26788 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 412 

[CMS–1393–F and CMS–1199–F] 

RINs 0938–AO94 and 0938–AN87 

Medicare Program; Prospective 

Payment System for Long-Term Care 

Hospitals RY 2009: Annual Payment 

Rate Updates, Policy Changes, and 

Clarifications; and Electronic 

Submission of Cost Reports: Revision 

to Effective Date of Cost Reporting 

Period 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule updates the 

annual payment rates for the Medicare 

prospective payment system (PPS) for 

inpatient hospital services provided by 

long-term care hospitals (LTCHs). We 

are also consolidating the annual July 1 

update for payment rates and the 

October 1 update for Medicare severity 

long-term care diagnosis-related group 

(MS–LTC–DRG) weights to a single 

rulemaking cycle that coincides with 

the Federal fiscal year (FFY). In 

addition, we are clarifying various 

policy issues. 

This final rule also finalizes the 

provisions from the Electronic 

Submission of Cost Reports: Revision to 

Effective Date of Cost Reporting Period 

interim final rule with comment period 

that was published in the May 27, 2005 

Federal Register which revises the 

existing effective date by which all 

organ procurement organizations 

(OPOs), rural health clinics (RHCs), 

Federally qualified health centers 

(FQHCs), and community mental health 

centers (CMHCs) are required to submit 

their Medicare cost reports in a 

standardized electronic format from cost 

reporting periods ending on or after 

December 31, 2004 to cost reporting 

periods ending on or after March 31, 

2005. This final rule does not affect the 

current cost reporting requirement for 

hospices and end-stage renal disease 

(ESRD) facilities. Hospices and ESRD 

facilities are required to continue to 

submit cost reports under the Medicare 

regulations in a standardized electronic 

format for cost reporting periods ending 

on or after December 31, 2004. 

DATES: The provisions of this final rule 

are effective on July 8, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Tzvi Hefter, (410) 786–4487 (General 

information). 

Judy Richter, (410) 786–2590 (General 

information, payment adjustments for 

special cases, onsite discharges and 

readmissions, interrupted stays, colocated providers, and short-stay 

outliers). 

Michele Hudson, (410) 786–5490 

(Calculation of the payment rates, 

MS–LTC–DRGs, relative weights and 

case-mix index, market basket, wage 

index, budget neutrality, and other 

payment adjustments). 

Ann Fagan, (410) 786–5662 (Patient 

classification system). 

Linda McKenna, (410) 786–4537 

(Payment adjustments and interrupted 

stay). 

Elizabeth Truong, (410) 786–6005 

(Federal rate update, budget 

neutrality, other adjustments, and 

calculation of the payment rates). 

Michael Treitel, (410) 786–4552 (High 

cost outliers and cost-to-charge 

ratios). 

Darryl E. Simms, (410) 786–4524 

(Electronic Submission of Cost 

Reports: Revision to Effective Date of 

Cost Reporting Period). 

Table of Contents 

I. Background of the LTCH PPS 

A. Legislative and Regulatory Authority 

B. Criteria for Classification as a LTCH 

1. Classification as a LTCH 

2. Hospitals Excluded from the LTCH PPS 

C. Transition Period for Implementation of 

the LTCH PPS 

D. Limitation on Charges to Beneficiaries 

E. Administrative Simplification 

Compliance Act (ASCA) and Health 

Insurance Portability and Accountability 

Act (HIPAA) Compliance 

II. Summary of the Provisions of This Final 

Rule 

III. Medicare Severity Long-Term Care 

Diagnosis-Related Group (LTC–DRG) 

Classifications and Relative Weights 

A. Background 

B. Patient Classifications Into MS–LTC– 

DRGs 

C. Organization of MS–LTC–DRGs 

D. Method for Updating the MS–LTC–DRG 

Classifications and Relative Weights 

1. Background 

2. FY 2008 MS–LTC–DRG Relative Weights 

IV. Changes to the LTCH PPS Payment Rates 

and other Changes for the 2009 LTCH 

PPS Rate Year 

A. Overview of the Development of the 

Payment Rates 

B. Consolidation of the Annual Updates for 

Payment and MS–LTC–DRG Relative 

Weights to One Annual Update 

C. LTCH PPS Market Basket 

1. Overview of the Rehabilitation, 

Psychiatric and Long-Term Care (RPL) 

Market Basket 

2. Market Basket Estimate for the 2009 

LTCH PPS Rate Year 

D. One-time Prospective Adjustment to the 

Standard Federal Rate 

E. Standard Federal Rate for the 2009 

LTCH PPS Rate Year 

1. Background 

2. Standard Federal Rate for the 2009 

LTCH PPS Rate Year 

F. Calculation of LTCH Prospective 

Payments for the 2009 LTCH PPS Rate 

Year 

1. Adjustment for Area Wage Levels 

a. Background 

b. Updates to the Geographic 

Classifications/Labor Market Area 

Definitions 

(1) Background 

(2) Update to the CBSA-Based Labor 

Market Area Definitions 

(3) Clarification of New England Deemed 

Counties 

(4) Codification of the Definitions of Urban 

and Rural Under 42 CFR Part 412, 

Subpart O 

c. Labor-Related Share 

d. Wage Index Data 

2. Adjustment for Cost-of-Living in Alaska 

and Hawaii 

3. Adjustment for High-Cost Outliers 

(HCOs) 

a. Background 

b. Cost-to-Charge Ratios (CCRs) 

c. Establishment of the RY 2009 Fixed-Loss 

Amount 

d. Application of Outlier Policy to ShortStay Outlier (SSO) Cases 

4. Other Payment Adjustments 

5. Technical Correction to the Budget 

Neutrality Requirement at 

§ 412.523(d)(2) 

G. Conforming Changes 

V. Computing the Adjusted Federal 

Prospective Payments for the 2009 LTCH 

PPS Rate Year 

VI. Monitoring 

VII. Method of Payment 

VIII. RTIs Research 

IX. Electronic Submission of Cost Reports: 

Revision to Effective Date of Cost 

Reporting Period 

A. Background 

B. Provisions of the Interim Final Rule 

with Comment Period 

C. Analysis of and Responses to Public 

Comments 

D. Provisions of the Final Regulations 

X. Collection of Information Requirements 

XI. Regulatory Impact Analysis 

A. RY 2009 LTCH PPS 

1. Introduction 

a. Executive Order 12866 

b. Regulatory Flexibility Act (RFA) 

c. Impact on Rural Hospitals 

d. Unfunded Mandates 

e. Federalism 

f. Alternatives Considered 

2. Anticipated Effects of Payment Rate 

Changes 

a. Budgetary Impact 

b. Impact on Providers 

c. Calculation of Prospective Payments 

d. Results 

(1) Location 

(2) Participation Date 

(3) Ownership Control 

(4) Census Region 

(5) Bed size 

e. Effects on the Medicare Program 

f. Effects on Medicare Beneficiaries 

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3. Accounting Statement 

B. Electronic Submission of Cost Reports: 

Revision to Effective Date of Cost 

Reporting Period 

Regulations Text 

Addendum 

Table 1: Long-Term Care Hospital Wage 

Index for Urban Areas for Discharges 

Occurring From July 1, 2008 through 

September 30, 2009 

Table 2: Long-Term Care Hospital Wage 

Index for Rural Areas for Discharges 

Occurring from July 1, 2008 through 

September 30, 2009 

Table 3: FY 2008 MS–LTC–DRG Relative 

Weights, Geometric Average Length of 

Stay, Short-Stay Outlier Threshold and 

IPPS-Comparable Threshold (for ShortStay Outlier Cases) 

Acronyms 

Because of the many terms to which we 

refer by acronym in this rule, we are listing 

the acronyms used and their corresponding 

terms in alphabetical order below: 

3M Health Information System 

AHA American Hospital Association 

AHIMA American Health Information 

Management Association 

ALOS Average length of stay 

ALTHA Acute Long Term Hospital 

Association 

ASCA Administrative Simplification 

Compliance Act of 2002 (Pub. L. 107–105) 

BBA Balanced Budget Act of 1997 (Pub. L. 

105–33) 

BBRA Medicare, Medicaid, and SCHIP 

[State Children’s Health Insurance 

Program] Balanced Budget Refinement Act 

of 1999 (Pub. L. 106–113) 

BIPA Medicare, Medicaid, and SCHIP [State 

Children’s Health Insurance Program] 

Benefits Improvement and Protection Act 

of 2000 (Pub. L. 106–554) 

BLS Bureau of Labor Statistics 

BN Budget neutrality 

CBSA Core-based statistical area 

CC Complications and comorbidities 

CCR Cost-to-charge ratio 

C&M Coordination and maintenance 

CMI Case-mix index 

CMS Centers for Medicare & Medicaid 

Services 

COLA Cost of living adjustment 

COP Condition of participation 

CPI Consumer Price Index 

CY Calendar year 

DSH Disproportionate share of low-income 

patients 

DRGs Diagnosis-related groups 

ECI Employment Cost Index 

FI Fiscal intermediary 

FY Fiscal year 

FFY Federal fiscal year 

HCO High-cost outlier 

HCRIS Hospital cost report information 

system 

HHA Home health agency 

HHS (Department of) Health and Human 

Services 

HIPAA Health Insurance Portability and 

Accountability Act (Pub. L. 104–191) 

HIPC Health Information Policy Council 

HwHs Hospitals within hospitals 

ICD–9–CM International Classification of 

Diseases, Ninth Revision, Clinical 

Modification (codes) 

IME Indirect medical education 

I–O Input-Output 

IPF Inpatient psychiatric facility 

IPPS [Acute Care Hospital] Inpatient 

Prospective Payment System 

IRF Inpatient rehabilitation facility 

LOS Length of stay 

LTC–DRG Long-term care diagnosis-related 

group 

LTCH Long-term care hospital 

MAC Medicare Administrative Contractor 

MCE Medicare code editor 

MDC Major diagnostic categories 

MedPAC Medicare Payment Advisory 

Commission 

MedPAR Medicare provider analysis and 

review 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (Pub. L. 108–173) 

MMSEA Medicare, Medicaid, and SCHIP 

Extension Act of 2007 (Pub. L. 110–173) 

MSA Metropolitan statistical area 

MS–DRG Medicare severity diagnosisrelated group 

MS–LTC–DRG Medicare severity long-term 

care diagnosis-related group 

NAICS North American Industrial 

Classification System 

NALTH National Association of Long Term 

Hospitals 

NCHS National Center for Health Statistics 

OACT [CMS’] Office of the Actuary 

OBRA 86 Omnibus Budget Reconciliation 

Act of 1986 (Pub. L. 99–509) 

OMB Office of Management and Budget 

OPM U.S. Office of Personnel Management 

O.R. Operating room 

OSCAR Online Survey Certification and 

Reporting (System) 

PIP Periodic interim payment 

PLI Professional liability insurance 

PMSA Primary metropolitan statistical area 

PPI Producer Price Indexes 

PPS Prospective payment system 

PSF Provider specific file 

QIO Quality Improvement Organization 

(formerly Peer Review organization (PRO)) 

RIA Regulatory impact analysis 

RPL Rehabilitation psychiatric long-term 

care (hospital) 

RTI Research Triangle Institute, 

International 

RY Rate year (begins July 1 and ends June 

30) 

SIC Standard industrial code 

SNF Skilled nursing facility 

SSO Short-stay outlier 

TEFRA Tax Equity and Fiscal 

Responsibility Act of 1982 (Pub. L. 97–248) 

TEP Technical expert panel 

UHDDS Uniform hospital discharge data set 

I. Background of the LTCH PPS 

A. Legislative and Regulatory Authority 

Section 123 of the Medicare, 

Medicaid, and SCHIP (State Children’s 

Health Insurance Program) Balanced 

Budget Refinement Act of 1999 (BBRA) 

(Pub. L. 106–113) as amended by 

section 307(b) of the Medicare, 

Medicaid, and SCHIP Benefits 

Improvement and Protection Act of 

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

for payment for both the operating and 

capital-related costs of hospital 

inpatient stays in long-term care 

hospitals (LTCHs) under Medicare Part 

A based on prospectively set rates. The 

Medicare prospective payment system 

(PPS) for LTCHs applies to hospitals 

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

the Social Security Act (the Act), 

effective for cost reporting periods 

beginning on or after October 1, 2002. 

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

defines a LTCH as ‘‘a hospital which has 

an average inpatient length of stay (as 

determined by the Secretary) of greater 

than 25 days.’’ Section 

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

provides an alternative definition of 

LTCHs: Specifically, a hospital that first 

received payment under section 1886(d) 

of the Act in 1986 and has an average 

inpatient length of stay (LOS) (as 

determined by the Secretary of Health 

and Human Services (the Secretary)) of 

greater than 20 days and has 80 percent 

or more of its annual Medicare inpatient 

discharges with a principal diagnosis 

that reflects a finding of neoplastic 

disease in the 12-month cost reporting 

period ending in fiscal year (FY) 1997. 

Section 123 of the BBRA requires the 

PPS for LTCHs to be a ‘‘per discharge’’

system with a diagnosis-related group 

(DRG) based patient classification 

system that reflects the differences in 

patient resources and costs in LTCHs. 

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 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 MS-long-term care 

diagnosis-related groups (MS–LTC–

DRGs) based on clinical characteristics 

and expected resource needs. Payments 

are calculated for each MS–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. 

The LTCH PPS replaced the 

reasonable cost-based payment system 

under the Tax Equity and Fiscal 

Responsibility Act of 1982 (TEFRA) 

(Pub. L. 97–248) for payments for 

inpatient services provided by a LTCH 

with a cost reporting period beginning 

on or after October 1, 2002. (The 

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26790 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

regulations implementing the TEFRA 

reasonable cost-based payment 

provisions are located at 42 CFR part 

413.) With the implementation of the 

PPS for acute care hospitals authorized 

by the Social Security Amendments of 

1983 (Pub. L. 98–21), which added 

section 1886(d) to the Act, certain 

hospitals, including LTCHs, were 

excluded from the PPS for acute care 

hospitals and were paid their reasonable 

costs for inpatient services subject to a 

per discharge limitation or target 

amount under the TEFRA system. For 

each cost reporting period, a hospitalspecific ceiling on payments was 

determined by multiplying the 

hospital’s updated target amount by the 

number of total current year Medicare 

discharges. (Generally, in this document 

when we refer to discharges, the intent 

is to describe Medicare discharges.) The 

August 30, 2002 final rule further 

details the payment policy under the 

TEFRA system (67 FR 55954). 

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, 

and the BN requirements mandated by 

section 123 of the BBRA. The same final 

rule that established regulations for the 

LTCH PPS under 42 CFR part 412, 

subpart O, also contained LTCH 

provisions related to covered inpatient 

services, limitation on charges to 

beneficiaries, medical review 

requirements, furnishing of inpatient 

hospital services directly or under 

arrangement, and reporting and 

recordkeeping requirements. We refer 

readers to the August 30, 2002 final rule 

for a comprehensive discussion of the 

research and data that supported the 

establishment of the LTCH PPS (67 FR 

55954). 

In the June 6, 2003 Federal Register, 

we published a final rule that set forth 

the FY 2004 annual update of the 

payment rates for the Medicare PPS for 

inpatient hospital services furnished by 

LTCHs (68 FR 34122). It also changed 

the annual period for which the 

payment rates are effective. The annual 

updated rates are now effective from 

July 1 through June 30 instead of from 

October 1 through September 30. We 

refer to the July through June time 

period as a ‘‘long-term care hospital rate 

year’’ (LTCH PPS rate year). In addition, 

we changed the publication schedule for 

the annual update to allow for an 

effective date of July 1. The payment 

amounts and factors used to determine 

the annual update of the LTCH PPS 

Federal rate are based on a LTCH PPS 

rate year. While the LTCH payment rate 

update is effective July 1, the annual 

update of the DRG classifications and 

relative weights for LTCHs are linked to 

the annual adjustments of the acute care 

hospital inpatient DRGs and are 

effective each October 1. 

The Medicare, Medicaid and SCHIP 

Extension Act of 2007 (MMSEA) (Pub. 

L. 110–173) that was enacted on 

December 29, 2007 has various effects 

on the LTCH PPS. The new law’s 

provisions also have varying timeframes 

of applicability. First, we note that 

certain provisions of the MMSEA 

provided that Secretary shall not apply, 

for cost reporting periods beginning on 

or after the date of the enactment of the 

MMSEA (December 29, 2007) for a 3- 

year period: The extension of payment 

adjustments at § 412.534 to 

‘‘grandfathered LTCHs’’ (a long term 

care hospital identified by the 

amendment made by section 4417(a) of 

Pub. L. 105–33); and the payment 

adjustment at § 412.536 to 

‘‘freestanding’’ LTCHs. In addition, the 

new law provides that the Secretary 

shall not apply, for the 3-year period 

beginning on the date of enactment of 

the Act the revision to the SSO policy 

that was finalized in the rate year RY 

2008 LTCH PPS final rule (72 FR 26904 

and 26992) and the one-time adjustment 

to the payment rates provided for in 

§ 412.523(d)(3). The statute also 

provides that the base rate for RY 2008 

be the same as the base rate for RY 2007 

(the revised base rate, however, does not 

apply to discharges occurring on or after 

July 1, 2007 and before April 1, 2008); 

for a 3-year moratorium (with specified 

exceptions) on the establishment of new 

LTCHs, LTCH satellites, and on the 

increase in the number of LTCH beds. 

The new law also revises in the 

threshold percentages for certain colocated LTCHs and LTCH satellites 

governed under § 412.534. Finally, the 

MMSEA provides for an expanded 

review of medical necessity for 

admission and continued stay at LTCHs. 

In this final rule, we are establishing the 

applicable Federal rates for RY 2009 

consistent with section 1886(m)(2) of 

the Act as amended by MMSEA. We are 

also revising the regulations at 

§ 412.523(d)(3) to change the 

methodology for the one-time budget 

neutrality adjustment and to comply 

with section 114(c)(4) of the MMSEA. 

Other policy revisions necessitated by 

the statutory changes of the MMSEA 

were addressed in separate rulemaking 

document and other provisions required 

by this new law will be addressed in the 

future. 

B. Criteria for Classification as a LTCH 

1. Classification as a LTCH 

Under the existing regulations at 

§ 412.23(e)(1) and (e)(2)(i), which 

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

the Act, to qualify to be paid under the 

LTCH PPS, a hospital must have a 

provider agreement with Medicare and 

must have an average Medicare 

inpatient LOS of greater than 25 days. 

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

that for cost reporting periods beginning 

on or after August 5, 1997, a hospital 

that was first excluded from the PPS in 

1986 and can demonstrate that at least 

80 percent of its annual Medicare 

inpatient discharges in the 12-month 

cost reporting period ending in FY 1997 

have a principal diagnosis that reflects 

a finding of neoplastic disease must 

have an average inpatient LOS for all 

patients, including both Medicare and 

non-Medicare inpatients, of greater than 

20 days. 

Section 412.23(e)(3) 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) by the number of total 

Medicare discharges for the hospital’s 

most recent complete cost reporting 

period. Section 412.23 also provides 

that subject to the provisions of 

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

this section, the average inpatient LOS 

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

calculated by dividing the total number 

of days for all patients, including both 

Medicare and non-Medicare inpatients 

(less leave or pass days) by the number 

of total discharges for the hospital’s 

most recent complete cost reporting 

period. 

In the RY 2005 LTCH PPS final rule 

(69 FR 25674), we specified the 

procedure for calculating a hospital’s 

inpatient average length of stay (ALOS) 

for purposes of classification as a LTCH. 

That is, if a patient’s stay includes days 

of care furnished during two or more 

separate consecutive cost reporting 

periods, the total days of a patient’s stay 

would be reported in the cost reporting 

period during which the patient is 

discharged (69 FR 25705). Therefore, we 

revised § 412.23(e)(3)(ii) to specify that, 

effective for cost reporting periods 

beginning on or after July 1, 2004, in 

calculating a hospital’s ALOS, if the 

days of an inpatient stay involve days of 

care furnished during two or more 

separate consecutive cost reporting 

periods, the total number of days of the 

stay are considered to have occurred in 

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26791 

the cost reporting period during which 

the inpatient was discharged. 

Fiscal intermediaries (FIs) verify that 

LTCHs meet the ALOS requirements. 

We note that the inpatient days of a 

patient who is admitted to a LTCH 

without any remaining Medicare days of 

coverage, regardless of the fact that the 

patient is a Medicare beneficiary, will 

not be included in the above 

calculation. Because Medicare would 

not be paying for any of the patient’s 

treatment, data on the patient’s stay 

would not be included in the Medicare 

claims processing systems. In order for 

both covered and noncovered days of a 

LTCH hospitalization to be included, a 

patient admitted to the LTCH must have 

at least 1 remaining benefit day (68 FR 

34123). 

The FI’s determination of whether or 

not a hospital qualifies as an LTCH is 

based on the hospital’s discharge data 

from the hospital’s most recent 

complete cost reporting period as 

specified in § 412.23(e)(3) and is 

effective at the start of the hospital’s 

next cost reporting period as specified 

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

does not meet the ALOS requirement as 

specified in § 412.23(e)(2)(i) or (ii), the 

hospital may provide the FI with data 

indicating a change in the ALOS by the 

same method for the period of at least 

5 months of the immediately preceding 

6-month period (69 FR 25676). Our 

interpretation of § 412.23(e)(3) was to 

allow hospitals to submit data using a 

period of at least 5 months of the most 

recent data from the immediately 

preceding 6-month period. 

As we stated in the FY 2004 Hospital 

Inpatient Prospective Payment System 

(IPPS) final rule, published in the 

August 1, 2003, Federal Register, prior 

to the implementation of the LTCH PPS, 

we did rely on data from the most 

recently submitted cost report for 

purposes of calculating the ALOS (68 

FR 45464). The calculation to determine 

whether an acute care hospital qualifies 

for LTCH status was based on total days 

and discharges for LTCH inpatients. 

However, with the implementation of 

the LTCH PPS, for the ALOS specified 

under § 412.23(e)(2)(i), we revised 

§ 412.23(e)(3)(i) to only count total days 

and discharges for Medicare inpatients 

(67 FR 55970 through 55974). In 

addition, the ALOS specified under 

§ 412.23(e)(2)(ii) is calculated by 

dividing the total number of days for all 

patients, including both Medicare and 

non-Medicare inpatients (less leave or 

pass days) by the number of total 

discharges for the hospital’s most recent 

complete cost reporting period. As we 

discussed in the FY 2004 IPPS final 

rule, we are unable to capture the 

necessary data from our existing cost 

reporting forms (68 FR 45464). 

Therefore, we notified FIs and LTCHs 

that until the cost reporting forms are 

revised, for purposes of calculating the 

ALOS, we will be relying upon census 

data extracted from Medicare Provider 

Analysis and Review (MedPAR) files 

that reflect each LTCH’s cost reporting 

period (68 FR 45464). Requirements for 

hospitals seeking classification as 

LTCHs that have undergone a change in 

ownership, as described in § 489.18, are 

set forth in § 412.23(e)(3)(iv). 

2. Hospitals Excluded From the LTCH 

PPS 

The following hospitals are paid 

under special payment provisions, as 

described in § 412.22(c), and therefore, 

are not subject to the LTCH PPS rules: 

• Veterans Administration hospitals. 

• Hospitals that are reimbursed under 

State cost control systems approved 

under 42 CFR part 403. 

• Hospitals that are reimbursed in 

accordance with demonstration projects 

authorized under section 402(a) of the 

Social Security Amendments of 1967 

(Pub. L. 90–248) (42 U.S.C. 1395b–1) or 

section 222(a) of the Social Security 

Amendments of 1972 (Pub. L. 92–603) 

(42 U.S.C. 1395b–1 (note)) (Statewide 

all-payer systems, subject to the rate-ofincrease test at section 1814(b) of the 

Act). 

• Nonparticipating hospitals 

furnishing emergency services to 

Medicare beneficiaries. 

C. Transition Period for Implementation 

of the LTCH PPS 

In the August 30, 2002, final rule (67 

FR 55954), we provided for a 5-year 

transition period. During this 5-year 

transition period, a LTCH’s total 

payment under the PPS was based on an 

increasing percentage of the Federal rate 

with a corresponding decrease in the 

percentage of the LTCH PPS payment 

that is based on reasonable cost 

concepts. However, effective for cost 

reporting periods beginning on or after 

October 1, 2006, total LTCH PPS 

payments are based on 100 percent of 

the Federal rate. 

D. Limitation on Charges to 

Beneficiaries 

In the August 30, 2002, final rule, we 

presented an in-depth discussion of 

beneficiary liability under the LTCH 

PPS (67 FR 55974 through 55975). In the 

RY 2005 LTCH PPS final rule (69 FR 

25676), we clarified that the discussion 

of beneficiary liability in the August 30, 

2002, final rule was not meant to 

establish rates or payments for, or define 

Medicare-eligible expenses. Under 

§ 412.507, if the Medicare payment to 

the LTCH is the full LTC–DRG payment 

amount, as consistent with other 

established hospital prospective 

payment systems, a LTCH may not bill 

a Medicare beneficiary for more than the 

deductible and coinsurance amounts as 

specified under § 409.82, § 409.83, and 

§ 409.87 and for items and services as 

specified under § 489.30(a). However, 

under the LTCH PPS, Medicare will 

only pay for days for which the 

beneficiary has coverage until the SSO 

threshold is exceeded. Therefore, if the 

Medicare payment was for a SSO case 

(§ 412.529) that was less than the full 

LTC–DRG payment amount because the 

beneficiary had insufficient remaining 

Medicare days, the LTCH could also 

charge the beneficiary for services 

delivered on those uncovered days 

(§ 412.507). 

E. Administrative Simplification 

Compliance Act (ASCA) and Health 

Insurance Portability and 

Accountability Act (HIPAA) Compliance 

Claims submitted to Medicare must 

comply with both the Administrative 

Simplification Compliance Act (ASCA) 

(Pub. L. 107–105), and Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) (Pub. L. 104–191). 

Section 3 of the ASCA requires that the 

Medicare Program deny payment under 

Part A or Part B for any expenses 

incurred for items or services ‘‘for 

which a claim is submitted other than 

in an electronic form specified by the 

Secretary.’’ Section 1862(h) of the Act 

(as added by section 3(a) of the ASCA) 

provides that the Secretary shall waive 

such denial in two specific types of 

cases and may also waive such denial 

‘‘in such unusual cases as the Secretary 

finds appropriate’’ (68 FR 48805). 

Section 3 of the ASCA operates in the 

context of the HIPAA regulations, which 

include, among other provisions, the 

transactions and code sets standards 

requirements codified as 45 CFR parts 

160 and 162, subparts A and I through 

R (generally known as the Transactions 

Rule). The Transactions Rule requires 

covered entities, including covered 

health care providers, to conduct certain 

electronic healthcare transactions 

according to the applicable transactions 

and code sets standards. 

II. Summary of the Provisions of This 

Final Rule 

The RY 2009 proposed rule appeared 

in the Federal Register (73 FR 5342) on 

January 29, 2008. We received 18 timely 

items of correspondence on the 

proposed rule that we respond to in the 

appropriate sections of this final rule. 

We also received one comment that 

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addressed our policy on satellites of 

LTCHs that is beyond the scope of this 

regulation. Also beyond the scope of 

this regulation was a comment directed 

to our interpretation of the ‘‘25 percent 

threshold policy’’ revisions, one of the 

requirements specified in 114 of the 

MMSEA, provisions of which will be 

addressed in a future rulemaking. 

In this final rule, we are revising the 

LTCH PPS payment rate update cycle 

and making other policy changes and 

clarifications. The following is a 

summary of the major areas that we are 

addressing in this final rule. 

In section III. of this final rule, we 

discuss the LTCH PPS patient 

classification and the relative weights 

which are linked to the annual 

adjustments of the acute care hospital 

inpatient DRG system, and are based on 

the annual revisions to the International 

Classification of Diseases, Ninth 

Revision, Clinical Modification (ICD–9–

CM) codes effective each October 1. In 

this section, we also summarize the 

severity adjusted MS–LTC–DRGs and 

the development of the relative weights 

for FY 2008 as established in the FY 

2008 IPPS final rule with comment 

period as well as the proposed update 

to the MS–LTC–DRGs and relative 

weights for FY 2009 presented in the FY 

2009 IPPS proposed rule. 

In section IV.B. of this final rule, we 

are extending the rate year cycle for RY 

2009 to a 15-month period, from July 1, 

2008 through September 30, 2009. We 

will continue to have an update to the 

MS–LTC–DRG classifications and 

weights effective for October 1, 2008. 

We are consolidating the annual update 

to the payment rates and the update of 

the MS–LTC classifications and weights 

beginning October 1, 2009. 

As discussed in section IV.E.2. of this 

final rule, we are establishing a 2.7 

percent update to the LTCH PPS Federal 

rate for the 2009 LTCH PPS rate year 

based on the most recent market basket 

estimate for the 15-month 2009 LTCH 

PPS rate year and an adjustment to 

account for improvements in coding and 

documentation. Also in section IV. of 

this final rule, we discuss the 

prospective payment rate for RY 2009. 

In section IV. D. of this final rule, we 

discuss the possible one-time 

adjustment to the Federal payment rate 

under § 412.523(d)(3). Consistent with 

section 114(c)(4) of MMSEA, we did not 

propose any adjustment under 

§ 412.523(d)(3). However, at this time, 

we are revising the regulations to clarify 

the objectives of the possible one-time 

adjustment, to more precisely reflect the 

methodology, and to reflect the 

requirements of section 114(c)(4) of the 

MMSEA to the regulatory text. 

In section V. of this final rule, we 

discuss the updates to the payment 

rates, including the revisions to the 

wage index, the labor-related share, the 

cost-of-living adjustment (COLA) 

factors, and the outlier threshold, for the 

2009 LTCH PPS rate year. 

In section VI. of this final rule, we 

discuss our on-going monitoring 

protocols under the LTCH PPS. 

In section VIII. of this final rule, we 

discuss Research Triangle Institute’s 

(RTI) analysis relating to the 

development of LTCH patient-and 

facility-level criteria. 

In section IX. of this final rule, we are 

finalizing the revision to the effective 

date of cost reporting periods for 

electronic submission of cost reports for 

certain entities. 

In section XI. of this final rule, we 

analyze the impact of the changes 

established in this final rule on 

Medicare expenditures, Medicareparticipating LTCHs, and Medicare 

beneficiaries. 

III. Medicare Severity Long-Term Care 

Diagnosis-Related Group (MS–LTC– 

DRG) Classifications and Relative 

Weights 

A. Background 

Section 123 of the BBRA requires that 

the Secretary implement a PPS for 

LTCHs (that is, a per-discharge system 

with a DRG-based patient classification 

system reflecting the differences in 

patient resources and costs). Section 

307(b)(1) of the BIPA modified the 

requirements of section 123 of the BBRA 

by requiring that the Secretary examine 

‘‘the feasibility and the impact of basing 

payment under such a system (the 

LTCH PPS) on the use of existing (or 

refined) hospital DRGs that have been 

modified to account for different 

resource use of LTCH patients, as well 

as the use of the most recently available 

hospital discharge data.’’

When the LTCH PPS was 

implemented for cost reporting periods 

beginning on or after October 1, 2002, 

we adopted the same DRG patient 

classification system (that is, the CMS 

DRGs) that was utilized at that time 

under the hospital inpatient prospective 

payment system (IPPS). As a component 

of the LTCH PPS, we refer to the patient 

classification system as the ‘‘LTC–

DRGs.’’ As discussed in greater detail 

below, although the patient 

classification system used under both 

the LTCH PPS and the IPPS are the 

same, the relative weights are different. 

The established relative weight 

methodology and data used under the 

LTCH PPS result in LTC–DRG relative 

weights that reflect ‘‘the different 

resource use of long-term care hospital 

patients consistent with the statute.’’

As part of our efforts to better 

recognize severity of illness among 

patients, in the FY 2008 IPPS final rule 

with comment period (72 FR 47130), the 

Medicare Severity diagnosis related 

groups (MS–DRGs) and the Medicare 

Severity long-term care diagnosis 

related groups (MS–LTC–DRGs) were 

adopted for the IPPS and the LTCH PPS, 

respectively, effective October 1, 2007 

(FY 2008). For a full description of the 

development and implementation of the 

MS–DRGs and MS–LTC–DRGs, see the 

FY 2008 IPPS final rule with comment 

period (72 FR 47141 through 47175 and 

47277 through 47299). (We note that in 

that same final rule, we revised the 

regulations at § 412.503 to specify that 

for LTCH discharges occurring on or 

after October 1, 2007, when applying 

the provisions of this subpart for policy 

descriptions and payment calculations, 

all references to LTC–DRGs would be 

considered a reference to MS–LTC–

DRGs. For the remainder of this section, 

we present the discussion in terms of 

the current MS–LTC–DRG patient 

classification unless specifically 

referring to the previous LTC–DRG 

patient classification system (that was in 

effect before October 1, 2007).) We 

believe the MS–DRGs (and by extension, 

the MS–LTC–DRGs) represent a 

substantial improvement over the 

previous CMS DRGs in their ability to 

differentiate cases based on severity of 

illness and resource consumption. 

The MS–DRGs represent an increase 

in the number of DRGs by 207 (that is, 

from 538 to 745) (72 FR 47171). In 

addition to improving the DRG system’s 

recognition of severity of illness, we 

believe the MS–DRGs are responsive to 

the public comments that were made on 

the FY 2007 IPPS proposed rule with 

respect to how we should undertake 

further DRG reform. The MS–DRGs use 

the CMS DRGs as the starting point for 

revising the DRG system to better 

recognize resource complexity and 

severity of illness. We have generally 

retained all of the refinements and 

improvements that have been made to 

the base DRGs over the years that 

recognize the significant advancements 

in medical technology and changes to 

medical practice. 

In accordance with section 123 of the 

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

of the BIPA and § 412.515, we use 

information derived from LTCH PPS 

patient records to classify LTCH 

discharges into distinct MS–LTC–DRGs 

based on clinical characteristics and 

estimated resource needs. As stated 

above, the MS–LTC–DRGs used as the 

patient classification component of the 

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LTCH PPS correspond to the hospital 

inpatient MS–DRGs in the IPPS. We 

assign an appropriate weight to the MS–

LTC–DRGs to account for the difference 

in resource use by patients exhibiting 

the case complexity and multiple 

medical problems characteristic of 

LTCHs. 

In a departure from the IPPS, we use 

low-volume MS–LTC–DRGs (less than 

25 LTCH cases) in determining the MS–

LTC–DRG relative weights, since LTCHs 

do not typically treat the full range of 

diagnoses as do acute care hospitals. To 

manage the large number of low-volume 

MS–LTC–DRGs (all MS–LTC–DRGs 

with fewer than 25 LTCH cases), for 

purposes of determining the relative 

weights, we group low-volume MS–

LTC–DRGs into 5 quintiles based on 

average charge per discharge. (A 

detailed discussion of the application of 

the Lewin Group ‘‘quintile’’ model that 

was used to develop the LTC–DRGs 

appears in the August 30, 2002, LTCH 

PPS final rule (67 FR 55978).) We also 

account for adjustments to payments for 

short-stay outlier (SSO) cases (that is, 

cases where the covered length of stay 

(LOS) at the LTCH is less than or equal 

to five-sixths of the geometric ALOS for 

the MS–LTC–DRG). Furthermore, we 

make adjustments to account for 

nonmonotonically increasing weights, 

when necessary (as described below in 

this section). That is, theoretically, cases 

under the MS LTC DRG system that are 

more severe require greater expenditure 

of medical care resources and will result 

in higher average charges. Therefore, in 

the three severity levels, weights should 

increase monotonically with severity, 

from the lowest to highest severity level. 

B. Patient Classifications Into MS–LTC– 

DRGs 

Generally, under the LTCH PPS, a 

Medicare payment is made at a 

predetermined specific rate for each 

discharge; that payment varies by the 

MS–LTC–DRG to which a beneficiary’s 

stay is assigned. Cases are classified into 

MS–LTC–DRGs for payment based on 

the following six data elements: 

• Principal diagnosis. 

• Up to eight additional diagnoses. 

• Up to six procedures performed. 

• Age. 

• Sex. 

• Discharge status of the patient. 

Upon the discharge of the patient 

from a LTCH, the LTCH must assign 

appropriate diagnosis and procedure 

codes from the most current version of 

the International Classification of 

Diseases, Ninth Revision, Clinical 

Modification (ICD–9–CM). HIPAA 

Transactions and Code Sets Standards 

regulations at 45 CFR parts 160 and 162 

require that no later than October 16, 

2003, all covered entities must comply 

with the applicable requirements of 

subparts A and I through R of part 162. 

Among other requirements, those 

provisions direct covered entities to use 

the ASC X12N 837 Health Care Claim: 

Institutional, Volumes 1 and 2, version 

4010, and the applicable standard 

medical data code sets for the 

institutional health care claim or 

equivalent encounter information 

transaction (see 45 CFR 162.1002 and 45 

CFR 162.1102). For additional 

information on the ICD–9–CM Coding 

System, refer to the FY 2008 IPPS final 

rule with comment period (72 FR 47241 

through 47243 and 47277 through 

47281). We also refer readers to the 

detailed discussion on correct coding 

practices in the August 30, 2002, LTCH 

PPS final rule (67 FR 55981 through 

55983). Additional coding instructions 

and examples are published in the 

Coding Clinic for ICD–9–CM. 

Medicare contractors (that is, fiscal 

intermediaries (FIs), now called 

Medicare Administrative Contractors 

(MACs)) enter the clinical and 

demographic information into their 

claims processing systems and subject 

this information to a series of automated 

screening processes called the Medicare 

Code Editor (MCE). These screens are 

designed to identify cases that require 

further review before assignment into a 

MS–LTC–DRG can be made. During this 

process, the following types of cases are 

selected for further development: 

• Cases that are improperly coded. 

(For example, diagnoses are shown that 

are inappropriate, given the sex of the 

patient. Code 68.69, Other and 

unspecified radical abdominal 

hysterectomy, would be an 

inappropriate code for a male.) 

• Cases including surgical procedures 

not covered under Medicare. (For 

example, organ transplant in a 

nonapproved transplant center.) 

• Cases requiring more information. 

(For example, ICD–9–CM codes are 

required to be entered at their highest 

level of specificity. There are valid 3- 

digit, 4-digit, and 5-digit codes. That is, 

code 262, Other severe protein-calorie 

malnutrition, contains all appropriate 

digits, but if it is reported with either 

fewer or more than 3 digits, the claim 

will be rejected by the MCE as invalid.) 

After screening through the MCE, 

each claim is classified into the 

appropriate MS–LTC–DRG by the 

Medicare LTCH GROUPER software. 

The Medicare GROUPER software, 

which is used under the LTCH PPS, is 

specialized computer software, and is 

the same GROUPER software program 

used under the IPPS. The GROUPER 

software was developed as a means of 

classifying each case into a MS–LTC–

DRG on the basis of diagnosis and 

procedure codes and other demographic 

information (age, sex, and discharge 

status). Following the MS–LTC–DRG 

assignment, the Medicare contractor (FI 

or MAC) determines the prospective 

payment amount by using the Medicare 

PRICER program, which accounts for 

hospital-specific adjustments. Under the 

LTCH PPS, we provide an opportunity 

for the LTCH to review the MS–LTC–

DRG assignments made by the Medicare 

contractor and to submit additional 

information within a specified 

timeframe as specified in § 412.513(c). 

The GROUPER software is used both 

to classify past cases to measure relative 

hospital resource consumption to 

establish the DRG weights and to 

classify current cases for purposes of 

determining payment. The records for 

all Medicare hospital inpatient 

discharges are maintained in the 

MedPAR file. The data in this file are 

used to evaluate possible MS–DRG 

classification changes and to recalibrate 

the MS–DRG and MS–LTC–DRG relative 

weights during CMS’ annual update 

under both the IPPS (§ 412.60(e)) and 

the LTCH PPS (§ 412.517), respectively. 

As discussed in greater detail in section 

III.D. of this preamble, with the 

implementation of section 503(a) of the 

MMA, there is the possibility that one 

feature of the GROUPER software 

program may be updated twice during a 

Federal FY (FFY) (October 1 and April 

1) as required by the statute for the IPPS 

(69 FR 48954 through 48957). The use 

of the ICD–9–CM code set is also 

compliant with the current 

requirements of the Transactions and 

Code Sets Standards regulations at 45 

CFR parts 160 and 162, published in 

accordance with HIPAA. 

C. Organization of the MS–LTC–DRGs 

The MS–DRGs (used under the IPPS) 

and the MS–LTC–DRGs (used under the 

LTCH PPS) are based on the CMS DRG 

structure. As noted above in this 

section, we refer to the DRGs under the 

LTCH PPS as MS–LTC–DRGs although 

they are structurally identical to the 

DRGs used under the IPPS. The MS–

DRGs are organized into 25 major 

diagnostic categories (MDCs), most of 

which are based on a particular organ 

system of the body; the remainder 

involve multiple organ systems (such as 

MDC 22, Burns). Within most MDCs, 

cases are then divided into surgical 

DRGs and medical DRGs. Surgical DRGs 

are assigned based on a surgical 

hierarchy that orders operating room 

(O.R.) procedures or groups of O.R. 

procedures by resource intensity. The 

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GROUPER software program does not 

recognize all ICD–9–CM procedure 

codes as procedures affecting DRG 

assignment, that is, procedures which 

are not surgical (for example, EKG), or 

minor surgical procedures (for example, 

86.11, Biopsy of skin and subcutaneous 

tissue). 

In developing Version 25.0 of the 

GROUPER program (the FY 2008 MS–

DRGs), the diagnoses comprising the CC 

list were completely redefined. The 

revised CC list is primarily comprised of 

significant acute disease, acute 

exacerbations of significant chronic 

diseases, advanced or end stage chronic 

diseases, and chronic diseases 

associated with extensive debility. In 

general, most chronic diseases were not 

included on the revised CC list. For a 

patient with a chronic disease, a 

significant acute manifestation of the 

chronic disease was required to be 

present and coded for the patient to be 

assigned a CC. 

In addition to the revision of the CC 

list, each CC was also categorized as a 

major CC (MCC) or a CC based on 

relative resource use. Approximately 12 

percent of all diagnoses codes were 

classified as a major CC (MCC), 24 

percent as a CC, and 64 percent as a non 

CC. Diagnoses closely associated with 

mortality (ventricular fibrillation, 

cardiac arrest, shock, and respiratory 

arrest) were assigned as an MCC if the 

patient lived but as a non CC if the 

patient died. 

The MCC, CC, and non CC 

categorization was used to subdivide the 

surgical and medical DRGs into up to 

three levels, with a case being assigned 

to the most resource intensive level (for 

example, a case with two secondary 

diagnoses that are categorized as an 

MCC and a CC is assigned to the MCC 

level). To create the MS–DRGs (and by 

extension, the MS–LTC–DRGs) 

individual DRGs were subdivided into 

three, two, or one level, depending on 

the CC impact on resources used for 

those cases. 

As noted above in this section, further 

information on the development and 

implementation of the MS–DRGs and 

MS–LTC–DRGs can be found in the FY 

2008 IPPS final rule with comment 

period (72 FR 47138 through 47175 and 

47277 through 47299). 

D. Method for Updating the MS–LTC–

DRG Classifications and Relative 

Weights 

1. Background 

Under the LTCH PPS, relative weights 

for each MS–LTC–DRG are a primary 

element used to account for the 

variations in cost per discharge and 

resource utilization among the payment 

groups (that is, the MS–LTC–DRGs). To 

ensure that Medicare patients classified 

to each MS–LTC–DRG have access to an 

appropriate level of services and to 

encourage efficiency, each year based on 

the best available data, we calculate a 

relative weight for each MS–LTC–DRG 

that represents the resources needed by 

an average inpatient LTCH case in that 

MS–LTC–DRG. For example, cases in a 

MS–LTC–DRG with a relative weight of 

2 will, on average, cost twice as much 

as cases in a MS–LTC–DRG with a 

relative weight of 1. Under § 412.517, 

the MS–LTC–DRG classifications and 

weighting factors (that is, relative 

weights) are adjusted annually to reflect 

changes in factors affecting the relative 

use of LTCH resources, including 

treatment patterns, technology and 

number of discharges. 

In the June 6, 2003 LTCH PPS final 

rule (68 FR 34122 through 34125), we 

changed the LTCH PPS annual payment 

rate update cycle to be effective July 1 

through June 30 instead of October 1 

through September 30. In addition, 

because the patient classification system 

utilized under the LTCH PPS is the 

same DRG system that is used under the 

IPPS, in that same final rule, we 

explained that the annual update of the 

LTC–DRG classifications and relative 

weights will continue to remain linked 

to the annual reclassification and 

recalibration of the CMS DRGs used 

under the IPPS (as is the case with the 

MS–DRGs effective for discharges 

occurring on or after October 1, 2007 

(see § 412.503)). Therefore, we specified 

that we will continue to update the 

LTC–DRG classifications and relative 

weights to be effective for discharges 

occurring on or after October 1 through 

September 30 each year. We further 

stated at that time that we will publish 

the annual proposed and final update of 

the LTC–DRGs in the same notice as the 

proposed and final update for the IPPS 

(69 FR 34125). (We note that in section 

IV.B. of this preamble, we are proposing 

to revise § 412.535 in order to 

consolidate the annual July 1 and 

October 1 LTCH PPS update cycles, so 

that beginning with FY 2010, both the 

annual update to the standard Federal 

rate (and other rate and policy changes) 

and the annual update to the MS–LTC–

DRGs would be presented in a single 

Federal Register publication to be 

effective on October 1 each year.) Under 

existing § 412.535(b), the FY 2008 

update of the LTCH PPS patient 

classification system and relative 

weights was presented in the FY 2008 

IPPS final rule with comment (72 FR 

47277 through 47299). For the reader’s 

benefit, we are providing a summary of 

the discussion presented in that final 

rule with comment in section III.D.2. of 

this preamble. 

For FY 2008, the MS–LTC–DRG 

classifications and relative weights were 

updated based on LTCH data from the 

FY 2006 MedPAR file, which contained 

hospital bills data from the March 2007 

update. The MS–LTC–DRG patient 

classification system for FY 2008 

consists of 745 DRGs that formed the 

basis of the Version 25.0 GROUPER 

program utilized under the LTCH PPS. 

The 745 MS–LTC–DRGs included two 

‘‘error DRGs.’’ As in the IPPS, we 

included two error DRGs in which cases 

that cannot be assigned to valid DRGs 

will be grouped. These two error DRGs 

are MS–LTC–DRG 998 (Principal 

Diagnosis Invalid as a Discharge 

Diagnosis) and MS–LTC–DRG 999 

(Ungroupable). The other 743 MS–LTC–

DRGs are the same DRGs used in the 

IPPS GROUPER program for FY 2008 

(Version 25.0). 

In the past, the annual update to the 

CMS DRGs was based on the annual 

revisions to the ICD–9–CM codes and 

was effective each October 1. The ICD–

9–CM coding update process was 

revised as discussed in greater detail in 

the FY 2005 IPPS final rule (69 FR 

48953 through 48957). Specifically, 

section 503(a) of the MMA includes a 

requirement for updating diagnosis and 

procedure codes twice a year instead of 

the former process of annual updates on 

October 1 of each year. This 

requirement is included as part of the 

amendments to the Act relating to 

recognition of new medical technology 

under the IPPS. (For additional 

information on this provision, including 

its implementation and its impact on 

the LTCH PPS, refer to the FY 2005 IPPS 

final rule (69 FR 48953 through 48957) 

and the RY 2006 LTCH PPS final rule 

(70 FR 24172 through 24177).) As noted 

above in this section, with the 

implementation of section 503(a) of the 

MMA, there is the possibility that one 

feature of the GROUPER software 

program may be updated twice during a 

FFY (October 1 and April 1) as required 

by the statute for the IPPS. Specifically, 

diagnosis and procedure codes for new 

medical technology may be created and 

added to existing DRGs in the middle of 

the FFY on April 1. No new MS–LTC–

DRGs will be created or deleted. 

Consistent with our current practice, 

any changes to the MS–DRGs or relative 

weights will be made at the beginning 

of the next FFY (October 1). Therefore, 

there will not be any impact on MS–

LTC–DRG payments under the LTCH 

PPS until the following October 1 

(although the new ICD–9–CM diagnosis 

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and procedure codes would be 

recognized April 1). 

As we explained in the FY 2008 IPPS 

final rule with comment period (72 FR 

47277), annual changes to the ICD–9–

CM codes historically were effective for 

discharges occurring on or after October 

1 each year. Thus, the manual and 

electronic versions of the GROUPER 

software, which are based on the ICD–

9–CM codes, were also revised annually 

and effective for discharges occurring on 

or after October 1 each year. The patient 

classification system used under the 

LTCH PPS (MS–LTC–DRGs) is the same 

DRG patient classification system used 

under the IPPS, which historically had 

been updated annually and was 

effective for discharges occurring on or 

after October 1 through September 30 

each year. We have also explained that 

since we do not publish a mid-year IPPS 

rule, we will assign any new diagnosis 

or procedure codes implemented on 

April 1 to the same DRG in which its 

predecessor code was assigned, so that 

there will be no impact on the DRG 

assignments until the following October 

1. Any coding updates will be available 

through the Web sites provided in 

section II.G.10. of the preamble of the 

FY 2008 IPPS final rule with comment 

period (72 FR 47241 through 47243) and 

through the Coding Clinic for ICD–9–

CM. Publishers and software vendors 

currently obtain code changes through 

these sources to update their code books 

and software system. If new codes are 

implemented on April 1, revised code 

books and software systems, including 

the GROUPER software program, will be 

necessary because we must use current 

ICD–9–CM codes. Therefore, for 

purposes of the LTCH PPS, because 

each ICD–9–CM code must be included 

in the GROUPER algorithm to classify 

each case into a MS–LTC–DRG, the 

GROUPER software program used under 

the LTCH PPS would need to be revised 

to accommodate any new codes. 

At the September 2007 ICD–9–CM 

C&M Committee meeting, there were no 

compelling requests for an April 1, 2008 

implementation of new ICD–9–CM 

codes, and therefore, we expect that the 

next update to the ICD–9–CM coding 

system will not occur until October 1, 

2008 (FY 2009). Therefore, we expect 

that the ICD–9–CM coding set 

implemented on October 1, 2007, will 

continue through September 30, 2008 

(FY 2008). The next update to the MS–

LTC–DRGs and relative weights for FY 

2009 will be presented in the FY 2009 

IPPS proposed and final rules. 

2. FY 2008 MS–LTC–DRG Relative 

Weights 

In accordance with § 412.523(c), we 

adjust the LTCH PPS standard Federal 

rate by the MS–LTC–DRG relative 

weights in determining payment to 

LTCHs for each case. Relative weights 

for each MS–LTC–DRG are a primary 

element used to account for the 

variations in cost per discharge and 

resource utilization among the payment 

groups as described in § 412.515. To 

ensure that Medicare patients who are 

classified to each MS–LTC–DRG have 

access to services and to encourage 

efficiency, we calculate a relative weight 

for each MS–LTC–DRG that represents 

the resources needed by an average 

inpatient LTCH case in that MS–LTC–

DRG. For example, cases in a MS–LTC–

DRG with a relative weight of 2 will, on 

average, cost twice as much as cases in 

a MS–LTC–DRG with a weight of 1. 

As we discussed in the FY 2008 IPPS 

final rule with comment period (72 FR 

47282), the MS–LTC–DRG relative 

weights effective under the LTCH PPS 

for Federal FY 2008 were calculated 

using the March 2007 update of FY 2006 

MedPAR data which contains hospital 

bills received through March 31, 2007, 

and Version 25.0 of the GROUPER 

software. 

LTCHs often specialize in certain 

areas, such as ventilator-dependent 

patients and rehabilitation or wound 

care. Some case types (DRGs) may be 

treated, to a large extent, in hospitals 

that have relatively high or relatively 

low charges. Distribution of cases with 

relatively high (or low) charges in 

specific MS–LTC–DRGs has the 

potential to inappropriately distort the 

measure of average charges. To account 

for the fact that cases may not be 

randomly distributed across LTCHs, we 

use a hospital-specific relative value 

(HSRV) method to calculate relative 

weights. We believe this method 

removes this hospital-specific source of 

bias in measuring average charges. 

Specifically, we reduce the impact of 

the variation in charges across providers 

on any particular MS–LTC–DRG relative 

weight by converting each LTCH’s 

charge for a case to a relative value 

based on that LTCH’s average charge. 

(See the FY 2008 IPPS final rule with 

comment period for further information 

on the application of the HSRV 

methodology under the LTCH PPS (72 

FR 47282).) 

To account for MS–LTC–DRGs with 

low volume (that is, with fewer than 25 

LTCH cases), we grouped those ‘‘low 

volume’’ MS–LTC–DRGs into 1 of 5 

categories (quintiles) based on average 

charges for the purposes of determining 

relative weights. Each of the low volume 

MS–LTC–DRGs grouped to a specific 

quintile received the same relative 

weight and ALOS using the formula 

applied to the regular MS–LTC–DRGs 

(25 or more cases). (See the FY 2008 

IPPS final rule with comment period for 

further explanation of the development 

and composition of each of the 5 low 

volume quintiles for FY 2008 (72 FR 

47283 through 47288).) 

After grouping the cases in the 

appropriate MS–LTC–DRG, generally, 

we calculated the relative weights by 

first removing statistical outliers and 

cases with a LOS of 7 days or less. Next, 

we adjusted the number of cases 

remaining in each MS–LTC–DRG for the 

effect of SSO cases under § 412.529. The 

short-stay adjusted discharges and 

corresponding charges were used to 

calculate ‘‘relative adjusted weights’’ in 

each MS–LTC–DRG using the HSRV 

method. In determining the FY 2008 

MS–LTC–DRG relative weights, we also 

made adjustments, as necessary, to 

adjust for nonmonotonicity for the 

severity levels within a specific base 

MS–LTC–DRG. (Refer to the FY 2008 

IPPS final rule with comment period for 

further information on the treatment of 

severity levels and adjustments for 

nonmonotonically increasing relative 

weights for FY 2008 (72 FR 47282 

through 47283 and 47293 through 

47295).) Furthermore, we determined 

FY 2008 MS–LTC–DRG relative weights 

for the 185 MS–LTC–DRGs for which 

there were no LTCH cases in the 

database (that is, LTCH claims from the 

FY 2006 LTCH MedPAR files). (A list of 

the FY 2008 ‘‘no-volume’’ MS–LTC–

DRGs and further explanation of their 

FY 2008 relative weight assignment can 

be found in the FY 2008 IPPS final rule 

with comment period (72 FR 47289 

through 47293).) 

In adopting the MS–LTC–DRGs 

beginning in FY 2008, we established a 

2-year transition. Specifically, for FY 

2008, the first year of the transition, 50 

percent of the relative weight for a MS–

LTC–DRG is based on the average LTC–

DRG relative weight under Version 24.0 

of the LTC–DRG GROUPER. The 

remaining 50 percent of the relative 

weight is based on the MS–LTC–DRG 

relative weight under Version 25.0 of 

the MS–LTC–DRG GROUPER. (See the 

FY 2008 IPPS final rule with comment 

period (72 FR 47295) for additional 

details on the methodology used to 

determine the transition blended MS–

LTC–DRG relative weights for FY 2008.) 

In the RY 2008 LTCH PPS final rule 

(72 FR 26882), under the broad 

authority conferred upon the Secretary 

under section 123 of Pub. L. 106–113 as 

amended by section 307(b) of Pub. L. 

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106–554 to develop the LTCH PPS, we 

established that beginning with the 

update for FY 2008, the annual update 

to the MS–LTC–DRG classifications and 

relative weights will be done in a budget 

neutral manner such that estimated 

aggregate LTCH PPS payments would be 

unaffected, that is, would be neither 

greater than nor less than the estimated 

aggregate LTCH PPS payments that 

would have been made without the MS–

LTC–DRG classification and relative 

weight changes. Historically, we had not 

updated the LTC–DRGs in a budget 

neutral manner because we believed 

that past fluctuations in the relative 

weights were primarily due to changes 

in LTCH coding practices rather than 

changes in patient severity. In light of 

the most recently available LTCH claims 

data at that time, which indicated that 

LTCH claims data no longer appeared to 

significantly reflect changes in LTCH 

coding practices in response to the 

implementation of the LTCH PPS, we 

believed that, beginning with FY 2008, 

it is appropriate to update the MS–LTC–

DRGs in a budget neutral manner (that 

is, so that estimated aggregate LTCH 

PPS payments will neither increase nor 

decrease). Accordingly, in that same 

final rule with comment period, we 

established under § 412.517(b) that the 

annual update to the MS–LTC–DRG 

classifications and relative weights be 

done in a budget neutral manner. (As 

noted above in section III.A. of this 

preamble, we revised the regulations at 

§ 412.503 to specify that ‘‘MS–LTC–

DRG’’ is used in place of ‘‘LTC–DRG’’

for discharges occurring on or after 

October 1, 2007.) Consistent with that 

provision, we updated the MS–LTC–

DRG classifications and relative weights 

for FY 2008 based on the most recent 

available data and included a budget 

neutrality adjustment. For further 

details on the methodology and 

calculation of the FY 2008 MS–LTC–

DRG budget neutrality factor, refer to 

the FY 2008 IPPS final rule with 

comment period (72 FR 47295 through 

47296). 

Table 11 of the Addendum to the FY 

2008 IPPS final rule with comment 

period lists the MS–LTC–DRGs and 

their respective transition blended 

budget neutral relative weights, 

geometric mean LOS, ‘‘short–stay 

outlier threshold’’ (that is, five-sixths of 

the geometric mean LOS), and the ‘‘IPPS 

Comparable Threshold’’ (that is, the 

IPPS geometric average length of stay 

plus one standard deviation) for each 

MS–LTC–DRG for FY 2008 (see (72 FR 

48143 through 48157), and the technical 

correction made in the October 10, 2007 

correction notice (72 FR 57733), which 

has been reprinted in Table 3 of the 

Addendum of this final rule for 

convenience). 

As we noted previously in this 

section, there were no new ICD–9–CM 

code requests for an April 1, 2008 

update. Therefore, Version 25.0 of the 

MS–DRG GROUPER software 

established in the FY 2008 IPPS final 

rule with comment period will continue 

to be effective until October 1, 2008. 

Moreover, the MS–LTC–DRGs and 

relative weights for FY 2008 established 

in Table 11 of that same IPPS final rule 

with comment period (78 FR 48143 

through 48157) will continue to be 

effective until October 1, 2008 (just as 

they would have been even if there had 

been any new ICD–9–CM code requests 

for an April 1, 2008 update). We note 

that Table 11 was corrected in the FY 

2008 IPPS correction notice that 

appeared in the October 10, 2007 

Federal Register (72 FR 57733) and is 

hereinafter referred to as the second FY 

2008 IPPS correction notice. 

Accordingly, Table 3 in the Addendum 

of this final rule lists the MS–LTC–

DRGs and their respective relative 

weights, geometric ALOS and ‘‘ShortStay Outlier Threshold’’ that we will 

continue to use for the period of July 1, 

2008 through September 30, 2009. (As 

noted above, this table is the same as 

Table 11 of the Addendum to the FY 

2008 IPPS final rule with comment 

period, including the technical 

correction made in the second FY 2008 

IPPS correction notice (72 FR 57733), 

which has been reprinted in Table 3 of 

the Addendum of this final rule for the 

reader’s convenience.) 

The next proposed update to the ICD–

9–CM coding system was presented in 

the FY 2009 IPPS proposed rule (and 

there were no April 1, 2008 updates to 

the ICD–9–CM coding system). In 

addition, the proposed MS–DRGs and 

GROUPER for FY 2009 that would be 

used for the IPPS and the LTCH PPS, 

effective October 1, 2008, and the 

proposed update to the MS–LTC–DRG 

relative weights for FY 2009 were 

presented in the recently published 

IPPS FY 2009 proposed rule (see 73 FR 

23590 through 23608). The proposed 

MS–LTC–DRGs and their respective 

proposed relative weights, geometric 

ALOS and ‘‘Short-Stay Outlier 

Threshold’’ that would be effective 

October 1, 2008 through September 30, 

2009 are presented in Table 11 to the 

Addendum of the FY 2009 IPPS 

proposed rule (73 FR 23891 through 

23905). 

IV. Changes to the LTCH PPS Payment 

Rates and Other Changes for the 2009 

LTCH PPS Rate Year 

A. Overview of the Development of the 

Payment Rates 

The LTCH PPS was effective 

beginning with a LTCH’s first cost 

reporting period beginning on or after 

October 1, 2002. Effective with that cost 

reporting period, LTCHs are paid, 

during a 5-year transition period, a total 

LTCH prospective payment that is 

comprised of an increasing proportion 

of the LTCH PPS Federal rate and a 

decreasing proportion based on 

reasonable cost-based principles, unless 

the hospital makes a one-time election 

to receive payment based on 100 

percent of the Federal rate, as specified 

in § 412.533. New LTCHs (as defined at 

§ 412.23(e)(4)) are paid based on 100 

percent of the Federal rate, with no 

phase-in transition payments. 

The basic methodology for 

determining LTCH PPS Federal 

prospective payment rates is set forth at 

§ 412.515 through § 412.536. In this 

section, we discuss the factors that 

would be used to update the LTCH PPS 

standard Federal rate for the 2009 LTCH 

PPS rate year that would be effective for 

LTCH discharges occurring on or after 

July 1, 2008 through September 30, 

2009. When we implemented the LTCH 

PPS in the August 30, 2002 LTCH PPS 

final rule (67 FR 56029 through 56031), 

we computed the LTCH PPS standard 

Federal payment rate for FY 2003 by 

updating the latest available (FY 1998 or 

FY 1999) Medicare inpatient operating 

and capital cost data, using the 

excluded hospital market basket. 

Section 123(a)(1) of the BBRA 

requires that the PPS developed for 

LTCHs be budget neutral for the initial 

year of implementation. Therefore, in 

calculating the standard Federal rate 

under § 412.523(d)(2), we set total 

estimated LTCH PPS payments equal to 

estimated payments that would have 

been made under the reasonable costbased payment methodology had the 

LTCH PPS not been implemented. 

Section 307(a)(2) of the BIPA specified 

that the increases to the target amounts 

and the cap on the target amounts for 

LTCHs for FY 2002 provided for by 

section 307(a)(1) of the BIPA shall not 

be considered in the development and 

implementation of the LTCH PPS. 

Section 307(a)(2) of the BIPA also 

specified that enhanced bonus 

payments for LTCHs provided for by 

section 122 of BBRA were not to be 

taken into account in the development 

and implementation of the LTCH PPS. 

Furthermore, as specified at 

§ 412.523(d)(1), the initial standard 

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Federal rate was reduced by an 

adjustment factor to account for the 

estimated proportion of outlier 

payments under the LTCH PPS to total 

estimated LTCH PPS payments (8 

percent). For further details on the 

development of the FY 2003 standard 

Federal rate, see the August 30, 2002 

LTCH PPS final rule (67 FR 56027 

through 56037), and for subsequent 

updates to the LTCH PPS Federal rate, 

refer to the following final rules: RY 

2004 LTCH PPS final rule (68 FR 34134 

through 34140), RY 2005 LTCH PPS 

final rule (69 FR 25682 through 25684), 

RY 2006 LTCH PPS final rule (70 FR 

24179 through 24180), RY 2007 LTCH 

PPS final rule (71 FR 27819 through 

27827), and RY 2008 LTCH PPS final 

rule (72 FR 26870 through 27029). 

B. Consolidation of the Annual Updates 

for Payment and MS–LTC–DRG Relative 

Weights to One Annual Update 

In the August 30, 2002 final rule 

implementing the LTCH PPS, we 

established a schedule at § 412.535 for 

publishing information pertaining to the 

LTCH PPS. That schedule set a 

publication date of ‘‘on or before August 

1 prior to the beginning of each Federal 

Fiscal Year (FFY),’’ which coincided 

with the statutorily mandated 

publication schedule for the IPPS (67 FR 

55954). In the June 6, 2003 LTCH PPS 

final rule, we revised this schedule in 

§ 412.535 to provide that 

‘‘(a) Information on the unadjusted Federal 

payment rates and a description of the 

methodology and data used to calculate the 

payment rates are published on or before 

May 1 prior to the start of each long-term care 

hospital prospective payment system rate 

year which begins July 1, unless for good 

cause it is published after May 1, but before 

June 1. 

(b) Information on the LTC–DRG 

classification and associated weighting 

factors is published on or before August 1 

prior to the beginning of each Federal fiscal 

year.’’

At the time, we explained that the 

LTC–DRG patient classifications used 

by the LTCH PPS for FY 2003 are based 

directly on the same version of DRGs 

used by the IPPS, that is, Grouper 20 (68 

FR 34126). As discussed above in 

section III of this final rule, effective for 

LTCH PPS discharges occurring on or 

after October 1, 2007, all references to 

LTC–DRGs and DRGs in the existing 

regulations are understood to represent 

MS–LTC–DRGs. This is addressed in the 

regulations at § 412.503. Therefore, we 

did not make any changes to the timing 

for the annual update for LTC–DRG 

classifications and relative weights. The 

annual update to the DRG classifications 

and relative weights continues to be 

published on a FFY cycle, as is the 

update of the acute care hospital IPPS 

DRG system. In changing the payment 

rate update schedule for the LTCH PPS, 

it was our intent to avoid concurrent 

publications of the annual updates for 

these two significant payment systems 

for purposes of administrative feasibility 

and efficiency. With this in mind, we 

changed the effective date for the annual 

update of the LTCH PPS payment rate 

from October 1 to July 1 of each year 

beginning with July 1, 2003. We 

believed this change would help use our 

limited resources effectively and 

facilitate a timely publication of both 

the IPPS and LTCH PPS proposed and 

final rules. Thus, currently the annual 

update of the LTCH PPS Federal rates 

does not coincide with the start of the 

FFY, but rather, are effective prior to the 

Federal FY. 

In the RY 2009 LTCH PPS proposed 

rule (73 FR 5351 through 5352), we 

proposed a change to the current 

schedule for the annual updates of the 

LTCH PPS Federal payment rates to 

consolidate the rulemaking cycle for the 

annual update of the LTCH PPS. Under 

our proposed policy, the annual update 

to the LTCH PPS Federal payment rates 

along with the description of the 

methodology and data used to calculate 

these payment rates, and the annual 

updating of the MS–LTC–DRG 

classifications and associated weighting 

factors for LTCHs would occur on the 

same schedule and appear in the same 

publication. Therefore, under our 

proposed policy, the updates to the rates 

and the weights would both be effective 

on October 1 (on a Federal fiscal year 

schedule). Consequently, under this 

proposal the annual updates to the 

LTCH PPS Federal rates would no 

longer be published with a July 1 

effective date. 

We received several comments on our 

proposal to consolidate the annual 

payment rate and MS–LTC–DRG update 

schedules of the LTCH PPS to an 

October 1 through September 30 cycle, 

which are summarized below. 

Comment: A large number of 

commenters, including MedPAC, agree 

with and strongly support our proposal 

to consolidate the LTCH rulemaking 

cycle to a single, annual rulemaking that 

corresponds with the IPPS annual 

update effective October 1 each year. In 

addition, many of these same 

commenters endorsed our proposal to 

extend the 2009 rate year by 3 months, 

allowing for a 15-month rate period 

(July 1, 2008 through September 30, 

2009), rather than having a 3-month 

period followed by a 12-month rate year 

to transition from a July 1 to an October 

1 update cycle. Commenters considered 

this proposal to be a reasonable one, and 

that a 15-month rate year would create 

an appropriate transition to an October 

1 update by allowing for stability in the 

LTCH PPS payment rates. Commenters 

noted that a 3-month rate year followed 

by a 12-month rate year would be 

unduly burdensome. We received no 

comments in opposition to our proposal 

to consolidate the LTCH rulemaking 

cycles. However, we received many 

comments on our proposed update to 

the Federal rate for the 15-month RY 

2009. One commenter suggested that 

CMS should include an inflationary 

update to address the 3 additional 

months. 

Although supportive of the proposal 

to consolidate the LTCH rulemaking 

cycles to be effective October 1, two 

commenters expressed concern that 

CMS had not provided a description of 

how this combined rulemaking would 

be accomplished. Other commenters 

believe that there could be confusion 

between LTCH PPS payment policy 

changes and IPPS payment policy 

changes if the annual rulemaking for the 

LTCH PPS were to be combined with 

the annual IPPS rulemaking. 

Consequently, these commenters 

recommended that the LTCH PPS rule 

be issued either separately from the 

IPPS rule or as a separate component 

within the IPPS rule to allow for easier 

accessibility and the ability to more 

accurately assess policy impacts on the 

LTCH PPS. 

Response: We appreciate the positive 

responses to our proposal to consolidate 

the annual July 1 update for payment 

rates and the October 1 update for MS–

LTC–DRG weights to a single annual 

update effective October 1, as well as 

the positive responses with regard to 

our proposal to extend the 2009 rate 

year for another 3 months; that is, from 

July 1, 2008 to September 30, 2009. We 

are finalizing these provisions in this 

final rule. 

In response to several commenters’

concerns that we had not provided 

sufficient details concerning the 

consolidation; that is, the manner in 

which we actually plan to produce the 

documents for the annual rulemaking 

for the LTCH PPS relative to the annual 

IPPS rulemaking, we are continuing to 

evaluate the commenters’ suggestions 

concerning whether the LTCH PPS 

proposed and final rules should be 

included as part of the proposed and 

final IPPS publications or whether it 

would be more appropriate for there to 

be two separate publications—one for 

the proposed and final IPPS rules and 

the other for the proposed and final 

LTCH PPS rules. Any decision that we 

make must take into consideration many 

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factors, including administrative 

feasibility and budgetary impact, that 

would affect the development and 

production of the annual rulemaking for 

the LTCH PPS and the IPPS. We do 

want to emphasize, however, that if the 

decision is made to produce the LTCH 

PPS rulemaking and the IPPS 

rulemaking in the same ‘‘package,’’ we 

would make every effort to clearly 

identify the LTCH PPS sections and 

differentiate those from the sections that 

only deal with the IPPS to avoid any 

confusion between LTCH PPS payment 

policy changes and IPPS payment 

policy changes. (We note that each of 

our regulations includes a title and a 

summary of its contents so the public 

can easily identify the material that 

applicable to LTCHs, including any 

material in a combined IPPS/LTCH PPS 

package. We also note that presently we 

publish the annual update to the MS–

LTC–DRG classifications and relative 

weights as well as other payment policy 

changes to excluded IPPS hospitals 

(such as HwHs) in the IPPS proposed 

and final rules with no discernible 

confusion on the part of the public. 

Therefore, we believe the public would 

be able to easily recognize those 

portions of a combined package that 

pertain to the LTCH PPS. 

In response to the commenter who 

suggested that we include an 

inflationary update to address the 3 

additional months for purposes of the 

consolidation, we would note that this 

issue is discussed in the summary of the 

comments and responses on the 

proposed 15-month RY 2009 market 

basket estimate in section IV.C. of the 

preamble of this final rule. The 

summary of the comments and 

responses on our proposed update to the 

Federal rate for the 15-month RY 2009 

can be found in section IV.E.2. of this 

preamble. 

After reviewing the public comments, 

we are finalizing our proposal to change 

the current schedule for the annual 

updates of the LTCH PPS Federal 

payment rates in this final rule. We are 

consolidating the rulemaking cycle for 

the annual update of the LTCH PPS 

Federal payment rates and description 

of the methodology and data used to 

calculate these payment rates, with the 

annual updating of the MS–LTC–DRG 

classifications and associated weighting 

factors for LTCHs so that the updates to 

the rates and the weights would both be 

effective on October 1 each Federal 

fiscal year. Under this change, the 

annual updates to the LTCH PPS 

Federal rates would no longer be 

published with a July 1 effective date. 

We believe that it is important to note 

that our revision to the existing 

rulemaking cycle is a result of 

comments on prior rules, as well as 

recent input from the LTCH industry, as 

well as consideration of our resources. 

After further consideration of those 

comments and concerns, we agree that 

having the effective date of the annual 

update of the LTCH PPS Federal 

payment rates on July 1 of each year 

while retaining the October 1 effective 

date for updating LTC–DRG 

classifications and weights has proved 

both burdensome and time-consuming 

for all parties involved. We are aware 

that a consolidated update that we are 

finalizing will be resource intensive, but 

it will eliminate some duplicative 

resource use. For example, some of our 

resources used for the payment 

simulations that are used to estimate 

LTCH PPS payments for purposes of the 

respective impact analyses are 

duplicated for the annual LTCH PPS 

rate update and the annual MS–LTC–

DRG update. Furthermore, the data used 

for LTCH PPS payment rate update 

impact analysis are also used in the 

annual MS–LTC–DRG. This 

consolidation of the rulemaking cycle 

will allow us to use the same 

information simultaneously for both 

these analyses. Moreover, we 

understand the concern that there are 

increased costs involved in updating the 

billing systems of LTCHs to 

accommodate two separate updates, one 

for the Federal rate and one for the DRG 

weights, in the same cost reporting 

period. We also considered the 

possibility that two separate updates 

could increase the potential for 

calculating payment errors under the 

LTCH PPS. 

In order to revise the payment rate 

update to an October 1 through 

September 30 period, as proposed, we 

will extend the 2009 rate period to 

September 30, 2009 such that RY 2009 

will be 15 months. This 15-month rate 

period will extend from July 1, 2008 

through September 30, 2009. We believe 

that the additional 3 months to RY 2009 

(July, August, and September) will 

provide for a smooth transition to a 

consolidated annual update for both the 

LTCH PPS payment rates and the LTCH 

PPS MS–LTC–DRG classifications and 

weighting factors. (When we developed 

this proposed policy, we considered the 

alternative of revising the payment rate 

update to an October 1 through 

September 30 period by shortening RY 

2009 such that it would only be 3 

months (that is, July 1, 2008 through 

September 30, 2008). We decided that 

this option would prove to be both 

burdensome and time consuming 

resulting in two payment rate changes 

within a very short (3-month) period of 

time.) 

After the 2009 rate period, the rate 

period for the LTCH PPS payment rate 

and other policy changes will be 

October 1 through September 30, and 

the annual update to the MS–LTC–DRG 

classifications and relative weights will 

continue to be effective on October 1. 

The October through September rate 

period will first begin on October 1, 

2009, therefore, the next update to the 

LTCH PPS Federal rates after the 15- 

month RY 2009 will be for RY 2010. We 

note that, once the annual LTCH PPS 

rate update cycle moves to October 1 

effective October 1, 2009, the LTCH PPS 

rate year will coincide with Federal FY 

beginning in 2010. 

In this final rule, we are finalizing our 

proposed revisions to § 412.503 to 

redefine the LTCH PPS’ rate year to 

mean October 1 through September 30, 

rather than from July 1 through June 30. 

We are also revising § 412.535 to reflect 

the change to the annual payment rate 

update cycle described above. The 

discussion of the 15-month market 

basket update for the 2009 rate year can 

be found below in sections IV.C.2.of this 

final rule. 

C. LTCH PPS Market Basket 

1. Overview of the Rehabilitation, 

Psychiatric and Long-Term Care (RPL) 

Market Basket 

Historically, the Medicare program 

has used a market basket to account for 

price increases in the services furnished 

by providers. The market basket used 

for the LTCH PPS includes both 

operating and capital-related costs of 

LTCHs because the LTCH PPS uses a 

single payment rate for both operating 

and capital-related costs. The 

development of the initial LTCH PPS 

standard Federal rate for FY 2003, using 

the excluded hospital with capital 

market basket, is discussed in further 

detail in the August 30, 2002 LTCH PPS 

final rule (67 FR 56027 through 56033). 

In the August 30, 2002 final rule (67 

FR 56016 through 56017 and 56030), 

which implemented the LTCH PPS, we 

established the use of the excluded 

hospital with capital market basket as 

the LTCH PPS market basket. The 

excluded hospital with capital market 

basket was also used to update the 

limits on LTCHs’ operating costs for 

inflation under the TEFRA reasonable 

cost-based payment system. We 

explained that we believe the use of the 

excluded hospital with capital market 

basket to update LTCHs’ costs for 

inflation was appropriate because the 

excluded hospital market basket (with a 

capital component) measures price 

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increases of the services furnished by 

excluded hospitals, including LTCHs. 

For further details on the development 

of the excluded hospital with capital 

market basket, see the RY 2004 LTCH 

PPS final rule (68 FR 34134 through 

34137). 

In the RY 2007 LTCH PPS final rule 

(71 FR 27810), we noted that based on 

our research, we did not develop a 

market basket specific to LTCH services. 

We are still unable to create a separate 

market basket specifically for LTCHs 

due to the small number of facilities and 

the limited amount of data that is 

reported (for instance, only 

approximately 15 percent of LTCHs 

reported contract labor cost data for 

2002). In that same final rule, under the 

broad authority conferred upon the 

Secretary by section 123 of the BBRA as 

amended by section 307(b) of the BIPA, 

we adopted the RPL market basket as 

the appropriate market basket of goods 

and services under the LTCH PPS for 

discharges occurring on or after July 1, 

2006. Specifically, beginning with the 

2007 LTCH PPS rate year, for the LTCH 

PPS, we adopted the use of the RPL 

market basket which is based on FY 

2002 cost report data. We choose to use 

the FY 2002 Medicare cost report data 

because it was the most recent, 

relatively complete cost data for 

inpatient rehabilitation facilities (IRFs), 

inpatient psychiatric facilities (IPFs), 

and LTCHs available at the time of 

rebasing. 

The RPL market basket is determined 

based on the operating and capital costs 

of IRFs, IPFs and LTCHs. All IRFs are 

currently paid under the IRF PPS 

Federal payment rate, all LTCHs are 

currently paid 100 percent of the 

standard Federal rate under the LTCH 

PPS, and most IPFs are transitioning to 

payment based on 100 percent of the 

Federal per diem payment amount 

under the IPF PPS. Payments to IPFs 

will be based exclusively on 100 percent 

of the Federal rate for cost reporting 

periods beginning on or after January 1, 

2008. As we explained in that same 

final rule, we believe a market basket 

based on the data of IRFs, IPFs and 

LTCHs is appropriate to use under the 

LTCH PPS since it is the best available 

data that reflects the cost structures of 

LTCHs. 

For further details on the 

development of the RPL market basket, 

including the methodology for 

determining the operating and capital 

portions of the RPL market basket, see 

the RY 2007 LTCH PPS final rule (71 FR 

27810 through 27817). 

2. Market Basket Estimate for the 2009 

LTCH PPS Rate Year 

As discussed in greater detail above in 

this section, for the 2009 LTCH PPS rate 

year, we are consolidating the current 

LTCH PPS rate year (payment rates and 

other policy changes) update and fiscal 

year MS–LTC–DRG update into one 

annual update cycle. Therefore, the next 

payment rate update cycle would be 

effective July 1, 2008 through September 

30, 2009 extending the next rate year 

update by 3 months representing a 15- 

month period for the RY 2009 rate. 

Accordingly, for the 2009 LTCH PPS 

rate year, we proposed to use a 15- 

month (that is, July 1, 2008 through 

September 30, 2009) estimate of the RPL 

market basket based on the best 

available data. 

Consistent with our historical 

practice, we estimate the RPL market 

basket update based on Global Insight, 

Inc.’s forecast using the most recent 

available data. Global Insight, Inc. is a 

nationally recognized economic and 

financial forecasting firm that contracts 

with CMS to forecast the components of 

CMS’ market baskets. To determine a 

15-month market basket update for RY 

2009, as we discussed in the proposed 

rule, we calculate the 5-quarter moving 

average index level for July 1, 2008 

through September 30, 2009 and the 4- 

quarter moving average index level for 

July 1, 2007 through June 30, 2008. The 

percent change in these two values 

represents the 15-month market basket 

update. 

In the RY 2009 proposed rule (73 FR 

5352), based on Global Insight’s 4th 

quarter 2007 forecast with history 

through the 3rd quarter of 2007, we 

proposed a 15-month market basket 

estimate of 3.5 percent for the proposed 

15-month 2009 LTCH PPS rate year. In 

that same proposed rule, we also 

proposed that if more recent data were 

available, we would use it to determine 

the RY 2009 market basket update in the 

final rule. Consistent with our historical 

practice to use the most recent estimate 

of the RPL market basket available for 

the final rule, the most recent estimate 

of the RPL market basket for July 1, 2008 

through September 30, 2009, based on 

Global Insight’s 1st quarter 2008 forecast 

with history through the 4th quarter of 

2007, is 3.6 percent. As we proposed 

and as noted above, we determine this 

15-month market basket update by 

calculating the 5-quarter moving average 

index level for July 1, 2008 through 

September 30, 2009 and the 4-quarter 

moving average index level for July 1, 

2007 through June 30, 2008. The percent 

change in these two values represents 

the 15-month market basket update for 

RY 2009. We note that, based on the 

most recent available data, if we were 

not consolidating the two annual LTCH 

PPS payment system updates by 

extending the 2009 LTCH PPS rate year 

by 3 months, the market basket estimate 

for a 12-month RY 2009 is 3.2 percent, 

based on the most recent estimate of the 

12-month RPL market basket for July 1, 

2008 through June 30, 2009. We 

determined this 12-month market basket 

estimate based on the method stated in 

the proposed rule (see 73 FR 5353). 

Comment: We received one comment 

on the 15-month market basket estimate 

for RY 2009 that we presented in the 

proposed rule, which suggested that the 

proposed market basket update for RY 

2009 does not include an inflationary 

update factor to address the additional 

3 months that would result from the 

proposal to extend the 2009 rate year 

through September 30, 2009. 

Response: We disagree with the 

comment that the proposed market 

basket update of 3.5 percent does not 

reflect the entire 15-month period. The 

proposed RY 2009 3.5 percent market 

basket estimate as well as the RY 2009 

3.6 percent market basket estimate we 

are establishing in this final rule as 

based on the forecasted increase in the 

LTCH PPS market basket (that is, the 

RPL market basket) to account for 

projected inflation for the entire 15- 

month RY 2009, which includes the 

additional 3 months that results from 

extending RY 2009 to move the annual 

rate update period from July 1 to 

October 1. As discussed in the proposed 

rule (73 FR 5352) and as reiterated 

above, we determined the 15-month 

market basket by calculating two 

average index levels: (1) the 5-quarter 

moving average index level for July 1, 

2008 through September 30, 2009; and 

(2) the 4-quarter moving average index 

level for July 1, 2007 through June 30, 

2008. The percent change in these two 

values represents the 15-month market 

basket estimate. By including the 3- 

month period of July 1, 2009 through 

September 30, 2009 in the first average 

index level calculated, we are capturing 

inflationary pressures for these 3 

months. In comparison, if we were 

calculating only a 12-month market 

basket estimate for the period July 1, 

2008 through June 30, 2009, we instead 

would calculate the 4-quarter moving 

average index level for July 1, 2008 

through June 30, 2009 and the 4-quarter 

moving average index level for July 1, 

2007 through June 30, 2008. The percent 

change in these two values represents 

the 12-month market basket estimate. 

Therefore, after our review of the public 

comments, we are finalizing the 15- 

month RPL market basket update of 3.6 

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percent for RY 2009, based on Global 

Insight’s 1st quarter 2008 forecast. The 

update to the standard Federal rate for 

RY 2009 is discussed below in section 

IV.E. of this preamble. 

D. One-time Prospective Adjustment to 

the Standard Federal Rate 

As we discussed in the August 30, 

2002 LTCH PPS final rule (67 FR 

56027), consistent with the statutory 

requirement for budget neutrality in 

section 123(a)(1) of the BBRA, we 

estimated aggregate payments under the 

LTCH PPS for FY 2003 to be equal to the 

estimated aggregate payments that 

would be made if the LTCH PPS were 

not implemented. Our methodology for 

estimating payments for purposes of the 

budget neutrality calculations used the 

best available data at the time and 

necessarily reflected several 

assumptions including costs, inflation 

factors and intensity of services 

provided. In conducting our budget 

neutrality calculations, we took into 

account the statutory requirement that 

certain statutory provisions that affect 

the level of payments to LTCHs in years 

prior to the implementation of the LTCH 

PPS shall not be taken into account in 

the development and implementation of 

the LTCH PPS. Specifically, section 

307(a)(2) of the BIPA requires that the 

increases to the target amounts and the 

increases to the cap on the target 

amounts for LTCHs provided for by 

section 307(a)(1) of the BIPA (as set 

forth in section 1886(b)(3)(J) of the Act) 

and the enhanced bonus payments for 

LTCHs provided for by section 122 of 

the BBRA (as set forth in section 

1886(b)(2)(E) of the Act) are not to be 

taken into account in the development 

and implementation of the LTCH PPS. 

We have been monitoring payment 

data in order to evaluate whether there 

is a significant difference between the 

payments estimated on the basis of the 

data available at the time of the August 

30, 2002 LTCH PPS final rule (67 FR 

56027 through 56037) and payment 

estimates based on more complete data 

that have become available since that 

time. We indicated from the inception 

of the LTCH PPS that it was possible for 

the aggregate amount of actual payments 

in FY 2003 to be significantly higher or 

lower than the estimates on which the 

budget neutrality calculations were 

based to the extent that later, more 

complete data differ significantly from 

the data that were available at the time 

of the original calculations. 

Section 123(a)(1) of the BBRA, as 

amended by section 307(b) of BIPA, 

provides broad authority to the 

Secretary in developing the LTCH PPS, 

including the authority for establishing 

appropriate adjustments. Under this 

broad authority to make appropriate 

adjustments, we provided in 

§ 412.523(d)(3) of the regulations, for the 

possibility of making a one-time 

prospective adjustment to the LTCH 

PPS rates by July 1, 2008, so that the 

effect of any significant difference 

between actual payments and estimated 

payments for the first year of the LTCH 

PPS would not be perpetuated in the 

LTCH PPS rates for future years. 

In the RY 2009 LTCH PPS proposed 

rule (72 FR 5353), based on the best 

available data at that time, we estimated 

that total Medicare program payments 

for LTCH services over the next 5 LTCH 

PPS rate years would be $4.67 billion 

for the 2009 LTCH PPS rate year; $4.82 

billion for the 2010 LTCH PPS rate year; 

$5.06 billion for the 2011 LTCH PPS 

rate year; $5.36 billion for the 2012 

LTCH PPS rate year; and $5.73 billion 

for the 2013 LTCH PPS rate year. 

In this final rule, consistent with the 

methodology established in the August 

30, 2002 final rule (67 FR 56036), and 

based on the most recent available data, 

for the readers benefit, we are providing 

an estimate of total Medicare program 

payments for LTCH services for the next 

5 LTCH PPS rate years in Table I. These 

estimates take into account the effects of 

changes as a result of the recent 

Medicare, Medicaid, and SCHIP 

Extension Act of 2007. 

TABLE I 

LTCH PPS rate year 

Estimated 

payments 

($ in billions) 

2009 ...................................... 4.78 

2010 ...................................... 4.99 

2011 ...................................... 5.14 

2012 ...................................... 5.36 

2013 ...................................... 5.67 

In accordance with the methodology 

established in the August 30, 2002 

LTCH PPS final rule (67 FR 56027 

through 56037), these estimates are 

based on the most recent available data. 

These estimates are also based on our 

estimate of LTCH PPS rate year 

payments to LTCHs using CMS’ Office 

of the Actuary’s (OACT) most recent 

estimate of the RPL market basket, 

which is based on information from 

Global Insight, Inc., of 3.2 percent for 

the 2009 LTCH PPS rate year, 2.9 

percent for the 2010 LTCH PPS rate 

year, 3.0 percent for the 2011 LTCH PPS 

rate year, and 3.2 percent for the 2012 

and 2013 LTCH PPS rate years. We note 

that while the provisions in the MMSEA 

are current law and OACT develops its 

spending projections based on existing 

policy, changes that are being adopted 

in this final rule, are not considered to 

be existing policy and therefore, are not 

shown in Table I. We also considered 

OACT’s most recent projections of 

changes in Medicare beneficiary 

enrollment of ¥0.3 percent in the 2009 

LTCH PPS rate year, 0.2 percent in the 

2010 LTCH PPS rate year, 0.5 percent in 

the 2011 LTCH PPS rate year, 1.5 

percent in the 2012 LTCH PPS rate year 

and, 2.5 percent in the 2013 LTCH PPS 

rate year. It is important to note that, 

while we provide these estimates of 

future payments under the LTCH PPS in 

order to provide the public with a 

projected estimate of payments to 

LTCHs, these estimates will be neither 

the basis for determining whether the 

one-time budget neutrality adjustment 

available under § 412.523(d)(3) of the 

regulations should be proposed, nor are 

these estimates the basis for any of the 

policy changes adopted in this final 

rule. It is also important to note that any 

proposal regarding the one-time budget 

neutrality adjustment would be based 

solely on the data that would be 

available at the time of the proposal, 

rather than on projections of payments 

under LTCH PPS for future years. 

In the August 30, 2002 LTCH PPS 

final rule implementing the LTCH PPS 

(67 FR 55954), we set forth the 

implementing regulations, based upon 

the broad authority granted to the 

Secretary, under section 123 of the 

BBRA (as amended by section 307(b) of 

the BIPA). Section 123(a)(1) of the 

BBRA required that the system 

‘‘maintain budget neutrality.’’ The 

statute requires the LTCH PPS to be 

budget neutral in FY 2003, so that 

estimated aggregate payments under the 

LTCH PPS for FY 2003 should be equal 

to the estimated aggregate payments that 

would be made if the LTCH PPS were 

not implemented for FY 2003. The 

methodology for determining the LTCH 

PPS standard Federal rate for FY 2003 

that would ‘‘maintain budget neutrality’’

is described in considerable detail in the 

August 30, 2002 final rule (67 FR 56027 

through 56037). As we discussed 

previously in this section, our 

methodology for estimating payments 

for the purposes of budget neutrality 

calculations used the best available 

data, and necessarily reflected 

assumptions in estimating aggregate 

payments that would be made if the 

LTCH PPS was not implemented. In the 

August 30, 2002 final rule, we also 

stated our intention to monitor LTCH 

PPS payment data to evaluate whether 

later data varied significantly from the 

data available at the time of the original 

budget neutrality calculations (for 

example, data related to inflation 

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factors, intensity of services provided, 

or behavioral response to the 

implementation of the LTCH PPS). To 

the extent the later data significantly 

differ from the data employed in the 

original calculations, the aggregate 

amount of payments during FY 2003 

based on later data may be higher or 

lower than the estimates upon which 

the budget neutrality calculations were 

based. In that same final rule, the 

Secretary exercised his broad authority 

in establishing the LTCH PPS and 

provided for the possibility of a onetime prospective adjustment to the 

LTCH PPS rates by October 1, 2006, in 

§ 412.523(d)(3). This deadline was 

revised to July 1, 2008, in the RY 2007 

LTCH PPS final rule. As we discussed 

in the RY 2007 LTCH PPS final rule (71 

FR 27842 through 27844), because the 

LTCH PPS was only recently 

implemented, sufficient new data had 

not yet been generated that would 

enable us to conduct a comprehensive 

reevaluation of our budget neutrality 

calculations. Therefore, in that same 

final rule, we did not implement the 

one-time adjustment provided under 

§ 412.523(d)(3) so that the effect of any 

significant difference between actual 

payments and estimated payments for 

the first year of the LTCH PPS would 

not be perpetuated in the PPS rates for 

future years. However, we stated that we 

would continue to collect and interpret 

new data as it became available in order 

to determine whether we should 

propose such an adjustment in the 

future. Therefore, we revised 

§ 412.523(d)(3) by changing the original 

October 1, 2006 deadline (established in 

the August 30, 2002 final rule that 

implemented the LTCH PPS) to July 1, 

2008, to postpone the possible one-time 

adjustment due to the time lag in the 

availability of Medicare data upon 

which a proposed adjustment would be 

based. We noted that there is a lag time 

between the submission of claims data 

and cost report data, and the availability 

of that data in the MedPAR files and 

HCRIS, respectively. As also explained 

in that same final rule, we believed that 

postponing the deadline of the possible 

one-time prospective adjustment to the 

LTCH PPS rates provided for in 

§ 412.523(d)(3) to July 1, 2008, would 

allow our decisions regarding a possible 

adjustment to be based on more 

complete and up-to-date data. It should 

be noted that, in the years following the 

initial implementation of the LTCH PPS, 

we have already adopted some revised 

policies and adjustments to LTCH PPS 

payment levels. However, none of these 

revised policies and payment 

adjustments have addressed the 

intended purpose of the adjustment 

allowed under § 412.523(d)(3) of the 

regulations, to ensure that any 

significant difference between the 

original estimates and calculations 

based on more recent data are not 

perpetuated in the LTCH PPS rates for 

future years. For example, the 

adjustments that we have made to 

account for coding changes in excess of 

real severity increases in RY 2007 and 

RY 2008 were made to account for 

changes in coding behavior in the years 

following the implementation of the 

LTCH PPS, and not to address any issue 

regarding the budget neutrality 

calculations that were used to establish 

the base rate for the LTCH PPS. 

Section 114(c)(4) of MMSEA provides 

that the ‘‘Secretary shall not, for the 3- 

year period beginning on the date of the 

enactment of this Act, make the onetime prospective adjustment to longterm care hospital prospective payment 

rates provided for in § 412.523(d)(3) of 

title 42, Code of Federal Regulations, or 

any similar provision.’’ That provision 

delays the effective date of any one-time 

budget neutrality adjustment until no 

earlier than December 29, 2010. 

Therefore, we proposed to revise 

§ 412.523(d)(3) of the regulations to 

conform with this requirement. 

Comment: Several commenters 

supported the proposed change in 

§ 412.523(d)(3) of regulations to conform 

with the requirements of section 

114(c)(4) of MMSEA, delaying the 

effective date of any one-time budget 

neutrality adjustment until no earlier 

than December 29, 2010. A few 

commenter disagreed with the proposed 

change to § 412.523(d)(3) because it did 

not include a specific date after which 

time CMS would no longer be able to 

implement a one-time budget neutrality 

as is currently specified in the 

regulations (that is, July 1, 2008). These 

commenters believe that the lack of an 

‘‘end date’’ in the proposed change to 

§ 412.523(d)(3) leaves LTCHs in a 

perpetual state of uncertainty, and 

therefore, recommend that CMS should 

specify in the regulations a reasonable 

date beyond which this adjustment can 

be made. 

Response: We appreciate the 

commenters support of the proposed 

change in § 412.523(d)(3) to conform 

with the requirements of section 

114(c)(4) of MMSEA, delaying the 

effective date of any one-time budget 

neutrality adjustment until no earlier 

than December 29, 2010. We understand 

commenters’ concerns and agree that it 

is reasonable to include a date by which 

the one-time budget neutrality 

adjustment must be implemented in 

order to provide predictability in LTCH 

PPS payments. In taking into account 

the statutory requirement that any onetime budget neutrality adjustment can 

be effective no earlier than December 

29, 2010, and that annual updates to the 

LTCH PPS will be effective October 1 

each year (beginning October 1, 2009, as 

discussed above in section IV.B. of this 

preamble), we believe that October 1, 

2012 would allow us sufficient time 

after the statutorily required 3-year 

delay to develop, propose and finalize 

any one-time budget neutrality 

adjustment. Therefore, we are revising 

the regulations at § 412.523(d)(3) to 

delay the effective date of any one-time 

budget neutrality adjustment so that any 

such adjustment would be made no 

earlier than December 29, 2010, and no 

later than October 1, 2012. We believe 

that this date will allow adequate time 

to consider any additional comments 

that may arise after the MMSEA 3-year 

delay concerning the potential 

methodology we presented in the RY 

2009 proposed rule without postponing 

indefinitely into the future any proposal 

for making an adjustment. 

Prior to the enactment of the MMSEA, 

we had developed a methodology for 

evaluating whether to propose a onetime budget neutrality adjustment under 

§ 412.523(d)(3) of the regulations. In 

order to inform the public of our 

thinking, and to stimulate comments for 

our consideration during the 3-year 

delay in implementing any one-time 

budget neutrality adjustment under the 

law referenced above, we discussed our 

analysis and its results in the proposed 

rule (73 FR 5356 through 5360). 

Evaluating the appropriateness of a 

possible future proposal for a one-time 

prospective adjustment under 

§ 412.523(d)(3) required a thorough 

review of the relevant LTCH data, as we 

discussed in the proposed rule. When 

we established the FY 2003 standard 

Federal rate in a budget neutral manner, 

we used the most recent LTCH cost data 

available at that time (that is, FY 1999 

data), and trended that data forward to 

estimate what Medicare would have 

paid to LTCHs in FY 2003 under the 

TEFRA payment system if the PPS were 

not implemented for FY 2003 (67 FR 

56033). We subsequently conducted a 

thorough review of the most recent 

relevant data and discussed those 

findings in the RY 2009 proposed rule. 

At the time we drafted the proposed 

rule, cost data from FY 2002, 

representing the final year LTCHs were 

paid under the TEFRA payment system, 

had become available. The cost report 

data for FY 2002 is comprised of a high 

proportion of settled and audited cost 

reports submitted by LTCHs. We also 

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have acquired payment data on the first 

year of the LTCH PPS (that is, FY 2003). 

On the basis of our review of these data 

sources, we developed a potential 

methodology for determining whether 

the one-time adjustment available under 

§ 412.523(d)(3) of the regulations should 

be proposed. On the basis of this 

methodology, we also presented a 

potential method for computing an 

adjustment, if appropriate. Employing 

that methodology, our analysis 

indicated that a permanent budget 

neutrality adjustment factor of 0.9625 to 

the LTCH PPS standard Federal rate 

could be warranted. Consistent with the 

requirements of section 114(c)(4) of the 

recently enacted MMSEA, we did not 

propose any adjustment for the 

upcoming rate year. However, we 

invited public comment on the analysis 

which we presented in the proposed 

rule. We noted that we would consider 

these comments if and when we decide 

to propose an actual adjustment. We 

also noted that in the final rule, we 

would respond to any comments on the 

proposed changes to § 412.523(d)(3) of 

the regulations that would: (1) Specify 

the methodology for the one-time 

budget neutrality adjustment; and (2) 

implement the requirements of section 

114(c)(4) of Pub. L. 110–173, in the final 

rule. 

In order to determine whether a onetime budget neutrality adjustment could 

be warranted, it is necessary to estimate 

both aggregate payments under the 

LTCH PPS for FY 2003 and the 

estimated aggregate payments that 

would have been made under the 

TEFRA system in FY 2003 if the LTCH 

PPS were not implemented. While we 

know actual TEFRA payments to LTCHs 

for FY 2002, the last year of payment 

under that methodology, it is necessary 

to estimate what TEFRA payments 

would have been in FY 2003 if the new 

LTCH PPS had not been implemented. 

In developing the methodology for 

evaluating a one-time adjustment that 

we presented in the proposed rule, we 

considered whether we should employ 

actual FY 2003 costs to calculate 

estimated TEFRA payments for FY 2003 

or employ costs for FY 2002 trended 

forward to FY 2003 as the basis for the 

calculation. We noted that basing the 

estimate on actual FY 2003 costs would 

avoid the need to employ any factor to 

update costs from FY 2002 to FY 2003. 

However, since FY 2003 was the first 

year of payment under the LTCH PPS, 

the cost experience of LTCHs in that 

year would reflect their response to the 

incentives provided by the new 

payment system, instead of reflecting 

behavior under the reasonable cost 

payment system. Indeed, 

implementation of an LTCH PPS should 

directly affect the behavior of LTCHs, 

and therefore, the level of costs in 

LTCHs. One of the incentives of a PPS 

is to improve efficiency in the delivery 

of care, which generally results in 

decreased cost per discharge. For this 

reason, employing FY 2003 costs 

directly could be a poor basis for 

estimating payments that ‘‘would have 

been made if the LTCH PPS were not 

implemented.’’ We indicated in the 

proposed rule that trending forward for 

1 year the costs incurred under the last 

year of the TEFRA payment system 

poses a smaller prospect for distortion 

than using costs incurred during the 

subsequent year, when the incentives 

faced by LTCHs to reduce costs could 

have had a significant effect. Therefore, 

we indicated that we believed it may be 

preferable to base our calculation of the 

estimated aggregate payments that 

would have been made if the LTCH PPS 

were not implemented (that is, 

estimated FY 2003 TEFRA payments) on 

FY 2002 costs, trended forward to FY 

2003 using the excluded hospital with 

capital market basket. And we noted in 

this context that some representatives of 

LTCHs had expressed concern that 

employing FY 2003 costs directly would 

provide a poor basis upon which to 

estimate payments that ‘‘would have 

been made if the LTCH PPS were not 

implemented’’ for precisely the reasons 

we have just discussed. We also noted 

that basing the estimate of FY 2003 

TEFRA payments on FY 2002 costs 

trended forward should satisfy these 

concerns. 

In determining whether a one-time 

budget neutrality adjustment could be 

warranted, we believe the estimate of 

the payments that would have been 

made in FY 2003 under the TEFRA 

methodology should be compared to 

estimated payments under the new 

LTCH PPS in FY 2003. The most direct 

way to determine payments under the 

new LTCH PPS, of course, is simply to 

aggregate the actual payments 

calculated under the LTCH PPS 

methodology for the discharges that 

occurred during the first year of the 

LTCH PPS (FY 2003). However, that 

approach raises an issue of consistency 

in the use of data. The discharges for 

which we paid under the LTCH PPS 

during FY 2003 are obviously not the 

same as the discharges for which costs 

were incurred during the last year of 

payment under the TEFRA 

methodology, FY 2002. For the reasons 

that we have just discussed, we stated 

in the proposed rule that we believed 

that the best way to estimate the TEFRA 

payments that would have been made to 

LTCHs during FY 2003 is to use inflated 

FY 2002 costs as a proxy for FY 2003 

costs. Comparing actual FY 2003 LTCH 

PPS payments to FY 2003 TEFRA 

payments estimated on the basis of FY 

2002 discharges would amount to a 

comparison between payments related 

to two different sets of discharges, 

potentially skewing the results. 

Therefore consistency suggests that, 

rather than comparing TEFRA payments 

based on FY 2002 costs updated to FY 

2003, to aggregate LTCH PPS payments 

for discharges that actually occurred in 

FY 2003, it would be preferable to 

compare estimated TEFRA payments 

based on updated FY 2002 costs to the 

estimated payments that would have 

been made under LTCH PPS 

methodology in FY 2003 for those same 

FY 2002 discharges. In other words, we 

believe that the best approach would be 

to compare—

• Estimated aggregate FY 2003 

TEFRA payments calculated on the 

basis of FY 2002 costs updated to FY 

2003; to 

• Estimated aggregate payments that 

would have been made in FY 2003 

under the LTCH PPS methodology, by 

applying the FY 2003 LTCH payment 

rules to the discharges that occurred in 

FY 2002. 

In this way, we would ensure that we 

are comparing the estimated FY 2003 

TEFRA payments, which are based on 

updated costs incurred for FY 2002 

discharges to the estimated PPS 

payments that would have been made 

for those same FY 2002 discharges 

under the new LTCH PPS payment 

methodology. 

Therefore, in the absence of the 

MMSEA, we stated in the proposed rule 

that we would have proposed to employ 

the general methodology we have just 

described to determine: (1) Whether the 

one-time adjustment available under 

§ 412.523(d)(3) of the regulations should 

be proposed for RY 2009, and (2) if such 

adjustment should be proposed, the 

actual proposed adjustment factor. In 

the proposed rule, we did propose to 

revise the current language of 

§ 412.523(d)(3) of the regulations to 

conform more accurately reflect the 

purpose of providing for a possible onetime budget neutrality adjustment. At 

the time of the final LTCH PPS rule in 

2002, we described the nature of the 

one-time adjustment in very general 

terms. Specifically, that section 

currently provides the following: 

The Secretary reviews payments under this 

prospective payment system and may make 

a one-time prospective adjustment to the 

long-term care hospital prospective payment 

system rates on or before July 1, 2008 so that 

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the effect of any significant difference 

between actual payments and estimated 

payments for the first year of the long term 

care hospital prospective payment system is 

not perpetuated in the prospective payment 

rates for future years. 

As we stated in the proposed rule, our 

policy objective in providing for this 

one-time budget neutrality adjustment 

has always been to ensure that 

computations based on the earlier, 

necessarily limited (but at that time best 

available) data available at the inception 

of the LTCH PPS would not be built 

permanently into the rates if data 

available at a later date could provide 

more accurate results. Prior to the 

thorough analysis we conducted in 

preparation for the RY 2009 proposed 

rule, we had believed that the 

appropriate method for meeting this 

policy objective involved comparing 

actual payment data from the first year 

of payment under the LTCH PPS to our 

earlier estimate of payments in the first 

year of the LTCH PPS. As we have just 

discussed, we determined that the most 

appropriate methodology for evaluating 

an adjustment to the original budget 

neutrality adjustment did not involve 

comparing the payments estimated in 

the original calculations against the 

‘‘actual payments * * * for the first 

year,’’ strictly speaking. Rather, as we 

discussed in the proposed rule, we 

believe that it is more appropriate to 

compare payments in the first year 

under the LTCH PPS to what payments 

would have been under the prior 

TEFRA rules for that year based on the 

best available data. As a result, under 

the broad authority of section 123 of the 

BBRA, as amended by section 307(b) of 

BIPA, to make appropriate adjustments 

to the LTCH PPS, we proposed to revise 

§ 412.523(d)(3) of the regulations. 

Furthermore, as discussed in the 

proposed rule, considerations of 

consistency and other factors suggest 

that the most appropriate comparison 

would employ an estimate of FY 2003 

LTCH PPS payments based on 

discharges from FY 2002. The cost 

incurred by LTCHs for those discharges 

would also be the basis for the best 

estimate of what would have been paid 

in FY 2003 under the TEFRA system. As 

we have discussed previously, we also 

proposed to revise that section of the 

regulations to correspond with the 

requirements of section 114(c)(4) of the 

Medicare, Medicaid, and SCHIP 

Extension Act of 2007. Specifically, we 

proposed to revise § 412.523(d)(3) of the 

regulations to read as follows: 

The Secretary reviews payments under this 

prospective payment system and may make 

a one-time prospective adjustment to the 

long-term care hospital prospective payment 

system rates no earlier than December 29, 

2010, so that the effect of any significant 

difference between the data used in the 

original computations and more recent data 

to determine budget neutrality is not 

perpetuated in the prospective payment rates 

for future years. 

Comment: One commenter objected to 

the proposed change in the regulation 

on the grounds that it does not truly 

reflect the methodology we discussed 

more clearly, especially since the 

proposed text of the regulation makes 

no mention of FY 2003, the first year of 

payments under the LTCH PPS. The 

commenter further objected that the 

phrases ‘‘data used in the original 

computations’’ and ‘‘more recent data to 

determine budget neutrality’’ in the 

proposed regulation text are imprecise. 

Response: We do not agree that the 

phrases ‘‘data used in the original 

computations’’ and ‘‘more recent data to 

determine budget neutrality’’ in the 

proposed regulation text are imprecise. 

The meanings of these terms are fully 

explained in the detailed account 

presented in the preamble to the 

proposed rule (73 FR 5354 through 

5360) of the methodology that we could 

employ in a proposal. We also clearly 

indicated in the preamble text that if we 

had proposed a one-time adjustment in 

the RY 2009 proposed rule, we would 

have used more recent data to estimate 

budget neutrality for the first year of the 

LTCH PPS, FY 2003. As we have also 

discussed, we indicated that we believe 

it is appropriate to use certain data 

elements from FY 2002, specifically FY 

2002 TEFRA costs and FY 2002 LTCH 

discharges, as the most effective and 

consistent way to estimate budget 

neutrality for FY 2003 while avoiding 

the potentially distorting effects of 

factors such as behavioral changes in 

the first year of the new payment 

system. However, we often avoid 

specifying precise data elements and 

other details of methodology in 

regulations text, and instead provide for 

the regulations to reflect in general but 

accurate terms the methodology to be 

employed. (Instead, we typically 

include a discussion of specific data 

elements and complex details of our 

methodology in the preamble where we 

can flesh out in greater detail the 

nuances of our policies.) The current 

regulations text is not consistent with 

the methodology we had developed as 

the best means to evaluate whether to 

propose an adjustment. Our proposed 

regulation text captured the concepts in 

general, but more accurate, terms. In 

response to this comment we are, 

however, revising the proposed 

regulation text to specify that the 

estimates of budget neutrality do indeed 

pertain to FY 2003, the first year of the 

LTCH PPS. As also discussed above, we 

are also revising the proposed 

regulations text to include a specific end 

date after which CMS would no longer 

consider implementing a one-time 

budget neutrality adjustment (that is, on 

or before October 1, 2012). In addition, 

the structure of the regulations text we 

are finalizing would work if we 

ultimately proposed to use FY 2002 data 

to estimate FY 2003 payments or if we 

would propose to use FY 2003 data. The 

final regulation text that we are 

adopting in this final rule will therefore 

read: 

The Secretary reviews payments under this 

prospective payment system and may make 

a one-time prospective adjustment to the 

long-term care hospital prospective payment 

system rates no earlier than December 29, 

2010 and by no later than October 1, 2012, 

so that the effect of any significant difference 

between the data used in the original 

computations of budget neutrality for FY 

2003 and more recent data to determine 

budget neutrality for FY 2003 is not 

perpetuated in the prospective payment rates 

for future years. 

Comment: Two commenters alleged 

that we had failed to provide data 

supporting the proposal of making a 

one-time prospective adjustment to the 

LTCH rates no earlier than December 29, 

2010. The commenters added that, 

without the ability to review the 

applicable data, the public cannot 

provide meaningful comment on this 

aspect of the proposed rule. 

Response: We did not actually 

propose to make a one-time prospective 

adjustment to the LTCH rates under 

§ 412.523(d)(3) in the proposed rule. As 

noted above, in the proposed rule we 

presented a potential methodology for 

determining whether the one-time 

adjustment available under 

§ 412.523(d)(3), could be warranted if 

we presented our analysis based on 

employing that method, and invited 

public comment on that analysis 

indicating that we would take such 

comments into account ‘‘if and when we 

decide to propose an actual adjustment’’

(see 73 FR 5354 and 5360). We did, 

however, propose to revise the 

regulations to provide that such an 

adjustment will not be made prior to 

December 29, 2010, as required by the 

MMSEA. We also described the 

potential methodology that we had 

developed prior to the passage of the 

MMSEA and revised the regulations text 

to be more consistent with the purpose 

of a one-time budget neutrality 

adjustment. 

We do not agree that the data we used 

in developing our estimate of a potential 

adjustment presented in the proposed 

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rule has been unavailable to 

commenters. We clearly identified our 

data sources in the proposed rule, for 

example, cost report data from the 

Hospital Cost Reporting Information 

System for FYs 1999 through 2003, and 

FY 2002 LTCH MedPAR data (see 73 FR 

5357 and 5359). We also described in 

great detail how we employed those 

data, including assumptions and 

adjustments that were necessary in 

developing a reasonable estimate. These 

data are readily available through our 

standard data request procedures that 

can be obtained by communication with 

our Office of Information Services (OIS). 

Information about obtaining MedPAR 

files and other Medicare data files is 

posted on the CMS Web page at: 

http://www.cms.hhs.gov/ 

FilesForOrderGenInfo/. Furthermore, we 

point out that other commenters were 

able to employ these and similar data 

sources to comment on the methodology 

that we discussed (in fact, one 

commenter commissioned an entire 

report on the ‘‘Assessment of the 

Proposed One-time Adjustment for Long 

Term Care Hospitals’’). Therefore, we 

disagree that the public lack the 

necessary data to provide meaningful 

comment on that informational aspect of 

the proposed rule. 

Our revision to § 412.523(d)(3) of the 

regulations would continue to provide 

that the Secretary may make a one-time 

adjustment to the LTCH PPS rates in 

order to ensure that any ‘‘significant’’

difference is not perpetuated in the 

LTCH PPS rates for future years. The 

regulation does not specifically define 

what constitutes a significant difference 

for this purpose. In the absence of 

section 114(c)(4) of the MMSEA, we 

would have proposed to consider as 

‘‘significant’’ any difference greater than 

or equal to a 0.25 percentage point 

difference between the original budget 

neutrality calculations and budget 

neutrality calculations based on the 

more recent data now available. This 

threshold avoids making an adjustment 

to account for very minor deviations 

between earlier and later estimates of 

budget neutrality. It is also consistent 

with thresholds that we have employed 

for similar purposes in prospective 

payment systems. For example, under 

the capital IPPS, we make a forecast 

error correction in the framework used 

to update the capital Federal rate if a 

previous forecast of input prices varies 

by at least a 0.25 percentage point from 

actual input price changes (72 FR 

47425). We do not believe that we 

should treat differences greater than or 

equal to 0.25 percent as not 

‘‘significant,’’ since the effect of any 

difference will be magnified as the rates 

are updated each year. 

As discussed previously, absent the 

requirement of section 114(c)(4) of the 

Medicare, Medicaid and SCHIP 

Extension Act of 2007, we would have 

proposed to use FY 2002 LTCH costs as 

a basis for estimating FY 2003 LTCH 

TEFRA payments in evaluating whether 

to propose a one-time prospective 

adjustment under § 412.523(d)(3). We 

also would have proposed to update the 

FY 2002 costs for inflation to FY 2003 

by our Office of the Actuary’s current 

estimate of the actual increase in the 

excluded hospital market basket from 

FY 2002 to FY 2003 of 4.2 percent. This 

updated amount would serve as the 

proxy for actual FY 2003 TEFRA costs 

in the proposed budget neutrality 

computation for purposes of 

§ 412.523(d)(3). We estimated FY 2003 

LTCH TEFRA payments using a 

methodology that is similar in concept 

to the methodology we used to estimate 

FY 2003 LTCH total payments under the 

TEFRA system when we determined the 

initial standard Federal rate in the 

August 30, 2002 final rule (67 FR 56030 

through 56033). We also made 

modifications to the methodology we 

initially used to estimate FY 2003 LTCH 

TEFRA payments because we are using 

data from a later period, as discussed in 

greater detail below. In general, we 

estimated total payments under the 

TEFRA payment system using the 

following steps: 

• Estimate each LTCH’s payment per 

discharge for inpatient operating costs 

under the TEFRA system for FY 2003; 

• Estimate each LTCH’s payment per 

discharge for capital-related costs for FY 

2003; and 

• Sum each LTCH’s estimated 

operating and capital payment per case 

to determine its estimated total FY 2003 

TEFRA payment system payment per 

discharge. In the proposed rule, we 

discussed each of these steps in detail 

(73 FR 5356–5359). 

Once we have estimated total TEFRA 

payments as the sum of each LTCH’s 

estimated operating and capital 

payment per case, it is also necessary to 

estimate FY 2003 payments under the 

LTCH PPS. We also discussed the 

method for making this estimate in the 

proposed rule (73 FR 5359 through 

5360). As the discussion in the 

proposed rule indicated, our analysis 

suggests that an adjustment of 3.75 

percent to the standard Federal rate may 

have been warranted. We expect to 

address the issue again when it is closer 

to the time section 114(c)(4) of the 

MMSEA permits us to implement a onetime adjustment under § 412.523(d)(3). 

In the meantime, we received a number 

of comments on the methodology that 

we have described. We also received a 

number of comments addressing the 

merits of implementing any one-time 

budget neutrality adjustment. As we 

stated in the proposed rule (73 FR 

5360), we will take these comments into 

account prior to proceeding with any 

proposal for a one-time budget 

neutrality adjustment on or after 

December 29, 2010, and we will 

consider them at the time when we 

develop such a proposal. 

E. Standard Federal Rate for the 2008 

LTCH PPS Rate Year 

1. Background 

At § 412.523(c)(3)(ii) of the 

regulations, for LTCH PPS rate years 

beginning RY 2004 through RY 2006, we 

updated the standard Federal rate by a 

rate increase factor to adjust for the most 

recent estimate of the increases in prices 

of an appropriate market basket of goods 

and services for LTCHs. We established 

the policy of annually updating the 

standard Federal rate because at that 

time we believed that was the most 

appropriate method for updating the 

LTCH PPS standard Federal rate 

annually for years after FY 2003. When 

we moved the date of the annual update 

of the LTCH PPS from October 1 to July 

1 in the RY 2004 LTCH PPS final rule 

(68 FR 34138), we revised 

§ 412.523(c)(3) to specify that for LTCH 

PPS rate years beginning on or after July 

1, 2003, the annual update to the 

standard Federal rate for the LTCH PPS 

would be equal to the previous rate 

year’s Federal rate updated by the most 

recent estimate of increases in the 

appropriate market basket of goods and 

services included in covered inpatient 

LTCH services. At that time, we 

believed that was the most appropriate 

method for updating the LTCH PPS 

standard Federal rate annually for years 

after RY 2004. 

In the RY 2007 LTCH PPS final rule 

(71 FR 27818), we explained that rather 

than solely using the most recent 

estimate of the LTCH PPS market basket 

as the basis of the update factor for the 

Federal rate for RY 2007, we believed 

that based on our ongoing monitoring 

activity, it was appropriate to adjust the 

Federal rate to account for the changes 

in coding practices (rather than patient 

severity). We established at 

§ 412.523(c)(3)(iii) of the regulations 

that the update to the standard Federal 

rate for the 2007 LTCH PPS rate year 

was zero percent. This was based on the 

most recent estimate of the LTCH PPS 

market basket at the time which was 

offset by an adjustment to account for 

changes in case-mix in prior periods 

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due to changes in coding practices 

rather than increased patient severity in 

FY 2004. Therefore, effective from July 

1, 2006 through June 30, 2007, the 

standard rate was $38,086.04 (71 FR 

27818). 

For the following year, we also 

considered changes in coding practices 

rather than patient severity in 

establishing the update to the Federal 

rate for the 2008 LTCH PPS rate year. In 

the RY 2008 final rule (72 FR 26887 

through 27890), we adjusted the Federal 

rate based on the most recent estimate 

of market basket (3.2 percent) and an 

adjustment to account for changes in 

coding practices (2.49 percent) in FY 

2005. Accordingly, we established at 

§ 412.523(c)(3)(iv) that the update to the 

standard Federal rate for RY 2008 was 

0.71 percent. Consequently, in the RY 

2008 final rule, we established the 

LTCH PPS standard Federal rate, 

effective from July 1, 2007 through June 

30, 2008, of $38,356.45 (see 72 FR 

26890). 

In the RY 2009 proposed rule, we 

mentioned that the newly enacted 

MMSEA contained a provision 

addressing the standard Federal rate for 

RY 2008 (73 FR 5360 through 5362). 

Specifically, section 114(e)(1) of Pub. L. 

110–173 adds a new subsection 

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

that the base rate for RY 2008 ‘‘shall be 

the same as the base rate for hospital 

discharges occurring during the rate 

year ending in 2007.’’ In addition, 

section 114(e)(2) of Pub. L. 110–173 

indicates that section 1886(m)(2) of the 

Act ‘‘shall not apply to discharges 

occurring on or after July 1, 2007, and 

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

9 months of RY 2008). We noted that the 

statute uses the term ‘‘base rate,’’ which 

is an undefined term in both section 

1886(m) of the Act and in 42 CFR Part 

412, subpart O. As we explained in the 

LTCH PPS RY 2009 proposed rule (73 

FR 5361), we are interpreting that term 

to be the standard Federal rate because 

we believe Congress meant to eliminate 

the 0.71 percent update from the RY 

2008 standard Federal rate. Under this 

interpretation, the standard Federal rate 

for RY 2008 would be the same as the 

standard Federal rate for RY 2007, that 

is, the 0.71 percent update finalized in 

the RY 2008 LTCH PPS final rule would 

be reversed. Therefore, we believe that 

the term ‘‘base rate’’ used in section 

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

standard Federal rate. In subsequent 

sections of this preamble, we are using 

the term ‘‘standard Federal rate’’ instead 

of ‘‘base rate’’ when referencing the 

provision in section 114(e)(1) of 

MMSEA in order to avoid further 

confusion. 

Furthermore, we believe section 

114(e) of the MMSEA specifically 

revises the standard Federal rate for RY 

2008. Specifically, section 114(e)(1) of 

MMSEA provides that under the new 

section 1886(m)(2) to the Act, the 

standard Federal rate for RY 2008 shall 

be the same as the standard Federal rate 

for RY 2007. The standard Federal rate 

for RY 2007 was $38,086.04 (71 FR 

27818). Section 114(e)(2) of MMSEA 

delays the application of the revised 

standard Federal rate of section 

114(e)(1). Specifically, section 114(e)(2) 

of the MMSEA states that the revised 

standard Federal rate of section 

114(e)(1) ‘‘shall not apply to discharges 

occurring on or after July 1, 2007, and 

before April 1, 2008.’’ Therefore, under 

the above interpretation, we believe it is 

appropriate that LTCH payments for 

discharges occurring on or after July 1, 

2007 through March 31, 2008, will 

continue to include an adjustment of 

0.71 percent which was included in the 

standard Federal rate that was in effect 

when the MMSEA was enacted on 

December 29, 2007. Also, we believe it 

is appropriate for discharges occurring 

on or after April 1, 2008 through June 

30, 2008, to be paid based on the revised 

RY 2008 standard Federal rate of 

$38,086.04, while payments for 

discharges occurring from July 1, 2007 

through March 31, 2008 will be 

determined based on the rate that had 

been used prior to the enactment of the 

MMSEA ($38,356.45). 

2. Standard Federal Rate for the 2009 

LTCH PPS Rate Year 

As discussed above, the MMSEA 

revises the standard Federal rate for RY 

2008 to $38,086.04 (the same as the 

standard Federal rate for 2007) while 

specifying that this rate ‘‘shall not apply 

to discharges occurring on or after July 

1, 2007, and before April 1, 2008’’ (that 

is, the first 9 months of RY 2008). In the 

proposed rule, consistent with our 

historical practice, we proposed to 

update the standard Federal rate from 

the previous year (that is, the standard 

Federal rate for RY 2008, which the 

MMSEA has revised to $38,086.04) to 

determine the standard Federal rate for 

RY 2009. Under the broad authority 

conferred upon the Secretary by section 

123 of the BBRA as amended by section 

307(b) of the BIPA, we proposed an 

annual update to the standard Federal 

rate for the 15-month 2009 rate year 

based on the most recent LTCH PPS 

market basket estimate of 3.5 percent 

(based on the best available data at that 

time) and an adjustment of 0.9 percent 

to account for the increase in case-mix 

in a prior period (FY 2006) that resulted 

from changes in coding practices rather 

than an increase in patient severity. 

As we discussed in greater detail in 

the RY 2007 and RY 2008 LTCH PPS 

final rules (71 FR 27819 through 27827 

and 72 FR 26887 through 26890, 

respectively), while we continue to 

believe that an update to the LTCH PPS 

standard Federal rate should be based 

on the most recent estimate of the LTCH 

PPS market basket, we believe it is 

appropriate that the standard Federal 

rate be offset by an adjustment to 

account for any changes in coding 

practices that do not reflect increased 

patient severity. Such an adjustment 

protects the integrity of the Medicare 

Trust Funds by ensuring that the LTCH 

PPS payment rates better reflect the true 

costs of treating LTCH patients (71 FR 

27819 through 27827). 

We continue to believe that an update 

to the LTCH PPS standard Federal rate 

year should be based on the most recent 

estimate of the LTCH PPS market 

basket, and, if appropriate, an 

adjustment to account for changes in 

coding practices that do not reflect 

increased patient severity. Furthermore, 

as we discussed in the RY 2009 

proposed rule (73 FR 5362), we did not 

finalize the proposed case-mix budget 

neutrality factor for the adoption of the 

severity adjusted MS–LTC–DRG patient 

classification system to the FY 2008 

MS–LTC–DRG relative weights in the 

FY 2008 IPPS final rule. Rather, we 

noted that consistent with past LTCH 

payment policy, we would continue to 

monitor LTCHs and we could propose 

to make adjustments when updating the 

standard Federal rate in the future, to 

account for improvements in coding and 

documentation that do not reflect any 

real changes in case mix during these 

years that we are implementing MS–

LTC–DRGs 

As we discussed in the RY 2009 

proposed rule, in determining the 

proposed update to the standard Federal 

rate for the 2009 LTCH PPS rate year, 

we performed a case-mix index (CMI) 

analysis using the most recent available 

LTCH claims data (FY 2006 MedPAR 

files) and estimated the observed CMI 

change for FY 2006 to be 1.9 percent 

(based on the most recent available 

LTCH case-mix data from FY 2005 

compared to FY 2006). As discussed in 

the RY 2009 proposed rule (73 FR 5362), 

we continue to believe it is appropriate 

to utilize the estimate of real CMI 

increase of 1.0 percent, based on the 

well-established RAND study referred to 

in the RY 2008 final rule, as the proxy 

for the portion of the observed 1.9 

percent CMI increase from FY 2005 to 

FY 2006 that represents real CMI 

changes for use in determining the RY 

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2009 Federal rate update. Accordingly, 

we proposed that 0.9 percent (1.9 ¥ 1.0 

= 0.9) of the observed 1.9 percent CMI 

increase from FY 2005 to FY 2006 

reflects CMI increase that is due to 

changes in coding practices rather than 

patient severity. 

The following is a summary of the 

comments received and our responses. 

Comment: A number of commenters 

disputed CMS’ interpretation of the 

MMSEA provision in section 114(e)(1) 

which specifies that ‘‘for discharges 

occurring during the rate year ending in 

2008 for a hospital, the base rate for 

such discharges for the hospital shall be 

the same as the base rate for discharges 

for the hospital occurring during the 

rate year ending in 2007.’’ That is, while 

CMS believes Congress intended to 

revise the standard Federal rate for RY 

2008 to be the same as the standard 

Federal rate for RY 2007, a number of 

commenters asserted that the language 

in this provision indicates that the RY 

2007 standard Federal rate is to be 

applied only to ‘‘discharges occurring 

during the rate year ending in 2008.’’

Furthermore, the commenters believed 

section 114(e)(2) of the MMSEA limits 

the application of the ‘‘lower’’ rate 

specified in section 114(e)(1) such that 

this ‘‘lower’’ rate does not apply to 

‘‘discharges occurring on or after July 1, 

2007, and before April 1, 2008’’ thereby 

limiting the application of this ‘‘lower’’

rate to just 3-months of RY 2008. That 

is, the commenters stated that the 

language Congress used neither 

explicitly revises the RY 2008 standard 

Federal rate, nor does it otherwise 

specifically grant CMS the authority to 

update the RY 2009 standard Federal 

rate based on the rate specified in this 

provision of the MMSEA. One 

commenter stated: ‘‘There is no basis to 

assume that Congress seeks to reduce 

LTCH payments for years to come 

through Section 114(e)(2). The threemonth freeze on the standard rate is a 

distinct act of Congress that should not 

be applied beyond the end of RY 2008.’’

Several commenters characterized CMS’

proposal to update the RY 2008 

standard Federal rate based on the 

MMSEA revised rate of $38,086.04 as 

‘‘arbitrary and capricious.’’ The 

commenters also believed 

implementation of the proposed update 

on the lower rate of $38,086.04 would 

produce a ‘‘retroactive effect’’ and is 

tantamount to ‘‘retroactive rule 

making.’’

Commenters protested the proposed 

RY 2009 update on the grounds that 

since ‘‘CMS actually provided no 

increase in the Federal rate for RY 2007, 

and now proposes to ignore any update 

for RY 2008, the newly proposed 2.6 

percent increase to the RY 2009 rate is 

actually an increase to the standard 

Federal rate that was in effect on July 1, 

2006, a full two years prior to the 

beginning of RY 2009.’’ Furthermore, 

the commenters urged CMS to apply the 

full market basket to a higher rate, that 

is, the RY 2008 standard Federal rate 

that had been finalized in the RY 2008 

final rule ($38,356.45), rather than to the 

MMSEA revised RY 2008 standard 

Federal rate of $38,086.04. 

Response: We disagree with the 

commenters that updating the RY 2008 

standard Federal rate based on the 

MMSEA revised RY 2008 standard 

Federal rate of $38,086.04 is ‘‘arbitrary 

and capricious.’’ For the reasons 

discussed in detail below, we continue 

to believe that our proposed (and final) 

approach for calculating the RY 2009 

standard Federal rate is appropriate, and 

consistent with a plain reading of the 

statute, Congressional intent, and our 

historic methodology for calculating the 

standard Federal rate. 

Section 114(e)(1) of MMSEA adds 

section 1886(m)(2) to the Act which 

specifies the standard Federal rate for 

RY 2008. Specifically, section 

1886(m)(2) provides that ‘‘for discharges 

occurring during the rate year ending in 

2008 for a hospital, the base rate for 

such discharges for the hospital shall be 

the same as the base rate for discharges 

for the hospital occurring during the 

rate year ending in 2007.’’ Section 

1886(m)(2) of the Act on its face 

explicitly provides for a single revised 

RY 2008 standard Federal rate. With 

respect to section 114(e)(2) of MMSEA, 

this section provides that section 

1886(m)(2) of the Act shall not apply to 

discharges occurring on or after July 1, 

2007 and before April 1, 2008. When 

read in conjunction, we believe sections 

1886(m)(2) of the Act and 114(e)(2) of 

MMSEA provide that the revised RY 

2008 standard Federal rate (which is the 

same as the RY 2007 standard Federal 

rate) is the standard Federal rate for all 

of RY 2008; however, for payment 

purposes, discharges occurring on or 

after July 1, 2007, and before April 1, 

2008 simply will not be paid based on 

that revised RY 2008 standard Federal 

rate. 

In contrast to the commenters’ belief 

that section 114(e)(2) limits the reduced 

standard Federal rate in section 

1886(m)(2) to a 3-month period (that is, 

the part of RY 2008 not included in ‘‘on 

or after July 1, 2007, and before April 1, 

2008’’), this section actually provides 

that the standard Federal rate specified 

in section 1886(m)(2) ‘‘shall not apply to 

discharges occurring on or after July 1, 

2007, and before April 1, 2008.’’ To the 

extent the MMSEA directs the revised 

standard Federal rate in section 

1886(m)(2) shall not apply during a 

specified period, it also necessarily 

means that the standard Federal rate in 

section 1886(m)(2) would otherwise 

apply for the entire RY 2008. We note 

that to the extent Congress intended to 

only revise the standard Federal rate for 

the last 3 months of RY 2008, it could 

have easily drafted § 1886(m)(2) to state 

this. Moreover, Congress could have 

amended the Act to provide for two 

separate standard Federal rates for RY 

2008, just as it has similarly done in the 

past with updates. For example, in at 

least one other PPS (for example, home 

health), Congress split the updates 

during a single year and revised the 

statute in a manner to specifically 

provide for the split updates. Therefore, 

contrary to the commenters’ assertion, 

we believe a plain reading of the statute 

indicates that Congress intended that 

the standard Federal rate for the longterm care hospital prospective payment 

system rate year beginning July 1, 2007 

and ending June 30, 2008 (that is, RY 

2008) is the same as the standard 

Federal rate for the previous long-term 

care hospital prospective payment 

system rate year updated by zero 

percent (that is, the same as the 

standard Federal rate for RY 2007). 

In addition, Congress is aware that we 

determine the standard Federal rate for 

a given year by taking the standard 

Federal rate from the previous year and 

updating it. Since Congress did not 

expressly direct us to deviate from that 

historical practice, the natural 

presumption is that we would take the 

revised RY 2008 standard Federal rate 

specified in section 1886(m)(2) and 

update it in order to calculate the RY 

2009 standard Federal rate. 

Furthermore, since our proposed 

calculation of the RY 2009 standard 

Federal rate is consistent with our longstanding practice of calculating the 

standard Federal rate, we do not believe 

that our methodology for calculating the 

RY 2009 standard Federal rate is 

arbitrary or capricious. In response to 

the comment that the MMSEA did not 

specifically grant CMS the authority to 

update the RY 2009 standard Federal 

rate based on the revised RY 2008 

standard Federal rate specified in the 

MMSEA, we note that such a grant was 

unnecessary. This is because Congress 

had already conferred broad 

discretionary authority to the Secretary 

under section 307(b)(1) of Public Law 

106–554 (also referenced under new 

1886(m)(1) of the Act) to provide for 

appropriate adjustment to the LTCH 

PPS, including updates. 

We also disagree with commenters 

that the proposed RY 2009 standard 

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Federal rate would produce a retroactive 

effect and is tantamount to retroactive 

rulemaking. We note that the RY 2009 

standard Federal rate will be 

prospectively applied to discharges 

beginning on July 1, 2008. That is, while 

our update for RY 2009 removed the 

benefit of the RY 2008 update of 0.71 

percent that had been finalized in the 

RY 2008 final rule, it can hardly be 

considered to have a ‘‘retroactive effect’’

since the proposed (and final) update 

will not result in recoupment of any 

payments made for RY 2008. 

Comment: Commenters also disagreed 

with the magnitude of the proposed 0.9 

percent adjustment to account for 

coding and documentation changes that 

occurred between FY 2005 and FY 2006 

that did not reflect increased patient 

severity. Specifically, with respect to 

our calculation of the apparent increase 

in case-mix (apparent increase equals 

observed increase minus real increase), 

some commenters disagreed with our 

use of 1 percent as a proxy for the real 

increase in case-mix for LTCHs based on 

a study of acute-care hospitals 

conducted by RAND using data from 

1987 to 1988. Several commenters 

stated that data from the RAND study do 

not provide sufficient justification for 

the adjustment and that more current, 

relevant data are required for sufficient 

justification. Specifically, several 

commenters stated that the 20 year old 

RAND study was not a valid source of 

information on real case-mix growth in 

LTCHs because the study focused on 

short-term acute-care hospitals, and that 

data from the RAND study is outdated 

and should not be relied upon. Some 

commenters stated that due to the age of 

the RAND study, it would not capture 

real case-mix growth that may have 

occurred in the intervening period as a 

result of changes in health care delivery 

patterns, increases in the prevalence of 

chronic conditions, or changes in the 

specialty mix of LTCHs. Specifically, 

they stated that there are legitimate 

reasons to support that ‘‘real’’ case-mix 

has indeed increased above the level 

estimated by the RAND study in the 

ensuing years. For example, they believe 

that factors such as longer life 

expectancy of beneficiaries, the 

migration of less sick and younger 

Medicare beneficiaries to Medicare 

Advantage, changes in the specialty mix 

of LTCHs, and generally, increasing 

proportions of beneficiaries that are 

suffering from multiple chronic 

diseases, all would contribute to a 

higher ‘‘real’’ case-mix than the estimate 

provided by the RAND study. In 

addition, one commenter believed that 

use of the RAND data was not consistent 

with CMS audit requirements 

concerning hospitals’ use of data from a 

contemporaneous time period for cost 

allocation. In addition, instead of 

relying on an estimate of real case-mix 

growth from the RAND study, some 

commenters believed that CMS should 

assume that all observed case-mix 

growth is real or should use observed 

case-mix growth adjusted to remove any 

providers with atypical case-mix 

changes as a proxy for real case-mix 

growth. 

MedPAC in its comments on the 

proposed rule stated that it believes 

CMS is justified in making adjustments 

to payments to take into account casemix increases resulting from changes in 

coding practices. However, MedPAC 

expressed concern that it was difficult 

to know whether the RAND study 

findings reflected current growth in real 

case-mix for LTCHs, and urged CMS to 

pursue more up-to-date information for 

future adjustments. In their comments, 

MedPAC also noted that in their March 

2008 report they had recommended a 

lower update than the one CMS had 

proposed even after the adjustment for 

the apparent increase in case-mix. 

Response: In the RY 2009 proposed 

rule, consistent with our previous 

methodology, we proposed to use the 

RAND study estimate of 1 percent as the 

proxy for the real case-mix change to 

determine the ‘‘apparent’’ case-mix 

change (which based on FY 2006 LTCH 

claims data is 0.9 percent). While the 

case-mix parameters from the RAND 

study are based on IPPS data for acutecare hospitals, we believe they are an 

appropriate proxy for real case-mix 

growth in LTCHs due to similarities 

between LTCHs and acute-care 

hospitals. The types of patients treated 

by LTCHs are similar to the types of 

patients treated in IPPS acute-care 

hospital step-down units. As described 

in more detail in the RY 2009 LTCH PPS 

proposed rule (73 FR 5374 to 5376), we 

contracted with Research Triangle 

Institute, International (RTI) for a study 

evaluating the feasibility of developing 

patient and facility level characteristics 

for LTCHs that could distinguish LTCH 

patients from those treated in other 

hospitals. Results from the RTI study, 

including findings from technical expert 

panels, indicate that patients treated in 

LTCHs and IPPS acute-care hospital 

step-down units are very similar. In 

addition, as we have discussed in many 

previous LTCH PPS proposed and final 

rules, acute-care hospitals paid under 

the IPPS and LTCHs paid under the 

LTCH PPS have much in common. 

Hospitals paid under both systems are 

required to meet the same certification 

criteria set forth in section 1861(e) of the 

Act to participate as a hospital in the 

Medicare program. LTCHs are certified 

as acute-care hospitals but are classified 

as LTCHs for payment purposes solely 

because such hospitals generally have 

an inpatient ALOS of greater than 25 

days (as set forth in section 

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

Furthermore, the LTCH PPS uses the 

same patient classification system that 

is used under the IPPS. Although there 

have been some modifications over 

time, the CMS–DRG system in place in 

IPPS hospitals during the time of the 

RAND study is generally the same base 

DRG system used in LTCHs between 

2005 and 2006. In addition, several 

LTCH PPS payment policies, such as the 

area wage adjustment (§ 412.525(c)), 

COLA for Alaska and Hawaii 

(§ 412.525(b)), and high cost outlier 

(HCO) policy (§ 412.525(a)) are modeled 

after similar IPPS policies. In summary, 

due to the similarities between LTCH 

hospitals and acute-care hospitals, 

including similarity in the patients 

treated by LTCHs and acute-care stepdown units, we believe it is appropriate 

to use the RAND study of real case-mix 

growth in acute-care hospitals as a 

proxy for real case-mix growth in 

LTCHs. 

Furthermore, although the data in the 

RAND study are not new, we continue 

to believe it is the best information 

available at this time to provide a proxy 

for real case-mix growth in LTCHs 

throughout this response. The 

methodology used by the RAND study 

to identify the real increase versus 

apparent increase in case-mix was very 

rigorous, involving chart abstraction 

data, claims data, and sophisticated 

statistical analyses. In the RY 2008 

LTCH PPS proposed rule, we solicited 

comments on other data sources that 

could be used to determine a proxy for 

real LTCH PPS case-mix change besides 

the RAND study. While some 

commenters on the RY 2008 and RY 

2009 proposed rules stated that we 

should assume all case-mix growth is 

real or we should use the observed casemix increase adjusted to eliminate any 

provider with atypical case-mix changes 

as a proxy for real case-mix growth, the 

commenters did not provide any data 

justifying these assertions and we did 

not receive any comments providing an 

alternative data source on real case-mix 

growth for LTCHs. With regard to the 

comments that the RAND study would 

not reflect real case-mix growth that 

may have occurred in the time period 

after the RAND study (for example due 

to changes in health care delivery 

patterns, increases in the prevalence of 

chronic conditions, aging of the 

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population, or changes in the specialty 

mix of LTCHs), we note that before, 

during, and after the time period 

examined by the RAND study, there are 

likely to be various factors driving real 

increases in case-mix. At this time, we 

are not aware of any data demonstrating 

that the factors contributing to increased 

case-mix in the time period after the 

RAND study would lead to faster growth 

in real case-mix between FY 2005 and 

FY 2006 than the factors contributing to 

real case-mix growth in the time period 

examined by the RAND study (FY 1987 

to FY 1988). Accordingly, we continue 

to believe that it is appropriate to use 

the RAND study, which was based on 

rigorous analytical and statistical 

methods, as a proxy for real case-mix 

growth in LTCHs in this RY 2009 LTCH 

PPS final rule, as we did in the RY 2008 

final rule. 

With respect to the comment that use 

of the RAND data is not consistent with 

CMS requirements for hospitals to use 

contemporaneous data for cost 

allocation as part of the cost reporting 

process, the timeframes applicable to 

hospitals for compiling their cost report 

data are not relevant to the timeframes 

used to establish the LTCH PPS 

payment rates and the update to the 

LTCH PPS Federal rate. Although CMS 

uses hospitals’ cost reporting data as 

part of its calculation of the LTCH PPS 

rates, the hospital cost reporting process 

and the process CMS uses to establish 

PPS rates are separate processes, 

governed by different requirements. The 

LTCH PPS is a per discharge payment 

system based on prospectively set rates. 

To establish payment rates, we use the 

most recently available claims data and 

cost report data; however, like other 

prospective payment systems, there are 

time lags in the data available to 

establish the prospective payment rates. 

Typically, the LTCH PPS payment rates 

are established based on claims data 

from 2 years prior and cost report data 

from 3 to 4 years prior. We also 

consistently use the most recent 

available data to determine the 

appropriate annual update factor. 

Accordingly, for this final rule we used 

the most recent available data, including 

the most recent estimate of the RPL 

market basket for July 1, 2008 through 

September 30, 2009 and the case-mix 

data from FY 2006, to establish the 2.7 

percent update factor for RY 2009. 

Furthermore, as discussed above, we 

believe the RAND study represents the 

best information on real case-mix 

increases available at this time. 

For all of the reasons discussed 

previously, we believe it is appropriate 

in calculating the RY 2009 update to 

continue to use 1 percent as a proxy for 

real case-mix growth in LTCHs based on 

the RAND study, as we did for the RY 

2008 update. Accordingly, since the 

observed CMI change for FY 2006 is 

estimated at 1.9 percent (based on the 

most recent available LTCH case-mix 

data from FY 2006 as compared to FY 

2005), accounting for the real CMI 

change of 1.0 percent, we estimate that 

0.9 percent (1.9 ¥ 1.0 = 0.9) of that 

increase reflects CMI increase that is 

due to changes in coding practices 

(rather than patient severity). 

Finally, we agree with MedPAC that 

it would be beneficial to pursue more 

recent information on real case-mix 

growth in LTCHs for the future, 

particularly since we recently changed 

patient classification systems. As 

discussed in the FY 2009 IPPS proposed 

rule (73 FR 23541 and 23542), we are 

currently developing plans to evaluate 

case-mix growth in acute-care IPPS 

hospitals under the MS–DRG system. In 

conjunction with these efforts, we 

intend to examine case-mix growth in 

LTCHs under the MS–LTC–DRG system 

and re-examine the issue of real casemix growth in LTCHs. 

Comment: Some commenters stated 

that it is inappropriate to use the lower 

end (1.0 percent) of the range of real 

case-mix growth (1.0 percent to 1.4 

percent) from the RAND study. These 

commenters indicated that consistency 

with the IPPS policy was not sufficient 

justification for adopting 1 percent, 

rather than 1.4 percent, as a proxy. 

Response: As discussed in more detail 

above, LTCH hospitals paid under the 

LTCH PPS have much in common with 

acute care hospitals paid under the 

IPPS, including being required to meet 

the same Medicare certification criteria, 

being paid under the same patient 

classification system, and having several 

LTCH PPS payment policies modeled 

after similar IPPS policies. In addition, 

as discussed previously, results from 

RTI’s research indicates that patients 

treated by LTCHs are very similar to 

patients treated in IPPS acute care 

hospital step down units. In the RY 

2008 final rule we adopted the more 

conservative 1.0 percent (rather than the 

1.4 percent) as a proxy for real CMI 

growth because it is consistent with 

what is used under the IPPS and we 

believed the similarities between LTCHs 

and acute care hospitals are significant 

as explained previously. For a more 

detailed discussion on the 1.0 percent 

for real CMI increase utilized in the 

IPPS, see the FY 2007 IPPS final rule (71 

FR 48156 through 48158), and the FY 

1994 IPPS proposed rule (58 FR 30444). 

In the RY 2008 proposed rule, we 

solicited comments on other data 

sources that could be used to determine 

a proxy for real LTCH PPS case-mix 

change besides the RAND study. While, 

as discussed above, some commenters 

on the RY 2008 and RY 2009 proposed 

rules asserted that we should assume 

real case-mix is equal to observed casemix or we should use the observed casemix increase adjusted to eliminate any 

provider with atypical case-mix changes 

as a proxy for the real case-mix increase, 

the commenters did not provide any 

data justifying these assertions and, we 

did not receive any comments providing 

an alternative data source on real casemix growth for LTCHs. Lacking any data 

to the contrary and for the reasons 

discussed above and in the previous 

responses, we continue to believe that 

similarities between LTCHs and acute 

care hospitals justify using the same 

proxy from the RAND study for real 

case-mix growth. Thus, as proposed, we 

are adopting the 1.0 percent proxy for 

real case-mix growth for LTCHs that is 

currently used under the IPPS for acute 

care hospitals. 

Comment: Some commenters stated 

that there was little potential for the 

case-mix of LTCHs to increase as a 

result of changes in coding practices. 

Some commenters believed that in 

establishing a policy of annually 

updating the LTC–DRGs (now the MS–

LTC–DRGs) and relative weights in a 

budget neutral manner, the RY 2008 

LTCH PPS final rule and FY 2008 IPPS 

final rule indicated that growth in 

apparent case-mix was no longer a 

concern, and thus these commenters 

believed there is no reason for an 

adjustment for an apparent increase in 

case-mix in RY 2009. These commenters 

stated that CMS’ continued use of an 

adjustment for ‘‘apparent’’ case-mix 

increases is inconsistent with CMS’

rationale in implementing budget 

neutral MS–LTC–DRG relative weights. 

Other commenters stated that most 

LTCH patients fall into high case-mix 

payment categories already or are paid 

outside of the LTCH payment system 

due to outlier status, and thus any casemix changes are more likely to be real 

than the result of coding improvements. 

A few commenters also questioned the 

need for an adjustment for apparent 

increases in case-mix with the adoption 

of MS–LTC–DRGs, and asked how could 

‘‘ * * * behavioral offset [of 0.9 

percent] be suggested when the new 

system [that is, the MS–LTC–DRGs] was 

specifically designed to stratify acuity 

across DRGs?’’

Response: In response to the 

commenters that question why we have 

proposed, at this time, a 0.9 percent 

adjustment to account for case-mix 

changes due to improved 

documentation and coding that are not 

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due to increased patient acuity, when 

we have just adopted the MS–LTC–

DRGs, we note that the proposed 0.9 

percent adjustment is to account for 

case-mix changes in coding that 

occurred in FY 2006, a year prior to the 

adoption of the MS–LTC–DRGs. With 

respect to the comments asserting that 

there is little potential for apparent casemix increases because most LTCH 

patients fall into high case-mix payment 

categories or receive outlier payments, 

we disagree. While in FY 2006 the 

potential for apparent increases in casemix due to shifts within base DRGs may 

have been limited to the extent that a 

substantial portion of LTCH patients 

were already in an LTC–DRG with a CC 

rather than an LTC–DRG without a CC, 

we believe there was still potential for 

apparent increases in case-mix due to 

shifts across base DRGs. In addition, 

only a small portion of LTCH PPS cases 

receive high cost outlier payments, and 

thus we believe the existence of high 

cost outliers has little impact on the 

potential for apparent case-mix 

increases. 

We also disagree with comments 

suggesting that our proposal to adjust 

for apparent CMI growth is inconsistent 

with CMS’ rationale for implementing 

the MS–LTC–DRG relative weights in a 

budget neutral manner. Specifically, in 

the RY 2008 LTCH PPS proposed and 

final rules, we explained that we 

considered whether to establish a policy 

of making annual changes to the LTC–

DRG classifications and recalibrating the 

LTC–DRG relative weights in a budget 

neutral manner. Previously, we had not 

implemented the annual changes to the 

LTC–DRG classifications and the 

recalibration of the LTC–DRG relative 

weights in a budget neutral manner 

because we believed that past 

fluctuations in the LTC–DRG relative 

weights were primarily due to changes 

in LTCH coding practices and we 

believed that changes in the LTCH PPS 

payment rates, including the LTCH 

relative weights, should accurately 

reflect changes in LTCHs’ true cost of 

care. Therefore, prior to RY 2008, we 

did not update the LTC–DRGs in a 

budget neutral manner because we did 

not want to build apparent CMI changes 

permanently into the LTCH PPS 

payment rates. In the RY 2008 LTCH 

PPS final rule, we stated that an analysis 

of the most recent available LTCH 

claims data show a steady decrease in 

the observed growth in the case-mix 

index from year to year since FY 2003 

(the observed case-mix change between 

FY 2003 and FY 2004 is 6.75 percent, 

between FY 2004 and FY 2005 is 3.49 

percent, and between FY 2005 and FY 

2006 is estimated to be 1.9 percent). 

With the substantial decline in observed 

case-mix growth between FY 2004 and 

FY 2006 noted above, we indicated that 

we believed the most recent available 

LTCH claims data (FY 2006) supports 

our belief that observed case-mix growth 

was now primarily the result of real 

increases and that changes in LTCH 

coding practices that resulted in 

fluctuations in the LTC–DRG relative 

weights appeared to be stabilizing. 

Therefore, we believe it appropriate to 

establish a policy of making annual 

changes to the LTC—DRG classifications 

and recalibrating the LTC—DRG relative 

weights in a budget neutral manner 

since budget neutrality would provide 

stability and predictability in LTCH PPS 

payments. 

While we believed apparent case-mix 

growth declined substantially between 

FY 2004 and FY 2006, the RY 2008 

LTCH PPS final rule reflects our belief 

that apparent CMI growth has not been 

eliminated entirely. We weighed the 

benefits of predictability and stability of 

payment against the fact that claims 

data reflect changes due to apparent 

CMI growth. As a result, we believed 

that the advantages of budget neutrality 

discussed previously outweighed any 

disadvantages such as the potential for 

fluctuations in the relative weights from 

apparent increases in case-mix. 

Furthermore, the adoption of budget 

neutral MS–LTC–DRG relative weights 

does not preclude the need for CMS to 

adjust for any apparent case-mix 

increase that CMS identifies through our 

ongoing monitoring of the LTCH 

payment system. While we would not 

expect the growth in apparent case-mix 

in FY 2006 to be as large as observed in 

the early years of the LTCH PPS, since 

hospitals have had more experience 

under this DRG-based payment system, 

we have no reason to believe that the 

potential for apparent case-mix growth 

has been eliminated entirely since with 

any DRG system there can be potential 

for apparent changes in case-mix. 

Consequently, we continue to believe it 

is appropriate to calculate the observed 

increase in case-mix, and identify the 

portion that is the result of an apparent 

increase, in order to prevent payment 

increases that do not reflect real 

increases in the severity of illness. 

In addition, we believe that the 

adoption of the MS–LTC–DRGs in FY 

2008, which better take into account 

severity of illness in Medicare payment 

rates, is likely to encourage LTCHs to 

improve their documentation and 

coding of patient diagnoses and is likely 

to result in further apparent increases in 

case-mix in the future, as discussed in 

more detail in the FY 2008 IPPS final 

rule (72 FR 47297 to 47298). As 

discussed in the FY 2008 IPPS final rule 

(72 FR 47298 through 47299), since we 

have established this mechanism to 

adjust LTCH payments to account for 

the effect of changes in coding and 

documentation in a prior period which 

is based on actual LTCH data, we would 

continue to monitor the LTCH payment 

system and should we detect an 

‘‘apparent’’ case-mix increase due to the 

adoption of the MS–LTC–DRG 

classification system, we would propose 

appropriate adjustments to account for 

that case-mix increase that is not due to 

increased patient severity. Also, as 

discussed in the FY 2008 IPPS final 

rule, if CMS is able to estimate an 

appropriate adjustment factor applicable 

to LTCHs, CMS would propose an 

adjustment factor to LTCHs to account 

prospectively for coding and 

documentation changes. 

Comment: Some commenters believe 

CMS has strayed from the basic purpose 

of the market basket update which is to 

account for the expected increase in 

prices for the upcoming year. The 

commenters portrayed the proposed 2.6 

percent update factor for RY 2009 as an 

‘‘inappropriate’’ and ‘‘unwarranted’’

reduced market basket update and has 

questioned CMS’ authority to 

implement anything other than the full 

RPL market basket update to account for 

price inflation. The commenter further 

contends that CMS’ reasoning for 

reducing the market basket update to 

account for ‘‘apparent’’ case mix 

increase in a previous period is not a 

factor that has anything to do with the 

function of the market basket. Instead of 

finalizing the update as proposed in the 

RY 2009 proposed rule, the majority of 

commenters strongly recommended that 

CMS apply an update based solely on 

the most recent estimate of the RPL 

market basket without an adjustment for 

case mix changes that are not due to 

increased patient severity. In contrast, 

MedPAC reiterated its recommendation 

included in its March 2008 Report to the 

Congress, suggesting the Secretary 

consider a lower update factor (than the 

2.6 percent that was proposed). 

Response: Section 123 of the BBRA, 

as amended by section 307(b) of the 

BIPA, provides that the Secretary may 

specify appropriate adjustments to the 

long-term care hospital payment system, 

including updates. This broad 

discretionary authority includes our 

ability to make adjustments in 

determining the annual update to the 

Federal rate for case-mix changes 

resulting from coding changes that do 

not reflect real change in case-mix 

regardless of whether such adjustment 

is for anticipated case-mix changes or 

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26810 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

case-mix changes that occurred in a 

previous time period. We note that in 

previous years, we have determined the 

annual update to the LTCH PPS 

standard Federal rate based on two 

elements: (1) A positive adjustment to 

account for the LTCH PPS market basket 

estimate in full, and (2) a negative 

adjustment to account for case-mix 

changes in a prior period that were not 

due to increased patient severity. 

Specifically, the adjustments for coding 

and documentation changes 

implemented in the RY 2007 and RY 

2008 final rules were based on actual 

LTCH case-mix data from FY 2004 and 

FY 2005, respectively (71 FR 27820 

through 27822 and 72 FR 26887 through 

26890). Based upon a CMI analysis 

using the most recent available LTCH 

claims data (FY 2006 MedPAR files), we 

continue to believe that within the 

observed case-mix change for FY 2006, 

there remains some portion of 

‘‘apparent’’ case-mix change. 

As stated above, and as we discussed 

in the proposed rule, our proposed 

update for RY 2009 included the full 

increase of the 15-month RPL market 

basket estimate based on the best 

available data at the time (which was 

3.5 percent). Therefore, our proposed 

(and final) update factor does account 

for the expected increase in prices for 

the upcoming year (RY 2009). However, 

the full market basket increase is not the 

only factor used in determining the 

proposed update for RY 2009. As 

discussed above, consistent with our 

historical practice and the Secretary’s 

broad discretionary authority to 

determine appropriate updates under 

the LTCH PPS, in addition to proposing 

to use the most recent estimate of the 

full RPL market basket increase, we 

proposed an adjustment to account for 

case-mix changes that were not due to 

increased patient severity from a prior 

period in determining the proposed 

update for RY 2009. 

In this final rule, as we proposed, we 

are using the most recent available 15- 

month RPL market basket estimate, 

which for the final rule is 3.6 percent as 

discussed above in section IV.C. of this 

preamble. As also discussed in this 

section, we are finalizing the proposed 

¥0.9 percent adjustment to account for 

the increase in case-mix in the prior 

period (FY 2006) that resulted from 

changes in coding practices rather than 

increased patient severity. Therefore, in 

this final rule, to update the standard 

Federal rate for RY 2009 in accordance 

with our established process, we are 

finalizing an update factor of 2.7 percent 

which is calculated based on two 

elements: (1) A positive adjustment of 

3.6 percent to account for the most 

recent RPL market basket estimate in 

full, and (2) a negative adjustment of 0.9 

percent to account for case-mix changes 

that were not due to increased patient 

severity. We note that in commenting on 

the proposed rule, MedPAC reiterated 

its recommendation included in its 

March 2008 Report to the Congress, 

suggesting the Secretary consider a 

lower update for LTCHs for RY 2009. In 

the March 2008 Report to Congress 

(page 231), the Commission 

recommended that the Secretary update 

LTCH payments by the LTCH PPS 

market basket index (that is, the RPL 

Market basket) less the Commission’s 

adjustment for productivity growth (1.5 

percent). Under the market basket 

estimates available at that time, 

MedPAC’s recommendation would be to 

update the LTCH PPS payment rates by 

1.6 percent. 

Comment: Some commenters believed 

there is no regulatory basis for CMS to 

adjust the market basket update to 

account for the apparent increase in 

case-mix for a previous year and that 

such an adjustment is inconsistent with 

the purpose of a market basket 

adjustment. One commenter also stated 

that making a case-mix adjustment to 

future payments to account for past 

payments violates the philosophy of a 

prospective payment system, and is 

inconsistent with other policies such as 

not correcting the market basket when 

the final data on the market basket for 

a specific time period turns out to be 

different from the estimate used as the 

basis of the update. Another commenter 

believed that it was inappropriate to 

make an adjustment for the apparent 

increase in case-mix that occurred 

during the 12 months from FY 2005 to 

FY 2006 when the final rule is covering 

a 15-month rate year. 

Response: Section 123 of the BBRA as 

amended by section 307(b) of the BIPA 

conferred upon the Secretary broad 

discretion to determine the standard 

rate and make appropriate adjustments 

to the system. We note that while 

§ 412.523(c)(3) specifies the update to 

the standard Federal rate for each year 

since the implementation of the LTCH 

PPS in FY 2003 (that is, RYs 2004 

through RY 2008), neither the statute 

nor the current regulations specifically 

require that the Secretary automatically 

apply a market basket increase to 

prospective years although we have 

done this in prior years, and are doing 

so in this final rule. 

As we discussed in greater detail in 

the RY 2007 LTCH PPS final rule (71 FR 

27819 through 27827), while we 

continue to believe that an update to the 

LTCH PPS Federal rate year should be 

based on the most recent estimate of the 

LTCH PPS market basket, we believe it 

appropriate that the rate update also 

reflect an adjustment to account for 

changes in coding practices that do not 

reflect increased patient severity. Such 

an adjustment protects the integrity of 

the Medicare Trust Funds by ensuring 

that the LTCH PPS payment rates better 

reflect the true costs of treating LTCH 

patients (71 FR 27798 through 27820). 

Therefore, in determining the RY 2009 

update to the LTCH PPS Federal rate, 

we believe it is appropriate to apply an 

adjustment to eliminate the effect of 

coding or classification changes in a 

prior period (FY 2006) that do not 

reflect real changes in LTCHs’ case-mix, 

for the reasons discussed above. As was 

the case when we determined the RY 

2007 and RY 2008 update factors, this 

adjustment is necessary to account for 

improved coding (rather than increased 

patient severity) in prior years. 

In addition, we do not agree with the 

comment that this adjustment is 

inconsistent with the philosophy of 

prospective payment system. This 

adjustment does not alter the 

fundamental aspect of the LTCH PPS, 

which is to make payment for a DRG 

based on a predetermined, fixed 

amount. Furthermore, the adjustment, 

while based on retrospective analysis of 

claims data, is applied prospectively to 

the LTCH PPS rates. Also, with respect 

to the commenter’s concern that the 

adjustment for apparent increases in 

case-mix that occurred in a prior period 

is different from policies in other areas 

such as not adjusting the payment rates 

to reflect retrospective revisions to the 

market basket estimates, we note that 

there are numerous principles that we 

try to balance simultaneously when 

making policy decisions. Among these 

principles are appropriate payment, 

predictability, averaging, beneficiary 

access to appropriate care, and equity. 

With regard to the adjustment for the 

apparent increase in case-mix, given the 

potential for apparent increases in casemix to lead to substantial inappropriate 

increases in payments over time without 

a corresponding increase in the severity 

of illness (or costs), we believe on 

balance it is in the best interest of the 

Medicare trust fund to make such an 

adjustment. With regard to an 

adjustment for revisions in the market 

basket estimates, given the typically 

small size of these market basket 

revisions, in the interest of predictable 

payments we have not made such an 

adjustment. 

With respect to the appropriateness of 

applying the adjustment to a 15-month 

rate year, the adjustment is included 

permanently in the rate and thus the 

result would be the same regardless of 

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whether RY 2009 is a 12-month or 15- 

month rate year. This is because the 

adjustments that we have made in prior 

years (that is, in RYs 2007 and 2008) 

and the adjustment we are making this 

year (in RY 2009) are cumulative. 

Therefore, in this final rule, under the 

broad authority conferred upon the 

Secretary by section 123 of the BBRA as 

amended by section 307(b) of the BIPA 

to include appropriate adjustments, 

including updates, in the establishment 

of the LTCH PPS, we are revising 

§ 412.523(c)(3), to specify that, for 

discharges occurring on or after July 1, 

2008 and on or before September 30, 

2009, the standard Federal rate for RY 

2008 will be updated by 2.7 percent, 

which is based on the most recent 

market basket estimate (3.6 percent) and 

an adjustment for the apparent increase 

in case-mix (0.9 percent) due to changes 

in coding practice rather than an 

increase in patient severity, as discussed 

in more detail subsequently. We note 

that the 2.7 percent update for RY 2009 

that we are establishing in this final rule 

is higher than the 1.6 percent update 

recommended by MedPAC in their 

March 2008 report. While MedPAC’s 

update recommendation was based on a 

12-month rate year, we believe that if 

MedPAC were to revise its update 

recommendation for a 15-month rate 

year, its recommended update would 

still in all likelihood be lower than the 

update being adopted in this final rule 

due to the formula MedPAC used to 

calculate its update recommendation 

(that is, the market basket increase 

minus MedPAC’s 1.5 percent estimate of 

productivity growth). 

Comment: Commenters claim that the 

cumulative effect of our changes to the 

LTCH PPS over the last few years has 

reduced LTCH margins significantly. 

Some commenters asserted that high 

profit margins had been one justification 

given in prior years’ regulations for the 

adjustment in the update to account for 

case-mix increases that reflected 

changes in coding practices. The 

commenters pointed to the MedPAC 

March 2008 report which estimated 

negative margins of between ¥1.4 

percent to ¥0.4 percent in 2008, and 

these commenters stated that an 

adjustment for the apparent increase in 

case-mix is not appropriate this year 

given the estimated negative margins. 

Response: OACT’s most recent 

estimate of LTCH inpatient Medicare 

margins is for FY 2006 (9.9 percent). 

While the 2006 margins appear to be 

substantial, we believe the 2006 margin 

estimates are unlikely to reflect the 

impact of the payment system changes 

that have occurred over the last two 

years, in particular those occurring in 

RY 2007 and RY 2008. Making estimates 

of the impact of recent payment system 

changes such as recalibrating the 

relative weights in 2007, adjusting for 

coding improvements, reducing 

aggregate payments for outliers, making 

changes to reimbursement for patients 

with the shortest length of stay (that is, 

short-stay outliers), and the ‘‘25 percent 

rule.’’ MedPAC projected that margins 

will be between ¥1.4 percent and ¥0.4 

percent for FY 2008. Given this analysis, 

MedPAC indicated in its March 2008 

report that ‘‘LTCHs may not be able to 

accommodate growth in the cost of 

caring for Medicare beneficiaries in 

2009 without an increase in the base 

rate.’’ However, MedPAC’s March 2008 

report recommended an update of 1.6 

percent for RY 2009 based on the market 

basket adjusted for MedPAC’s estimate 

of productivity growth. The update that 

we are adopting in this final rule of 2.7 

percent (which includes the 0.9 percent 

adjustment for the apparent increase in 

case-mix) is higher than the update 

proposed in the RY 2009 LTCH PPS 

proposed rule (2.6 percent) and higher 

than the update recommended by 

MedPAC in its March 2008 report (1.6 

percent). As noted previously, while the 

update recommended by MedPAC was 

based on a 12-month rate year, we 

believe that if MedPAC were to revise 

its update recommendation for a 15- 

month rate year, it would still in all 

likelihood be lower than the update 

being adopted in this final rule, 

Therefore, we do not believe it can be 

concluded from MedPAC’s margin 

projections and update recommendation 

that the 2.7 percent update established 

in this final rule, which is based on the 

most recent estimate of the market 

basket increase and an adjustment for 

the apparent increase in case-mix, is 

inadequate since MedPACs update 

recommendation (which was issued 

contemporaneously with their margin 

analysis) is lower than the 2.7 percent 

update established in this final rule. 

Furthermore, we note that most of the 

reductions cited by the commenters and 

considered by MedPAC in their margin 

analysis were implemented by CMS in 

RY 2007 and RY 2008 and were 

reversed (for three years) by section 114 

of the MMSEA. Therefore, we expect 

margins would be higher than projected 

taking into account these changes. 

As more data become available, we 

intend to continue to monitor LTCHs’

margins. In the past, we have observed 

that LTCHs have adapted to our 

regulatory changes by modifying their 

business model to maximize 

profitability while operating under the 

new changes. For example, when we 

implemented the 25 percent (or 

applicable percentage) threshold 

payment adjustment in FY 2005 for colocated LTCHs and satellites, we are 

aware that LTCHs shifted emphasis 

from developing co-located facilities to 

developing freestanding LTCHs. Thus, 

we believe LTCHs are likely to continue 

to respond to the payment changes in 

ways that mitigate the impact on their 

profitability. 

Comment: One commenter 

recommended that CMS provide a full 

market basket update for all cases that 

are not paid on a full MS–LTC–DRG 

basis such as cases paid under the short 

stay outlier (SSO) policy or the 25 

percent rule, stating that hospitals have 

no ‘‘practical opportunity for upcoding’’

such cases. 

Response: Even for cases that will be 

paid on a full MS–LTC–DRG basis in RY 

2009, we are providing a full market 

basket adjustment (3.6 percent), which 

is combined with an adjustment for the 

apparent increase in case-mix in a prior 

period (¥0.9 percent), to yield a 

combined update of 2.7 percent. With 

respect to cases that are not paid on a 

full MS–LTC–DRG basis, we believe it is 

appropriate to apply the adjustment for 

apparent case-mix, where applicable, for 

several reasons. Under current law, SSO 

cases are paid the lower of 100 percent 

of estimated costs of the case; 120 

percent of the MS–LTC–DRG per diem 

multiplied by the covered LOS of the 

case; the Federal prospective payment 

for the MS–LTC–DRG; or a blend of 

120% of the LTC–DRG per diem amount 

and an amount that is comparable to 

what the case would be paid under the 

IPPS (computed as a per diem). The 

majority of SSO cases are not impacted 

by the market basket update or the 

adjustment for the apparent increase in 

case-mix because they are paid based on 

the estimated cost of the case which is 

determined by multiplying the covered 

charges for the case by the LTCH’s CCR. 

For those SSO cases paid under the 

other payment options, we believe it is 

appropriate to apply the adjustment for 

the apparent increase in case-mix. The 

purpose of doing so is to adjust for 

apparent increases in case-mix that 

occurred under the LTCH PPS in a prior 

period (FY 2006). Whether there is 

potential for future apparent increases 

in case-mix in RY 2009 for these cases 

is not relevant to this adjustment 

because this adjustment is for a prior 

period. Nevertheless, we disagree with 

the commenter’s assertion that there is 

no potential for an apparent increase in 

case-mix for SSO cases paid under the 

2nd and 4th options in the SSO 

payment formula described above 

because these options are based on 

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DRGs. The payment amount for those 

cases is dependent on the MS–LTC–

DRG to which the patient is assigned. In 

other words, the MS–LTC–DRG per 

diem amount, which is a component of 

the 2nd and 4th options in the SSO 

payment formula as described above, is 

computed based on the MS–LTC–DRG 

to which the case is grouped. Similarly, 

with respect to the 25 percent rule, 

notwithstanding the changes made to it 

by MMSEA, the payment amounts 

calculated under this policy are 

dependent upon the MS–LTC–DRG to 

which the case is assigned. As with any 

DRG system there is potential for 

apparent changes in case-mix because 

there can be shifts within or across base 

DRGs. Accordingly, for the reasons 

discussed above, we are not adopting 

the commenter’s suggestion to apply the 

full market basket update without an 

adjustment for the apparent increase in 

case-mix that occurred in FY 2006 to all 

cases that are not paid on a full MS–

LTC–DRG basis. 

In summary, as we proposed, we are 

establishing an update to the standard 

Federal Rate for RY 2009 based on the 

most recent estimate of the full LTCH 

PPS market basket estimate which went 

up to 3.6 percent (as discussed above in 

section IV.C.2. of this preamble) and an 

adjustment to account for the increase 

in case-mix in the prior period (FY 

2006) that resulted from changes in 

coding practices of ¥0.9 percent. 

Therefore, the update factor to the 

standard Federal rate for RY 2009 is 2.7 

percent (3.6¥0.9 = 2.7). That is, under 

the broad authority conferred upon the 

Secretary under the BBRA and the 

BIPA, we specify under 

§ 412.523(c)(3)(v), that, for discharges 

occurring on or after July 1, 2008, and 

on or before September 30, 2009, the 

standard Federal rate from the previous 

year would be updated by 2.7 percent. 

In determining the standard Federal rate 

for RY 2009, we applied the 2.7 percent 

update to the RY 2008 standard Federal 

rate of $38,086.04, which is the same 

standard Federal rate applicable for 

discharges occurring during RY 2007, 

consistent with section 1886(m)(2) of 

the Act. Consequently, we are 

establishing a standard Federal rate for 

RY 2009 of $39,114.36, which will be 

effective for LTCH discharges occurring 

on or after July 1, 2008, and through 

September 30, 2009. We note that the 

President’s FY 2009 budget proposal 

includes the provision that would 

provide for a zero percent update to the 

Federal rate for 2009 through 2011, and 

then would reduce the market basket 

update to the Federal rate by 0.65 

percent in each year thereafter. 

F. Calculation of LTCH Prospective 

Payments for the 2009 LTCH PPS Rate 

Year 

1. Adjustment for Area Wage Levels 

a. Background 

Under the authority of section 123 of 

the BBRA as amended by section 307(b) 

of the BIPA, we established an 

adjustment to the LTCH PPS Federal 

rate to account for differences in LTCH 

area wage levels at § 412.525(c). The 

labor-related share of the LTCH PPS 

Federal rate, currently estimated by the 

FY 2002-based RPL market basket (as 

discussed in greater detail in section 

IV.C.1. of this preamble), is adjusted to 

account for geographic differences in 

area wage levels by applying the 

applicable LTCH PPS wage index. The 

applicable LTCH PPS wage index is 

computed using wage data from 

inpatient acute care hospitals without 

regard to reclassification under sections 

1886(d)(8) or 1886(d)(10) of the Act. 

As we discussed in the August 30, 

2002, LTCH PPS final rule (67 FR 

56015), when the LTCH PPS was 

implemented, we established a 5-year 

transition to the full wage adjustment. 

The wage index adjustment was 

completely phased-in beginning with 

cost reporting periods beginning in FY 

2007. Therefore, for cost reporting 

periods beginning on or after October 1, 

2006, the applicable LTCH wage index 

values are the full (five-fifths) LTCH 

PPS wage index values calculated based 

on acute-care hospital inpatient wage 

index data without taking into account 

geographic reclassification under 

sections 1886(d)(8) and (d)(10) of the 

Act. For additional information on the 

phase-in of the wage index adjustment 

under the LTCH PPS, refer to the August 

30, 2002, LTCH PPS final rule (67 FR 

56017 through 56019) and the RY 2008 

LTCH PPS final rule (72 FR 26891). 

b. Updates to the Geographic 

Classifications/Labor Market Area 

Definitions 

(1) Background 

As discussed in the August 30, 2002, 

LTCH PPS final rule, which 

implemented the LTCH PPS (67 FR 

56015 through 56019), in establishing 

an adjustment for area wage levels 

under § 412.525(c), the labor-related 

portion of a LTCH’s Federal prospective 

payment is adjusted by using an 

appropriate wage index based on the 

labor market area in which the LTCH is 

located. In the RY 2006 LTCH PPS final 

rule (70 FR 24184 through 24185), in 

regulations at § 412.525(c), we revised 

the labor market area definitions used 

under the LTCH PPS effective for 

discharges occurring on or after July 1, 

2005, based on the Office of 

Management and Budget’s (OMB’s) Core 

Based Statistical Area (CBSA) 

designations based on 2000 Census data. 

We made this revision because we 

believe that those new CBSA-based 

labor market area definitions will ensure 

that the LTCH PPS wage index 

adjustment most appropriately accounts 

for and reflects the relative hospital 

wage levels in the geographic area of the 

hospital as compared to the national 

average hospital wage level. As set forth 

in existing § 412.525(c)(2), a LTCH’s 

wage index is determined based on the 

location of the LTCH in an urban or 

rural area as defined in 

§ 412.64(b)(1)(ii)(A) through (C). An 

urban area under the LTCH PPS is 

currently defined at § 412.64(b)(1)(ii)(A) 

and (B). Under § 412.64(b)(1)(ii)(C), a 

rural area is defined as any area outside 

of an urban area. 

We note that these are the same 

CBSA-based designations implemented 

for acute care hospitals under the IPPS 

at § 412.64(b) effective October 1, 2004, 

(69 FR 49026 through 49034). For 

further discussion of the labor market 

area (geographic classification) 

definitions currently used under the 

LTCH PPS, see the RY 2006 LTCH PPS 

final rule (70 FR 24182 through 24191). 

(2) Update to the CBSA-Based Labor 

Market Area Definitions 

On December 18, 2006, OMB 

announced the inclusion of two new 

CBSAs and the revision of designations 

for six areas (OMB Bulletin No. 07–01). 

This OMB bulletin is available on the 

OMB Web site at http:// 

www.whitehouse.gov/omb/bulletins/ 

fy2007/b07-01.pdf. The two new CBSAs 

outlined in this bulletin are as follows: 

• Lake Havasu-Kingman, Arizona 

(CBSA code 29420). This CBSA comes 

from Mohave County, Arizona. 

• Palm Coast, Florida (CBSA code 

37380). This CBSA comes from Flager 

County, Florida. 

The six revised CBSA designations 

outlined in this bulletin are as follows: 

• Mauldin, South Carolina, and 

Easley, South Carolina, qualify as new 

principal cities of the GreenvilleMauldin-Easley, South Carolina CBSA 

(CBSA code 24860). 

• Conway, Arkansas, qualifies as a 

new principal city of the Little RockNorth Little Rock-Conway, Arkansas 

CBSA (CBSA code 30780). 

• Goleta, California, qualifies as a 

new principal city of the Santa BarbaraSanta Maria-Goleta, California CBSA 

(CBSA code 42060). 

• Franklin, Tennessee, qualifies as a 

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Davidson-Murfreesboro-Franklin, 

Tennessee CBSA (CBSA code 34980). 

• Fort Pierce, Florida, no longer 

qualifies as a principal city of the Port 

St. Lucie-Fort Pierce, Florida CBSA; the 

new designation is Port St. Lucie, 

Florida CBSA (CBSA code 38940). 

• Essex County, Massachusetts 

Metropolitan Division, was renamed as 

the Peabody, Massachusetts 

Metropolitan Division, which changed 

the CBSA code from 21604 to 37764. 

We note that these six revised CBSA 

designations made in OMB Bulletin No. 

07–01 do not change the composition 

(constituent counties) of the affected 

CBSAs; they only revise the CBSA titles 

(and the CBSA code for the CBSA that 

consists of Essex County, MA). 

We noted in the RY 2009 LTCH PPS 

proposed rule that we are currently not 

aware of any LTCHs located in the two 

new proposed CBSAs (that is, proposed 

CBSA 29420 and proposed CBSA 

37380), and the six proposed revisions 

to the CBSA designations would only 

revise the CBSA titles (and the CBSA 

code for the CBSA that consists of Essex 

Co., MA). We also noted that these 

proposed revisions to the CBSA-based 

designations were adopted under the 

IPPS effective beginning October 1, 

2007, (72 FR 47308 through 47309). 

We received no comments on the two 

new CBSAs and the revision of 

designations for six areas (based on 

OMB Bulletin No. 07–01) that were 

presented in the RY 2009 LTCH PPS 

proposed rule (73 FR 5363). In this final 

rule, under the broad authority 

conferred upon the Secretary by section 

123 of the BBRA, as amended by section 

307(b) of BIPA to determine appropriate 

adjustments under the LTCH PPS, as we 

proposed, we are applying these 

changes to the current CBSA-based 

labor market area definitions and 

geographic classifications used under 

the LTCH PPS effective for discharges 

occurring on or after July 1, 2008. We 

believe these revisions to the LTCH PPS 

CBSA-based labor market area 

definitions, which are based on the most 

recent available data, will ensure that 

the LTCH PPS wage index adjustment 

most appropriately accounts for and 

reflects the relative hospital wage levels 

in the geographic area of the hospital as 

compared to the national average 

hospital wage level. Accordingly, the 

RY 2009 LTCH PPS wage index values 

presented in Tables 1 and 2 in the 

Addendum of this final rule reflect the 

revisions to the CBSA-based labor 

market area definitions described above. 

(3) Clarification of New England 

Deemed Counties 

As we did in the proposed rule, we 

are also taking this opportunity to 

address the change in the treatment of 

‘‘New England deemed counties’’ (that 

is, those counties in New England listed 

in § 412.64(b)(1)(ii)(B) that were deemed 

to be parts of urban areas under section 

601(g) of the Social Security 

Amendments of 1983) that was made in 

the FY 2008 IPPS final rule with 

comment period. These counties 

include the following: Litchfield 

County, Connecticut; York County, 

Maine; Sagadahoc County, Maine; 

Merrimack County, New Hampshire; 

and Newport County, Rhode Island. Of 

these five ‘‘New England deemed 

counties,’’ three (York County, 

Sagadahoc County, and Newport 

County) are also included in 

metropolitan statistical areas defined by 

OMB and are considered urban under 

both the current IPPS and LTCH PPS 

labor market area definitions in 

§ 412.64(b)(1)(ii)(A) (they will also be 

urban under the conforming changes to 

§ 412.503 that we are making in this 

final rule). The remaining two, 

Litchfield County and Merrimack 

County, are geographically located in 

areas that are considered rural under the 

current IPPS (and LTCH PPS) labor 

market area definitions (however, they 

have been previously deemed urban 

under the IPPS in certain circumstances 

as discussed below). 

In the FY 2008 IPPS final rule with 

comment period (72 FR 47337 through 

47338), § 412.64(b)(1)(ii)(B) was revised 

such that the two ‘‘New England 

deemed counties’’ that are still 

considered rural by OMB (Litchfield 

County, CT and Merrimack County, NH) 

are no longer considered urban effective 

for discharges occurring on or after 

October 1, 2007, and therefore, are 

considered rural in accordance with 

§ 412.64(b)(1)(ii)(C). However, for 

purposes of payment under the IPPS, 

acute-care hospitals located within 

those areas are treated as being 

reclassified to their deemed urban area 

effective for discharges occurring on or 

after October 1, 2007 (see 72 FR 47337 

through 47338). (We note that the LTCH 

PPS does not provide for such 

geographic reclassification (67 FR 56019 

through 56020)). Also in the FY 2008 

IPPS final rule with comment period (72 

FR 47338), we explained that we have 

limited this policy change for the ‘‘New 

England deemed counties’’ only to IPPS 

hospitals, and any change to non-IPPS 

provider wage indices would be 

addressed in the respective payment 

system rules. Accordingly, as stated 

above and as we did in the proposed 

rule, we are taking this opportunity to 

clarify the treatment of ‘‘New England 

deemed counties’’ under the LTCH PPS 

in this final rule. 

As discussed above, under existing 

§ 412.525(c)(2), a LTCH’s wage index is 

determined based on the location of the 

LTCH in an urban or rural area as 

defined in § 412.64(b)(1)(ii)(A) through 

(C). Under existing § 412.525(c)(2), an 

urban area under the LTCH PPS is 

currently defined at § 412.64(b)(1)(ii)(A) 

and (B), and a rural area is defined as 

any area outside of an urban area in 

§ 412.64(b)(1)(ii)(C). 

Historical changes to the labor market 

area/geographic classifications and 

annual updates to the wage index values 

under the LTCH PPS have been made 

effective July 1 each year. When we 

established the most recent LTCH PPS 

payment rate update, effective for LTCH 

discharges occurring on or after July 1, 

2007 through June 30, 2008, we 

considered the ‘‘New England deemed 

counties’’ (including Litchfield County, 

CT and Merrimack County, NH) as 

urban for RY 2008 (in accordance with 

the definitions of urban and rural stated 

in the RY 2008 LTCH PPS final rule (72 

FR 26891) and as evidenced by the 

inclusion of Litchfield County as one of 

the constituent counties of urban CBSA 

25540 (Hartford-West Hartford-East 

Hartford, CT), and the inclusion of 

Merrimack county as one of the 

constituent counties of urban CBSA 

31700 (Manchester-Nashua, NH)). (See 

72 FR 27004 and 27008, respectively). 

As noted above, existing 

§ 412.525(c)(2) indicates that the terms 

‘‘rural’’ and ‘‘urban’’ as areas are defined 

according to the definitions of those 

terms in § 412.64(b)(1)(ii)(A) through 

(C). As Litchfield County, CT and 

Merrimack County, NH would be 

considered rural areas in accordance 

with our regulations at (§ 412.525(c)(2), 

these two counties will be ‘‘rural’’ under 

the LTCH PPS effective with the next 

update of the LTCH PPS payment rates, 

which will be July 1, 2008 (Under the 

LTCH PPS effective for discharges on or 

after July 1, 2008, Litchfield County, CT 

and Merrimack County, NH are not 

urban under § 412.64(b)(1)(ii)(A–B) and 

therefore are rural under 

§ 412.64(b)(1)(ii)(c) in the regulations). 

We note that Litchfield and Merrimack 

Counties will also be rural under our 

revision to§ 412.503, discussed in 

greater detail below, that incorporates 

the existing definitions of ‘‘urban’’ and 

‘‘rural’’ areas. Therefore, Litchfield 

County, CT and Merrimack County, NH 

will be considered ‘‘rural’’ effective for 

LTCH PPS discharges occurring on or 

after July 1, 2008, and will no longer be 

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considered as being part of urban CBSA 

25540 (Hartford-West Hartford-East 

Hartford, CT) and urban CBSA 31700 

(Manchester-Nashua, NH), respectively. 

We note that currently we are not aware 

of any LTCHs located in either 

Litchfield County, CT or Merrimack 

County, NH. We also note that this 

policy is consistent with our policy of 

not taking into account IPPS geographic 

reclassifications in determining 

payments under the LTCH PPS. In 

addition, as discussed above, in this 

section, effective for discharges on or 

after July 1, 2008, § 412.64(b)(1)(ii)(B) is 

no longer applicable under the LTCH 

PPS. We note that we received no 

comments on this clarification. 

(4) Codification of the Definitions of 

Urban and Rural Under 42 CFR Part 412 

Subpart O 

Under the current regulations at 

§ 412.525(c), the labor-related portion of 

the LTCH PPS Federal rate is adjusted 

to account for geographical differences 

in the area wage levels using an 

appropriate wage index to reflect the 

relative level of hospital wages and 

wage-related costs in the geographic 

area (that is, urban or rural area) of the 

hospital compared to the national 

average level of hospital wages and 

wage-related costs annually. Currently, 

the application of the wage index under 

existing § 412.525(c)(2) is made on the 

basis of the location of the facility in an 

urban or rural area as defined in 

§ 412.64(b)(1)(ii)(A) through (C) (in 42 

CFR part 412 subpart D). 

In light of the regulatory construct 

discussed above where existing 

§ 412.525(c) indicated that the terms 

‘‘rural area’’ and ‘‘urban area’’ as 

defined according to the definitions of 

those terms’’ under the IPPS in 42 CFR 

part 412 subpart D, in the proposed rule, 

we explained that we believe it may be 

administratively simpler to have the 

LTCH PPS urban and rural labor market 

area definitions self-contained in 

(§ 412.503) 42 CFR part 412 subpart O 

rather than cross-referring to the 

definitions of urban and rural in the 

IPPS regulations in 42 CFR part 412, 

subpart D. We also noted that this 

approach is similar to the change we 

made in § 412.525(a) for high cost 

outliers and § 412.529 for short-stay 

outliers in the FY 2007 IPPS final rule 

when we embedded within Subpart O 

the regulatory provisions concerning the 

determination of cost-to-charge ratios 

(CCRs) and the reconciliation of outlier 

payments (71 FR 48115 through 48122). 

Therefore, in the proposed rule (72 FR 

5364), under the broad authority of 

section 123 of the BBRA as amended by 

section 307(b) of BIPA we proposed to 

codify in § 412.503 the definitions for 

‘‘urban area’’ and ‘‘rural area.’’ We 

stated that the proposed definitions for 

‘‘urban area’’ and ‘‘rural area’’ in 

§ 412.503 would incorporate the 

provisions of § 412.62(f)(1)(ii) and 

(f)(1)(iii) as well as § 412.64(b)(1)(ii)(A) 

through (C) in the regulations. 

Furthermore, we also explained that the 

definition of ‘‘urban area’’ at 

§ 412.64(b)(1)(ii)(B) is no longer 

applicable under the LTCH PPS 

effective for discharges occurring on or 

after July 1, 2008 (as explained above in 

section IV.F.1.b.3.), and therefore, the 

only remaining definition of ‘‘urban 

area’’ will be that of a Metropolitan 

Statistical Area (MSA) as defined by the 

Executive Office of Management and 

Budget. Thus, we omitted the language 

of § 412.64(b)(1)(ii)(B) from the 

proposed definition of ‘‘urban area’’ that 

would be applicable to discharges 

occurring on or after July 1, 2008 in 

proposed § 412.503. We, however, 

included the language from 

§ 412.64(b)(1)(ii)(A) in the proposed 

definition of ‘‘urban area’’ in the 

regulations that would be applicable to 

discharges occurring on or after July 1, 

2008 in proposed § 412.503. For the 

reason just described, we explained that 

the proposed definitions of ‘‘urban’’ and 

‘‘rural’’ that would be effective for 

discharges occurring on or after July 1, 

2008 (in subparagraph (3) in both the 

proposed definition of ‘‘rural area’’ and 

the proposed definition of ‘‘urban area’’) 

vary slightly from the wording in the 

current regulations at 

§ 412.64(b)(1)(ii)(A) through (C); 

however, substantively the definitions 

are the same. We believe that the slight 

difference in the wording of proposed 

§ 412.503 more precisely conveys the 

treatment of New England deemed 

counties under the LTCH PPS, as 

discussed above. As a conforming 

change, we also proposed to replace the 

cross-references to § 412.62(f)(1)(iii) and 

§ 412.64(b)(1)(ii)(A) through (C) of the 

regulations in existing § 412.525(c) with 

references to the proposed definitions of 

‘‘urban area’’ and ‘‘rural area’’ at 

§ 412.503. Therefore, in the proposed 

rule, we also proposed to revise 

§ 412.525(c) to specify that the 

application of the LTCH PPS wage 

index would be made on the basis of the 

location of the LTCH in an urban or 

rural area as defined in proposed 

§ 412.503. 

We received no comments on our 

proposal to codify the definitions of 

urban and rural under 42 CFR part 412 

subpart O in § 412.503 or our proposal 

to replace the cross-references to the 

definitions of urban and rural set forth 

under 42 CFR part 412 subpart D in 

existing § 412.525(c) with references to 

the proposed definitions of ‘‘urban area’’

and ‘‘rural area’’ at § 412.503. 

Accordingly, in this final rule, under the 

broad authority of section 123 of the 

BBRA as amended by section 307(b) of 

BIPA, as proposed, we are codifying the 

definitions for ‘‘urban area’’ and ‘‘rural 

area’’ in § 412.503 for the reasons 

discussed above. As proposed, the 

definitions for ‘‘urban area’’ and ‘‘rural 

area’’ in § 412.503 incorporate the 

provisions of § 412.62(f)(1)(ii) and 

(f)(1)(iii) as well as § 412.64(b)(1)(ii)(A) 

through (C). However, as discussed 

above, since the definition of ‘‘urban 

area’’ at § 412.64(b)(1)(ii)(B) is no longer 

applicable under the LTCH PPS 

effective for discharges occurring on or 

after July 1, 2008, the only remaining 

definition of ‘‘urban area’’ will be that 

of a Metropolitan Statistical Area (MSA) 

as defined by the Executive Office of 

Management and Budget. Thus, we 

omitted the language of 

§ 412.64(b)(1)(ii)(B) from the definition 

of ‘‘urban area’’ that will be applicable 

to discharges occurring on or after July 

1, 2008 in § 412.503. However, we 

included the language from 

§ 412.64(b)(1)(ii)(A) in the definition of 

‘‘urban area’’ that will be applicable to 

discharges occurring on or after July 1, 

2008 in proposed § 412.503. 

Additionally, as proposed, as a 

conforming change, we are revising 

existing § 412.525(c) by replacing the 

cross-references to § 412.62(f)(1)(iii) and 

§ 412.64(b)(1)(ii)(A) through (C) with 

references to the newly added 

definitions of ‘‘urban area’’ and ‘‘rural 

area’’ at § 412.503. Therefore, in this 

final rule, we are also revising 

§ 412.525(c) to specify that the 

application of the LTCH PPS wage 

index would be made on the basis of the 

location of the LTCH in an urban or 

rural area as defined in § 412.503. As 

discussed in section VI.G.3. of this final 

rule, we are also making conforming 

changes to the regulations governing 

short-stay outlier payments (at 

§ 412.529) and the special payment 

provisions for co-located LTCHs (at 

§ 412.534) and free-standing LTCHs (at 

§ 412.536), which refer to the definition 

of urban and rural under the LTCH PPS. 

We note that, as proposed, this revision 

to § 412.525(c) includes the deletion of 

existing subparagraphs (1) and (2) since 

the newly added definitions of ‘‘urban 

area’’ and ‘‘rural area’’ at § 412.503 

contain the definitions for the respective 

time periods covered in existing 

§ 412.525(c)(1) and (2). 

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c. Labor-Related Share 

In the August 30, 2002 LTCH PPS 

final rule (67 FR 56016), we established 

a labor-related share of 72.885 percent 

based on the relative importance of the 

labor-related share of operating costs 

(wages and salaries, employee benefits, 

professional fees, postal services, and all 

other labor-intensive services) and 

capital costs of the excluded hospital 

with capital market basket based on FY 

1992 data. We did not revise the laborrelated share in RYs 2004 through 2006 

while we conducted further analysis to 

determine the most appropriate 

methodology and data for determining 

the labor-related share under the LTCH 

PPS (70 FR 24182). After our research 

into the labor-related share methodology 

was completed, we revised the laborrelated share under the LTCH PPS in the 

RY 2007 final rule (71 FR 27829). 

Specifically, beginning in RY 2007, we 

established a labor-related share based 

on the relative importance of the laborrelated share of operating costs (wages 

and salaries, employee benefits, 

professional fees, postal services, and all 

other labor-intensive services) and 

capital costs of the RPL market basket 

based on FY 2002 data, as it is the best 

available data that reflect the cost 

structure of LTCHs. 

Consistent with our historical 

practice, the labor-related share 

currently used under the LTCH PPS is 

determined by identifying the national 

average proportion of operating costs 

and capital costs that are related to, 

influenced by, or vary with the local 

labor market. Accordingly, in the RY 

2008 LTCH PPS final rule (72 FR 

26892), we updated the LTCH PPS 

labor-related share to 75.788 percent 

based on the relative importance of the 

labor-related share of operating costs 

(wages and salaries, employee benefits, 

professional fees, and all other laborintensive services) and capital costs of 

the RPL market basket based on FY 2002 

data from the first quarter of 2007 

forecast. 

In the proposed rule (73 FR 5364 

through 5366), under the broad 

authority conferred upon the Secretary 

by section 123 of the BBRA as amended 

by section 307(b) of the BIPA, consistent 

with our historical practice of 

determining the labor-related share, we 

proposed to revise the LTCH PPS laborrelated share from 75.788 percent to 

75.920 percent based on the sum of the 

relative importance of the labor-related 

share of operating costs (wages and 

salaries, employee benefits, professional 

fees, and all other labor-intensive 

services) and capital costs of the FY 

2002-based RPL market basket from the 

fourth quarter of 2007 forecast. 

Consistent with our proposal to 

consolidate the annual LTCH PPS 

updates by proposing to extend RY 2009 

by 3 months, we proposed to use the 15- 

month RY 2009 RPL market basket to 

determine the proposed labor-related 

share for RY 2009. Furthermore, we 

proposed to use the FY 2002-based RPL 

market basket costs based on data from 

the fourth quarter of 2007 forecast to 

determine the labor-related share for the 

LTCH PPS during RY 2009, that is, 

effective for discharges occurring on or 

after July 1, 2008 and through 

September 30, 2009, because at that 

time it was the most recent available 

data. We note that in the proposed rule, 

we inadvertently indicated the proposed 

labor related share would be effective 

occurring on or after July 1, 2008 and 

before September 30, 2009 (73 FR 5365), 

when we meant to say through 

September 30, 2009 which is consistent 

with the time period for RY 2009. 

Consistent with our historical practice 

of using the best data available, we also 

proposed that if more recent data are 

available to determine the labor-related 

share of the RPL market basket, we 

would use it for determining the RY 

2009 LTCH PPS labor-related share in 

the final rule. 

We received no comments on the 

proposed labor related share for RY 

2009. As discussed in section IV.C.2. of 

this preamble, we now have data from 

the 1st quarter of 2008 forecast (with 

history through the 4th quarter of 2007) 

available for determining the laborrelated share of the FY 2002-based RPL 

market basket. Based on this more 

recent data, in this final rule, under the 

broad authority conferred upon the 

Secretary by section 123 of the BBRA as 

amended by section 307(b) of the BIPA, 

consistent with our historical practice of 

determining the labor-related share by 

identifying the national average 

proportion of operating costs and capital 

costs that are related to, influenced by, 

or varies with the local labor market, we 

are revising the LTCH PPS labor-related 

share from 75.788 percent to 75.662 

percent based on the sum of the relative 

importance of the labor-related share of 

operating costs (wages and salaries, 

employee benefits, professional fees, 

and all other labor-intensive services) 

and capital costs of the FY 2002-based 

RPL market basket from the first quarter 

of 2008 forecast, as shown in Table II. 

In this final rule, for RY 2009, we are 

using the FY 2002-based RPL market 

basket costs based on data from the first 

quarter of 2008 forecast to determine the 

labor-related share for the LTCH PPS for 

RY 2009 effective for discharges 

occurring on or after July 1, 2008 and 

through September 30, 2009, as this is 

the most recent available data. The 

labor-related share for RY 2009 LTCH 

PPS continues to be determined as the 

sum of the relative importance of each 

labor-related cost category, and reflects 

the different rates of price change for 

these cost categories between the base 

year (FY 2002) and the (15-month) 2009 

LTCH PPS rate year. As discussed in 

greater detail above in section IV.B. of 

this final rule, we are moving the LTCH 

PPS annual payment rate year beginning 

July 1st to a rate year beginning October 

1st and will have a 15-month rate year 

for 2009 that is, July 1, 2008 through 

September 30, 2009. Accordingly, we 

are using the 15-month RY 2009 RPL 

market basket, discussed above, to 

determine the labor-related share for RY 

2009 in this final rule. Based on the 

most recent available data, the sum of 

the relative importance for the 2009 

LTCH PPS rate year for operating costs 

(wages and salaries, employee benefits, 

professional fees, and labor-intensive 

services) will be 71.719, as shown in 

Table II. The portion of capital that is 

influenced by the local labor market for 

this final rule, as was proposed, is still 

estimated to be 46 percent, which is the 

same percentage used when we 

established the current labor-related 

share in the RY 2008 LTCH PPS final 

rule. Based on the most recent available 

data, the relative importance for capital 

will be 8.572 percent of the FY 2002- 

based RPL market basket for the 2009 

LTCH PPS rate year. As proposed, we 

are multiplying the estimated portion of 

capital influenced by the local labor 

market (46 percent) by the relative 

importance for capital (8.572 percent) to 

determine the labor-related share of 

capital for the 2009 LTCH PPS rate year. 

The result is 3.943 percent (0.46 x 8.572 

percent), which we add to the 71.719 

percent for the operating cost amount to 

determine the total labor-related share 

for the 2009 LTCH PPS rate year. Thus, 

based on the latest available data, we are 

establishing a labor-related share of 

75.662 percent (71.719 percent + 3.943 

percent) under the LTCH PPS for the 

2009 LTCH PPS rate year. As noted 

above in this section, the labor-related 

share in this final rule is determined 

using the same methodology as 

employed in calculating the current 

LTCH labor-related share (72 FR 26892) 

and the labor-related shares used under 

the IRF PPS and IPF PPS, which also 

use the RPL market basket. 

Table II shows the 2008 LTCH PPS 

rate year relative importance laborrelated share of the FY 2002-based RPL 

market basket (established in the RY 

2008 LTCH PPS final rule) and the 2009 

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LTCH PPS rate year relative importance 

labor-related share of the FY 2002-based 

RPL market basket (established in this 

final rule). 

TABLE II.—RY 2008 LABOR-RELATED SHARE RELATIVE IMPORTANCE AND RY 2009 LABOR-RELATED SHARE RELATIVE

IMPORTANCE OF THE FY 2002-BASED RPL MARKET BASKET

Cost category 

RY 2008 

relative 

importance * 

RY 2009 

relative 

importance 

Wages and Salaries ................................................................................................................................................ 52.588 52.663 

Employee Benefits ................................................................................................................................................... 14.127 14.024 

Professional fees ..................................................................................................................................................... 2.907 2.895 

All other labor intensive services ** ......................................................................................................................... 2.145 2.137 

Subtotal ............................................................................................................................................................. 71.767 71.719 

Labor share of capital costs .................................................................................................................................... 4.021 3.943 

Total Labor-related share ................................................................................................................................. 75.788 75.662 

* As established in the RY 2008 LTCH PPS final rule (72 FR 26892). 

** Other labor intensive services includes landscaping services, services to buildings, detective and protective services, repair services, laundry 

services, advertising, auto parking and repairs, physical fitness facilities, and other government enterprises. 

d. Wage Index Data 

Historically, under the LTCH PPS, we 

have established LTCH PPS wage index 

values calculated from acute care IPPS 

hospital wage data without taking into 

account geographic reclassification 

under sections 1886(d)(8) and (d)(10) of 

the Act. As we discussed in the August 

30, 2002 LTCH PPS final rule (67 FR 

56019), since hospitals that are 

excluded from the IPPS are not required 

to provide wage-related information on 

the Medicare cost report. Therefore, we 

would need to establish instructions for 

the collection of this LTCH data as well 

as develop some type of application and 

determination process before a 

geographic reclassification adjustment 

under the LTCH PPS could be 

implemented. Thus, the wage 

adjustment established under the LTCH 

PPS is based on a LTCH’s actual 

location without regard to the urban or 

rural designation of any related or 

affiliated provider. Acute care hospital 

inpatient wage index data are also used 

to establish the wage index adjustment 

used in other Medicare PPSs, such as 

the IRF PPS, IPF PPS, HHA PPS, and 

SNF PPS. 

In the RY 2008 LTCH PPS final rule 

(72 FR 26893), we established LTCH 

PPS wage index values for the RY 2008 

calculated from the same data collected 

from cost reports submitted by hospitals 

for cost reporting periods beginning 

during FY 2003 that was used to 

compute the FY 2007 acute care 

hospital inpatient wage index data 

without taking into account geographic 

reclassification under sections 

1886(d)(8) and (d)(10) of the Act 

because that was the best available data 

at that time. The LTCH PPS wage index 

values applicable for discharges 

occurring on or after July 1, 2007 

through June 30, 2008 are shown in 

Table I (for urban areas) and Table 2 (for 

rural areas) in the Addendum to the RY 

2008 LTCH PPS final rule (72 FR 26996 

through 27019). 

In the proposed rule (72 FR 5366), 

under the broad authority conferred 

upon the Secretary by section 123 of the 

BBRA, as amended by section 307(b) of 

BIPA, to determine appropriate 

adjustments under the LTCH PPS, we 

proposed to use the same data collected 

from cost reports submitted by hospitals 

for cost reporting periods beginning 

during FY 2004 that was used to 

compute the FY 2008 acute care 

hospital inpatient wage index data 

without taking into account geographic 

reclassification under sections 

1886(d)(8) and (d)(10) of the Act to 

determine the applicable wage index 

values under the LTCH PPS in RY 2009 

because these data (FY 2004) are the 

most recent complete data available at 

that time. We proposed to continue to 

use IPPS wage data as a proxy to 

determine the proposed LTCH wage 

index values for RY 2009 because both 

LTCHs and acute-care hospitals are 

required to meet the same certification 

criteria set forth in section 1861(e) of the 

Act to participate as a hospital in the 

Medicare program and they both 

compete in the same labor markets, and 

therefore, experience similar wagerelated costs. We also noted that the 

IPPS wage data used to determine the 

proposed RY 2009 LTCH wage index 

values reflected our policy adopted 

under the IPPS beginning in FY 2008 

that apportions the wage data for multicampus hospitals’ located in different 

labor market areas (CBSAs) to each 

CBSA where the campuses are located 

(For additional information see the FY 

2008 IPPS final rule with comment (72 

FR 47317 through 47320)). We also 

explained that the proposed RY 2009 

LTCH PPS wage index values were 

computed consistent with the urban and 

rural geographic classifications (labor 

market areas) discussed in that same 

proposed rule and consistent with prereclassified IPPS wage index policy 

(that is, our historical policy of not 

taking into account IPPS geographic 

reclassifications in determining 

payments under the LTCH PPS). The 

proposed RY 2009 wage index values 

also reflected our proposals, (which are 

discussed below), to establish wage 

index values in urban and rural areas in 

which there are no IPPS wage data from 

which to compute a wage index value 

under our methodology described 

above. (Additional details on this 

proposal, which we are finalizing 

without modification in this final rule, 

are discussed below or can be found in 

the RY 2009 proposed rule (73 FR 

5366).) We received no comments on 

our proposal to update the wage index 

values based on the most recent 

available data or our proposed 

methodology for computing the RY 2009 

LTCH PPS wage index. 

In this final rule, under the broad 

authority conferred upon the Secretary 

by section 123 of the BBRA, as amended 

by section 307(b) of BIPA, to determine 

appropriate adjustments under the 

LTCH PPS, as proposed, we are using 

the same data (collected from cost 

reports submitted by hospitals for cost 

reporting periods beginning during FY 

2004) used to compute the FY 2008 

acute care hospital inpatient wage index 

data without taking into account 

geographic reclassification under 

sections 1886(d)(8) and (d)(10) of the 

Act to determine the applicable wage 

index values under the LTCH PPS in RY 

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2009 because these data (FY 2004) are 

the most recent complete data. (For 

information on the data used to 

compute the FY 2008 IPPS wage index 

refer to the FY 2008 IPPS final rule with 

comment period (72 FR 47308 through 

47309, 47315)). As we explained in the 

proposed rule, we continue to use IPPS 

wage data as a proxy to determine the 

proposed LTCH wage index values for 

RY 2009 because both LTCHs and acutecare hospitals are required to meet the 

same certification criteria set forth in 

section 1861(e) of the Act to participate 

as a hospital in the Medicare program 

and they both compete in the same labor 

markets, and therefore, experience 

similar wage-related costs. As also 

discussed in the proposed rule, we note 

that the IPPS wage data used to 

determine the RY 2009 LTCH wage 

index values reflects our policy adopted 

under the IPPS beginning in FY 2008 

that apportions the wage data for 

multicampus hospitals’ located in 

different labor market areas (CBSAs) to 

each CBSA where the campuses are 

located (For additional information see 

the FY 2008 IPPS final rule with 

comment period (72 FR 47317 through 

47320)). For the RY 2009 LTCH PPS 

wage index, which is computed from 

IPPS wage data submitted by hospitals 

for cost reporting periods beginning in 

FY 2004 (just like comparable to the FY 

2008 IPPS wage index), we allocated 

salaries and hours to the campuses of 

two multicampus hospitals with 

campuses that are located in different 

labor areas, one in Massachusetts and 

another in Illinois. Thus, the RY 2009 

LTCH PPS wage index values for the 

following CBSAs are affected by this 

policy: Boston-Quincy, MA (CBSA 

14484), Providence-New Bedford-Falls 

River, RI-MA (CBSA 39300), ChicagoNaperville-Joliet, IL (CBSA 16974) and 

Lake County-Kenosha County, IL-WI 

(CBSA 29404) (refer to Table 1 in the 

Addendum of this final rule). As 

proposed, the RY 2009 LTCH PPS wage 

index values presented in this final rule 

were computed consistent with the 

urban and rural geographic 

classifications (labor market areas) 

discussed above in section IV.F.1.b. of 

this final rule and consistent with prereclassified IPPS wage index policy, that 

is, our historical policy of not taking 

into account IPPS geographic 

reclassifications in determining 

payments under the LTCH PPS. 

Specifically, we note (as we did in the 

proposed rule) that the wage data of the 

IPPS hospitals located in Litchfield 

county, CT, and Merrimack county, NH, 

were included in the calculation of the 

RY 2009 LTCH PPS statewide rural 

wage index values for Connecticut and 

New Hampshire, respectively (rather 

than urban CBSA 25540 (Hartford-West 

Hartford-East Hartford, CT) and urban 

CBSA 31700 (Manchester-Nashua, NH), 

respectively). In addition, the RY 2009 

wage index reflects the policy, which is 

discussed in greater detail below, we are 

establishing to determine wage index 

values in urban and rural areas in which 

there are no IPPS wage data from which 

to compute a wage index value under 

our methodology described above. As 

noted above, the RY 2009 LTCH PPS 

wage index values in this final rule were 

computed from the same FY2004 acute 

care hospital inpatient wage data that 

were used to compute the FY 2008 wage 

index currently used under the IPPS. 

Also, as proposed in the RY 2009 

proposed rule (73 FR 5366 through 

5368), we are establishing a policy for 

determining LTCH PPS wage index 

values for labor market areas in which 

there is no IPPS hospital wage data from 

which to compute a wage index value 

under our methodology described 

above. In the RY 2009 proposed rule, we 

explained that currently, there are no 

LTCHs located in labor areas where 

there is no IPPS hospital wage data (or 

IPPS hospitals). However, we believed it 

was appropriate to establish a 

methodology for determining LTCH PPS 

wage index values for these areas in the 

event that in the future a LTCH should 

open in one of those areas. Thus, any 

LTCH that would open in an area in 

which there is no IPPS wage data for 

which to compute a wage index based 

on our established methodology would 

have a wage index value assigned to 

them for determining their LTCH PPS 

payments. Consistent with the proposed 

rule, in this final rule we are adopting 

the policy which provides that each 

year we will determine a wage index 

value for any area in which there is no 

IPPS wage data based on the 

methodologies described below. These 

policies for determining LTCH PPS 

wage index values for areas with no 

IPPS hospital wage data are consistent 

with the policies that have been 

established under other Medicare postacute care PPSs, such as SNF and HHA, 

as well as the IPPS. 

Specifically, as proposed, we are 

establishing a policy for determining a 

LTCH PPS wage index value for urban 

CBSAs with no IPPS wage data by using 

an average of all of the urban areas 

within the State to serve as a reasonable 

proxy for determining the LTCH PPS 

wage index for an urban area without 

specific IPPS hospital wage index data. 

We believe that an average of all of the 

urban areas within the State would be 

a reasonable proxy for determining the 

LTCH PPS wage index for an urban area 

in the State with no wage data because 

it is based on pre-reclassified IPPS wage 

data, it is easy to evaluate, and it uses 

the most geographically similar relative 

wage-related costs data available. (Our 

rationale for using pre-reclassified IPPS 

wage data is discussed above in the 

beginning of this section.) As proposed, 

we are also establishing a policy for 

determining a LTCH PPS wage index 

value for rural areas with no IPPS wage 

data using the unweighted average of 

the wage indices from all of the CBSAs 

that are contiguous to the rural counties 

of the State to serve as a reasonable 

proxy in determining the LTCH PPS 

wage index for a rural area without 

specific IPPS hospital wage index data. 

For this purpose, as proposed, we are 

defining ‘‘contiguous’’ as sharing a 

border. As explained, in the proposed 

rule, we are not able to apply an 

averaging in rural areas with no wage 

data similar to what we are doing for 

urban areas with no wage data because 

there is no rural hospital data available 

for averaging on a state-wide basis. We 

believe that using an unweighted 

average of the wage indices from all of 

the CBSAs that are contiguous to the 

rural counties of the State is a 

reasonable proxy for determining the 

wage index for rural areas in a State 

with no wage data because it is based on 

pre-reclassified IPPS wage data, it is 

easy to evaluate, and it uses the most 

geographically similar relative wagerelated costs data available. (Our 

rationale for using pre-reclassified IPPS 

wage data is discussed above in the 

beginning of this section.) In addition, 

as IPPS wage data is dynamic, it is 

possible that areas without IPPS wage 

data may vary in the future, and each 

year we would determine a wage index 

value for any area in which there is no 

IPPS wage data based on our 

methodologies. Additional details on 

our proposals on setting the LTCH PPS 

wage indices, which we are finalizing 

without modification in this final rule, 

are discussed below or can be found in 

the RY 2009 proposed rule (73 FR 5367). 

Comment: We received no comments 

opposing and a few comments in 

support of our proposed methodology 

for setting LTCH PPS wage indices for 

areas where there are no IPPS wage 

data. These commenters noted that 

although it would be unlikely that a 

LTCH would operate in an area without 

an acute care IPPS hospital to supply 

wage data, as IPPS hospitals are a 

common referral source, the 

commenters agreed that it is practical to 

prepare for this unlikely scenario, and 

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26818 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

find our proposed methodology to be 

reasonable. 

Response: We appreciate the 

commenters’ support of our proposals to 

establish LTCH PPS wage index values 

for areas where there are no IPPS wage 

data. As noted above, currently, there 

are no LTCHs located in labor areas 

where there is no IPPS hospital wage 

data (or IPPS hospitals), however, we 

believe it is appropriate to establish a 

methodology for determining LTCH PPS 

wage index values for these areas in the 

event that in the future a LTCH should 

open in one of those areas. Thus, any 

LTCH that would open in an area in 

which there is no IPPS wage data for 

which to compute a wage index based 

on our established methodology would 

have a wage index value assigned to 

them for determining their LTCH PPS 

payments. 

In this final rule, under the broad 

authority conferred upon the Secretary 

by section 123 of the BBRA as amended 

by section 307(b) of BIPA to determine 

appropriate adjustments under the 

LTCH PPS, we are finalizing our 

proposal to establish a policy for 

determining LTCH PPS wage index 

values for labor market areas in which 

there is no IPPS hospital wage data from 

which to compute a wage index value 

under our methodology described 

above. Under this policy, each year we 

would determine a wage index value for 

any area in which there is no IPPS wage 

data based on the methodologies 

described below. As IPPS hospitals may 

open or close at any time, the number 

of areas without any IPPS wage data 

may change from year to year, and even 

when an IPPS hospital does open in an 

area where there are currently no IPPS 

hospitals, because there is a lag-time 

between the time a hospital opens or 

becomes an IPPS provider and when the 

hospital’s cost report wage data are 

available to include in calculating the 

area wage index (72 FR 47323), we 

believe it is appropriate to establish a 

methodology for determining LTCH PPS 

wage index values for these areas, if 

necessary. We note that our policies for 

determining LTCH PPS wage index 

values for areas with no IPPS hospital 

wage data are consistent with the 

policies that have been established 

under other Medicare post-acute care 

PPSs, such as SNF and HHA, as well as 

the IPPS. 

The first situation for which we are 

establishing a policy for determining a 

LTCH PPS wage index value is for urban 

CBSAs with no IPPS wage data. 

Consistent with the policy established 

under other PPSs, such as the HHA (70 

FR 40795 and 71 FR 65892 through 

65893), as proposed, we are establishing 

a methodology of using an average of all 

of the urban areas within the State to 

serve as a reasonable proxy for 

determining the LTCH PPS wage index 

for an urban area without specific IPPS 

hospital wage index data. As we 

explained in the proposed rule, we 

believe that an average of all of the 

urban areas within the State would be 

a reasonable proxy for determining the 

LTCH PPS wage index for an urban area 

in the State with no wage data because 

it is based on pre-reclassified IPPS wage 

data, it is easy to evaluate, and it uses 

the most geographically similar relative 

wage-related costs data available. 

In this final rule, based on the FY 

2004 IPPS wage data that we are using 

to determine the RY 2009 LTCH PPS 

wage index, which is discussed above, 

there is no IPPS wage data for the urban 

area of Hinesville-Fort Stewart, GA 

(CBSA 25980). (As we noted in the 

proposed rule, as IPPS wage data is 

dynamic, it is possible that urban areas 

without IPPS wage data will vary in the 

future.) Consistent with our policy for 

determining a LTCH PPS wage index 

value for urban areas with no IPPS wage 

data (discussed above), in this final rule, 

we calculated the wage index value for 

RY 2009 for CBSA 25980 as the average 

of the wage index values for all of the 

other urban areas within the State of 

Georgia (that is, CBSAs 10500, 12020, 

12060, 12260, 15260, 16860, 17980, 

19140, 23580, 31420, 40660, 42340, 

46660 and 47580) (refer to Table 1 of the 

Addendum of this final rule). (As noted 

above, there are currently no LTCHs 

located in CBSA 25980). As discussed 

in the proposed rule, we believe that 

this policy could be readily applied to 

other urban CBSAs (besides CBSA 

25980) that lack IPPS wage data. 

However, as proposed, we may reexamine the application of this policy 

should a similar situation arise in the 

future. 

The other situation for which we are 

establishing a policy for determining a 

LTCH PPS wage index value is for rural 

areas with no IPPS wage data. 

Consistent with the policy established 

under other PPSs, such as the HHA (71 

FR 65905 through 65906) and the IPPS 

(72 FR 47323 through 47324), as 

proposed, we are establishing a policy 

of using the unweighted average of the 

wage indices from all of the CBSAs that 

are contiguous to the rural counties of 

the State to serve as a reasonable proxy 

in determining the LTCH PPS wage 

index for a rural area without specific 

IPPS hospital wage index data. For this 

purpose, we define ‘‘contiguous’’ as 

sharing a border. As we explained in the 

proposed rule, we are not able to apply 

a similar averaging in rural areas with 

no wage data as we did above for urban 

areas with no wage data because there 

is no rural hospital data available for 

averaging on a state-wide basis. We 

believe that using an unweighted 

average of the wage indices from all of 

the CBSAs that are contiguous to the 

rural counties of the State is a 

reasonable proxy for determining the 

wage index for rural areas in a State 

with no wage data because it is based on 

pre-reclassified IPPS wage data, it is 

easy to evaluate, and it uses the most 

geographically similar relative wagerelated costs data available. 

In this final rule, based on the FY 

2004 IPPS data that we are using to 

determine the RY 2009 LTCH PPS wage 

index, which is discussed above, rural 

Massachusetts (CBSA code 11) does not 

have any IPPS wage data. (As noted in 

the proposed rule, as IPPS wage data is 

dynamic, it is possible that rural areas 

without IPPS wage data will vary in the 

future.) Consistent with our policy for 

determining a LTCH PPS wage index 

value for rural areas with no IPPS 

hospital wage data (described above), in 

this final rule, we determined the wage 

index value for RY 2009 for rural 

Massachusetts by computing the 

unweighted average of the wage indices 

from all of the CBSAs that are 

contiguous to the rural counties in that 

State. Specifically, in the case of 

Massachusetts, the entire rural area 

consists of Dukes and Nantucket 

counties. As discussed in our proposal, 

we determined that the borders of Dukes 

and Nantucket counties are 

‘‘contiguous’’ with Barnstable County, 

MA, and Bristol County, MA. Therefore, 

the RY 2009 LTCH PPS wage index 

value for rural Massachusetts is 

computed as the unweighted average of 

the RY 2009 wage indexes for 

Barnstable county and Bristol county 

(refer to Tables 1 and 2 of the 

Addendum of this final rule). (As noted 

above, there are currently no LTCHs 

located in rural Massachusetts.) We 

discussed in the proposed rule, we 

believe that this policy could be readily 

applied to other rural areas (besides 

Massachusetts) that lack IPPS wage data 

(possibly due to acute-care hospitals 

converting to a different provider type 

that does not submit the appropriate 

wage data). However, we may reexamine the application of this policy 

should a similar situation arise in the 

future. 

The RY 2009 LTCH wage index values 

that will be applicable for LTCH 

discharges occurring on or after July 1, 

2008 through September 30, 2009, are 

presented in Table 1 (for urban areas) 

and Table 2 (for rural areas) in the 

Addendum of this final rule. As 

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discussed in greater detail above in 

section IV.B. of this preamble, we are 

moving the LTCH PPS annual payment 

rate update cycle from July 1 to October 

1 and will have a 15-month rate year for 

2009 (that is, July 1, 2008 through 

September 30, 2009). Therefore, as 

proposed, the next proposed update to 

the LTCH wage index values will be 

effective for discharges occurring on or 

after October 1, 2009 (FY 2010). In 

addition, as noted above, the wage 

index adjustment under the LTCH PPS 

was completely phased in beginning 

with cost reporting periods beginning in 

FY 2007 (that is, for cost reporting 

periods beginning on or after October 1, 

2006). Therefore, for LTCH PPS 

discharges occurring during RY 2009, 

the labor related portion of the standard 

Federal rate is adjusted by the 

applicable full (five fifths) proposed RY 

2009 LTCH PPS wage index value, 

which are shown in Tables 1 and 2 of 

the Addendum to this final rule). 

2. Adjustment for Cost-of-Living in 

Alaska and Hawaii 

In the August 30, 2002 final rule (67 

FR 56022), we established, under 

§ 412.525(b), a cost of living adjustment 

(COLA) for LTCHs located in Alaska 

and Hawaii to account for the higher 

costs incurred in those States. In the RY 

2008 LTCH PPS final rule (72 FR 

26894), for RY 2008, we established a 

COLA to payments for LTCHs located in 

Alaska and Hawaii by multiplying the 

standard Federal payment rate by the 

appropriate factor listed in Table III of 

that same final rule. 

Similarly, in the RY 2009 LTCH PPS 

proposed rule (73 FR 5368), under the 

broad authority conferred upon the 

Secretary by section 123 of the BBRA as 

amended by section 307(b) of BIPA to 

determine appropriate adjustments 

under the LTCH PPS, for RY 2009 we 

proposed to apply a COLA to payments 

to LTCHs located in Alaska and Hawaii 

by multiplying the proposed standard 

Federal payment rate by the proposed 

factors listed below in Table III because 

they were the most recent available data 

at that time. These proposed factors 

were obtained from the U.S. Office of 

Personnel Management (OPM) and are 

currently also used under the IPPS (72 

FR 47422). In addition, we proposed 

that if OPM releases revised COLA 

factors before March 1, 2008, we would 

use the revised factors for the 

development of LTCH PPS payments for 

RY 2009 and publish those revised 

COLA factors in the final rule. 

We received no comments on our 

proposed COLA for LTCHs located in 

Alaska and Hawaii for RY 2009. We 

note that as of March 1, 2008, OPM did 

not revise the COLA factors we 

proposed for RY 2009 in the proposed 

rule. Accordingly, in this final rule, 

under the broad authority conferred 

upon the Secretary by section 123 of the 

BBRA as amended by section 307(b) of 

BIPA to determine appropriate 

adjustments under the LTCH PPS, in 

this final rule, as proposed, we are 

establishing that for RY 2009 we will 

make a COLA to payments to LTCHs 

located in Alaska and Hawaii by 

multiplying the standard Federal 

payment rate by the factors listed below 

in Table III because they are the most 

recent available data at this time. 

TABLE III.—COST-OF-LIVING ADJUSTMENT FACTORS FOR ALASKA AND HAWAII HOSPITALS FOR THE 2009 LTCH PPS 

RATE YEAR

Alaska: 

City of Anchorage and 80-kilometer (50-mile) radius by road ............................................................................................................. 1.24 

City of Fairbanks and 80-kilometer (50-mile) radius by road .............................................................................................................. 1.24 

City of Juneau and 80-kilometer (50-mile) radius by road .................................................................................................................. 1.24 

All other areas of Alaska ...................................................................................................................................................................... 1.25 

Hawaii: 

City and County of Honolulu ................................................................................................................................................................ 1.25 

County of Hawaii .................................................................................................................................................................................. 1.17 

County of Kauai .................................................................................................................................................................................... 1.25 

County of Maui and County of Kalawao .............................................................................................................................................. 1.25 

3. Adjustment for High-Cost Outliers 

(HCOs) 

a. Background 

Under the broad authority conferred 

upon the Secretary by section 123 of the 

BBRA as amended by section 307(b) of 

BIPA, in the regulations at § 412.525(a), 

we established an adjustment for 

additional payments for outlier cases 

that have extraordinarily high costs 

relative to the costs of most discharges. 

We refer to these cases as high cost 

outliers (HCOs). Providing additional 

payments for outliers strongly improves 

the accuracy of the LTCH PPS in 

determining resource costs at the patient 

and hospital level. These additional 

payments reduce the financial losses 

that would otherwise be incurred when 

treating patients who require more 

costly care and, therefore, reduce the 

incentives to underserve these patients. 

We set the outlier threshold before the 

beginning of the applicable rate year so 

that total estimated outlier payments are 

projected to equal 8 percent of total 

estimated payments under the LTCH 

PPS. Outlier payments under the LTCH 

PPS are determined consistent with the 

instructions issued for the IPPS outlier 

policy. 

Under § 412.525(a) in the regulations 

(in conjunction with the revised 

definition of ‘‘LTC–DRG’’ at § 412.503), 

we make outlier payments for any 

discharges if the estimated cost of a case 

exceeds the adjusted LTCH PPS 

payment for the MS–LTC–DRG plus a 

fixed-loss amount. Specifically, in 

accordance with § 412.525(a)(3) (in 

conjunction with the revised definition 

of ‘‘LTC–DRG’’ at § 412.503), we pay 

outlier cases 80 percent of the difference 

between the estimated cost of the 

patient case and the outlier threshold, 

which is the sum of the adjusted Federal 

prospective payment for the MS–LTC–

DRG and the fixed-loss amount. The 

fixed-loss amount is the amount used to 

limit the loss that a hospital will incur 

under the outlier policy for a case with 

unusually high costs. This results in 

Medicare and the LTCH sharing 

financial risk in the treatment of 

extraordinarily costly cases. Under the 

LTCH PPS HCO policy, the LTCH’s loss 

is limited to the fixed-loss amount and 

a fixed percentage (currently 80 percent) 

of costs above the outlier threshold 

(MS–LTCDRG payment plus the fixedloss amount). The fixed percentage of 

costs is called the marginal cost factor. 

We calculate the estimated cost of a case 

by multiplying the Medicare allowable 

covered charge by the overall hospital 

cost-to-charge ratio (CCR). 

Under the LTCH PPS, we determine a 

fixed-loss amount, that is, the maximum 

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loss that a LTCH can incur under the 

LTCH PPS for a case with unusually 

high costs before the LTCH will receive 

any additional payments. We calculate 

the fixed-loss amount by estimating 

aggregate payments with and without an 

outlier policy. The fixed-loss amount 

will result in estimated total outlier 

payments being projected to be equal to 

8 percent of projected total LTCH PPS 

payments. Currently, MedPAR claims 

data and CCRs based on data from the 

most recent provider specific file (PSF) 

(or from the applicable Statewide 

average CCR if a LTCH’s CCR data are 

faulty or unavailable) are used to 

establish a fixed-loss threshold amount 

under the LTCH PPS. 

b. Cost-to-Charge Ratios (CCRs) 

The following is a discussion of costto-charge ratios (CCRs) used in 

determining payments for high cost and 

short-stay outlier cases under the LTCH 

PPS, at § 412.525(a) and § 412.529, 

respectively. Although this section is 

specific to HCO cases, because CCRs 

and the policies and methodologies 

pertaining to them are used in 

determining payments for both high cost 

and short-stay outlier (SSO) cases (as 

explained below), we are discussing the 

determination of CCRs under the LTCH 

PPS for both of these type of cases 

simultaneously. In section IV.G. of this 

final rule, which discusses SSO cases, 

we refer the reader to this section of the 

preamble for a complete discussion on 

the determination of CCRs. 

In determining both HCO payments 

(at § 412.525(a)) and SSO payments (at 

§ 412.529), we calculate the estimated 

cost of the case by multiplying the 

LTCH’s overall CCR by the Medicare 

allowable charges for the case. In 

general, we use the LTCH’s overall CCR, 

which is computed based on either the 

most recently settled cost report or the 

most recent tentatively settled cost 

report, whichever is from the latest cost 

reporting period, in accordance with 

§ 412.525(a)(4)(iv)(B) and 

§ 412.529(c)(4)(iv)(B) for HCOs and 

SSOs, respectively. (We note that in 

some instances we use an alternative 

CCR, such as the statewide average CCR 

in accordance with the regulations at 

§ 412.525(a)(4)(iv)(C) and 

§ 412.529(c)(4)(iv)(C), or a CCR that is 

specified by CMS or that is requested by 

the hospital under the provisions of the 

regulations at § 412.525(a)(4)(iv)(A) and 

§ 412.529(c)(4)(iv)(A).) Under the LTCH 

PPS, a single prospective payment per 

discharge is made for both inpatient 

operating and capital-related costs. 

Therefore, we compute a single 

‘‘overall’’ or ‘‘total’’ LTCH-specific CCR 

based on the sum of LTCH operating 

and capital costs (as described in 

Chapter 3, section 150.24, of the 

Medicare Claims Processing Manual 

(CMS Pub. 100–4)) as compared to total 

charges. Specifically, a LTCH’s CCR is 

calculated by dividing a LTCH’s total 

Medicare costs (That is, the sum of its 

operating and capital inpatient routine 

and ancillary costs) by its total Medicare 

charges (that is, the sum of its operating 

and capital inpatient routine and 

ancillary charges). 

Generally, a LTCH is assigned the 

applicable statewide average CCR if, 

among other things, a LTCH’s CCR is 

found to be in excess of the applicable 

maximum CCR threshold (that is, the 

LTCH CCR ceiling). This is because 

CCRs above this threshold are most 

likely due to faulty data reporting or 

entry, and, therefore, CCRs based on 

erroneous data should not be used to 

identify and make payments for outlier 

cases. Thus, under our established 

policy, generally, if a LTCH’s calculated 

CCR is above the applicable ceiling, the 

applicable LTCH PPS statewide average 

CCR is assigned to the LTCH instead of 

the CCR computed from its most recent 

(settled or tentatively settled) cost report 

data. 

In the FY 2008 IPPS final rule with 

comment period, in accordance with 

§ 412.525(a)(4)(iv)(C)(2) for high-cost 

outliers and § 412.529(c)(4)(iv)(C)(2) for 

short-stay outliers, using our established 

methodology for determining the LTCH 

total CCR ceiling, based on IPPS total 

CCR data from the March 2007 update 

to the Provider-Specific File (PSF), we 

established a total CCR ceiling of 1.284 

under the LTCH PPS effective October 

1, 2007 through September 30, 2008. We 

also note that in the FY 2009 IPPS 

proposed rule (73 FR 23681), using our 

established methodology for 

determining the LTCH total CCR ceiling, 

based on IPPS total CCR data from the 

December 2007 update of the PSF, we 

proposed a total CCR ceiling of 1.262 

under the LTCH PPS that would be 

effective October 1, 2008 through 

September 30, 2009. In that same 

proposed rule, we also proposed that if 

more recent data were available, we 

would use it to establish a total CCR 

ceiling under the LTCH PPS for FY 2009 

in the FY 2009 IPPS final rule. (For 

further detail on our methodology for 

annually determining the LTCH total 

CCR ceiling, we refer readers to the FY 

2007 IPPS final rule (71 FR 48119 

through 48121) and the FY 2008 IPPS 

final rule with comment period (72 FR 

47403 through 47404).) 

Our general methodology established 

for determining the statewide average 

CCRs used under the LTCH PPS is 

similar to our established methodology 

for determining the LTCH total CCR 

ceiling (described above) since it is 

based on ‘‘total’’ IPPS CCR data. Under 

the LTCH PPS HCO policy at 

§ 412.525(a)(4)(iv)(C) and the SSO 

policy at § 412.529(c)(4)(iv)(C), the fiscal 

intermediary (FI) may use a statewide 

average CCR, which is established 

annually by CMS, if it is unable to 

determine an accurate CCR for a LTCH 

in one of the following circumstances: 

(1) New LTCHs that have not yet 

submitted their first Medicare cost 

report (for this purpose, consistent with 

current policy, a new LTCH is defined 

as an entity that has not accepted 

assignment of an existing hospital’s 

provider agreement in accordance with 

§ 489.18); (2) LTCHs whose CCR is in 

excess of the LTCH CCR ceiling (as 

discussed above); and (3) other LTCHs 

for whom data with which to calculate 

a CCR are not available (for example, 

missing or faulty data). (Other sources of 

data that the FI may consider in 

determining a LTCH’s CCR include data 

from a different cost reporting period for 

the LTCH, data from the cost reporting 

period preceding the period in which 

the hospital began to be paid as a LTCH 

(that is, the period of at least 6 months 

that it was paid as a short-term acute 

care hospital), or data from other 

comparable LTCHs, such as LTCHs in 

the same chain or in the same region.) 

In Table 8C of the Addendum the FY 

2008 IPPS final rule with comment 

period (72 FR 48127), in accordance 

with the regulations at 

§ 412.525(a)(4)(iv)(C) for HCOs and 

§ 412.529(c)(4)(iv)(C) for SSO, using our 

established methodology for 

determining the LTCH statewide 

average CCRs, based on using the most 

recent complete IPPS total CCR data 

from the March 2007 update of the PSF, 

we established the LTCH PPS statewide 

average total CCRs for urban and rural 

hospitals effective for discharges 

occurring on or after October 1, 2007, 

and before October 1, 2008. We note 

that in the FY 2009 IPPS proposed rule 

(73 FR 23681), using our established 

methodology for determining the LTCH 

statewide average CCRs, based on the 

most recent complete IPPS total CCR 

data from the December 2007 update of 

the PSF, we proposed LTCH PPS 

statewide average total CCRs for urban 

and rural hospitals that would be 

effective for discharges occurring on or 

after October 1, 2008, and through 

September 30, 2009, in Table 8C of the 

Addendum to that proposed rule (73 FR 

23874). In that same proposed rule, we 

also proposed that if more recent data 

were available, we would use it to 

establish LTCH PPS statewide average 

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total CCRs for urban and rural hospitals 

for FY 2009 in the FY 2009 IPPS final 

rule. (For further detail on our 

methodology for annually determining 

the LTCH urban and rural statewide 

average CCRs, we refer readers to the FY 

2007 IPPS final rule (71 FR 48119 

through 48121) and FY 2008 IPPS final 

rule with comment period (72 FR 47403 

through 47404).) 

We note, under the LTCH PPS high 

cost outlier policy at 

§ 412.525(a)(4)(iv)(D) and the LTCH PPS 

SSO policy at § 412.529(c)(4)(iv)(D), the 

payments for high cost outlier and SSO 

cases, respectively, are subject to 

reconciliation. Specifically, any 

reconciliation of outlier payments is 

based on the CCR calculated based on 

a ratio of costs to charges computed 

from the relevant cost report and charge 

data determined at the time the cost 

report coinciding with the discharge is 

settled. For additional information, refer 

to the RY 2008 LTCH PPS final rule (72 

FR 26899 through 26900). 

c. Establishment of the RY 2009 FixedLoss Amount 

When we implemented the LTCH 

PPS, as discussed in the August 30, 

2002 LTCH PPS final rule (67 FR 56022 

through 56026), under the broad 

authority of section 123 of the BBRA as 

amended by section 307(b) of BIPA, we 

established a fixed-loss amount so that 

total estimated outlier payments are 

projected to equal 8 percent of total 

estimated payments under the LTCH 

PPS. To determine the fixed-loss 

amount, we estimate outlier payments 

and total LTCH PPS payments for each 

case using claims data from the 

MedPAR files. Specifically, to 

determine the outlier payment for each 

case, we estimate the cost of the case by 

multiplying the Medicare covered 

charges from the claim by the LTCH’s 

hospital specific CCR. Under 

§ 412.525(a)(3) (in conjunction with the 

revised definition of ‘‘LTC–DRG’’ at 

§ 412.503), if the estimated cost of the 

case exceeds the outlier threshold (the 

sum of the adjusted Federal prospective 

payment for the MS–LTC–DRG and the 

fixed-loss amount), we pay an outlier 

payment equal to 80 percent of the 

difference between the estimated cost of 

the case and the outlier threshold (the 

sum of the adjusted Federal prospective 

payment for the MS–LTC–DRG and the 

fixed-loss amount). 

In the RY 2008 LTCH PPS final rule 

(72 FR 26898), we used claims data from 

the December 2006 update of the FY 

2006 MedPAR files and CCRs from the 

December 2006 update of the PSF, as 

those were the best available data at that 

time, to calculate a fixed-loss amount 

that would result in estimated outlier 

payments projected to be equal to 8 

percent of total estimated payments for 

the 2008 LTCH PPS rate year. We 

believe that CCRs from the PSF are the 

best available CCR data for determining 

estimated LTCH PPS payments for a 

given LTCH PPS rate year because they 

are the most recently available CCRs 

actually used to make LTCH PPS 

payments. 

We also discussed in the RY 2008 

LTCH PPS rate year final rule (72 FR 

26898), we calculated a single fixed-loss 

amount for the 2008 LTCH PPS rate year 

based on the version 24.0 of the 

GROUPER, which was the version in 

effect as of the beginning of the LTCH 

PPS rate year (that is, July 1, 2007 for 

the 2008 LTCH PPS rate year). In 

addition, we applied the outlier policy 

in the regulations at § 412.525(a) in 

determining the fixed-loss amount for 

the 2008 LTCH PPS rate year; that is, we 

assigned the applicable Statewide 

average CCR only to LTCHs whose CCRs 

exceeded the ceiling. Accordingly, we 

used the FY 2007 LTCH PPS total CCR 

ceiling of 1.321 (72 FR 26898). As noted 

in that same final rule, in determining 

the fixed-loss amount for the 2008 

LTCH PPS rate year using the CCRs 

from the PSF, there were no LTCHs with 

missing CCRs or with CCRs in excess of 

the current ceiling and, therefore, there 

was no need for us to independently 

assign the applicable Statewide average 

CCR to any LTCHs in determining the 

fixed-loss amount for the 2008 LTCH 

PPS rate year (as this may have already 

been done by the FI in the PSF in 

accordance with the established policy). 

Accordingly, in the RY 2008 final rule 

(72 FR 26898), as amended by the RY 

2008 correction notice (72 FR 36613), 

we established a fixed-loss amount of 

$20,738 for the 2008 LTCH PPS rate 

year. In the recently issued interim final 

rule with comment that implements 

certain provisions of section 114 of the 

MMSEA, including the revision to the 

standard Federal rate for RY 2008, we 

revised the fixed-loss amount to $20,707 

for discharges occurring on or after 

April 1, 2008 through June 30, 2008. 

Thus, we pay an outlier case 80 percent 

of the difference between the estimated 

cost of the case and the outlier threshold 

(the sum of the adjusted Federal LTCH 

PPS payment for the MS–LTC–DRG and 

the applicable RY 2008 fixed-loss 

amount). 

In the RY 2009 proposed rule, for the 

2009 LTCH PPS rate year, we used the 

March 2006 update of the FY 2006 

MedPAR claims data to determine a 

proposed fixed-loss amount that would 

result in estimated outlier payments 

projected to be equal to 8 percent of 

total estimated payments, based on the 

policies described in that proposed rule, 

because those data were the most recent 

complete LTCH data available. 

Consistent with our historical practice 

of using the best data available, we also 

proposed that if more recent LTCH 

claims data become available, we would 

to use it for determining the fixed-loss 

amount for the 2009 LTCH PPS rate year 

in the final rule. In the proposed rule, 

as also noted previously, we proposed 

to determined the RY 2009 fixed-loss 

amount based on the version of the 

GROUPER that would be in effect as of 

the beginning of the 2009 LTCH PPS 

rate year (July 1, 2008), that is, Version 

25.0 of the GROUPER (as established in 

the FY 2008 IPPS final rule (72 FR 

47278)). 

Additionally, in the proposed rule, we 

used CCRs from the July 2007 update of 

the PSF for determining the proposed 

fixed-loss amount for the 2009 LTCH 

PPS rate year as they were the most 

recent complete available data at that 

time. Consistent with our historical 

practice of using the best data available, 

we also proposed that if more recent 

CCR data were available, we would use 

it for determining the fixed-loss amount 

for the 2009 LTCH PPS rate year in the 

final rule. Furthermore, in determining 

the proposed fixed-loss amount for the 

2009 LTCH PPS rate year, we used the 

current FY 2008 applicable LTCH 

‘‘total’’ CCR ceiling of 1.284 and LTCH 

Statewide average ‘‘total’’ CCRs 

established in the FY 2008 IPPS final 

rule (72 FR 47404 and 48126 through 

48127) such that the current applicable 

Statewide average CCR would be 

assigned if, among other things, a 

LTCH’s CCR exceeded the current 

ceiling (1.284). 

Therefore, based on the data and 

policies described in the proposed rule, 

under the broad authority of section 

123(a)(1) of the BBRA and section 

307(b)(1) of BIPA, in this final rule, we 

are establishing a fixed-loss amount of 

$22,960 for the 2009 LTCH PPS rate 

year. Thus, we pay an outlier case 80 

percent of the difference between the 

estimated cost of the case and the 

outlier threshold (the sum of the 

adjusted proposed Federal LTCH 

payment for the MS–LTC–DRG and the 

fixed-loss amount of $22,960). 

Comment: A few commenters 

expressed concern that we made an 

error in computing the proposed fixedloss amount by not incorporating the 

changes to LTCH PPS payments 

provided for by the MMSEA, such as the 

modification to the payment formula for 

short-stay outlier (SSO) cases at 

§ 412.529 and to the payment 

adjustments to LTCH discharges that 

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were admitted from specific referring 

hospitals and that exceed various 

percentage thresholds at §§ 412.534 and 

412.536 (often referred to as the ‘‘25- 

percent rule’’) that were current law. 

These commenters expected that 

because these MMSEA provisions 

would increase LTCH PPS payments in 

RY 2009, the fixed-loss amount for RY 

2009 should either decrease from the 

current RY 2008 amount or be lower 

than the proposed fixed-loss amount 

(holding all other factors constant). The 

commenters believed that because total 

estimated RY 2009 LTCH PPS payments 

that include the effect of these MMSEA 

provisions would increase over the 

original estimate of RY 2009 LTCH PPS 

payments, the 8 percent outlier target 

that is based on total estimated 

payments would also increase in size, 

and therefore, the fixed-loss amount for 

RY 2009 should decrease in order to 

increase estimated high cost outlier 

payments so as to meet the 8 percent 

target. Several commenters also stated 

that they believe that, because we are 

projecting that estimated LTCH PPS 

payments would increase in RY 2009 as 

compared to RY 2008, the fixed-loss 

amount for RY 2009 should decrease 

relative to the RY 2008 fixed-loss 

amount. Therefore, these commenters 

recommended that the calculation of the 

fixed-loss amount for RY 2009 be 

revised to take into account all the 

known policy changes that would affect 

LTCH PPS payments in RY 2009, 

including those mandated by the 

MMSEA, as to not establish a fixed-loss 

amount that would result in 

‘‘underpayment’’ to LTCHs. A few other 

commenters opposed the proposed 

increase to the fixed-loss amount since 

such an increase would result in fewer 

cases qualifying for an additional high 

cost outlier payment. One commenter 

remarked that the proposed ‘‘modest 

increase’’ in the fixed-loss amount is 

‘‘acceptable,’’ but asserted that LTCHs 

with very high case-mix indexes would 

be impacted more than LTCHs with low 

case-mix indexes. Another commenter 

stated that the proposed increase to the 

fixed-loss amount failed to consider the 

acuity of patients and is based only on 

mathematics. The commenter added 

that the proposed increase to the fixedloss amount would further increase 

LTCHs’ loss on these cases before they 

qualify for an additional payment as 

HCOs. The commenter recommended 

that if CMS believes an increase to the 

fixed-loss amount is warranted, then 

any increase to the fixed-loss amount 

should be limited to an annual 

inflationary increase. 

Response: We disagree with the 

commenters that we erred in the 

computation of the proposed fixed-loss 

amount by not incorporating all of the 

known policy changes that would affect 

LTCH PPS payments in RY 2009. In 

addition to including the proposed 

changes to the rates and factor for RY 

2009 included in the proposed rule, 

such as the proposed 2.6 percent RY 

2009 Federal rate, we did in fact include 

those provisions of the MMSEA that 

would affect RY 2009 LTCH PPS 

payments. Specifically, our payment 

model for estimating RY 2009 LTCH 

PPS payments, used in both the 

proposed rule and in this final rule, 

incorporated the modification to the 

payment formula for SSO cases, such 

that in RY 2009 LTCH payments for 

SSO cases would be the lesser of 100 

percent of the estimated cost of the case; 

120 percent of the MS–LTC–DRG 

specific per diem amount for each 

covered day; the full LTC–DRG 

payment; or a blend of the 120 percent 

of the MS–LTC–DRG specific per diem 

amount and an amount comparable to 

the IPPS per diem amount (capped at 

the full IPPS comparable amount). With 

respect to the ‘‘25-percent rule,’’

historically in estimating LTCH PPS 

payments for purposes of determining 

the fixed-loss amount (and for the 

impact analysis, as we discuss in 

section XI. of this final rule), we have 

not included an estimated change in 

payments due to the payment 

adjustments to LTCH discharges that 

were admitted from specific referring 

hospitals and that exceed various 

percentage thresholds at §§ 412.534 and 

412.536. We are not aware of any 

instances where the FI has made any 

adjustments to LTCHs’ payments under 

this policy. Consequently, we believe 

that LTCHs have modified their 

admission practices such that they have 

not become subject to those payment 

adjustments, and therefore, no estimated 

payment adjustments under these 

provisions are reflected in our payment 

model. Therefore, as the commenters 

recommended, in calculating both the 

proposed RY 2009 fixed-loss amount 

and the RY 2009 fixed-loss amount 

established in this final rule, we have 

taken into account all the known policy 

changes that would affect LTCH PPS 

payments in RY 2009, including those 

mandated by the MMSEA. 

Generally, we would agree with the 

commenters that an estimated increase 

in LTCH PPS payments alone, holding 

all other factors constant, should result 

in a decrease in the fixed-loss amount 

from the current fixed-loss amount. 

However, the commenters have not 

considered other factors that affect the 

computation of the fixed-loss amount. 

Specifically, as discussed in the 

proposed rule and as discussed below in 

this section, we used the best available 

LTCH claims data from the MedPAR 

files and CCRs from the PSF to estimate 

total LTCH PPS payments and to 

estimate the costs of each case, as well 

as the payment rates, factors and 

policies that would be in effect during 

the applicable time period, in 

determining a fixed-loss amount that 

would result in estimated outlier 

payments that would be equal to 8 

percent of total estimated payments. In 

computing the current fixed-loss 

amount for RY 2008, as noted above, we 

used claims data from the December 

2006 update of the FY 2006 MedPAR 

files and CCRs from the December 2006 

update of the PSF, as that was the best 

available data at that time. We also used 

Version 24.0 (FY 2007) of the GROUPER 

software and the FY 2007 LTC–DRG 

relative weights to determine the RY 

2008 fixed-loss amount as this was the 

version that was in effect as of the 

beginning of RY 2008 (July 1, 2007). In 

the proposed rule, in computing the 

proposed fixed-loss amount for RY 2009 

that would result in estimated outlier 

payments that would be equal to 8 

percent of total estimated payments, we 

used LTCH claims data from the March 

2006 update of the FY 2006 MedPAR 

files and CCRs from the July 2007 

update of the PSF as they were the most 

recent complete available data at that 

time. We also used Version 25.0 (FY 

2008) of the GROUPER software and the 

FY 2008 MS–LTC–DRG relative weights 

to determine the proposed RY 2009 

fixed-loss amount as this would be the 

version that would be in effect as of the 

beginning of RY 2009 (July 1, 2008). As 

we have discussed throughout this 

section, in order to determine a fixedloss amount that would result in 

estimated high cost outlier payments 

that would be equal to 8 percent of total 

estimated payments, it is necessary to 

use the best available payment rates, 

factors and policy information upon 

which to compute those payment 

estimates, and therefore, it would be 

inappropriate to ‘‘hold all other factors 

constant’’ when determining the fixedloss amount. Furthermore, based on the 

most recent available data and payment 

model described above, we currently 

project that estimated RY 2008 high cost 

outlier payments are approximately 8.2 

percent of estimated total RY 2008 

LTCH PPS payments. Maintaining the 

fixed-loss amount at the current level 

would result in HCO payment that 

exceed the current regulatory 

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requirement that estimated HCO 

payments would be projected to equal 8 

percent of estimated total LTCH PPS 

payments. Therefore, based on more 

recent data, it appears that the current 

RY 2008 fixed-loss amount may be too 

low since estimated HCO payments are 

slightly higher than the 8 percent target. 

For these reasons, we disagree with 

commenters that just because we are 

projecting an estimated increase in 

LTCH PPS payments in RY 2009 as 

compared to RY 2008, the fixed-loss 

amount for RY 2009 should decrease 

relative to the RY 2008 fixed-loss 

amount or should be lower than the 

proposed RY 2009 fixed-loss amount. 

We acknowledge that an increase to 

the fixed-loss amount will increase a 

LTCH’s ‘‘loss’’ on a specific case before 

it qualifies for an additional payment a 

HCO, as noted by one commenter; 

however, as we explained in the RY 

2007 LTCH PPS final rule (71 FR 

27836), because a relatively higher 

fixed-loss amount identifies fewer cases 

as HCO cases (since the amount that the 

estimated cost of the case must exceed 

before the case qualifies as a HCO case 

is higher), such a policy better identifies 

LTCH patients that are unusually costly 

cases. The intent of the HCO policy is 

to provide an additional payment to 

LTCH cases that have unusually high 

costs. We would remind commenters 

that if we would not increase the fixedloss amount, HCO payments would 

represent significantly more than 8 

percent of estimated total LTCH PPS 

payments. Furthermore, as also 

discussed in the same RY 2007 final 

rule, HCO payments are budget neutral 

and are funded by prospectively 

reducing the non-outlier PPS payment 

rates by projected total outlier 

payments. The higher the outlier target, 

the greater the (prospective) reduction 

to the base payment that would need to 

be applied to the standard Federal rate 

in order to maintain budget neutrality. 

Moreover in the proposed rule (73 FR 

5371), we discussed the possibility of 

adjusting the existing 8 percent outlier 

target or 80 percent marginal cost factor 

under the LTCH PPS HCO policy and 

explained our reasons for not proposing 

to make any changes to those 

components of the LTCH PPS HCO 

policy at that time. However, we stated 

that we continue to be interested in any 

comments that would support revisiting 

the analysis that was used to establish 

the existing 8 percent outlier target and 

the existing 80 percent marginal cost 

factor, using the most recent available 

data to evaluate whether any changes to 

the current HCO policy should be made, 

and therefore, may result in a smaller 

increase (or even a decrease) in the 

fixed-loss amount for RY 2009. We 

received no comments in response to 

this solicitation or in response to our 

decision not to propose changes to the 

existing 8 percent outlier target and the 

existing 80 percent marginal cost factor. 

Therefore, for the reasons cited 

previously in this response, we continue 

to believe that it is appropriate to 

increase the fixed-loss amount in order 

to maintain estimated HCO payments at 

the projected 8 percent of total 

estimated payments. Such a policy 

continues to appropriately identify 

cases that are HCO cases (that is, cases 

with an unusually high cost). Because 

maintaining an 8 percent outlier target 

necessitates an increase to the fixed-loss 

amount based on our payment 

simulations, we are not adopting the 

commenter’s suggestion to limit any 

increase to the fixed-loss to an annual 

inflationary increase, such as the most 

recent estimate of the LTCH PPS market 

basket because that would result in 

estimated outlier payments in excess of 

8 percent of estimated total LTCH PPS 

payments. 

We appreciate the commenters’

acceptance of the proposed increase to 

the fixed-loss amount; however, we 

disagree that the increase would have a 

disproportionate impact on LTCHs with 

very high case-mix indexes as compared 

to LTCHs with low case-mix indexes. 

Rather we believe that LTCHs with high 

and low case mix indexes would be 

impacted similarly by the change in the 

fixed loss amount. High cost outlier 

payments are made to LTCHs when the 

estimated costs of a case exceed the 

adjusted MS–LTC–DRG payment 

amount by more than the fixed-loss 

amount, with the additional outlier 

payment equaling 80 percent of that 

difference as provided in § 412.525(a) 

(in conjunction with § 412.503). Cases 

in MS–LTC–DRGs with higher relative 

weights (higher case-mix) receive higher 

adjusted MS–LTC–DRG payments than 

cases in MS–LTC–DRGs with lower 

relative weights (lower case-mix). With 

differences in case-mix already 

accounted for in the adjusted MS–LTC–

DRG payment amounts that are part of 

the formula for determining high cost 

outlier payments, LTCHs with higher or 

lower case-mix are treated similarly in 

terms of how much costs must exceed 

the adjusted MS–LTC–DRG payment 

amount by in order to receive additional 

high cost outlier payments. In addition, 

as we discussed in the RY 2007 final 

rule (71 FR 27835), LTCHs could have 

a relatively high case-mix index, but 

have few or no HCO cases since a 

‘‘high’’ case-mix index is an indication 

of the level of intensity of the types of 

patients treated at a LTCH and not 

necessarily an indication of treating 

unusually high cost cases. 

In summary, we believe that an 

increase to the fixed-loss amount for RY 

2009 is appropriate. We are using the 

same methodology that we proposed to 

use in the RY 2009 proposed rule to 

calculate the fixed-loss amount for RY 

2009 in this final rule (using updated 

data and the policies established in this 

final rule, as described below) in order 

to maintain estimated HCO payments at 

the projected 8 percent of total 

estimated LTCH PPS payments. 

Consistent with our historical practice 

of using the best data available as we 

proposed, in this final rule, in 

determining the fixed-loss amount for 

RY 2009, we used the most recent 

available LTCH claims data and CCR 

data, as well as all the known policy 

changes that would affect LTCH PPS 

payments in RY 2009, including those 

mandated by the MMSEA and those 

established in this final rule. 

Specifically, in this final rule, for the 

2009 LTCH PPS rate year, we used 

LTCH claims data from the December 

2007 update of the FY 2007 MedPAR 

files to determine a fixed-loss amount 

that would result in estimated outlier 

payments projected to be equal to 8 

percent of total estimated payments in 

RY 2009, based on the policies 

described in this final rule (including 

those established in section 114 of the 

MMSEA as discussed above), because 

these data are the most recent complete 

LTCH data currently available. As noted 

above, as proposed, we determined the 

RY 2009 fixed-loss amount based on the 

version of the GROUPER that will be in 

effect as of the beginning of the 2009 

LTCH PPS rate year (July 1, 2008), that 

is, Version 25.0 of the GROUPER (as 

established in the FY 2008 IPPS final 

rule (72 FR 47278)). Additionally, in 

this final rule, we used CCRs from the 

January 2008 update of the PSF for 

determining the RY 2009 fixed-loss 

amount as they are the most recent 

complete data currently available. 

Furthermore, as proposed, in 

determining the RY 2009 fixed-loss 

amount, we used the current FY 2008 

applicable LTCH ‘‘total’’ CCR ceiling of 

1.284 and LTCH Statewide average 

‘‘total’’ CCRs established in the FY 2008 

IPPS final rule (72 FR 47404 and 48126 

through 48127) such that the current 

applicable Statewide average CCR 

would be assigned if, among other 

things, a LTCH’s CCR exceeded the 

current ceiling (1.284). As was the case 

when we determined the proposed RY 

2009 fixed-loss amount in the proposed 

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rule, in determining the RY 2009 fixedloss amount using the CCRs from the 

PSF, there was no need for us to 

independently assign the applicable 

Statewide average CCR to any LTCHs (as 

this may have already been done by the 

FI or MAC in the PSF in accordance 

with our established policy). (Currently, 

the applicable FY 2008 LTCH Statewide 

average CCRs can be found in Table 8C 

of the FY 2008 IPPS final rule (72 FR 

48126 through 48127).) 

In this final rule, based on the data 

and policies described in this final rule 

(including those established in section 

114 of the MMSEA as discussed above), 

under the broad authority of section 

123(a)(1) of the BBRA and section 

307(b)(1) of BIPA, we are establishing a 

fixed-loss amount of $22,960 for the 

2009 LTCH PPS rate year. Thus, we will 

to pay an outlier case 80 percent of the 

difference between the estimated cost of 

the case and the outlier threshold (the 

sum of the adjusted Federal LTCH 

payment for the MS–LTC–DRG and the 

fixed-loss amount of $22,960). 

We note that the final fixed-loss 

amount for RY 2009 is somewhat higher 

than the proposed RY 2009 fixed-loss 

amount of $21,199 and the current 

fixed-loss amount of $20,738. As 

discussed in greater detail above, based 

on the most recent available LTCH data 

to estimate the cost of each LTCH case 

and estimated total LTCH PPS 

payments, this increase in the fixed-loss 

amount is appropriate and necessary to 

maintain the requirement that estimated 

outlier payments would be projected to 

be equal to 8 percent of estimated total 

LTCH PPS payments, as required under 

§ 412.525(a). As stated above, based on 

the most recent available data we 

estimate that the current fixed-loss 

amount may be too low as our payment 

models project that RY 2008 HCO 

payments are estimated to equal 8.2 

percent of total estimated LTCH PPS 

payments. As we discussed in the 

proposed rule (73 FR 5371), maintaining 

the fixed-loss amount at the current 

level would result in HCO payments 

above the current regulatory 

requirement that estimated outlier 

payments would be projected to equal 8 

percent of estimated total LTCH PPS 

payments. Based on the regression 

analysis that was performed when we 

implemented the LTCH PPS (August 30, 

2002 final rule (67 FR 56022 through 

56027)), we established the outlier target 

at 8 percent of estimated total LTCH 

PPS payments to allow us to achieve a 

balance between the ‘‘conflicting 

considerations of the need to protect 

hospitals with costly cases, while 

maintaining incentives to improve 

overall efficiency’’ (67 FR 56024). That 

regression analysis also showed that 

additional increments of outlier 

payments over 8 percent (that is, raising 

the outlier target to a larger percentage 

than 8 percent) would reduce financial 

risk, but by successively smaller 

amounts. Outlier payments are budget 

neutral, and therefore, outlier payments 

are funded by prospectively reducing 

the non-outlier PPS payment rates by 

projected total outlier payments. The 

higher the outlier target, the greater the 

(prospective) reduction to the base 

payment would need to be applied to 

the Federal rate to maintain budget 

neutrality. 

As an alternative to proposing to 

lower the fixed-loss amount for RY 

2009, in the proposed rule (73 FR 5371), 

we discussed adjusting the marginal 

cost factor (that is, the percentage that 

Medicare will pay of the estimated cost 

of a case that exceeds the sum of the 

adjusted Federal prospective payment 

for the MS–LTC–DRG and the fixed-loss 

amount for LTCH PPS outlier cases as 

specified in § 412.525(a)(3) (in 

conjunction with the revised definition 

of ‘‘LTC–DRG’’ at § 412.503), which is 

currently equal to 80 percent, as a 

means of ensuring that estimated outlier 

payments would be projected to equal 8 

percent of estimated total LTCH PPS 

payments. When we initially 

established the 80 percent marginal cost 

factor in the August 30, 2002 final rule 

(67 FR 56022 through 56027), we 

explained that our analysis of paymentto-cost ratios for HCO cases showed that 

a marginal cost factor of 80 percent 

appropriately addresses outlier cases 

that are significantly more expensive 

than nonoutlier cases, while 

simultaneously maintaining the 

integrity of the LTCH PPS. 

In proposing increases to the fixedloss amount for RY 2007, RY 2008 and 

RY 2009 (71 FR 27834; 72 FR 4799 

through 4800; and 73 FR 5371, 

respectively), we solicited comments on 

whether we should revisit the regression 

analysis discussed above in this section 

that was used to establish the existing 

8 percent outlier target and 80 percent 

marginal cost factor, using the most 

recent available data to evaluate 

whether the current outlier target of 8 

percent or the 80 percent marginal cost 

factor should be adjusted, and therefore, 

could have resulted in less of an 

increase in the fixed-loss amount for RY 

2007 and RY 2008, respectively. In 

response to this solicitation in the RY 

2007 proposed rule (as summarized in 

the RY 2007 LTCH PPS final rule (71 FR 

27834 through 27835)), several 

commenters opposed any option that 

would allow us to revisit the regression 

analysis that was used to establish the 

existing 80 percent marginal cost factor 

and existing outlier target of 8 percent. 

The commenters stated their belief that 

the LTCH PPS is still in its early stages 

and further changes to the 80 percent 

marginal cost factor or 8 percent outlier 

target would result in instability to the 

system. The commenters cautioned 

against making any premature changes 

to the factors affecting HCO payments to 

LTCHs, particularly the marginal cost 

factor and outlier target established by 

regulation when the LTCH PPS was 

implemented. Also, the commenters 

agreed that keeping the marginal cost 

factor at 80 percent and the outlier pool 

at 8 percent better identifies LTCH 

patients that are unusually costly cases, 

and that this policy appropriately 

addresses outlier cases that are 

significantly more expensive than nonoutlier cases. Similarly, as summarized 

in the RY 2008 final rule (72 FR 26897 

through 26899), we received no 

comments in support of revisiting the 

regression analysis discussed above that 

was used to establish the existing 8 

percent outlier target and 80 percent 

marginal cost factor, using the most 

recent available data to evaluate 

whether the current outlier target of 8 

percent or the 80 percent marginal cost 

factor should be adjusted in response to 

our solicitation on this issue. As noted 

above, we received no response to this 

solicitation in the RY 2009 proposed 

rule. 

In response to these comments, we 

agreed with the commenters that, based 

on the regression analysis done for the 

implementation of the LTCH PPS 

(August 30, 2002; 68 FR 56022 through 

56027), a marginal cost factor of 80 

percent and a outlier target of 8 percent 

adequately identifies LTCH patients that 

are unusually costly cases, and that 

such a policy appropriately addresses 

LTCH HCO cases that are significantly 

more expensive than non-outlier cases, 

which is consistent with our intent of 

the LTCH HCO policy as stated when 

we implemented the LTCH PPS in the 

August 30, 2002 final rule (67 FR 

56025). Therefore, as supported by 

many commenters, in both the RY 2007 

final rule (71 FR 27834) and the RY 

2008 final rule (72 FR 26897 through 

26899), we did not revisit the regression 

analysis that was used to establish the 

existing 80 percent marginal cost factor 

and existing outlier target of 8 percent, 

and therefore, did not make any changes 

to the marginal cost factor or outlier 

target in either of those final rules. 

Although increasing the fixed-loss 

amount from $20,738 to $22,960 based 

on the latest available data and all 

known policy changes that would affect 

LTCH PPS payments in RY 2009, 

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26825 

including those mandated by the 

MMSEA and those established in this 

final rule, will increase the amount of 

the ‘‘loss’’ that LTCH must incur under 

the LTCH PPS for a case with unusually 

high costs before the LTCH would 

receive any additional Medicare 

payments, as we discussed above and as 

we explained in greater detail in the RY 

2006 LTCH PPS final rule (70 FR 24195 

through 24196), we continue to believe 

that the existing 8 percent outlier target 

and 80 percent marginal cost factor 

continue to adequately maintain the 

LTCHs’ share of the financial risk in 

treating the most costly patients and 

ensure the efficient delivery of services. 

Accordingly, we are not adjusting the 

existing 8 percent outlier target or 80 

percent marginal cost factor under the 

LTCH PPS HCO policy at this time. 

For the reasons described above, we 

believe the final fixed-loss amount of 

$22,960 will appropriately identify 

unusually costly LTCH cases while 

maintaining the integrity of the LTCH 

PPS. Therefore, under the broad 

authority of section 123(a)(1) of the 

BBRA and section 307(b)(1) of BIPA, we 

are establishing a fixed-loss amount of 

$22,960 based on the best available 

LTCH data and all of the known policy 

changes that would affect LTCH PPS 

payments in RY 2009, including those 

mandated by the MMSEA and those 

established in this final rule, because we 

believe an increase in the fixed-loss 

amount is appropriate and necessary to 

maintain estimated outlier payments 

which are projected to be equal to 8 

percent of estimated total LTCH PPS 

payments, as required under 

§ 412.525(a). 

d. Application of Outlier Policy to 

Short-Stay Outlier (SSO) Cases 

As we discussed in the August 30, 

2002 final rule (67 FR 56026), under 

some rare circumstances, a LTCH 

discharge could qualify as a SSO case 

(as defined in the regulations at 

§ 412.529 in conjunction with the 

regulations at § 412.503 and discussed 

in section IV.G. of this preamble) and 

also as a HCO case. In this scenario, a 

patient could be hospitalized for less 

than five-sixths of the geometric ALOS 

for the specific MS–LTC–DRG, and yet 

incur extraordinarily high treatment 

costs. If the costs exceeded the high cost 

outlier threshold (that is, the SSO 

payment plus the fixed-loss amount), 

the discharge is eligible for payment as 

a HCO. Thus, for a SSO case in the 2009 

LTCH PPS rate year, the HCO payment 

would be 80 percent of the difference 

between the estimated cost of the case 

and the outlier threshold (the sum of the 

proposed fixed-loss amount of $22,960 

and the amount paid under the SSO 

policy as specified in § 412.529). 

4. Other Payment Adjustments 

Section 123(a)(1) of the BBRA, as 

amended by section 307(b) of BIPA, 

granted the Secretary broad authority to 

determine appropriate adjustments 

under the LTCH PPS, including whether 

(and how) to provide for adjustments to 

reflect variations in the necessary costs 

of treatment among LTCHs. In 

developing the LTCH PPS payment 

methodology, we conducted extensive 

regression analyses of the relationship 

between LTCH costs (including both 

operating and capital-related costs per 

case) and several factors that may affect 

costs such as the percent of Medicaid 

patients treated, the percent of 

Supplemental Security Income (SSI) 

patients treated, the hospital’s 

geographic location, and training 

residents in approved medical 

education programs (67 FR 56014). The 

appropriateness of potential payment 

adjustments were evaluated based upon 

whether including each adjustment 

increased the accuracy of payments to 

LTCHs. 

In the August 30, 2002 LTCH PPS 

final rule, we detailed the extensive data 

analysis performed by our contractor, 

3M Health Information Systems (3M) 

and our resulting decisions to 

implement a COLA for LTCHs in Alaska 

and Hawaii (§ 412.525(b)) and an 

adjustment to account for geographical 

differences in area wage levels 

(§ 412.525(c)). In addition, we discussed 

the extensive data analyses that led to 

the decision not to implement 

adjustments for geographic 

reclassification, rural location, the 

treatment of a disproportionate share of 

low-income patients (DSH), or indirect 

medical education (IME) costs. We also 

noted that we would continue to collect 

data and revisit these determinations as 

additional data became available. (For 

more detailed information, see 67 FR 

56014 through 56027.) 

When we implemented the LTCH PPS 

for FY 2003, we provided for a 5-year 

transition period (§ 412.533), to allow 

LTCHs time to adjust to the new 

payment system (67 FR 56038). For cost 

reporting periods beginning on or after 

October 1, 2006, the final year of the 5- 

year transition, LTCHs are paid based 

on 100 percent of the Federal rate. 

We continued to collect and interpret 

new data as they became available to 

determine if these data support 

proposing any additional payment 

adjustments. In both the RY 2007 and 

the RY 2008 LTCH PPS final rules, we 

stated that we believed that it was 

appropriate to wait for the conclusion of 

the 5-year transition to 100 percent of 

the Federal rate under the LTCH PPS to 

maximize the availability of data that 

reflected LTCH behavior in response to 

the implementation of the LTCH PPS. 

The availability of this data would allow 

us to conduct a comprehensive 

reevaluation of payment adjustments 

under the LTCH PPS. (See the RY 2007 

and RY 2008 LTCH PPS final rules (71 

FR 27839) and (72 FR 26900), 

respectively.) 

Therefore, in the RY 2009 LTCH PPS 

proposed rule, we indicated that we had 

3M perform data analyses similar to 

those conducted at the inception of the 

LTCH PPS for FY 2003. 3M evaluated 

LTCH data from the most recent cost 

report files in our HCRIS database 

(updated through June 30, 2007) for 

providers’ cost reports beginning during 

fiscal years 2004 through 2006 (73 FR 

5371 through 5372). At that time, we 

stated that we believe that in the 5 years 

since the start of the LTCH PPS, there 

has been sufficient new data generated 

to allow for a comprehensive 

reevaluation of the appropriateness of 

payment adjustments such as 

geographic reclassification, rural 

location, DSH, and IME under the LTCH 

PPS at this time. 

In the RY 2009 LTCH PPS proposed 

rule, we stated that our most recent data 

analysis which is based on the 

comprehensive data analysis by 3M 

(referenced above), indicates that 

proposing payment adjustments for 

geographic reclassification, rural 

location, DSH, or indirect medical 

education (IME) costs would not 

improve the accuracy of payments to 

LTCHs (73 FR 3772). (3M’s ‘‘Report on 

LTCH Payment Methodology Review 

and Results’’ is posted on our Web site 

at http://www.cms.hhs.gov/ 

LongTermCareHospitalPPS/ 

08_download.asp#TopOfPage. We also 

noted that we believed that these 

analyses confirm our initial 

determinations as we developed the 

LTCH PPS regarding the applicability of 

PPS payment adjustments. Therefore, 

we did not propose to adopt any 

additional payment adjustments such as 

geographic reclassification, rural 

location, DSH, or IME, as features of the 

LTCH PPS. Finalized policies for the RY 

2009 wage index adjustment and the 

COLA were discussed in sections IV.D.1 

and 2. of this final rule, respectively. 

Furthermore, now that the 5-year 

transition to the LTCH PPS was 

completed, we noted that we had 

collected data that reflects LTCH 

behavior in response to the 

implementation of the LTCH PPS. We 

believe that our above described 

analyses of LTCH PPS data do not 

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26826 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

support the adoption of any additional 

payment adjustments. We further stated 

that we believe that since 3M’s recent 

analyses confirm policy determinations 

that had been in place since the 

implementation of the LTCH PPS for FY 

2003, that annual data analyses related 

to potential payment adjustments for 

geographic reclassification, rural 

location, DSH or IME would not be 

necessary barring significant 

transformations in the nature of the 

LTCH universe or substantial changes in 

Medicare payment outcomes that 

warrant additional evaluation. 

Comment: One commenter requested 

that we consider applying a payment 

adjustment under the LTCH PPS to 

account for increased provider costs at 

LTCHs for dialysis patients. 

Specifically, the commenter suggested 

that we adopt the IPPS policy of 

providing additional payments to 

LTCHs if 10 percent or more of the 

hospital’s annual Medicare discharges 

are dialysis patients. Alternatively, the 

commenter suggested that a new MS–

DRG be added to recognize the increase 

in LTCH resources utilized by a patient 

requiring dialysis. The commenter also 

states that Medicare payments presently 

do not take into account resources used 

for providing higher intensity wound 

care that does not require surgical 

intervention. The commenter suggests 

that Medicare undertake a study to 

determine whether the MS–DRG system 

captures the resource intensity 

necessary for treating this group of 

patients. 

Response: When we were designing 

the payment system for LTCHs, we 

evaluated the policies and payment 

adjustments that are features of the PPS 

for inpatient acute care hospitals (IPPS) 

and our contractor, 3M Health 

Information Systems conducted 

comprehensive analyses of CMS data to 

determine which elements were 

appropriate for adoption in the 

projected LTCH PPS. It was apparent 

from these analyses that even though 

LTCHs are certified as acute care 

hospitals and further, that in many 

communities, patients that could 

otherwise be treated in LTCHs are 

treated in acute care hospitals as high 

cost outliers, that there are differences 

between the hospitals’ systems that 

should result in different payment 

features. One of these features was the 

ESRD payment add-on. Under the IPPS, 

additional payments are made for 

patients with ESRD who receive dialysis 

treatment during an inpatient hospital 

stay unless the principal diagnosis 

(which determines the Major Diagnostic 

Category to which a case is assigned) is 

one of three diagnosis-related groups 

(MS–DRGs) directly related to kidney 

disease. An IPPS hospital is eligible for 

the additional payment if ESRD 

beneficiaries, excluding discharges 

classified into the three MS–DRGs 

directly related to kidney disease, 

constitute at least 10 percent of the 

hospital’s total Medicare discharges. 

Furthermore, in order for such a case to 

count towards the threshold percentage, 

the patient must be certified as an end 

stage renal dialysis (ESRD) patient, that 

is, the patient must have applied and 

been approved for this program. (The 

specifics of this payment adjustment are 

set forth at § 412.104.) The reason for 

this is that the number of patients 

requiring ESRD treatment in all of the 

acute care hospitals in the country over 

the course of any year (other than in 

those three MS–DRGs referenced above), 

represent a small fraction of acute care 

hospital cases. Therefore, the costs for 

treating that small number of cases 

would not be substantially reflected in 

the averaging methodology that we use 

to determine the relative payment for 

each MS–DRG. If an acute care hospital, 

for example, treats a patient with a 

broken leg who also needs dialysis, 

costs of the dialysis treatment for that 

patient would not have a significant 

impact on the averaging process of costs 

for all broken leg cases nationwide, and 

would not be factored into the DRG 

payment for that case to that acute care 

hospital. We have established the ESRD 

add-on because we believed that if more 

than 10 percent of such a hospital’s 

discharges during a cost reporting 

period presented such a scenario, this 

additional payment would ensure that 

the acute care hospital was adequately 

compensated by Medicare for providing 

total medial treatment for such patients. 

In response to the commenter’s 

suggestion that we adopt a similar 

policy under the LTCH PPS, we 

continue to believe that applying this 

payment adjustment to LTCHs would be 

inappropriate. LTCH’s typically treat 

very sick patients with a number of 

serious secondary illnesses 

(multicomorbidities) that require 

hospital-level care for, on average, 

greater than 25 days for any one spell 

of illness. We believe that given the 

patient population treated at LTCHs, a 

higher proportion of LTCH patients 

would require dialysis than would be 

treated at an acute care hospital and 

paid for under the IPPS. Although the 

LTCH PPS uses the same patient 

classification system as is used by the 

IPPS, the relative weights assigned to 

the MS–LTC–DRGs under the LTCH 

PPS, are based on LTCH cases which 

reflect ‘‘differences in patient resource 

use and costs,’’ in LTCHs as mandated 

by the Balanced Budget Refinement Act 

(BBRA) of 1999, the initial enabling 

statute for the establishment of the 

LTCH PPS. A patient-classification 

system using relative weights, such as 

the DRG-based system used by both the 

IPPS and the LTCH PPS, determines the 

amount that Medicare pays for 

particular types of cases, based on the 

hospital resources employed in treating 

such cases as compared to the resources 

utilized in treating other types of cases 

and assigns all cases numerical values, 

called ‘‘relative weights’’. Data, such as 

charges, used to measure hospital 

resource use for each MS–LTC–DRG are 

captured on patient claims which 

Medicare uses in the annual update of 

the relative weights. Accordingly, we 

believe that the additional resources 

associated with renal dialysis treatments 

are include in the data used to set the 

MS–LTC–DRG relative weights each 

year. 

The BBRA also required that total 

estimated payments under the LTCH 

PPS, established at the outset of the 

LTCH PPS for cost reporting periods 

beginning on or after October 1, 2002, 

was to be budget neutral to what 

Medicare would have paid under the 

then-existing reasonable-cost based 

TEFRA payment system had the LTCH 

PPS not been implemented. All patient 

treatment costs reflected in the LTCH 

cost data under the TEFRA payment 

system were included in our calculation 

of the base standard Federal rate that 

was established for FY 2003. Since 

FY2003, the standard Federal Rate has 

been updated annually (48 FR 39746 

and 67 FR 55957). Accordingly, we 

believe that since renal dialysis 

treatments were among treatments 

offered at LTCHs prior to the beginning 

of the LTCH PPS (for cost reporting 

periods beginning on or after October 1, 

2002), that the costs of such treatments 

would have been included in the base 

standard Federal rate, which is the 

foundation of the current standard 

Federal rate (and the RY 2009 standard 

Federal rate). 

Given the typical profile of the 

Medicare beneficiary receiving 

treatment in LTCHs, dialysis is not an 

uncommon treatment so we believe that 

the costs associated with ESRD as a 

secondary diagnoses or comorbidity are 

both reflected in the setting of the 

standard Federal payment rate and also 

are reasonably reflected in the annual 

update of the MS–LTC–DRG weights 

based on the resources used in treating 

cases that are grouped into specific MS–

LTC–DRGs (see 67 FR 55984 through 

55995 and 72 FR 47277). Therefore, we 

believe our payments for specific cases 

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under the LTCH PPS include the higher 

costs associated with dialysis treatments 

for patients in LTCHs without any 

additional add-on. Furthermore, an 

additional feature of the LTCH PPS is 

that Medicare will make outlier 

payments for unusually costly patients, 

including those with ESRD, if the costs 

for treating any patient exceed a 

specified threshold. Consequently, at 

this time, we do not believe that an 

additional ESRD adjustment is either 

appropriate or necessary under the 

LTCH PPS. 

The commenters alternatively 

suggested the addition of an additional 

MS–DRG that would recognize the 

higher resource use of dialysis patients. 

When we developed the MS–DRGs for 

use beginning October 1, 2007, we 

reduced the existing CMS DRGs down 

to the base DRGs, then applied the five 

specific criteria upon which we would 

evaluate the instances under which we 

would then subdivide those base DRGs 

into subgroups based on the severity of 

the cases. Therefore, this alternative had 

already been considered and rejected, as 

the base DRG did not meet all of the 

criteria required to make additional 

subgroups. These criteria are listed in 

the FY 2008 IPPS final rule (72 FR 

47169). Therefore, we will not create 

additional MS–LTC–DRGs reflecting 

dialysis treatments for FY 2009. 

Regarding the commenter’s concern 

that Medicare does not recognize the 

hospital resources utilized in treating 

higher intensity wounds not requiring 

surgery, we note that Medicare 

payments are based on data gathered 

from LTCH cost reports and LTCH 

Medicare claims and we believe, 

therefore, that the LTCH PPS payments 

which are based upon this data reflect 

the reported resource use (that is, 

charges and costs) of delivering care to 

Medicare beneficiaries at LTCHs 

including treatment for higher intensity 

wounds not requiring surgery. However, 

we also note that MS–LTC–DRG system 

is not static but is rather a dynamic 

mechanism which is responsive to 

changes in medical resource use. If, for 

example, new and more costly treatment 

modalities became available for a 

particular MS–LTC–DRG, that result in 

increased hospital costs, such increased 

costs would eventually be reflected in 

increased MS–LTC–DRG relative 

weights in the future (typically there is 

about a 2-year lag in the claims data 

used to set the relative weights). 

Similarly, should treatment modalities 

result in decreased treatment costs, we 

would expect the relative weights for 

those MS–LTC–DRGs affected by this 

change to decrease. Additionally, as 

noted above, we would also remind the 

commenter that under the LTCH PPS, if 

the costs for treating any patient exceed 

a specified threshold the case could 

qualify for high cost outlier payments. 

For the same reasons noted previously 

in this paragraph, we also believe it is 

unnecessary to undertake a study on 

such wound patients. 

We would also remind the commenter 

that Medicare payment under a PPS is 

based on a system of averages, so that 

some Medicare payments may exceed 

hospital costs for a particular case 

which would then offset other cases 

where the Medicare payments were less 

than the hospital costs. With this model 

in mind, and available data on LTCH 

costs and industry margins and growth 

since the start of the LTCH PPS for cost 

reporting periods beginning on or after 

October 1, 2002, we believe that, in 

general, our Medicare payment policies 

under the LTCH PPS have been and 

continue to be appropriate and 

reasonable. 

5. Technical Correction to the Budget 

Neutrality Requirement at 

§ 412.523(d)(2) 

Section 123(a)(1) of the BBRA 

requires that the PPS developed for 

LTCHs be budget neutral for the initial 

year of implementation. Furthermore, 

under section 307(a)(2) of the BIPA, the 

increases to the target amounts and the 

cap on the target amounts for LTCHs 

provided for by section 307(a)(1) of 

BIPA (as set forth in section 

1886(b)(3)(J) of the Act), and the 

enhanced bonus payments for LTCHs 

provided for by section 122 of BBRA (as 

set forth in section 1886(b)(2)(E) of the 

Act) were not to be taken into account 

in the development and implementation 

of the LTCH PPS. Therefore, when we 

implemented the LTCH PPS, in the 

August 30, 2002 final rule (67 FR 

56052), we established a budget 

neutrality requirement at § 412.523(d)(2) 

for calculating the standard Federal rate 

for FY 2003 such that estimated 

aggregate LTCH PPS payments were 

estimated to be equal to estimated 

payments that would have been made to 

LTCHs under the reasonable cost-based 

payment methodology had the PPS for 

LTCHs not been implemented, and, to 

implement section 307(a)(2) of the 

BIPA, we excluded the effects of 

sections 1886(b)(2) and (b)(3) of the Act. 

We proposed a technical correction to 

existing § 412.523(d)(2) that would more 

precisely describe the provisions of 

sections 1886(b)(2) and (b)(3) of the Act 

that were not taken into account when 

determining the standard Federal rate 

under § 412.523(d). The current 

regulatory language at § 412.523(d)(2) 

cites the general sections of the Act 

which contain the specific provisions 

set forth in § 307(a)(2) of Public Law 

106–554 that the Secretary is required to 

not take into account in developing the 

PPS. We believe that it is clearer and 

more precise to cite the specific 

subparagraphs the Secretary did not 

take into account rather than to cite the 

general sections of the Act of which 

such subparagraphs are a part. In order 

to mitigate any confusion that may be 

caused by existing regulations, we 

proposed to make a technical correction 

at § 412.523(d)(2). Specifically, we 

proposed to revise § 412.523(d)(2) to 

state that the effects of section 

1886(b)(2)(E) of the Act (enhanced 

bonus payments for LTCHs, as 

described above) and section 

1886(b)(3)(J) of the Act (increases to the 

hospital-specific target amounts and the 

cap on the target amounts for LTCHs, as 

described above) were excluded in the 

development of the FY 2003 LTCH PPS 

standard Federal rate. This technical 

correction would make the regulatory 

language consistent with section 

307(a)(2) of BBRA and consistent with 

the methodology we used to determine 

the LTCH PPS standard Federal rate 

under § 412.523, and it is not a change 

in policy. (Accordingly, no adjustments 

to the LTCH PPS standard Federal rate 

computed under § 412.523(d) were 

proposed in conjunction with this 

proposed technical correction to 

§ 412.523(d)(2).) 

We received no comments on this 

proposed technical correction. 

Therefore, for the reasons described 

above, in this final rule, as we proposed, 

we are revising § 412.523(d)(2) to state 

that the effects of section 1886(b)(2)(E) 

of the Act (enhanced bonus payments 

for LTCHs) and section 1886(b)(3)(J) of 

the Act (increases to the hospitalspecific target amounts and the cap on 

the target amounts for LTCHs) were 

excluded in the development of the FY 

2003 LTCH PPS standard Federal rate. 

G. Conforming Changes 

Various regulations throughout 42 

CFR Part 412 Subpart O indicate that 

the terms ‘‘urban area’’ and ‘‘rural area’’

are defined according to the definitions 

of ‘‘urban area’’ and ‘‘rural area’’ found 

in 42 CFR Part 412 Subpart D (the IPPS 

regulations). Specifically, §§ 412.525(c), 

412.529(d)(4)(ii)(B) and (d)(4)(iii)(B), 

412.534(d)(1), (f)(2)(ii), and (f)(3)(ii), and 

412.536(c)(1), (e)(2)(ii), and (e)(3)(ii) of 

Subpart O refer to the definitions of 

‘‘urban area’’ and ‘‘rural area’’ in either 

§ 412.62(f)(1)(ii) and (f)(1)(iii) or 

§ 412.64(b)(1)(ii)(A)–(C) in 42 CFR Part 

412 Subpart D. As discussed above in 

section IV.F.1.b.(4). of this preamble, we 

believe that it is administratively 

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26828 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

simpler to define the terms ‘‘urban area’’

and ‘‘rural area’’ in § 412.503 rather than 

cross-referencing the definitions of 

‘‘urban area’’ and ‘‘rural area’’ in 

§ 412.62(f)(1)(ii) and § 412.62(f)(1)(iii) 

and § 412.64(b)(1)(ii)(A) through (C). 

Consequently, as we proposed, we are 

adding definitions for ‘‘urban area’’ and 

‘‘rural area’’ in § 412.503 which will 

incorporate the provisions of 

§ 412.62(f)(1)(ii) and (f)(1)(iii) as well as 

§ 412.64(b)(1)(ii)(A) through (C). In the 

proposed rule (73 FR 5372), because we 

proposed to define ‘‘urban area’’ and 

‘‘rural area’’ in § 412.503, we proposed 

to replace the citations to the definitions 

of ‘‘urban area’’ and ‘‘rural area’’ at 

§ 412.62(f)(1)(ii) and § 412.62(f)(1)(iii) 

and § 412.64(b)(1)(ii)(A) through (C) 

which are found in the existing 

regulations at §§ 412.525(c), 

412.529(d)(4)(ii)(B) and (d)(4)(iii)(B), 

412.534(d)(1), (f)(2)(ii), and (f)(3)(ii), and 

412.536(c)(1), (e)(2)(ii), and (e)(3)(ii) 

with references to § 412.503. 

We received no comments on this 

proposed conforming change. 

Accordingly, in this final rule, as 

proposed, we are revising the abovedescribed references. Specifically, we 

are replacing the citations to the 

definitions of ‘‘urban area’’ and ‘‘rural 

area’’ at § 412.62(f)(1)(ii) and § 412.62 

(f)(1)(iii) and § 412.64(b)(1)(ii)(A)–(C) in 

the existing regulations at §§ 412.525(c), 

412.529(d)(4)(ii)(B) and (d)(4)(iii)(B), 

412.534(d)(1), (f)(2)(ii), and (f)(3)(ii), and 

412.536(c)(1), (e)(2)(ii), and (e)(3)(ii) 

with references to § 412.503. 

V. Computing the Adjusted Federal 

Prospective Payments for the 2009 

LTCH PPS Rate Year 

In accordance with § 412.525 and as 

discussed in section IV.F.1. of this final 

rule, the standard Federal rate is 

adjusted to account for differences in 

area wages by multiplying the laborrelated share of the standard Federal 

rate by the appropriate LTCH PPS wage 

index (as shown in Tables 1 and 2 of the 

Addendum of this final rule). The 

standard Federal rate is also adjusted to 

account for the higher costs of hospitals 

in Alaska and Hawaii by multiplying 

the nonlabor-related share of the 

standard Federal rate by the appropriate 

cost-of-living factor (shown in Table III 

in section IV.F.2 of this preamble). In 

this final rule, we are establishing a 

standard Federal rate for the 2009 LTCH 

PPS rate year of $39,114.36 as discussed 

in section IV.E.2. of this preamble. We 

illustrate the methodology to adjust the 

Federal prospective payments for the 

2009 LTCH PPS rate year in the 

following example: 

Example: During the 2009 LTCH PPS rate 

year, a Medicare patient is in a LTCH located 

in Chicago, Illinois (CBSA 16974). The full 

LTCH PPS wage index value for CBSA 16974 

is 1.0715 (see Table 1 in the Addendum of 

this final rule). The Medicare patient is 

classified into MS–LTC–DRG 28 (Spinal 

Procedures with MCC), which has a current 

relative weight of 1.1417 (see Table 3 of the 

Addendum of this final rule). 

To calculate the LTCH’s total adjusted 

Federal prospective payment for this 

Medicare patient, we compute the wageadjusted Federal prospective payment 

amount by multiplying the unadjusted 

standard Federal rate ($39,114.36) by the 

labor-related share (75.662 percent) and the 

wage index value (1.0715). This wageadjusted amount is then added to the 

nonlabor-related portion of the unadjusted 

standard Federal rate (24.338 percent; 

adjusted for cost of living, if applicable) to 

determine the adjusted Federal rate, which is 

then multiplied by the MS–LTC–DRG 

relative weight (1.1417) to calculate the total 

adjusted Federal prospective payment for the 

2009 LTCH PPS rate year ($47,072.73). Table 

IV illustrates the components of the 

calculations in this example. 

TABLE IV 

Unadjusted Standard Federal Prospective Payment Rate ........................................................................................................... $39,114.36 

Labor-Related Share ..................................................................................................................................................................... × 0.75662 

Labor-Related Portion of the Federal Rate ................................................................................................................................... = $29,594.71 

Wage Index (CBSA 16974) ........................................................................................................................................................... × 1.0715 

Wage-Adjusted Labor Share of Federal Rate ............................................................................................................................... = $31,710.73 

Nonlabor-Related Portion of the Federal Rate ($39,114.36 × 0.24338) ....................................................................................... + $9,519.65 

Adjusted Federal Rate Amount ..................................................................................................................................................... = $41,230.38 

MS–LTC–DRG 9 Relative Weight ................................................................................................................................................. × 1.1417 

Total Adjusted Federal Prospective Payment ........................................................................................................................ = $47,072.73 

VI. Monitoring 

In the August 30, 2002 final rule (67 

FR 56014), we described an on-going 

monitoring component to the new LTCH 

PPS. Specifically, we discussed ongoing analysis of the various policies 

that we believe would provide equitable 

payment for stays that reflect less than 

the full course of treatment and reduce 

the incentives for inappropriate 

admissions, transfers, or premature 

discharges of patients that are present in 

a discharge-based PPS. As a result of our 

data analysis, we have revisited a 

number of our original policies and 

have identified behaviors by certain 

LTCHs that lead to inappropriate 

Medicare payments. 

In the RY 2009 proposed rule, we 

summarized policy initiatives that we 

have issued as a result of our ongoing 

monitoring program (73 FR 5373 

through 5374). 

We did not propose any new payment 

adjustments in the RY 2009 proposed 

rule resulting from our monitoring 

activity, but we continue to pursue our 

ongoing monitoring program that 

involves the CMS Office of Research 

and Development (ORDI), existing QIO 

monitoring, monitoring by Medicare 

contractors (that is, FIs or MACs), and 

studies described in the RY 2006 LTCH 

PPS final rule (70 FR 24211). 

VII. Method of Payment 

Under § 412.513, a Medicare LTCH 

patient is classified into a MS–LTC–

DRG based on the principal diagnosis, 

up to eight additional (secondary) 

diagnoses, and up to six procedures 

performed during the stay, as well as 

age, sex, and discharge status of the 

patient. The MS–LTC–DRG is used to 

determine the Federal prospective 

payment that the LTCH will receive for 

the Medicare-covered Part A services 

the LTCH furnished during the 

Medicare patient’s stay. Under 

§ 412.541(a), the payment is based on 

the submission of the discharge bill. The 

discharge bill also provides data to 

allow for reclassifying the stay from 

payment at the full MS–LTC–DRG rate 

to payment for a case as a SSO (under 

§ 412.529) or as an interrupted stay 

(under § 412.531), or to determine if the 

case will qualify for a HCO payment 

(under § 412.525(a)). 

Accordingly, the ICD–9–CM codes 

and other information used to determine 

if an adjustment to the full MS–LTC–

DRG payment is necessary (for example, 

LOS or interrupted stay status) are 

recorded by the LTCH on the Medicare 

patient’s discharge bill and submitted to 

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the Medicare FI for processing. The 

payment represents payment in full, 

under § 412.521(b), for inpatient 

operating and capital-related costs, but 

not for the costs of an approved medical 

education program, bad debts, blood 

clotting factors, anesthesia services by 

hospital-employed nonphysician 

anesthetists or the costs of photocopying 

and mailing medical records requested 

by a Quality Improvement Organization 

(QIO), which are costs paid outside the 

LTCH PPS. 

As under the previous reasonable 

cost-based payment system, under 

§ 412.541(b), a LTCH may elect to be 

paid using the periodic interim payment 

(PIP) method described in § 413.64(h), 

based on the estimated prospective 

payment for the year, and may be 

eligible to receive accelerated payments 

as described in § 413.64(g). We exclude 

HCO payments that are paid upon 

submission of a discharge bill from the 

PIP amounts. In addition, Part A costs 

that are not paid for under the LTCH 

PPS, including Medicare costs of an 

approved medical education program, 

bad debts, blood clotting factors, 

anesthesia services by hospitalemployed nonphysician anesthetists 

and the costs of photocopying and 

mailing medical records requested by a 

QIO, are subject to the interim payment 

provisions as specified in § 412.541(c). 

Under § 412.541(d), LTCHs with 

unusually long lengths of stay that are 

not receiving payment under the PIP 

method may bill on an interim basis (60 

days after an admission and at intervals 

of at least 60 days after the date of the 

first interim bill) and this should 

include any HCO payment determined 

as of the last day for which the services 

have been billed. 

VIII. RTI’s Research 

With the recommendations of 

MedPAC’s June 2004 Report to Congress 

as a point of departure, we awarded a 

contract to Research Triangle Institute, 

International (RTI) at the start of FY 

2005 for a comprehensive evaluation of 

the feasibility of developing patient and 

facility level characteristics for LTCHs 

that could distinguish LTCH patients 

from those treated in other hospitals. 

In the RY 2009 LTCH PPS proposed 

rule, we included a description of RTI’s 

research, as well as two technical expert 

panels (TEPs) held during 2007 (73 FR 

5374 through 5376). We also noted that 

we had posted the reports on both Phase 

I and Phase II of RTI’s research on our 

Web site at http://www.cms.hhs.gov/ 

LongTermCareHospitalPPS/ 

02a_RTIReports.asp#TopOfPage. 

Although we did not propose any 

policy initiatives in the RY 2009 LTCH 

PPS proposed rule as a result of RTI’s 

research, we received 10 comments on 

their work. We will pass these 

comments on to RTI and we have 

instructed RTI researchers to consider 

these concerns as they proceed with 

Phase III of their report. 

We would also note that MedPAC’s 

comment on our several policies that 

were proposed in our RY 2009 LTCH 

PPS proposed rule (addressed elsewhere 

in this preamble) included a section 

focusing on one significant aspect of our 

contract with RTI for an evaluation of 

the feasibility of developing patient and 

facility-level criteria for LTCHs. Since 

this contract was developed and 

awarded as a result of MedPAC’s 

recommendations in its June 2004 

Report to Congress (p. 120) as noted 

above, we believe that it is appropriate 

to include the following update to their 

initial analysis: 

The types of cases treated by LTCHs can 

be (and are) treated in other settings, 

particularly in step-down units of many 

acute-care hospitals. Therefore, it is not 

possible (nor desirable) to develop criteria 

defining patients who can be cared for 

exclusively in LTCHs. Rather, CMS should 

seek to define the level of care typically 

furnished in LTCHs, step-down units of 

many acute-care hospitals, and some 

specialized skilled nursing facilities (SNFs) 

and inpatient rehabilitation facilities (IRFs). 

The Commission’s entire comment is 

posted on the MedPAC Web site at 

http://www.medpac.gov/documents/ 

03242008_LTCH_comment_DK.pdf. 

In addition, we wish to take this 

opportunity to discuss recent 

developments in the related area of 

value-based purchasing (VBP). VBP ties 

payment to performance through the use 

of incentives based on measures of 

quality and cost of care. The 

implementation of VBP is rapidly 

transforming CMS from being a passive 

payer of claims to an active purchaser 

of higher quality, more efficient health 

care for Medicare beneficiaries. Our 

VBP initiatives include hospital pay for 

reporting (the Reporting Hospital 

Quality Data for the Annual Payment 

Update Program), physician pay for 

reporting (the Physician Quality 

Reporting Initiative), home health pay 

for reporting, the Hospital VBP Plan 

Report to Congress, and various VBP 

demonstration programs across payment 

settings, including the Premier Hospital 

Quality Incentive Demonstration and 

the Physician Group Practice 

Demonstration. 

The preventable hospital-acquired 

conditions payment provision for IPPS 

hospitals is another of CMS’s valuebased purchasing initiatives. The 

principle behind the hospital-acquired 

conditions payment provision 

(Medicare not paying more for hospitalacquired conditions) could be applied to 

all types of hospitals and Medicare 

payment systems for other settings of 

care. Section 1886(d)(4)(D) of the Act 

required the Secretary to select, for IPPS 

hospital payment purposes, hospitalacquired conditions that: (a) Are high 

cost, high volume, or both; (b) are 

assigned to a higher-paying Medicare 

severity diagnosis-related group (MS–

DRG) when present as a secondary 

diagnosis; and (c) could reasonably have 

been prevented through the application 

of evidence-based guidelines. Beginning 

October 1, 2008, Medicare can no longer 

assign an inpatient hospital discharge to 

a higher-paying MS–DRG if a selected 

hospital-acquired condition was not 

present on admission. That is, the case 

will be paid as though the secondary 

diagnosis was not present (Medicare 

will continue to assign a discharge to a 

higher-paying MS–DRG in those 

instances where the selected condition 

was, in fact, present on admission). 

The broad principle articulated in the 

hospital-acquired conditions payment 

provision could be expanded to 

hospitals other than IPPS hospitals, 

such as long-term care hospitals. 

Alignment of incentives across all 

Medicare payment systems is an 

important goal for CMS’ VBP initiatives. 

Consequently, we are taking this 

opportunity to open the discussion of 

the applicability of the hospitalacquired conditions payment provision 

to long-term care hospitals with 

stakeholders in the provider community 

as well as with the general public as we 

advance in our fight against hospitalacquired conditions in all types of 

hospitals. 

IX. Electronic Submission of Cost 

Reports: Revision to Effective Date of 

Cost Reporting Period 

A. Background 

In the August 22, 2003, Federal 

Register (68 FR 50717), we published 

the ‘‘Electronic Submission of Cost 

Reports’’ final rule requiring all 

hospices, organ procurement 

organizations (OPOs), rural health 

clinics (RHCs), Federally qualified 

health centers (FQHCs), and community 

mental health centers (CMHCs) to 

submit Medicare cost reports in a 

standardized electronic format. This 

requirement was effective for cost 

reporting periods ending on or after 

December 31, 2004. 

Section 902 of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) 

amended section 1871(a) of the Act and 

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26830 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

requires the Secretary, in consultation 

with the Director of the Office of 

Management and Budget, to establish 

and publish timelines for the 

publication of Medicare final 

regulations based on the previous 

publication of a Medicare proposed or 

interim final regulation. Section 902 of 

the MMA also states that the timelines 

for these regulations may vary but shall 

not exceed 3 years after publication of 

the preceding proposed or interim final 

regulation except under exceptional 

circumstances. 

This final rule finalizes provisions set 

forth in the May 25, 2005 interim final 

rule with comment period. In addition, 

this final rule has been published 

within 3 years of the interim final rule 

with comment period. Therefore, we 

believe that the final rule is in 

accordance with the Congress’ intent to 

ensure timely publication of final 

regulations. 

B. Provisions of the Interim Final Rule 

with Comment Period 

In the May 27, 2005, Federal Register 

(70 FR 30640 through 30643), we 

published the ‘‘Electronic Submission of 

Cost Reports: Revision to Effective Date 

of Cost Reporting Period’’ interim final 

rule with comment period revising the 

existing effective date for submission of 

electronic cost reports for OPOs, RHCs, 

FQHCs, and CMHCs from cost reporting 

periods ending on or after December 31, 

2004, to cost reporting periods ending 

on or after March 31, 2005. 

As stated in the May 27, 2005, interim 

final with comment period, hospices 

and End-Stage Renal Disease (ESRD) 

facilities continue to be subject to the 

electronic filing requirements as 

referenced in the August 23, 2003, final 

rule as software for these provider types 

is available. Therefore, all hospices and 

ESRD facilities are still required to 

submit standardized electronic cost 

reports for cost reporting periods ending 

on or after December 31, 2004. 

C. Analysis of and Responses to Public 

Comments 

We received two public comments in 

response to the May 27, 2005, interim 

final rule with comment period. One 

comment was outside the scope of this 

rule because it dealt with physical 

therapy and will not be addressed. The 

other comment agreed with our 

proposed change. 

D. Provisions of the Final Regulations 

We are finalizing the provisions of the 

May 27, 2005, interim final rule with 

comment period without change. Since 

the provisions of § 413.24 are already 

codified and there are no revisions, we 

are not republishing the regulation text 

for § 413.24 in this final rule. 

X. Collection of Information 

Requirements 

This document contains the 

regulation text associated with CMS–

1393–F. The associated regulation text 

does not contain any information 

collection requirements; consequently, 

it need not be reviewed by the Office of 

Management and Budget under the 

authority of the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501 et seq.). 

However, we are republishing the 

information collection requirements 

associated with CMS–1199–F. The 

requirements referenced and discussed 

below pertain to 42 CFR 413.24 and are 

currently approved by OMB. 

Currently § 413.24 requires hospitals, 

to submit cost reports in a standardized 

electronic format for cost reporting 

periods beginning on or after October 1, 

1989. SNFs, and HHAs must submit cost 

reports in a standardized electronic 

format for cost reporting periods ending 

on or after December 31, 1996. 

Hospices, ESRD facilities, OPOS, RHCs, 

FQHCs and CMHCs must submit cost 

reports in a standardized electronic 

format for cost reporting periods ending 

on or after December 31, 2004. These 

reporting requirements are currently 

approved as described below. 

This interim final rule revises the 

dates by which OPOs, RHCs, FQHCs, 

and CMHCs must submit cost reports in 

a standardized electronic format. Under 

the revised requirements OPOs, RHCs, 

FQHCs, and CMHCs must now submit 

cost reports in a standardized electronic 

format for cost reporting periods ending 

on or after March 31, 2005, rather than 

December 31, 2004. This change does 

not impose any new burden. 

As noted above, while all the above 

reporting requirements are subject to the 

PRA, they are currently approved under 

the following OMB control numbers. 

Provider type OMB control 

No. Expiration date 

Hospital .................................................................................................................................................................... 0938–0050 05/31/2008 

Hospice Program ..................................................................................................................................................... 0938–0758 01/31/2008 

Renal Dialysis Facility .............................................................................................................................................. 0938–0236 08/31/2010 

Federally Qualified Health Center ........................................................................................................................... 0938–0107 06/30/2008 

Home Health Agency ............................................................................................................................................... 0938–0022 08/31/2010 

End Stage Renal Disease Networks ....................................................................................................................... 0938–0657 12/31/2009 

Skilled Nursing Facility ............................................................................................................................................ 0938–0463 06/30/2010 

Organ Procurement Organization/Histocompatibility Laboratories ......................................................................... 0938–0102 08/31/2008 

We have submitted a copy of this final 

rule to OMB for its review of the 

aforementioned information collection 

requirements. 

XI. Regulatory Impact Analysis 

A. RY 2009 LTCH PPS Final Rule 

1. Introduction 

We have examined the impacts of this 

final 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 Act, the 

Unfunded Mandates Reform Act of 1995 

(UMRA) (Pub. L. 104–4), and Executive 

Order 13132. 

a. Executive Order 12866 

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 one year). In the impact analysis, 

we are using the rates, factors and 

policies presented in this final rule, 

including updated wage index values, 

and the best available claims and CCR 

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data to estimate the change in payments 

for the 2009 LTCH PPS rate year. As 

stated in section IV.E. of this preamble, 

section 114(e)(1) of the MMSEA revises 

the standard Federal rate for RY 2008 by 

providing that ‘‘for discharges occurring 

during the rate year ending in 2008 for 

a hospital, the base rate for such 

discharges for the hospital shall be the 

same as the base rate for 2007’’ (in other 

words, the standard Federal rate for RY 

2008 is the same as the standard Federal 

rate for RY 2007). Also, section 114(e)(2) 

of the MMSEA provides that the revised 

standard Federal rate for RY 2008 ‘‘shall 

not apply to discharges occurring on or 

after July 1, 2007, and before April 1, 

2008’’ (that is, the first 9 months of RY 

2008). As noted in section IV.E. of this 

preamble, the standard Federal rate for 

RY 2007 was $38,086.04. Accordingly, 

the standard Federal rate for RY 2008 is 

$38,086.04. As discussed in section 

IV.E. of this preamble, consistent with 

our historical practice, we updated the 

standard Federal rate for RY 2008 by 2.7 

percent in order to establish the RY 

2009 standard Federal rate at 

$39,114.36. Furthermore, we note that 

section 114(c)(3) of MMSEA requires a 

3-year suspension of our application of 

the revisions to the SSO policy at 

§ 412.529(c)(3)(i) that was finalized in 

the RY 2008 final rule. Both of these 

revisions to RY 2008 LTCH PPS 

payments (that is, sections 114(c)(3) and 

(e)(1) through (2) of MMSEA) affect the 

modeling of payments in this impact 

analysis, which we discussed in greater 

detail in section XVI.B.3. of this final 

rule. Based on the best available data for 

the 391 LTCHs in our database, we 

estimate that the update to the standard 

Federal rate for RY 2009 (discussed in 

section IV.E. of the preamble of this 

final rule) and the changes to the area 

wage adjustment (discussed in section 

IV.F.1. of the preamble of this final rule) 

for the 2009 LTCH PPS rate year, in 

addition to an estimated increase in 

SSO payments and a slight increase in 

HCO payments (as discussed in greater 

detail below) will result in an increase 

in estimated payments from the 2008 

LTCH PPS rate year of approximately 

$110 million (or about 2.5 percent). 

Based on the 391 LTCHs in our 

database, we estimate RY 2008 LTCH 

PPS payments to be approximately 

$4.36 billion and RY 2009 LTCH PPS 

payments to be approximately $4.47 

billion. Because the combined 

distributional effects and estimated 

changes to the Medicare program 

payments would be greater than $100 

million, this final rule is considered a 

major economic rule, as defined in this 

section. We note the approximately 

$110 million for the projected increase 

in estimated aggregate LTCH PPS 

payments resulting from the provisions 

presented in this final rule does not 

reflect changes in LTCH admissions or 

case-mix intensity in estimated LTCH 

PPS payments, which would also affect 

overall payment changes. 

We note that the average combined 

effect of the standard Federal rate and 

area wage adjustment changes on 

estimated aggregate payments cannot be 

computed by simply adding up the 

estimated averages in columns 6 and 7 

of Table V because each of those two 

columns are intended to show the 

isolated impact of the respective change 

(that is, the change to the standard 

Federal rate or the change to the area 

wage adjustment) on estimated 

payments for RY 2009 as compared to 

RY 2008, and the interactive effects 

resulting from both the change to the 

standard Federal rate and change to the 

area wage adjustment (and estimated 

changes to the HCO and SSO payments) 

are not accounted for in the modeling of 

estimated payments to produce the 

percent change in each of these 

columns. However, the change in 

estimated SSO and HCO payments, and 

the interactive effects of all changes are 

taken into account in the modeling of 

estimated payments for RY 2009 as 

compared to RY 2008 in Column 8 of 

Table V. 

Notwithstanding this limitation in 

comparing the various columns in Table 

V, the difference between the projected 

increase in payments per discharge from 

RY 2008 to RY 2009 for all changes of 

2.5 percent (column 8) and the sum of 

the projected increase due to the change 

to the standard Federal rate (1.9 percent 

in column 6) and the change due to the 

area wage adjustment (¥0.1 percent in 

column 7) is mostly attributable to the 

effect of the estimated increase in 

payments for SSO cases and the 

estimated slight estimated increase in 

payments for HCO cases in RY 2009 as 

compared to RY 2008. That is, in 

calculating the estimated increase in 

payments from RY 2008 to RY 2009 for 

SSO and HCO cases, we increased 

estimated costs by the applicable market 

basket (approximately 3.2 percent). We 

note that, SSO cases comprise 

approximately 16 percent of estimated 

total LTCH PPS payments and HCO 

cases comprise approximately 8 percent 

of estimated total LTCH PPS payments. 

The majority of the payments for SSO 

cases (over 60 percent) are based on the 

estimated cost of the case. 

While the effects of the estimated 

increase in SSO and HCO payments and 

the change to the standard Federal rate 

are projected to increase estimated 

payments per discharge from RY 2008 to 

RY 2009, the changes to the area wage 

adjustment from RY 2008 to RY 2009 

are expected to result in a small 

decrease of 0.1 percent in estimated 

aggregate LTCH PPS payments from the 

2008 LTCH PPS rate year to the 2009 

LTCH PPS rate year (see column 7 of 

Table V). As discussed in section IV.F.1. 

of this rule, we are updating the wage 

index values for RY 2009 based on the 

most recent available data. In addition, 

we are slightly decreasing the laborrelated share from 75.788 percent to 

75.662 percent under the LTCH PPS for 

RY 2009 based on the most recent 

available data on the relative 

importance of the labor-related share of 

operating and capital costs of the market 

basket applicable to the LTCH PPS (also 

discussed in section IV.F.1. of this final 

rule). 

b. Regulatory Flexibility Act (RFA) 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities. 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 the 

analysis that follows. Medicare FIs are 

not considered to be small entities. The 

Secretary certifies that this final rule 

would not have a significant economic 

impact on a substantial number of small 

entities. 

Currently, our database of 391 LTCHs 

includes the data for 85 non-profit 

(voluntary ownership control) LTCHs 

and 273 proprietary LTCHs. Of the 

remaining 33 LTCHs, 16 LTCHs are 

Government-owned and operated and 

the ownership type of the other 17 

LTCHs is unknown (as shown in Table 

V). The impact of the payment rate and 

policy changes for the 2009 LTCH PPS 

rate year (including the update to the 

standard Federal rate and the changes to 

the area wage adjustment) is discussed 

in section XVI.B.4.c. of this final rule. 

As we discuss in detail throughout 

the preamble of this final rule, based on 

the most recent available LTCH data, we 

believe that the provisions of this final 

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rule would result in an increase in 

estimated aggregate LTCH PPS 

payments and that the resulting LTCH 

PPS payment amounts result in 

appropriate Medicare payments. 

The impact analysis of the payment 

rate and policy changes in Table V 

shows that estimated payments per 

discharge are expected to increase 

approximately 2.5 percent, on average, 

for all LTCHs from the 2008 LTCH PPS 

rate year as compared to the 2009 LTCH 

PPS rate year. The projected 2.5 percent 

increase in estimated payments per 

discharge from the 2008 LTCH PPS rate 

year to the 2009 LTCH PPS rate year is 

attributable to the change to the rate, the 

area wage adjustment (discussed in 

section IV.F.1. of this final rule), and 

estimated increases in SSO and HCO 

payments (as discussed in greater detail 

below). As Table V shows, the change 

in just the standard Federal rate is 

projected to result in an estimated 

average increase of 1.9 percent in 

estimated payments per discharge from 

RY 2008 to RY 2009, on average, for all 

LTCHs, while just the changes to the 

area wage adjustment are projected to 

result in an estimated decrease of 0.1 

percent, on average, for all LTCHs 

(columns 6 and 7 of Table V, 

respectively). A thorough discussion of 

the regulatory impact analysis for the 

changes presented in this final rule can 

be found below in section XI.A.3.c. of 

this final rule. 

c. Impact on Rural Hospitals 

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 and has 

fewer than 100 beds. As shown in Table 

V, we are projecting a 2.0 percent 

increase in estimated payments per 

discharge from the 2008 LTCH PPS rate 

year as compared to the 2009 LTCH PPS 

rate year for rural LTCHs that would 

primarily result from the changes 

presented in this final rule (that is, the 

update to the standard Federal rate 

discussed in section IV.E. of the 

preamble of this final rule and the 

changes to the area wage adjustment as 

discussed in section IV.F.1. of the 

preamble of this final rule) based on the 

data of the 25 rural LTCHs in our 

database of 391 LTCHs for which 

complete data were available. 

As shown in Table V, the estimated 

increase in estimated LTCH PPS 

payments from the 2008 LTCH PPS rate 

year as compared to the 2009 LTCH PPS 

rate year for rural LTCHs is primarily 

due to the update to the standard 

Federal rate (as discussed in greater 

detail in section IV.E. of the preamble of 

this final rule) and the change in the 

area wage adjustment (as discussed in 

greater detail in section V.F.1. of the 

preamble of this final rule) in 

conjunction with the estimated 

increased payments for SSO cases and 

a slight estimated increase in payments 

to HCO cases (as discussed below in 

section XI.A. 2.c. of this final rule). We 

believe that the changes to the area wage 

adjustment presented in this final rule 

(that is, the use of updated wage data 

and the change in the labor-related 

share) will result in accurate and 

appropriate LTCH PPS payments in RY 

2009 since they are based on the most 

recent available data. Such updated data 

appropriately reflect national 

differences in area wage levels and 

identifies the portion of the standard 

Federal rate that should be adjusted to 

account for such differences in area 

wages, thereby resulting in accurate and 

appropriate LTCH PPS payments. 

d. Unfunded Mandates 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any one year of 

$100 million in 1995 dollars, updated 

annually for inflation. That threshold 

level is currently approximately $130 

million. This final rule 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. 

e. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it publishes 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. 

We have examined this final rule 

under the criteria set forth in Executive 

Order 13132 and have determined that 

this final rule will not have any 

significant impact on the rights, roles, 

and responsibilities of State, local, or 

tribal governments or preempt State 

law, based on the 16 State and local 

LTCHs (that is, Government ownership 

type) in our database of 391 LTCHs for 

which data were available. 

f. Alternatives Considered 

In the preamble of this final rule, we 

are setting forth the annual update to 

the payment rates for the LTCH PPS for 

RY 2009. In this preamble, we specify 

the statutory authority for the provisions 

that are presented, identify those 

policies where discretion has been 

exercised, and present rationale for our 

decisions as well as alternatives that 

were considered, and address comments 

on suggested alternatives from 

commenters (where relevant). 

2. Anticipated Effects of Payment Rate 

Changes 

We discuss the impact of the changes 

to the payment rates, factors, and other 

payment rate policies presented in the 

preamble of this final rule in terms of 

their estimated fiscal impact on the 

Medicare budget and on LTCHs. 

a. Budgetary Impact 

Section 123(a)(1) of the BBRA 

requires that the PPS developed for 

LTCHs ‘‘maintain budget neutrality.’’

We believe that the statute’s mandate for 

budget neutrality applies only to the 

first year of the implementation of the 

LTCH PPS (that is, FY 2003). Therefore, 

in calculating the FY 2003 standard 

Federal rate under § 412.523(d)(2), we 

set total estimated payments for FY 

2003 under the LTCH PPS so that 

estimated aggregate payments under the 

LTCH PPS are estimated to equal the 

amount that would have been paid if the 

LTCH PPS had not been implemented. 

b. Impact on Providers 

The basic methodology for 

determining a per discharge LTCH PPS 

payment is set forth in § 412.515 

through § 412.536. In addition to the 

basic MS–LTC–DRG payment (standard 

Federal rate multiplied by the MS–LTC–

DRG relative weight), we make 

adjustments for differences in area wage 

levels, COLA for Alaska and Hawaii, 

and SSOs. Furthermore, LTCHs may 

also receive HCO payments for those 

cases that qualify based on the threshold 

established each rate year. 

To understand the impact of the 

changes to the LTCH PPS payments 

discussed in section IV. of this final rule 

on different categories of LTCHs for the 

2009 LTCH PPS rate year, it is necessary 

to estimate payments per discharge for 

the 2008 LTCH PPS rate year using the 

rates, factors and policies established in 

the RY 2008 LTCH PPS final rule (72 FR 

26870 through 27029), the RY 2008 

LTCH PPS correction notice (72 FR 

36613 through 36616) and the 

applicable sections of MMSEA (as 

described in greater detail below in 

section XI.A.2.c. of this final rule). It is 

also necessary to estimate the payments 

per discharge that will be made under 

the LTCH PPS rates, factors and policies 

for the 2009 LTCH PPS rate year (as 

discussed in the preamble of this final 

rule). These estimates of RY 2008 and 

RY 2009 LTCH PPS payments are based 

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on the best available LTCH claims data 

and other factors such as the application 

of inflation factors to estimate costs for 

SSO and HCO cases in each year. We 

also evaluated the change in estimated 

2008 LTCH PPS rate year payments to 

estimated 2009 LTCH PPS rate year 

payments (on a per discharge basis) for 

each category of LTCHs. 

Hospital groups were based on 

characteristics provided in the OSCAR 

data, FY 2004 through FY 2006 cost 

report data in HCRIS, and PSF data. 

Hospitals with incomplete 

characteristics were grouped into the 

‘‘unknown’’ category. Hospital groups 

include the following: 

• Location: Large Urban/Other Urban/ 

Rural. 

• Participation date. 

• Ownership control. 

• Census region. 

• Bed size. 

To estimate the impacts of the 

payment rates and policy changes 

among the various categories of existing 

providers, we used LTCH cases from the 

FY 2007 MedPAR file to estimate 

payments for RY 2008 and to estimate 

payments for RY 2009 for 391 LTCHs. 

While currently there are just under 400 

LTCHs, the most recent growth is 

predominantly in for-profit LTCHs that 

provide respiratory and ventilatordependent patient care. We believe that 

the discharges from the FY 2007 

MedPAR data for the 391 LTCHs in our 

database, which includes 273 

proprietary LTCHs, provide sufficient 

representation in the MS-LTC–DRGs 

containing discharges for patients who 

received LTCH care for the most 

commonly treated LTCH patients’

diagnoses. 

c. Calculation of Prospective Payments 

For purposes of this impact analysis, 

to estimate per discharge payments 

under the LTCH PPS, we simulated 

payments on a case-by-case basis using 

LTCH claims from the FY 2007 MedPAR 

files. In the impact analysis for the 

proposed rule, for modeling estimated 

LTCH PPS payments for both RY 2008 

and RY 2009, we had applied the RY 

2008 standard Federal rate (that is, 

$38,086.04) provided for by section 

114(e) of MMSEA, and the SSO policy 

provided for by section 114(c)(3) of the 

MMSEA (that is, excluding the revisions 

to the SSO policy at § 412.529(c)(3)(i) of 

the regulations). Although we were 

aware at the time that the effective date 

for the change in the SSO policy during 

RY 2008 in the MMSEA is December 29, 

2007, and that discharges occurring on 

or after July 1, 2007 and before April 1, 

2008 are not paid under the RY 2008 

standard Federal rate in 1886(m)(2) of 

the Act, nonetheless, for purposes of 

that impact analysis in the proposed 

rule, we applied both the MMSEA 

revised SSO policy and MMSEA revised 

standard Federal rate for all of RY 2008 

in the estimation of RY 2008 LTCH PPS 

payments. Similarly, in modeling LTCH 

PPS payments in the proposed rule to 

project the average change in estimated 

payments per discharge from RY 2008 to 

RY 2009 due to the change in the 

standard Federal rate, rather than using 

the RY 2008 standard Federal rate 

finalized in the RY 2008 final rule, we 

compared the MMSEA revised RY 2008 

standard Federal rate (that is, 

$38,086.04), to the proposed RY 2009 

standard Federal rate of $39,076.28 (that 

is, $38,086.04 updated by the proposed 

2.6 percent update factor, as discussed 

in the RY 2009 proposed rule (73 FR 

5361 through 5362)) in order to estimate 

the effect of proposing to update the 

standard Federal rate by 2.6 percent. As 

we discussed in the RY 2009 proposed 

rule (73 FR 5379), we took this approach 

for the impact analysis in the proposed 

rule since for the last 3 months of the 

2008 LTCH PPS rate year (that is, April 

2008 through June 2008), which is the 

3-month period immediately preceding 

the start of the 2009 LTCH PPS rate 

year, LTCH discharges are paid under 

the RY 2008 standard Federal rate and 

SSO policy established by section 114 of 

the MMSEA. However, we received a 

comment on the impact analysis of the 

proposed rule. 

Comment: A commenter disagreed 

with our methodology for projecting RY 

2008 estimated payments as if the 

MMSEA provisions on the SSO policy 

and RY 2008 standard Federal rate (that 

is, sections 114(c)(3) and 114(c)(1) of the 

MMSEA) had been in effect for all of RY 

2008. The commenter believed that we 

were overstating the projected increase 

in estimated payments for RY 2009 in 

the proposed rule because we did not 

fully account for the MMSEA provisions 

that affect the projection of RY 2008 

estimated payments. The commenter 

suggested that we fully account for the 

MMSEA changes to the standard 

Federal rate for 2008, the SSO payment 

policy, and the ‘‘25 percent rule’’ at 42 

CFR 412.534 and 412.536, in our impact 

analysis. 

Response: Regarding the ‘‘25 percent 

rule’’ at 42 CFR 412.534 and 412.536, 

we note that historically, we have not 

included this policy in our impact 

analysis. We are not aware of any 

instances where the FI has made any 

adjustments under this policy. 

Consequently, our impact analysis does 

not include any effect on estimated 

payments for RY 2008 or RY 2009 due 

to the ‘‘25 percent rule’’ at 42 CFR 

412.534 and 412.536. With respect to 

commenters’’ suggestion that we model 

payments for the MMSEA changes 

according to the timeframes set forth in 

the MMSEA, instead of our approach in 

which we projected RY 2008 payments 

as if discharges during all of the RY 

2008 were paid under the MMSEA 

revised standard Federal rate and 

MMSEA revised SSO policy for all of 

RY 2008 we agree that our approach 

may have resulted in slightly overstating 

the estimate of the change in payments 

from RY 2008 to RY 2009 in the 

proposed rule. Therefore, to address this 

concern, we modified the impact 

analysis for this final rule. Specifically, 

for purposes of the impact analysis in 

this final rule, rather than applying the 

MMSEA revised SSO policy and 

MMSEA revised RY 2008 standard 

Federal rate to discharges for all of RY 

2008 in the estimation of RY 2008 LTCH 

PPS payments, we accounted for the 

effect on LTCH payments as a result of 

the MMSEA changes to these two 

policies during RY 2008. That is, for the 

first 9 months of RY 2008 (July 1, 2007 

through March 31, 2008), estimated 

LTCH payments for LTCH discharges 

were determined based on the ‘‘higher’’

rate of $38,356.45, while for the last 3 

months of RY 2008 (April 1, 2008 

through June 30, 2008), estimated LTCH 

payments for LTCH discharges were 

determined based on the ‘‘lower’’

MMSEA revised RY 2008 standard 

Federal rate of $38,086.04. Additionally, 

we modeled estimated RY 2008 LTCH 

PPS payments by incorporating the 

change to the SSO policy, which 

excludes the revisions to the SSO policy 

at § 412.529(c)(3)(i), that occurred 

midyear in RY 2008 in accordance with 

the MMSEA. (Additional information on 

section 114 of the MMSEA can be found 

at section I.A. of this final rule.) 

Furthermore, in modeling estimated 

LTCH PPS payments for both RY 2008 

and RY 2009 in this impact analysis, we 

applied the RY 2008 and RY 2009 

adjustments for area wage differences 

(as described in section IV.F.1. of the 

preamble of this final rule), and the 

COLA for Alaska and Hawaii (as 

described in section IV.F.2. of the 

preamble of this final rule). Specifically, 

we adjusted for area wage differences 

for estimated 2008 LTCH PPS rate year 

payments using the current LTCH PPS 

labor-related share of 75.788 percent (72 

FR 26892), the wage index values 

established in the Tables 1 and 2 of the 

Addendum of the RY 2008 final rule (72 

FR 26996 through 27019) and the COLA 

factors established in Table III of the 

preamble of the RY 2008 final rule (72 

FR 26894). Similarly, we adjusted for 

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26834 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

area wage differences for estimated 2009 

LTCH PPS rate year payments using the 

LTCH PPS labor-related share of 75.662 

percent (see section IV.D.1.c. of this 

final rule), the wage index values 

presented in the Tables 1 and 2 of the 

Addendum of this final rule and the 

COLA factors established in Table III of 

the preamble of this final rule. 

As discussed above, we also 

accounted for the payment policy for 

SSOs. We also estimated additional 

payments that would be made for HCOs 

(as described in section IV.F.3. of this 

final rule). In modeling payments for 

SSO and HCO cases in RY 2008, we 

applied an inflation factor of 1.025 

percent (determined by OACT) to the 

estimated costs of each case determined 

from the charges reported on the claims 

in the FY 2007 MedPAR files and the 

best available CCRs from the January 

2008 update of the PSF. In modeling 

payments for SSO and HCO cases in RY 

2009, we applied an inflation factor of 

1.058 (determined by OACT) to the 

estimated costs of each case determined 

from the charges reported on the claims 

in the FY 2007 MedPAR files and the 

best available CCRs from the January 

2008 update of the PSF. As noted in 

section IV.F.4. of this final rule, we are 

not making adjustments for rural 

location, geographic reclassification, 

indirect medical education costs, or a 

DSH payment for the treatment of lowincome patients because our most recent 

data analysis that reflects LTCH 

behavior subsequent to the 

implementation of the LTCH PPS 

indicates that payment adjustments for 

geographic reclassification, rural 

location, DSH, or indirect medical 

education costs would not improve the 

accuracy of payments made under the 

LTCH PPS to LTCHs. (See Section 

IV.F.4. of this final rule.). 

These impacts reflect the estimated 

‘‘losses’’ or ‘‘gains’’ among the various 

classifications of LTCHs from the 2008 

LTCH PPS rate year to the 2009 LTCH 

PPS rate year based on the payment 

rates and policy changes presented in 

this final rule. Table V illustrates the 

estimated aggregate impact of the LTCH 

PPS among various classifications of 

LTCHs. 

• The first column, LTCH 

Classification, identifies the type of 

LTCH. 

• The second column lists the 

number of LTCHs of each classification 

type. 

• The third column identifies the 

number of LTCH cases. 

• The fourth column shows the 

estimated payment per discharge for the 

2008 LTCH PPS rate year (as described 

above). 

• The fifth column shows the 

estimated payment per discharge for the 

2009 LTCH PPS rate year (as described 

above). 

• The sixth column shows the 

percentage change in estimated 

payments per discharge from the 2008 

LTCH PPS rate year to the 2009 LTCH 

PPS rate year for changes to the 

standard Federal rate (as discussed in 

section IV.E. of the preamble of this 

final rule). 

• The seventh column shows the 

percentage change in estimated 

payments per discharge from the 2008 

LTCH PPS rate year to the 2009 LTCH 

PPS rate year for changes to the area 

wage adjustment at § 412.525(c) (as 

discussed in section IV.F.1. of the 

preamble of this final rule). 

• The eighth column shows the 

percentage change in estimated 

payments per discharge from the 2008 

LTCH PPS rate year (column 4) to the 

2009 LTCH PPS rate year (column 5) for 

all changes. 

TABLE V.—IMPACT OF PAYMENT RATE AND PAYMENT RATE POLICY CHANGES TO LTCH PPS PAYMENTS FOR RY 2009 

[Estimated 2008 LTCH PPS rate year payments compared to estimated 2009 LTCH PPS rate year payments*] 

LTCH classification Number of 

LTCHs 

Number of 

LTCH PPS 

cases 

Average 

estimated RY 

2008 LTCH 

PPS rate year 

payment per 

case 1

Average 

estimated RY 

2009 LTCH 

PPS rate year 

payment per 

case 2

Percent 

change in 

estimated payments per discharge from 

RY 2008 to 

RY 2009 for 

finalized 

changes to the 

federal rate 3

Percent 

change in 

estimated payments per discharge from 

RY 2008 to 

RY 2009 for 

finalized 

changes to the 

area wage 

adjustment 4

Percent 

change in 

payments per 

discharge from 

RY 2008 to 

RY 2009 for 

all changes 5

All Providers ................. 391 129,255 $33,698 $34,545 1.9 ¥0.1 2.5 

By location: 

Rural ..................... 25 6,150 27,457 28,019 2.0 ¥0.4 2.0 

Urban .................... 366 123,105 34,010 34,871 1.9 ¥0.1 2.5 

Large ..................... 188 74,266 35,399 36,322 1.8 0.0 2.6 

Other ..................... 178 48,839 31,898 32,665 1.9 ¥0.2 2.4 

By Participation Date: 

Before Oct. 1983 .. 17 6,927 29,776 30,691 1.9 0.5 3.1 

Oct. 1983–Sept. 

1993 .................. 46 18,659 35,173 36,050 1.8 ¥0.1 2.5 

Oct. 1993–Sept. 

2002 .................. 201 69,664 33,286 34,080 1.9 ¥0.2 2.4 

After October 2002 120 32,289 34,184 35,090 1.9 0.0 2.7 

Unknown Participation Date ............ 7 1,716 41,097 42,368 1.8 0.5 3.1 

By Ownership Type: 

Voluntary ............... 85 22,712 34,269 35,184 1.8 0.0 2.7 

Proprietary ............ 273 101,601 33,441 34,266 1.9 ¥0.2 2.5 

Government .......... 16 2,370 36,129 37,151 1.8 0.2 2.8 

Unknown Ownership Type ........... 17 2,572 36,564 37,539 1.9 0.0 2.7 

By Region: 

New England ........ 16 8,266 30,010 30,969 1.9 0.7 3.2 

Middle Atlantic ...... 29 8,135 34,623 35,341 1.8 ¥0.6 2.1 

South Atlantic ........ 49 13,364 38,348 39,354 1.8 ¥0.1 2.6 

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26835 

TABLE V.—IMPACT OF PAYMENT RATE AND PAYMENT RATE POLICY CHANGES TO LTCH PPS PAYMENTS FOR RY 2009—

Continued 

[Estimated 2008 LTCH PPS rate year payments compared to estimated 2009 LTCH PPS rate year payments*] 

LTCH classification Number of 

LTCHs 

Number of 

LTCH PPS 

cases 

Average 

estimated RY 

2008 LTCH 

PPS rate year 

payment per 

case 1

Average 

estimated RY 

2009 LTCH 

PPS rate year 

payment per 

case 2

Percent 

change in 

estimated payments per discharge from 

RY 2008 to 

RY 2009 for 

finalized 

changes to the 

federal rate 3

Percent 

change in 

estimated payments per discharge from 

RY 2008 to 

RY 2009 for 

finalized 

changes to the 

area wage 

adjustment 4

Percent 

change in 

payments per 

discharge from 

RY 2008 to 

RY 2009 for 

all changes 5

East North Central 67 19,180 37,205 38,117 1.9 ¥0.2 2.5 

East South Central 31 8,343 33,095 33,763 1.9 ¥0.6 2.0 

West North Central 19 5,199 35,471 36,415 1.9 0.0 2.7 

West South Central 134 50,770 29,655 30,343 1.9 ¥0.3 2.3 

Mountain ............... 25 5,569 35,779 36,774 1.8 0.0 2.8 

Pacific ................... 21 10,429 41,664 42,987 1.8 0.6 3.2 

By Bed Size: 

Beds: 0–24 ............ 34 4,633 30,444 31,044 2.0 ¥0.6 2.0 

Beds: 25–49 .......... 195 44,616 33,618 34,440 1.9 ¥0.2 2.4 

Beds: 50–74 .......... 78 26,845 33,393 34,248 1.9 ¥0.1 2.6 

Beds: 75–124 ........ 47 22,806 36,034 37,013 1.8 0.1 2.7 

Beds: 125–199 ...... 21 16,536 32,717 33,514 1.9 ¥0.2 2.4 

Beds: 200 + .......... 16 13,819 32,961 33,798 1.9 ¥0.1 2.5 

1Estimated 2008 LTCH PPS rate year payments based on the rates, factors and policies established in the RY 2008 LTCH PPS final rule (72 

FR 26870 through 27029), the RY 2008 LTCH PPS correction notice (72 FR 36613 through 36616) and the applicable sections of the MMSEA. 

As described in section XVI.B.3. of this final rule, for the purpose of this impact analysis, we modeled estimated RY 2008 payments based on 

the MMSEA provisions regarding the application of the revised standard Federal rate for RY 2008 and the revised SSO policy. Specifically, in estimating RY 2008 LTCH PPS payments, we applied the MMSEA revised RY 2008 standard Federal rate of $38,086.04 to 3 months of RY 2008 

(that is, April 1, 2008, through June 30, 2008) and we applied the RY 2008 rate from the RY 2008 LTCH PPS final rule of $38,356.45 to 9 

months of RY 2008 (that is, July 1, 2007, though March 31, 2008). Additionally, in estimating RY 2008 LTCH PPS payments, we accounted for 

the midyear change to the SSO policy provided for by section 114(c)(3) of the MMSA (that is, excluding the revisions to the SSO policy at 

§ 412.529(c)(3)(i)) for discharges occurring on or after December 29, 2007. 

2Estimated 2009 LTCH PPS rate year payments based on the payment rates and policy changes presented in the preamble of this final rule. 3Percent change in estimated payments per discharge from the 2008 LTCH PPS rate year to the 2009 LTCH PPS rate year for the changes 

to the Federal rate, as discussed in section IV.E. of the preamble of this final rule. (Note, because about 34 percent of all LTCH cases are projected to receive a payment adjustment under the SSO policy that is based either on the estimated cost of the case or the ‘‘blend option’’ (which 

is based in part on the ‘‘IPPS comparable amount’’) rather than the Federal rate in RY 2009, the percent change in estimated payments per discharge due to the changes to the Federal rate for most of the categories of LTCHs, 1.9 percent, is somewhat less than the update to the Federal 

rate of 2.7 percent. In addition, since payments in RY 2008 were modeled based on the two rates applied during RY 2008 as described above, 

the estimated increase in payments to those cases that were paid based on the ‘‘higher’’ RY 2008 rate from the RY 2008 LTCH PPS final rule 

(approximately 75 percent of cases) will be less than the 2.7 percent update that was applied to the ‘‘lower’’ revised RY 2008 standard Federal 

rate in determining the RY 2009 Federal rate.) 4Percent change in estimated payments per discharge from the 2008 LTCH PPS rate year to the 2009 LTCH PPS rate year for changes to 

the area wage adjustment at § 412.525(c) (as discussed in section V.F.1. of the preamble of this final rule). 5Percent change in estimated payments per discharge from the 2008 LTCH PPS rate year (as described in section XI.A.2.c. of this final rule) 

to the 2009 LTCH PPS rate year including all of the changes presented in the preamble of this final rule. Note, this column, which shows the 

percent change in estimated payments per discharge for all changes, may not equal the sum of the percent changes in estimated payments per 

discharge for changes to the standard Federal rate (column 6) and the changes to the area wage adjustment (column 7) due to the effect of estimated changes in both payments to SSO cases that are paid based on estimated costs and aggregate HCO payments (as discussed in this final 

rule), as well as other interactive effects that cannot be isolated. 

d. Results 

Based on the most recent available 

data (as described previously for 391 

LTCHs), we have prepared the following 

summary of the impact (as shown in 

Table V) of the LTCH PPS payment rate 

and policy changes presented in this 

final rule. The impact analysis in Table 

V shows that estimated payments per 

discharge are expected to increase 

approximately 2.5 percent, on average, 

for all LTCHs from the 2008 LTCH PPS 

rate year as compared to the 2009 LTCH 

PPS rate year as a result of the payment 

rate and policy changes presented in 

this final rule. We note that although we 

are proposing a 2.7 percent increase to 

the standard Federal rate for RY 2009, 

based on the latest market basket 

estimate (3.6 percent) for the 15-month 

2009 rate year and offset by the coding 

and documentation adjustment (0.9 

percent), for most categories of LTCHs, 

the impact analysis shown in Table V 

only shows a 1.9 percent increase 

(column 6) in estimated payments per 

discharge from RY 2008 to RY 2009 as 

a result of the change to the standard 

Federal rate. The projected impact of 1.9 

percent for the change in the standard 

Federal rate shown in column 6 is less 

than the 2.7 percent update to the 

standard Federal rate discussed in 

section IV.C. of the preamble due to 

several factors. First, as we discussed 

above, we modified the impact analysis 

for this final rule in response to a 

comment we received on the impact 

analysis performed for the proposed 

rule. Specifically, in our modeling of 

estimated payments for RY 2008, we 

accounted for the mid-year change in 

the SSO payment policy that occurred 

during RY 2008 and incorporated both 

the ‘‘lower’’ MMSEA revised RY 2008 

standard Federal rate, under which 

discharges are paid for 3 months, and 

the ‘‘higher’’ rate from the RY 2008 

LTCH PPS final rule, under which 

discharges are paid for 9 months, in 

accordance with the MMSEA as 

discussed above and in more detail in 

section I.E. of this preamble. Since 

payments in RY 2008 were modeled 

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26836 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

based on the two rates under which 

discharges are paid during RY 2008 as 

described above, the estimated increase 

in payments to those cases that were 

paid based on the ‘‘higher’’ RY 2008 rate 

from the RY 2008 LTCH PPS final rule 

(approximately 75 percent of cases) will 

be less than the 2.7 percent update that 

was applied to the ‘‘lower’’ MMSEA 

revised RY 2008 standard Federal rate 

in determining the RY 2009 Federal 

rate. Furthermore, approximately 30 

percent of LTCH cases are SSO cases, 

which are paid based on the estimated 

cost of the case or the blend option one 

component of which is the IPPS 

comparable amount rather than on the 

updated Federal rate. The inclusion of 

the estimated payments for these SSO 

cases in the estimate of the average 

payment per discharge for all LTCH 

cases results in an estimated increase 

that is less than the 2.7 percent update 

to the standard Federal rate. Therefore, 

because over 30 percent of all LTCH 

PPS cases are projected to receive a 

payment that is not based fully on the 

standard Federal rate, the percent 

change in estimated payments per 

discharge due to the change to the 

standard Federal rate for most categories 

of LTCHs shown in Table V is projected 

to be 1.9 percent, which is somewhat 

less than the 2.5 percent update to the 

standard Federal rate. In addition to the 

1.9 percent increase to the standard 

Federal rate for RY 2009, the projected 

percent increase in estimated payments 

per discharge from the 2008 LTCH PPS 

rate year to the 2009 LTCH PPS rate year 

of 2.5 percent shown in Table V (see 

column 8) reflects the effect of estimated 

SSO payments and a slight increase in 

estimated HCO payments as we 

discussed previously. That is, in 

calculating the estimated increase in 

payments for HCO and SSO from RY 

2008 to RY 2009, we increased costs by 

applying the applicable market basket 

(approximately 3.2 percent). As noted 

above, SSOs comprise approximately 16 

percent of total LTCH PPS payments 

and HCOs comprise approximately 8 

percent of estimated total LTCH PPS 

payments. Furthermore, as discussed 

previously in this regulatory impact 

analysis, the average increase in 

estimated payments per discharge from 

the 2008 LTCH PPS rate year to the 2009 

LTCH PPS rate year, on average, for all 

LTCHs is approximately 2.5 (as shown 

in Table V) and was determined by 

comparing estimated RY 2009 LTCH 

PPS payments (using the rates and 

policies discussed in the preamble of 

this rule) to estimated RY 2008 LTCH 

PPS payments (as described above in 

section XI.A.2.c. of this regulatory 

impact analysis). 

(1) Location 

Based on the most recent available 

data, the majority of LTCHs are in urban 

areas. Approximately 6 percent of the 

LTCHs are identified as being located in 

a rural area, and approximately 5 

percent of all LTCH cases are treated in 

these rural hospitals. The impact 

analysis presented in Table V shows 

that the average percent increase in 

estimated payments per discharge for 

the 2008 LTCH PPS rate year compared 

to the 2009 LTCH PPS rate year for all 

hospitals is 2.5 percent for all changes. 

For rural LTCHs, the percent change for 

all changes is estimated to be 2.0 

percent, while for urban LTCHs, we 

estimate this increase to be 2.5 percent. 

Large urban LTCHs are projected to 

experience a 2.6 percent increase in 

estimated payments per discharge from 

the 2008 LTCH PPS rate year compared 

to the 2009 LTCH PPS rate year, while 

other urban LTCHs are projected to 

experience a 2.4 percent increase in 

estimated payments per discharge from 

the 2008 LTCH PPS rate year compared 

to the 2009 LTCH PPS rate year, as 

shown in Table V. Rural LTCHs are 

projected to experience a somewhat 

lower than average increase in estimated 

payments per discharge for all changes 

primarily due to the changes to the area 

wage adjustment (0.4 percent, see 

column 7 of table V). That is, 72 percent 

of the LTCHs in these areas are expected 

to experience a decrease in their wage 

index value from RY 2008 to RY 2009. 

(2) Participation Date 

LTCHs are grouped by participation 

date into four categories: (1) Before 

October 1983; (2) between October 1983 

and September 1993; (3) between 

October 1993 and September 2002; and 

(4) after October 2002. Based on the 

most recent available data, the majority 

(approximately 51 percent) of the LTCH 

cases are in hospitals that began 

participating between October 1993 and 

September 2002, and are projected to 

experience about the average increase 

(2.4 percent) in estimated payments per 

discharge from the 2008 LTCH PPS rate 

year compared to the 2009 LTCH PPS 

rate year, as shown in Table V. 

LTCHs that began participating in 

Medicare between October 1983 and 

September 1993, are projected to 

experience the average percent increase 

(2.5 percent) in estimated payments per 

discharge from the 2008 LTCH PPS rate 

year compared to the 2009 LTCH PPS 

rate year, as shown in Table V. 

Approximately 12 percent of LTCHs 

began participating in Medicare 

between October 1983 and September 

1993 while approximately 31 percent of 

LTCHs began participating in Medicare 

after October 2002 (that is, the 

beginning of the LTCH PPS, which was 

implemented for cost reporting periods 

beginning on or after October 1, 2002). 

LTCHs that began participating in 

Medicare after October 2002 are 

projected to experience a slightly higher 

than average percent increase (2.7 

percent) in estimated payments per 

discharge from the 2008 LTCH PPS rate 

year compared to the 2009 LTCH PPS 

rate year, as shown in Table V. 

Similarly, LTCHs that began 

participating before October 1983 are 

projected to experience higher than the 

average increase (3.1 percent) in 

estimated payments per discharge for 

the 2009 LTCH PPS rate year as 

compared to the 2008 LTCH PPS rate 

year (see Table V). 

(3) Ownership Control 

Other than LTCHs whose ownership 

control type is unknown, LTCHs are 

grouped into three categories based on 

ownership control type: voluntary; 

proprietary; and government. Based on 

the most recent available data, 

approximately 4 percent of LTCHs are 

identified as government-owned and 

operated (see Table V). We expect that 

for these government-owned and 

operated LTCHs, estimated 2009 LTCH 

PPS rate year payments per discharge 

will increase 2.8 percent in comparison 

to the 2008 LTCH PPS rate year, as 

shown in Table V. We are projecting 

that government-run LTCHs will 

experience a somewhat higher than 

average increase in estimated payments 

in RY 2009 as compared to RY 2008 

primarily due to the effect of the 

changes to the area wage adjustment. 

Specifically, the majority (69 percent) of 

hospitals in this category are projected 

to experience an increase in their wage 

index value from RY 2008 to RY 2009. 

In addition, because the majority 

(approximately 75 percent) of hospitals 

in this category have a wage index of 

less than 1.0, the decrease to the laborrelated share (from 75.788 percent to 

75.662 percent) also contributes to the 

larger than average increase in estimated 

payments for RY 2009 as compared to 

RY 2008, shown in Table V. 

We project that estimated 2009 LTCH 

PPS rate year payments per discharge 

for voluntary LTCHs, which account for 

approximately 22 percent of LTCHs, 

will increase slightly higher than the 

average (2.7 percent) in comparison to 

estimated 2008 LTCH PPS rate year 

payments (see Table V). The majority 

(approximately 70 percent) of LTCHs 

are identified as proprietary. We project 

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26837 

that RY 2009 estimated payments per 

discharge for these proprietary LTCHs 

will increase by the average (2.5 

percent) in comparison to the 2008 

LTCH PPS rate year (see Table V). 

(4) Census Region 

Estimated payments per discharge for 

the 2009 LTCH PPS rate year are 

projected to increase for LTCHs located 

in all regions in comparison to the 2008 

LTCH PPS rate year. The percent 

increase in estimated payments per 

discharge for the 2009 LTCH PPS rate 

year as compared to the 2008 LTCH PPS 

rate year for all regions is largely 

attributable to the increase in the 

standard Federal rate, while the 

variations in the estimated percent 

increases in payments ranging from 2.0 

percent to 3.2 percent, is primarily due 

to the differences in estimated payment 

changes due to changes to the area wage 

adjustment. 

Of the 9 census regions, we project 

that the increase in 2009 LTCH PPS rate 

year estimated payments per discharge 

in comparison to the 2008 LTCH PPS 

rate year will have the largest impact on 

LTCHs in the New England and Pacific 

regions (3.2 percent for both; see Table 

V). LTCHs located in both the New 

England and Pacific regions are 

expected to experience a larger than 

average increase in estimated payments 

due to the changes in the area wage 

adjustment (0.7 percent for the New 

England region, and 0.6 percent for the 

Pacific region, as shown in Table V). 

This is because approximately 87 

percent of LTCHs located in the New 

England region and all of LTCHs in the 

Pacific region are projected to 

experience an increase in their wage 

index values for RY 2009 as compared 

to RY 2008. 

For LTCHs located in the Middle 

Atlantic and East South Central regions, 

we estimate that the somewhat lower 

than average projected increase (2.1 

percent and 2.0 percent, respectively) in 

estimated payments per discharge for 

the 2009 LTCH PPS rate year compared 

to the 2008 LTCH PPS rate year is 

largely a result of the changes to the area 

wage adjustment. Specifically, the vast 

majority of LTCHs in the Middle 

Atlantic region (approximately 86 

percent) and East South Central region 

( approximately 71 percent) would 

experience a decrease in their wage 

index value from RY 2008 to RY 2009 

which contributes to the lower than 

average estimated increase in payments 

from RY 2008 to RY 2009. 

We project that in comparison to the 

2008 LTCH PPS rate year, the 2009 

LTCH PPS rate year estimated payments 

per discharge for LTCHs in the West 

North Central, South Atlantic, East 

North Central, and West South Central 

regions will increase near the average 

(2.7 percent, 2.6 percent, 2.5 percent, 

and 2.3 percent, respectively). For 

LTCHs located in the Mountain region, 

we estimate that the slightly higher than 

average projected increase (2.8 percent) 

in estimated payments per discharge for 

the 2009 LTCH PPS rate year compared 

to the 2008 LTCH PPS rate year is a 

result of the changes to the area wage 

adjustment. That is, we estimate that a 

slight majority (52 percent) of hospitals 

in the Mountain region will experience 

an increase in their wage index values 

from RY 2008 to RY 2009. 

(5) Bed Size 

LTCHs were grouped into six 

categories based on bed size: 0–24 beds; 

25–49 beds; 50–74 beds; 75–124 beds; 

125–199 beds; and greater than 200 

beds. 

We are projecting an increase in 

estimated 2009 LTCH PPS rate year 

payments per discharge in comparison 

to the 2008 LTCH PPS rate year for all 

bed size categories. Most LTCHs are in 

bed size categories where estimated 

2009 LTCH PPS rate year payments per 

discharge are projected to increase at or 

near the average increase of 2.5 percent 

for all LTCHs, in comparison to 

estimated 2008 LTCH PPS rate year 

payments per discharge (that is, all 

LTCH bed size categories except the 

category of LTCHs with 0–24 beds). 

Specifically, estimated payments per 

discharge for the 2009 LTCH PPS rate 

year are projected to increase for LTCHs 

with 25–49 and 125–199 beds at 2.4 

percent, for LTCHs with more than 200 

beds at 2.5 percent, for LTCHs with 50–

74 beds at 2.6 percent, and for LTCHs 

with more than 75–124 beds, at 2.7 

percent. 

Estimated payments per discharge for 

the 2009 LTCH PPS rate year for LTCHs 

with 0–24 beds are projected to have a 

somewhat lower than average increase 

(2.0 percent) in comparison to all 

hospitals. This lower than average 

increase in estimated payments per 

discharge for LTCHs with 0–24 beds is 

largely due to the changes to the area 

wage adjustment. Specifically, LTCHs in 

this category are expected to experience 

a larger than average decrease in their 

payments from RY 2008 to RY 2009 due 

to the changes to the area wage 

adjustment primarily because 

approximately 74 percent of the 

hospitals in this category are projected 

to experience a decrease in their wage 

index value from RY 2008 to RY 2009. 

e. Effect on the Medicare Program 

Based on actuarial projections, an 

estimate of Medicare spending (total 

estimated Medicare program payments) 

for LTCH services over the next 5 years 

based on current LTCH PPS policy (as 

established in previous LTCH PPS final 

rules) is shown in Table IV in section 

IV.D. of the preamble of this rule. As 

noted previously, we project that the 

provisions of this rule will result in an 

increase in estimated aggregate LTCH 

PPS payments in RY 2009 of 

approximately 110 million (or about 2.5 

percent) for the 391 LTCHs in our 

database. 

Consistent with the statutory 

requirement for budget neutrality, as we 

discussed in the August 30, 2002 final 

rule that implemented the LTCH PPS, in 

developing the LTCH PPS, we intended 

estimated aggregate payments under the 

LTCH PPS in FY 2003 be projected to 

equal the estimated aggregate payments 

that would have been made if the LTCH 

PPS were not implemented. Our 

methodology for estimating payments 

for purposes of the BN calculations for 

determining the FY 2003 standard 

Federal rate used the best available data 

and necessarily reflects assumptions. As 

discussed in section IV.D. of this rule, 

section 114(c)(4) of the MMSEA 

provides that the ‘‘Secretary shall not, 

for the 3-year period beginning on the 

date of the enactment of this Act, make 

the one-time prospective adjustment to 

long-term care hospital prospective 

payment rates provided for in 

§ 412.523(d)(3) of title 42, Code of 

Federal Regulations, or any similar 

provision.’’ That provision delays the 

effective date of any one-time budget 

neutrality adjustment until no earlier 

than December 29, 2010. However, prior 

to the enactment of the MMSEA of 2007, 

we had developed a methodology for 

evaluating the appropriateness of 

proposing a one-time budget neutrality 

adjustment under existing 

§ 412.523(d)(3). In order to inform the 

public of our thinking, and to stimulate 

comments for our consideration during 

the 3-year delay in implementing any 

adjustment under the recent legislation, 

we have presented our analysis and its 

results in section IV.D. of the preamble 

of the RY 2009 LTCH PPS proposed rule 

(73 FR 5376 through 5383). 

f. Effect on Medicare Beneficiaries 

Under the LTCH PPS, hospitals 

receive payment based on the average 

resources consumed by patients for each 

diagnosis. We do not expect any 

changes in the quality of care or access 

to services for Medicare beneficiaries 

under the LTCH PPS, but we expect that 

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26838 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

paying prospectively for LTCH services 

would enhance the efficiency of the 

Medicare program. 

3. Accounting Statement 

As discussed in section XVI.A.1. of 

this final rule, the impact analysis of 

this final rule projects an increase in 

estimated aggregate payments of 

approximately $110 million (or about 

2.5 percent) for the 391 LTCHs in our 

database. Therefore, as required by OMB 

Circular A–4 (available at http:// 

www.whitehouse.gov/omb/circulars/

a004/a-4.pdf), in Table V, we have 

prepared an accounting statement 

showing the classification of the 

expenditures associated with the 

provisions of this final rule. Table VI 

provides our best estimate of the 

increase in Medicare payments under 

the LTCH PPS as a result of the 

provisions presented in this final rule 

based on the data for the 391 LTCHs in 

our database. All expenditures are 

classified as transfers to Medicare 

providers (that is, LTCHs). 

TABLE VI.—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM THE 2008 LTCH 

PPS RATE YEAR TO THE 2009 

LTCH PPS RATE YEAR

[In millions] 

Category Transfers 

Annualized Monetized Transfers.Positive transfer—Estimated increase in expenditures: $110 million 

From Whom To 

Whom? 

Federal Government To 

LTCH Medicare Providers 

In accordance with the provisions of 

Executive Order 12866, this final rule 

was reviewed by the Office of 

Management and Budget. 

B. Electronic Submission of Cost 

Reports: Revision to Effective Date of 

Cost Reporting Period 

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). This rule does not reach 

the economic threshold and thus is not 

considered a major rule. 

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. Individuals and States are not 

included in the definition of a small 

entity. We are not preparing an analysis 

for the RFA because we have 

determined that this rule will 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 and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined 

that this rule will not have a significant 

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. 

The threshold level is currently 

approximately $130 million. This rule 

will have no consequential effect on the 

governments mentioned or on the 

private sector. 

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 E.O. 13132 are not 

applicable. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 412 

Administrative practice and 

procedure, Health facilities, Medicare, 

Puerto Rico, Reporting and 

recordkeeping requirements. 

■ For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 412—PROSPECTIVE PAYMENT 

SYSTEMS FOR INPATIENT HOSPITAL 

SERVICES 

■ 1. The authority citation for part 412 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh) and section 124 of Pub. L. 106–113 

(113 Stat. 1501A–332). 

Subpart O—Prospective Payment 

System for Long Term Care Hospitals 

■ 2. Section 412.503 is amended by—

■ A. Revising the definition of ‘‘Longterm care hospital prospective payment 

system rate year’’. 

■ B. Adding new definitions of ‘‘rural’’

and ‘‘urban’’ in alphabetical order. 

The revision and additions read as 

follows: 

§ 412.503 Definitions. 

* * * * * 

Long-term care hospital prospective 

payment system rate year means—

(1) From July 1, 2003 and ending on 

or before June 30, 2008, the 12-month 

period of July 1 through June 30. 

(2) From July 1, 2008 and ending on 

September 30, 2009, the 15-month 

period of July 1, 2008 through 

September 30, 2009. 

(3) Beginning on or after October 1, 

2009, the 12-month period of October 1 

through September 30. 

* * * * * 

Rural area means—(1) For cost 

reporting periods beginning on or after 

October 1, 2002, with respect to 

discharges occurring during the period 

covered by such cost reports but before 

July 1, 2005, an area defined in 

§ 412.62(f)(1)(iii); 

(2) For discharges occurring on or 

after July 1, 2005, and before July 1, 

2008, an area as defined in 

§ 412.64(b)(1)(ii)(C); and 

(3) For discharges occurring on or 

after July 1, 2008, any area outside an 

urban area. 

Urban area means—(1) For cost 

reporting periods beginning on or after 

October 1, 2002, with respect to 

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26839 

discharges occurring during the period 

covered by such cost reports but before 

July 1, 2005, an area defined in 

§ 412.62(f)(1)(ii); 

(2) For discharges occurring on or 

after July 1, 2005, and before July 1, 

2008, an urban area means an area as 

defined in § 412.64(b)(1)(ii)(A) and (B); 

and 

(3) For discharges occurring on or 

after July 1, 2008, a Metropolitan 

Statistical Area, as defined by the 

Executive Office of Management and 

Budget. 

■ 3. Section 412.523 is amended by—

■ A. Adding new paragraph (c)(3)(v). 

■ B. Revising paragraph (d)(2) by 

removing the phrase ‘‘sections 

1886(b)(2) and (b)(3) of the Act’’ and 

adding ‘‘section 1886(b)(2)(E) and 

(b)(3)(J) of the Act’’ in its place. 

■ C. Revising paragraph (d)(3). 

The addition and revisions read as 

follows: 

§ 412.523 Methodology for calculating the 

Federal prospective payment rates. 

* * * * * 

(c) * * * 

(3) * * * 

(v) For long-term care hospital 

prospective payment system rate year 

beginning July 1, 2008 and ending 

September 30, 2009. The standard 

Federal rate for long-term care hospital 

prospective payment system rate year 

beginning July 1, 2008 and ending 

September 30, 2009 is the standard 

Federal rate for the previous long-term 

care hospital prospective payment 

system rate year updated by 2.7 percent. 

The standard Federal rate is adjusted, as 

appropriate, as described in paragraph 

(d) of this section. 

* * * * * 

(d) * * * 

(3) The Secretary reviews payments 

under this prospective payment system 

and may make a one-time prospective 

adjustment to the long-term care 

hospital prospective payment system 

rates no earlier than December 29, 2010, 

and by no later than October 1, 2012, so 

that the effect of any significant 

difference between the data used in the 

original computations of budget 

neutrality for FY 2003 and more recent 

data to determine budget neutrality for 

FY 2003 is not perpetuated in the 

prospective payment rates for future 

years. 

* * * * * 

■ 4. Section 412.525 is amended by 

revising paragraph (c) to read as follows: 

§ 412.525 Adjustments to the Federal 

prospective payment. 

* * * * * 

(c) Adjustments for area levels. The 

labor portion of a long-term care 

hospital’s Federal prospective payment 

is adjusted to account for geographical 

differences in the area wage levels using 

an appropriate wage index (established 

by CMS), which reflects the relative 

level of hospital wages and wage-related 

costs in the geographic area (that is, 

urban or rural area as determined in 

accordance with the definitions set forth 

in § 412.503) of the hospital compared 

to the national average level of hospital 

wages and wage-related costs. The 

appropriate wage index (established by 

CMS) is updated annually. 

■ 5. Section 412.529 is amended by 

revising paragraphs (d)(4)(ii)(B) and 

(d)(4)(iii)(b) to read as follows: 

§ 412.529 Special payment provision for 

short-stay outliers. 

* * * * * 

(d) * * * 

(4) * * * 

(ii) * * * 

(B) Is adjusted for different area wage 

levels based on the geographic 

classifications set forth at § 412.503 and 

the applicable hospital inpatient 

prospective payment system laborrelated share, using the applicable 

hospital inpatient prospective payment 

system wage index value for 

nonreclassified hospitals. For LTCHs 

located in Alaska and Hawaii, this 

amount is also adjusted by the 

applicable hospital inpatient 

prospective payment system cost of 

living adjustment factors. 

* * * * * 

(iii) * * * 

(B) Is adjusted for the applicable 

geographic adjustment factors, 

including local cost variation based on 

the geographic classifications set forth at 

§ 412.503 and the applicable full 

hospital inpatient prospective payment 

system wage index value for 

nonreclassified hospitals and, 

applicable large urban location cost of 

living adjustment factors for LTCHs in 

Alaska and Hawaii, if applicable. 

* * * * * 

■ 6. Section 412.534 is amended by 

revising paragraphs (d)(1), (f)(2)(ii), and 

(f)(3)(ii) to read as follows: 

§ 412.534 Special payment provisions for 

long-term care hospitals within hospitals 

and satellites of long-term care hospitals. 

* * * * * 

(d) * * * 

(1) 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 in 

which the long-term care hospital or 

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. 

* * * * * 

(f) * * * 

(2) * * * 

(ii) Is adjusted for different area wage 

levels based on the geographic 

classifications set forth at § 412.503 and 

the applicable hospital inpatient 

prospective payment system laborrelated share, using the applicable 

hospital inpatient prospective payment 

system wage index value for nonreclassified hospitals. For LTCHs 

located in Alaska and Hawaii, this 

amount is also adjusted by the 

applicable hospital inpatient 

prospective payment system cost of 

living adjustment factors;* * * 

(3) * * * 

(ii) Is adjusted by the applicable 

geographic adjustment factors, 

including local cost variation based on 

the applicable geographic classifications 

set forth at § 412.503 and the applicable 

full hospital inpatient prospective 

payment system wage index value for 

nonreclassified hospitals, applicable 

large urban location and cost of living 

adjustment factors for LTCHs for Alaska 

and Hawaii, if applicable; 

* * * * * 

■ 7. Section 412.535 is amended by—

■ A. Revising the introductory text. 

■ B. Revising paragraph (a). 

■ C. Redesignating paragraph (b) as 

paragraph (d). 

■ D. Adding new paragraphs (b) and (c). 

The revisions and additions read as 

follows: 

§ 412.535 Publication of the Federal 

prospective payment rates. 

Except as specified in paragraph (b), 

CMS publishes information pertaining 

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26840 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

to the long-term care hospital 

prospective payment system effective 

for each annual update in the Federal 

Register. 

(a) For the period beginning on or 

after July 1, 2003 and ending on June 30, 

2008, information on the unadjusted 

Federal payment rates and a description 

of the methodology and data used to 

calculate the payment rates are 

published on or before May 1 prior to 

the start of each long-term care hospital 

prospective payment system rate year 

which begins July 1, unless for good 

cause it is published after May 1, but 

before June 1. 

(b) For the period beginning on July 

1, 2008 and ending on September 30, 

2009, information of the unadjusted 

Federal payment rates and a description 

of the methodology and data used to 

calculate the payment rates are 

published on or before May 1 prior to 

the start of the long-term care hospital 

prospective payment system rate year 

which begins July 1, unless for good 

cause it is published after May 1, but 

before June 1. 

(c) For the period beginning on or 

after October 1, 2009, information on 

the unadjusted Federal payment rates 

and a description of the methodology 

and data used to calculate the payment 

rates are published on or before August 

1 prior to the start of the Federal fiscal 

year which begins October 1, unless for 

good cause it is published after August 

1, but before September 1. 

* * * * * 

■ 8. Section 412.536 is amended by 

revising paragraphs (c)(1), (e)(2)(ii), and 

(e)(3)(ii) 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. 

* * * * * 

(c) Special treatment of rural 

hospitals. (1) Subject to paragraph (f) of 

this section, in the case of a long-term 

care hospital or long-term care hospital 

satellite facility that is located in a rural 

area as defined in § 412.503 that has a 

discharged Medicare inpatient 

population of whom more than 50 

percent were admitted to the long-term 

care hospital or long-term care hospital 

satellite facility from a hospital not colocated with the long-term care hospital 

or with the satellite of a long-term care 

hospital, payment for the Medicare 

discharges who are admitted from that 

hospital and who cause the long-term 

care hospital or satellite facility to 

exceed the 50 percent threshold for 

Medicare discharges is determined at 

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 

(e) of this section, to the amount that is 

otherwise payable under subpart A, 

§ 412.1(a). Payments for the remainder 

of the long-term care hospital’s or longterm care hospital satellite facility’s 

Medicare discharges admitted from that 

referring hospital are made under the 

rules in this subpart at § 412.500 

through § 412.541 with no adjustment 

under this section. 

* * * * * 

(e) * * * 

(2) * * * 

(ii) Is adjusted for different area wage 

levels based on the geographic 

classifications defined at § 412.503 and 

the applicable hospital inpatient 

prospective payment system laborrelated share, using the applicable 

hospital inpatient prospective payment 

system wage index value for 

nonreclassified hospitals. For long-term 

care hospitals located in Alaska and 

Hawaii, this amount is also adjusted by 

the applicable hospital inpatient 

prospective payment system cost of 

living adjustment factors; 

* * * * * 

(3) * * * 

(ii) Is adjusted by the applicable 

geographic adjustment factors, 

including local cost variation based on 

the applicable geographic classifications 

set forth at § 412.503 and the applicable 

full hospital inpatient prospective 

payment system wage index value for 

non-reclassified hospitals, applicable 

large urban location and cost of living 

adjustment factors for long-term care 

hospitals for Alaska and Hawaii, if 

applicable; 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: April 24, 2008. 

Kerry Weems, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: May 1, 2008. 

Michael O. Leavitt, 

Secretary. 

The following addendum will not 

appear in the Code of Federal 

Regulations. 

Addendum 

This addendum contains the tables 

referred to throughout the preamble to 

this final rule. The tables presented 

below are as follows: 

Table 1: Long-Term Care Hospital 

Wage Index for Urban Areas for 

Discharges Occurring from July 1, 2008 

through September 30, 2009. 

Table 2: Long-Term Care Hospital 

Wage Index for Rural Areas for 

Discharges Occurring from July 1, 2008 

through September 30, 2009. 

Table 3: FY 2008 MS-LTC-DRG 

Relative Weights, Geometric Average 

Length of Stay, and Short-Stay Outlier 

Threshold (effective for discharges 

occurring on or after July 1, 2008 

through September 30, 2009)). (Note: 

This table is the same information 

provided in Table 11 of the FY 2008 

IPPS final rule (72 FR 48143 through 

48157), which has been reprinted here 

for convenience.) 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

10180 ....... Abilene, TX ........................................................................................................................................................................ 0.7957 

Callahan County, TX.

Jones County, TX.

Taylor County, TX.

10380 ....... Aguadilla-Isabela-San Sebastia ́n, PR ............................................................................................................................... 0.3448 

Aguada Municipio, PR.

Aguadilla Municipio, PR.

An ̃asco Municipio, PR.

Isabela Municipio, PR.

Lares Municipio, PR.

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26841 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Moca Municipio, PR.

Rinco ́n Municipio, PR.

San Sebastia ́n Municipio, PR.

10420 ....... Akron, OH ......................................................................................................................................................................... 0.8794 

Portage County, OH.

Summit County, OH.

10500 ....... Albany, GA ........................................................................................................................................................................ 0.8514 

Baker County, GA.

Dougherty County, GA.

Lee County, GA.

Terrell County, GA.

Worth County, GA.

10580 ....... Albany-Schenectady-Troy, NY .......................................................................................................................................... 0.8588 

Albany County, NY.

Rensselaer County, NY.

Saratoga County, NY.

Schenectady County, NY.

Schoharie County, NY.

10740 ....... Albuquerque, NM .............................................................................................................................................................. 0.9554 

Bernalillo County, NM.

Sandoval County, NM.

Torrance County, NM.

Valencia County, NM.

10780 ....... Alexandria, LA ................................................................................................................................................................... 0.7979 

Grant Parish, LA.

Rapides Parish, LA.

10900 ....... Allentown-Bethlehem-Easton, PA-NJ ............................................................................................................................... 0.9865 

Warren County, NJ.

Carbon County, PA.

Lehigh County, PA.

Northampton County, PA.

11020 ....... Altoona, PA ....................................................................................................................................................................... 0.8618 

Blair County, PA.

11100 ....... Amarillo, TX ....................................................................................................................................................................... 0.9116 

Armstrong County, TX.

Carson County, TX.

Potter County, TX.

Randall County, TX.

11180 ....... Ames, IA ............................................................................................................................................................................ 1.0046 

Story County, IA.

11260 ....... Anchorage, AK .................................................................................................................................................................. 1.1913 

Anchorage Municipality, AK.

Matanuska-Susitna Borough, AK.

11300 ....... Anderson, IN ..................................................................................................................................................................... 0.8827 

Madison County, IN.

11340 ....... Anderson, SC .................................................................................................................................................................... 0.9086 

Anderson County, SC.

11460 ....... Ann Arbor, MI .................................................................................................................................................................... 1.0539 

Washtenaw County, MI.

11500 ....... Anniston-Oxford, AL .......................................................................................................................................................... 0.7926 

Calhoun County, AL.

11540 ....... Appleton, WI ...................................................................................................................................................................... 0.9598 

Calumet County, WI.

Outagamie County, WI.

11700 ....... Asheville, NC ..................................................................................................................................................................... 0.9185 

Buncombe County, NC.

Haywood County, NC.

Henderson County, NC.

Madison County, NC.

12020 ....... Athens-Clarke County, GA ................................................................................................................................................ 1.0517 

Clarke County, GA.

Madison County, GA.

Oconee County, GA.

Oglethorpe County, GA.

12060 ....... Atlanta-Sandy Springs-Marietta, GA ................................................................................................................................. 0.9828 

Barrow County, GA.

Bartow County, GA.

Butts County, GA.

Carroll County, GA.

Cherokee County, GA.

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26842 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Clayton County, GA.

Cobb County, GA.

Coweta County, GA.

Dawson County, GA.

DeKalb County, GA.

Douglas County, GA.

Fayette County, GA.

Forsyth County, GA.

Fulton County, GA.

Gwinnett County, GA.

Haralson County, GA.

Heard County, GA.

Henry County, GA.

Jasper County, GA.

Lamar County, GA.

Meriwether County, GA.

Newton County, GA.

Paulding County, GA.

Pickens County, GA.

Pike County, GA.

Rockdale County, GA.

Spalding County, GA.

Walton County, GA.

12100 ....... Atlantic City, NJ ................................................................................................................................................................. 1.2198 

Atlantic County, NJ.

12220 ....... Auburn-Opelika, AL ........................................................................................................................................................... 0.8090 

Lee County, AL.

12260 ....... Augusta-Richmond County, GA-SC .................................................................................................................................. 0.9645 

Burke County, GA.

Columbia County, GA.

McDuffie County, GA.

Richmond County, GA.

Aiken County, SC.

Edgefield County, SC.

12420 ....... Austin-Round Rock, TX .................................................................................................................................................... 0.9544 

Bastrop County, TX.

Caldwell County, TX.

Hays County, TX.

Travis County, TX.

Williamson County, TX.

12540 ....... Bakersfield, CA ................................................................................................................................................................. 1.1051 

Kern County, CA.

12580 ....... Baltimore-Towson, MD ...................................................................................................................................................... 1.0134 

Anne Arundel County, MD.

Baltimore County, MD.

Carroll County, MD.

Harford County, MD.

Howard County, MD.

Queen Anne’s County, MD.

Baltimore City, MD.

12620 ....... Bangor, ME ....................................................................................................................................................................... 0.9978 

Penobscot County, ME.

12700 ....... Barnstable Town, MA ........................................................................................................................................................ 1.2603 

Barnstable County, MA.

12940 ....... Baton Rouge, LA ............................................................................................................................................................... 0.8034 

Ascension Parish, LA.

East Baton Rouge Parish, LA.

East Feliciana Parish, LA.

Iberville Parish, LA.

Livingston Parish, LA.

Pointe Coupee Parish, LA.

St. Helena Parish, LA.

West Baton Rouge Parish, LA.

West Feliciana Parish, LA.

12980 ....... Battle Creek, MI ................................................................................................................................................................ 1.0179 

Calhoun County, MI.

13020 ....... Bay City, MI ....................................................................................................................................................................... 0.8897 

Bay County, MI.

13140 ....... Beaumont-Port Arthur, TX ................................................................................................................................................ 0.8531 

Hardin County, TX.

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26843 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Jefferson County, TX.

Orange County, TX.

13380 ....... Bellingham, WA ................................................................................................................................................................. 1.1474 

Whatcom County, WA.

13460 ....... Bend, OR .......................................................................................................................................................................... 1.0942 

Deschutes County, OR.

13644 ....... Bethesda-Gaithersburg-Frederick, MD ............................................................................................................................. 1.0511 

Frederick County, MD.

Montgomery County, MD.

13740 ....... Billings, MT ........................................................................................................................................................................ 0.8666 

Carbon County, MT.

Yellowstone County, MT.

13780 ....... Binghamton, NY ................................................................................................................................................................ 0.8949 

Broome County, NY.

Tioga County, NY.

13820 ....... Birmingham-Hoover, AL .................................................................................................................................................... 0.8898 

Bibb County, AL.

Blount County, AL.

Chilton County, AL.

Jefferson County, AL.

St. Clair County, AL.

Shelby County, AL.

Walker County, AL.

13900 ....... Bismarck, ND .................................................................................................................................................................... 0.7225 

Burleigh County, ND.

Morton County, ND.

13980 ....... Blacksburg-Christiansburg-Radford, VA ........................................................................................................................... 0.8192 

Giles County, VA.

Montgomery County, VA.

Pulaski County, VA.

Radford City, VA.

14020 ....... Bloomington, IN ................................................................................................................................................................. 0.8915 

Greene County, IN.

Monroe County, IN.

Owen County, IN.

14060 ....... Bloomington-Normal, IL .................................................................................................................................................... 0.9325 

McLean County, IL.

14260 ....... Boise City-Nampa, ID ....................................................................................................................................................... 0.9465 

Ada County, ID.

Boise County, ID.

Canyon County, ID.

Gem County, ID.

Owyhee County, ID.

14484 ....... Boston-Quincy, MA ........................................................................................................................................................... 1.1792 

Norfolk County, MA.

Plymouth County, MA.

Suffolk County, MA.

14500 ....... Boulder, CO ...................................................................................................................................................................... 1.0426 

Boulder County, CO.

14540 ....... Bowling Green, KY ............................................................................................................................................................ 0.8159 

Edmonson County, KY.

Warren County, KY.

14740 ....... Bremerton-Silverdale, WA ................................................................................................................................................. 1.0904 

Kitsap County, WA.

14860 ....... Bridgeport-Stamford-Norwalk, CT ..................................................................................................................................... 1.2735 

Fairfield County, CT.

15180 ....... Brownsville-Harlingen, TX ................................................................................................................................................. 0.8914 

Cameron County, TX.

15260 ....... Brunswick, GA ................................................................................................................................................................... 0.9475 

Brantley County, GA.

Glynn County, GA.

McIntosh County, GA.

15380 ....... Buffalo-Niagara Falls, NY ................................................................................................................................................. 0.9568 

Erie County, NY.

Niagara County, NY.

15500 ....... Burlington, NC ................................................................................................................................................................... 0.8747 

Alamance County, NC.

15540 ....... Burlington-South Burlington, VT ....................................................................................................................................... 0.9660 

Chittenden County, VT.

Franklin County, VT.

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26844 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Grand Isle County, VT.

15764 ....... Cambridge-Newton-Framingham, MA ............................................................................................................................... 1.1215 

Middlesex County, MA.

15804 ....... Camden, NJ ...................................................................................................................................................................... 1.0411 

Burlington County, NJ.

Camden County, NJ.

Gloucester County, NJ.

15940 ....... Canton-Massillon, OH ....................................................................................................................................................... 0.8935 

Carroll County, OH.

Stark County, OH.

15980 ....... Cape Coral-Fort Myers, FL ............................................................................................................................................... 0.9396 

Lee County, FL.

16180 ....... Carson City, NV ................................................................................................................................................................ 1.0003 

Carson City, NV.

16220 ....... Casper, WY ....................................................................................................................................................................... 0.9385 

Natrona County, WY.

16300 ....... Cedar Rapids, IA ............................................................................................................................................................... 0.8852 

Benton County, IA.

Jones County, IA.

Linn County, IA.

16580 ....... Champaign-Urbana, IL ...................................................................................................................................................... 0.9392 

Champaign County, IL.

Ford County, IL.

Piatt County, IL.

16620 ....... Charleston, WV ................................................................................................................................................................. 0.8289 

Boone County, WV.

Clay County, WV.

Kanawha County, WV.

Lincoln County, WV.

Putnam County, WV.

16700 ....... Charleston-North Charleston, SC ..................................................................................................................................... 0.9124 

Berkeley County, SC.

Charleston County, SC.

Dorchester County, SC.

16740 ....... Charlotte-Gastonia-Concord, NC-SC ................................................................................................................................ 0.9520 

Anson County, NC.

Cabarrus County, NC.

Gaston County, NC.

Mecklenburg County, NC.

Union County, NC.

York County, SC.

16820 ....... Charlottesville, VA ............................................................................................................................................................. 0.9277 

Albemarle County, VA.

Fluvanna County, VA.

Greene County, VA.

Nelson County, VA.

Charlottesville City, VA.

16860 ....... Chattanooga, TN-GA ........................................................................................................................................................ 0.8994 

Catoosa County, GA.

Dade County, GA.

Walker County, GA.

Hamilton County, TN.

Marion County, TN.

Sequatchie County, TN.

16940 ....... Cheyenne, WY .................................................................................................................................................................. 0.9308 

Laramie County, WY.

16974 ....... Chicago-Naperville-Joliet, IL ............................................................................................................................................. 1.0715 

Cook County, IL.

DeKalb County, IL.

DuPage County, IL.

Grundy County, IL.

Kane County, IL.

Kendall County, IL.

McHenry County, IL.

Will County, IL.

17020 ....... Chico, CA .......................................................................................................................................................................... 1.1290 

Butte County, CA.

17140 ....... Cincinnati-Middletown, OH-KY-IN ..................................................................................................................................... 0.9784 

Dearborn County, IN.

Franklin County, IN.

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26845 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Ohio County, IN.

Boone County, KY.

Bracken County, KY.

Campbell County, KY.

Gallatin County, KY.

Grant County, KY.

Kenton County, KY.

Pendleton County, KY.

Brown County, OH.

Butler County, OH.

Clermont County, OH.

Hamilton County, OH.

Warren County, OH.

17300 ....... Clarksville, TN-KY ............................................................................................................................................................. 0.8251 

Christian County, KY.

Trigg County, KY.

Montgomery County, TN.

Stewart County, TN.

17420 ....... Cleveland, TN ................................................................................................................................................................... 0.8052 

Bradley County, TN.

Polk County, TN.

17460 ....... Cleveland-Elyria-Mentor, OH ............................................................................................................................................ 0.9339 

Cuyahoga County, OH.

Geauga County, OH.

Lake County, OH.

Lorain County, OH.

Medina County, OH.

17660 ....... Coeur d’Alene, ID .............................................................................................................................................................. 0.9532 

Kootenai County, ID.

17780 ....... College Station-Bryan, TX ................................................................................................................................................ 0.9358 

Brazos County, TX.

Burleson County, TX.

Robertson County, TX.

17820 ....... Colorado Springs, CO ....................................................................................................................................................... 0.9719 

El Paso County, CO.

Teller County, CO.

17860 ....... Columbia, MO ................................................................................................................................................................... 0.8658 

Boone County, MO.

Howard County, MO.

17900 ....... Columbia, SC .................................................................................................................................................................... 0.8800 

Calhoun County, SC.

Fairfield County, SC.

Kershaw County, SC.

Lexington County, SC.

Richland County, SC.

Saluda County, SC.

17980 ....... Columbus, GA-AL ............................................................................................................................................................. 0.8729 

Russell County, AL.

Chattahoochee County, GA.

Harris County, GA.

Marion County, GA.

Muscogee County, GA.

18020 ....... Columbus, IN .................................................................................................................................................................... 0.9537 

Bartholomew County, IN.

18140 ....... Columbus, OH ................................................................................................................................................................... 1.0085 

Delaware County, OH.

Fairfield County, OH.

Franklin County, OH.

Licking County, OH.

Madison County, OH.

Morrow County, OH.

Pickaway County, OH.

Union County, OH.

18580 ....... Corpus Christi, TX ............................................................................................................................................................. 0.8588 

Aransas County, TX.

Nueces County, TX.

San Patricio County, TX.

18700 ....... Corvallis, OR ..................................................................................................................................................................... 1.0959 

Benton County, OR.

19060 ....... Cumberland, MD-WV ........................................................................................................................................................ 0.8294 

mstockstill on PROD1PC66 with RULES3

26846 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Allegany County, MD.

Mineral County, WV.

19124 ....... Dallas-Plano-Irving, TX ..................................................................................................................................................... 0.9915 

Collin County, TX.

Dallas County, TX.

Delta County, TX.

Denton County, TX.

Ellis County, TX.

Hunt County, TX.

Kaufman County, TX.

Rockwall County, TX.

19140 ....... Dalton, GA ......................................................................................................................................................................... 0.8760 

Murray County, GA.

Whitfield County, GA.

19180 ....... Danville, IL ........................................................................................................................................................................ 0.8957 

Vermilion County, IL.

19260 ....... Danville, VA ....................................................................................................................................................................... 0.8240 

Pittsylvania County, VA.

Danville City, VA.

19340 ....... Davenport-Moline-Rock Island, IA-IL ................................................................................................................................ 0.8830 

Henry County, IL.

Mercer County, IL.

Rock Island County, IL.

Scott County, IA.

19380 ....... Dayton, OH ....................................................................................................................................................................... 0.9190 

Greene County, OH.

Miami County, OH.

Montgomery County, OH.

Preble County, OH.

19460 ....... Decatur, AL ....................................................................................................................................................................... 0.7885 

Lawrence County, AL.

Morgan County, AL.

19500 ....... Decatur, IL ......................................................................................................................................................................... 0.8074 

Macon County, IL.

19660 ....... Deltona-Daytona Beach-Ormond Beach, FL .................................................................................................................... 0.9031 

Volusia County, FL.

19740 ....... Denver-Aurora, CO ........................................................................................................................................................... 1.0718 

Adams County, CO.

Arapahoe County, CO.

Broomfield County, CO.

Clear Creek County, CO.

Denver County, CO.

Douglas County, CO.

Elbert County, CO.

Gilpin County, CO.

Jefferson County, CO.

Park County, CO.

19780 ....... Des Moines-West Des Moines, IA .................................................................................................................................... 0.9226 

Dallas County, IA.

Guthrie County, IA.

Madison County, IA.

Polk County, IA.

Warren County, IA.

19804 ....... Detroit-Livonia-Dearborn, MI ............................................................................................................................................. 0.9999 

Wayne County, MI.

20020 ....... Dothan, AL ........................................................................................................................................................................ 0.7270 

Geneva County, AL.

Henry County, AL.

Houston County, AL.

20100 ....... Dover, DE .......................................................................................................................................................................... 1.0099 

Kent County, DE.

20220 ....... Dubuque, IA ...................................................................................................................................................................... 0.9058 

Dubuque County, IA.

20260 ....... Duluth, MN-WI ................................................................................................................................................................... 0.9975 

Carlton County, MN.

St. Louis County, MN.

Douglas County, WI.

20500 ....... Durham, NC ...................................................................................................................................................................... 0.9816 

Chatham County, NC.

Durham County, NC.

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26847 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Orange County, NC.

Person County, NC.

20740 ....... Eau Claire, WI ................................................................................................................................................................... 0.9475 

Chippewa County, WI.

Eau Claire County, WI.

20764 ....... Edison, NJ ......................................................................................................................................................................... 1.1181 

Middlesex County, NJ.

Monmouth County, NJ.

Ocean County, NJ.

Somerset County, NJ.

20940 ....... El Centro, CA .................................................................................................................................................................... 0.8914 

Imperial County, CA.

21060 ....... Elizabethtown, KY ............................................................................................................................................................. 0.8711 

Hardin County, KY.

Larue County, KY.

21140 ....... Elkhart-Goshen, IN ............................................................................................................................................................ 0.9611 

Elkhart County, IN.

21300 ....... Elmira, NY ......................................................................................................................................................................... 0.8264 

Chemung County, NY.

21340 ....... El Paso, TX ....................................................................................................................................................................... 0.8989 

El Paso County, TX.

21500 ....... Erie, PA ............................................................................................................................................................................. 0.8495 

Erie County, PA.

21660 ....... Eugene-Springfield, OR .................................................................................................................................................... 1.0932 

Lane County, OR.

21780 ....... Evansville, IN-KY .............................................................................................................................................................. 0.8662 

Gibson County, IN.

Posey County, IN.

Vanderburgh County, IN.

Warrick County, IN.

Henderson County, KY.

Webster County, KY.

21820 ....... Fairbanks, AK .................................................................................................................................................................... 1.1050 

Fairbanks North Star Borough, AK.

21940 ....... Fajardo, PR ....................................................................................................................................................................... 0.4375 

Ceiba Municipio, PR.

Fajardo Municipio, PR.

Luquillo Municipio, PR.

22020 ....... Fargo, ND-MN ................................................................................................................................................................... 0.8042 

Cass County, ND.

Clay County, MN.

22140 ....... Farmington, NM ................................................................................................................................................................ 0.9587 

San Juan County, NM.

22180 ....... Fayetteville, NC ................................................................................................................................................................. 0.9368 

Cumberland County, NC.

Hoke County, NC.

22220 ....... Fayetteville-Springdale-Rogers, AR-MO ........................................................................................................................... 0.8742 

Benton County, AR.

Madison County, AR.

Washington County, AR.

McDonald County, MO.

22380 ....... Flagstaff, AZ ...................................................................................................................................................................... 1.1687 

Coconino County, AZ.

22420 ....... Flint, MI ............................................................................................................................................................................. 1.1220 

Genesee County, MI.

22500 ....... Florence, SC ..................................................................................................................................................................... 0.8249 

Darlington County, SC.

Florence County, SC.

22520 ....... Florence-Muscle Shoals, AL ............................................................................................................................................. 0.7680 

Colbert County, AL.

Lauderdale County, AL.

22540 ....... Fond du Lac, WI ............................................................................................................................................................... 0.9667 

Fond du Lac County, WI.

22660 ....... Fort Collins-Loveland, CO ................................................................................................................................................. 0.9897 

Larimer County, CO.

22744 ....... Fort Lauderdale-Pompano Beach-Deerfield Beach, FL .................................................................................................... 1.0229 

Broward County, FL.

22900 ....... Fort Smith, AR-OK ............................................................................................................................................................ 0.7933 

Crawford County, AR.

Franklin County, AR.

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26848 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Sebastian County, AR.

Le Flore County, OK.

Sequoyah County, OK.

23020 ....... Fort Walton Beach-Crestview-Destin, FL .......................................................................................................................... 0.8743 

Okaloosa County, FL.

23060 ....... Fort Wayne, IN .................................................................................................................................................................. 0.9284 

Allen County, IN.

Wells County, IN.

Whitley County, IN.

23104 ....... Fort Worth-Arlington, TX ................................................................................................................................................... 0.9693 

Johnson County, TX.

Parker County, TX.

Tarrant County, TX.

Wise County, TX.

23420 ....... Fresno, CA ........................................................................................................................................................................ 1.0993 

Fresno County, CA.

23460 ....... Gadsden, AL ..................................................................................................................................................................... 0.8159 

Etowah County, AL.

23540 ....... Gainesville, FL .................................................................................................................................................................. 0.9196 

Alachua County, FL.

Gilchrist County, FL.

23580 ....... Gainesville, GA ................................................................................................................................................................. 0.9216 

Hall County, GA.

23844 ....... Gary, IN ............................................................................................................................................................................. 0.9224 

Jasper County, IN.

Lake County, IN.

Newton County, IN.

Porter County, IN.

24020 ....... Glens Falls, NY ................................................................................................................................................................. 0.8256 

Warren County, NY.

Washington County, NY.

24140 ....... Goldsboro, NC .................................................................................................................................................................. 0.9288 

Wayne County, NC.

24220 ....... Grand Forks, ND-MN ........................................................................................................................................................ 0.7881 

Polk County, MN.

Grand Forks County, ND.

24300 ....... Grand Junction, CO .......................................................................................................................................................... 0.9864 

Mesa County, CO.

24340 ....... Grand Rapids-Wyoming, MI .............................................................................................................................................. 0.9315 

Barry County, MI.

Ionia County, MI.

Kent County, MI.

Newaygo County, MI.

24500 ....... Great Falls, MT ................................................................................................................................................................. 0.8675 

Cascade County, MT.

24540 ....... Greeley, CO ...................................................................................................................................................................... 0.9658 

Weld County, CO.

24580 ....... Green Bay, WI .................................................................................................................................................................. 0.9727 

Brown County, WI.

Kewaunee County, WI.

Oconto County, WI.

24660 ....... Greensboro-High Point, NC .............................................................................................................................................. 0.9010 

Guilford County, NC.

Randolph County, NC.

Rockingham County, NC.

24780 ....... Greenville, NC ................................................................................................................................................................... 0.9402 

Greene County, NC.

Pitt County, NC.

24860 ....... Greenville-Mauldin-Easley, SC ......................................................................................................................................... 0.9860 

Greenville County, SC.

Laurens County, SC.

Pickens County, SC.

25020 ....... Guayama, PR .................................................................................................................................................................... 0.3064 

Arroyo Municipio, PR.

Guayama Municipio, PR.

Patillas Municipio, PR.

25060 ....... Gulfport-Biloxi, MS ............................................................................................................................................................ 0.8773 

Hancock County, MS.

Harrison County, MS.

Stone County, MS.

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26849 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

25180 ....... Hagerstown-Martinsburg, MD-WV .................................................................................................................................... 0.9013 

Washington County, MD.

Berkeley County, WV.

Morgan County, WV.

25260 ....... Hanford-Corcoran, CA ...................................................................................................................................................... 1.0499 

Kings County, CA.

25420 ....... Harrisburg-Carlisle, PA ..................................................................................................................................................... 0.9280 

Cumberland County, PA.

Dauphin County, PA.

Perry County, PA.

25500 ....... Harrisonburg, VA ............................................................................................................................................................... 0.8867 

Rockingham County, VA.

Harrisonburg City, VA.

25540 ....... Hartford-West Hartford-East Hartford, CT ........................................................................................................................ 1.0959 

Hartford County, CT.

Middlesex County, CT.

Tolland County, CT.

25620 ....... Hattiesburg, MS ................................................................................................................................................................ 0.7366 

Forrest County, MS.

Lamar County, MS.

Perry County, MS.

25860 ....... Hickory-Lenoir-Morganton, NC ......................................................................................................................................... 0.9028 

Alexander County, NC.

Burke County, NC.

Caldwell County, NC.

Catawba County, NC.

25980 ....... Hinesville-Fort Stewart, GA ............................................................................................................................................... 0.9187 

Liberty County, GA.

Long County, GA.

26100 ....... Holland-Grand Haven, MI ................................................................................................................................................. 0.9006 

Ottawa County, MI.

26180 ....... Honolulu, HI ...................................................................................................................................................................... 1.1556 

Honolulu County, HI.

26300 ....... Hot Springs, AR ................................................................................................................................................................ 0.9109 

Garland County, AR.

26380 ....... Houma-Bayou Cane-Thibodaux, LA ................................................................................................................................. 0.7892 

Lafourche Parish, LA.

Terrebonne Parish, LA.

26420 ....... Houston-Sugar Land-Baytown, TX ................................................................................................................................... 0.9939 

Austin County, TX.

Brazoria County, TX.

Chambers County, TX.

Fort Bend County, TX.

Galveston County, TX.

Harris County, TX.

Liberty County, TX.

Montgomery County, TX.

San Jacinto County, TX.

Waller County, TX.

26580 ....... Huntington-Ashland, WV-KY-OH ...................................................................................................................................... 0.9041 

Boyd County, KY.

Greenup County, KY.

Lawrence County, OH.

Cabell County, WV.

Wayne County, WV.

26620 ....... Huntsville, AL .................................................................................................................................................................... 0.9146 

Limestone County, AL.

Madison County, AL.

26820 ....... Idaho Falls, ID ................................................................................................................................................................... 0.9264 

Bonneville County, ID.

Jefferson County, ID.

26900 ....... Indianapolis-Carmel, IN ..................................................................................................................................................... 0.9844 

Boone County, IN.

Brown County, IN.

Hamilton County, IN.

Hancock County, IN.

Hendricks County, IN.

Johnson County, IN.

Marion County, IN.

Morgan County, IN.

mstockstill on PROD1PC66 with RULES3

26850 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Putnam County, IN.

Shelby County, IN.

26980 ....... Iowa City, IA ...................................................................................................................................................................... 0.9568 

Johnson County, IA.

Washington County, IA.

27060 ....... Ithaca, NY ......................................................................................................................................................................... 0.9630 

Tompkins County, NY.

27100 ....... Jackson, MI ....................................................................................................................................................................... 0.9329 

Jackson County, MI.

27140 ....... Jackson, MS ...................................................................................................................................................................... 0.8011 

Copiah County, MS.

Hinds County, MS.

Madison County, MS.

Rankin County, MS.

Simpson County, MS.

27180 ....... Jackson, TN ...................................................................................................................................................................... 0.8676 

Chester County, TN.

Madison County, TN.

27260 ....... Jacksonville, FL ................................................................................................................................................................. 0.9021 

Baker County, FL.

Clay County, FL.

Duval County, FL.

Nassau County, FL.

St. Johns County, FL.

27340 ....... Jacksonville, NC ................................................................................................................................................................ 0.8079 

Onslow County, NC.

27500 ....... Janesville, WI .................................................................................................................................................................... 0.9702 

Rock County, WI.

27620 ....... Jefferson City, MO ............................................................................................................................................................ 0.8478 

Callaway County, MO.

Cole County, MO.

Moniteau County, MO.

Osage County, MO.

27740 ....... Johnson City, TN .............................................................................................................................................................. 0.7677 

Carter County, TN.

Unicoi County, TN.

Washington County, TN.

27780 ....... Johnstown, PA .................................................................................................................................................................. 0.7543 

Cambria County, PA.

27860 ....... Jonesboro, AR .................................................................................................................................................................. 0.7790 

Craighead County, AR.

Poinsett County, AR.

27900 ....... Joplin, MO ......................................................................................................................................................................... 0.8951 

Jasper County, MO.

Newton County, MO.

28020 ....... Kalamazoo-Portage, MI .................................................................................................................................................... 1.0433 

Kalamazoo County, MI.

Van Buren County, MI.

28100 ....... Kankakee-Bradley, IL ........................................................................................................................................................ 1.0238 

Kankakee County, IL.

28140 ....... Kansas City, MO-KS ......................................................................................................................................................... 0.9504 

Franklin County, KS.

Johnson County, KS.

Leavenworth County, KS.

Linn County, KS.

Miami County, KS.

Wyandotte County, KS.

Bates County, MO.

Caldwell County, MO.

Cass County, MO.

Clay County, MO.

Clinton County, MO.

Jackson County, MO.

Lafayette County, MO.

Platte County, MO.

Ray County, MO.

28420 ....... Kennewick-Richland-Pasco, WA ....................................................................................................................................... 1.0075 

Benton County, WA.

Franklin County, WA.

28660 ....... Killeen-Temple-Fort Hood, TX .......................................................................................................................................... 0.8249 

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26851 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Bell County, TX.

Coryell County, TX.

Lampasas County, TX.

28700 ....... Kingsport-Bristol-Bristol, TN-VA ........................................................................................................................................ 0.7658 

Hawkins County, TN.

Sullivan County, TN.

Bristol City, VA.

Scott County, VA.

Washington County, VA.

28740 ....... Kingston, NY ..................................................................................................................................................................... 0.9556 

Ulster County, NY.

28940 ....... Knoxville, TN ..................................................................................................................................................................... 0.8036 

Anderson County, TN.

Blount County, TN.

Knox County, TN.

Loudon County, TN.

Union County, TN.

29020 ....... Kokomo, IN ....................................................................................................................................................................... 0.9591 

Howard County, IN.

Tipton County, IN.

29100 ....... La Crosse, WI-MN ............................................................................................................................................................ 0.9685 

Houston County, MN.

La Crosse County, WI.

29140 ....... Lafayette, IN ...................................................................................................................................................................... 0.8869 

Benton County, IN.

Carroll County, IN.

Tippecanoe County, IN.

29180 ....... Lafayette, LA ..................................................................................................................................................................... 0.8247 

Lafayette Parish, LA.

St. Martin Parish, LA.

29340 ....... Lake Charles, LA .............................................................................................................................................................. 0.7777 

Calcasieu Parish, LA.

Cameron Parish, LA.

29404 ....... Lake County-Kenosha County, IL-WI ............................................................................................................................... 1.0603 

Lake County, IL.

Kenosha County, WI.

29420 ....... Lake Havasu City-Kingman, AZ ........................................................................................................................................ 0.9333 

Mohave County, AZ.

29460 ....... Lakeland, FL ..................................................................................................................................................................... 0.8661 

Polk County, FL.

29540 ....... Lancaster, PA .................................................................................................................................................................... 0.9252 

Lancaster County, PA.

29620 ....... Lansing-East Lansing, MI ................................................................................................................................................. 1.0119 

Clinton County, MI.

Eaton County, MI.

Ingham County, MI.

29700 ....... Laredo, TX ........................................................................................................................................................................ 0.8093 

Webb County, TX.

29740 ....... Las Cruces, NM ................................................................................................................................................................ 0.8676 

Dona Ana County, NM.

29820 ....... Las Vegas-Paradise, NV ................................................................................................................................................... 1.1799 

Clark County, NV.

29940 ....... Lawrence, KS .................................................................................................................................................................... 0.8227 

Douglas County, KS.

30020 ....... Lawton, OK ....................................................................................................................................................................... 0.8025 

Comanche County, OK.

30140 ....... Lebanon, PA ..................................................................................................................................................................... 0.8192 

Lebanon County, PA.

30300 ....... Lewiston, ID-WA ............................................................................................................................................................... 0.9454 

Nez Perce County, ID.

Asotin County, WA.

30340 ....... Lewiston-Auburn, ME ........................................................................................................................................................ 0.9193 

Androscoggin County, ME.

30460 ....... Lexington-Fayette, KY ....................................................................................................................................................... 0.9191 

Bourbon County, KY.

Clark County, KY.

Fayette County, KY.

Jessamine County, KY.

Scott County, KY.

Woodford County, KY.

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26852 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

30620 ....... Lima, OH ........................................................................................................................................................................... 0.9424 

Allen County, OH.

30700 ....... Lincoln, NE ........................................................................................................................................................................ 1.0051 

Lancaster County, NE.

Seward County, NE.

30780 ....... Little Rock-North Little Rock-Conway, AR ........................................................................................................................ 0.8863 

Faulkner County, AR.

Grant County, AR.

Lonoke County, AR.

Perry County, AR.

Pulaski County, AR.

Saline County, AR.

30860 ....... Logan, UT-ID ..................................................................................................................................................................... 0.9183 

Franklin County, ID.

Cache County, UT.

30980 ....... Longview, TX .................................................................................................................................................................... 0.8717 

Gregg County, TX.

Rusk County, TX.

Upshur County, TX.

31020 ....... Longview, WA ................................................................................................................................................................... 1.0827 

Cowlitz County, WA.

31084 ....... Los Angeles-Long Beach-Glendale, CA ........................................................................................................................... 1.1771 

Los Angeles County, CA.

31140 ....... Louisville-Jefferson County, KY-IN ................................................................................................................................... 0.9065 

Clark County, IN.

Floyd County, IN.

Harrison County, IN.

Washington County, IN.

Bullitt County, KY.

Henry County, KY.

Jefferson County, KY.

Meade County, KY.

Nelson County, KY.

Oldham County, KY.

Shelby County, KY.

Spencer County, KY.

Trimble County, KY.

31180 ....... Lubbock, TX ...................................................................................................................................................................... 0.8680 

Crosby County, TX.

Lubbock County, TX.

31340 ....... Lynchburg, VA ................................................................................................................................................................... 0.8732 

Amherst County, VA.

Appomattox County, VA.

Bedford County, VA.

Campbell County, VA.

Bedford City, VA.

Lynchburg City, VA.

31420 ....... Macon, GA ........................................................................................................................................................................ 0.9541 

Bibb County, GA.

Crawford County, GA.

Jones County, GA.

Monroe County, GA.

Twiggs County, GA.

31460 ....... Madera, CA ....................................................................................................................................................................... 0.8069 

Madera County, CA.

31540 ....... Madison, WI ...................................................................................................................................................................... 1.0935 

Columbia County, WI.

Dane County, WI.

Iowa County, WI.

31700 ....... Manchester-Nashua, NH ................................................................................................................................................... 1.0273 

Hillsborough County, NH.

31900 ....... Mansfield, OH ................................................................................................................................................................... 0.9271 

Richland County, OH.

32420 ....... Mayagu ̈ez, PR ................................................................................................................................................................... 0.3711 

Hormigueros Municipio, PR.

Mayagu ̈ez Municipio, PR.

32580 ....... McAllen-Edinburg-Mission, TX .......................................................................................................................................... 0.9123 

Hidalgo County, TX.

32780 ....... Medford, OR ...................................................................................................................................................................... 1.0318 

Jackson County, OR.

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26853 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

32820 ....... Memphis, TN-MS-AR ........................................................................................................................................................ 0.9250 

Crittenden County, AR.

DeSoto County, MS.

Marshall County, MS.

Tate County, MS.

Tunica County, MS.

Fayette County, TN.

Shelby County, TN.

Tipton County, TN.

32900 ....... Merced, CA ....................................................................................................................................................................... 1.2120 

Merced County, CA.

33124 ....... Miami-Miami Beach-Kendall, FL ....................................................................................................................................... 1.0002 

Miami-Dade County, FL.

33140 ....... Michigan City-La Porte, IN ................................................................................................................................................ 0.8914 

LaPorte County, IN.

33260 ....... Midland, TX ....................................................................................................................................................................... 1.0017 

Midland County, TX.

33340 ....... Milwaukee-Waukesha-West Allis, WI ................................................................................................................................ 1.0214 

Milwaukee County, WI.

Ozaukee County, WI.

Washington County, WI.

Waukesha County, WI.

33460 ....... Minneapolis-St. Paul-Bloomington, MN-WI ....................................................................................................................... 1.1093 

Anoka County, MN.

Carver County, MN.

Chisago County, MN.

Dakota County, MN.

Hennepin County, MN.

Isanti County, MN.

Ramsey County, MN.

Scott County, MN.

Sherburne County, MN.

Washington County, MN.

Wright County, MN.

Pierce County, WI.

St. Croix County, WI.

33540 ....... Missoula, MT ..................................................................................................................................................................... 0.8953 

Missoula County, MT.

33660 ....... Mobile, AL ......................................................................................................................................................................... 0.8033 

Mobile County, AL.

33700 ....... Modesto, CA ..................................................................................................................................................................... 1.1962 

Stanislaus County, CA.

33740 ....... Monroe, LA ........................................................................................................................................................................ 0.7832 

Ouachita Parish, LA.

Union Parish, LA.

33780 ....... Monroe, MI ........................................................................................................................................................................ 0.9414 

Monroe County, MI.

33860 ....... Montgomery, AL ................................................................................................................................................................ 0.8088 

Autauga County, AL.

Elmore County, AL.

Lowndes County, AL.

Montgomery County, AL.

34060 ....... Morgantown, WV ............................................................................................................................................................... 0.8321 

Monongalia County, WV.

Preston County, WV.

34100 ....... Morristown, TN .................................................................................................................................................................. 0.7388 

Grainger County, TN.

Hamblen County, TN.

Jefferson County, TN.

34580 ....... Mount Vernon-Anacortes, WA .......................................................................................................................................... 1.0529 

Skagit County, WA.

34620 ....... Muncie, IN ......................................................................................................................................................................... 0.8214 

Delaware County, IN.

34740 ....... Muskegon-Norton Shores, MI ........................................................................................................................................... 0.9836 

Muskegon County, MI.

34820 ....... Myrtle Beach-Conway-North Myrtle Beach, SC ................................................................................................................ 0.8634 

Horry County, SC.

34900 ....... Napa, CA ........................................................................................................................................................................... 1.4476 

Napa County, CA.

34940 ....... Naples-Marco Island, FL ................................................................................................................................................... 0.9487 

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26854 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Collier County, FL.

34980 ....... Nashville-Davidson-Murfreesboro-Franklin, TN ................................................................................................................ 0.9689 

Cannon County, TN.

Cheatham County, TN.

Davidson County, TN.

Dickson County, TN.

Hickman County, TN.

Macon County, TN.

Robertson County, TN.

Rutherford County, TN.

Smith County, TN.

Sumner County, TN.

Trousdale County, TN.

Williamson County, TN.

Wilson County, TN.

35004 ....... Nassau-Suffolk, NY ........................................................................................................................................................... 1.2640 

Nassau County, NY.

Suffolk County, NY.

35084 ....... Newark-Union, NJ-PA ....................................................................................................................................................... 1.1862 

Essex County, NJ.

Hunterdon County, NJ.

Morris County, NJ.

Sussex County, NJ.

Union County, NJ.

Pike County, PA.

35300 ....... New Haven-Milford, CT ..................................................................................................................................................... 1.1871 

New Haven County, CT.

35380 ....... New Orleans-Metairie-Kenner, LA .................................................................................................................................... 0.8897 

Jefferson Parish, LA.

Orleans Parish, LA.

Plaquemines Parish, LA.

St. Bernard Parish, LA.

St. Charles Parish, LA.

St. John the Baptist Parish, LA.

St. Tammany Parish, LA.

35644 ....... New York-White Plains-Wayne, NY-NJ ............................................................................................................................ 1.3115 

Bergen County, NJ.

Hudson County, NJ.

Passaic County, NJ.

Bronx County, NY.

Kings County, NY.

New York County, NY.

Putnam County, NY.

Queens County, NY.

Richmond County, NY.

Rockland County, NY.

Westchester County, NY.

35660 ....... Niles-Benton Harbor, MI ................................................................................................................................................... 0.9141 

Berrien County, MI.

35980 ....... Norwich-New London, CT ................................................................................................................................................. 1.1432 

New London County, CT.

36084 ....... Oakland-Fremont-Hayward, CA ........................................................................................................................................ 1.5685 

Alameda County, CA.

Contra Costa County, CA.

36100 ....... Ocala, FL ........................................................................................................................................................................... 0.8627 

Marion County, FL.

36140 ....... Ocean City, NJ .................................................................................................................................................................. 1.0988 

Cape May County, NJ.

36220 ....... Odessa, TX ....................................................................................................................................................................... 1.0042 

Ector County, TX.

36260 ....... Ogden-Clearfield, UT ........................................................................................................................................................ 0.9000 

Davis County, UT.

Morgan County, UT.

Weber County, UT.

36420 ....... Oklahoma City, OK ........................................................................................................................................................... 0.8815 

Canadian County, OK.

Cleveland County, OK.

Grady County, OK.

Lincoln County, OK.

Logan County, OK.

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26855 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

McClain County, OK.

Oklahoma County, OK.

36500 ....... Olympia, WA ..................................................................................................................................................................... 1.1512 

Thurston County, WA.

36540 ....... Omaha-Council Bluffs, NE-IA ........................................................................................................................................... 0.9561 

Harrison County, IA.

Mills County, IA.

Pottawattamie County, IA.

Cass County, NE.

Douglas County, NE.

Sarpy County, NE.

Saunders County, NE.

Washington County, NE.

36740 ....... Orlando-Kissimmee, FL .................................................................................................................................................... 0.9226 

Lake County, FL.

Orange County, FL.

Osceola County, FL.

Seminole County, FL.

36780 ....... Oshkosh-Neenah, WI ........................................................................................................................................................ 0.9551 

Winnebago County, WI.

36980 ....... Owensboro, KY ................................................................................................................................................................. 0.8652 

Daviess County, KY.

Hancock County, KY.

McLean County, KY.

37100 ....... Oxnard-Thousand Oaks-Ventura, CA ............................................................................................................................... 1.1852 

Ventura County, CA.

37340 ....... Palm Bay-Melbourne-Titusville, FL ................................................................................................................................... 0.9325 

Brevard County, FL.

37380 ....... Palm Coast, FL ................................................................................................................................................................. 0.8945 

Flager County, FL.

37460 ....... Panama City-Lynn Haven, FL ........................................................................................................................................... 0.8313 

Bay County, FL.

37620 ....... Parkersburg-Marietta-Vienna, WV-OH .............................................................................................................................. 0.8105 

Washington County, OH.

Pleasants County, WV.

Wirt County, WV.

Wood County, WV.

37700 ....... Pascagoula, MS ................................................................................................................................................................ 0.8647 

George County, MS.

Jackson County, MS.

37764 ....... Peabody, MA ..................................................................................................................................................................... 1.0650 

Essex County, MA.

37860 ....... Pensacola-Ferry Pass-Brent, FL ....................................................................................................................................... 0.8281 

Escambia County, FL.

Santa Rosa County, FL.

37900 ....... Peoria, IL ........................................................................................................................................................................... 0.9299 

Marshall County, IL.

Peoria County, IL.

Stark County, IL.

Tazewell County, IL.

Woodford County, IL.

37964 ....... Philadelphia, PA ................................................................................................................................................................ 1.0925 

Bucks County, PA.

Chester County, PA.

Delaware County, PA.

Montgomery County, PA.

Philadelphia County, PA.

38060 ....... Phoenix-Mesa-Scottsdale, AZ ........................................................................................................................................... 1.0264 

Maricopa County, AZ.

Pinal County, AZ.

38220 ....... Pine Bluff, AR .................................................................................................................................................................... 0.7839 

Cleveland County, AR.

Jefferson County, AR.

Lincoln County, AR.

38300 ....... Pittsburgh, PA ................................................................................................................................................................... 0.8525 

Allegheny County, PA.

Armstrong County, PA.

Beaver County, PA.

Butler County, PA.

Fayette County, PA.

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26856 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Washington County, PA.

Westmoreland County, PA.

38340 ....... Pittsfield, MA ..................................................................................................................................................................... 1.0091 

Berkshire County, MA.

38540 ....... Pocatello, ID ...................................................................................................................................................................... 0.9465 

Bannock County, ID.

Power County, ID.

38660 ....... Ponce, PR ......................................................................................................................................................................... 0.4450 

Juana Dı ́az Municipio, PR.

Ponce Municipio, PR.

Villalba Municipio, PR.

38860 ....... Portland-South Portland-Biddeford, ME ............................................................................................................................ 1.0042 

Cumberland County, ME.

Sagadahoc County, ME.

York County, ME.

38900 ....... Portland-Vancouver-Beaverton, OR-WA .......................................................................................................................... 1.1498 

Clackamas County, OR.

Columbia County, OR.

Multnomah County, OR.

Washington County, OR.

Yamhill County, OR.

Clark County, WA.

Skamania County, WA.

38940 ....... Port St. Lucie, FL .............................................................................................................................................................. 1.0016 

Martin County, FL.

St. Lucie County, FL.

39100 ....... Poughkeepsie-Newburgh-Middletown, NY ........................................................................................................................ 1.0982 

Dutchess County, NY.

Orange County, NY.

39140 ....... Prescott, AZ ...................................................................................................................................................................... 1.0020 

Yavapai County, AZ.

39300 ....... Providence-New Bedford-Fall River, RI-MA ..................................................................................................................... 1.0574 

Bristol County, MA.

Bristol County, RI.

Kent County, RI.

Newport County, RI.

Providence County, RI.

Washington County, RI.

39340 ....... Provo-Orem, UT ................................................................................................................................................................ 0.9557 

Juab County, UT.

Utah County, UT.

39380 ....... Pueblo, CO ........................................................................................................................................................................ 0.8851 

Pueblo County, CO.

39460 ....... Punta Gorda, FL ............................................................................................................................................................... 0.9254 

Charlotte County, FL.

39540 ....... Racine, WI ......................................................................................................................................................................... 0.9498 

Racine County, WI.

39580 ....... Raleigh-Cary, NC .............................................................................................................................................................. 0.9839 

Franklin County, NC.

Johnston County, NC.

Wake County, NC.

39660 ....... Rapid City, SD .................................................................................................................................................................. 0.8811 

Meade County, SD.

Pennington County, SD.

39740 ....... Reading, PA ...................................................................................................................................................................... 0.9356 

Berks County, PA.

39820 ....... Redding, CA ...................................................................................................................................................................... 1.3541 

Shasta County, CA.

39900 ....... Reno-Sparks, NV .............................................................................................................................................................. 1.0715 

Storey County, NV.

Washoe County, NV.

40060 ....... Richmond, VA ................................................................................................................................................................... 0.9425 

Amelia County, VA.

Caroline County, VA.

Charles City County, VA.

Chesterfield County, VA.

Cumberland County, VA.

Dinwiddie County, VA.

Goochland County, VA.

Hanover County, VA.

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TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Henrico County, VA.

King and Queen County, VA.

King William County, VA.

Louisa County, VA.

New Kent County, VA.

Powhatan County, VA.

Prince George County, VA.

Sussex County, VA.

Colonial Heights City, VA.

Hopewell City, VA.

Petersburg City, VA.

Richmond City, VA.

40140 ....... Riverside-San Bernardino-Ontario, CA ............................................................................................................................. 1.1100 

Riverside County, CA.

San Bernardino County, CA.

40220 ....... Roanoke, VA ..................................................................................................................................................................... 0.8691 

Botetourt County, VA.

Craig County, VA.

Franklin County, VA.

Roanoke County, VA.

Roanoke City, VA.

Salem City, VA.

40340 ....... Rochester, MN .................................................................................................................................................................. 1.0755 

Dodge County, MN.

Olmsted County, MN.

Wabasha County, MN.

40380 ....... Rochester, NY ................................................................................................................................................................... 0.8858 

Livingston County, NY.

Monroe County, NY.

Ontario County, NY.

Orleans County, NY.

Wayne County, NY.

40420 ....... Rockford, IL ....................................................................................................................................................................... 0.9814 

Boone County, IL.

Winnebago County, IL.

40484 ....... Rockingham County-Strafford County, NH ....................................................................................................................... 1.0111 

Rockingham County, NH.

Strafford County, NH.

40580 ....... Rocky Mount, NC .............................................................................................................................................................. 0.9001 

Edgecombe County, NC.

Nash County, NC.

40660 ....... Rome, GA ......................................................................................................................................................................... 0.9042 

Floyd County, GA.

40900 ....... Sacramento—Arden-Arcade—Roseville, CA .................................................................................................................... 1.3505 

El Dorado County, CA.

Placer County, CA.

Sacramento County, CA.

Yolo County, CA.

40980 ....... Saginaw-Saginaw Township North, MI ............................................................................................................................. 0.8812 

Saginaw County, MI.

41060 ....... St. Cloud, MN .................................................................................................................................................................... 1.0549 

Benton County, MN.

Stearns County, MN.

41100 ....... St. George, UT .................................................................................................................................................................. 0.9358 

Washington County, UT.

41140 ....... St. Joseph, MO-KS ........................................................................................................................................................... 0.8762 

Doniphan County, KS.

Andrew County, MO.

Buchanan County, MO.

DeKalb County, MO.

41180 ....... St. Louis, MO-IL ................................................................................................................................................................ 0.9024 

Bond County, IL.

Calhoun County, IL.

Clinton County, IL.

Jersey County, IL.

Macoupin County, IL.

Madison County, IL.

Monroe County, IL.

St. Clair County, IL.

Crawford County, MO.

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26858 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Franklin County, MO.

Jefferson County, MO.

Lincoln County, MO.

St. Charles County, MO.

St. Louis County, MO.

Warren County, MO.

Washington County, MO.

St. Louis City, MO.

41420 ....... Salem, OR ......................................................................................................................................................................... 1.0572 

Marion County, OR.

Polk County, OR.

41500 ....... Salinas, CA ....................................................................................................................................................................... 1.4775 

Monterey County, CA.

41540 ....... Salisbury, MD .................................................................................................................................................................... 0.8994 

Somerset County, MD.

Wicomico County, MD.

41620 ....... Salt Lake City, UT ............................................................................................................................................................. 0.9399 

Salt Lake County, UT.

Summit County, UT.

Tooele County, UT.

41660 ....... San Angelo, TX ................................................................................................................................................................. 0.8579 

Irion County, TX.

Tom Green County, TX.

41700 ....... San Antonio, TX ................................................................................................................................................................ 0.8834 

Atascosa County, TX.

Bandera County, TX.

Bexar County, TX.

Comal County, TX.

Guadalupe County, TX.

Kendall County, TX.

Medina County, TX.

Wilson County, TX.

41740 ....... San Diego-Carlsbad-San Marcos, CA .............................................................................................................................. 1.1492 

San Diego County, CA.

41780 ....... Sandusky, OH ................................................................................................................................................................... 0.8822 

Erie County, OH.

41884 ....... San Francisco-San Mateo-Redwood City, CA .................................................................................................................. 1.5195 

Marin County, CA.

San Francisco County, CA.

San Mateo County, CA.

41900 ....... San Germa ́n-Cabo Rojo, PR ............................................................................................................................................ 0.4729 

Cabo Rojo Municipio, PR.

Lajas Municipio, PR.

Sabana Grande Municipio, PR.

San Germa ́n Municipio, PR.

41940 ....... San Jose-Sunnyvale-Santa Clara, CA .............................................................................................................................. 1.5735 

San Benito County, CA.

Santa Clara County, CA.

41980 ....... San Juan-Caguas-Guaynabo, PR .................................................................................................................................... 0.4528 

Aguas Buenas Municipio, PR.

Aibonito Municipio, PR.

Arecibo Municipio, PR.

Barceloneta Municipio, PR.

Barranquitas Municipio, PR.

Bayamo ́n Municipio, PR.

Caguas Municipio, PR.

Camuy Municipio, PR.

Cano ́vanas Municipio, PR.

Carolina Municipio, PR.

Catan ̃o Municipio, PR.

Cayey Municipio, PR.

Ciales Municipio, PR.

Cidra Municipio, PR.

Comer ́ıo Municipio, PR.

Corozal Municipio, PR.

Dorado Municipio, PR.

Florida Municipio, PR.

Guaynabo Municipio, PR.

Gurabo Municipio, PR.

Hatillo Municipio, PR.

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26859 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Humacao Municipio, PR.

Juncos Municipio, PR.

Las Piedras Municipio, PR.

Lo ́ıza Municipio, PR.

Manat ́ı Municipio, PR.

Maunabo Municipio, PR.

Morovis Municipio, PR.

Naguabo Municipio, PR.

Naranjito Municipio, PR.

Orocovis Municipio, PR.

Quebradillas Municipio, PR.

R ́ıo Grande Municipio, PR.

San Juan Municipio, PR.

San Lorenzo Municipio, PR.

Toa Alta Municipio, PR.

Toa Baja Municipio, PR.

Trujillo Alto Municipio, PR.

Vega Alta Municipio, PR.

Vega Baja Municipio, PR.

Yabucoa Municipio, PR.

42020 ....... San Luis Obispo-Paso Robles, CA ................................................................................................................................... 1.2488 

San Luis Obispo County, CA.

42044 ....... Santa Ana-Anaheim-Irvine, CA ......................................................................................................................................... 1.1766 

Orange County, CA.

42060 ....... Santa Barbara-Santa Maria-Goleta, CA ........................................................................................................................... 1.1714 

Santa Barbara County, CA.

42100 ....... Santa Cruz-Watsonville, CA ............................................................................................................................................. 1.6122 

Santa Cruz County, CA.

42140 ....... Santa Fe, NM .................................................................................................................................................................... 1.0734 

Santa Fe County, NM.

42220 ....... Santa Rosa-Petaluma, CA ................................................................................................................................................ 1.4696 

Sonoma County, CA.

42260 ....... Sarasota-Bradenton-Venice, FL ........................................................................................................................................ 0.9933 

Manatee County, FL.

Sarasota County, FL.

42340 ....... Savannah, GA ................................................................................................................................................................... 0.9131 

Bryan County, GA.

Chatham County, GA.

Effingham County, GA.

42540 ....... Scranton—Wilkes-Barre, PA ............................................................................................................................................. 0.8457 

Lackawanna County, PA.

Luzerne County, PA.

Wyoming County, PA.

42644 ....... Seattle-Bellevue-Everett, WA ............................................................................................................................................ 1.1572 

King County, WA.

Snohomish County, WA.

42680 ....... Sebastian-Vero Beach, FL ................................................................................................................................................ 0.9412 

Indian River County, FL.

43100 ....... Sheboygan, WI .................................................................................................................................................................. 0.8975 

Sheboygan County, WI.

43300 ....... Sherman-Denison, TX ....................................................................................................................................................... 0.8320 

Grayson County, TX.

43340 ....... Shreveport-Bossier City, LA .............................................................................................................................................. 0.8476 

Bossier Parish, LA.

Caddo Parish, LA.

De Soto Parish, LA.

43580 ....... Sioux City, IA-NE-SD ........................................................................................................................................................ 0.9251 

Woodbury County, IA.

Dakota County, NE.

Dixon County, NE.

Union County, SD.

43620 ....... Sioux Falls, SD ................................................................................................................................................................. 0.9563 

Lincoln County, SD.

McCook County, SD.

Minnehaha County, SD.

Turner County, SD.

43780 ....... South Bend-Mishawaka, IN-MI ......................................................................................................................................... 0.9617 

St. Joseph County, IN.

Cass County, MI.

43900 ....... Spartanburg, SC ............................................................................................................................................................... 0.9422 

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26860 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Spartanburg County, SC.

44060 ....... Spokane, WA .................................................................................................................................................................... 1.0455 

Spokane County, WA.

44100 ....... Springfield, IL .................................................................................................................................................................... 0.8944 

Menard County, IL.

Sangamon County, IL.

44140 ....... Springfield, MA .................................................................................................................................................................. 1.0366 

Franklin County, MA.

Hampden County, MA.

Hampshire County, MA.

44180 ....... Springfield, MO ................................................................................................................................................................. 0.8695 

Christian County, MO.

Dallas County, MO.

Greene County, MO.

Polk County, MO.

Webster County, MO.

44220 ....... Springfield, OH .................................................................................................................................................................. 0.8694 

Clark County, OH.

44300 ....... State College, PA .............................................................................................................................................................. 0.8768 

Centre County, PA.

44700 ....... Stockton, CA ..................................................................................................................................................................... 1.1855 

San Joaquin County, CA.

44940 ....... Sumter, SC ........................................................................................................................................................................ 0.8599 

Sumter County, SC.

45060 ....... Syracuse, NY .................................................................................................................................................................... 0.9910 

Madison County, NY.

Onondaga County, NY.

Oswego County, NY.

45104 ....... Tacoma, WA ..................................................................................................................................................................... 1.1055 

Pierce County, WA.

45220 ....... Tallahassee, FL ................................................................................................................................................................. 0.9025 

Gadsden County, FL.

Jefferson County, FL.

Leon County, FL.

Wakulla County, FL.

45300 ....... Tampa-St. Petersburg-Clearwater, FL .............................................................................................................................. 0.9020 

Hernando County, FL.

Hillsborough County, FL.

Pasco County, FL.

Pinellas County, FL.

45460 ....... Terre Haute, IN ................................................................................................................................................................. 0.8805 

Clay County, IN.

Sullivan County, IN.

Vermillion County, IN.

Vigo County, IN.

45500 ....... Texarkana, TX-Texarkana, AR ......................................................................................................................................... 0.7770 

Miller County, AR.

Bowie County, TX.

45780 ....... Toledo, OH ........................................................................................................................................................................ 0.9431 

Fulton County, OH.

Lucas County, OH.

Ottawa County, OH.

Wood County, OH.

45820 ....... Topeka, KS ....................................................................................................................................................................... 0.8538 

Jackson County, KS.

Jefferson County, KS.

Osage County, KS.

Shawnee County, KS.

Wabaunsee County, KS.

45940 ....... Trenton-Ewing, NJ ............................................................................................................................................................ 1.0699 

Mercer County, NJ.

46060 ....... Tucson, AZ ........................................................................................................................................................................ 0.9245 

Pima County, AZ.

46140 ....... Tulsa, OK .......................................................................................................................................................................... 0.8340 

Creek County, OK.

Okmulgee County, OK.

Osage County, OK.

Pawnee County, OK.

Rogers County, OK.

Tulsa County, OK.

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Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26861 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Wagoner County, OK.

46220 ....... Tuscaloosa, AL ................................................................................................................................................................. 0.8303 

Greene County, AL.

Hale County, AL.

Tuscaloosa County, AL.

46340 ....... Tyler, TX ............................................................................................................................................................................ 0.9114 

Smith County, TX.

46540 ....... Utica-Rome, NY ................................................................................................................................................................ 0.8486 

Herkimer County, NY.

Oneida County, NY.

46660 ....... Valdosta, GA ..................................................................................................................................................................... 0.8098 

Brooks County, GA.

Echols County, GA.

Lanier County, GA.

Lowndes County, GA.

46700 ....... Vallejo-Fairfield, CA .......................................................................................................................................................... 1.4666 

Solano County, CA.

47020 ....... Victoria, TX ........................................................................................................................................................................ 0.8302 

Calhoun County, TX.

Goliad County, TX.

Victoria County, TX.

47220 ....... Vineland-Millville-Bridgeton, NJ ........................................................................................................................................ 1.0133 

Cumberland County, NJ.

47260 ....... Virginia Beach-Norfolk-Newport News, VA-NC ................................................................................................................ 0.8818 

Currituck County, NC.

Gloucester County, VA.

Isle of Wight County, VA.

James City County, VA.

Mathews County, VA.

Surry County, VA.

York County, VA.

Chesapeake City, VA.

Hampton City, VA.

Newport News City, VA.

Norfolk City, VA.

Poquoson City, VA.

Portsmouth City, VA.

Suffolk City, VA.

Virginia Beach City, VA.

Williamsburg City, VA.

47300 ....... Visalia-Porterville, CA ....................................................................................................................................................... 1.0091 

Tulare County, CA.

47380 ....... Waco, TX .......................................................................................................................................................................... 0.8518 

McLennan County, TX.

47580 ....... Warner Robins, GA ........................................................................................................................................................... 0.9128 

Houston County, GA.

47644 ....... Warren-Troy-Farmington Hills, MI ..................................................................................................................................... 1.0001 

Lapeer County, MI.

Livingston County, MI.

Macomb County, MI.

Oakland County, MI.

St. Clair County, MI.

47894 ....... Washington-Arlington-Alexandria, DC-VA-MD-WV ........................................................................................................... 1.0855 

District of Columbia, DC.

Calvert County, MD.

Charles County, MD.

Prince George’s County, MD.

Arlington County, VA.

Clarke County, VA.

Fairfax County, VA.

Fauquier County, VA.

Loudoun County, VA.

Prince William County, VA.

Spotsylvania County, VA.

Stafford County, VA.

Warren County, VA.

Alexandria City, VA.

Fairfax City, VA.

Falls Church City, VA.

Fredericksburg City, VA.

mstockstill on PROD1PC66 with RULES3

26862 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 1.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR URBAN AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009—Continued 

CBSA code Urban area 

(constituent counties) 

Proposed 

wage index 

Manassas City, VA.

Manassas Park City, VA.

Jefferson County, WV.

47940 ....... Waterloo-Cedar Falls, IA ................................................................................................................................................... 0.8519 

Black Hawk County, IA.

Bremer County, IA.

Grundy County, IA.

48140 ....... Wausau, WI ....................................................................................................................................................................... 0.9679 

Marathon County, WI.

48260 ....... Weirton-Steubenville, WV-OH ........................................................................................................................................... 0.7924 

Jefferson County, OH.

Brooke County, WV.

Hancock County, WV.

48300 ....... Wenatchee, WA ................................................................................................................................................................ 1.1469 

Chelan County, WA.

Douglas County, WA.

48424 ....... West Palm Beach-Boca Raton-Boynton Beach, FL ......................................................................................................... 0.9728 

Palm Beach County, FL.

48540 ....... Wheeling, WV-OH ............................................................................................................................................................. 0.6961 

Belmont County, OH.

Marshall County, WV.

Ohio County, WV.

48620 ....... Wichita, KS ........................................................................................................................................................................ 0.9062 

Butler County, KS.

Harvey County, KS.

Sedgwick County, KS.

Sumner County, KS.

48660 ....... Wichita Falls, TX ............................................................................................................................................................... 0.7920 

Archer County, TX.

Clay County, TX.

Wichita County, TX.

48700 ....... Williamsport, PA ................................................................................................................................................................ 0.8043 

Lycoming County, PA.

48864 ....... Wilmington, DE-MD-NJ ..................................................................................................................................................... 1.0824 

New Castle County, DE.

Cecil County, MD.

Salem County, NJ.

48900 ....... Wilmington, NC ................................................................................................................................................................. 0.9410 

Brunswick County, NC.

New Hanover County, NC.

Pender County, NC.

49020 ....... Winchester, VA-WV .......................................................................................................................................................... 0.9913 

Frederick County, VA.

Winchester City, VA.

Hampshire County, WV.

49180 ....... Winston-Salem, NC ........................................................................................................................................................... 0.9118 

Davie County, NC.

Forsyth County, NC.

Stokes County, NC.

Yadkin County, NC.

49340 ....... Worcester, MA .................................................................................................................................................................. 1.1287 

Worcester County, MA.

49420 ....... Yakima, WA ...................................................................................................................................................................... 1.0267 

Yakima County, WA.

49500 ....... Yauco, PR ......................................................................................................................................................................... 0.3284 

Gua ́nica Municipio, PR.

Guayanilla Municipio, PR.

Pen ̃uelas Municipio, PR.

Yauco Municipio, PR.

49620 ....... York-Hanover, PA ............................................................................................................................................................. 0.9359 

York County, PA.

49660 ....... Youngstown-Warren-Boardman, OH-PA .......................................................................................................................... 0.9002 

Mahoning County, OH.

Trumbull County, OH.

Mercer County, PA.

49700 ....... Yuba City, CA ................................................................................................................................................................... 1.0756 

Sutter County, CA.

Yuba County, CA.

49740 ....... Yuma, AZ .......................................................................................................................................................................... 0.9488 

Yuma County, AZ.

mstockstill on PROD1PC66 with RULES3

Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26863 

TABLE 2.—LONG-TERM CARE HOSPITAL WAGE INDEX FOR RURAL AREAS FOR DISCHARGES OCCURRING FROM JULY 1, 

2008 THROUGH SEPTEMBER 30, 2009 

CBSA code Nonurban area Proposed 

wage index 

01 ............. Alabama ............................................................................................................................................................................ 0.7533 

02 ............. Alaska ................................................................................................................................................................................ 1.2109 

03 ............. Arizona .............................................................................................................................................................................. 0.8479 

04 ............. Arkansas ........................................................................................................................................................................... 0.7371 

05 ............. California ........................................................................................................................................................................... 1.2023 

06 ............. Colorado ............................................................................................................................................................................ 0.9704 

07 ............. Connecticut ....................................................................................................................................................................... 1.1119 

08 ............. Delaware ........................................................................................................................................................................... 0.9727 

10 ............. Florida ............................................................................................................................................................................... 0.8465 

11 ............. Georgia .............................................................................................................................................................................. 0.7659 

12 ............. Hawaii ................................................................................................................................................................................ 1.0612 

13 ............. Idaho ................................................................................................................................................................................. 0.7920 

14 ............. Illinois ................................................................................................................................................................................ 0.8335 

15 ............. Indiana ............................................................................................................................................................................... 0.8576 

16 ............. Iowa ................................................................................................................................................................................... 0.8566 

17 ............. Kansas .............................................................................................................................................................................. 0.7981 

18 ............. Kentucky ............................................................................................................................................................................ 0.7793 

19 ............. Louisiana ........................................................................................................................................................................... 0.7373 

20 ............. Maine ................................................................................................................................................................................. 0.8476 

21 ............. Maryland ............................................................................................................................................................................ 0.9034 

22 ............. Massachusetts .................................................................................................................................................................. 1.1589 

23 ............. Michigan ............................................................................................................................................................................ 0.8953 

24 ............. Minnesota .......................................................................................................................................................................... 0.9079 

25 ............. Mississippi ......................................................................................................................................................................... 0.7700 

26 ............. Missouri ............................................................................................................................................................................. 0.7930 

27 ............. Montana ............................................................................................................................................................................ 0.8379 

28 ............. Nebraska ........................................................................................................................................................................... 0.8849 

29 ............. Nevada .............................................................................................................................................................................. 0.9272 

30 ............. New Hampshire ................................................................................................................................................................. 1.0470 

31 ............. New Jersey*.

32 ............. New Mexico ....................................................................................................................................................................... 0.8940 

33 ............. New York ........................................................................................................................................................................... 0.8268 

34 ............. North Carolina ................................................................................................................................................................... 0.8603 

35 ............. North Dakota ..................................................................................................................................................................... 0.7182 

36 ............. Ohio ................................................................................................................................................................................... 0.8714 

37 ............. Oklahoma .......................................................................................................................................................................... 0.7492 

38 ............. Oregon .............................................................................................................................................................................. 0.9906 

39 ............. Pennsylvania ..................................................................................................................................................................... 0.8385 

41 ............. Rhode Island* ....................................................................................................................................................................

42 ............. South Carolina .................................................................................................................................................................. 0.8656 

43 ............. South Dakota .................................................................................................................................................................... 0.8549 

44 ............. Tennessee ......................................................................................................................................................................... 0.7723 

45 ............. Texas ................................................................................................................................................................................. 0.7968 

46 ............. Utah ................................................................................................................................................................................... 0.8116 

47 ............. Vermont ............................................................................................................................................................................. 0.9919 

49 ............. Virginia .............................................................................................................................................................................. 0.7896 

50 ............. Washington ....................................................................................................................................................................... 1.0259 

51 ............. West Virginia ..................................................................................................................................................................... 0.7454 

52 ............. Wisconsin .......................................................................................................................................................................... 0.9667 

53 ............. Wyoming ........................................................................................................................................................................... 0.9287 

* All counties within the State are classified as urban. 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

001 ........... Heart transplant or implant of heart assist system w MCC .............................................. 0.0000 0.0 0.0 

002 ........... Heart transplant or implant of heart assist system w/o MCC ........................................... 0.0000 0.0 0.0 

003 ........... ECMO or trach w MV 96+ hrs or PDX exc face, mouth & neck w maj O.R .................... 4.2380 64.3 53.6 

004 ........... Trach w MV 96+ hrs or PDX exc face, mouth & neck w/o maj O.R ................................ 3.0249 46.7 38.9 

005 ........... Liver transplant w MCC or intestinal transplant ................................................................ 0.0000 0.0 0.0 

006 ........... Liver transplant w/o MCC .................................................................................................. 0.0000 0.0 0.0 

007 ........... Lung transplant .................................................................................................................. 0.0000 0.0 0.0 

008 ........... Simultaneous pancreas/kidney transplant ......................................................................... 0.0000 0.0 0.0 

009 ........... Bone marrow transplant .................................................................................................... 1.1417 29.0 24.2 

mstockstill on PROD1PC66 with RULES3

26864 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

010 ........... Pancreas transplant ........................................................................................................... 1.1417 29.0 24.2 

011 ........... Tracheostomy for face, mouth & neck diagnoses w MCC ............................................... 1.5545 35.2 29.3 

012 ........... Tracheostomy for face, mouth & neck diagnoses w CC .................................................. 1.5545 35.2 29.3 

013 ........... Tracheostomy for face, mouth & neck diagnoses w/o CC/MCC ...................................... 1.5545 35.2 29.3 

020 ........... Intracranial vascular procedures w PDX hemorrhage w MCC ......................................... 1.5545 35.2 29.3 

021 ........... Intracranial vascular procedures w PDX hemorrhage w CC ............................................ 0.5472 20.3 16.9 

022 ........... Intracranial vascular procedures w PDX hemorrhage w/o CC/MCC ................................ 0.5472 20.3 16.9 

023 ........... Cranio w major dev impl/acute complex CNS PDX w MCC or chemo implant ............... 1.5545 35.2 29.3 

024 ........... Cranio w major dev impl/acute complex CNS PDX w/o MCC ......................................... 0.5472 20.3 16.9 

025 ........... Craniotomy & endovascular intracranial procedures w MCC ........................................... 1.5545 35.2 29.3 

026 ........... Craniotomy & endovascular intracranial procedures w CC .............................................. 1.5545 35.2 29.3 

027 ........... Craniotomy & endovascular intracranial procedures w/o CC/MCC .................................. 1.5545 35.2 29.3 

028 ........... Spinal procedures w MCC ................................................................................................ 1.1417 29.0 24.2 

029 ........... Spinal procedures w CC or spinal neurostimulators ......................................................... 1.1417 29.0 24.2 

030 ........... Spinal procedures w/o CC/MCC ....................................................................................... 0.5472 20.3 16.9 

031 ........... Ventricular shunt procedures w MCC ............................................................................... 1.5545 35.2 29.3 

032 ........... Ventricular shunt procedures w CC .................................................................................. 0.5472 20.3 16.9 

033 ........... Ventricular shunt procedures w/o CC/MCC ...................................................................... 0.5472 20.3 16.9 

034 ........... Carotid artery stent procedure w MCC ............................................................................. 1.5545 35.2 29.3 

035 ........... Carotid artery stent procedure w CC ................................................................................ 1.1417 29.0 24.2 

036 ........... Carotid artery stent procedure w/o CC/MCC .................................................................... 1.1417 29.0 24.2 

037 ........... Extracranial procedures w MCC ....................................................................................... 1.5545 35.2 29.3 

038 ........... Extracranial procedures w CC .......................................................................................... 1.1417 29.0 24.2 

039 ........... Extracranial procedures w/o CC/MCC .............................................................................. 1.1417 29.0 24.2 

040 ........... Periph/cranial nerve & other nerv syst proc w MCC ........................................................ 1.2704 36.2 30.2 

041 ........... Periph/cranial nerve & other nerv syst proc w CC or periph neurostim ........................... 1.0810 34.3 28.6 

042 ........... Periph/cranial nerve & other nerv syst proc w/o CC/MCC ............................................... 0.7305 22.9 19.1 

052 ........... Spinal disorders & injuries w CC/MCC ............................................................................. 1.0629 32.3 26.9 

053 ........... Spinal disorders & injuries w/o CC/MCC .......................................................................... 1.0629 32.3 26.9 

054 ........... Nervous system neoplasms w MCC ................................................................................. 0.7205 23.6 19.7 

055 ........... Nervous system neoplasms w/o MCC .............................................................................. 0.6779 22.0 18.3 

056 ........... Degenerative nervous system disorders w MCC .............................................................. 0.7407 26.4 22.0 

057 ........... Degenerative nervous system disorders w/o MCC ........................................................... 0.6309 24.4 20.3 

058 ........... Multiple sclerosis & cerebellar ataxia w MCC ................................................................... 0.7305 22.9 19.1 

059 ........... Multiple sclerosis & cerebellar ataxia w CC ...................................................................... 0.5595 22.6 18.8 

060 ........... Multiple sclerosis & cerebellar ataxia w/o CC/MCC ......................................................... 0.5472 20.3 16.9 

061 ........... Acute ischemic stroke w use of thrombolytic agent w MCC ............................................ 0.7897 24.2 20.2 

062 ........... Acute ischemic stroke w use of thrombolytic agent w CC ............................................... 0.6563 22.7 18.9 

063 ........... Acute ischemic stroke w use of thrombolytic agent w/o CC/MCC ................................... 0.5472 20.3 16.9 

064 ........... Intracranial hemorrhage or cerebral infarction w MCC ..................................................... 0.7746 25.1 20.9 

065 ........... Intracranial hemorrhage or cerebral infarction w CC ........................................................ 0.6691 23.3 19.4 

066 ........... Intracranial hemorrhage or cerebral infarction w/o CC/MCC ............................................ 0.5472 20.3 16.9 

067 ........... Nonspecific cva & precerebral occlusion w/o infarct w MCC ........................................... 0.5472 20.3 16.9 

068 ........... Nonspecific cva & precerebral occlusion w/o infarct w/o MCC ........................................ 0.5472 20.3 16.9 

069 ........... Transient ischemia ............................................................................................................ 0.5472 20.3 16.9 

070 ........... Nonspecific cerebrovascular disorders w MCC ................................................................ 0.7897 24.2 20.2 

071 ........... Nonspecific cerebrovascular disorders w CC ................................................................... 0.6563 22.7 18.9 

072 ........... Nonspecific cerebrovascular disorders w/o CC/MCC ....................................................... 0.5472 20.3 16.9 

073 ........... Cranial & peripheral nerve disorders w MCC ................................................................... 0.7849 25.6 21.3 

074 ........... Cranial & peripheral nerve disorders w/o MCC ................................................................ 0.6260 23.4 19.5 

075 ........... Viral meningitis w CC/MCC ............................................................................................... 0.7305 22.9 19.1 

076 ........... Viral meningitis w/o CC/MCC ............................................................................................ 0.5472 20.3 16.9 

077 ........... Hypertensive encephalopathy w MCC .............................................................................. 0.7305 22.9 19.1 

078 ........... Hypertensive encephalopathy w CC ................................................................................. 0.7305 22.9 19.1 

079 ........... Hypertensive encephalopathy w/o CC/MCC ..................................................................... 0.5472 20.3 16.9 

080 ........... Nontraumatic stupor & coma w MCC ............................................................................... 0.6312 24.6 20.5 

081 ........... Nontraumatic stupor & coma w/o MCC ............................................................................ 0.5618 23.1 19.3 

082 ........... Traumatic stupor & coma, coma >1 hr w MCC ................................................................ 0.8864 29.5 24.6 

083 ........... Traumatic stupor & coma, coma >1 hr w CC ................................................................... 0.7305 22.9 19.1 

084 ........... Traumatic stupor & coma, coma >1 hr w/o CC/MCC ....................................................... 0.7305 22.9 19.1 

085 ........... Traumatic stupor & coma, coma <1 hr w MCC ................................................................ 0.9044 28.3 23.6 

086 ........... Traumatic stupor & coma, coma <1 hr w CC ................................................................... 0.7437 25.1 20.9 

087 ........... Traumatic stupor & coma, coma <1 hr w/o CC/MCC ....................................................... 0.6361 20.4 17.0 

088 ........... Concussion w MCC ........................................................................................................... 1.1417 29.0 24.2 

089 ........... Concussion w CC .............................................................................................................. 1.1417 29.0 24.2 

090 ........... Concussion w/o CC/MCC .................................................................................................. 1.1417 29.0 24.2 

091 ........... Other disorders of nervous system w MCC ...................................................................... 0.8019 25.6 21.3 

092 ........... Other disorders of nervous system w CC ......................................................................... 0.6704 22.0 18.3 

mstockstill on PROD1PC66 with RULES3

Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26865 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

093 ........... Other disorders of nervous system w/o CC/MCC ............................................................. 0.5811 20.1 16.8 

094 ........... Bacterial & tuberculous infections of nervous system w MCC ......................................... 1.0328 27.9 23.3 

095 ........... Bacterial & tuberculous infections of nervous system w CC ............................................ 0.9306 27.0 22.5 

096 ........... Bacterial & tuberculous infections of nervous system w/o CC/MCC ................................ 0.9306 27.0 22.5 

097 ........... Non-bacterial infect of nervous sys exc viral meningitis w MCC ...................................... 0.9289 26.8 22.3 

098 ........... Non-bacterial infect of nervous sys exc viral meningitis w CC ......................................... 0.8629 22.7 18.9 

099 ........... Non-bacterial infect of nervous sys exc viral meningitis w/o CC/MCC ............................ 0.7305 22.9 19.1 

100 ........... Seizures w MCC ................................................................................................................ 0.7904 26.5 22.1 

101 ........... Seizures w/o MCC ............................................................................................................. 0.6177 21.4 17.8 

102 ........... Headaches w MCC ........................................................................................................... 0.8249 25.0 20.8 

103 ........... Headaches w/o MCC ........................................................................................................ 0.8249 25.0 20.8 

113 ........... Orbital procedures w CC/MCC .......................................................................................... 0.7305 22.9 19.1 

114 ........... Orbital procedures w/o CC/MCC ....................................................................................... 0.7305 22.9 19.1 

115 ........... Extraocular procedures except orbit ................................................................................. 0.8249 25.0 20.8 

116 ........... Intraocular procedures w CC/MCC ................................................................................... 0.8249 25.0 20.8 

117 ........... Intraocular procedures w/o CC/MCC ................................................................................ 0.8249 25.0 20.8 

121 ........... Acute major eye infections w CC/MCC ............................................................................. 0.7305 22.9 19.1 

122 ........... Acute major eye infections w/o CC/MCC .......................................................................... 0.5472 20.3 16.9 

123 ........... Neurological eye disorders ................................................................................................ 0.5472 20.3 16.9 

124 ........... Other disorders of the eye w MCC ................................................................................... 1.1417 29.0 24.2 

125 ........... Other disorders of the eye w/o MCC ................................................................................ 0.8249 25.0 20.8 

129 ........... Major head & neck procedures w CC/MCC or major device ........................................... 1.1977 26.4 22.0 

130 ........... Major head & neck procedures w/o CC/MCC ................................................................... 0.7305 22.9 19.1 

131 ........... Cranial/facial procedures w CC/MCC ............................................................................... 1.5545 35.2 29.3 

132 ........... Cranial/facial procedures w/o CC/MCC ............................................................................ 1.5545 35.2 29.3 

133 ........... Other ear, nose, mouth & throat O.R. procedures w CC/MCC ........................................ 0.7305 22.9 19.1 

134 ........... Other ear, nose, mouth & throat O.R. procedures w/o CC/MCC ..................................... 0.7305 22.9 19.1 

135 ........... Sinus & mastoid procedures w CC/MCC .......................................................................... 0.7305 22.9 19.1 

136 ........... Sinus & mastoid procedures w/o CC/MCC ....................................................................... 0.7305 22.9 19.1 

137 ........... Mouth procedures w CC/MCC .......................................................................................... 1.5545 35.2 29.3 

138 ........... Mouth procedures w/o CC/MCC ....................................................................................... 1.5545 35.2 29.3 

139 ........... Salivary gland procedures ................................................................................................. 1.5545 35.2 29.3 

146 ........... Ear, nose, mouth & throat malignancy w MCC ................................................................ 1.1977 26.4 22.0 

147 ........... Ear, nose, mouth & throat malignancy w CC ................................................................... 1.0416 24.9 20.8 

148 ........... Ear, nose, mouth & throat malignancy w/o CC/MCC ....................................................... 0.7305 22.9 19.1 

149 ........... Dysequilibrium ................................................................................................................... 0.5472 20.3 16.9 

150 ........... Epistaxis w MCC ............................................................................................................... 0.7305 22.9 19.1 

151 ........... Epistaxis w/o MCC ............................................................................................................ 0.7305 22.9 19.1 

152 ........... Otitis media & URI w MCC ............................................................................................... 0.7305 22.9 19.1 

153 ........... Otitis media & URI w/o MCC ............................................................................................ 0.7305 22.9 19.1 

154 ........... Nasal trauma & deformity w MCC .................................................................................... 0.7703 21.0 17.5 

155 ........... Nasal trauma & deformity w CC ....................................................................................... 0.7703 21.0 17.5 

156 ........... Nasal trauma & deformity w/o CC/MCC ........................................................................... 0.7305 22.9 19.1 

157 ........... Dental & Oral Diseases w MCC ........................................................................................ 0.8249 25.0 20.8 

158 ........... Dental & Oral Diseases w CC ........................................................................................... 0.8249 25.0 20.8 

159 ........... Dental & Oral Diseases w/o CC/MCC .............................................................................. 0.5472 20.3 16.9 

163 ........... Major chest procedures w MCC ........................................................................................ 2.2157 39.7 33.1 

164 ........... Major chest procedures w CC ........................................................................................... 1.5545 35.2 29.3 

165 ........... Major chest procedures w/o CC/MCC .............................................................................. 1.5545 35.2 29.3 

166 ........... Other resp system O.R. procedures w MCC .................................................................... 2.4392 42.3 35.3 

167 ........... Other resp system O.R. procedures w CC ....................................................................... 2.1594 38.0 31.7 

168 ........... Other resp system O.R. procedures w/o CC/MCC ........................................................... 1.1417 29.0 24.2 

175 ........... Pulmonary embolism w MCC ............................................................................................ 0.7160 22.0 18.3 

176 ........... Pulmonary embolism w/o MCC ......................................................................................... 0.5989 20.1 16.8 

177 ........... Respiratory infections & inflammations w MCC ................................................................ 0.8393 23.5 19.6 

178 ........... Respiratory infections & inflammations w CC ................................................................... 0.7671 22.2 18.5 

179 ........... Respiratory infections & inflammations w/o CC/MCC ....................................................... 0.6885 19.0 15.8 

180 ........... Respiratory neoplasms w MCC ......................................................................................... 0.8140 20.2 16.8 

181 ........... Respiratory neoplasms w CC ............................................................................................ 0.7103 19.3 16.1 

182 ........... Respiratory neoplasms w/o CC/MCC ............................................................................... 0.5472 20.3 16.9 

183 ........... Major chest trauma w MCC .............................................................................................. 0.5472 20.3 16.9 

184 ........... Major chest trauma w CC ................................................................................................. 0.5472 20.3 16.9 

185 ........... Major chest trauma w/o CC/MCC ..................................................................................... 0.5472 20.3 16.9 

186 ........... Pleural effusion w MCC ..................................................................................................... 0.8259 23.6 19.7 

187 ........... Pleural effusion w CC ........................................................................................................ 0.7042 21.1 17.6 

188 ........... Pleural effusion w/o CC/MCC ........................................................................................... 0.7042 21.1 17.6 

189 ........... Pulmonary edema & respiratory failure ............................................................................. 0.9743 24.0 20.0 

190 ........... Chronic obstructive pulmonary disease w MCC ............................................................... 0.6858 20.9 17.4 

mstockstill on PROD1PC66 with RULES3

26866 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

191 ........... Chronic obstructive pulmonary disease w CC .................................................................. 0.6256 19.5 16.3 

192 ........... Chronic obstructive pulmonary disease w/o CC/MCC ...................................................... 0.5832 17.2 14.3 

193 ........... Simple pneumonia & pleurisy w MCC .............................................................................. 0.7088 21.6 18.0 

194 ........... Simple pneumonia & pleurisy w CC ................................................................................. 0.6429 19.8 16.5 

195 ........... Simple pneumonia & pleurisy w/o CC/MCC ..................................................................... 0.5962 18.2 15.2 

196 ........... Interstitial lung disease w MCC ......................................................................................... 0.6529 20.0 16.7 

197 ........... Interstitial lung disease w CC ............................................................................................ 0.6133 19.6 16.3 

198 ........... Interstitial lung disease w/o CC/MCC ............................................................................... 0.5956 19.7 16.4 

199 ........... Pneumothorax w MCC ...................................................................................................... 0.8249 25.0 20.8 

200 ........... Pneumothorax w CC ......................................................................................................... 0.7305 22.9 19.1 

201 ........... Pneumothorax w/o CC/MCC ............................................................................................. 0.5472 20.3 16.9 

202 ........... Bronchitis & asthma w CC/MCC ....................................................................................... 0.6903 21.1 17.6 

203 ........... Bronchitis & asthma w/o CC/MCC .................................................................................... 0.5650 17.1 14.3 

204 ........... Respiratory signs & symptoms .......................................................................................... 0.8187 22.0 18.3 

205 ........... Other respiratory system diagnoses w MCC .................................................................... 0.8207 22.4 18.7 

206 ........... Other respiratory system diagnoses w/o MCC ................................................................. 0.7667 21.5 17.9 

207 ........... Respiratory system diagnosis w ventilator support 96+ hours ......................................... 2.0266 34.3 28.6 

208 ........... Respiratory system diagnosis w ventilator support <96 hours ......................................... 1.5514 27.8 23.2 

215 ........... Other heart assist system implant ..................................................................................... 0.8249 25.0 20.8 

216 ........... Cardiac valve & oth maj cardiothoracic proc w card cath w MCC ................................... 1.5545 35.2 29.3 

217 ........... Cardiac valve & oth maj cardiothoracic proc w card cath w CC ...................................... 0.8249 25.0 20.8 

218 ........... Cardiac valve & oth maj cardiothoracic proc w card cath w/o CC/MCC .......................... 0.8249 25.0 20.8 

219 ........... Cardiac valve & oth maj cardiothoracic proc w/o card cath w MCC ................................ 1.5545 35.2 29.3 

220 ........... Cardiac valve & oth maj cardiothoracic proc w/o card cath w CC ................................... 0.8249 25.0 20.8

221 ........... Cardiac valve & oth maj cardiothoracic proc w/o card cath w/o CC/MCC ....................... 0.8249 25.0 20.8 

222 ........... Cardiac defib implant w cardiac cath w AMI/HF/shock w MCC ....................................... 1.5545 35.2 29.3 

223 ........... Cardiac defib implant w cardiac cath w AMI/HF/shock w/o MCC .................................... 1.5545 35.2 29.3 

224 ........... Cardiac defib implant w cardiac cath w/o AMI/HF/shock w MCC .................................... 1.5545 35.2 29.3 

225 ........... Cardiac defib implant w cardiac cath w/o AMI/HF/shock w/o MCC ................................. 1.5545 35.2 29.3 

226 ........... Cardiac defibrillator implant w/o cardiac cath w MCC ...................................................... 1.5545 35.2 29.3 

227 ........... Cardiac defibrillator implant w/o cardiac cath w/o MCC ................................................... 1.5545 35.2 29.3 

228 ........... Other cardiothoracic procedures w MCC .......................................................................... 1.5410 35.0 29.2 

229 ........... Other cardiothoracic procedures w CC ............................................................................. 1.2681 30.8 25.7 

230 ........... Other cardiothoracic procedures w/o CC/MCC ................................................................. 0.8249 25.0 20.8 

231 ........... Coronary bypass w PTCA w MCC .................................................................................... 1.5545 35.2 29.3 

232 ........... Coronary bypass w PTCA w/o MCC ................................................................................. 0.8249 25.0 20.8 

233 ........... Coronary bypass w cardiac cath w MCC .......................................................................... 1.5545 35.2 29.3 

234 ........... Coronary bypass w cardiac cath w/o MCC ....................................................................... 0.8249 25.0 20.8 

235 ........... Coronary bypass w/o cardiac cath w MCC ....................................................................... 1.5545 35.2 29.3 

236 ........... Coronary bypass w/o cardiac cath w/o MCC .................................................................... 0.8249 25.0 20.8 

237 ........... Major cardiovasc procedures w MCC or thoracic aortic anuerysm repair ....................... 1.5545 35.2 29.3 

238 ........... Major cardiovasc procedures w/o MCC ............................................................................ 0.8249 25.0 20.8 

239 ........... Amputation for circ sys disorders exc upper limb & toe w MCC ...................................... 1.3794 37.4 31.2 

240 ........... Amputation for circ sys disorders exc upper limb & toe w CC ......................................... 1.2872 36.1 30.1 

241 ........... Amputation for circ sys disorders exc upper limb & toe w/o CC/MCC ............................. 1.1417 29.0 24.2 

242 ........... Permanent cardiac pacemaker implant w MCC ............................................................... 1.5545 35.2 29.3 

243 ........... Permanent cardiac pacemaker implant w CC .................................................................. 1.5545 35.2 29.3 

244 ........... Permanent cardiac pacemaker implant w/o CC/MCC ...................................................... 1.1417 29.0 24.2 

245 ........... AICD lead & generator procedures ................................................................................... 0.7305 22.9 19.1 

246 ........... Perc cardiovasc proc w drug-eluting stent w MCC or 4+ vessels/stents ......................... 0.8249 25.0 20.8 

247 ........... Perc cardiovasc proc w drug-eluting stent w/o MCC ........................................................ 0.8249 25.0 20.8 

248 ........... Perc cardiovasc proc w non-drug-eluting stent w MCC or 4+ ves/stents ........................ 1.5545 35.2 29.3 

249 ........... Perc cardiovasc proc w non-drug-eluting stent w/o MCC ................................................ 1.5545 35.2 29.3 

250 ........... Perc cardiovasc proc w/o coronary artery stent or AMI w MCC ...................................... 0.8249 25.0 20.8

251 ........... Perc cardiovasc proc w/o coronary artery stent or AMI w/o MCC ................................... 0.8249 25.0 20.8 

252 ........... Other vascular procedures w MCC ................................................................................... 1.5410 35.0 29.2 

253 ........... Other vascular procedures w CC ...................................................................................... 1.2681 30.8 25.7 

254 ........... Other vascular procedures w/o CC/MCC .......................................................................... 0.8249 25.0 20.8 

255 ........... Upper limb & toe amputation for circ system disorders w MCC ...................................... 1.1713 33.7 28.1

256 ........... Upper limb & toe amputation for circ system disorders w CC ......................................... 0.9516 29.4 24.5 

257 ........... Upper limb & toe amputation for circ system disorders w/o CC/MCC ............................. 0.9516 29.4 24.5 

258 ........... Cardiac pacemaker device replacement w MCC .............................................................. 1.5545 35.2 29.3 

259 ........... Cardiac pacemaker device replacement w/o MCC ........................................................... 1.5545 35.2 29.3 

260 ........... Cardiac pacemaker revision except device replacement w MCC .................................... 1.5545 35.2 29.3 

261 ........... Cardiac pacemaker revision except device replacement w CC ....................................... 0.5472 20.3 16.9 

262 ........... Cardiac pacemaker revision except device replacement w/o CC/MCC ........................... 0.5472 20.3 16.9 

263 ........... Vein ligation & stripping ..................................................................................................... 0.8249 25.0 20.8 

264 ........... Other circulatory system O.R. procedures ........................................................................ 1.0667 31.6 26.3 

mstockstill on PROD1PC66 with RULES3

Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26867 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

280 ........... Acute myocardial infarction, discharged alive w MCC ...................................................... 0.7263 21.4 17.8 

281 ........... Acute myocardial infarction, discharged alive w CC ......................................................... 0.6931 22.8 19.0 

282 ........... Acute myocardial infarction, discharged alive w/o CC/MCC ............................................ 0.6931 22.8 19.0 

283 ........... Acute myocardial infarction, expired w MCC .................................................................... 0.6609 17.0 14.2 

284 ........... Acute myocardial infarction, expired w CC ....................................................................... 0.6609 17.0 14.2 

285 ........... Acute myocardial infarction, expired w/o CC/MCC ........................................................... 0.6609 17.0 14.2 

286 ........... Circulatory disorders except AMI, w card cath w MCC .................................................... 1.1417 29.0 24.2 

287 ........... Circulatory disorders except AMI, w card cath w/o MCC ................................................. 0.8249 25.0 20.8 

288 ........... Acute & subacute endocarditis w MCC ............................................................................ 0.9082 26.4 22.0 

289 ........... Acute & subacute endocarditis w CC ............................................................................... 0.8580 26.4 22.0 

290 ........... Acute & subacute endocarditis w/o CC/MCC ................................................................... 0.7664 25.5 21.3 

291 ........... Heart failure & shock w MCC ............................................................................................ 0.6968 21.4 17.8 

292 ........... Heart failure & shock w CC ............................................................................................... 0.6252 20.4 17.0 

293 ........... Heart failure & shock w/o CC/MCC .................................................................................. 0.5775 18.5 15.4 

294 ........... Deep vein thrombophlebitis w CC/MCC ........................................................................... 0.8249 25.0 20.8 

295 ........... Deep vein thrombophlebitis w/o CC/MCC ........................................................................ 0.8249 25.0 20.8 

296 ........... Cardiac arrest, unexplained w MCC ................................................................................. 0.6609 17.0 14.2 

297 ........... Cardiac arrest, unexplained w CC .................................................................................... 0.6609 17.0 14.2 

298 ........... Cardiac arrest, unexplained w/o CC/MCC ........................................................................ 0.6609 17.0 14.2 

299 ........... Peripheral vascular disorders w MCC ............................................................................... 0.7152 24.8 20.7 

300 ........... Peripheral vascular disorders w CC .................................................................................. 0.6150 22.2 18.5 

301 ........... Peripheral vascular disorders w/o CC/MCC ..................................................................... 0.5557 19.4 16.2 

302 ........... Atherosclerosis w MCC ..................................................................................................... 0.6170 21.9 18.3 

303 ........... Atherosclerosis w/o MCC .................................................................................................. 0.5673 20.5 17.1 

304 ........... Hypertension w MCC ........................................................................................................ 0.8249 25.0 20.8 

305 ........... Hypertension w/o MCC ..................................................................................................... 0.5856 22.6 18.8 

306 ........... Cardiac congenital & valvular disorders w MCC .............................................................. 0.8786 24.2 20.2 

307 ........... Cardiac congenital & valvular disorders w/o MCC ........................................................... 0.7767 23.1 19.3 

308 ........... Cardiac arrhythmia & conduction disorders w MCC ......................................................... 0.7431 24.7 20.6 

309 ........... Cardiac arrhythmia & conduction disorders w CC ............................................................ 0.5940 20.4 17.0 

310 ........... Cardiac arrhythmia & conduction disorders w/o CC/MCC ................................................ 0.5184 17.0 14.2 

311 ........... Angina pectoris .................................................................................................................. 0.7305 22.9 19.1 

312 ........... Syncope & collapse ........................................................................................................... 0.5336 19.7 16.4 

313 ........... Chest pain ......................................................................................................................... 0.5472 20.3 16.9 

314 ........... Other circulatory system diagnoses w MCC ..................................................................... 0.8123 23.1 19.3 

315 ........... Other circulatory system diagnoses w CC ........................................................................ 0.7114 21.6 18.0 

316 ........... Other circulatory system diagnoses w/o CC/MCC ............................................................ 0.6243 18.9 15.8 

326 ........... Stomach, esophageal & duodenal proc w MCC ............................................................... 1.8646 36.2 30.2 

327 ........... Stomach, esophageal & duodenal proc w CC .................................................................. 1.5545 35.2 29.3 

328 ........... Stomach, esophageal & duodenal proc w/o CC/MCC ...................................................... 0.5472 20.3 16.9 

329 ........... Major small & large bowel procedures w MCC ................................................................ 1.5545 35.2 29.3 

330 ........... Major small & large bowel procedures w CC ................................................................... 1.5545 35.2 29.3 

331 ........... Major small & large bowel procedures w/o CC/MCC ....................................................... 0.5472 20.3 16.9 

332 ........... Rectal resection w MCC .................................................................................................... 1.5057 36.1 30.1 

333 ........... Rectal resection w CC ....................................................................................................... 1.3309 30.7 25.6 

334 ........... Rectal resection w/o CC/MCC .......................................................................................... 0.8249 25.0 20.8 

335 ........... Peritoneal adhesiolysis w MCC ......................................................................................... 1.5545 35.2 29.3 

336 ........... Peritoneal adhesiolysis w CC ............................................................................................ 0.7305 22.9 19.1 

337 ........... Peritoneal adhesiolysis w/o CC/MCC ............................................................................... 0.7305 22.9 19.1 

338 ........... Appendectomy w complicated principal diag w MCC ....................................................... 0.8884 24.1 20.1 

339 ........... Appendectomy w complicated principal diag w CC .......................................................... 0.7667 22.2 18.5 

340 ........... Appendectomy w complicated principal diag w/o CC/MCC .............................................. 0.6856 19.9 16.6 

341 ........... Appendectomy w/o complicated principal diag w MCC .................................................... 0.8884 24.1 20.1 

342 ........... Appendectomy w/o complicated principal diag w CC ....................................................... 0.7667 22.2 18.5 

343 ........... Appendectomy w/o complicated principal diag w/o CC/MCC ........................................... 0.6856 19.9 16.6

344 ........... Minor small & large bowel procedures w MCC ................................................................ 0.8884 24.1 20.1 

345 ........... Minor small & large bowel procedures w CC ................................................................... 0.7667 22.2 18.5 

346 ........... Minor small & large bowel procedures w/o CC/MCC ....................................................... 0.6856 19.9 16.6 

347 ........... Anal & stomal procedures w MCC .................................................................................... 1.1417 29.0 24.2 

348 ........... Anal & stomal procedures w CC ....................................................................................... 0.8249 25.0 20.8 

349 ........... Anal & stomal procedures w/o CC/MCC ........................................................................... 0.5472 20.3 16.9 

350 ........... Inguinal & femoral hernia procedures w MCC .................................................................. 1.5545 35.2 29.3 

351 ........... Inguinal & femoral hernia procedures w CC ..................................................................... 1.1417 29.0 24.2 

352 ........... Inguinal & femoral hernia procedures w/o CC/MCC ......................................................... 0.8249 25.0 20.8 

353 ........... Hernia procedures except inguinal & femoral w MCC ...................................................... 0.8249 25.0 20.8 

354 ........... Hernia procedures except inguinal & femoral w CC ......................................................... 0.8249 25.0 20.8 

355 ........... Hernia procedures except inguinal & femoral w/o CC/MCC ............................................ 0.8249 25.0 20.8 

356 ........... Other digestive system O.R. procedures w MCC ............................................................. 1.5057 36.1 30.1 

mstockstill on PROD1PC66 with RULES3

26868 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

357 ........... Other digestive system O.R. procedures w CC ................................................................ 1.3309 30.7 25.6 

358 ........... Other digestive system O.R. procedures w/o CC/MCC .................................................... 0.8249 25.0 20.8 

368 ........... Major esophageal disorders w MCC ................................................................................. 1.1417 29.0 24.2 

369 ........... Major esophageal disorders w CC .................................................................................... 1.1417 29.0 24.2 

370 ........... Major esophageal disorders w/o CC/MCC ........................................................................ 1.1417 29.0 24.2 

371 ........... Major gastrointestinal disorders & peritoneal infections w MCC ...................................... 0.8884 24.1 20.1 

372 ........... Major gastrointestinal disorders & peritoneal infections w CC ......................................... 0.7667 22.2 18.5 

373 ........... Major gastrointestinal disorders & peritoneal infections w/o CC/MCC ............................. 0.6856 19.9 16.6 

374 ........... Digestive malignancy w MCC ........................................................................................... 0.8340 22.9 19.1 

375 ........... Digestive malignancy w CC .............................................................................................. 0.7563 19.7 16.4 

376 ........... Digestive malignancy w/o CC/MCC .................................................................................. 0.5472 20.3 16.9 

377 ........... G.I. hemorrhage w MCC ................................................................................................... 0.7032 22.5 18.8 

378 ........... G.I. hemorrhage w CC ...................................................................................................... 0.6334 21.5 17.9 

379 ........... G.I. hemorrhage w/o CC/MCC .......................................................................................... 0.5472 20.3 16.9 

380 ........... Complicated peptic ulcer w MCC ...................................................................................... 0.8249 25.0 20.8 

381 ........... Complicated peptic ulcer w CC ......................................................................................... 0.8249 25.0 20.8 

382 ........... Complicated peptic ulcer w/o CC/MCC ............................................................................. 0.7305 22.9 19.1 

383 ........... Uncomplicated peptic ulcer w MCC .................................................................................. 0.8249 25.0 20.8 

384 ........... Uncomplicated peptic ulcer w/o MCC ............................................................................... 0.7305 22.9 19.1 

385 ........... Inflammatory bowel disease w MCC ................................................................................. 0.8874 24.6 20.5 

386 ........... Inflammatory bowel disease w CC .................................................................................... 0.7655 22.9 19.1 

387 ........... Inflammatory bowel disease w/o CC/MCC ....................................................................... 0.7655 22.9 19.1 

388 ........... G.I. obstruction w MCC ..................................................................................................... 0.8967 22.8 19.0 

389 ........... G.I. obstruction w CC ........................................................................................................ 0.7893 21.9 18.3 

390 ........... G.I. obstruction w/o CC/MCC ............................................................................................ 0.7893 21.9 18.3 

391 ........... Esophagitis, gastroent & misc digest disorders w MCC ................................................... 0.8509 24.4 20.3 

392 ........... Esophagitis, gastroent & misc digest disorders w/o MCC ................................................ 0.6943 20.4 17.0 

393 ........... Other digestive system diagnoses w MCC ....................................................................... 0.9915 25.5 21.3 

394 ........... Other digestive system diagnoses w CC .......................................................................... 0.8523 22.0 18.3 

395 ........... Other digestive system diagnoses w/o CC/MCC .............................................................. 0.7214 20.9 17.4 

405 ........... Pancreas, liver & shunt procedures w MCC ..................................................................... 1.5545 35.2 29.3 

406 ........... Pancreas, liver & shunt procedures w CC ........................................................................ 1.5545 35.2 29.3 

407 ........... Pancreas, liver & shunt procedures w/o CC/MCC ............................................................ 1.1417 29.0 24.2 

408 ........... Biliary tract proc except only cholecyst w or w/o c.d.e. w MCC ....................................... 1.5545 35.2 29.3 

409 ........... Biliary tract proc except only cholecyst w or w/o c.d.e. w CC .......................................... 1.5545 35.2 29.3 

410 ........... Biliary tract proc except only cholecyst w or w/o c.d.e. w/o CC/MCC ............................. 1.5545 35.2 29.3 

411 ........... Cholecystectomy w c.d.e. w MCC .................................................................................... 1.1417 29.0 24.2 

412 ........... Cholecystectomy w c.d.e. w CC ....................................................................................... 1.1417 29.0 24.2 

413 ........... Cholecystectomy w c.d.e. w/o CC/MCC ........................................................................... 1.1417 29.0 24.2 

414 ........... Cholecystectomy except by laparoscope w/o c.d.e. w MCC ............................................ 1.1417 29.0 24.2 

415 ........... Cholecystectomy except by laparoscope w/o c.d.e. w CC ............................................... 1.1417 29.0 24.2 

416 ........... Cholecystectomy except by laparoscope w/o c.d.e. w/o CC/MCC ................................... 1.1417 29.0 24.2 

417 ........... Laparoscopic cholecystectomy w/o c.d.e. w MCC ............................................................ 1.5545 35.2 29.3 

418 ........... Laparoscopic cholecystectomy w/o c.d.e. w CC ............................................................... 1.1417 29.0 24.2 

419 ........... Laparoscopic cholecystectomy w/o c.d.e. w/o CC/MCC .................................................. 1.1417 29.0 24.2 

420 ........... Hepatobiliary diagnostic procedures w MCC .................................................................... 1.1417 29.0 24.2 

421 ........... Hepatobiliary diagnostic procedures w CC ....................................................................... 0.8249 25.0 20.8 

422 ........... Hepatobiliary diagnostic procedures w/o CC/MCC ........................................................... 0.8249 25.0 20.8 

423 ........... Other hepatobiliary or pancreas O.R. procedures w MCC ............................................... 1.1417 29.0 24.2 

424 ........... Other hepatobiliary or pancreas O.R. procedures w CC .................................................. 0.8249 25.0 20.8 

425 ........... Other hepatobiliary or pancreas O.R. procedures w/o CC/MCC ...................................... 0.8249 25.0 20.8 

432 ........... Cirrhosis & alcoholic hepatitis w MCC .............................................................................. 0.6223 19.0 15.8 

433 ........... Cirrhosis & alcoholic hepatitis w CC ................................................................................. 0.6223 19.0 15.8 

434 ........... Cirrhosis & alcoholic hepatitis w/o CC/MCC ..................................................................... 0.5472 20.3 16.9 

435 ........... Malignancy of hepatobiliary system or pancreas w MCC ................................................. 0.7422 20.2 16.8 

436 ........... Malignancy of hepatobiliary system or pancreas w CC .................................................... 0.7086 19.6 16.3 

437 ........... Malignancy of hepatobiliary system or pancreas w/o CC/MCC ....................................... 0.7086 19.6 16.3 

438 ........... Disorders of pancreas except malignancy w MCC ........................................................... 1.0057 24.3 20.3 

439 ........... Disorders of pancreas except malignancy w CC .............................................................. 0.8437 21.9 18.3 

440 ........... Disorders of pancreas except malignancy w/o CC/MCC .................................................. 0.7204 18.8 15.7 

441 ........... Disorders of liver except malig, cirr, alc hepa w MCC ..................................................... 0.7588 21.8 18.2 

442 ........... Disorders of liver except malig, cirr, alc hepa w CC ........................................................ 0.6925 21.2 17.7 

443 ........... Disorders of liver except malig, cirr, alc hepa w/o CC/MCC ............................................ 0.6925 21.2 17.7 

444 ........... Disorders of the biliary tract w MCC ................................................................................. 0.8181 24.0 20.0 

445 ........... Disorders of the biliary tract w CC .................................................................................... 0.6977 21.7 18.1 

446 ........... Disorders of the biliary tract w/o CC/MCC ........................................................................ 0.5472 20.3 16.9 

453 ........... Combined anterior/posterior spinal fusion w MCC ........................................................... 1.5545 35.2 29.3 

454 ........... Combined anterior/posterior spinal fusion w CC .............................................................. 1.5545 35.2 29.3 

mstockstill on PROD1PC66 with RULES3

Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26869 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

455 ........... Combined anterior/posterior spinal fusion w/o CC/MCC .................................................. 1.5545 35.2 29.3 

456 ........... Spinal fus exc cerv w spinal curv/malig/infec or 9+ fus w MCC ....................................... 1.5545 35.2 29.3 

457 ........... Spinal fus exc cerv w spinal curv/malig/infec or 9+ fus w CC .......................................... 1.5545 35.2 29.3 

458 ........... Spinal fus exc cerv w spinal curv/malig/infec or 9+ fus w/o CC/MCC ............................. 1.5545 35.2 29.3 

459 ........... Spinal fusion except cervical w MCC ................................................................................ 1.5545 35.2 29.3 

460 ........... Spinal fusion except cervical w/o MCC ............................................................................. 1.5545 35.2 29.3 

461 ........... Bilateral or multiple major joint procs of lower extremity w MCC ..................................... 1.5545 35.2 29.3 

462 ........... Bilateral or multiple major joint procs of lower extremity w/o MCC .................................. 1.1417 29.0 24.2 

463 ........... Wnd debrid & skn grft exc hand, for musculo-conn tiss dis w MCC ................................ 1.3514 38.8 32.3 

464 ........... Wnd debrid & skn grft exc hand, for musculo-conn tiss dis w CC ................................... 1.1906 36.3 30.3

465 ........... Wnd debrid & skn grft exc hand, for musculo-conn tiss dis w/o CC/MCC ....................... 1.0747 29.6 24.7 

466 ........... Revision of hip or knee replacement w MCC ................................................................... 1.5545 35.2 29.3 

467 ........... Revision of hip or knee replacement w CC ...................................................................... 1.5545 35.2 29.3 

468 ........... Revision of hip or knee replacement w/o CC/MCC .......................................................... 1.5545 35.2 29.3 

469 ........... Major joint replacement or reattachment of lower extremity w MCC ............................... 1.5545 35.2 29.3 

470 ........... Major joint replacement or reattachment of lower extremity w/o MCC ............................ 1.5545 35.2 29.3 

471 ........... Cervical spinal fusion w MCC ........................................................................................... 1.5545 35.2 29.3 

472 ........... Cervical spinal fusion w CC .............................................................................................. 1.5545 35.2 29.3 

473 ........... Cervical spinal fusion w/o CC/MCC .................................................................................. 1.5545 35.2 29.3 

474 ........... Amputation for musculoskeletal sys & conn tissue dis w MCC ........................................ 1.3338 36.6 30.5 

475 ........... Amputation for musculoskeletal sys & conn tissue dis w CC ........................................... 1.1390 32.7 27.3 

476 ........... Amputation for musculoskeletal sys & conn tissue dis w/o CC/MCC .............................. 1.1390 32.7 27.3 

477 ........... Biopsies of musculoskeletal system & connective tissue w MCC .................................... 1.5545 35.2 29.3 

478 ........... Biopsies of musculoskeletal system & connective tissue w CC ....................................... 1.1417 29.0 24.2 

479 ........... Biopsies of musculoskeletal system & connective tissue w/o CC/MCC ........................... 1.1417 29.0 24.2 

480 ........... Hip & femur procedures except major joint w MCC ......................................................... 1.5545 35.2 29.3 

481 ........... Hip & femur procedures except major joint w CC ............................................................ 1.5545 35.2 29.3 

482 ........... Hip & femur procedures except major joint w/o CC/MCC ................................................ 1.1417 29.0 24.2 

483 ........... Major joint & limb reattachment proc of upper extremity w CC/MCC .............................. 1.5545 35.2 29.3 

484 ........... Major joint & limb reattachment proc of upper extremity w/o CC/MCC ........................... 1.1417 29.0 24.2 

485 ........... Knee procedures w pdx of infection w MCC .................................................................... 1.5545 35.2 29.3 

486 ........... Knee procedures w pdx of infection w CC ....................................................................... 1.1417 29.0 24.2 

487 ........... Knee procedures w pdx of infection w/o CC/MCC ........................................................... 1.1417 29.0 24.2 

488 ........... Knee procedures w/o pdx of infection w CC/MCC ........................................................... 1.5545 35.2 29.3 

489 ........... Knee procedures w/o pdx of infection w/o CC/MCC ........................................................ 1.5545 35.2 29.3 

490 ........... Back & neck proc exc spinal fusion w CC/MCC or disc device/neurostim ...................... 1.1417 29.0 24.2 

491 ........... Back & neck proc exc spinal fusion w/o CC/MCC ............................................................ 1.1417 29.0 24.2 

492 ........... Lower extrem & humer proc except hip, foot, femur w MCC ........................................... 1.5545 35.2 29.3 

493 ........... Lower extrem & humer proc except hip, foot, femur w CC .............................................. 1.1417 29.0 24.2 

494 ........... Lower extrem & humer proc except hip, foot, femur w/o CC/MCC .................................. 0.8249 25.0 20.8 

495 ........... Local excision & removal int fix devices exc hip & femur w MCC ................................... 1.3650 38.1 31.8

496 ........... Local excision & removal int fix devices exc hip & femur w CC ...................................... 1.1981 36.8 30.7 

497 ........... Local excision & removal int fix devices exc hip & femur w/o CC/MCC .......................... 1.1417 29.0 24.2 

498 ........... Local excision & removal int fix devices of hip & femur w CC/MCC ................................ 1.5545 35.2 29.3 

499 ........... Local excision & removal int fix devices of hip & femur w/o CC/MCC ............................. 0.7305 22.9 19.1 

500 ........... Soft tissue procedures w MCC ......................................................................................... 1.3212 35.2 29.3 

501 ........... Soft tissue procedures w CC ............................................................................................ 1.2903 30.7 25.6 

502 ........... Soft tissue procedures w/o CC/MCC ................................................................................ 0.8249 25.0 20.8 

503 ........... Foot procedures w MCC ................................................................................................... 1.1417 29.0 24.2 

504 ........... Foot procedures w CC ...................................................................................................... 0.8249 25.0 20.8 

505 ........... Foot procedures w/o CC/MCC .......................................................................................... 0.5472 20.3 16.9 

506 ........... Major thumb or joint procedures ....................................................................................... 0.7305 22.9 19.1 

507 ........... Major shoulder or elbow joint procedures w CC/MCC ..................................................... 0.8249 25.0 20.8 

508 ........... Major shoulder or elbow joint procedures w/o CC/MCC .................................................. 0.8249 25.0 20.8 

509 ........... Arthroscopy ........................................................................................................................ 0.5472 20.3 16.9 

510 ........... Shoulder, elbow or forearm proc, exc major joint proc w MCC ....................................... 1.1417 29.0 24.2 

511 ........... Shoulder, elbow or forearm proc, exc major joint proc w CC .......................................... 1.1417 29.0 24.2 

512 ........... Shoulder, elbow or forearm proc, exc major joint proc w/o CC/MCC .............................. 0.5472 20.3 16.9 

513 ........... Hand or wrist proc, except major thumb or joint proc w CC/MCC ................................... 1.5545 35.2 29.3 

514 ........... Hand or wrist proc, except major thumb or joint proc w/o CC/MCC ................................ 0.7305 22.9 19.1 

515 ........... Other musculoskelet sys & conn tiss O.R. proc w MCC .................................................. 1.3230 34.8 29.0 

516 ........... Other musculoskelet sys & conn tiss O.R. proc w CC ..................................................... 1.1417 29.0 24.2 

517 ........... Other musculoskelet sys & conn tiss O.R. proc w/o CC/MCC ......................................... 0.8249 25.0 20.8

533 ........... Fractures of femur w MCC ................................................................................................ 0.8249 25.0 20.8 

534 ........... Fractures of femur w/o MCC ............................................................................................. 0.7305 22.9 19.1 

535 ........... Fractures of hip & pelvis w MCC ...................................................................................... 0.7305 22.9 19.1 

536 ........... Fractures of hip & pelvis w/o MCC ................................................................................... 0.5998 23.7 19.8 

537 ........... Sprains, strains, & dislocations of hip, pelvis & thigh w CC/MCC .................................... 0.5472 20.3 16.9 

mstockstill on PROD1PC66 with RULES3

26870 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

538 ........... Sprains, strains, & dislocations of hip, pelvis & thigh w/o CC/MCC ................................. 0.5472 20.3 16.9 

539 ........... Osteomyelitis w MCC ........................................................................................................ 0.9013 29.7 24.8 

540 ........... Osteomyelitis w CC ........................................................................................................... 0.8107 28.7 23.9 

541 ........... Osteomyelitis w/o CC/MCC ............................................................................................... 0.7787 26.9 22.4 

542 ........... Pathological fractures & musculoskelet & conn tiss malig w MCC .................................. 0.7359 21.7 18.1 

543 ........... Pathological fractures & musculoskelet & conn tiss malig w CC ..................................... 0.6347 21.3 17.8 

544 ........... Pathological fractures & musculoskelet & conn tiss malig w/o CC/MCC ......................... 0.5472 20.3 16.9 

545 ........... Connective tissue disorders w MCC ................................................................................. 0.8501 23.9 19.9 

546 ........... Connective tissue disorders w CC .................................................................................... 0.6492 20.7 17.3 

547 ........... Connective tissue disorders w/o CC/MCC ........................................................................ 0.5472 20.3 16.9 

548 ........... Septic arthritis w MCC ....................................................................................................... 0.8584 28.2 23.5 

549 ........... Septic arthritis w CC .......................................................................................................... 0.7347 26.4 22.0 

550 ........... Septic arthritis w/o CC/MCC ............................................................................................. 0.6704 23.5 19.6 

551 ........... Medical back problems w MCC ........................................................................................ 0.7305 26.6 22.2 

552 ........... Medical back problems w/o MCC ..................................................................................... 0.6022 22.8 19.0 

553 ........... Bone diseases & arthropathies w MCC ............................................................................ 0.8249 25.0 20.8 

554 ........... Bone diseases & arthropathies w/o MCC ......................................................................... 0.4822 20.5 17.1 

555 ........... Signs & symptoms of musculoskeletal system & conn tissue w MCC ............................. 0.7305 22.9 19.1 

556 ........... Signs & symptoms of musculoskeletal system & conn tissue w/o MCC .......................... 0.7305 22.9 19.1 

557 ........... Tendonitis, myositis & bursitis w MCC .............................................................................. 0.8177 25.9 21.6 

558 ........... Tendonitis, myositis & bursitis w/o MCC ........................................................................... 0.6919 21.4 17.8 

559 ........... Aftercare, musculoskeletal system & connective tissue w MCC ...................................... 0.7157 26.2 21.8

560 ........... Aftercare, musculoskeletal system & connective tissue w CC ......................................... 0.6393 24.6 20.5 

561 ........... Aftercare, musculoskeletal system & connective tissue w/o CC/MCC ............................. 0.5889 21.7 18.1 

562 ........... Fx, sprn, strn & disl except femur, hip, pelvis & thigh w MCC ......................................... 1.1417 29.0 24.2 

563 ........... Fx, sprn, strn & disl except femur, hip, pelvis & thigh w/o MCC ...................................... 0.5472 20.3 16.9 

564 ........... Other musculoskeletal sys & connective tissue diagnoses w MCC ................................. 0.8134 24.9 20.8 

565 ........... Other musculoskeletal sys & connective tissue diagnoses w CC .................................... 0.7382 24.8 20.7 

566 ........... Other musculoskeletal sys & connective tissue diagnoses w/o CC/MCC ........................ 0.6862 22.1 18.4 

573 ........... Skin graft &/or debrid for skn ulcer or cellulitis w MCC .................................................... 1.3068 38.0 31.7 

574 ........... Skin graft &/or debrid for skn ulcer or cellulitis w CC ....................................................... 1.1567 37.1 30.9 

575 ........... Skin graft &/or debrid for skn ulcer or cellulitis w/o CC/MCC ........................................... 0.9938 31.7 26.4 

576 ........... Skin graft &/or debrid exc for skin ulcer or cellulitis w MCC ............................................ 1.5545 35.2 29.3 

577 ........... Skin graft &/or debrid exc for skin ulcer or cellulitis w CC ............................................... 1.1417 29.0 24.2 

578 ........... Skin graft &/or debrid exc for skin ulcer or cellulitis w/o CC/MCC ................................... 0.7305 22.9 19.1 

579 ........... Other skin, subcut tiss & breast proc w MCC ................................................................... 1.2793 36.8 30.7 

580 ........... Other skin, subcut tiss & breast proc w CC ...................................................................... 1.1001 34.8 29.0 

581 ........... Other skin, subcut tiss & breast proc w/o CC/MCC ......................................................... 0.9100 29.9 24.9 

582 ........... Mastectomy for malignancy w CC/MCC ........................................................................... 1.5545 35.2 29.3 

583 ........... Mastectomy for malignancy w/o CC/MCC ........................................................................ 1.5545 35.2 29.3 

584 ........... Breast biopsy, local excision & other breast procedures w CC/MCC .............................. 1.1417 29.0 24.2 

585 ........... Breast biopsy, local excision & other breast procedures w/o CC/MCC ........................... 1.1417 29.0 24.2 

592 ........... Skin ulcers w MCC ............................................................................................................ 0.8875 27.1 22.6 

593 ........... Skin ulcers w CC ............................................................................................................... 0.7877 26.8 22.3 

594 ........... Skin ulcers w/o CC/MCC ................................................................................................... 0.7342 24.3 20.3 

595 ........... Major skin disorders w MCC ............................................................................................. 0.7525 24.5 20.4 

596 ........... Major skin disorders w/o MCC .......................................................................................... 0.6155 23.8 19.8 

597 ........... Malignant breast disorders w MCC ................................................................................... 0.8249 25.0 20.8 

598 ........... Malignant breast disorders w CC ...................................................................................... 0.7305 22.9 19.1 

599 ........... Malignant breast disorders w/o CC/MCC .......................................................................... 0.7305 22.9 19.1 

600 ........... Non-malignant breast disorders w CC/MCC ..................................................................... 0.7305 22.9 19.1 

601 ........... Non-malignant breast disorders w/o CC/MCC .................................................................. 0.7305 22.9 19.1 

602 ........... Cellulitis w MCC ................................................................................................................ 0.6643 22.5 18.8 

603 ........... Cellulitis w/o MCC ............................................................................................................. 0.5528 19.4 16.2 

604 ........... Trauma to the skin, subcut tiss & breast w MCC ............................................................. 0.8249 25.0 20.8 

605 ........... Trauma to the skin, subcut tiss & breast w/o MCC .......................................................... 0.5685 21.2 17.7 

606 ........... Minor skin disorders w MCC ............................................................................................. 0.8324 23.2 19.3 

607 ........... Minor skin disorders w/o MCC .......................................................................................... 0.6776 22.6 18.8 

614 ........... Adrenal & pituitary procedures w CC/MCC ...................................................................... 1.2008 33.1 27.6 

615 ........... Adrenal & pituitary procedures w/o CC/MCC ................................................................... 0.7305 22.9 19.1 

616 ........... Amputat of lower limb for endocrine, nutrit, & metabol dis w MCC ................................. 1.4505 41.0 34.2

617 ........... Amputat of lower limb for endocrine, nutrit, & metabol dis w CC .................................... 1.2414 33.3 27.8 

618 ........... Amputat of lower limb for endocrine, nutrit, & metabol dis w/o CC/MCC ........................ 0.8249 25.0 20.8 

619 ........... O.R. procedures for obesity w MCC ................................................................................. 0.8249 25.0 20.8 

620 ........... O.R. procedures for obesity w CC .................................................................................... 0.8249 25.0 20.8 

621 ........... O.R. procedures for obesity w/o CC/MCC ........................................................................ 0.8249 25.0 20.8 

622 ........... Skin grafts & wound debrid for endoc, nutrit & metab dis w MCC ................................... 1.1462 35.6 29.7

623 ........... Skin grafts & wound debrid for endoc, nutrit & metab dis w CC ...................................... 1.0197 32.2 26.8 

mstockstill on PROD1PC66 with RULES3

Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26871 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

624 ........... Skin grafts & wound debrid for endoc, nutrit & metab dis w/o CC/MCC ......................... 0.8249 25.0 20.8 

625 ........... Thyroid, parathyroid & thyroglossal procedures w MCC .................................................. 1.3385 36.6 30.5 

626 ........... Thyroid, parathyroid & thyroglossal procedures w CC ..................................................... 1.2008 33.1 27.6 

627 ........... Thyroid, parathyroid & thyroglossal procedures w/o CC/MCC ......................................... 0.7305 22.9 19.1 

628 ........... Other endocrine, nutrit & metab O.R. proc w MCC .......................................................... 1.3385 36.6 30.5 

629 ........... Other endocrine, nutrit & metab O.R. proc w CC ............................................................. 1.2008 33.1 27.6 

630 ........... Other endocrine, nutrit & metab O.R. proc w/o CC/MCC ................................................. 0.7305 22.9 19.1 

637 ........... Diabetes w MCC ............................................................................................................... 0.7726 25.8 21.5 

638 ........... Diabetes w CC .................................................................................................................. 0.6757 24.0 20.0 

639 ........... Diabetes w/o CC/MCC ...................................................................................................... 0.6064 20.6 17.2 

640 ........... Nutritional & misc metabolic disorders w MCC ................................................................. 0.7879 23.2 19.3 

641 ........... Nutritional & misc metabolic disorders w/o MCC .............................................................. 0.6889 22.0 18.3 

642 ........... Inborn errors of metabolism .............................................................................................. 0.7305 22.9 19.1 

643 ........... Endocrine disorders w MCC ............................................................................................. 0.7358 24.9 20.8 

644 ........... Endocrine disorders w CC ................................................................................................ 0.7358 24.9 20.8 

645 ........... Endocrine disorders w/o CC/MCC .................................................................................... 0.5472 20.3 16.9 

652 ........... Kidney transplant ............................................................................................................... 0.0000 0.0 0.0 

653 ........... Major bladder procedures w MCC .................................................................................... 1.1417 29.0 24.2 

654 ........... Major bladder procedures w CC ....................................................................................... 0.7305 22.9 19.1 

655 ........... Major bladder procedures w/o CC/MCC ........................................................................... 0.5472 20.3 16.9 

656 ........... Kidney & ureter procedures for neoplasm w MCC ........................................................... 0.8249 25.0 20.8 

657 ........... Kidney & ureter procedures for neoplasm w CC .............................................................. 0.8249 25.0 20.8 

658 ........... Kidney & ureter procedures for neoplasm w/o CC/MCC .................................................. 0.8249 25.0 20.8 

659 ........... Kidney & ureter procedures for non-neoplasm w MCC .................................................... 1.1417 29.0 24.2 

660 ........... Kidney & ureter procedures for non-neoplasm w CC ....................................................... 0.7305 22.9 19.1 

661 ........... Kidney & ureter procedures for non-neoplasm w/o CC/MCC ........................................... 0.5472 20.3 16.9

662 ........... Minor bladder procedures w MCC .................................................................................... 0.8249 25.0 20.8 

663 ........... Minor bladder procedures w CC ....................................................................................... 0.8249 25.0 20.8 

664 ........... Minor bladder procedures w/o CC/MCC ........................................................................... 1.5545 35.2 29.3 

665 ........... Prostatectomy w MCC ....................................................................................................... 0.8249 25.0 20.8 

666 ........... Prostatectomy w CC .......................................................................................................... 0.8249 25.0 20.8 

667 ........... Prostatectomy w/o CC/MCC ............................................................................................. 1.1417 29.0 24.2 

668 ........... Transurethral procedures w MCC ..................................................................................... 1.5545 35.2 29.3 

669 ........... Transurethral procedures w CC ........................................................................................ 1.5545 35.2 29.3 

670 ........... Transurethral procedures w/o CC/MCC ............................................................................ 0.8249 25.0 20.8 

671 ........... Urethral procedures w CC/MCC ....................................................................................... 0.7305 22.9 19.1 

672 ........... Urethral procedures w/o CC/MCC .................................................................................... 0.5472 20.3 16.9 

673 ........... Other kidney & urinary tract procedures w MCC .............................................................. 1.3255 33.6 28.0 

674 ........... Other kidney & urinary tract procedures w CC ................................................................. 1.2557 30.6 25.5 

675 ........... Other kidney & urinary tract procedures w/o CC/MCC ..................................................... 1.1417 29.0 24.2 

682 ........... Renal failure w MCC ......................................................................................................... 0.8553 23.6 19.7 

683 ........... Renal failure w CC ............................................................................................................ 0.7752 21.8 18.2 

684 ........... Renal failure w/o CC/MCC ................................................................................................ 0.7121 20.5 17.1 

685 ........... Admit for renal dialysis ...................................................................................................... 0.7726 26.0 21.7 

686 ........... Kidney & urinary tract neoplasms w MCC ........................................................................ 0.8933 23.6 19.7 

687 ........... Kidney & urinary tract neoplasms w CC ........................................................................... 0.7305 22.9 19.1 

688 ........... Kidney & urinary tract neoplasms w/o CC/MCC ............................................................... 0.5472 20.3 16.9 

689 ........... Kidney & urinary tract infections w MCC .......................................................................... 0.6624 22.9 19.1 

690 ........... Kidney & urinary tract infections w/o MCC ....................................................................... 0.5655 20.2 16.8 

691 ........... Urinary stones w esw lithotripsy w CC/MCC .................................................................... 1.5545 35.2 29.3 

692 ........... Urinary stones w esw lithotripsy w/o CC/MCC ................................................................. 1.5545 35.2 29.3 

693 ........... Urinary stones w/o esw lithotripsy w MCC ....................................................................... 0.7305 22.9 19.1 

694 ........... Urinary stones w/o esw lithotripsy w/o MCC .................................................................... 0.7305 22.9 19.1 

695 ........... Kidney & urinary tract signs & symptoms w MCC ............................................................ 0.8249 25.0 20.8 

696 ........... Kidney & urinary tract signs & symptoms w/o MCC ......................................................... 0.5472 20.3 16.9 

697 ........... Urethral stricture ................................................................................................................ 0.5472 20.3 16.9 

698 ........... Other kidney & urinary tract diagnoses w MCC ............................................................... 0.7919 22.6 18.8 

699 ........... Other kidney & urinary tract diagnoses w CC .................................................................. 0.7293 22.1 18.4 

700 ........... Other kidney & urinary tract diagnoses w/o CC/MCC ...................................................... 0.6052 19.6 16.3 

707 ........... Major male pelvic procedures w CC/MCC ........................................................................ 0.7305 22.9 19.1 

708 ........... Major male pelvic procedures w/o CC/MCC ..................................................................... 0.5472 20.3 16.9 

709 ........... Penis procedures w CC/MCC ........................................................................................... 1.1417 29.0 24.2 

710 ........... Penis procedures w/o CC/MCC ........................................................................................ 1.1417 29.0 24.2 

711 ........... Testes procedures w CC/MCC ......................................................................................... 1.1417 29.0 24.2 

712 ........... Testes procedures w/o CC/MCC ...................................................................................... 1.1417 29.0 24.2 

713 ........... Transurethral prostatectomy w CC/MCC .......................................................................... 1.5545 35.2 29.3 

714 ........... Transurethral prostatectomy w/o CC/MCC ....................................................................... 0.5472 20.3 16.9 

715 ........... Other male reproductive system O.R. proc for malignancy w CC/MCC .......................... 1.5545 35.2 29.3 

mstockstill on PROD1PC66 with RULES3

26872 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

716 ........... Other male reproductive system O.R. proc for malignancy w/o CC/MCC ....................... 1.5545 35.2 29.3 

717 ........... Other male reproductive system O.R. proc exc malignancy w CC/MCC ......................... 1.1417 29.0 24.2 

718 ........... Other male reproductive system O.R. proc exc malignancy w/o CC/MCC ...................... 0.5472 20.3 16.9 

722 ........... Malignancy, male reproductive system w MCC ................................................................ 0.8249 25.0 20.8 

723 ........... Malignancy, male reproductive system w CC ................................................................... 0.7305 22.9 19.1 

724 ........... Malignancy, male reproductive system w/o CC/MCC ....................................................... 0.5472 20.3 16.9 

725 ........... Benign prostatic hypertrophy w MCC ............................................................................... 1.1417 29.0 24.2 

726 ........... Benign prostatic hypertrophy w/o MCC ............................................................................ 0.5472 20.3 16.9 

727 ........... Inflammation of the male reproductive system w MCC .................................................... 0.7754 25.9 21.6 

728 ........... Inflammation of the male reproductive system w/o MCC ................................................. 0.6172 20.8 17.3 

729 ........... Other male reproductive system diagnoses w CC/MCC .................................................. 1.0319 26.6 22.2 

730 ........... Other male reproductive system diagnoses w/o CC/MCC ............................................... 0.7305 22.9 19.1 

734 ........... Pelvic evisceration, rad hysterectomy & rad vulvectomy w CC/MCC .............................. 1.1417 29.0 24.2 

735 ........... Pelvic evisceration, rad hysterectomy & rad vulvectomy w/o CC/MCC ........................... 0.5472 20.3 16.9 

736 ........... Uterine & adnexa proc for ovarian or adnexal malignancy w MCC ................................. 1.1417 29.0 24.2 

737 ........... Uterine & adnexa proc for ovarian or adnexal malignancy w CC .................................... 0.8249 25.0 20.8 

738 ........... Uterine & adnexa proc for ovarian or adnexal malignancy w/o CC/MCC ........................ 0.5472 20.3 16.9 

739 ........... Uterine, adnexa proc for non-ovarian/adnexal malig w MCC ........................................... 1.1417 29.0 24.2 

740 ........... Uterine, adnexa proc for non-ovarian/adnexal malig w CC .............................................. 0.8249 25.0 20.8 

741 ........... Uterine, adnexa proc for non-ovarian/adnexal malig w/o CC/MCC .................................. 0.5472 20.3 16.9 

742 ........... Uterine & adnexa proc for non-malignancy w CC/MCC ................................................... 0.8249 25.0 20.8 

743 ........... Uterine & adnexa proc for non-malignancy w/o CC/MCC ................................................ 0.5472 20.3 16.9 

744 ........... D&C, conization, laparascopy & tubal interruption w CC/MCC ........................................ 0.8249 25.0 20.8 

745 ........... D&C, conization, laparascopy & tubal interruption w/o CC/MCC ..................................... 0.8249 25.0 20.8

746 ........... Vagina, cervix & vulva procedures w CC/MCC ................................................................ 0.8249 25.0 20.8 

747 ........... Vagina, cervix & vulva procedures w/o CC/MCC ............................................................. 0.8249 25.0 20.8 

748 ........... Female reproductive system reconstructive procedures .................................................. 0.8249 25.0 20.8 

749 ........... Other female reproductive system O.R. procedures w CC/MCC ..................................... 0.8249 25.0 20.8 

750 ........... Other female reproductive system O.R. procedures w/o CC/MCC .................................. 0.8249 25.0 20.8 

754 ........... Malignancy, female reproductive system w MCC ............................................................. 1.1417 29.0 24.2 

755 ........... Malignancy, female reproductive system w CC ................................................................ 0.8249 25.0 20.8 

756 ........... Malignancy, female reproductive system w/o CC/MCC .................................................... 0.5472 20.3 16.9 

757 ........... Infections, female reproductive system w MCC ................................................................ 0.8375 22.6 18.8 

758 ........... Infections, female reproductive system w CC ................................................................... 0.8317 27.2 22.7 

759 ........... Infections, female reproductive system w/o CC/MCC ...................................................... 0.5472 20.3 16.9 

760 ........... Menstrual & other female reproductive system disorders w CC/MCC ............................. 1.1417 29.0 24.2 

761 ........... Menstrual & other female reproductive system disorders w/o CC/MCC .......................... 0.5472 20.3 16.9 

765 ........... Cesarean section w CC/MCC ........................................................................................... 0.8249 25.0 20.8 

766 ........... Cesarean section w/o CC/MCC ........................................................................................ 0.7305 22.9 19.1 

767 ........... Vaginal delivery w sterilization &/or D&C .......................................................................... 0.7305 22.9 19.1 

768 ........... Vaginal delivery w O.R. proc except steril &/or D&C ....................................................... 0.7305 22.9 19.1 

769 ........... Postpartum & post abortion diagnoses w O.R. procedure ............................................... 0.7305 22.9 19.1 

770 ........... Abortion w D&C, aspiration curettage or hysterotomy ...................................................... 0.7305 22.9 19.1 

774 ........... Vaginal delivery w complicating diagnoses ....................................................................... 0.7305 22.9 19.1 

775 ........... Vaginal delivery w/o complicating diagnoses .................................................................... 0.7305 22.9 19.1 

776 ........... Postpartum & post abortion diagnoses w/o O.R. procedure ............................................ 1.1417 29.0 24.2 

777 ........... Ectopic pregnancy ............................................................................................................. 0.7305 22.9 19.1 

778 ........... Threatened abortion .......................................................................................................... 0.5472 20.3 16.9 

779 ........... Abortion w/o D&C .............................................................................................................. 0.5472 20.3 16.9 

780 ........... False labor ......................................................................................................................... 0.5472 20.3 16.9 

781 ........... Other antepartum diagnoses w medical complications .................................................... 1.1417 29.0 24.2 

782 ........... Other antepartum diagnoses w/o medical complications ................................................. 0.5472 20.3 16.9 

789 ........... Neonates, died or transferred to another acute care facility ............................................ 0.5472 20.3 16.9 

790 ........... Extreme immaturity or respiratory distress syndrome, neonate ....................................... 0.5472 20.3 16.9 

791 ........... Prematurity w major problems .......................................................................................... 1.1417 29.0 24.2 

792 ........... Prematurity w/o major problems ....................................................................................... 0.5472 20.3 16.9 

793 ........... Full term neonate w major problems ................................................................................ 1.1417 29.0 24.2 

794 ........... Neonate w other significant problems ............................................................................... 1.1417 29.0 24.2 

795 ........... Normal newborn ................................................................................................................ 0.5472 20.3 16.9 

799 ........... Splenectomy w MCC ......................................................................................................... 1.1417 29.0 24.2 

800 ........... Splenectomy w CC ............................................................................................................ 0.8249 25.0 20.8 

801 ........... Splenectomy w/o CC/MCC ................................................................................................ 0.8249 25.0 20.8 

802 ........... Other O.R. proc of the blood & blood forming organs w MCC ........................................ 1.5545 35.2 29.3

803 ........... Other O.R. proc of the blood & blood forming organs w CC ........................................... 0.7305 22.9 19.1 

804 ........... Other O.R. proc of the blood & blood forming organs w/o CC/MCC ............................... 0.7305 22.9 19.1 

808 ........... Major hematol/immun diag exc sickle cell crisis & coagul w MCC .................................. 0.8009 20.7 17.3 

809 ........... Major hematol/immun diag exc sickle cell crisis & coagul w CC ..................................... 0.8009 20.7 17.3 

810 ........... Major hematol/immun diag exc sickle cell crisis & coagul w/o CC/MCC ......................... 0.8009 20.7 17.3 

mstockstill on PROD1PC66 with RULES3

Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 26873 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

811 ........... Red blood cell disorders w MCC ...................................................................................... 0.6655 23.2 19.3 

812 ........... Red blood cell disorders w/o MCC ................................................................................... 0.5699 19.5 16.3 

813 ........... Coagulation disorders ........................................................................................................ 0.8015 21.5 17.9 

814 ........... Reticuloendothelial & immunity disorders w MCC ............................................................ 0.7474 22.6 18.8 

815 ........... Reticuloendothelial & immunity disorders w CC ............................................................... 0.7305 22.9 19.1 

816 ........... Reticuloendothelial & immunity disorders w/o CC/MCC ................................................... 0.7305 22.9 19.1 

820 ........... Lymphoma & leukemia w major O.R. procedure w MCC ................................................. 0.8249 25.0 20.8

821 ........... Lymphoma & leukemia w major O.R. procedure w CC .................................................... 0.8249 25.0 20.8 

822 ........... Lymphoma & leukemia w major O.R. procedure w/o CC/MCC ....................................... 0.8249 25.0 20.8 

823 ........... Lymphoma & non-acute leukemia w other O.R. proc w MCC ......................................... 1.1417 29.0 24.2 

824 ........... Lymphoma & non-acute leukemia w other O.R. proc w CC ............................................ 1.1417 29.0 24.2 

825 ........... Lymphoma & non-acute leukemia w other O.R. proc w/o CC/MCC ................................ 0.5472 20.3 16.9 

826 ........... Myeloprolif disord or poorly diff neopl w maj O.R. proc w MCC ...................................... 0.8249 25.0 20.8 

827 ........... Myeloprolif disord or poorly diff neopl w maj O.R. proc w CC ......................................... 0.8249 25.0 20.8 

828 ........... Myeloprolif disord or poorly diff neopl w maj O.R. proc w/o CC/MCC ............................. 0.8249 25.0 20.8 

829 ........... Myeloprolif disord or poorly diff neopl w other O.R. proc w CC/MCC .............................. 1.5545 35.2 29.3 

830 ........... Myeloprolif disord or poorly diff neopl w other O.R. proc w/o CC/MCC ........................... 1.5545 35.2 29.3 

834 ........... Acute leukemia w/o major O.R. procedure w MCC .......................................................... 1.1417 29.0 24.2 

835 ........... Acute leukemia w/o major O.R. procedure w CC ............................................................. 0.8249 25.0 20.8 

836 ........... Acute leukemia w/o major O.R. procedure w/o CC/MCC ................................................. 0.5472 20.3 16.9 

837 ........... Chemo w acute leukemia as sdx or w high dose chemo agent w MCC ......................... 1.5545 35.2 29.3 

838 ........... Chemo w acute leukemia as sdx w CC or high dose chemo agent ................................ 0.8249 25.0 20.8 

839 ........... Chemo w acute leukemia as sdx w/o CC/MCC ................................................................ 1.5545 35.2 29.3 

840 ........... Lymphoma & non-acute leukemia w MCC ....................................................................... 0.8718 20.8 17.3 

841 ........... Lymphoma & non-acute leukemia w CC .......................................................................... 0.8026 20.1 16.8 

842 ........... Lymphoma & non-acute leukemia w/o CC/MCC .............................................................. 0.7305 22.9 19.1 

843 ........... Other myeloprolif dis or poorly diff neopl diag w MCC ..................................................... 1.1417 29.0 24.2 

844 ........... Other myeloprolif dis or poorly diff neopl diag w CC ........................................................ 1.1417 29.0 24.2 

845 ........... Other myeloprolif dis or poorly diff neopl diag w/o CC/MCC ............................................ 1.1417 29.0 24.2 

846 ........... Chemotherapy w/o acute leukemia as secondary diagnosis w MCC .............................. 1.6788 37.4 31.2 

847 ........... Chemotherapy w/o acute leukemia as secondary diagnosis w CC ................................. 1.4350 27.6 23.0 

848 ........... Chemotherapy w/o acute leukemia as secondary diagnosis w/o CC/MCC ..................... 0.7305 22.9 19.1 

849 ........... Radiotherapy ..................................................................................................................... 0.8994 23.5 19.6 

853 ........... Infectious & parasitic diseases w O.R. procedure w MCC ............................................... 1.7687 38.1 31.8 

854 ........... Infectious & parasitic diseases w O.R. procedure w CC .................................................. 1.4381 30.8 25.7 

855 ........... Infectious & parasitic diseases w O.R. procedure w/o CC/MCC ...................................... 0.7305 22.9 19.1

856 ........... Postoperative or post-traumatic infections w O.R. proc w MCC ...................................... 1.4470 36.1 30.1 

857 ........... Postoperative or post-traumatic infections w O.R. proc w CC ......................................... 1.1886 31.5 26.3 

858 ........... Postoperative or post-traumatic infections w O.R. proc w/o CC/MCC ............................. 1.1109 28.4 23.7 

862 ........... Postoperative & post-traumatic infections w MCC ............................................................ 0.8670 25.2 21.0 

863 ........... Postoperative & post-traumatic infections w/o MCC ......................................................... 0.7478 23.4 19.5 

864 ........... Fever of unknown origin .................................................................................................... 0.7305 22.9 19.1 

865 ........... Viral illness w MCC ........................................................................................................... 0.7823 21.8 18.2 

866 ........... Viral illness w/o MCC ........................................................................................................ 0.6431 21.2 17.7 

867 ........... Other infectious & parasitic diseases diagnoses w MCC ................................................. 1.0954 23.6 19.7 

868 ........... Other infectious & parasitic diseases diagnoses w CC .................................................... 0.8869 22.0 18.3 

869 ........... Other infectious & parasitic diseases diagnoses w/o CC/MCC ........................................ 0.5472 20.3 16.9 

870 ........... Septicemia w MV 96+ hours ............................................................................................. 1.9505 30.5 25.4 

871 ........... Septicemia w/o MV 96+ hours w MCC ............................................................................. 0.8299 23.5 19.6 

872 ........... Septicemia w/o MV 96+ hours w/o MCC .......................................................................... 0.7340 21.9 18.3 

876 ........... O.R. procedure w principal diagnoses of mental illness ................................................... 0.7305 22.9 19.1 

880 ........... Acute adjustment reaction & psychosocial dysfunction .................................................... 0.5472 20.3 16.9 

881 ........... Depressive neuroses ......................................................................................................... 0.5472 20.3 16.9 

882 ........... Neuroses except depressive ............................................................................................. 0.5472 20.3 16.9 

883 ........... Disorders of personality & impulse control ....................................................................... 0.5472 20.3 16.9 

884 ........... Organic disturbances & mental retardation ....................................................................... 0.4883 23.3 19.4 

885 ........... Psychoses ......................................................................................................................... 0.4140 23.8 19.8 

886 ........... Behavioral & developmental disorders .............................................................................. 0.5472 20.3 16.9 

887 ........... Other mental disorder diagnoses ...................................................................................... 0.5472 20.3 16.9 

894 ........... Alcohol/drug abuse or dependence, left ama ................................................................... 0.5472 20.3 16.9 

895 ........... Alcohol/drug abuse or dependence w rehabilitation therapy ............................................ 0.5472 20.3 16.9 

896 ........... Alcohol/drug abuse or dependence w/o rehabilitation therapy w MCC ............................ 0.8249 25.0 20.8 

897 ........... Alcohol/drug abuse or dependence w/o rehabilitation therapy w/o MCC ......................... 0.5472 20.3 16.9 

901 ........... Wound debridements for injuries w MCC ......................................................................... 1.3395 35.2 29.3 

902 ........... Wound debridements for injuries w CC ............................................................................ 1.1605 33.5 27.9 

903 ........... Wound debridements for injuries w/o CC/MCC ................................................................ 0.7305 22.9 19.1 

904 ........... Skin grafts for injuries w CC/MCC .................................................................................... 1.3351 40.8 34.0 

905 ........... Skin grafts for injuries w/o CC/MCC ................................................................................. 0.7305 22.9 19.1 

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26874 Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and Regulations 

TABLE 3.—FY–2008 MS–LTC–DRGS, RELATIVE WEIGHTS, GEOMETRIC AVERAGE LENGTH OF STAY AND SHORT-STAY

OUTLIER THRESHOLD—Continued 

MS–LTC–

DRG MS–LTC–DRG title Relative weight 1

Geometric 

average 

length of 

stay 

Short stay 

outlier 

threshold 2

906 ........... Hand procedures for injuries ............................................................................................. 0.5472 20.3 16.9 

907 ........... Other O.R. procedures for injuries w MCC ....................................................................... 1.6622 36.8 30.7 

908 ........... Other O.R. procedures for injuries w CC .......................................................................... 1.3966 34.1 28.4 

909 ........... Other O.R. procedures for injuries w/o CC/MCC .............................................................. 0.8249 25.0 20.8 

913 ........... Traumatic injury w MCC .................................................................................................... 0.8462 26.9 22.4 

914 ........... Traumatic injury w/o MCC ................................................................................................. 0.6448 21.9 18.3 

915 ........... Allergic reactions w MCC .................................................................................................. 0.5472 20.3 16.9 

916 ........... Allergic reactions w/o MCC ............................................................................................... 0.5472 20.3 16.9 

917 ........... Poisoning & toxic effects of drugs w MCC ....................................................................... 0.7305 22.9 19.1 

918 ........... Poisoning & toxic effects of drugs w/o MCC .................................................................... 0.7305 22.9 19.1 

919 ........... Complications of treatment w MCC .................................................................................. 0.9858 26.3 21.9 

920 ........... Complications of treatment w CC ..................................................................................... 0.8518 24.6 20.5 

921 ........... Complications of treatment w/o CC/MCC ......................................................................... 0.7511 23.0 19.2 

922 ........... Other injury, poisoning & toxic effect diag w MCC ........................................................... 0.5472 20.3 16.9 

923 ........... Other injury, poisoning & toxic effect diag w/o MCC ........................................................ 0.5472 20.3 16.9 

927 ........... Extensive burns or full thickness burns w MV 96+ hrs w skin graft ................................. 1.5545 35.2 29.3 

928 ........... Full thickness burn w skin graft or inhal inj w CC/MCC ................................................... 1.1417 29.0 24.2 

929 ........... Full thickness burn w skin graft or inhal inj w/o CC/MCC ................................................ 0.7305 22.9 19.1 

933 ........... Extensive burns or full thickness burns w MV 96+ hrs w/o skin graft .............................. 1.5545 35.2 29.3

934 ........... Full thickness burn w/o skin grft or inhal inj ...................................................................... 0.6998 24.2 20.2 

935 ........... Non-extensive burns .......................................................................................................... 0.7525 24.9 20.8 

939 ........... O.R. proc w diagnoses of other contact w health services w MCC ................................. 1.2500 33.8 28.2 

940 ........... O.R. proc w diagnoses of other contact w health services w CC .................................... 1.1066 33.8 28.2

941 ........... O.R. proc w diagnoses of other contact w health services w/o CC/MCC ........................ 0.9719 28.8 24.0 

945 ........... Rehabilitation w CC/MCC .................................................................................................. 0.5867 22.2 18.5 

946 ........... Rehabilitation w/o CC/MCC ............................................................................................... 0.4935 18.9 15.8 

947 ........... Signs & symptoms w MCC ............................................................................................... 0.6340 22.7 18.9 

948 ........... Signs & symptoms w/o MCC ............................................................................................ 0.5642 23.4 19.5 

949 ........... Aftercare w CC/MCC ......................................................................................................... 0.6693 22.1 18.4 

950 ........... Aftercare w/o CC/MCC ...................................................................................................... 0.5735 18.5 15.4 

951 ........... Other factors influencing health status .............................................................................. 1.5837 26.2 21.8 

955 ........... Craniotomy for multiple significant trauma ........................................................................ 1.5545 35.2 29.3 

956 ........... Limb reattachment, hip & femur proc for multiple significant trauma ............................... 0.7305 22.9 19.1 

957 ........... Other O.R. procedures for multiple significant trauma w MCC ........................................ 1.5545 35.2 29.3 

958 ........... Other O.R. procedures for multiple significant trauma w CC ........................................... 1.1417 29.0 24.2 

959 ........... Other O.R. procedures for multiple significant trauma w/o CC/MCC ............................... 1.1417 29.0 24.2 

963 ........... Other multiple significant trauma w MCC ......................................................................... 1.5545 35.2 29.3 

964 ........... Other multiple significant trauma w CC ............................................................................ 0.7305 22.9 19.1 

965 ........... Other multiple significant trauma w/o CC/MCC ................................................................ 0.5472 20.3 16.9 

969 ........... HIV w extensive O.R. procedure w MCC ......................................................................... 1.5545 35.2 29.3 

970 ........... HIV w extensive O.R. procedure w/o MCC ...................................................................... 1.5545 35.2 29.3 

974 ........... HIV w major related condition w MCC .............................................................................. 0.8908 21.9 18.3 

975 ........... HIV w major related condition w CC ................................................................................. 0.7492 21.3 17.8 

976 ........... HIV w major related condition w/o CC/MCC ..................................................................... 0.7382 18.0 15.0 

977 ........... HIV w or w/o other related condition ................................................................................. 0.7305 22.9 19.1 

981 ........... Extensive O.R. procedure unrelated to principal diagnosis w MCC ................................. 2.2339 42.0 35.0 

982 ........... Extensive O.R. procedure unrelated to principal diagnosis w CC .................................... 1.8277 37.6 31.3 

983 ........... Extensive O.R. procedure unrelated to principal diagnosis w/o CC/MCC ....................... 1.1417 29.0 24.2 

984 ........... Prostatic O.R. procedure unrelated to principal diagnosis w MCC .................................. 1.5545 35.2 29.3

985 ........... Prostatic O.R. procedure unrelated to principal diagnosis w CC ..................................... 1.1417 29.0 24.2 

986 ........... Prostatic O.R. procedure unrelated to principal diagnosis w/o CC/MCC ......................... 1.1417 29.0 24.2 

987 ........... Non-extensive O.R. proc unrelated to principal diagnosis w MCC .................................. 1.6972 37.9 31.6 

988 ........... Non-extensive O.R. proc unrelated to principal diagnosis w CC ..................................... 1.3386 33.2 27.7 

989 ........... Non-extensive O.R. proc unrelated to principal diagnosis w/o CC/MCC ......................... 0.8249 25.0 20.8 

998 ........... Principal diagnosis invalid as discharge diagnosis ........................................................... 0.0000 0.0 0.0 

999 ........... Ungroupable ...................................................................................................................... 0.0000 0.0 0.0 

1Transition blended relative weights for FY 2008 determined as described in Step 7 in section II.I.4. of the preamble of the FY 2008 IPPS final 

rule (72 FR 47295). 2The ‘‘short-stay outlier threshold’’ is calculated as 5⁄6ths of the geometric average length of stay of the MS–LTC–DRG (as specified at 

§ 412.529(a), in conjunction with § 412.503). 

[FR Doc. 08–1219 Filed 5–2–08; 9:18 am] 

BILLING CODE 4120–01–P 

mstockstill on PROD1PC66 with RULES3