regulations at § 412.22(h)(2)(i), and 

similarly referenced in § 412.22(f)(1). 

The moratorium on an increase of beds 

is subject to the exception at section 

114(d)(3) of MMSEA. Specifically, 

section 114(d)(3) of the MMSEA states 

that the moratorium on an increase in 

beds shall not apply if an existing LTCH 

or LTCH satellite facility is ‘‘located in 

a State where there is only one other 

long-term care hospital; and requests an 

increase in beds following the closure or 

the decrease in the number of beds of 

another long-term care hospital in the 

State.’’ Section 114 (d)(3)(B) of the 

MMSEA also provides that the 

exception to the moratorium on the 

increase in bed numbers for existing 

LTCHs or LTCH satellite facilities does 

not apply to the limit on the number of 

beds in ‘‘grandfathered’’ LTCH HwHs as 

specified at § 412.22(f) and LTCH 

satellite facilities as specified at 

§ 412.22(h)(3). Under § 412.22(f) and 

§ 412.22(h)(3), respectively, 

‘‘grandfathered’’ LTCH HwHs and LTCH 

satellite facilities (that is, HwHs that 

were in existence on or before 

September 30, 1995 and LTCH satellite 

facilities that were in existence on or 

before September 30, 1999 and that 

meet certain specified conditions) are 

exempted from compliance with 

‘‘separateness and control’’ policies as 

long as they do not increase their bed 

numbers. (See the FY 2007 IPPS final 

rule (71 FR 48106 through 48115).) 

Therefore, even if a ‘‘grandfathered’’

LTCH HwH or LTCH satellite facility is 

located in a State where there is only 

one other LTCH and it requests an 

increase in beds following the closure or 

the decrease in the number of beds of 

another long-term care hospital in the 

State, it would not be able to maintain 

its grandfathered status if it would 

increase the number of beds at the 

LTCH under this exception. 

Decisions regarding whether a 

specific situation will be considered to 

meet the exceptions to the 

establishment and classification of new 

LTCHs or new LTCH satellite facilities 

or the exceptions on increasing the 

number of beds in existing LTCHs or 

LTCH satellite facilities will be 

determined on a case-by-case basis by 

the applicant’s FI/MAC and the CMS 

Regional Office (RO). 

In compliance with section 114(d) of 

MMSEA, we are revising our regulations 

at § 412.23 to include a description of 

the moratorium on the establishment of 

new LTCHs and LTCH satellites and the 

moratorium on increasing the number of 

beds in existing LTCHs and existing 

LTCH satellites. Additionally, in 

§ 412.23(e)(5) we have established a 

definition of a freestanding LTCH. 

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. 553(b) of the 

Administrative Procedure Act (APA). In 

addition, section 1871(b)(1) of the Act 

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) of the Act 

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. 

Several provisions of the MMSEA 

changed existing LTCH PPS policies (it 

affected the adjustment policies in 

§ 412.534 and § 412.536; and placed a 

moratorium on new LTCHs and LTCH 

satellite facilities, as well as a 

moratorium on bed increases in existing 

LTCHs and LTCH satellite facilities). 

These changes were required to be 

implemented: (1) Beginning December 

29, 2007 (section 114(d) of MMSEA); or 

(2) beginning with cost reporting 

periods beginning on or after December 

29, 2007 (section 114(c)(1) and (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. We also note that we 

established a definition of ‘‘freestanding 

LTCH’’ at § 412.23(e)(5) consistent with 

our application of § 412.534 and 

§ 412.536 in order to ensure consistent 

implementation of section 114(c)(1) of 

the MMSEA. 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 § 412.534 

and § 412.536 (including the addition of 

the definition of freestanding LTCH at 

§ 412.23(e)(5)) as well as the moratorium 

on new LTCHs and LTCH satellite 

facilities, and the moratorium on 

increasing beds at an existing LTCH and 

an existing satellite facility of a LTCH. 

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 

nondiscretionary provisions of the 

MMSEA with respect to a moratorium 

on the establishment of new long-term 

care hospitals and long-term care 

satellite facilities and on the increase of 

long-term care hospital beds in existing 

LTCHs or LTCH satellite facilities, and 

payment policies pertaining to § 412.534 

and § 412.536. 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. 

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 either 

contemporaneously with the enactment 

of the MMSEA on December 29, 2007 or 

beginning with cost reporting periods 

beginning on or after December 29, 2007 

as applicable. Therefore, under the 

authority of section 1871(e)(1)(A)(i) of 


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29708 Federal Register / Vol. 73, No. 100 / Thursday, May 22, 2008 / Rules and Regulations 

the Act, we are making the provisions 

of this interim final rule with comment 

period that implement sections 114(d) 

of MMSEA retroactive to December 29, 

2007. The statute also requires that 

section 114(c)(1) and (2) be 

implemented beginning with cost 

reporting periods beginning on or after 

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)(1) 

and (2) effective for cost reporting 

periods beginning on or after 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 or 

for cost reporting periods beginning on 

or after December 29, 2007, as indicated 

above. Therefore, under the authority of 

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

are making these changes effective 

under the timeframe 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 

effective date. 

V. Collection of Information 

Requirements 

This document does not impose 

information collection and 

recordkeeping requirements. 

Consequently, it need not be reviewed 

by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995. 

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). 

The enactment of section 114(c) of 

MMSEA requires several modifications 

to the regulations at § 412.534 and 

§ 412.536, which, as discussed in 

section II.A of this interim final rule 

with comment period, address the 

percentage thresholds between referring 

hospitals (typically acute care hospitals) 

and LTCHs and satellites of LTCHs. We 

estimate that the implementation of 

MMSEA provisions pertaining to 

§ 412.534 and § 412.536 will result in a 

projected increase of approximately $30 

million in estimated aggregate LTCH 

PPS payments for RY 2008. We note that 

at this time, we are unable to quantify 

the impact of the provision at section 

114(d) of MMSEA which provides for a 

moratorium on the establishment of 

LTCHs, LTCH satellite facilities, and on 

the increase of LTCH beds in existing 

LTCHs or satellite facilities for a period 

of 3 years. We are unable to provide an 

estimate of the impact of the 

moratorium provisions in section II.B. of 

this interim final rule with comment 

period because we have no way of 

determining how many LTCHs would 

have opened in the absence of the 

moratorium, nor do we have sufficient 

information at this time to determine 

how many new LTCHs will meet the 

exceptions criteria provided for in the 

statute. Because the 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 interim final rule with comment 

period will 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. 


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Federal Register / Vol. 73, No. 100 / Thursday, May 22, 2008 / Rules and Regulations 29709 

■ 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. Section 412.23 is amended by 

adding new paragraphs (e)(5) through 

(e)(7) to read as follows: 

§ 412.23 Excluded hospitals: 

Classifications. 

* * * * * 

(e) * * * 

(5) Freestanding long-term care 

hospital. For purposes of this paragraph, 

a freestanding long-term care hospital 

means a hospital that meets the 

requirements of paragraph (e)(1) and (2) 

of this section and all of the following: 

(i) Does not occupy space in a 

building also used by another hospital. 

(ii) Does not occupy space in one or 

more separate or entire buildings 

located on the same campus as 

buildings used by another hospital. 

(iii) Is not part of a hospital that 

provides inpatient services in a building 

also used by another hospital. 

(6) Moratorium on the establishment 

of new long-term care hospitals and 

long-term care hospital satellite 

facilities. 

(i) General rule. Except as specified in 

paragraph (e)(6)(ii) of this paragraph, for 

the period beginning December 29, 2007 

and ending December 28, 2010, a 

moratorium applies to the establishment 

and classification of a long-term care 

hospital or long-term care hospital 

satellite facility as described in 

§ 412.23(e). 

(ii) Exception. The moratorium 

specified in paragraph (e)(6)(i) of this 

section is not applicable to the 

establishment and classification of a 

long-term care hospital that meets the 

requirements in paragraph (e) of this 

section or a long-term care hospital 

satellite facility that meets the 

requirements in § 412.22(h), if the longterm care hospital met one of the 

following criteria on or before December 

29, 2007: 

(A) Began its qualifying period for 

payment in accordance with paragraph 

(e) of this section. 

(B)(1) Has a binding written 

agreement with an outside, unrelated 

party for the actual construction, 

renovation, lease or demolition for a 

long-term care hospital; and 

(2) Has expended, before December 

29, 2007, at least 10 percent (or, if less, 

$2.5 million) of the estimated cost of the 

project specified in paragraph (ii)(B)(1) 

of this paragraph. 

(C) Had obtained an approved 

certificate of need from the State, when 

required by State law. 

(7) Moratorium on increasing the 

number of beds in existing long-term 

care hospitals and existing long-term 

care hospital satellite facilities. 

(i) For purposes of this paragraph, an 

existing long-term care hospital or longterm care hospital satellite facility 

means a long-term care hospital that 

meets the requirements of paragraph (e) 

of this section or long-term care hospital 

satellite facility that meets the 

requirements of § 412.22(h) of this part 

and received payment under the 

provisions of subpart O of this part on 

or before December 29, 2007. 

(ii) Effective for the period beginning 

December 29, 2007 and ending 

December 28, 2010—

(A) Except as specified in paragraph 

(e)(7)(ii)(B) of this section, the number 

of Medicare-certified beds in an existing 

long-term care hospital or an existing 

long-term care hospital satellite facility 

as defined in paragraph (e)(7)(i) of this 

section must not be increased beyond 

the number of Medicare-certified beds 

on December 29, 2007. 

(B) Except as specified in paragraph 

(e)(7)(ii)(C) of this section, the 

moratorium specified in paragraph 

(e)(7)(ii)(A) of this section is not 

applicable to an existing long-term care 

hospital or existing long-term care 

hospital satellite facility as defined in 

paragraph (e)(7)(i) of this section that 

meets both of the following 

requirements: 

(1) Is located in a State where there is 

only one other long-term care hospital 

that meets the criteria specified in 

§ 412.23(e) of this subpart. 

(2) Requests an increase in the 

number of Medicare-certified beds after 

the closure or decrease in the number of 

Medicare-certified beds of another longterm care hospital in the State. 

(C) The exception specified in 

paragraph (e)(7)(ii)(B) of this section 

does not effect the limitation on 

increasing beds under § 412.22(f) and 

§ 412.22(h)(3) of subpart. 

* * * * * 

■ 4. Section 412.534 is amended by 

revising paragraphs (b) through (e), and 

(h) to read as follows. 

§ 412.534 Special payment provisions for 

long-term care hospitals within hospitals 

and satellites of long-term care hospitals. 

* * * * * 

(b) Patients admitted from hospitals 

not located in the same building or on 

the same campus as the long-term care 

hospital or long-term care hospital 

satellite. 

(1) For cost reporting periods 

beginning on or after October 1, 2004 

and before July 1, 2007. Payments to the 

long-term care hospital as described in 

§ 412.23(e)(2)(i) meeting the criteria in 

§ 412.22(e)(2) for patients admitted to 

the long-term care hospital or to a longterm care hospital satellite facility as 

described in § 412.23(e)(2)(i) that meets 

the criteria of § 412.22(h) from another 

hospital that is not the co-located 

hospital are made under the rules in this 

subpart with no adjustment under this 

section. 

(2) For cost reporting periods 

beginning on or after July 1, 2007. For 

cost reporting periods beginning on or 

after July 1, 2007, payments to one of 

the following long-term care hospitals or 

long-term care hospital satellites are 

subject to the provisions of § 412.536 of 

this subpart: 

(i) A long-term care hospital as 

described in § 412.23(e)(2)(i) of this part 

that meets the criteria of § 412.22(e) of 

this part. 

(ii) Except as provided in paragraph 

(h) of this section, a long-term care 

hospital as described in § 412.23(e)(2)(i) 

of this part that meets the criteria of 

§ 412.22(f) of this part. 

(iii) A long-term care hospital satellite 

facility as described in § 412.23(e)(2)(i) 

of this part that meets the criteria in 

§ 412.22(h) or § 412.22(h)(3)(i) of this 

part. 

(c) Patients admitted from the 

hospital located in the same building or 

on the same campus as the long-term 

care hospital or satellite facility. Except 

for a long-term care hospital or a longterm care hospital satellite facility that 

meets the requirements of paragraphs 

(d) or (e) of this section, payments to the 

long-term care hospital for patients 

admitted to it or to its long-term care 

hospital satellite facility from the colocated hospital are made under either 

of the following: 

(1) For cost reporting periods 

beginning on or after October 1, 2004 

and before December 29, 2007 and for 

cost reporting periods beginning on or 

after December 29, 2010. 

(i) Except as provided in paragraphs 

(g) and (h) of this section, for any cost 

reporting period beginning on or after 

October 1, 2004 and before December 

29, 2007 and for cost reporting periods 

beginning on or after December 29, 2010 


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in which the long-term care hospital or 

its satellite facility has a discharged 

Medicare inpatient population of whom 

no more than 25 percent were admitted 

to the hospital or its satellite facility 

from the co-located hospital, payments 

are made under the rules at §§ 412.500 

through 412.541 in this subpart with no 

adjustment under this section. 

(ii) Except as provided in paragraph 

(g) or (h) of this section, for any cost 

reporting period beginning on or after 

October 1, 2004 and before December 

29, 2007 and for cost reporting periods 

beginning on or after December 29, 2010 

in which the long-term care hospital or 

satellite facility has a discharged 

Medicare inpatient population of whom 

more than 25 percent were admitted to 

the hospital or satellite facility from the 

co-located hospital, payments for the 

patients who are admitted from the colocated hospital and who cause the 

long-term care hospital or satellite 

facility to exceed the 25 percent 

threshold for discharged patients who 

have been admitted from the co-located 

hospital are the lesser of the amount 

otherwise payable under this subpart or 

the amount payable under this subpart 

that is equivalent, as set forth in 

paragraph (f) of this section, to the 

amount that would be determined under 

the rules at § 412.1(a). Payments for the 

remainder of the long-term care 

hospital’s or satellite facility’s patients 

are made under the rules in this subpart 

at §§ 412.500 through 412.541 with no 

adjustment under this section. 

(iii) In determining the percentage of 

patients admitted to the long-term care 

hospital or its satellite from the colocated hospital under paragraphs 

(c)(1)(i) and (c)(1)(ii) of this section, 

patients on whose behalf an outlier 

payment was made to the co-located 

hospital are not counted towards the 25 

percent threshold. 

(2) For cost reporting periods 

beginning on or after December 29, 2007 

and before December 29, 2010. 

(i) Except for a long-term care hospital 

and long-term care hospital satellite 

facility subject to paragraphs (g) or (h) 

of this section, payments are determined 

using the methodology specified in 

paragraph (c)(1) of this section. 

(ii) Payments for a long-term care 

hospital and long-term care hospital 

satellite facility subject to paragraph (g) 

of this section are determined using the 

methodology specified in paragraph 

(c)(1) of this section except that 25 

percent is substituted with 50 percent. 

(d) Special treatment of rural 

hospitals. 

(1) For cost reporting periods 

beginning on or after October 1, 2004 

and before December 29, 2007 and for 

cost reporting periods beginning on or 

after December 29, 2010. 

(i) Subject to paragraphs (g) and (h) of 

this section, in the case of a long-term 

care hospital or satellite facility that is 

located in a rural area as defined in 

§ 412.503 and is co-located with another 

hospital for any cost reporting period 

beginning on or after October 1, 2004 

and before December 29, 2007 and for 

any cost reporting period beginning on 

or after December 29, 2010 in which the 

long-term care hospital or long-term 

care satellite facility has a discharged 

Medicare inpatient population of whom 

more than 50 percent were admitted to 

the long-term care hospital or satellite 

facility from the co-located hospital, 

payments for the patients who are 

admitted from the co-located hospital 

and who cause the long-term care 

hospital or satellite facility to exceed the 

50 percent threshold for discharged 

patients who were admitted from the colocated hospital are the lesser of the 

amount otherwise payable under this 

subpart or the amount payable under 

this subpart that is equivalent, as set 

forth in paragraph (f) of this section, to 

the amount that were otherwise payable 

under § 412.1(a). Payments for the 

remainder of the long-term care 

hospital’s or long-term care hospital 

satellite facility’s patients are made 

under the rules in this subpart at 

§§ 412.500 through 412.541 with no 

adjustment under this section. 

(ii) In determining the percentage of 

patients admitted from the co-located 

hospital under paragraph (d)(1)(i) of this 

section, patients on whose behalf outlier 

payment was made at the co-located 

hospital are not counted toward the 50 

percent threshold. 

(2) For cost reporting periods 

beginning on or after December 29, 2007 

and before December 29, 2010. 

(i) Except for long-term care hospitals 

and long-term care hospital satellite 

facilities subject to paragraphs (g) or (h) 

of this section, payments are determined 

using the methodology specified in 

paragraph (d)(1) of this paragraph. 

(ii) Payments for long-term care 

hospitals and long-term care hospital 

satellite facilities subject to paragraph 

(g) of this section are determined using 

the methodology specified in paragraph 

(d)(1) of this section except that 50 

percent is substituted with 75 percent. 

(e) Special treatment of urban single 

or MSA-dominant hospitals. 

(1) For cost reporting periods 

beginning on or after October 1, 2004 

and before December 29, 2007 and for 

cost reporting periods beginning on or 

after December 29, 2010. 

(i) Subject to paragraphs (g) and (h) of 

this section, in the case of a long-term 

care hospital or a long-term care 

hospital satellite facility that is colocated with the only other hospital in 

the MSA or with a MSA-dominant 

hospital as defined in paragraph 

(e)(1)(iv) of this paragraph, for any cost 

reporting period beginning on or after 

October 1, 2004 and before December 

29, 2007 and for any cost reporting 

periods beginning on or after December 

29, 2010 in which the long-term care 

hospital or long-term care hospital 

satellite facility has a discharged 

Medicare inpatient population of whom 

more than the percentage calculated 

under paragraph (e)(1)(ii) of this 

paragraph were admitted to the hospital 

from the co-located hospital, payments 

for the patients who are admitted from 

the co-located hospital and who cause 

the long-term care hospital to exceed the 

applicable threshold for discharged 

patients who have been admitted from 

the co-located hospital are the lesser of 

the amount otherwise payable under 

this subpart or the amount under this 

subpart that is equivalent, as set forth in 

paragraph (f) of this section, to the 

amount that otherwise would be 

determined under § 412.1(a). Payments 

for the remainder of the long-term care 

hospital’s or satellite facility’s patients 

are made under the rules in this subpart 

with no adjustment under this section. 

(ii) For purposes of paragraph (e)(1)(i) 

of this paragraph, the percentage used is 

the percentage of total Medicare 

discharges in the Metropolitan 

Statistical Area in which the hospital is 

located that are from the co-located 

hospital for the cost reporting period for 

which the adjustment was made, but in 

no case is less than 25 percent or more 

than 50 percent. 

(iii) In determining the percentage of 

patients admitted from the co-located 

hospital under paragraph (e)(1)(i) of this 

section, patients on whose behalf outlier 

payment was made at the co-located 

hospital are not counted toward the 

applicable threshold. 

(iv) For purposes of this paragraph, an 

‘‘MSA-dominant hospital’’ is a hospital 

that has discharged more than 25 

percent of the total hospital Medicare 

discharges in the MSA in which the 

hospital is located. 

(2) For cost reporting periods 

beginning on or after December 29, 2007 

and before December 29, 2010. 

(i) Except for long-term care hospitals 

and long-term care hospital satellite 

facilities subject to paragraphs (g) or (h) 

of this section, payments are determined 

using the methodology specified in 

paragraph (e)(1) of this section. 

(ii) Payments for long-term care 

hospitals and long-term care hospital 

satellite facilities subject to paragraph 


rfrederick on PROD1PC67 with RULES
Federal Register / Vol. 73, No. 100 / Thursday, May 22, 2008 / Rules and Regulations 29711 

(g) of this section are determined using 

the methodology specified in paragraph 

(e)(1) of this section except that 75 

percent is substituted for 50 percent. 

* * * * * 

(h) Effective date of policies in this 

section for certain co-located LTCH 

hospitals and satellites of LTCHs. The 

policies set forth in this section apply to 

Medicare patient discharges that were 

admitted from a hospital located in the 

same building or on the same campus as 

a long-term care hospital described in 

§ 412.23(e)(2)(i) that meets the criteria in 

§ 412.22(f) and a satellite facility of a 

long-term care hospital as described at 

§ 412.22(h)(3)(i) for discharges occurring 

in cost reporting periods beginning on 

or after July 1, 2007. 

(1) Except as specified in paragraph 

(h)(4) of this section, in the case of a 

long-term care hospital or long-term 

care hospital satellite facility that is 

described under paragraph (h) of this 

section, the thresholds applied at 

paragraphs (c), (d), and (e) of this 

section are not less than the following 

percentages: 

(i) For cost reporting periods 

beginning on or after July 1, 2007 and 

before July 1, 2008, the lesser of 75 

percent of the total number of Medicare 

discharges that were admitted to the 

long-term care hospital or long-term 

care hospital satellite facility from its 

co-located hospital during the cost 

reporting period or the percentage of 

Medicare discharges that had been 

admitted to the long-term care hospital 

or satellite from that co-located hospital 

during the long-term care hospital’s or 

satellite’s RY 2005 cost reporting period. 

(ii) For cost reporting periods 

beginning on or after July 1, 2008 and 

before July 1, 2009, the lesser of 50 

percent of the total number of Medicare 

discharges that were admitted to the 

long-term care hospital or the long-term 

care hospital satellite facility from its 

co-located hospital or the percentage of 

Medicare discharges that had been 

admitted from that co-located hospital 

during the long-term care hospital’s or 

satellite’s RY 2005 cost reporting period. 

(iii) For cost reporting periods 

beginning on or after July 1, 2009, 25 

percent of the total number of Medicare 

discharges that were admitted to the 

long-term care hospital or satellite from 

its co-located hospital during the cost 

reporting period. 

(2) In determining the percentage of 

Medicare discharges admitted from the 

co-located hospital under this 

paragraph, patients on whose behalf a 

Medicare high cost outlier payment was 

made at the co-located referring hospital 

are not counted toward this threshold. 

(3) Except as specified in paragraph 

(h)(4) of this section, for cost reporting 

periods beginning on or after July 1, 

2007, payments to long term care 

hospitals described in § 412.23(e)(2)(i) 

that meet the criteria in § 412.22(f) and 

satellite facilities of long-term care 

hospitals described at § 412.22(h)(3)(i) 

are subject to the provisions of § 412.536 

for discharges of Medicare patients who 

are admitted from a hospital not located 

in the same building or on the same 

campus as the LTCH or LTCH satellite 

facility. 

(4) For a long-term care hospital 

described in § 412.23(e)(2)(i) that meets 

the criteria in § 412.22(f), the policies 

set forth in this paragraph and in 

§ 412.536 of this part do not apply for 

discharges occurring in cost reporting 

periods beginning on or after December 

29, 2007 and before December 29, 2010. 

■ 5. Section 412.536 is amended by 

revising paragraph (a) to read as follows: 

§ 412.536 Special payment provisions for 

long-term care hospitals and satellites of 

long-term care hospitals that discharged 

Medicare patients admitted from a hospital 

not located in the same building or on the 

same campus as the long-term care 

hospital or satellite of the long-term care 

hospital. 

(a) Scope. (1) Except as specified in 

paragraph (a)(2) of this section, for cost 

reporting periods beginning on or after 

July 1, 2007, the policies set forth in this 

section apply to discharges from the 

following: 

(i) Long-term care hospitals as 

described in § 412.23(e)(2)(i) that meet 

the criteria in § 412.22(e). 

(ii) Long-term care hospitals as 

described in § 412.23(e)(2)(i) and that 

meet the criteria in § 412.22(f). 

(iii) Long-term care hospital satellite 

facilities as described in § 412.23(e)(2)(i) 

and that meet the criteria in § 412.22(h). 

(iv) Long-term care hospitals as 

described in § 412.23(e)(5). 

(2) For cost reporting periods 

beginning on or after December 29, 2007 

and before December 29, 2010, the 

policies set forth in this section are not 

applicable to discharges from a longterm care hospital described in 

§ 412.23(e)(5) of this part or described in 

§ 412.23(e)(2)(i) of this part and that 

meet the criteria specified in § 412.22(f) 

of this part. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: May 8, 2008. 

Kerry Weems, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: May 15, 2008. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. 08–1285 Filed 5–16–08; 4:00 pm] 

BILLING CODE 4120–01–P 

COMMISSION OF FINE ARTS 

45 CFR Part 2102 

Procedures and Policies 

AGENCY: The Commission of Fine Arts. 

ACTION: Final rule. 

SUMMARY: This document amends the 

procedures and policies governing the 

administration of the U.S. Commission 

of Fine Arts. It serves to modify the time 

limit on a recommendation for concept 

approval for projects submitted to the 

Commission under the Old Georgetown 

Act and the Shipstead-Luce Act in order 

to address more consistently the 

requirements and procedures of the 

District of Columbia government. 

DATES: Effective June 16, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Thomas Luebke, Secretary, (202) 504–

2200. 

SUPPLEMENTARY INFORMATION: As 

established by Congress in 1910, the 

Commission of Fine Arts is a small 

independent advisory body made up of 

seven Presidentially appointed ‘‘well 

qualified judges of the arts’’ whose 

primary role is architectural review of 

designs for buildings, parks, monuments 

and memorials erected by the Federal or 

District of Columbia governments in 

Washington, DC. In addition to 

architectural review, the Commission 

considers and advises on the designs for 

coins, medals, and U.S. memorials on 

foreign soil. The Commission also 

advises the District of Columbia 

government on private building projects 

within the Georgetown Historic District, 

the Rock Creek Park perimeter, and the 

Monumental Core area. The 

Commission advises Congress, the 

President, Federal agencies, and the 

District of Columbia government on the 

general subjects of design, historic 

preservation, and on orderly planning 

on matters within its jurisdiction. 

Specific items this document amends 

clarify the procedure. Therefore, as 

these changes clarify established 

procedures and are minor in nature, the 

Commission determines that notice and 

comment are unnecessary and that, in 

accordance with 5 U.S.C. 553(b)(B), 


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